Just Bought TurnAround Park in NC


#1

It is a small park. 10 Park owned homes, 8 Tenant owned, 4 vacant lots. The park owned homes have a lot of deferred maintenance. None of Park Owned renters are paying market rent. Most are paying about $300 per month less than market. Worse, as we were in court yesterday trying to evict 2 non payers, they complained to the Judge that the properties are in too poor of repair for habitation.

All leases have expired. Had planned to upgrade slowly but wonder if it would make more sense to send notice of non-renewal to the remaining tenants before they start slinging accusations. (one is already pretending that some mildew is mold that is causing her child asthma).

Have only owned the park for about 10 days and getting the homes repaired will take about 2 weeks per home. Hate the idea of mass eviction but not as much as I would hate being sued over problems that we have not caused and have not had time to correct.

The rental market here is very strong. Had planned to sell off each home as they were completed but leaning towards renting some of them as the differential between lot rent and home rent is significant. Lot rent is about $300 per month and the market rate for home rental is more like $850-$950 for 2 bed mobile and $1,000 to $1300 for 3 bedroom homes.

Anxious for advice please.


#2

You need to know the standard of habitability for the homes in your state. Typically this means working furnace and hot water, no holes in the walls or roof, working doors and windows, these sorts of things.

if the homes are truly not habitable, you need to bring them up to code ASAP and/or you might be required to give your tenant somewhere else to live in the interim IE, a hotel or something. Or, you may be able to get a judge to agree to evictions given that you just purchased the park. You’re facing the risk of inheriting liability for the past issues that have been building up since before last week. The tenants have a compelling reason not to pay rent and a judge might agree with them. If things are really that bad, I would try to evict the tenants, trash the homes and bring a new ones. Fixing them in 2 weeks each (affordably) is a probably a pipe dream.

If the market is as strong as you say, you can bring in new homes under one of the programs such as the CASH program from 21st Mortgage, and you will be in the black, the community will be nicer and more attractive overall, and you’ll have a ton more equity.

Mass eviction is harsh, but the alternative of letting tenants live in squalor is worse. As a landlord, you have a responsibility to your tenants. This business is not just a right to receive income. In the end, you probably have to face the local judge and you want to come in with the “white hat” and a viable plan. Count yourself lucky if you don’t inherit the liability for the problems of relocating your tenants.

If things are not so bad, I’d be proactive about finding out what your tenants want done, and taking care of those things ASAP, while proceeding with plan of rehab or replacing homes one at a time. Given your facts about the market, I’d say replacing is the way to go. You can break even at around $400 plus lot rent, IMO.

You might think about bringing in one new home, shifting one of your tenants into that home, junking the old empty home, bringing in another new home, etc etc. Of course your current tenants may be there because they can’t afford what you say is the “market” rent, in which case you have to decide what kind of park you want to run.


#3

Thank You Brandon!!!


#4

If the community is in rough shape, as you describe, and you want to improve it you will likely need to replace all the present tenants over time. Realistically the majority of present tenants are probably bottom of the barrel and will pull the community back down after you do your improvements. Most of your efforts will be wasted on the existing tenants unfortunately.


#5

Thank you so much Brandon and Greg!!

On Friday I spoke to a lawyer who says that since the leases are no longer current, I can simply terminate the leases with 7 days notice. I hate to do it for humanitarian and short term cash flow reasons but it is the best option to avoid liability, potential litigation challenges, and (as Greg noted) wasted resources.

Planning to take termination notices to all park owned homes on Monday. Leaning towards offering cash for keys if the homes are left on time and in broom clean condition. Any thoughts on amount I should offer (if any) please?