Mobile Home Park Mastery: Episode 217

Kung Fu Negotiation Moves

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The art of Kung Fu is in maneuvering your opponent’s momentum to achieve the desired result. And this holds true for smart mobile home park buyers, who have learned over the years some Kung Fu tactics of their own. In this Mobile Home Park Mastery podcast we’re going to review these strategies. All of these are win/win – as that’s the best way to buy mobile home parks – but are ingenious and highly effective.

Episode 217: Kung Fu Negotiation Moves Transcript

A couple decades ago, I took a class in kung fu. Never done it, before interested me, kind of an introductory class. I never always impressed how kung fu allows you to focus on very simple strategies that are highly effective, very, very clever, and also uses your opponent's force against them. This is Frank Rolfe, the Mobile Home Park Mastery Podcast we're going to talk about how mobile home park owners themselves have developed their own special kung fu moves that allow them to get the job done strategically, simply and using the other person's momentum.

First, let's talk about the idea of giving any mobile home park seller a cash and terms price. Now we all know that one of the beauties of mobile home park purchasing is the availability of seller financing. And this is only possible because moms and pops typically on them free and clear. And when you own something free and clear, certainly you can carry paper on it if you like just the same as you can sell it for cash. So how do we steer a mobile home park seller since it's so much more attractive for us as the buyer? How do we steer them into taking a note at closing, as opposed to the cash? And a great kung fu maneuver to do that with is by simply offering them two options when you initially go to buy the property: a cash price, and then a higher terms price. Now what this does is it steers those who would normally say, "No, I don't think I want to seller finance, I just want to get paid off in cash." It steers them to accept the terms price because it is higher. And as we all know, most sellers, if given two options of two prices, will always select the higher one.

Now, even for those who still are really reluctant to carry the paper, the simple fact that you've kind of got them thinking about it can also be effective. We've had many sellers who have changed their mind. They wouldn't carry paper on the front end. And then 30 days in they change their mind 60 days and they change their mind. We have had people just a few days before closing change their mind. What happened? Well, you planted that seed and it kind of grew because they came to find out when they talked to their tax accountant, when they talked to their broker at AG Edwards, they found out how little they would get back on their cash and how much cash they'd pay in tax. And a lot of that can be started, that whole conversation, that whole narrative, can be started when you give the seller a cash versus terms. Price is not two separate contracts. Again, it's just two options, Option A or Option B. Due diligence, financing contingency, they're in both offers. But sometimes when you say, "Here's my cash price, and here's my much higher terms price," they'll go with the higher one.

Number two, let's say that a mom and pop seller has a bunch of park owned homes, and they're older 1960s, 1970s, 1980s and they think they're worth a fortune. So they say, "Well yes, you can buy my mobile home park for $550,000." But on these ten 1980s Park owned homes, I want an additional $300,000, or $30,000 each. Now we all know that those old homes like that they're really worth nothing. Even a good repair they might be worth only a couple thousand dollars, that's what they blue book for, that's what other sellers sell them for. But some moms and pops have this idea that they're hugely valuable because they remember how much money they spent over the last 40 years rehabbing them. Or they're confused because they put most of the value of those homes into the park on home rental. But of course the smart buyer is going to convert it as much as they humanly can to the real property lot read.

Here's a kung fu maneuver on that. Tell them, "Well if you think this home is worth $30,000 then just go ahead and pay me the lot rent, and you sell the home." Now I one time, on a park that I sold, I stepped into their shoes. I actually did keep the home. It was a brand new singlewide in a park in Texas. I hated to give it to the buyer for very little compensation. So I decided I would keep it and I would sell it off over time and you can imagine where that went. Very first person I put in there as a tenant completely trashed the place, ran off. I was looking at thousands and thousands of dollars in renovation. I didn't even own the park. I didn't want to drive down there anymore. So I then deeded it over to the park buyer.

Third item is what's called down selling homes. Now what does that even mean? How do you down sell a home? Well, whenever you go into a car dealership coming in off an ad, typically they will try and up sell you to the next level of automobile. So if you come in to look at that Dodge Charger with the fabric seats, it's a loss leader, they'll try to upgrade you into a Dodge Challenger with leather seats. That's because the higher the price point, typically the more profit for the dealer. But in our industry, a better kung fu maneuver is to simply when someone comes in looking at your newest home, your most expensive home say, 'Well, would you like to see some other options that are less expensive?" Now you could only do this of course if you have some other homes besides the new one. But it always freaks people out because they've never before ever encountered any business that wants to promote something that's less expensive. Now as the park owner, it's not really less expensive, because if they buy that new home, I'm going to have to come out of pocket thousands of dollars to rehab this older home. And if they'll buy the older home from me, it saves me from putting that additional money in. On top of that, it makes the customer much stickier, much less likely to ever leave or run because they'll have their own thousands of dollars invested in getting that home back up to speed. It's always a good idea if you have even just a handful of homes, from a brand new home, all the way down to the worst home on the whole property, the oldest home in the worst repair, try and see if they have an interest in those older homes. Every time you can find somebody, and not every buyer will do it, most buyers will say, "No I don't really want an older home, I want this brand new that's ready to go now." Many people don't like to do home renovations, they don't like the uncertainty, or they don't have the capital to do it. But those of you can get who came in to buy the new home that you can convince to buy the older home, you really are way ahead and it's a great kung fu maneuver because again, people never anticipate it.

Another kung fu maneuver that marketers can use is off duty police. If you've got a crime problem in a mobile home park what do you do? Well, you know, the police could solve it. But they're too unfocused to do it, they've got way too much going on. They can't devote the resources to your property. So you can kind of kung fu hire the police yourself by arranging a hired off duty policeman. You can even select policemen who come in uniform with their own squad car. Now, it doesn't take a lot to fix problems in most mobile home parks. We're not crime centers. A study done by the US government show the mobile home parks had the same crime rate as surrounding subdivisions. We don't share that crazy over the top crime that apartments do. But still with as little crime as we have, there's really no way using the conventional system to get the job done. Because we don't have enough police. And we have too much crime in America right now. And when you add the two together from supply and demand, they simply can't supply the time that you need on your property. So again, just hire an off duty policeman, they'll get the job done. It's not that expensive when you look at what it might be if you didn't take action in your property. Just a great kung fu maneuver.

Another one is in some states, not all states, but in some states, you cannot tear down an old home unless it has the title. And this gets to be a problem because we all know that mobile home titling in just about every state is a complete nightmare. Nobody has the old titles, no one knows where the old titles are, you can't even find the serial number on the old home. The state doesn't give you any help whatsoever, even when you call they put you on hold for an hour. So if you buy a park in some states, and there's these old abandoned homes in there, no one even knows who they belong to. But they're sitting there sometimes with the windows broken out. And you ask mom and pop, "Why in the world is this here?" and they say, "Well, I don't know what else to do. I can't get a title on it. I can't even find a serial number on it. So it's been sitting here for years because there is no option available to me otherwise." Here's a kung fu maneuver for you" go get those homes condemned. The city Inspector, the health inspector, anything having to do with health and safety takes precedence over virtually all the other laws. So if they will come out and look at those old mobile homes with the windows broken out, and they'll say, "This is unsafe, this can't be here. As a city, we refuse to have this kind of thing in our city boundaries." And they'll go ahead and condemn those and put a big old red tag or red sheet of paper on them saying this home condemned. That typically allows you then to go ahead and tear the home down without the title.

Now if you're in one of the states, where you don't need a title to tear down a home, well then disregard what I just said. If you're in a state where it does, at least check it out. Don't do it without talking to your state mobile home association doing your own due diligence. But in some cases, the way to get around titling law, to get the job done, to get the job done that needs to be done, you don't want to have these old abandoned park owned homes sitting in mobile home parks. It's a terrible idea. It attracts all kinds of transients, criminal behavior, and it's hideous and horrible looking for the good residents who are paying rent. So sometimes you can get around the titling laws and stupid things like those abandoned parking homes, which anyone would clearly in government say this is a bad idea. But in America today, we're so bureaucratic, we're so off base, people just don't grasp it, they don't go out in mobile home parks, they don't see the reality of their bad decisions. So next time you've got those old abandoned homes and you don't have a title and you can't tear them down without a title, don't you know, go get them condemned. The city inspector will come in and condemn them often based on the laws of your state. That gives you the ability to go ahead and get them removed.

The bottom line to all this is there are some very clever strategies developed by park buyers and park owners over the decades that allow you to use the opponent's force against them. And at the same time, very, very clever, simple maneuvers that always seem to effectively get the job done. This is Frank Rolfe, the Mobile Home Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.