Mobile Home Park Mastery: Episode 196

Turning Dealers Into Lot-Filling Machines

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Mobile home retail dealers are typically all about selling new homes – mostly to people putting them out on their farm or ranch. But there’s another side to the retail story. In this Mobile Home Park Mastery podcast we’re going to discuss strategies to have dealers bring in and sell homes inside your mobile home park. It can be a win/win business model if handled properly. And with the average occupied lot being worth around $50,000 more than a vacant one, it’s a concept that is worthy of consideration.

Episode 196: Turning Dealers Into Lot-Filling Machines Transcript

Mobile home retailers, those mobile home dealers you see out there along the highway, like Rodney Dangerfield they get very little respect, and that's really wrong because they can do a lot to help fill the lots in your mobile home park. This is Frank Rolfe, the Mobile Home Park Mastery Podcast. We're going to be talking about how to turn those retailers, those dealers, into lot filling machines, not the way you're thinking, not having them bring in new homes that they just sold to customers.

As we all know, there's not a lot of that which goes on these days, but instead to have them use your park as a repository for their older homes and newer homes, where they can sell them with a little bit of an edge. And that edge is all about location. We all know that in the world of single family homes, it's all about location, location, location. The same would be true for mobile home buyers except typically when they buy a new one from a retailer, it's sitting in a parking lot. They have to then go out and choose where to put it. However, when you try to sell one already in the park it's more what the typical American household is looking for. That turnkey experience of home and lot, home and location. It's really a very effective tool for them to sell homes when they can sell that turnkey package.

How would it work? How could you get a dealer to bring in their old inventory or their new inventory, into your park kind of like a model home, as a specc home, and then sell it inside your property? Well, here's how it works. First off, the dealer typically has not only new homes on that lot, they often have older trade in homes. These are homes they've allocated virtually no money to. They go through the experiment of claiming it's a trade in but it really isn't. unlike cars where there's a ready market for used cars, as they all know there's not really that big or ready a market for used homes. So the homes just stack up in their yard, not really doing any good.  No one ever really comes in and buys them.

So what they could do, however, is take that old inventory and put it in to a lot in your mobile home park, and then rehab that inventory, run the ads for it, and sell it right where it sits already remodeled, set up and skirted, inside your mobile home park. Hey, while we're at it, why don't they take one of those new homes? Maybe not the most expensive one they have, but it's been sitting around for a while, it's not selling very well sitting in a parking lot. Let's have them put that in your mobile home park, fix it up, skirt it, and get that out the door. Let's at least give that a try. That's how the concept would theoretically work, and there's no reason it wouldn't work. We've done it many, many times. It always has fairly good success.

So then the question would be how do you get that in motion? If the basic business model is definitely constructed in a way that should work, how do we get them to take the shot? Well the first thing you do is you get a list of all the mobile home dealers in your area, and you can cast a pretty big net. It doesn't have to be a dealer just down the street. Anyone in your entire metro area would be fair game. So make a list of all of those dealers. Then I put together a little pitch package, a little brochure, of exactly what I want them to do and how the program would work. The concept would be they take any home they want, bring it into your park, set it up, skirt it, rehab it, and you don't charge them a penny of rent until the thing is sold. They have nothing at risk other than the cost of moving the home in and getting it ready. Of course, they already have guys who do that pretty cheap. Unlike you as a park owner out scrounging around to find a home handyman guy that can fix up that mobile home, they already have people like that in their back pocket, and the same with the movers. So they should be able to get it into your park and set up at a cost far, far lower than yours.

Then, basically, you would go ahead and run the ads. The park owner himself may be the one who goes ahead and pays the ads. You can have your manager show the home. It saves them all the time and trouble of having to have someone run over and unlock the door, and lock it back. But when the customer is interested they then get deferred back to the dealer to cut the final sale. So basically once again, it's a complete win-win. It's highly efficient. You're using the best talents of everyone involved so there's no reason why this shouldn't work.

Now, not everyone is going to do it. You can make that list of all those dealers, you can put together your little pitch, you can go and talk to them. They're not all going to do it. Some have no used homes. Some are only selling double wides. A whole lot of the mobile homes sold in America today from those retailers, they exclusively go on farms and ranches. They're for land owners who may be looking for a home for themselves or for their kids, whatever the case may be. They don't sell hardly, some of the dealers sell nothing into mobile home parks so they aren't going to be a very good prospect for you. But others out there, they fit the bill perfectly. They've got the old used single wide sitting there as the trade ins. They do sell to people a little more scale. Those would be the best candidates, so you just hit them all up and say okay, who wants to give this a whirl? If you do it right, if you've got a good sales pitch, if you've got a good location of your park, you will find someone who will do it.

It's very, very simple. Just bring in one, just one. Let's test the program. If the one gets sold, then bring in another. You're not asking them for a big commitment, you're not asking to bring in five homes. You don't want them to bring five homes because if they're not any good to sell it, if that home is not what people want, then you know it's never going to work. So let's put a little moderation on it. See if you can go ahead and get just one to come in. So that's your whole goal when you pitch, is let's just give this a test. We don't know if it's going to work, we think it could work, and that old home sitting on your lot is not doing you any good at all gathering dust, taking up real estate, it's not very attractive from the street. Let's try this and see if we can get this going.

Now, what kills this program then, it sounds like it's got all kinds of reasons it should work. But why does it not always work? Well, let's go over the reasons the program might fail. First reason it might fail is that maybe your park, its location, its clientele, just can't find anyone who has got the decent credit or the down payment to buy the home. It happens to park owners all the time. So of course it could happen with that street retailer. He doesn't know what your clientele is like at all. The other problem would be if they priced their home too high. Sometimes, that's what the dealers want to do. They want to bring that old '89 home , the thing is only worth a native value of $7,000 and they want $30,000 for it. Once again, that probably isn't going to work because it's not something that someone is necessarily going to want. Or maybe they just have lousy sales ability. Maybe they're not good at closing the deal. They're so used to selling double wides for $110,000 they can't really calibrate their sales skills, they can't hone them where they can go ahead and sell stuff that's inexpensive that would go into a mobile home park.

So there are reasons that the test may fail, and if it does fail what ends up happening? Well, we've had it where they've actually pulled the home out, put it back in the dealership, or we've had them acknowledge it's a failure and they go ahead and sell it for what they can get and never do it again. But the number one reason these situations fail is when you start competing with them. Now what do I mean by that? Well, so you got the dealer bringing the homes in and they are selling pretty good, and then you say, "Hm, I think I want to accelerate my rate of fill." So then you start buying your own homes and bringing them in to compete with the dealer. Now the reason that is never going to work is because you're going to sell your homes a whole lot cheaper than they are, so you get money from the value of that lot. When that lot went from vacant to occupied, you get a whole bunch of money so you're willing to take even a loss on your home. The retailer, he can't do that. He doesn't get any value form the lot at all. All he gets is the profit or the loss from selling the home. So you're going to basically, you're going to undercut him.

The problem is you're going to have that same manager showing both homes, their home and your home, and which one do you think they're going to push more? Which one gets the bigger commission? Clearly, your home. So you're going to choke the program dead. You're going to stop it dead in its tracks. You're going to go in and I guarantee when you compete head on head, between you selling your own homes and the dealer selling his homes, you're going to win, it's guaranteed. Now the problem is now you've kind of won, but yet you've kind of lost because now what has to happen is you're going to have to go find the homes and bring them, spend the capital, take all the risk, and you could have just let the dealer do it.

So many times when I've seen those programs work, where the dealers start populating vacant lots in the park, the park owner themselves is who shoots the program in the foot because they start getting envious, desirous of faster and faster results. Now, if you have goals, if you want to fill a whole lot of lots, then probably the dealer isn't going to work. So if your idea is I want to fill four homes a month, well I can guarantee you need to be buying your own homes, bringing them in, and doing this process yourself because you're never going to get a retailer who even has four homes a park to put in  your park. However, if you just have a few vacant lots, you don't have delusions of grandeur, you're simply trying to get these last remaining vacant lots full, then working with a dealer in that capacity may work just fine. But the very minute that you decide to ramp it up and start getting into the same business they're doing, you'll win but you're also going to lose, you're going to lose them as doing it.

Now, it's perfectly worthwhile to tell the dealer on the front end to lay down the mechanics of how this will work. As much as you want them to bring in the home, you can't have them in there trying to sell that home in perpetuity. If they bring in the home and it sits there for now a year and a half and they've never sold it, it's really not doing you any good but of course it looks good because it's nicer to have a new home in that lots than a lot sitting empty. Structurally, it won't work and worse than that, there's opportunity cost. You're wasting your time trying to let that dealer do it when in fact maybe you should have just done something yourself. So even once you get them to do the program, you can't just let it sit there and rock and roll forever without having any performance.

So you might set down some ground rules with the dealer as to we're going to do this test, we think it will work, but here's how it's going to work. You've got to get the thing out the door within X number of days or months, or I think you both have to agree that it didn't work out in the end, we'll have to move on to something different. But the very minute you start selling homes what always is the kryptonite to the model, you're going to end the dealer's participation. Does this model work? Again, it works perfectly well in select parks. We've had it work fantastically in some areas. But it's really only going to work for you if you have expectations of a slower  fill rate where it's more their speed, not your speed, and you don't try and get into the business of competing with them. The minute you open yourself up to that channel, the whole train will derail. This is Frank Rolfe, the Mobile Home Park Mastery Podcast series. Hope you enjoyed this. Talk to you again soon.