Dilemma


#1

One of the meanings of this word:

a situation requiring a choice between equally undesirable alternatives.

And we have one at the Park. We are running about 80% occupancy there and me and my business partner Tj had a talk about what to do about that. Typically rents run 600 for s/w and 750 d/w homes. We have had several empty since April and 2 from June.

My argument is missing even one month’s rent at $750 per month dropping rent to 690 would cover that hit if we kept it full at the lower rent. Losing 3 month’s rent or more makes no sense…these are spic and span rent ready homes. I want to drop d/w to 695 and singles to 550.

His argument is lower rent atracts lower classes (he is right) and if word got out in the park we were renting at reduced rates our older tenants would want this same treatment!!! I (weakly) responded we would ask newer tenants to be quiet about their rates. He laughed and asked if these are the same tenats that smoke and drink together one weekend and are arrested for brawling next weekend? I shut up…

Talking with my friend SandiFL this evening I shared this prob with her and she had a GREAT suggestion…tie this lower rent to odd jobs around the Park. One of the biggies is cleaning around the dumpster every week

when emptied another is trash pickup where the school busses picks up every day, or raking. WOW! I like it.

Any others? Suggestions?? We hate to see 8K plus go uncollected each month. This is bottom line money.

Please don’t forget we have a MOM coming up peeps…link is below and it will be my last co-hosting this event… get those room reservations this month please:

http://mobilehomeuniversity.com/forum/read.php?f=1&i=6666&t=6666#reply_6666

We have some great minds on this Board and I very rarely ask for help but this 20+% vacancy is killing me, this is like free money going to waste in very tough times.

Greg


#2

A few goofy ideas from a Yankee. How about a months free rent (December). The numbers are the same but you can offer a “Christmas Bonus” program where the December rent is forgiven so your tenant can have a better christmas? Plus that way the rent effectively goes up to market after one year. Or providing a moving truck and crew (your maint guys). A $50 gas card every month the rent is paid on time.


#3

I have read columns regarding the rent-up phase in Self Storage Biz. They negotiate each deal (consider any deal)- they advocate discounting your set price by as much as 50% for first 6-12 months. They of course, are counting on retaining a high percentage of these customers when rates normalize. Keep in mind, I have never dealt with anything like what you are. Suggestion: I think I would advertise discounts off normal rates - perhaps target a particularly good group with coupons - this way you may be able to get your prices back up with less grief. Additionally, you would account for these discounts as advertising…you really have not cut your prices - you have increased advertising spending during a slow time; The bottom line wouldn’t be any better - but fundamentally, your business wouldn’t be devalued.


#4

“How much money down and how much a month”

I would lower the monthly payment a little and lower the down payment as well.

I am always running ads saying " BUY ON CONTRACT, $900 moves you in!

These ads have an amazing effect.

You stated, "His argument is lower rent atracts lower classes (he is right) "

He is right. But his conclusion may be needs to be taken further. I would argue that lower down ads attract MORE people. Your job is to figure out which of these “low down payment people” are worthy of living in your home. True the diamonds are harder to find. But there are MORE of them along with more bad applicants.

They are out there! Medical bills, disability and social security. These 3 things create some good tenants with $900.

I am having more and more great long term tenants then ever. And more and more of them only have $900 to move in. I take $380 out for first months lot rent and lot deposit, then another $120 to start up the insurance. That only leaves $400 down on the home.

I will sell a home for 900 up=-front if it is $10,000 or below.

I am looking for the monthly payment.

I am also getting a fair amount of the homes back after 1-3 years. But because I cherry picked the people they are way less likely to be the type to trash it and leave. They are more the likely to call me and say" I have to give my home back next month"

But because I have so many applicants with $900 I can be picky.

I do have to waste alot of time showing the homes. But i will show them until I get one in front of me and I think to myself, “this is the one”

Get some attractive ads that attract PEOPLE, the more the better. Then cherry pick them.

Good luck,

Briton (IN)

Post Edited (09-11-08 09:46)


#5

Taking Don’s idea step further, how about a discount on rent when they pay on or before the first. Let’s say 5-10%? You could advertise the discounted price (as long as you have a disclaimer in small type such as “Rental price advertised shows our “Early Bird” discount price for early payment. Call to find out more.”.

So, you’d basically get the price down to what you feel you need to, but only if they perform on the conditions. If they don’t, then they go up to full rent.

I’m curious if this would work. As a professional in the advertising business, it’s always about a “call to action” - something that will motivate the reader to pick up the phone or come to your park. The word that works the most effectively is “FREE”, so if you could work in “FREE” somewhere in your ad (such as includes first month “FREE” or “FREE refrigerator with a 12 month lease”, etc.) you will drive more action. Better yet if you put it at the top of the ad in color (4 times the response as black and white).


#6

but, Free lot fees for my park worked out to be an incentive to move out when free period expired - this was during the rent-up phase when my park was brand-new, and Gt, AHFS, BofA were lending loose. I have found that spiffs can yield unintended consequences— which is OK if you get mostly what your aiming for.


#7

Much as Britton has mentioned, I’m throwing out crazy terms to get the phone ringing… I want every person that reads my ad to call and “I” filter through them to find the folks I want. My record to date is just over 50 calls in one day on a 2 bedroom ad, call volume kept up for a week before I could get the ad pulled.

I have added my main criteria to my ads during times when I have high vacancy rates, “no felonies, major criminal, or evictions accepted. Pets Welcome. No Deposit Possible” what ever it takes to keep my phone ringing. If you haven


#8

Shawn,

Thanks for the solid observation on the Free rent. If you noticed, I said free rent with a 12 month lease, so the hope is that the contract will be enough of an incentive for them to stay beyond the 30 day free rent.

Another idea would be to say “FREE Month Rent” in the ad, but tag it on to the end. Not sure if it would be that effective though.

Whenever we make a “FREE” offer we make sure that even if it were abused, it would still not hurt the business, or actually still help it (like Free Fries with the purchase of a Burger - fries are like .30 cents and you’ll make over $1.50 margin on the burger). So, the thing is to think up some free stuff that would be enticing enough to drive people to call or come to the MHP.

The key is that whatever is free shouldn’t take money out of your pocket in the form of a heavy investment. If a one year lease contract is worth $2,400, then a $75-$100 incentive isn’t too high a price to pay. But what shape or form can that take? I’ve got to put some thought into this, but I’m sure that more experienced operators can list 5-10 items that they can think would motivate people.


#9

Shawn

I am amazed that people moved their homes after the free rent period. I must be missing something here. What are moving costs in your area? Removing skirting, unblocking a home, moving it, etc runs into a tidy sum.

Have those tenants really done the math, comparing the move cost to the possible savings in lot rent? I had always assumed that mobile homes pretty much stay fixed their entire lives. At some meeting I heard a speaker say that 90% of mobile homes are moved once, from the dealer to the park.

Dennis


#10

Keep in mind, this was during a time of loose lending(1997-1999). And yes, I was able to buy the repos. But, this move-in incentive (1 yr. free lot fees) usually became a move-out incentive when the whopping $95 per month fees kicked in.


#11

Thanks for creating this discussion, Greg. I am having a hard time filling vacancies myself (9 vacant out of 22 right now) and couldn’t quite understand why until I talked to Ryan (NC) and read the ads in the local thrify nickel paper. Be sure to look at what your competition is offering before you decide on a course of action. I placed and ad in the paper and got pretty lean response. THEN I read what my competition had advertised. DUH!!

NOBODY around here is charging app fees, and plenty are offering no deposit/no down payment move-ins. Ooops. I had both things listed in my ads. And my prices appeared out of line, too, even though I have current tenants paying those same rates.

As Ryan said, even the good folks are looking for a deal, so no down payment gets them to pick up the phone, too.

I tried the Free December thing in a series of ads and it didn’t generate much excitement. I guess my tenants don’t think 5 months in advance! Are we really surprised??

I am personally going to try the 10% discount for early payment route, and advertise the heck out of that discounted price. Then, of course, we’ll do that old “Well, you DO plan to pay on time, don’t you??” routine if they balk at the penalty.

Let’s keep a good dialog going on this issue. I’ve been a landlord a long time (if I told you how long you might be able to guess my age) and have not had such a hard time finding people with move-in money as I’m seeing right now.

Knowing what is working for others right now is key.

Lin


#12

a problem shared is halved and I believe this.

There are some great ideas coming thru and I HAVE to do something…the old tried and true methods simply are NOT keeping units full. Will experiment until I get to 96% occupancy like you (congrats BTW).

Ryan, you and I have discussed this before, but in my world (like yours) end results matter more than fancy, pie-in-the-sky theories. Condensed:

You are 96% occupancy

I am at 79.4% occupancy

Conclusion:

I need to listen to what you have to say LOL!!!

It really is that simple my friend, please email some of your ads Ryan and thanks everyone for the ideas…

Greg


#13

kinda humbling taking advise from a 22 year old LOL.

What is it now? 2 Parks in 5 years?

You go Briton!

Thank you for the clear message,

Greg


#14

Briton,

Where in IN are you? We have parks near Ft. Wayne & Muncie.


#15

Greg and John,

I will try to answer both of you in one post.

Greg,

Time flies my friend. I turned 25 last month!

I bought parks 3 and 4 in 2007. I now have 84 lots including 11 rentals and around $50,000 in lonnie deals.

I am looking at another park with 83 lots and that has been mismanaged. It has 10 empty lots and 10 empty rentals. The problem is the owner thinks its worth alot more than I do. We’ll see if he comes around… I am getting to the point where I have more opportunities than time and money.

on that note

----John,

I would like to hear more about your operation!

I have 2 parks in Dekalb county, 1 in Noble and 1 in Stueben. All of them are north of Fort Wayne 30 to 45 minutes.

There are a couple parks listed on MHPstore.com in Muncie that I have tried about 50 times to call about. When someone finally picked up they hung up on me! WEIRD! Do you know the situation on those parks?

I would love to hear what you do and more about your parks in FW and Muncie.

Mabye we can meet up for lunch sometime.

Briton (IN)

mobilehomepark@gmail.com


#16

Briton,

I work with partners due to time constraints imposed by my tax practice. @ 32 lots near Muncie & 84 lots near Ft. Wayne. We paid about $5,000 per lot on average, working on filling them now. I tend to buy MH in Ohio (where I reside) and move them to IN, have 6 ready to go right now.

I will be in Ft Wayne area around Thurday 25th & again Monday 28th, travelling to speak in Chicago on the days in between, perhaps we can meet for lunch or the like. I also have a speech for a REIA in Ft Wayne on 10/18, probably will stay the entire weekend to work on parks.

I haven’t followed up on Muncie parks, I have enough lots to fill for now (about 40) to be looking for more, in fact, have another park owner who called that I may simply assign that deal to interested investor, near Indy. People who do not call back are great sellers, as their dilligence on operations is equally poor. We have done well with post cards.

John Hyre


#17

Time really does fly. 84 spaces, 25 years old. WOW

It is true stories like this that keeps me posting and all in this business.

I know you are a private kinda guy but I really wished you would post more…you are an inspiration to newbies and us old guys too and your advice is always well thought out and clear in content.

Greg


#18

I would recommend to all newbie


#19

I would love to meet up and chat over lunch and/or check out your park in Fort Wayne. I could meet you on the 25th or the 28th.

Being a mobile home guru, I am obviously intrigued by your operation.

I will email you my phone number.

Briton (IN)


#20

Look forward to it. I might perhaps be viewed as a “guru” insofar as taxation & asset protection of RE are concerned…but with regard to MH & small MHP’s, I rank as merely “proficient”. Glad to share what I do know.