Poaching/Getting New Homes/Ect

If a home is for sale in another park, should you not purchase and move it out of good business?

Is it “good business” to do a “we’ll move your home for free” special?

What is considered kosher vs what is not in your opinions?

If a home is for sale in another park, my approach is to contact the park manager or owner and ask for their permission to buy it. That’s good business in my opinion.

Yes, I’d say it is good/fair business to do a ‘we’ll move your home for free’ special. Sometimes people just want to live someplace else (for a variety of reasons, including crappy mgmt at park they’re living in, a crappy neighbor, high lot rent, etc.) and don’t have the means/funds to move their home. Beware though - you may be getting someone else’s problem child.

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I have a lot to say on this subject and I am sure a lot of you will rain down a lot of hate on me. So be it.

First we have to have a clear vision of what is at stake – what is the value of a home in your park. The obvious way to approach the problem is to take the number of homes in a park and divide the market value of the park by the number of homes and that is the value of a new home in the park.

I think that is wrong.

I believe that the profits of a park are concentrated in the margins – the last lots filled. The first so many filled lots cover the park’s expenses. After that the homes rents go mostly to the bottom line. There may be a few expense that go up as you bring in more homes such as management compensation and insurance, but not by much. So that, say, you have a 50 lot park with a vacant lot and the rent on that lot is $350/month, perhaps $325 makes it down to the bottom line.

So let’s run the numbers on that.

$325/increase in monthly NOI X 12 months = $3,900 increased annual NOI / 9% cap rate = $43,333 capital gain. Got that? Every home new home in our park is worth $43k to say nothing about an almost $4k in income.

Now say our 50 lot park has 10 vacant lots. Fill those lots and you are some $430,000 richer.

OK, now let’s look at that gentleman’s agreement that is standing between you and $430,000.

If we buy a home out of a park, move it into our park, put it in ship shape condition and sell it we are working at a $4000 disadvantage over the park owner who’s park it is in because of the moving costs. If we can do all of that and sell at a profit, which if we buy smart, we can, that means the owner of the park could have done the same only with a $4,000 bigger profit. That he is not it doing means he is not minding his business. Is he too lazy to take on the project? Too uninvolved to know what is going on? Too stupid to understand what is at stake as laid out above?

So what’s that gentleman’s agreement saying – I am supposed to put the interests of park owners who are lazy, uninvolved and stupid over my interests as a businessman? Really? We certainly don’t do that when buying our parks from such owners. There has been a lot of talk in these precincts about how to "bond"with elderly Mom & Pop to get a better deal out of them. That strikes me as being cynically manipulative, but whatever. And how to promise them a good retirement income from the note you will sign with at high rate only to refi after the deal closes. And what about our tenants “chained to their booths”. We jack up the rents on them and bill back the water. Then hit them with billing back the trash. Ha! Poor fools, they are too stupid to know a water bill back is a rent increase. No gentleman’s agreement there.

Well, yeah, we are business men and women. We are in it for the money. I know I am. Sure, I would not poach from a friend’s park. I would not poach from a park in the same general area. But 100 miles away? And some poor guy can’t sell his home and has to keep dropping his price? Are you saying this guy should be cut off from my capital. He can only sell to other people like him who have no money? He can’t can’t have access to the open market where he can sell his property to the highest bidder --perhaps a person who understand the value of a new home in his park? Looks to me the park owner is asleep at the wheel. Looks to me as if he has some attitude about tenants being peons. I’m supposed to pass on $43,000 to respect that attitude?

Think again.

Let’s look at something else. “Move In Special! We will pay your moving fees!!!” You don’t think that is poaching? Really? Like some farmer is going to see that and go “Whow, Martha, we can move that MH we use for our farm manager into town and start paying lot rent on it.” Yeah right.

Business is competitive. Look at Home Depot and Lowes building next to each other in a most ungentlemanly way. Look at Amazon battling with Walmart. And Walmart sinking Mom & Pop stores. But in our business of owning that 50 lot park with 10 vacant lot we should not be willing to fight and compete for that $430,000 gain? What do you think this is, a game of Frisbee?

I have a lot more to say, but I’ve got to get back to closing out Jan books but I want to touch on one more issue:

Let’s step back, way back and take a look at the big picture and answer the big question: What purpose in the universe do we serve as park owners? The answer from on high: We provide capital to those who have none, save the MH they own.

If they had capital, they could buy some land, pay to improve the land so as to put their home on it. But they have none, so they put it on our land with our improvements to the land which we are able to provide do to our capital (or access to other people’s capital.) I believe that our responsibility to provide capital goes beyond just the land and the pipes in that land. We may have to step forward and provide some capital to get that nasty looking roof on lot 34 fixed and bill the tenant so we get our capital back in a couple of years. Why? Because they are dirt poor and don’t have the capital to do it and if it is not done that home is going to be a goner and we will have lost $43,000 dollars in value.

And if someone is moving out and the home is looking like a plumb, ripe for the picking, we may have to step forward and provide the owner with the capital so they can move on, and we can have control over it. Heck, we can put it in good shape and make a few grand off of it in the process so that our capital will come back to us in greater quantities. This is a capital intensive business. I tell my tenants I will buy their homes if they are moving. I am upfront and tell them I can not pay top dollar, since I need to pay to clean them up pay to resell them. But the money is there if they need it. I tell them come to me and maybe I can help out somehow.

I’ve got to get back to work.

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I think you are going to make yourself very unpopular with other park owners. Some of them might get mad enough and have the financial resources to strip your park of all your paying tenants with offers you can’t match. I know because I have seen this done by several of our clients in reaction to this practice.

You will also find yourself very unpopular at state association meetings as well, and state associations are very valuable resources.

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Poaching is not germane to the topic but generally a term used for illegal hunting of animals. With that said perhaps the best approach is have a very appealing and desirable property people love to be in your park. If their home meets your requirements and they want to move let the market determine the winners and if they want help with moving expenses so be it. Presently since our requirement are stringent homes in most other parks would not qualify. When you have an exceptional operation you will have no concern of homes moving . The south Texas situation is unusually where there are park owners not just moving the homes for free but also giving a year’s free rent which really is making the future bleak unless the parks are turned to family parks which is happening.

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There is a lot of truth in what you say Ken. It is a distasteful practice that should only be deployed when there is no other alternative and then practiced artfully and with restraint. The fundamental reality which makes this such a problem is:

You must fill lots or die.

Well, not you, but your business will die a slow death as your park’s older homes die off and there is a move out every now and then. If you are in a market that will support new homes, it is not much of a problem, tho I find problems with the financing that is available for new home sales. If you are in a market that will only support used homes in the $10 to $25k range then you have to go into the used home market and buy them there. But all but very a few rare homes, if any, are in parks. This points to another fundamental problems with our business:

There are more vacant lots in parks then there are homes to fill them.

When you drive the parks in you area and see all the vacant lots do you ever ask yourself, where is the supply of vacant homes that can fill those lots? I am not talking about in big cities where people will line up to buy a $45 - $65k home, but the low income parks in smaller towns in places like Ohio, Indiana or central Illinois. When you drive the parks and see older homes that are looking pretty rough, do you ever ask yourself how long it will be till they will be hauled off to the mobile home grave yard? Right now I have five such homes that look too far gone to fix up and I am willing to fix up homes most would pass on. That means five vacant lots added to the number of already vacant lots in my areas. Remember when we were kids and played that game called Musical Chairs? I kind of think we are still in that game.

Where are the five homes to refill those five lots of mine? On Farmer John’s back 40? Yeah, right. I know of only one place. If any of you have a better way then what I have laid out above, please tell.

It may well be that time proves Carl to be the wise one. It may be that low income parks have a fatal flaw that the kind of park that he has described to us for years does not have. I would guess as the old flat tops die off and vacant lots accumulate, the practice he wrote about of we will pay your moving cost and give you a rent free year to boot, will spread and turn into and we give you 65" smart TV.

A low income park may prove to be a poor long term investments. Those 5 dead homes I currently have, represent about a $150,000 loss to the valuation of my parks. Ouch. I saw something similar in Central California in the early 2000’s when I was in the apartment business. Cheap money was plentiful and the builders went to town, building new apartment buildings even though there was no increase in population to speak of. That of course resulted in high vacancy rates and everyone was trying to out do each other with move-in specials. It got kind of ugly (till the housing bubble saved the day.)

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Everyone is having trouble finding homes. The prices on late model homes in good condition has gotten so high that, where manufacturers making the right homes are available, many have given up on pre owned altogether and moved to buying new homes which also helps with upgrading the park and the quality of the tenants.

Obviously every situation is different, but I have seen, and participated in, situations in the last several years where parks considered run down and one star parks stripped of every home that are replaced with brand new homes. Those parks became three star parks with owner occupied homes instead of rentals and 100% occupancy.

It worked and it worked well. The obvious caveat was, it took bundles of cash to get that done. It also took professional marketing and sales efforts to meet the time deadlines. It also helped that the infrastructure was in good shape. It may not be for everyone, but the rewards were worth it. That said, not everyone is up to the task and perhaps not all markets can support this type of effort.

I feel that if the home in said MHP had value they (THE MHP OWNER WHERE THE HOME IS UP FOR SALE) would purchase it themselves… Since they are not and it is a property for sale to the general public, buy it…IF the numbers work for you.
Also one needs to take in the account the market of your MHP to the avalable MH’s (used) or inventory in your area. Some areas of the country the used MH inventory is very small. Take what you can and move on…
IF a MHP owner does not take advantage what is right under their nose you defiantly should.

I completely agree with this observation and I would love to provide this for an old park. I want to bring in new/newer home to fill the vacancies and when I get an old 80s model back dump it and replace with new. But the capital required is what makes these smaller operations so hard to run. My question to you is should only those with extra capital able to make this improvement get involved in the more poorly managed parks? How does a smaller operation enter the game when entering the game requires financing on a poorly producing park and the need to improve infrastructure and bring in homes? Do we just sit out and what for something else?

I would not personally poach from other parks, but that’s just me.
However it is not a issue since my community rules do not allow for moving used homes into the community. New homes, direct from dealers, are the only ones allowed in.