Mobile Home Park Investing Tips - 1 to 5
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Our Weekly Mobile Home Park Investing Tips. Along with comments from investors. Enjoy!
Mobile Home Park Tip #1
You need to make some initial changes to your thinking and behavior to improve your chances of successfully removing the obstacles to mobile home park profitability.
First, you need to slow things down. You will notice that a lot of your tenants demand instant response to their problems. They call you at 2:00 am and demand that if you don't respond in ten minutes, they will call the authorities to complain. You have to immediately end this "rapid response" program.
Many of these tenants make these threats because they know you'll make a bad decision in their favor if you don't have time to think. You have to slow the business down.
The only problem in a mobile home park that you need to respond to immediately is a dire threat to safety, or a problem that could rapidly escalate into a significant expense item. For example, a water leak, other than the rupture of a main line, can wait. In my markets, water costs $3 per 1,000 gallons. While waste is bad, a water leak is hardly a reason for immediate attention. We never repair water leaks on weekends or at night because the extra cost of doing so (plumbers charge significantly more during these times) is always more than the cost of the water usage itself. A sewer, back-up, however, requires fairly immediate attention because, if left alone, it could cause you a big clean up bill, and even penalties from the city.
There is no tenant issue that demands instant service. If your tenant demands quick service, then suggest to them that they move to a Ritz Carlton hotel and the concierge will be happy to jump through hoops.
Mobile Home Park Tip #2
At your park your new policy is that you will get to things slowly and methodically, using proper decisions. To help you in your "slow things down" program, make yourself less accessible. Don't ever answer your phone for a tenant (caller I.D. is required), and let all of their calls go to voicemail. And then don't call them back for a day or so unless it is super important. This will gradually send the message that you won't be rushed any more, and that you are not that interested in 24/7 servicing.
While you are slowing things down, you have to prepare yourself for making tough, unpopular decisions. You need to develop an alter ego who enjoys confrontation and unpopularity. If you are like me, you have enjoyed a fairly prosperous life surrounded by intelligent, rational people who abhor unpleasantness. So to get in the mood for being the reverse of your natural personality, you need to develop a "Hollywood" quality alter ego of "Mr. Nasty". Initially, you may need some crutch to put you in the mood. Mine was an old WWII army helmet. When I had to make unpopular decisions and phone calls, I would put the old helmet on (in the privacy of my home), psych myself up, and start making nasty calls that would shock George Patton himself. Once you have established your alter ego, the need for the props go away, but you can still keep it around as you laugh about those bad times later down the road.
The next adjustment you need to make in your mind is to assure yourself that you are the boss. You own the park. The tenants do not. Despite your bank loan commitments, you have the right to shut it down if you so desire, or at least to evict each and every person in the park if you get such a whim. And don't ever forget it. When a tenant gives you perpetual grief, you can tell them that it's your park and you'll do as you please, as long as it's within the law, and you can kick them out if they don't stop bothering you.
Mobile Home Park Tip #3
Comment from Previous Tip in this Series:
Dave,
I have to disagree whole heartedly for a number of VERY good reasons. You never need to get nasty. Why get nasty when it is never your fault. "I wish I could help, but it's not up to me. It was not my decision. It was owner. I would love to help, but there's nothing I can do."
Why get nasty. Who needs that stress, and who needs to put themselves in that kind of danger. I know a real estate investor whose property manager was stabbed in the heart when confronting a tenant over rent.
Another, even better, reason to take this approach is and I hope property owners know that they MUST own the park in an LLC, Corporation, or limited partnership, NEVER in their own name - if everyone knows you own the park, then guess who is the first to get sued? If you are "just the manager" for ABC Park Management, Inc. who happens to manager the park for Sunshine Properties, LLC, then when someone trips and falls, you are not the first one they think of when the lawyer starts suing.
So, you never say you own the park. That way all the unpopular decisions are not your fault, they are the fault of an unknowable, distant, unreasonable, and unreachable owner who must be appeased. There may be times when you can even be a good guy and bring a case before the owner on a tenant's behalf. There should never be a reason to be nasty. It's stressful on you, on them, on the properties they leave behind, and it can be dangerous, physically and financially.
Ben
Ben,
I appreciate your comments on this tip series. I agree completely that it is always better to start with a more civil approach and see if things can be resolved. If the resident does not respond with the civil approach then you may have to move on to other means of enforcing the rules or rent collections. But always be smart about it with you or your manager's safety in mind. The context of the Mr. Nasty approach was if you are in your office (as the owner) making phone calls from a distance. Maybe this approach would be better labeled as Mr. Firm.
I have heard similar stories of property managers and owners that have been threatened and in some cases harmed physically like the property manager you mentioned. In one case, the owner was actually shot and killed over a problem with a tenant. Your advice is right on point and it is never worth putting yourself or your managers in danger over rent.
Your thoughts on owning the park in an LLC, Corp, or other entity is also very important. We will have an entire series of tips on this point but for any investors or owners reading this, never buy an investment property in your own personal name. Many investors still do this and are sorry later when they get sued. That extra shield definitely allows me to sleep better at night on my properties. Great advice and 100% right on.
You last comment about not telling people that you are the owner and making the owner sound like a distant and unreachable entity is also a great idea that I have used ever since my first few parks. I will be the first to admit that when I was first starting out, it felt good to walk around the park and have people come up to me and say things like "you are so young and must be rich to own the park" and similar things. However, that good feeling would have changed quickly had I been sued. I am satisfied now to visit my parks in small rental cars and old jeans.
Thanks again for the great comments and disagreements!
On to the next part of this series...
I bought a park once where the tenants had been terrorizing the former owner, calling him at home at all hours of the day or night complaining that the neighbor was making too much noise, etc. This owner had let the tenants run all over him, and in doing so he had empowered them to get the feeling that they owned the park and he was their servant.
When I took over, I got sick of these people almost immediately. I told anyone that called in that obviously they weren't happy and that they needed to find a new place to move their trailer. Of course, it costs thousands to move a trailer, and pretty soon the roles changed and I became the boss, constantly threatening to have them move out.
The final adjustment you need to make before starting my program of redemption is to swallow your ego and stop being the owner at least as far as everyone in and related to the park will know. To start your plan, you will need to announce to the whole world that you have a new partner, or have hired a consultant to make major changes to the property. This will already get them braced for some big shake-ups to come. It also allows you to slow things down even further now you have to ask your phantom "partner" for his approval. Then you can blame the new partner for the most unpopular decisions even to city inspectors.
Once you have made these four mindset adjustments, you are ready to begin the process of reclaiming your property and sanity.
Mobile Home Park Tip #4
Comment From Last Tip:
Dave,
Thanks for the tip regarding the property manager / phantom partner. Your approach is one that I've been using successfully for years now. There are only a hanful of tenants in all my parks that know I'm the owner (or for that matter even know me). Of those tenants who have somehow discovered that I am the owner, I always let them know that I am the managing member whose sole responsibility is to protecting my "partners" interest. I let them know that my partners ownership interest far exceeds mine and that I answer to them. It has been an effective strategy in diffusing some situations and also in enforcing park rules (such as strict adherence to timely payment of rent). For those people who like the recognition of being the owner, I would suggest asking yourself if you're in the business for the notoriety or the money. For me the answer is always the money.
Brian
Finding a Manager for your Mobile Home Park:
When I am taking over a park and need to find a manager, I always start by asking the previous owner if he knows of someone that he would recommend that currently lives in the park. This is a question that he will not have a good answer immediately but if given some time to think about it he/she can usually come up with a few recommendations.
In the rare case that he has no recommendations and you can't find a suitable current resident to run the park (by sending out a letter or posting a flyer in the park), then you will have to look elsewhere. Of the 100 or so managers that I have had, I went outside of the park for a manager on only approximately 10 occasions.
I have three places that I currently use and have never had a problem finding several qualified managers for each position.
- Place an ad in a local newspaper advertising the position.
- Place a Free ad on MobileHomeParkStore.com under our employment section.
- Place a listing on Craigs List.
If you need someone fast the best avenue will be the local newspaper. If you have some time and want to find a manager or management couple that has previous experience, then the MHPS.com and CraigsList.com will bring in the better candidates.
Mobile Home Park Tip #5
Comments From Last Tip: Dave,
Great series of tips,
The absolute best managers I have ever had were a park residents. They were a couple that lived in the park for several years and really enjoyed the life style our park offered. Their enthusiasm was transmitted to the other residents, especially when they started to hold monthly community cook outs, organized and led softball and bowling teams, with the same name as the park, to compete in a local leagues.
We provided the tee-shirts with the parks name on the front for the teams and hot dogs for the cook outs. For next to nothing we found the best source of local promotion that we could ever find, current resident excitement about being representatives of their community.
Keep those tips commin'...your making e-mail something to look forward to again.
David Oxhandler
THE MANUFACTURED HOUSING GLOBAL NETWORK www.MobileHome.com
Thanks David I appreciate your comments. If you haven't ever visited David's site... www.MobileHome.com you should visit it. He has many great articles and other resources for the Industry. Mobile Home Park Managers... Continued Once you find a potential manager for your mobile home park, the work is still not over. Questions such as background checks, credit checks, how much to pay them, what their responsibilities will be, are they an employee or contractor and others still need to be answered.
Should you obtain a background or credit check? The right answer to this question is probably yes. Does everyone do it? No.
My personal thoughts on this are that you should obtain these background checks if you suspect any reason to do so. I have only performed a few background checks over the years and have been fortunate in finding good managers for the most part. I currently have some excellent managers that I am sure have terrible credit.
When I am interviewing potential managers and making my selection I rely on my gut feelings more often than not. If the potential manager needs this job in order to survive that has been a good indication that they may not be a great manager. They will constantly be looking for a raise and if they need money that bad, then it opens the door to theft. My worst managers have been the ones that did not have at least one spouse working elsewhere and their compensation was only from running the park.
Other indications that I have found of poor quality managers have been those that are constantly talking and say they know how to do everything. They have worked in every trade known to man. Once they get the job, you find out that they don't know how to send a fax or replace the inner workings of a toilet even though they may have been a plumber for 5 years. I would much rather have someone that knows their limits and is not afraid to disclose those limits up front.
So, a background check is a good idea but the real key is interpreting what they say they can do and forming your opinion of how well they will do it.
One other note on the background checks... The reason that you should obtain this stems into potential future liability issues. You don't want to hire someone as the manager that may have had issues in the past as sex offenders or other crimes that can come back to haunt you. If you hire an offender and then he/she has a problem with one of your residents, you don't want to face a potential lawsuit.
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By Dave Reynolds and Frank Rolfe Dave Reynolds and Frank Rolfe are mobile home park investor and together own and operate over 100 parks. Frank also leads regular Mobile Home Park Investing Bootcamps through www.MobileHomeUniversity.com.