March 2008

This issue of the MobileHomeParkStore.com and MHBay.com Newsletter includes: 

1. The Marketing Contest!!!
2. Updates and Other Announcements
3. Marketing your Mobile Home Park, by Dave Reynolds
4. Comments
5. Questions and Answers with Dave
6. Mobile Home Park Bootcamp with Frank & Dave
7. Tell us what you think and send us your articles!

The Marketing Contest:Earlier this month we asked people to write down their best ideas on marketing.  Whether it be to fill up vacant spaces in your community, sell homes to potential residents, or sell you mobile home park when it is time to sell. All the entries are below and we need you to help vote for the best one. Just send an email to contest@mhps.com with the number of the entry that you think is best. The winner will get a copy of our new manual on the "30 Days of Due Diligence". Number 1: Dave, thank you so much for your articles. I am a MHP owner. I have a pretty large park with 120 spaces. It currently has 40+ vacant spaces, and I don't have the cash to fill them. With that said, I have found that if I can come up with the cash for a home, (and I have purchased over 30 in 3 1/2 years), I can fill that thing immediately with a type of lease purchase I have created. I have seen lease purchases go terribly wrong here, (not personally), in that when you attempt to evict a non-payer, then the local magistrate may consider there to be equity in the home, and kick it out of magistrates court, and into master in equity. This gets pretty ugly here, as you are then labeled a "predatory lender" and it just goes downhill from there. What I have done is set up a contract, that the tenant buys for a minimum of $1500. In this contract, if my home is say 19,900, I run a 5,7, or 10 year amortization, based on the tenants ability to afford the monthly (lease) payment, plus lot rent. In this contact, I agree to sell them that home for whatever that 12th month payoff would be. Hence, their best deal would be to buy the home in month 1 or 2 of the contact. However, since in SC, a 12 month lease is all that is legal, I tell them that if they honor their lease payments on time, I will renew that contract on a year to year basis, reducing the price annually. So, eventually they will own the home, if they will lease it for enough years to get their purchase option down to 0. This seems to create a "owner" mentality, even though many have walked away. I just wish I could afford to fill my park with homes, and then start going to the tenants who have been in the park for years, and update them to a newer home. Somedays, I wish I didn't own it, but, I keep looking to the future.   Gene H. Number 2: Because water is the most expensive utility I have, I've done two things that should help.  I've written a letter for my manager to distribute to the tenants saying basically that for every dollar's worth of water they use, the city charges an extra three more dollars to flush it down the drain.  The sewer cost is a 3x multiple of the actual water use and if they want to help us keep rents down, keep water use under control, and report any leaks or running toilets immediately...yakity yak.   I have also put in low flow shower heads.  Push button.  They're great.  Five bucks apiece at Wal-Mart. Jim D. Number 3: Along with the subject of filling empty lots is creating additional lots.  The property I am purchasing has an additional eight empty acres.  I wouldn't purchase an MHP just for that purpose, but since I have it, how do I take advantage of it?  David D. Number 4: My daughter swears by Craigslist.... My Park needs more owners rather than renters, I need more trailers to rent... But I was surprised about all the postings for Housing Wanted, etc. On Craigslist....   It's FREE! Jane T. Number 5: Dave-  They say word of mouth marketing is the cheapest and one of the best ways to sell anything.  Why not send out a flyer offering an incentive to present court occupants for referring 'qualified' prospective park occupants?  A couple of months free rent always looks good.  Ken C. Number 6: Dave, Personally, I think that all too often we take our current residence (customers) for granted and don't thank them for their business.  These solid customers are the real bread & butter (CASH) of all businesses. There are many, many ways of doing this and the methods will depend on the size of the park(s). For example: 

• Yard of the month award.  Nothing expensive just a little award for them to show the neighbors 
• Park newsletter sent out monthly or at least quarterly w/ free "in-park" classified ads
• Thank you notes for "little" things that are not often seen (Clean yard award, etc)
• Cash awards or gift cards as commission for helping rent out a space or sell a home
• Small fruit baskets or fresh baked apple pie when a new residence (customer) moves in
• Baby gift for a new born (no matter if the parents are legal or not)
• An 8 or 10 dollar frozen turkey or ham for Christmas for all tenants
• A $20 dollar Walmart gift card for renewing a one year lease.
• Every spring give away bulbs, small plants and maintenance free shrubbery to plant on their lot
• A park sponsored Bowling Team

A free B-B-Q & watermelon for the 4th of July for park residents only None of these things will cost more than few dollars and will help create a sense of community to the park.  When you can get get neighbors watching out for neighbors, and their children, then the entire park will begin to jell into it's own little community where people really want to live. Dave, I have other ideas but those are enough for the moment. Lee N Number 7: Hi Dave, In response to the Marketing email, as your student, I would like to response to that.  From what I learned from you and Frank, if I have a park, the first thing I would do is to invest in a sign with a nice name and phone number at the entrance of the park (this sign advertises 24/7 for you).  Second, find a good greeter.  Third, have an ad on the local yellow pages.  Fourth, give an incentive to the current tenants to recruit their friends and relatives.  Fifth, have flyers at the local MH dealers of the park. Sixth, find out who the Lonnie dealers are and work with them. As of to market any industry or service, I think the most important part is to target to the appropriate people/audiences and have them alter their behaviors to your specific goals.  Even better, those skilled marketers have you thinking it is your ideas, but it is actually theirs all along. As for me, I think one of the best marketing tools is word of mouth.  The person's integrity and trustworthiness are worth gold. Just some thoughts...maybe you are grading me a "C" for this. :) Thanks, Stella   After reading all of these send an email with your vote to contest@mhps.com.  If you have any thoughts or additions to this list I will post in the next newsletter.  Thanks to all that participated.

Updates & Other Announcements:

We are getting closer to moving all of our websites to a new platform.  The web designers have been busy and the new site design should be online sometime in May.  The new site structure will have most of the same links and same information but will allow you to search and sort the listings much easier.  Also, you will be able to login and update your listings as often as you like. 

Marketing your Mobile Home Park

By: Dave Reynolds

When I am looking to market my mobile home park whether it be to potential residents to bring their homes in or to sell homes in the park, I believe that the first contact with the potential customer is key.  This first contact may be via a telephone call to your office, a drive-by by the potential resident, or in many cases could be a referral from a current resident or some other local business (chamber of commerce, dealer, broker, etc). Let's face it, if you or your manager is rude when they call in, they probably will call the next park.  If they drive in and the roads are in bad shape, the sign is falling down, or there are dangerous dogs running around, they probably will turn around and look for the next park.  And the same holds true with referrals from your current customers.  If you current customers don't like living there they will bad mouth you all over town and never refer their friends and relatives to move in.  Continuing on to other local businesses that would otherwise refer your community to potential residents, you don't stand a chance if you have a bad reputation. So I think the best form of marketing is to build your credibility in your town, keep your current residents happy, and make sure that those potential customers have a good first impression whether it be a phone call or a drive-by. Before you ever spend one penny on a newspaper ad, a flyer a the local dealer, or some type of direct mailing to apartment complexes, you should make sure that you have everything in place to attract good residents once they respond.  Here is my top 5 list of things you need to do first: 

1. Focus on the entrance to the park:  A nice sign that says "Welcome to ___________ Mobile Home Community".  Also plant some bushes or trees near the entrance and keep the grass mowed and trimmed nicely.
2. Roads:  Your roads don't have to paved and have curb and gutters, but they do have to be passable.  If there are large potholes, patch them immediately.  If they need graded, grade them.  Before a potential resident ever gets out of the car they will see your entrance and drive on the roads.  Make that a good experience.
3. Park Office:  with the park office you want to make sure that it looks inviting.  I have been to many an office that is not properly marked with "Welcome" or some other inviting remark.  Instead it says something like, "if your rent is not paid by the 5th it is late" or "take your excuses somewhere else".  Is that any way to greet a potential resident?
4. Park Office again:  I have also been to many parks that as you are walking up to the office you are greeted by a fence with a dog inside and you have to decide whether to enter or not.  Other times you knock on the door and then there are 3 dogs scratching at the door waiting to pounce on you.  I don't have a problem with my manager's home being duplicated as the park office, but I do think they need to take precautions against scaring people off with their own dogs.
5. General Appearance of the Community:  once the potential resident enters the park and is satisfied with the entrance and roads, they will encounter the rest of the park.  If the park is a complete disaster with trash, junk, high grass and weeds, and so on, do you think this will be a good selling point for potential customers?   At least it is not a good selling point for the customers you are hoping to attract.

Ok, now that we have the entrance, roads, office, and general look of the community ready for new residents, what do we do next?  Let's suppose that we are talking about getting new customers to move their home into our park and that we have 25 vacant lots.  Now apply one of the best marketing ideas I have ever heard which goes something like this.  Is it better to do ONE thing 25 times to fill those lots?  Or is it better to do TWENTY-FIVE things one time to fill those lots?  I think the latter is the better approach.  Maybe in the past you could just bring a flyer down to the local mobile home dealer and watch as he fills up the park.  This is not going to happen anymore.  You need to to get the flyer down to the dealer, run an ad in the paper, get referrals from your customers, join the chamber, and generally get the word out about your mobile home park. Here is a list of some of my ideas that should get you started. 

1. Flyer to all Mobile Home Dealers in a 25 mile radius - On the flyer, offer some form of move in special (free 3 months, lower rent, etc).
2. Join the Chamber of Commerce - then in all of your flyers and ads you can put that you are a member of the Chamber - builds credibility.
3. Entrance Sign - it works for you 24/7 and make sure to put your phone number on it!
4. Sponsor a Referral Program to your residents - if they refer someone give them a nice reward (not a $5 discount on the rent).
5. Talk to local Real Estate Brokers - if they have a customer that can't qualify on a house, maybe they will send them your way (give them a referral fee as well).
6. Advertisement in the paper or papers - make your ad different from the rest of the ads in the paper - not the simple... mobile home lots for rent, call ???.   Instead, try something like... Incredibly Large and Spacious Mobile Home Sites...  We will pay you $1,000.00 to help with moving costs!  The first five callers will also get the first 3 months Rent FREE!  - you get the point, make it stand out and make it enticing.
7. Start a Community Newsletter and send out the best stories from your newsletter to the local paper to have published.  Most local newspapers have a community or local section and are always looking for good stories to publish.  Also, if you get the email address from all potential prospects, you can send them this newsletter every month so when they think about moving they won't have forgot about you.
8. Signs on Vacant Lots - put nice signs on your vacant lots with a phone number for people to call.
9. Banner signs at entrance - big move in special or discounted rate or we pay you $1,000 to move your home to our park type of banners around the perimeter on high traffic areas of the park.
10. Telephone Book - make sure that you have an ad in the phone book as this is where many of your potential customers will find you.  In the ad, you might want to include something about your move-in specials or direct them to your website to find out the move-in special of the month.

Finally, when you are out there doing your marketing, it is important to test what is working and what is not working.  If you run ads in the paper and get no calls... then stop running that ad and try a different one.  If none of your park residents are referring people to move in, find out way and up the ante.

3-28-08Terri: Had the closing at 10:00am this morning. You can mark it SOLD. Thank you for a great site. Glen

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3-21-08

Terri, The Mobile Home Park is under contract for $8,000,000 and scheduled to close 5/12/08. I don’t know if you include this information on your website or not. You will be happy to know the buyer saw the listing on mobilehomeparkstore.com. Allyson

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3-13-08

Hi Terri, Can you please remove our listing from MHPS? We have not closed a sale yet, but I am still getting a trickle of calls (your site is too effective!). I would like to limit the amount of people out there who know about the sale. If we need to re-instate the listing I will let you know,but I would like to remove it from your site for now. Thanks! Jeff

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3-11-08

Dave & Frank, This note will be different than most you probably receive. I just wanted to let you know that I purchased your cd's and books and found them to be very informative. So informative that I have decided it is probably not a business I would enjoy being in. I just wanted to say thank you for saving me from getting into a business that I would probably kick myself later. Thank you, Bob M.

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3-4-08 (4 Days After Posting the Ad)

Thank you so much...we have received so many inquiries since you posted our information. We have a couple of people wanting to present offers...so I think we should remove the ad for right now and see if any of the people that have responded so far will buy it. Thanks again for all your help. Alison I.

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3-3-08

Terri, Please remove our park for sale ad. We sold it using your service! Thank you, Danny P.

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3-2-08

Hi Terri, I need to remove my listing from your site for awhile. I actually got an offer but discovered that I need to take care of a couple things before I re-list it. Your website is great and I will use it again and again. Thanks, Gregory H.

Are you a manufactured home owner or community owner with homes or lots for sale or rent?

If so, then you can list your new and used mobile homes for sale or rent and lots for sale or rent for FREE at MHBay.com

Q&A with DaveQuestion: Dave, Along with the subject of filling empty lots is creating additional lots. The property I am purchasing has an additional eight empty acres. I wouldn't purchase an MHP just for that purpose, but since I have it, how do I take advantage of it? So I'm thinking, how do I calculate the cost of developing additional infrastructure (roads, electrical, water, sewer, pads, etc.), purchase used homes (I've got your book on this), are bank loans available for all this, attract lot-renters, and generate revenue quickly enough to cover new expenses? Thanks, David D Answer: David, This is a good question.  You are correct that you should not base a park purchase on the additional acreage in most cases.  I have expanded a few parks in the past but only if I knew the demand was there to fill the vacant lots.  I would make sure the current park was full and I was receiving calls or had access to good used homes to put in to the new section to sell. As to calculating the cost of developing the additional lots it will depend on the requirements of the city/county and other things such as availability of the water/sewer, tap fees. We had a park in Tyler, TX that had about 40 units.  The water and sewer line was already there so all we had to do was to dig trenches to connect to the existing line.  The electric company put in the meters at no cost to us.  We had to put in roads which cost about $50,000.  We added base and driveways to each lot and for about $100,000 we had 30 more lots. That was about 8 years ago.  It would probably have cost $150-200K in today's dollars.  Since you will already have the park you will have time to get estimates from contractors and utility companies to find out what it would cost to expand.  I would guess it would be somewhere in the $5,000 to $10,000 per lot range. As far as getting money for the expansion, I have had the best luck with local banks.  I am not sure if you could separate the acreage when you purchase the park so that it is clear of any mortgages but that would be a plus if you are looking to get a construction loan.  You would have that piece of land to put up as collateral. If you can sort the financing out, the key will be to know your market and absorption rate.  It is tough in most areas of the country right now but I have parks that if I could expand I would because I have a waiting list for people to get into. Another thought would be to create land/home packages on the 8 acres where you buy the home set it up and sell it as a land/home.  I have done this and in the right markets you can make $20-40K per home. Hope this helps. Dave

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Question: Hi Dave, I am new to the commercial mortgage industry and have several prospective clients that are active in mobile home parks. As a company, our expertise lies primarily in multifamily and retail, so mobile home parks are somewhat new to us. I should mention that I have found your articles and website very helpful in preparing me to effectively talk about mobile home parks as a real estate investment. One of my potential clients just recently sent me a refinance deal and I was wondering if you had any benchmarks for expenses in my underwriting? A lender I am working with said he has seen total expenses being around 35% of effective gross income and a private investor said he uses 18% of gross potential income. Any insight you could provide would be very helpful. Thanks! ANDREW G Answer: Andrew, The industry average is about 38.5%. However, it depends alot on who pays utilities, who owns the streets, age of park, and such. I have had parks in the 10% to 50% range but would say a good rule of thumb is 35-40%. Thanks, Dave

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Question:  Dave: I am learning a lot from the books and cds. Right now the biggest issue I am struggling with is how to convert from rentals to lot only. This is clearly a "no brainer." My question, though, is how to value the park when you know you are going to lose that rental income and the value (even if it's small - when you have 50 or a 100 it can add up) of the homes. You teach the 10/20 rule and I like it. But if the park is going to lose income by dropping out of the rental game, then won't that immediately drop the NOI and thus hurt your cap rate? Obviously, related to all of this is how in the world do you get the owner to discount the price they have in their mind based on income from rents and homes and to value the park more based on lot rent only. It really is two different businesses. He is selling one kind of business and I am trying to buy a totally different business. It seems like it's my problem and not his. But if he doesn't come my way some, then I'll never buy from him. Thanks,  Doug P Answer: Doug, Thanks for the comments and questions. It has been my experience that by converting the rental homes to rent-to-own or notes that you actually increase your cash flow because you still receive the same income for 3-5 years but your expenses drop. As the notes are paid off and you are collecting just lot rental income, you may receive less gross income but in most cases (with most of my parks), this decrease in gross income also creates a decrease in delinquency and expenses. A lot will depend on the park you buy and that market but in most cases they about even out when you consider the home repairs and constant move-in's and out's. Not to mention that you will have fewer headaches, you can pay a manager less to run the park and so on. There are always exceptions to the rule (when a market is so hot that people pay on time as they have nowhere else to go). As for your next question, here are a couple of suggestions: 1. Tell him to keep the homes and sell them separately and reduce the price to you. I have done this several times. 2. Show him on paper what it would cost for you to go out and buy homes similar to the ones in the park (ie: 1990 home down the road for $10K plus $2K moving and setup equals $12K). Then ask him why you should pay him more than that for his homes that are in similar condition. 3. Ask him to sell the park only and then lease/option the homes from him based on the price you are able to go out and lease/option the homes to the residents. 4. If you are going through a lender, explain to him (or have your lender explain) that there is not a way to finance homes with the park. Thanks again, Dave

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Question: Dave I just wanted to ask what your experience has been with mobile home parks during a recession declared or undeclared. Anything you would recommend.  Rick Answer: Rick, I haven't really went through a recession as a park owner and while I would be cautious, I am still looking to do deals. Personally I am avoiding parks that have high vacancy or one horse towns. I am putting zero value on vacant lots right now. The other type of parks I would be cautious of are those that have many new homes with residents with large mortgages or that are upside down on them. The bread and butter parks (old parks, older homes, decent markets), I don't think will be affected nearly as bad as other types of real estate. Just my two cents worth. Dave