“…the life of man, solitary, poor, nasty brutish and short.” - Hobbes
The thread title says it all - I have never seen as much poverty in all my life as I have in the five weeks since we closed on a 95 lot park in Wisconsin. Not everyone here is poor - but most are - a few depressingly so. Yes the numbers look good, collections are good - but my spirits are down.
Tonight I got a text from a resident who has no car - he asked if he could give me $50 to buy some toys for another resident - a young man raising two small boys all by himself - perhaps the poorest resident in the entire park, living in a trailer he owns that looks like it will blow down in the next stiff breeze. I was told that the young man bought his children no toys at all because he has set aside the money for January’s rent and is afraid to spend anything (my iron fist no-pay-no-stay letter worked - we got 100% collections in month one on a park with a 50% delinquency rate before).
Was I being manipulated? Perhaps, but it isn’t the point. I went to Target and spent another $300 on toys for these boys.
I have so much - my residents have so little. Yes, it is true that many (most) of them are in the situations they are in because of repeated bad decisions in their lives. But what of the children? It isn’t the children’s fault.
I see why mom and pop never raised the rents - they had a heart.
You cannot be around these people on the front lines of property management and avoid feeling their pain - if you can, you aren’t human.
There is clearly a lot of mental illness in the resident base, low IQ’s, disabilities, former and current drug use. Over the years I’ve done well in multifamily - I made the leap to manufactured housing to test the waters. So far everything Frank has preached to us has been true - from demographic macro research, to the ROI of doing “amazing diligence” on individual properties, to deal-sourcing and to property management.
But I was not prepared to handle the poverty.
Yes, people make choices - but to paraphrase - “The sins of the fathers are visited on the sons…” So many of these people - my clients - came out of horrific backgrounds. I, on the other hand, did not. I’m here on the ground transition-managing what was supposed to be a pure investment, nothing more. But being here it is difficult if not impossible to avoid feeling for the residents. We eliminated the prior managers (huge problem - stealing from the residents, the prior owner, cooking meth, terrorizing the park, etc.) and now I have people beating my door down wanting to move into this park - and I’m not even advertising, nor do I have any empty units rehabbed yet. These people look to me like a savior figure - I do not mean to sound grandiose, but they literally have no alternative. Frank was not kidding - these folks are like Waffle House clients chained to the booths. I do not want to be anyone’s savior - it isn’t a good feeling - having customers who can’t leave you. I thought it would be coming from apartments where people will leave at the drop of a hat - but it isn’t.
It doesn’t feel like I’ve earned their business - it feels like I’ve been a shrewd investor who recognized a great opportunity - a mismanaged out-of-favor oligopoly with high switching costs, purchased at an insane cap from a clueless, lazy rich absentee owner.
They can’t move their homes - they can’t qualify for mortgages to buy homes. They are at my mercy - if I raised rents to $425 from $325 I believe most of them would swallow the pill and pay - even though market is $300 and many are living on minimum wage.
The park is surrounded by luxury SFR and is in a fantastic area economically - all the macro signals are in place to relentlessly raise rents over the next four years. But should I? I’m agnostic but maybe someday I will have to answer for what I did in this world.
What answer could I give if my God asks me “Why did you raise the rents on those working mothers when your cup was already overflowing? I blessed you with everything, my son - but you wanted to take more from those who had the least.”
When I leave this property in a couple months after implementing systems, cleaning it up physically and hiring a permanent on-site - it will be easy to look at my spreadsheets on my Macbook, sitting by the beach, staring at the ocean. I’ll punch a couple numbers, realize that $50 a month is viable and will push my IRR to a great number. I’ll look at upgrading my 70D to a P100D - maybe get those 21" wheels on it also.
Meanwhile back at my cash cow a single dad will wonder where he gets that extra $50 from. Yes I too studied econ - spare me the free market, highest and best use, must-raise-rents-or-parks-disappear lectures. Tonight I’m not in the mood. I agree with those positions, in theory. But it’s hard to believe in them when looking into the hollow, vacant eyes of the poverty-stricken faces of my residents.
Sorry for the ramble - be grateful for what we have. There is no solution - no answer but one: “There but for the grace of God go I…”