The Dow Jones Industrial average ended 2018 with loss of around 6%. Meanwhile, Treasuries and CDs did not even keep up with the pace of inflation. In a nutshell, traditional investment vehicles have failed to deliver. And that performance looks to remain the same in 2019. So really the growth in momentum of mobile home park investing has something to do with the decline of traditional money management methods. We remember back in the 1990s when virtually nobody invested in mobile home parks. The Dow Jones began 1990 at 5,103 and then tripled during that decade to about 15,000. Given that performance, who would even think about buying a “trailer park”? Well, times have changed. Following the Dot.com bust, the market fell by a third, and then declined significantly more during the Great Recession in 2007. The doubling of the Dow Jones between 2009 and 2019 has now peaked and changed direction. So really the future of mobile home park investing is based, to some degree, on how confident you are in traditional investing options. Personally, we have zero confidence in the markets. It’s only a matter of time before the current positive economic times collapse into another recession with the Dow falling further. And since the Fed views quantitative easing as the only vehicle available to jumpstart recessions, interest rates (and Treasuries and CD yields) will only go lower, as well. The bottom line is that we’re more than happy to focus on the alternative investment strategy known as mobile home parks. We view them as the ultimate contrarian option to benefit from U.S. economic decline, and we love the fact that they have had their supply shut off since the 1970s, thereby creating a “moat” that protects our investment continuously. In a world of uncertainty and financial upheaval, we take great comfort in knowing that our investment dollars are centered on the basic need of affordable housing and we have no reliance on anyone but ourselves.
Memo From Frank & Dave
Why Mobile Home Park Residents Are Well-Suited For The Next Recession
If you assume that a national recession is nearing, what group of our population is best-suited to deal with the strains of this economic upheaval? The answer is simple. Of those holding employment, mobile home park residents are the best insulated from negative impact from recessions. But why?
Back-stopped by minimum wage laws
While an executive earning $300,000 per year can free-fall in wages when searching for a new position, those earning $10 to $15 per hour can only retreat a small amount, as they have their wages guaranteed with a floor called “minimum wage”. This minimum earnings law requires that all employers pay at least $7.25 per hour in most states (although some have increased this to $10). The bottom line is that lower-earning Americans have the lowest risk in paycheck shock when changing jobs.
The strongest segment of employment in the U.S.
Over 50% of all jobs in the U.S. created since the Great Recession began are in the pay range of $15 per hour or less. So this is clearly the fastest growing employment category in America. What’s the reason for this? Probably because the fastest-growing industry is fast food, which does not have high paying positions other than unit managers. In addition, the advent of even greater automation in many businesses is eliminating the need for skilled labor and instead only retaining people to fill the raw materials and clean the facility.
No training or educational roadblocks
This is a huge issue that few people talk about, but the fact is that lower-earning individuals don’t have to worry about time-consuming training or required degrees or certification. You can literally walk into a Taco Bell and start work that very moment. On-the-job training is just that – while you are on the pay clock. While many higher-paid Americans have to find jobs that match their training and experience – and are held back from many opportunities because they lack the required degrees or professional testing – those who earn $15 per hour or less have no down time or restrictions. This makes them much more fluid in their ability to replace jobs lost or displaced during a national recession.
A national recession is inevitable. That’s not a huge concern to mobile home park owners, as our residents are the perfect group to survive these type of events.
Nuveen Takes The Unusual Step Of Declaring That Mobile Home Parks Are The Only Attractive Opportunity In U.S. Real Estate
Nuveen is one of the 100 largest investment funds in the world, with around $1 trillion in capital. It represents the pensions of around 5 million teachers, and it’s well-known to be a solid investment performer. So it probably shocked many investors in it’s forecast for 2019 in which it declared that the best investment option in U.S. real estate are mobile home parks. Here’s exactly what they said in their report:
Structural change creates opportunities in the late cycle.
We favor investing in 90 global cities offering scale, growth, sustainability, and resilience. Attractive sectors include global real estate debt, global industrial, apartment and student housing in Europe, and manufactured housing in the U.S.
Is this a big deal? Not really, except for the fact that these type of opinions help to strengthen the mobile home park asset class in the minds of bankers, appraisers, and large investment groups. Having Nuveen become an industry fan help the momentum that Carlyle started (the largest private equity group in the U.S. who has bought around 5,000 mobile home park lots so far), followed by Brookfield, Apollo, GIC and others who have entered the mobile home park space in a big way in recent years.
Why Most Smart Park Owner Are Changing Over To Purchasing Platform To Buy Virtually Everything For Their Property
In 2018 we became huge customers of Purchasing Platform – one of their largest. And we suggest any park owner to look at what this new buying service can do in regards to positively impact your community. It’s literally a game-changer.
What is “Purchasing Platform”?
Purchasing Platform is an online GPO (group purchasing organization) and eMarketplace that has been created specifically for the mobile home and mobile home park industries. More than 1,800 MH communities access Purchasing Platform every month to take advantage of their pre-negotiated pricing, single checkout from 40+ vendors, auto expense mapping to their chart of accounts, multi-level workflow approval to provide accountability across their portfolios, etc. They offer 20-30% savings on more than 10 million products and an integrated "Buying Desk" service that acts as a purchasing agent for your community to make sure they always deliver aggregate savings on every order.
How big do you have to be to use Purchasing Platform? Can you use it with only one property?
The answer is yes – there’s no minimum limit of properties or dollars spent. Some of the largest industry portfolios use them but the majority of their clients own and operate between 1 and 30 mobile home parks. This is not a service that is only available to the largest owners – it’s one that every park owner in the U.S. can utilize.
Why use Purchasing Platform?
In addition to the obvious cost savings on products and services, use of Purchasing Platform drastically reduces the number of trips your manager has to make to retail stores (time spent not managing your property), eliminates the need for expense classification and receipt transcription while also providing valuable oversight to the owner with workflow approval. They also allow members to load their own catalogs to make sure that managers only can order what they want them to.
Summary of benefits
Here are the main reasons that we have become huge users of the Purchasing Platform:
- Easy to use interface. Not hard at all for any manager to master.
- Single checkout from more than 40 of the industry’s largest vendors.
- Huge savings on more than 10 million products.
- Price Match Guarantee: if you can find it lower somewhere else, they’ll match it.
- Create your own custom catalog.
- On-Demand Buying Desk feature gets you immediate support for volume quotes.
- Comprehensive Workflow Approval functionality to keep you in control of all buying.
- Maps out all expenses to your Chart of Accounts.
- Integrates everything seamlessly into your property management software.
You can try Purchasing Platform at no risk for 90 days
Purchasing Platform allows all park owners to try their system for three months with no obligation to continue. That’s how we got started – we gave it a try and liked it. So if these advantage look good to you (which they certainly should) we recommend you contact Purchasing Platform today at 312-622-6552 and [email protected] and get set up on a 90 day trial.
We think you’ll find this to be one of the big improvements in your operation for 2019.
Tips On Site Preparation For The Arrival Of A Home
One of the best ways to increase the net income (and value) of a mobile home park is to increase the occupancy. Since the government continues to shun supporting consumers obtaining their own mortgage, this typically requires the park owner to buy and bring in the home to fill the vacant lot. Having that first home come in can be a scary endeavor for any park owner. So what are some important tips you need to know for successful site preparation?
Is this the best lot available?
If you’re bringing in a home, it always seems to go best if you use a lot that has had a home on it before (the more recent the better). This is because you know that the utilities have worked recently, and the electricity has normally already been upgraded to some degree. If you’re bringing in an all-electric home that needs 200 amp service, then your best bet to find a lot with 200 amp service already installed is on a lot that was used three years ago, not thirty (when homes were more likely to have a 50 amp service). So the initial question is: which lots have been the most recently used?
Do the utilities work?
Just because there are connections on the lot for water, sewer and gas, that does not mean that they necessarily work. Go buy a short piece of hose and connect it to the water supply line and turn it on, sticking the other end of the hose into the sewer. Let the water run on full blast for 10 minutes and see if the sewer line backs up or drains perfectly. Gas and electric are a little more tricky since you would have to file for new service to turn those on (and those typically are not a problem unless the home needs more amps than what is currently set up). Want to know how many amps the service can handle? Open the breaker box and add up how many total amps the breakers are.
What size home fits, given reasonable setbacks?
Just because the lot is 80’ long does not necessarily mean that it will hold an 80’ long home. Front and rear setbacks, as well as utility easements, can restrict how much of the lot is usable. So before you can buy a home for a lot, you need to know these items and account for them in your measurements. You can’t play it fast and loose here. While there are some things in life that you can make fit through sheer determination and manipulation (like fitting a mattress through a door opening) a mobile home is not one of them.
Site preparation requirements
Every state in the U.S. has lot preparation requirements. These are a part of the sign installation regulations and cover all types of items such as how many blocks the home sits on, tie-downs, and whether the blocks can sit on the earth, pads, runners, piers or slabs. The good news is that the installer is who has to know these items and suffer through audits of the governmental group that controls this function. The bad news is that you, the home owner, has to pay for them. So to correctly budget for the home’s arrival, you need to know the true cost of the lot preparation.
What permits are required
Some park owners get into trouble for having a home arrive and go into a lot without filing for the correct permit to do so. This is normally just a matter of paying a small fee and getting a permit. In other cities, the only thing you have to do is file for a power connection and the inspector comes out and gives is a green tag (approval) or red tag (disapproval).
Bringing in a home can be stressful. This list of necessary items will make the process for pleasurable and successful.
Want To Re-Finance Your Park Using The New Agency Debt Product?
If you are considering re-financing your mobile home park, then you need to learn all the benefits of the new programs offered by Fannie Mae and Freddie Mac, collectively known as “Agency ”debt. The advantages of this type of financing are numerous, including:
- Low, fixed interest rates
- 12-year terms on 25 year amortization
- The ability to re-size the loan annually and take out even more money as income increases
MJ Vukovich is an expert on Agency debt and he works for Bellwether Enterprises, which is one of the top underwriters on this specialty loan product in the U.S. He is also a third-generation park owner who speaks your language. So give him a call today at (612) 335-7740 and let him tell you what an Agency debt loan can do for your property, or email him at [email protected].
Mobile Home Flashback
What’s interesting about some of the advertising campaigns for mobile homes in the 1940s and 1950s is the fact that lower cost was not the biggest part of the story. In this ad from the Trailer Coach Manufacturing Association (a forerunner to today’s Manufactured Housing Institute) what’s interesting are the keywords which serve to reinforce the following points: 1) smart living 2) economical living 3) adventure 4) luxury 5) convenience and 6) zestful living. Why does the affordable housing business seem to only want to talk about the price-point? Last year, Time magazine wrote a story called the “Home of the Future” which described mobile home parks as basically “gated communities”. Maybe all of us have lost track of the benefits of our product. When you talk to your residents (most of which come from the apartment sector) you hear the same repetitive narrative of the true benefits being 1) no neighbors banging on your walls or ceiling 2) having a yard 3) parking by the front door 4) having a sense of community. Few people even mention the “price”. So maybe we should learn from these ads of the 1940s that mobile home parks have more than one benefit!
Buying A Mobile Home Park Is Not As Expensive As It Looks
It’s a Mobile Home Park Boot Camp tradition that we eat at least one dinner at a Japanese hibachi steakhouse – typically Benihana. While this may sound like an expensive habit, the truth is that most of the entrees at Benihana cost around $25, which includes soup, salad and rice. Compare that to the standard entrée at casual dining restaurants (including the non-included salad and sides) and they are roughly equivalent. The bottom line is that some things that are stereotyped as expensive aren’t actually that costly. And this is also true of buying mobile home parks.
There are plenty of parks that are in the sub-$500,000 category
For some reason, many new buyers in the industry assume that all mobile home parks are in the $1 million plus bracket. This is simply not true. Our first parks were under $500,000 in cost, and we have bought parks for as little as $50,000 over the years – including a recent one for $150,000. Not all mobile home parks are giant, and the cost is related to the size. In every market there are plentiful parks that are 25 lots or smaller, and these often are priced at less than $500,000.
You can buy parks for lower amounts down if the seller carries the financing
The size of the deal is not the only consideration. Another is the capital required to buy it. And sellers who carry paper will often go with lower down-payment amounts – sometimes as low as zero down (we have done 12 of those deals over the years). The key is 1) for the seller to carry the paper and 2) the seller to “bond” with you. When we say “bond” what we mean is that the seller likes you and trusts you – and is willing to help you buy the property while maintaining a safe amount of capital in reserve.
Some turnarounds require strategy and not capital outlay
Another reason that you can buy mobile home parks without breaking the bank is that those that sell for lower amounts due to problems can be fixed without a large amount of capital repair. Often the issue that needs fixing is nothing more than raising the rent or installing water submeters, or maybe superficial repairs like better mowing or a few cans of paint. Some mobile home parks are like playing chess and you can unlock their potential with prudent strategy instead of expensive upgrades.
21st Mortgage has forever changed the capital requirement for filling lots
Prior to the arrival of the CASH program by 21st Mortgage, filling vacant lots in mobile home parks was an extremely expensive endeavor. You could figure on needing around $30,000 cash to fill one lot. But the CASH program allows you to fill lots without any capital outlay. Even used homes can be brought in under this program. Instead of needing $3 million to fill 100 vacant lots, you can now get by with $0 out of pocket if the program is successful in your park.
Mobile home parks come in different shapes and sizes. They are not all expensive. Investors with lower amounts of capital can still find plentiful deals to fit their budget.
Why We’ve Been Converting All Of Our Water Sub-Meters To Metron
We have been rapidly converting every existing water meter in our 30,000 lot portfolio to Metron-Farnier Sustainable Services. So why are we such huge fans of the Metron metering system? The answers are many:
- These meters are read remotely and do not require our managers to read them (or screw up the readings).
- The meters are read by Metron every 60 minutes, 24 hours a day. As a result, Metron can alert you when there’s a leak, and that can save you thousands of dollars per year.
- The meters are amazingly accurate and strong.
- Metron’s meter bodies have been manufactured in Europe for years – they are well-established and a proven performer.
- Metron’s electronics are built and tested in Boulder, CO.
- The cost is only around $5 per month per meter, and in most states this cost can be passed on to the resident.
- These meters do not require you to have access to them, so they are perfect for winterization or difficult access situations.
So why would you not use Metron? We don’t have a clue.
To get more information on Metron metering, call Rick Minogue at 303-449-8833 or email him at [email protected] Tell them that Frank & Dave sent you. We’re their biggest fans.
Here’s Your Copy Of This Month’s Manufactured Housing Review
If you enjoy this monthly newsletter, then you will certainly also like the Manufactured Housing Review – the industry’s only monthly magazine that covers many different industry topics. Edited by our friend Kurt Kelley of MobileInsurance, MHR offers many insights and opinions that reflect current events in the affordable housing industry, with no topic taboo.
To view this month’s issue, click here!
How To Hire And Manage Contractors
One of the great American nightmares has been trying to work with bad contractors. This is a scene from the 1948 classic film “Mr. Blandings Builds His Dream House” in which the home owner does battle with bad workmen, and it’s further reinforced in the 1986 film “The Money Pit” with Tom Hanks. Is it possible to renovate a structure in a stress-free and successful manner? Here are some tips on how to accomplish that.
Ask around to build the list of potential contractors
Sure you can put an ad on Craigslist, or write down some ads for local handymen. But is that really the best source of leads? Instead, talk to other park owners, mobile home movers and dealers, and find out who the experienced workmen are – people who are already knowledgeable on the subtle differences regarding mobile home renovations and repair. Make a complete list of these referrals – they are 100 times more important than a bird in the bush.
Make sure they have sufficient insurance
Never allow any contractor to work on a home until you are 100% sure that they have insurance coverage. Without it, any injury may suck you into a lawsuit. We’ve had workmen pretend to be injured after ten minutes on the job, as an obvious shakedown for a quick insurance buck. You are working with people who often have low morals and are working with power tools. Don’t take any chances with insurance coverage whatsoever.
Check their references
A good worker will have plenty of happy customers you can talk to. But a bad one will have none. So get at least three references and call them. You will be surprised at what you learn. Some will say that they have never heard of that person, and others will say that they are in the process of suing them. If a contractor does not have at least three happy customers out there, then they have no business working on your property.
Require a written contract with total amount and time frame
Never hire anyone on the basis of hourly labor plus materials. The ending will be potentially a bill that is three times what you anticipated, and then off to court you go. Instead, all contracts should be a total turn-key “parts and labor” bid – to the penny. This is the only protection you have from the unscrupulous vendor.
Put in penalties for failure to hit the deadline
All contracts should also provide for a start and end date, and a financial penalty for each day that the work is not done beyond those limits. Otherwise, the contractor may start work, walk off to do other jobs, and then return at their leisure. Every day that the work is not done is costing you money – and the only way to align your interests with the contractor is a deadline and penalty.
Do not pay until the job is complete
You have a smart phone, right? Well, use it. Don’t ever pay any contractor without photographic evidence that the work has been satisfactorily completed. No photos, not money. No exceptions. Before they invented the smart phone, paying people was a gamble. There’s no reason to risk paying contractors for work no done these days.
Mobile homes need repair. When they are privately-owned, it’s not your problem. But when you own them, you are thrust into the dreaded American hobby of trying to successfully contend with the home renovation person. These tips will get you going in the right direction.
Understanding The Terminology Of The Industry From The Land Perspective
This is a postcard that I bought at an antique store recently. It’s of a motel but you’ll also notice the sign says “mobile home court” and that you can see some early trailers in the background. Indeed, the way that mobile home parks grew from their early beginnings is often reflected in the terminology used in the industry. So how did history shape the name of the mobile home park?
The parking lot phase
Mobile home parks began as an afterthought – a weak commitment to the industry by mostly the lodging sector. Motels (and even landowners) would allow people to pull off the highway and park their trailers (also known as coaches) in the back. During this period (which lasted from the 1930s to the early 1950s) the standard name for our industry was “trailer park” or “trailer court”. It was not derogatory but completely accurate. These were simply parking lots.
The enhanced parking lot phase
As mobile home parks began to increase in demand, they grew in size and sophistication. Soon they did not need a motel to anchor them, and they were more than just a paved field. From the early 1950s to the late 1960s, the simple parking lot concept grew into standardized yards and parking areas for cars. They were high density but still not lacking charm, and typically featured laundry buildings since units did not have washer/dryer connections. These were normally called “mobile home parks” as they were no longer a derivative of the RV “trailer” product but more like full-time homes. Now the industry was taking form.
In this final stage from the later 1960s to current, the product became similar to a subdivision. Thanks to the efforts of HUD to create professional design via attractive loan products for park development, properties became larger with amenities such as clubhouses and pools, and much larger lots. At this point, many owners adopted the name “manufactured home community” to reflect the more professional upgrades.
Mobile home parks are a true American original, and a cultural icon that few people understand or appreciate. You can find items reflecting the history of the industry in many antique stores and old magazines – and they are all completely fascinating.
How To Succeed At The Serious Duty Of Providing Affordable Housing
Affordable housing is a serious business. Millions of Americans live in mobile home parks, and their quality of life is contingent upon the successful management of these properties. All mobile home parks are stewards of this unique form of housing, in which both the customer and park owner are stakeholders in the business (they own the home and the park owns the land). So how can you succeed in this important mission?
Offer a safe and clean environment
All Americans want a clean and safe living environment. They want a zero tolerance policy on crime and on those that stand in the way of their quality of life. You can give them this by adopting a “no play/no stay” policy in which all residents must play by the park rules or be evicted. It’s not fair to those who maintain their home and yard to a high standard to have a neighbor that meets none of the park rules. And it’s never fair to allow any person to jeopardize the residents’ feeling of security in their home or yard.
Offer a lifeline to unhappy residents
We give all of our residents a toll free number – as well as email address – where they can contact us if they have any problems that are not addressed by the manager. We call this our “Help Line”. This offers a safety valve in the case that a park manager stops doing their duty. It also ensures that all problems are addressed in a reasonable time frame and to the resident’s satisfaction.
Offer superior common areas
While all park owners are somewhat reliant on our residents to maintain their homes and yards, the common areas are 100% within the immediate control of the property. As a result, they should be immaculate. All buildings should be attractively painted and all green spaces properly mowed and edged. These spaces set the standard for the entire park and failure is not acceptable.
Offer professional-grade entry pride
A good entry gives all arriving residents a sense of pride, and all new visitors a positive first impression. To accomplish this, every mobile home park needs a nice sign (about $2,000) and some entry fencing (about $10 per linear foot). Supplement that potentially with some hardy, native landscaping that does not require irrigation, and you’re set. But the old days of a sheet of plywood sign and a broken plastic planter are over – and good riddance.
Offer professional management
Residents prefer professional management. Sure, some will tell you they hate it, but those are the same people who have not paid their rent in two months and have a non-running car and pit bull in the yard. Good customers like the concept of fairness that comes from uniform application of collections and rules enforcement. And they also like the way a property looks when a professional manager ensures that the common areas are perfect. You can tell when you drive into a community that is properly managed, and so can your residents.
Offer pricing that’s a good value
One of the biggest challenges that all community owners face in the future is raising lot rents to correct levels while at the same time maintaining an outstanding value for customers. Charles Becker, the economist from Duke University, wrote a paper about a year ago in which he determined that mobile home park lot rents are roughly 50% below market, when compared to surrounding single-family and multi-family pricing. And it’s a fact that, unless owners raise rents to acceptable levels, many mobile home parks will be demolished to make way for more profitable uses. As a result, it’s important that all owners push to make their properties even better values, which is possible by improving amenities, making capital improvements, and simply providing better management.
As part of the concept of increasing value, one of the bedrocks of this effort is working on “community-building”. This is simply creating spaces for residents to congregate and make friends. Outdoor concepts include picnic tables with charcoal grills, playing fields, and even splashpads. Indoor options include a library for adults and children, game areas for ping-pong and pool, and a party room that is adaptable to every type of activity.
America is in a housing crisis. The need for affordable housing has never been greater. Mobile home park ownership is a serious business that has huge rewards for those who are willing to get involved.
Is Your Attorney a “Deal Killer” or a “Deal Maker”?
How many deals have you seen go down the drain because your attorney stacked up a million roadblocks to even the simplest problems, and then failed to offer any path to solve them? This is called “deal killing” and some attorneys do this so that they take no risk – if the deal never happens, they can never be criticized for missing a deal point, or for not spotting a flaw in the contract. The problem with this, however, is that you can’t get anywhere. At the other end of the spectrum are the “deal maker” attorneys that recognize real problems from trivial ones, and strive to solve these roadblocks using common sense and legal experience. And the best of those type of attorneys is Dave DiMarco from Woods Oviatt Gilman. We once had a deal go south in a big way – the very driveway into the property was determined to be on somebody else’s property. Any other attorney would have said “well, that’s it, the deal’s dead” but Dave DiMarco sprung into action. We located the owner, negotiated a purchase, personally handled the details, and the deal went forward. And all that over a weekend, no less. And that’s why we love Dave DiMarco and you should, too. If you need service like that, then consider using Dave DiMarco on your next transaction. You can reach him at (585) 987-2833.
The Problem Of Investing In Assets That Are Not Income Producing
Classic Ferraris have wild swings in value, as they are simply assets that people like to look at. They don’t produce any income. So what people will pay is completely subjective and unpredictable. Even within the Ferrari line-up, there are models that people like and those they don’t, and the success of the classic 250 does not mean that the less-intoxicating Mondial will follow suit. That’s the inherent danger in investing in things that are not measured in income production. And in real estate, one of the worst offenders are single-family homes. You seldom see a home that actually ties back to income production potential. Instead it’s based on consumer tastes, speculation, and simply what’s in vogue at the moment. The home that sells for $1 million only rents for maybe $5,000 per month which, after subtracting for property tax, repairs and insurance, yields a cap rate of 1% or less. That’s why we like mobile home parks. Although they are not as pretty as a McMansion, they are completely predictable and not subject to the elasticity of assets that don’t make any money.
The CASH Program From 21st Mortgage: One of the Big News Stories of 2019
One of the biggest things going in the mobile home park industry is the CASH program from 21st Mortgage. If you own a mobile home park, the power of this program is astounding. You can fill vacant lots with zero out-of-pocket cost. You can get customers approved to buy homes with amazing speed and a “can-do” attitude. You don’t have to get in the middle of financing or the SAFE Act. And you can tap hundreds of thousands – or millions – of dollars sitting there in vacant lots. The demand for affordable housing in the U.S. is enormous, and the only thing holding most parks back from 100% occupancy are new and used homes that your customers can qualify for. With the CASH program, those obstacles can be overcome and your occupancy can soar. We are the largest users of this program in the U.S., and we know how great it is.
For more information on this program visit their website or call Candice Doolan at 800-955-0021 ext 1735 or email her at [email protected].
Tell-Tale Signs That Your Mobile Home Park Has Management Problems
While managers are the most important part of your mobile home park team, they sometimes go bad, and your ability to see this decline rapidly is essential to saving your investment and getting you back on the road to hitting your budgets. So what are some tell-tale signs that your mobile home park manager has gone bad?
The best mobile home park collection philosophy is “no pay/no stay” which means that you have to either pay your rent in full each month or leave the property – it’s the only fair and workable system. When residents start falling behind, the normal issue is that the manager is not sticking with this system, and starts to let them pay late, make partial payments, or not pay at all. This is normally linked to the manager not sending out the required demand letters, or being too lazy to file the evictions on time. You can spot this trend in your receivables, and you should stay on top of that constantly.
Property condition issues
Common areas in mobile home parks should be immaculate, as they are fully under your control. But resident yards and homes should also be held to a higher standard, since this is what gives all neighbors the highest quality of life. Unfortunately, a failing manager will allow the property condition to run afoul of your goals. The correct system is called “no play/no stay” which means that you must play by the rules or you can’t live in the park. You will detect this by using a monthly HD video of the property as a surveillance tool. Have the manager buy a Polaroid Cube camera and suction cup mount, place it on the roof of the car facing forward, and record the entire property on a drive-thru (starting at the entrance). You can then have the manager send you the chip, download it, and watch what your park looks like. Do this at least once per month.
Unusually long turn-around times on homes
Any vacant park-owned home should be renovated typically within a month. But what about when it takes the manager three? This is a typical symbol of the manager that has lost their enthusiasm for their job (or your financial goals). While finding handymen who can work on homes is often difficult, we’ve never seen a market where it was impossible, and a good manager is always asking for new candidates.
Difficulty in filling homes
This is a very common sign of the fading manager. Ready homes are sitting on the market for months without any new resident buying or renting them. Here’s the reality. The normal industry metric is that every three calls should result in one showing, and every three showings should result in one sale or rental. When the park is getting 30 calls and still not a single new resident, the typical cause is that the manager is not answering the phone, doing a terrible job on the phone, not showing up at the showings, not displaying any sales ability, or not knowing how to close the deal. To detect this you should port your park phone line through Who’s Calling or a similar vendor that records all calls, and then exit interview those who called to see why they did not buy or rent. The results may horrify you.
Skyrocketing expenses and a surge in repair costs
Every park – like every household – should have a defined budget. But what happens when the expenses at a mobile home park are completely out of whack? The answer is that the manager has either lost their feeling or responsibility in keeping costs low, or there is some type of embezzlement scam that is costing you money. You will see this trend in your monthly P&L. You should pounce on any cost-overrun and immediately find the root of the problem.
Bad gut feeling
This is the most basic sign of danger with your manager: the overall nagging feeling that something bad is going on even before you have tangible proof. You can get these subtle concerns for a variety of reasons, such as an abrupt change in the way the manager talks to you or their availability by phone. When you get a bad gut feeling you should trust it, and immediately start watching your property more closely than ever.
It’s a simple fact that even the best managers can go bad. Watch for these signs or trouble, and act accordingly. Remember the old industry adage “it’s easier to change people than to change people”. Your investment hangs in the balance.
Need A Phase I Environmental Report? Mike Renz Is Your Man For The Job!
The New York Times called Frank a human encyclopedia of all things mobile home park and, if that’s true, then Mike Renz is the human encyclopedia of all things under the ground. You see, when it comes to Phase I Environmental Assessments, nobody in the industry is more knowledgeable than Renz. He’s our go-to guy for all things pollution-oriented, from Phase I reports to simply asking questions on what we see going on next door to the property (or even inside that concerns us). We were once walking through a property and saw a brown colored solution oozing from the property. Within minutes, Mike had pulled up the data and figured out what it was (rusty water from an iron-ore- rich artesian spring). That’ the kind of information that we find invaluable in today’s litigious world of environmental condition. On top of that, we’ve had Phase I reports that failed for existing pollution, and Mike Renz has been able to solve them by using common sense and technology, like the time he proved the EPA wrong by doing a simple core-drilling to prove that a supposed landfill on a mobile home park did not actually exist (it had been phoned into the EPA by a former manager who had a grudge against the owner). If you want that level of expertise on your side, then you need Mike Renz to be your Phase I Environmental provider. That’s who we use, and he’s amazingly good.
You can contact Mike Renz at (614) 538-0451.
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