It’s one thing to buy and renovate a mobile home, but that’s of no value if you can’t properly rent or sell it. As the 5th largest owner of mobile home parks in the U.S., Frank is going to discuss his lessons learned from the sale or rental of thousands of homes across 30 states. You’ll learn what the 9/3/1 template is, and other valuable insider secrets that can help you to get your homes out the door and help solve the affordable housing crisis one home at a time. This is the fourth in our five-part series on mobile homes.
Episode 22: Insider Secrets To Selling Or Renting Mobile Homes Transcript
Trailers for sale or rent. It was a hit song for Roger Miller back in 1964. This is Frank Rolfe with Mobile Home Park Mastery. I'm going to be talking about the insider's secrets of how to properly rent or sell a mobile home. These are some things you may not be aware of that we have found over the last 20 years as being very valuable. This first one is a piece of the bedrock to properly analyzing and getting homes out the door. It's called the 931 report. Now, Dave and I noticed over the last two decades that the sales or rental process has a lot of commonality between each mobile home park. You get roughly three calls to equal one showing and three showings equals one sale or rental. There's a nine call for every one home rented or sold ratio that's pretty commonplace across all states, across all mobile home parks.
Now every park we buy, and that you should buy, we've done a test ad to make sure that we have enough demand to meet that initial nine number. We don't buy a park unless it gets roughly nine or ten calls a week. Now, if I can harness those nine calls, I should then get three showings. With my three showings, I should never go without getting at least one sale or rental. The 931 report is extremely important in figuring out where you are screwing up, if you are in fact not getting enough homes rented or sold. If you're getting the number nine on the calls, which that should be an assumption that should be proven out in fact with your test ad, then that should translate to three showings.
But let's say it's not. Let's say you get nine calls but you only get one showing, or no showings. What that means is basically whoever is answering your phone either is A, not answering the phone, or B, not doing a good enough job with the customer to have them come in and look. That is a call answering and/or salesmanship on the phone issue. If you're getting three showings but you're not getting any homes rented or sold, what that means is whoever is doing the showing does not have A, the ability to show up on time to actually show the home, or B, the salesman ability to go ahead and convince them to close the sale and sign the contract. It could also mean that your pricing is out of whack for the market, or that your product quality is out of whack for the market. But the 931 report in our opinion is probably the most important way of doing an investigation on a weekly basis of each park to see exactly what's going on in your sales or rental process.
Number two insider secret. You can never start the process of selling any mobile home and doing a rent to own or a mortgage on it unless you fully understand and abide by the rules of the SAFE act and Dodd Frank. Most people do not even know what those are because they got very, very little advertising when they came out. The SAFE act was in 2008, coming out of the 2007 housing crisis, the government had to blame somebody and they blamed the mortgage companies, although we really know of course it was the consumer who overstretched their ability to pay. However, they had to blame someone, so the mortgage companies, they're the ones that we all point our finger at and say "Shame on you." To protect us from evil mortgage companies, they came up with the SAFE act. At that moment in 2008, you could not create a new mortgage unless you were SAFE act licensed and compliant.
Then they brought Dodd Frank in 2010, which added on a whole another giant several inch thick compilation of laws. Now, even you, as a mobile home park owner, have to abide by this. This is our laws of the United States, so you have to meet the requirements of SAFE act and Dodd Frank, even if you don't know about it. There's so many people who don't because they never saw the mention. There were no billboards put up. They didn't send letters to any park owners saying "Hey, now there's this SAFE act thing you have to abide by." If you don't know what I'm talking about, you need to A, Google it up and read about the SAFE act and Dodd Frank. B, talk to your state mobile home association and learn what they mean. C, become an expert on the topic. You cannot possibly want to go crosswise with the US government by failing to be licensed and following the rules of the SAFE Act and Dodd Frank.
And don't be thinking this only applies to mortgages, because the State of Ohio early on claimed that any rent to own transaction was a, "Disguised mortgage," and then a lot of other states got behind what they said and said, "Hey, ditto for us." None of this has ever been proven in case law to our knowledge. I'm fully unaware of any park owner ever having an action against them by the SAFE Act or Dodd Frank folks. But nevertheless, you don't want to be the first one. You don't want to be the pioneer. So before you would ever think about selling and carrying paper in any format, including rent to own transaction, you need to learn all about the SAFE Act and Dodd Frank.
Next item, whenever you put your ads into either rent or sell a mobile home, they need to always go under the mobile home for rent section, not the mobile home for sale section. Now, why would that be? If you're wanting to sell the home, wouldn't you put it under mobile homes for sale? Well here's the issue. We think that's what's happened is that so many customers have learned that they do not have sufficient credit or down payment to meet the requirements of the mobile home dealers out there that they think that mobile homes for sale are dealer ads and that mobile homes for rent are the kind of ads that they can qualify for. As a result, you'll find you'll get a lot more activity off any ad that says, "Mobile homes for rent," than, "Mobile homes for sale."
Now if you have the money, go ahead and run both. But if it's $250 to put it on mobile homes for rent, and a second 250 to put it in the classified ads under mobile homes for sale, you might just want to go with the rent, because you'll probably get most of your really meaty calls that will actually result in an actual closing out of the mobile homes for rent. Insider secret number four, use a credit company when you do your screening that simply tells the park manager yes or no. Do not give the park manager insight into the actual criminal and credit report on the customer.
Why? Privacy of information issues. In the olden days, what would happen is the park manager would have access to the credit records of everybody. You as the park owner would pay a certain amount and that would give the manager credit access to the customer to see what was going on with their credit and criminal. Those were in days where in America was a lot less litigious obviously. Today, if you go with those same services, and yes they do exist, the problem is going to be that your manager is going to have private information on that resident, and if they move in, you know the likelihood is very high they will tell their best friend something about the resident, and that might spread throughout the park. It might launch you into litigation for privacy of information failings.
So the best thing to do is to use a credit screening company that simply allows you as the park owner to set the bar on credit score and on criminal, and then they do the search. They read the insider information, and then the credit company itself tells your manager a simple accepted or denied, approved or denied, yes or no. Don't let your manager inside those people's information. It's a very, very scary thing to do. And now that they have these new screening processes available, it makes absolutely no sense why you would even want to do that.
Insider secret number five, mystery shop. Mystery shop constantly. Mystery shop every day. Mystery shop when you're driving to the mall. You can never get enough mystery shopping in. That allows you to really know what's going on with your mobile home park when you're not there. How do you do it? *67 and dial the number for the home for rent or for sale in your park and just simply see what happens. See if someone answers the phone. See if they answer the phone with a cheery, "Hi, Big Oak Estates. How can I help you?" Or if they answer with, "What do you want?" Then, when they do answer, simply say, and don't use your normal voice, disguise it a bit, "Do you have any trailers for rent? Or do you have any mobile homes for rent?" And let them run with the ball and see what they say.
What they may say may alarm you. They may try and pre-screen the resident when there's no reason to pre-screen the resident, start asking them lots of questions on, "How much do you make," and all kinds of information which you should not typically ever ask a resident, and certainly not when you're trying to get them to come in and look at it. Or in some cases, because they don't want to be bothered with a showing, they may say, "Oh no, we're full. We don't have any homes available." Even though you might have 10. Now, how else do you mystery shop?
Well, if you want to take it a step further, if you're concerned that you're getting a lot of people calling and a lot of showings and no closing, there's nothing to stop you from going on Craigslist and hiring somebody to go by the mobile home park posing as a customer to see what happens. That will let you know if the manager even shows up to show the home. Or when they go to show the home, do they have really good sales ability? Or is it just awful? Do they tell the resident, "Oh, you wouldn't want to live here. There's so many better mobile home parks nearby. There's one down the street. I think it's even cheaper."
Now why would a park manager throw you under the bus like that? Well, a lot of reasons. Sometimes the park manager like having more vacancy. They just don't like the density. Other times, they look at the resident, every new resident's been a pain, someone they have to collect from, someone they'll have to write up a rules violation notice, something that might offend their next door neighbor best friend. So there's a lot of reasons why they would throw you under the bus. The key is making sure they can't throw you under the bus.
Now, the final item goes kind of with mystery shopping, and that's called the exit interview. Now what this means is you actually call customers who did not go forward to rent or sell the mobile home with a simple question, "Why? What did we do wrong? Where did we screw up?" You will be amazed how many times you will unlock some very, very important information for your mobile home park by asking people who decided not to live there why they made that decision. You'll learn that your price may be too high. You'll learn that the quality of the product may be not in line with what they want.
You'll learn that the park itself may have a bad reputation. Then you know that in order for you to succeed, you're going to have to fix these items. I'll give you some real life examples. We had a property once where we just couldn't get any homes out the door. Nobody was going to buy them, no one was going to rent them. And what we found was in that particular market, people could not afford more than about a thousand dollars total. Yet we were asking to what amounted to more like $1400 in the form of their deposit and first month's rent. So as a result, we realized that we had to lower that price down to a thousand. Once we did that, people started flowing into the homes again and everything was solved.
We've also found in exit interviews there may be another park in the market that's offering a move in special superior to what we have. And what we need to do is we need to match that special. Other times, we found people just don't want the certain kind of home we brought in. They don't want home that's maybe two bedroom, they only want three bedroom. Maybe they don't want an older home, they only want a newer. Maybe they don't want a newer home, they only want an older. This is very, very important information for you to have, right? Because as you start buying more mobile homes to move into those vacant lots, you want to make sure you're completely on top of what your customers are looking for.
Otherwise, it's very inefficient. There's no win win if you bring in homes that they can neither afford, nor do they actually want. So exit interviews, although a little awkward, calling people who decided not to live there, can be chalk full of really, really valuable data that you can't really get from any other source. So I'd heartily recommend any time you have home that are not moving ... Now, bear in mind, remember our ratio, nine calls equals one sale or rental. So that means you're going to fail in eight customers before you get to that ninth that goes through. So it's not a factor that you should close every single person that comes in the door.
But you should close a high enough ratio to tie back that 931 report, and if you're not doing that, it's a great idea to call people and say, "Hey, what happened? Why didn't we get your business?" Because you may find things that you never knew before. And these things could be the most valuable thing for your business. Bear in mind, it's very important when you are filling vacant lots, when you are trying to rent or sell homes, that you go very slowly and methodically and learn all about your customers as you go. You need to look at every customer as a learning experience, even those that don't take the home are the source of really good data.
That allows you to very much hone and fine tune the final decision of what kind of homes you bring into that property. And when you can get in the sweet spot of what customers want, coupled with what you're bringing in, it's amazing the power you can unlock then. We have properties that we filled a hundred lots in in the span of a year or two. Think of the value you create. If a vacant lot and an occupied lot is a $30 thousand difference, and you can bring in 30 homes, then that's a million dollars nearly of value you've unlocked if you can just master the process of what customers are looking at and properly meet that 931 report and get those homes occupied.
Now, in our next, in our fifth part of this five part series on the insider secrets of all about mobile homes, we're going to have our first interview. We have had no interviews so far on the Mobile Home Park Mastery podcast. And we wanted to save our first interview for what we think is probably the most important home program in the United States. And that is the one brought forth by 21st Mortgage, which is a part of Warren Buffet's Clayton Home empire and 21st Mortgage empire. It's a situation which allows park owners to fill vacant lots with effectively zero down and zero out of pocket.
It's a very exciting program. We're, in fact, the largest users of that program in the United States. And we have somebody from 21st who's been nice enough to come on and tell us all about the program, its origins, how it works. I think you'll find it to be very, very enlightening, very, very important step if you're looking at buying or already own a mobile home park, because there's nothing greater in the world than the financial power of filling vacant lots, particularly when you can do it with zero out of pocket. This is Frank Rolfe with Mobile Home Park Mastery, and we'll be talking to you again soon.