Mobile Home Park Mastery: Episode 328

How Far Can You Automate?

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AI has everyone thinking about a future in which payroll can be replaced with computers and robots. Certainly, technology has made some useful improvements in how mobile home parks are managed, but is the age of the manager-free property approaching? In this Mobile Home Park Mastery podcast we’re going to review just how far you can automate a “trailer park”.

Episode 328: How Far Can You Automate? Transcript

Artificial intelligence, also known as AI, is changing America right now. You'll see it in the stock market where prices are going up 'cause people are having this fantasy that employees are gonna go away. And in every business, it doesn't matter what it may be, from fast food all the way down to mending shoes, people are trying to figure out are there ways I'm missing to reduce my need, my reliance on payroll? This is Frank Rolfe, the Mobile Home Park Mastery podcast. The question is, how far can you automate mobile home parks? Now the first thing is, why would you wanna automate? What's wrong with people? Well, there's lots of things wrong with people these days. Number one, they're too costly. People want more now than they ever have in American history. You're seeing employees that are demanding wages that would be unthinkable not too many years ago. It all stems from perhaps covid, but also what they call the great resignation where people just don't wanna work anymore. In fact, recently, a study showed the millennials say that the minimum price they would have to earn to actually care and show up for work is at least $80,000 a year. That's impossible when you're in the mobile home park business and no one makes that kind of money.

The next issue, of course with employees is litigation. If you talk to insurance companies, you'll find that today, with most mobile home parks, employee litigation is about as common as tenant litigation. So that's kind of a bad deal. You're literally paying people who ultimately may just turn right around and sue you. And of course then there's the issue of the fact that people come and go and you'll have to be running ads to find managers and to then train managers and manage managers. And there's that human aspect that is a real downer, because even the best trained manager may go astray, they may get in trouble, they may start embezzling, who knows what. Then you'll have the unpleasant duty of firing them and finding their replacement and then training them.

So if we all say, sure, I'd love to have a mobile home park without a manager, I'd love to have a mobile home park where I don't have to rely on people anymore. Is that achievable with the mobile home park? Well, let's start off on the collection side because collections is a big duty of managers. And yes, you can automate collections a lot these days by changing to ACH rent collection. We're about 92% ACH paid in our portfolio. And if you have a more northern state bend to your portfolio, then you may be able to achieve a hundred percent. I know of many owners up in states like Wisconsin who have that, they've got 100% ACH payment. That means that your manager is no longer in the loop, doesn't have to get the rent, doesn't have to deposit the rent, doesn't have to touch the rent.

The only thing your manager is good for now on rent collections in that case is to perhaps knock on the door of anyone who has not paid. So ACH, yes, that is a great way to automate the first role of your manager, which isn't collecting rent. And you can also automate evictions. Let's say you have someone on their ACH and for whatever reason they don't make the payment or their automatic check, there is insufficient funds and you have to evict them. In most of America, in most markets, there are what we call evictions attorneys. These are attorneys that just do that, that one function. They evict just as there are attorneys who do traffic tickets, there are attorneys who just do evictions. You see them at the courthouse. They've got these giant brief cases filled with sometimes hundreds of eviction cases.

Now of course, the apartment industries who really pays the bills of giant apartment complex might have in any given month, 20 or 30 evictions based on how big it is and what the economy is doing. And they carry these little files around, and when they get to court, they don't know your property, they don't know you, they just have a file. And in the file, they typically organize it where they have a copy of the lease and a copy of the demand letter and then a simple chart for the judge to show how much money is owed. And they open the file and they plead your case. They almost always win. And so yeah, you can automate evictions too. So you can have the ACH rent and you can have a attorney who just does evictions to go out and do that.

And then you can also monitor your phone lines. We are huge proponents of the fact that every park should in fact have all phone lines recorded. All incoming calls should certainly be recorded. There are services such as who's calling, you basically port your number through that. When somebody calls that park number, they get a recording saying that this call is being recorded to help with customer service, et cetera. And now you're gonna have a log. Every time someone calls in, you know the number of who called, you know how many seconds the call was, so you know whether it was answered or not. And if it was answered, you have a recording of what was said. So although I'm not being able to now eliminate the manager, I certainly would get a much better control using automation. And then in some mobile home parks, people are going to next step. I did it back in my early portfolio where I would have all the phones from the different mobile home parks go to one individual. So it's not quite automation, but in fact, it's definitely more efficient by having all the calls go to one trained professional who answers all lines. And again, all those lines being recorded.

Now one aspect that's very, very hard to automate in mobile home parks are park owned homes. Park owned homes have always been the kryptonite to efficient management. And if you talk to most moms and pops when they sell, they'll tell you their most unpleasant duty in the park or the rental homes. So if you wanna get more efficient there, if you wanna be able to get out of the payroll habit, you might look into getting those homes sold off. Renting mobile homes is never proven to be profitable for most people. It's because if you look at what is left over after taking out full market lot rent minus that home rental, and you put in reasonable amounts or expectations or repair and maintenance, which is typically about $200 a month for home repair, plus tax plus insurance altogether about $300 a month, typically, you're not making any money at all with that rental. You're far, far better off putting that in the hands of the tenant who does all their own repair and maintenance. Plus it makes them a stakeholder in the business and they take better care of the home. So if you wanna automate the whole cycle of how we do, rehab homes, run ads, show them, sell them. Better idea, just get out of the home business altogether. In most cases, you're better off literally giving the home away than trying to rent it out and hope to make any money 'cause it's not really going to happen.

Now, as far as the accounting side goes, you certainly need to automate that. You would never want your onsite manager to do any accounting at all. Back in the old days, that's what mom and pops did. That's why the records are so bad. That's why often when you say, let me see your last three years P&Ls, they give you sheets of paper written in purple crayon. That's 'cause the manager had no idea how accounting worked, no computer skills whatsoever. And you can't let yourself fall into that same mom and pop trap. So you would certainly wanna automate, you would want to have all the accounting data from any and all mobile home parks you own going through a professional. Professional accountant, and then after that, through an actual CPA to prepare your tax returns.

There's another feature of mobile home park ownership, which you can't automate, but yet it can be taken off site. And that's having a monthly review of the money coming in and the money going out. We call it a budget actual difference review. You look at every category from your budget to see whether you're making it or not. And if you're not hitting the number, then you need to think through creatively, what am I doing wrong and how do I fix that? And that's not something that should be happening in the field. Your manager should not be privy to or part of your budget or your performance. That part, it's none of their business. It's all about your business. So you need to take control of that. So again, that's efficiently done. It's not going through payroll, it's not going through a W-2 employee. It's going through yourself.

Finally, much of the management of the park, and by management, I mean the key issues such as the financing, loan renewals, all those items, again, those come through you as the owner, so those don't really happen much in the field either. So then the key question is, gosh, there's a lot there we just talked about that doesn't really happen through the manager, so do we even need managers today? And the answer is yes. You still need to have a manager in the field at your mobile home park. Now, why is that? You need someone to be your eyes and ears in the field. You need someone to tell you if there's been a weather event or the power is out or there's been the police there, whatever the case may be. Maybe you have a resident who does in fact abandon their home and you take the home through abandonment. Now you wanna sell it, you've gotta have a warm body there to show the home and a jockey around whatever agreements that need to be signed.

We'll, never as an industry get completely away from the human touch. You need a manager to work kind of as the mayor of the town. Someone who goes around, puts out the fires, solves tenant disputes. So someone with good people skills is essential. Someone that lives on site is definitely preferred, but will never get completely out of the people business. You're never gonna be able to get a mobile home park that runs like the new concept for McDonald's where there's no people and the food moves out on a conveyor belt to the drive through window. Just not going to happen. But we're coming ever more close every, every year. We'll never get there completely. We're never going to have an AI run mobile home park. We're never gonna be able to run parks in the absence of having some warm body on site. But there have been massive improvements through technology that make managing mobile home parks more simple today and more efficient than anyone would've ever imagined. This is Frank Rolfe, the Mobile Home Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.