Wayne Gretzky once said "you miss 100% of the shots you don't take" - and that's as true for mobile home parks as it is for ice hockey. In this Mobile Home Park Mastery podcast we're going to discuss why it's essential to make offers regardless of the odds of success, as well as some tips to make those offers better received. Since success in buying mobile home parks is all about volume, it's essential that you take those shots.
Episode 222: No Shots No Glory Transcript
Wayne Gretzky once said that, "You miss 100% of the shots you don't take." This is Frank Rolfe, the Mobile Home Park Mastery Podcast. We're going to talk about why Wayne Gretzky was so correct not only in ice hockey, but also in making offers on mobile home parks.
Let's first analyze why you should take every possible shot you can and making a mobile home park offer. You have no risk in doing so, no downside at all. If someone has a mobile home park for sale at a certain price, and you want to go ahead and throw out your price which is significantly lower, what's the worst that can happen? Nothing. What can they do? Hang up on you? Yell at you? Belittle you? That doesn't seem like much of a price on what could be a once in a lifetime opportunity to buy a mobile home park at a really good price. So since there's really no downside and making as many offers as you can, it doesn't cost you any money to make an offer, then you should definitely do it. It's stupid not to make lots and lots of offers.
Also, you never really know how the seller will respond. You don't really know what they're thinking. I've made offers to people that I thought seemed frightfully low, only to find them to either accept it immediately. Or maybe call me in a few days to accept it. Or maybe to counter and come to a price that's somewhat similar to what I threw out. Sellers are just like anybody else. It's a supply and demand world. It's a competitive world out there. If they throw their price out there on their mobile home park and no one takes the bait, and time ticks and nothing's happening, at some point they start to get anxious, sometimes even desperate. They actually lose all the confidence they had when they threw out that high price to begin with. And suddenly, at some moment, they decide to cave on the price. They decide it's not moving, it's priced inappropriately, it's starting to gather dust, it's starting to get embarrassing, I better go ahead and mark it down. You want to be there at that moment when you mark it down. But you won't know if the moment is there unless you make the offer. You've got to take the shot and make the offer because you really don't know what's going on in the mind of the seller. Don't think for a minute that you can second guess what the seller is thinking because you can't. All you can do is throw out the offer and see what happens.
Also, there's a power of volume in our industry. The more offers you make, the better you do. It's not just true in mobile home parks, it's true in anything in life. The more shots you get, the more the odds are in your favor that something will hit. The more stones that you turn over, the more likely you are to find what you are seeking. So it just goes without saying, therefore, that taking lots and lots of shots is a smart thing to do, no downside. It might work and the more you do, the better your odds.
So how do you improve your odds when making all those shots? Making all those offers? Well, the first thing you want to do is you want to make sure that you calculate your offer carefully. I've written lots of books, written a whole course on mobile home park investing. And I've always advocated that you offer a price that is within the realm of what you think something's worth. Like anything else when you're negotiating, and you want to start low, because you can't ever go back down. But you have to be realistic in that initial offering. There's a science to mobile home park investing. You've got to calculate what you think that park is worth. And on top of that, you've got to calculate what it can be utilizing that raw material to your advantage. Maybe a year from now, maybe 90 days from now, whenever you make that first rent raise, whenever you cut that cost. Remember there's some key drivers to making money with mobile home parks. In a nutshell, it's raising rent, filling lots, pushing water and sewer cost back on the customer, cutting any other excessive cost. And then finally making the park a nicer place to live, which benefits you with a lower cap rate, a happier customer base, the ability to maintain and keep your existing customers, and attract new ones.
Now, when you are buying some of these properties, particularly ones that are heavy turnarounds, all you're really buying is raw material: a permit, the actual infrastructure of whatever the park is built. But you can change that business model significantly from what Mom and Pop had, sometimes in a huge manner nearly immediately. Isn't it fair to include some of that in your pricing? I would think so. But at the same time, don't give away the farm. Don't give away all of the improvements you can make for the next several years. But when you're trying to make an offer on a property, in a competitive market, you have to be realistic in what you do. So make sure that when you make an offer, you've thought very carefully through it. It's not something you just randomly throw out, make sure that it makes sense, because any offer that doesn't get a counter is a failed offer.
Also, you will do better in the matter as far as how you are received based on how you present it. It's very important to me to preface an offer, particularly when you're offering far, far lower than what the seller is asking, is to start off by saying, "I've run the numbers, and here's where I come up on it. But tell me what I'm doing wrong." Offer to them to put in their input. Be consultative in your approach. Don't insult them, tell them, "This is what I come up with," and you can even tell them the mechanics of how you did. But again, maybe you missed something. Share with them what you're doing and see what they're doing. And maybe you did miss something, maybe you forgot the fact it comes with a eight unit apartment complex, things like that. But don't present it with "Oh, your price is stupid, here's what I think it should be." Instead, just tell them that based on the information at hand, this is where I calculate the price to be but tell me what I'm doing wrong.
Also listen to what they say. Sometimes with what the seller tells you, you can see how to morph the offer into something more attractive to them yet that still is compelling for you. Often that can be found in the financing. Sometimes the price doesn't make sense, but it does make sense when in the context of seller financing, perhaps at a low interest rate, or more attractive structure.
Finally, remember, the whole concept of bonding is such a strong force in our industry. Lots of sellers and most older Americans start to realize there's more to life than just money. They tend to help to try and favor people that they like. So be someone that they like. When you start throwing out lots of offers and talking to sellers and saying, "You know, here's where I come in at this. And here's why," in the course of that conversation, the seller may decide that they like you. And just because they like you, they may decide to finally drop the price and come down to your offer. And you spurred them on. You were the catalyst of that decision, simply because you started to bond with them.
The big item I think for Wayne Gretzky's quote is you don't want to live a life of regrets. If you don't take shots and lots of shots and make lots of offers, then there's no doubt that if you don't buy a mobile home park, you'll always regret that you didn't make more offers. And even if you do buy a park or two, you'll always regret the ones that you didn't make offers on. Many people have said the worst thing that can happen to you in life is not the things that you do, but the things that you don't do. You don't want to reflect back years later, particularly as you're driving by various mobile home parks that you might have owned, and second guess yourself and say, "Gosh, why? Why didn't I make an offer on that?" The worst is when you hear from other people, "Hey, did you hear that mobile home park sold?" and you later find out roughly the price and it's lower than you yourself are going to offer, because that person took the shot. They made the offer. They presented it properly and they were rewarded with getting the deal under contract.
The bottom line to it all is Wayne Gretzky is completely correct. You have to go ahead and take those shots. And if you don't, then you have nobody to blame but yourself. And unlike Wayne Gretzky when Wayne Gretzky took a shot in a hockey game, every shot he took that he missed hurt. Hurt the team hurt their chance of winning. It was a shot that somebody else might have taken succeeded with. You, however, have no risk whatsoever when you take your shots, when you make your offers. There's no way it can ever count against you. So the next time you see a deal that looks attractive to you, you like the location, you like the infrastructure, make the offer. Don't hold back, don't second guess. Don't be afraid to embarrass yourself. Go out on a limb and do it. There's an old saying, "Behold the turtle. It only makes progress when it sticks its neck out." Go ahead and make lots of offers take lots of shots. You'll be really amazed at how well things will turn out for you. This is Frank Rolfe, the Mobile Home Park Mastery Podcast. Hope you enjoyed this. And I'll talk to you again soon.