Mobile Home Park Mastery: Episode 144

Important Quotes, Sayings, Stories And Jokes

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The mobile home park industry is filled with a number of time-proven mantras. It has benefitted from various high-profile players that are often quoted in the media, as well as affiliated stories from other sectors of real estate that have remarkable overlap. The sum of this body of work is the collective wisdom of many who have gone before, as well as those who are still an active part of the industry. In this episode of Mobile Home Park Mastery, we’re going to review many of these items and what they mean to all park owners and operators.

Episode 144: Important Quotes, Sayings, Stories And Jokes Transcript

Sayings, mantras. Every industry has them. What does the mobile home park industry have? This is Frank Rolfe from the Mobile Home Park Mastery Podcast series. We're going to be talking about what the specific sayings, the formulas, the words of wisdom that we all feel and carry forward in the industry.

So here we go. Number one, a quote from Sam Zell. "When everyone is going right, look left." That's an important way to start because most people in the mobile home park industry have had to have the foresight to do the unthinkable, to buy a mobile home park. To most American investors, it's heresy. They think of mobile home parks as these nasty, horrible things with no actual knowledge of how they work with the money that they make. Zell is always very contrary, and has been throughout his industry career. So I thought that's a good quote to start, "When everyone is going right, look left."

Another quote I like, "Time kills deals." What that means is there's always a sense of urgency in everything you do. If you're looking at buying a mobile home park, every second you don't put it under contract, somebody else might. Every moment that you delay in signing the customer up to buy a mobile home, they may find one they like better at a different mobile home park. So I have a little sign in my office which says, "Time kills deals," and I've seen that same sign in other people's offices, so I think that's another good quote or mantra for the industry.

The next one comes from the eviction space and that's, "No pay, no stay." I don't know if Dave and I invented that or if someone did because it's such a great saying. I'm sure we're can't be the first to do it. What the theme means is that people have to pay their rent if they want to stay in your property. You don't do payment plans. Why? Because you're not a bank. There are things out there called banks. There are things called friends and family. You are not a financing institution. You are just a mobile home park owner. So basically if people want to live in your mobile home park, they have to pay their rent every month.

Here's another good evictions mantra or saying, it was a joke told to me in a Small Claims Court case. I was sitting there with a bunch of other landlords in my early days and an old man turned to me and said, "Before you evict someone, you need to walk a mile in their shoes." And I thought he was then going to give me some interesting ending and he then said, "That way when you win the eviction, you're a mile away and you have their shoes." Doesn't really mean a lot, I just thought it was funny.

Another saying is, "No play, no stay." Same as no pay, no stay, but on a different reason. This relates to the rules of the park. What it means is if you do not play by the rules, you cannot live in the mobile home park. Why? It's not fair to everyone else. Most mobile home parks have tighter rules or regulations than the surrounding city has. That's one of the benefits we give the residents. You can not under any conditions let somebody not follow the same rules of polite society as all the other residents because it's not fair to them.

If somebody has a home which looks terrible and they see it everyday when they look out the window, the guy with a terrible looking home, he looks out on all the nice manicured homes and yards. It's not fair to punish those who are doing a good job. So if you cannot play by the rules which are for the good of the greater community, then we won't let you stay in the mobile home park.

Here's another good saying, "The 60/70 formula." What does that even mean? It's a quick formula that Dave and I devised 25 years ago to help you come up with a good offering price when you're looking at buying a mobile home park, but the guy doesn't know what he wants. Here's how it works. You take the lot rent of the park and how many occupied lots there are, so it's number of occupied lots, times lot rent, times either 60 or 70. 60 if the park pays the water and sewer, and 70 if the tenants pay their water and sewer. And when you multiply those three things together, number of occupied lots, lot rent and then either 60 or 70, that gives you a ballpark price which equates to around a 12 CAP.

Now why is it important to have a 12 CAP? Well, it's important simply because when you're negotiating, as all Americans like to do, you want to start at a high price and work your way down. You can't go backwards. If I offer a price at a 12 CAP, or I'm sorry, a low price and work your way upwards. If I start off with a 12 CAP price and they counter it at a eight, I might be able to come up at a 10. So we're always wanting to start low on the price and high on the CAP, such that we have room to maneuver. And the 60/70 formula has been adopted throughout the industry as a great way to get the ball rolling on a price.

Next one is called a, nine three one. What's a nine three one? It means for every three calls you should have a showing and for every three showings you should have a sale or rental. So this helps you analyze what's wrong, what's deficient, in your sales program and your mobile home park. Because if you're getting at least nine calls in a week, you should be able to move at least one home. Now, that's very ballpark, that's very guideline. Based on the credit and the amount of down-payment your customers have, you may not always hit nine three one. You may have required twice that. Maybe 18 six one, but nevertheless, there should be a correlation between the calls coming in, the number of showings that are made, and how fast the product moves out the door.

Another saying that goes with that, "Trust, but verify." Ronald Reagan said it. The guy in our company who's just has a mastery, an absolutely wiz of sales and rentals always says it. And what it means is you can go ahead and entrust the manager to do the right thing, but you've got to verify it. You have to make sure that they are doing what they're supposed to be doing. And today we can do that with technology. We can now track how many calls are coming in. We can track all kinds of numbers, so for the first time ever we're able to very closely verify, but you must always remember that, trust, but verify. Don't just trust. You've got to have the verification on there also.

Let's move now to another quote from Sam Zell. Sam Zell says, "I pound on my people, taking risk is great. You've got to be paid to take the risk. The risk-return-ratio is probably the most significant determinant of success as an investor." Absolutely correct. If you read on Sam Zell's book, Am I Being Too Subtle? He talks about the fact you should always buy something that has high reward and low risk, and you should never buy anything that has high risk and low reward. So you have to have a very healthy risk-reward or you shouldn't buy that mobile home park.

Another saying in the industry I like is, "It's easier to change people than to change people." What does that mean? It means in our industry, you don't really have the luxury. We don't have that large an employee pool. We can go ahead and counterbalance someone who's not doing a good job with somebody else. Typically, most parks have only one manager. As a result with just that one player, you cannot afford to have a weak player. He could literally cost you your business, cost you your mobile home park.

So what that saying means is, it's easier to change people, which means to find a replacement person, than it is to change people, which means to change their behavior. You certainly don't have the time, even if you wanted to do that. IBM and big corporations can perhaps have intense training programs and a lot of patience and a lot of time to fix things like that, but in our industry, you typically do not have that luxury.

Another saying I think is very good is, "Problems are only opportunities in work clothes." That was, I quote from Kaiser, the steel magnate. Oftentimes with mobile home parks, we're buying properties who are in trouble. They have problems. But that's where the opportunity lies. When you bring an old mobile home park back to life, you created an incredible amount of value. So you should actually embrace and cherish those problems because the problems are what translate into big dollars in your pocket book. So I think that's always another good saying.

Here's another good one from Sam Zell. "Anytime you don't sell, you buy." So if we had chosen not to sell Equity Office for $39 billion, we would be buying Equity Office for $39 billion. And he's referring there to the huge sale he made right before the 2007 crash, when he sold off a huge amount of his office buildings.

But the same is true in any asset, in particularly in mobile home parks. If you have a mobile home park and you think that park is worth $900,000 and someone offers you 1.2 million, if you don't take that 1.2 million, you essentially bought that mobile home park back and that's probably not an intelligent maneuver. So anytime someone gives you an offer for any mobile home park that is higher than what you would pay for it, even if it happens two days after you bought it, you should probably take it. That makes the most sensible approach. In fact, Warren Buffet wrote an entire letter to his shareholders a few years ago on that very premise, that anytime you don't sell an asset you just bought it back at the same price. You need to look very carefully at any offering you have.

This is my final item and it's lengthy but I have it hanging on the wall of my office. I've always treasured this thing. I found this at an estate sale years ago. I liked to go to a lot of estate sales and antique stores. I always try to learn from the past, and I've always been fascinated with the Great Depression. And obviously right now and the troubled times we live in, that's probably a good thing to focus on.

This is something that was said around by a company called Hubbard and Company, they no longer exist. And they sold pole line hardware and bolts, drop forgings and galvanizing, and they're based out of Chicago. This is a letter that they sent to their salespeople, and I guess all the different vendors that they sold these parts to. And it's titled, "This is the way conditions look to us at present." The year 1930, so we know this is right after the Depression hit. So it hit at the end of 1929. Now we're 1930 and all American business and all Americans are in absolute shock because things have gone from being very, very good to horrible in a very short span of time economically. And it's titled The Little Black Hen. And this was banged out on a manual typewriter there in Chicago in 1930, so here's what it says.

It said, "The little red rooster. Gosh, all him like. Things are tough. Seems that worms are getting scarcer and I cannot find enough. What's become of all those fat ones is a mystery to me. There were thousands through that rainy spell, but now where can they be? The old black hen, who heard him, didn't grumble or complain. She'd gone through lots of dry spells, she had lived through floods of rain. So she flew up on the grindstone and she gave her claws a wet. As she said, 'I've never seen the time there were no worms to get.' She picked a new and undug spot, the earth was hard and firm."

"The little rooster jeered, new ground, that's no place for a worm. The old black hen just spread her feet. She dug both fast and free. 'I must go to the worms,' she said, 'the worms won't come to me.' The rooster vainly spend his day through habit, by the ways, we're fat worms have passed in squads back in the rainy days. When nightfall found him supperless, he growled and [inaudible 00:11:11] rough. 'I'm hungry as a foul can be. Conditions sure are tough.' He turned to the old black hen and said, 'It's worse with you, if you're not only hungry, but you must be tired too. I rested while I watched for worms, so I feel fairly perk. But how are you? Without worms too, and after all that work?'"

The old black hen hopped to her perch and dropped her eyes to sleep. And murmured in a drowsy tone, 'Young man, hear this and weep. I'm full of worms and happy, for I've dined both long and well. The worms are there as always, but I had to dig like hell.' Oh here and there, red roosters still are holding my sales positions. They cannot do much business now because of poor conditions. But soon as things get right again, they'll sell a hundred firms. Meanwhile, the old black hens are out and gobbling up the worms. Yours for more business, Hubbard and Company."

What does that mean to me? I've always found that to be inspirational because what it says is even in troubled times, the business is still out there. You just got to work harder for it. You just got to dig deeper to get it. And that could also be reflected when you're looking for mobile home parks. It can be reflective when you're looking for financing for a mobile home park that doesn't meet the normal cookie cutter ratios and items, and you have to dig deep to find a lender. Also holds true when you're trying to find the correct customer to buy that mobile home.

The answer is, you can't just go through the same format as you always have. Times change, things evolve. You've got to constantly be on the move, but you have to keep working hard. Don't never give yourself the feeling that you can give into failure because failure is just not an option if you want to be successful, they are polar opposites. So I've always found this letter to be inspirational because here's somebody in 1930, at the darkest moments in the Depression, telling the salesforce, "Guys, you can do this. Just get out there, work harder. You're going to find the worms. Don't just give up." And particularly in times like these, I find that very inspirational, and that's why it has a very special spot in my office.

Again, these are some sayings, some mantras, things that give us peace. Things that mean something to people who own and operate mobile home parks, but also relied to other items and [inaudible 00:13:26], even mobile home park related. But the bottom line is, is these kinds of sayings, these kind of formulas that give us all peace of mind, that help us transfer wisdom from the past to the new age. So hopefully you enjoyed this and I'll talk to you again next week.