I am buying a park in Illinois that and several of the residents are six months behind on rent. I
I have asked for a price concession from the seller but he is not budging and has no explanation for why so many many residents (25%) are significantly behind on rent.
If I knew these people would start paying, no problem. But, if they all refuse to pay then I am looking at lots of evictions and vacancy. The homes are old and rough so I don’t want to have to take them if they leave the park.
Going off what I’ve heard on 1 of the mhu podcast. Try to negotiate w the seller to escrow the value of lost tenants at closing. After 6-12 months you can determine how many of the delinquent payers are still delinquent or paying. I would wipe the slate clean w everyone and start over. This will be their 1 time change to pay on time or be evicted. Good luck w negotiations.
The primary reason tenants get behind in rent is always poor management. Landlords that are good at managing do not allow tenants to fall behind, they either pay or leave/get evicted.
Investing in this community will be high risk if you can not survive vacancies. Every tenant that is behind will need to be retrained to pay on time, not a easy task when the present owner has taught them that they do not have to pay rent. Tenants will leave and you will be stuck with some old homes. If you are not prepared to upgrade the community with newer homes this community may not fit your investment strategy.
If you believe you can turn around this community stick to your demands and walk away if he does not come around. He has created problems for the next owner, he needs to be finically punished.
Having owned parks on the border, Mission, Texas that were once snow birds only and as the safety of such areas decreased the parks are mostly Hispanic and very messy and collecting money will always be a problem. They will communicate amongst themselves and you will be out of business unless you ease up greatly on normal requirements. If the park was less than 25% Hispanic usually no probable–just my experience and from present owners of such parks. Personally if the property was given to me, I would walk—not prejudice but reality. You mentioned the fact that it was !00% non-Anglo–you have questions!!!
I have an all hispanic park and would tell everyone to strive to have an all hispanic park. I prefer to them as tenants. They make the best and most reliable payers. However, like all other tenants you have to lay down the law quickly and treat them with respect and have a very short leach. You do it right and they will take care of the park and your rent “money order” will be in your mailbox every month guaranteed.
Collecting the back rent will be difficult. You may want to consider forgiving it. Consider writing each household a personalized stern letter about you being the new owner and having a no pay, no stay policy. In that letter let them know that they will have a clean record with you and will be allowed to prove themselves going forward by paying timely.
Celectric, I like this idea but Seller is obstinate. He is 95 years old and 100% firm on everything. My options appear to be a) close and deal with it, or b) don’t close.
25% of the park is not really a big deal. Chances are that even if they were paying and you start making changes you are going to lose that amount anyways. Hispanics always pay but the park was mismanaged to begin with so its more of the fault of the owner. The odds are the situation would be the exact same even if it was all english speaking. (By the way Puerto Ricans are American). You are going to have to work hard in the transition of ownership the first few months anyways. Your not going to walk in to something thats already done for you. I wouldn’t make this particular issue a big deal.
If you believe he is over priced keep in mind he is 95, his days are numbered. Wait till he dies and his heirs will be glad to off load it for what ever they can get.
Patients is a virtue.
Thank you for reminding everyone that Puerto Rican’s are AMERICANS. It’s time folks stopped lumping all “Hispanics “ in together as one group and thinking of them as “Mexicans.” “Hispanics can be indigenous Indians of the Americas, or from Central, South, or North America. they can come from the Caribbean. One thread, and only one ties “Hispanics” together, and that is some ancestry ties to European Spain. Which most of America has some ties to Europe, or Africa, or Asia, in some dna form, some more than others.
“Hispanics” are from many various global countries, islands, and completely different cultures, foods, ways of living, foods, ethnic & indigenous backgrounds, etc. I would please ask we all stop stereotyping people.
Before I get some backlash for my “soap box” comments, I am merely pointing out that the original poster was speaking about Puerto Ricans, and then a few people started talking about Mexicans. That would be like talking about the Irish, and someone start speaking about Polish or Russian people. They are completely different.
Tenants are tenants. If you establish fair and clear rules and enforce them consistently and fairly… your tenants will learn to follow them and respect them. Period. Make it clear from day one. Rent is due X day… ALWAYS. On X day late eviction process automatically begins. Late fees until paid in full are XXX. (yes make the late fees as obscene as your state laws allow). Always enforce it and it works. It isn’t magic… it’s management. Owning a park isn’t as simple as many would have you think… and yet… it is.
It is insane to refer to the ethnicity or nationality of a tenant, such as saying “Hispanic.” Insane. US Fair Housing laws are so clear. It exposes you to a federal lawsuit and it’s wrong. Even when you are saying good things about the ethnic group, it’s still illegal and wrong. I am NOT politically correct myself. I’m not an SJW. I’m an older, long-time investor/developer/park owner. All our decisions are made carefully for legal business reasons. There’s no need to identify tenants by protected Fair Housing Class characteristics, and it’s illegal. Treat each person the same, regardless of those characteristics. The comment above by Jsmith is a good example of how to do it properly.
My understanding is that this is a thread regarding the risks of purchasing a park with a high number of tenants behind on rent.
REA nd Shamrock94 it would be better for you to start a new thread to expand on your topic rather than going off topic here.
We are in the process of turning around a mostly hispanic park. My experience with “hispanics” is that they are mostly honest, hardworking, family-oriented and make for good MHP tenants. But, as with any population, regardless of what characteristics you use to define it, there are those that are better and those worse that the mean. A few things to consider based on our experience:
People who move into or stay in a community that is poorly run and with no rules often don’t like rules and order. When you put rules in place, some will leave. I’ve heard “Why can’t I have a [fill in the blank: toilet, garbage bags, washing machine, tires, refrigerator, broken down car, etc] in my front yard? The former owner let me.” You will have turnover. And, if they can pull their crappy home out and place it on a county parcel, even without utilities or codes, and live in squalor, they will.
But they can learn that they have to pay and most do. We started with 50% on-time payments $5,000 in delinquent rent and people paying any amount almost any and every day of the month. Our first day we announce “Christmas in July” and forgave all past due rent, also announced there was a new Sheriff in town (not in those words) and instituted No Pay NoStay, mandated PayLease CashPay with no partial payments and we now have >95% on time payments and no delinquency beyond 12 days, and at this point few evictions. My advice is as above: set the rules on Day 1 and don’t waiver; Gradually turning the screws just prolongs the pain.
You will lose tenants. You may lose homes. You will be left with crappy homes that you will either need to demolish or dump $5-8k into. If you are buying it at an 8% cap on what is in place now, you should have a lot capital reserves and there must be a longer-term, big upside (or you are doing this as a hobby). If you are buying it at a 12% Cap, it makes better sense but be ready for the work and the time it takes.
I grew up in the southern US at a time we used racial words freely that no one would use today. I still don’t understand those who feel the gender pronouns that have sufficed for the English language hundreds of years are suddenly insufficient for their needs, BUT:
Your first two sentences make it very difficult to read your question or give you a serious answer. If you’re buying a park, the old debt is probably uncollectible at this point, so assign a low value to it.
Otherwise, I couldn’t care less about skin color, just the color and numbers on the rent deposit and would tell anyone working for me those words/ attitudes you posted are invitations for fair housing suits. I’ll fire that before it gets a chance to cost me every penny I have invested in my park.
But I was responding to the other investor who mentioned it and it’s up except able and illegal as another mentioned above. So it was not I who went off topic IMHO. I did not understand why it was brought up to begin with. Thank you.