Mobile home parks are mostly a cashless business today, with virtually all residents paying by checks, money-orders or automated clearinghouse (ACH). However, before you put away your change drawer, there are still some instances in which accepting cash is vital. In this Mobile Home Park Mastery podcast we’re going to discuss why having a firm policy of “no cash accepted” can cost you significant money without a more flexible framework.
Episode 307: Take The Cash Transcript
We all know that the modern mobile home park owner never accepts anything other than money orders and cheques or ACH, but sometimes, you really should take the cash. This is Frank Rolfe, Mobile Home Park Mastery Podcast. We're gonna be talking about those certain times as a park owner where the correct decision is to go ahead and take the currency, take the greenbacks, whatever you wanna call that thing which we call cash, which is widely dissipating from our life in America. But still, at certain moments, if you don't take it, will be a horrible lost opportunity. So what are those situations in which you need to take the cash? Well, the first one is in those states that require you to always take the cash, including regularly for rent. Some people do not realize that you can't have, in some states, the requirement that you only get paid in cheques, money orders, or ACH.
Why do those states do that? Well, because they wanna protect customers who don't have bank accounts, who apparently don't have the ability to go down and understand the market to make a cashier's cheque or money order, because they might be taken advantage of. And as a result, they try and protect those people and give them the fact that the landlord must accept the cash, so they don't end up getting evicted when they can't navigate the waters of these more complicated things. So first off, if you're in one of those states that does require you to accept cash, well, you have to accept cash. The manager can't say to everyone who comes in, this blanket, "Oh, well, we don't take cash," because you must. So, rule number one is, know if you cannot accept cash. Now, why don't we want to accept cash in Mobile Home Parks?
Well, we don't wanna accept cash for several reasons. Reason number one is you don't really have a good written record, and this is to protect both you and the customer if you take cash. If they go out and give you a cheque or a money order, there's an automatic receipt that comes with that, so we can trace it all back and we can tie it back. Another problem is when you give managers cash, they're prone to take some of it. It's called embezzlement. It happens in mobile home parks all the time. We found in due diligence, many mobile home parks with the amount of cash that's being pocketed by the managers, is vast. It's incredibly big. So as a result, we don't really want them to be handling cash. It's not smart for the business. Finally, it's not really safe for the manager to have it be known that there's cash in that office on certain start of the month, periods, because what might happen is someone might break into that old office because they think there's a whole bunch of money in there, which there may well be, and that would endanger the manager.
So cash just is not a good idea for your business, yet in some states, you must take a little bit of it. Now, what's another reason why you might take some cash? Well, let's say that I am evicting a tenant and the constable goes to them maybe at the moment where we're serving the writ of execution or writ of possession and says, "No, wait a minute now. Hold on there, hold the presses. I got a bunch of cash, I can pay that off." We get calls all the time from constables who say, "Well, the customer's got you. You're evicting them and I'm here to serve them with the writ, and they've got $2,400 in cash and I wanna know if you want me to take it." And the answer, of course, is yes, take it. Or you may have someone go to the office in the midst of eviction and say, "Gosh, you know what? Okay, here's the deal. I got $1,600.25 right here." You've gotta take that cash. What's gonna happen is, if you don't take that cash, if you say, "Well, let me think about it, I need a money order or a cashier's cheque or a cheque." What happens? Well, by the time you give them the time to think about it, they often change their mind. They have this alter ego, the good them, the smart them, the responsible them, and yet the irresponsible them, which is what got them in trouble to begin with.
So if they leave, if you don't take that money, then it's never coming back to you. It's all over. If they offer that cash to the constable and he doesn't take that cash, what's gonna happen is they're gonna just immediately think, "Okay, hold on. I need to reserve this cash because I'm probably gonna get kicked out. I gotta go use that to find more housing for my family." So in those life or death moments, in evictions, always take the cash. I don't even care if the problem is you get a call from a family member who... Or maybe they stop by the office and say, "Oh, I don't want Henry to get evicted in Lot 14. Here, I've got $2,300 in cash." Take the cash. Don't just knee-jerk, say, "Oh no, we don't take cash," because you'll never see that money again. The minute they leave, I don't care who it is, they're never coming back in again. They're not gonna go get the cheque or the money order. They're gonna move on to the next most pressing problem.
Next, when somebody comes to you and they wanna go ahead and buy that park-owned home you have, and they are gonna spend $10,000, $20,000 and they bring it to you in a sack of cash, we've had that happen many times. It seems impossible, right? Like, who in America today has $20,000 in cash, in $10s and $20s in a bag? Well, some of your residents do. They don't believe in the banking system, so the way they save money is they just put that cash in a jar or in a sack or in their mattress, and then at some point when they wanna spend it, that's how they produce it. They bring it to you in a big old bag. Now, if you tell them, "Oh man, we can't take that cash. You gotta go get us a money order with that thing," here's the problem. Most everyone knows in the US today, if you do something in cash, over $10,000 dollars, it's tracked by the federal government. And often, the customer who doesn't use the banking may have other issues of their own past life that they don't really want people to know what they're doing or what's going on. So the minute you tell them something like that, they're never coming back.
There's another park owner down the street that's willing to take the cash. So, you got to take the cash. I don't care if the manager goes out and embezzles $1,000 of it in that scenario, at least you got $19,000 on that mobile home, in cash, right there, which is infinitely better than all the other options on the table. So, take the cash whenever it's offered to you in that big, brown paper bag. Now, cash is an unusual thing, right? Because it is the currency of America, but at the same time, we don't use it a whole lot, it seems. Everyone always pulls out their Visa card, MasterCard, those kind of items. But nevertheless, it's not illegal to take cash. If someone brings you a bag of $20,000 in $20s, $10s, $5s and $1s, it's not illegal to deposit that cash. It doesn't make you a criminal enterprise. Many businesses take cash all the time. Restaurants always deal in a huge amount of cash. There's many businesses that are. It doesn't mean you're on the Ozark show, you're laundering money. No, you just had a mobile home for sale and the guy said, "I'll give you $20,000 in cash, and here it is in a bag," and you take it down to the bank and you deposit it.
The problem is, if you just take this blanket attitude of, "No, no, no, we don't do that. We just take the cheques and the money orders and such," you're gonna miss out on a lot of big dollar opportunities. Everything I just mentioned is big bucks. 20 grand's a lot of cash. 4,000 bucks on an eviction from someone who hasn't paid in a long time, that's a lot of money. You cannot miss those opportunities. That being said, you don't want it to be the norm. You don't want to tell the manager, "Oh yeah, cash is fine. Let's take a whole bunch of cash." No, let's only take all rent in cheques and money orders. So I guess the bottom line to it is you only wanna take cash in those unique, customized, very rare occurrences. Never should you ever take regular rent in cash, unless you're required by your state. But even then, only on those people who request it. Definitely, cheques, money orders and ACH are far superior. We're currently at about 92% ACH with our portfolio, and that's part of the industry going forward. Everyone wants to gravitate away from everything except ACH. It makes life so simple. But we can't just look to the whole world to be so complicated. Some people just deal in cash. There's nothing wrong with that. Currency for the US government is still legal tender and there are occasions when you definitely need to take the cash. This is Frank Rolfe from Mobile Home Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.