Kristin
Do you do a credit check to get a idea of the likely hood of them defaulting or if you would be able to collect in the event they do default.
Do you have a minimum score requirement.
Sorry I did not see this sooner, but I just got back from the Seattle Boot Camp.
The original deal that was posted does not work at all. The value of the park is basically 10 lots x $100 lot rent x 12 x .5 (higher expense ratio needed due to small park size) x 10 (10% cap rate) = $60,000. Even if you were crazy enough to count the full home rental, the value would only be $300 (home rent) x 10 x 12 x .4 (you have to cover the R&M, insurance, taxes, etc. on those homes) x 10 (10% cap rate) = $144,000. This seller is delusional â his asking price is nearly a 10% cap rate on the total revenue of the park including the homes without any allowance for expenses. We call this type of seller someone who is âfishing for idiotsâ: asking a ridiculous price and hoping that someone who does not know any better gets caught up in his B.S. Remember the article 20 years ago about the person who bought the pickle jar on eBay for $10,000? Donât let that be you.
I would stay out of markets with $100 rents unless the market rent is around $200 and the mom and pop have just not raised the rent in a decade or more. Thereâs just no money in $100 rents, and they are very hard to find a buyer or lender for.
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The poster above is Frank Rolfe. He is the owner of the bootcamp that I recommended to you. I have nothing to do with it, I had attended it a few months ago.
My advice to you was correct and sincere.
So is this. You need to spend a day reading a couple of years worth of back posts, then attend the bootcamp or at least get the home study course. If you donât youâre likely to lose your shirt on a deal.
Greg, as per your question:
âDo you do a credit check to get a idea of the likely hood of them defaulting or if you would be able to collect in the event they do default.
Do you have a minimum score requirement.â
The Credit Check is really dependent upon the Background Check Company that we use.
We tell every Prospective Tenant that we will run their Credit, Criminal and Eviction Reports and every Prospective Tenant gives their permission (through their signature) for us to run all three Reports.
Initially, we did run all three Reports (including the Credit Check).
The Credit Reports showed defaults on credit cards, student loans and medical bills.
When we moved to another Background Check Company, that Company required that their Company physically visit our MHP in order to do the Credit Checks (which required a large upfront costs).
Since what really matters to us are the Criminal and Eviction Reports, we have selected not to run the Credit Checks with the new company.
For us the real determining factors for Potential Tenants are:
1.) Is paying your Rent your top priority? If not, it will show in the Eviction Report
2.) Are you a law abiding citizen? If not, it will show in the Criminal Report
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Do your eviction reports show tenants that have done a midnight run or only those that have been officially evicted.
I ask about credit checks as it appears you are working at improving the quality of your communities. From my experience to avoid discrimination all applicants require to be screened by the same standards. I have found that using credit checks and having a minimum standard it has been easy to elevate the quality of tenant and use the report to eliminate applicants with other undesirable traits.
For example it would be illegal to discriminate based on the applicant receiving government assistance but you can reject them for having a poor credit score which all applicants on assistance will have. Because I operate in a tenant friendly nanny state every weapon at my disposal to protect my tenants is put in play.
My reports tell me exactly what they owe, who they owe it to, what their payment pattern is and their credit limit as well as present and previous address and employer.
From all that it is easy for me to know exactly what the percentage possibility is of any individual defaulting and my ability to collect if they do. To date I have not had a single tenant default but I only rent one home. I do sell homes although I never finance. Thatâs what banks are for, and they always do credit checks.
What you quickly learn is that smart and reliable individuals use and manage credit wisely and more than anything value their credit rating. Reading a credit report is like reading their mind.
Now I know most community owners do not do credit checks because none of their applicants would pass but for those operating a higher level community or wanting to upgrade their tenant base it is one of many valuable tools to protect your business. The credit check for me is used to weed out applicants not necessarily to find the best applicant.
Our credit check company only requires a inspection of our office space.
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I donât know if this works in all states or not but I started using https://www.mysmartmove.com a few years ago for credit checks. The prospective tenant enters their information and pays them. It then emails me the results. If the tenant is serious, they will do it. Now, I live in an apartment world, not a MHP world but I imagine that the information you are looking for is the same.
I must also thank all of the contributors here. I started not long ago and knew absolutely nothing. I have a long ways to go but appreciate reading all of the great advice you all give!
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