Mobile Home Park Mastery: Episode 130

The Benefits Of Solitude

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Film star Greta Garbo used to exclaim “I want to be alone” when approached by fans and even other actors. And this sentiment can also have beneficial aspects in certain functions of the mobile home park buyer and operator. As you’ll see, there is power in solitude: the power of making better decisions. While many decisions a park owner makes work best with a spirit of inclusion of all parties involved, there are certain moments when being an independent thinker pays big dividends.

Episode 130: The Benefits Of Solitude Transcript

"I want to be alone." Those were the famous and frequent words of Greta Garbo, the Hollywood film star of the 1920s and 30s. She always wanted solitude. She wanted to be away from everybody else, away from the public. And for many mobile home park owners at certain moments, that's a really good way to live, free from the view, free from the opinions of others. So let's go over five times mobile home park owners should want to be alone.

First, when you're just choosing to invest in mobile home parks in general. Most people don't understand them. Most Americans hate them and most Americans hate the entire idea of mobile home parks and certainly those who own it. So if you're going to go into the mobile home park business, you have to be independent enough not to worry about what people say.

When I bought my first park, Glen Haven down in Dallas, everyone who heard I was buying the park gave me all kinds of words of wisdom, all completely wrong. One person told me I would be killed owning the mobile home park. Another person told me there can't be any money in mobile home parks and they were all wrong. In fact, I found quickly in the field myself, the mobile home park industry was nothing like the stereotype that I had been taught thanks to the United States media. But again, it's really hard to elect to buy and operate a mobile home park if you talk or listen to others because they will have nothing but negative energy, negative sentiments against it.

Another time is when you're buying that mobile home park, it's very important often that you might want to close separately from the seller. Now what do I mean by that? Well, most people think when you have a real estate closing, that you and the seller have to be there on the same day, at the same time to do it. But that is a fallacy.

What really goes on as a title company prefers to do it that way because it's simple for them. They have both parties there. They turn to the page, there's two signatures, they have you each side and then they notarize and they move to the next. And if they do it separately, they'd have to do that thing two times. So clearly for their own selfish reasons, they would rather have you close together. But as you'll soon find out in your mobile home park career, it doesn't work that way. You can have people close in different cities even.

So why would I then prefer to close separately from the seller? Well, here's why. When you are at the closing and the seller is signing over documentation and giving up an asset, which is often their only asset and their only large asset and something they built from scratch has spent their whole life on, things can get a little strange. It can be a very emotional time for them. They feel almost like they've sold out something valuable, that they've let people down, perhaps the manager and the residents. And they're always looking possibly for some out at the final moment.

If you're there minding your own business, they can suddenly turn on you because they believe that you are the culprit that forced them to give up this precious asset, even though it was their idea. They wanted to sell. They listed it with the broker. They agreed to everything from day one. In the final moments, things can get really strange. I've seen deals blow up right before me, fortunately not one that we're involved in, but I've seen deals that blow up because people choose to close at the same time and in that one brief moment together, the seller who's been very, very happy and very, very supportive of the buyers suddenly turns on them, seemingly overnight, over the most trivial items. So it's often best to, again, close separately from the seller.

Another time when it's a good thing to be alone, he's you need to stay physically separated from the residents in a mobile home park. Here's the flow. Here's the organizational chart. You have residents, you have the manager, the manager reports to you. The residents do not report to you. If you mess up the org chart, things are not going to work effectively. People are going to look at the manager only selectively as being in power, but if they don't like what the manager says or does, they're simply going to go to you as the owner to try and have you override it. It doesn't work as a business.

What needs to happen is you have a manager. They manage the property, they are the point of contact for the resident. If the resident is unhappy, they need to voice that frustration to the manager and then the manager can then contact you. But you cannot wildly disperse your phone number, your contact information to all the residents.

Now, that's not entirely true. We also fully recommend that every park owner have a helpline. This is a phone number and an email address, which is where people can contact in case of problems. You've got to have that channel because what if your manager goes rogue and nobody can reach you and yet the manager will not tell you exactly what's going on? So you have to have that backup ability. But again, and even in the backup ability, you're not going to get everyone in the entire property calling you or emailing you simultaneously. So it allows, on the big things, the big moments, for you to stay in the loop of what's going on. But on day to day activities you don't need to manage. That's why you have the manager.

Some of the worst messes I see people get into, and I'm as guilty as anybody, is if you own a property that is too near your home or your office and you visited it too frequently and you let people know, every time you're there, hey, I'm the owner, maybe you do it out of ego, maybe you do it because you think it's good for the business, but it's not. Next thing you know the residents are confused. Who's the manager? Is that the person there with the sign in the yard that says manager, or is it you, the owner? And then everything becomes dysfunctional. So you don't have to say aloof from your residents spiritually. You want them to all be happy. You want everyone to realize that the residents are where the money comes from, so they are the customers. They really hold all the cards. But at the same time you've got to have the org chart. You've got to have some methodology in which the residents go to the manager and the manager goes to you. The minute you put yourself on the same level as the manager in a workability mode, it always signals disaster.

Next time you need to be separate and not listen to others is when choosing the lot rent level for your mobile home park. Here's what happens. You're running a business and there is, contrary to what some people would say, there's a very scientific methodology on selecting the correct lot rent. Typically what you do is you get the comps of all the other mobile home parks in the market. Using street view, you go ahead and rate your property against the others and you will soon see where you fit in. It's not complicated. You'll say, ah, well the nicest property in town with the pool and the clubhouse, it's running for $550. The worst property in town on the lagoon and the well where the homes don't have skirts, it's at $195. And the ones kind of like mine or seem to be in a range of about $350 to $400. And I'm right now at $330 so I'm going to go ahead and elect a $30 increase to take me to $360 so I can stay right where I'm supposed to stay as far as rents. You also look at the metric of apartment rents, single family homes, everything else. And then based on all this, you make the independent decision of what the rent level will be for the next year. That's the correct way to do it.

But what happens is if you don't do that by yourself independently of others, you'll get all this pressure. The residents, they don't like higher rents. The manager, they don't like higher rents because when you raise the rents then the tenants all come and complain to them and they don't much like it. And of course local politicians don't like higher rents because they love this narrative in America right now that anyone who raises rents must be a predatory capitalist, because for some reason all businesses should keep prices insanely low apparently. And that's not really going to get you where you need to be.

I think you need to put on a white lab coat when choosing rents and look at the whole thing. But remember, you are a for profit business and there is a thing in America called the right to elect your rents. Ff you're not in a state with rent controlled and rents can be set by you to whatever limit you want. And there's no need for you to set artificially low rent. That's what mom and pops did for all those decades. We call it mom and pop quantitative easing. What did it get them? Well, not much. What did it get? The American public will not much either.

Mobile home parks could be so much nicer. We're starved for capital expenditures, to keeping them in good order because the rents would not support it. And as a result, people had a lower quality of life than they could have. And now you as the person bringing that mobile home park back to life, you're going to need to set the rent levels that do allow for capital expenditures going forward and do allow you to make it a nice, clean, safe, affordable place to live that people can be proud of. But it's very hard to make the decision to raise rents or to set rent levels when you do it based not on the facts, not on your own research, not in your own independent thinking. But when you ask the opinion of others.

Finally visiting the park. Whenever you go and visit your mobile home park, the most essential thing you must do is not tell anyone you're doing it. You need to be totally independent of knowledge of your manager or anyone else of the day and time of your arrival. In fact, it doesn't hurt to let them know it can't possibly happen. Tell the manager, yeah, I'm going on vacation starting the next Wednesday, when in fact you start showing up on Thursday because they didn't expect it could possibly happen.

When you keep people in the loop of your movement and when you will arrive at the mobile home park, here's what actually happens. They fake it. They stage it. It is the only time of the year perhaps they mow it properly. Make sure everything is picked up, make sure there's no trash in the trash enclosure. But that's not fair. That's not what you want to see. You're going there to see what it looks like every day. You want to see the actual daily performance, not some trumped up attempt at making the park look better than it ever has before. So you must never tell the manager when you'll be there.

Now you'll say, well, but wait now, if the manager doesn't know, how do I meet with the manager? I would rather not meet with the manager and catch them off guard and see what's really going on in the property than to prearrange the meeting. You can always talk to the manager by phone. You can always talk to the manager by FaceTime or Skype. That's not really essential. What's essential is that you see for yourself what your residents see every day. And the only way you'll be able to know truthfully and fairly what they see is if you arrive unexpected. It's just the only way to do it.

So the bottom line is Greta Garbo was completely correct. I don't think she ever owned a mobile home park. Not sure she ever owned any real estate at all, but there are times when you definitely should want to be alone. This is Frank Rolfe, the Mobile Home Mastery Podcast Series. Hope you enjoyed this. Talk to you again soon.