Poaching Residents From ARC For My Park


#1

In my market (Oklahoma City), ARC has developed a very bad reputation. They sold against the dealers when the dealers sent prospects into their parks to buy dealer homes and they’ve been raising rents a lot on residents (like from $150/mo. with utilities to $230+/mo. without utilities) over the past five years.

I spent this afternoon driving through two ARC parks and talking to residents. I asked them a very open-ended question: “Can you please tell me about this park?” The response was positive on safety and cleanliness, but universally negative on management and lot rent.

After I got an ear full I then said: “Hmm… I run a mobile home park 20 miles from here in a rural location. It’s got dirt roads, so it’s not as nice as this, but it is a very clean park and the lot rent is just $175/mo. Oh, and by the way, water and sewer are included. Do you think if we offered to move houses into our park for free and set them up for free, that people here might be interested in moving into our park?”

Responses varied from “Probably” to “In a heartbeat! What’s your name again…?”

So I’ve made careful note of the addresses and lot numbers in the ARC parks and I’m thinking I should put together a direct-mail piece (probably a post card) that will inform ARC tenants that we’ll move them for free, and get them set up to the utilities for free (and maybe that we’ll even guarantee that lot rents won’t go up for 3 years). Frankly my regular lot rent is only $150/mo., so bringing in good-quality tenants with good-quality homes at $175/mo. is already a premium and I’d be willing to lock it in for several years. But maybe this is over-kill…?

I’ve heard anecdotally that you don’t want to get into a ‘poaching war’ with another park owner for fear he/she will do the same to you. However, in a situation such as this where my lot rent is about 1/2 of ARCs I have a strong competitive advantage. I don’t see how ARC could effectively poach my tenants with their higher lot rents and management’s poor reputation. (But maybe I’m naive!)

I’ve also only got 38 spaces to fill, and ARC has approximately 1,660 spaces under management in the OKC area, so even if I got all 38 of my residents from ARC parks, I’m frankly not even sure they’d notice.

‘David and Goliath’ anyone? ; )

The math looks good. My alternative use of my money is doing Lonnie deals. The economics on that are:

  • $17,000 for a good-quality used home set up in my park, ready to sell, which will generate a $350/month lease-option note plus $175 lot rent = $525/month (e.g. 3.1% of my capital back every month)

Whereas the poaching strategy yields:

  • $4,000 for moving, hooking-up and constructing new deck and skirting, which will generate $175/month lot rent (e.g. 4.4% of my capital back every month).

Not only is the poaching strategy more profitable, it yields higher-quality cash flows (e.g. all ‘ten-CAPable’ lot rent, vs. partial lease-option note and only partial lot rent).

BTW - 80%+ of the homes in these two ARC parks are s nest…!


#2

Stir up a hornet’s nest? To late for that dude, 29 seconds after you left the park the manager was already getting calls. No place does Gossip ( news) travel faster than in a park.


#3

Jefferson,

I’ve considered this a viable infill solution for a while if there is a park that the tenants are unhappy or unsafe in the general area. People given a choice tend to be happy campers and I think that anything approached with this game plan needs to be for the betterment of the tenant. win-win.

You state that you are half of the ARC park, That’s a big selling point and if given a choice I’m sure there are good people that want to move but don’t have the cash to do so. If you help them move their home at your expense they accomplish something they couldn’t do on their own… your reward is an active rented lot with a happy paying tenant and a great return on your investment. For easy numbers if a move and setup cost run you 3k and your lot rent is $175 your return on the investment is just shy of 70% if the home stays for 60 months.

In fill cost can fairly easily run from 6-15k per pad if you move a home you’ve purchased in to the park, so theoretically you could move 2-5 homes in for the cost of one. Lot rent is the main key on bigger properties and stable lot rent tenants produce large equity gains on infill. I’ve not done this personally but I believe the logic behind the idea is sound… Give the tenant a choice and let them decide.

But what if they only stay a few months? A few will likely be disrupted by the change but I find it unlikely that it will cause them to move the home back out in short order. My main concern would be that the title to the home be unencumbered thus a finance company ain’t going to come looking for the home down the road… You could also lien the title subject to say performance on a 12 month lease if you cover the move cost.

I’ve pulled homes outa hostile parks without experiencing retribution from mismanaged parks, it is fully possible to get in a “poaching” war but in the end the tenants will be the ones that choose where they want to live! Treat people with respect and common decency and the rewards are great.

I was happy to have taken my family to one of our new turn around parks today (they weren’t allowed to visit a few months ago) to be greeted by very happy tenants who were making sure they knew how to pay their rent when we change over to payment accounts. Again a little decency and respect provided along side a decent place to live goes a long way! =)

Best wishes,

Ryan Needler


#4

I had a friend in Texas do something similiar, but he and his wife actually took it one step further.

They set up 2 very nice d/w repos and furnished them with decent, cast off furniture. Went to Wal Mart and got cheap, plates, pans, skillets, etc. and let folks rent these units for the month their home was being set up. His philosophy (correct) was there will be more takers if he provided a place close for them during the interim process…in other words less action needed from these new tenants.

Over 4 years he brought in over 40 homes and filled up his Park. At the end of his infill process, he sold these two rentals and had him a very nice, full 90 space Park lot rent only.

He had all move in folks sign a 2 year contract, or they were liable for the cost of move in and set up…only had one problem in those 4 years and he eventually got his set up money from a move out.

Good Luck,

Greg


#5

Jefferson,

First off the problems with the ARC parks (at least in OK) are much, much worse than what you mentioned. They are doing things that are potentially illegal as far as late charges and have completely given up caring about their residents, IMHO. They are also not going to be able to do anything about you poaching if you decide to move forward. The only concern I have is that the distance from your park to where most of the jobs are will cause a lot of people to not take you up on the offer. That or they will take the offer without realizing the cost in gas compared to the ARC parks where they live now. Once they figure it out they could be leaving your park or stop paying. But if you keep this in mind when screening the new move ins I think that you should be able to fill your vacancies pretty easy.

Just my thoughts,

Jad


#6

Consider . . . you’re missing out on all the Lonnie Deal income if you do this -


#7

What is an ARC Park?

Thanks, DK


#8

What is an ARC Park?

Thanks, DK


#9

Affordable Residential Communities


#10

Who are the owners of the ARC company?


#11

by a REIT (Real Estate Investment Trust).

They are terrible owners here in FL also. We pull tons of repos from their Parks each year.

Theie dynamic here is to buy a 9 CAP park, double lot rent, and tack on huge late, litter, noise fines. They are in Court all the time.

Greg


#12

ARC was a publicly traded company but this year they were purchased by a private company that deals in real estate (the name escapes me). When this happened they took the company private and unfortunately it has gone downhill even worse than it had been.


#13

Greg,

They seem to specialize in harassing long-term residents for no discernible reason- one of my payors takes great care of her lot and home, and they keep giving her a hard time about how she mows her lawn. Her husband was deployed, she had a toddler and a newborn, and they made her mow her lawn over again because her mowing pattern was “erratic”. Can you imagine how hard it is to mow a lawn while keeping an eye on a toddler and a newborn? I’m impressed that she even attempted mowing the lawn so soon after giving birth.

I cut her payments to me in half so she’d stay in the home, and I told the park manager that if she left I’d pull the home out. That seems to have quieted them for the time being.

Anne


#14

Thank You.


#15

as you well know, is long term tenants are the most valuable component in any Park. We bend over backwards to keep quality folks in our small Park.

I am in the process of doing something fairly different (and the same) now Anne. Sold a nice 4/2 D/W to a nice young couple, she had a daughter from a previous marriage, he had a daughter from a previous marriage. This was in 2004. They divorced in Feb of this year and as part of the property settlement, they need to sell home and split proceeds. In July she fell behind in payments, caught up in Oct and fell behind again last month.

I had collected a 9.3K down and over 3 years of 876 per month payments (4 lates in 37 payments). Called a meeting of all concerned and layed out the facts; if I didn’t get paid there would be no money to split for them and the single Mom would be out of the home.(the DAD was living with his folks)…after the usual he said/she said we agreed to this:

I get a DLF (deed in lieu of foreclosure)

Upon resale they split 75% of down payment of 10K.

She and her daughter get a 2/2 single in my Park for 500 rent per month for 1 year (usual rent on this unit is 625 per month)

He and his daughter get a 2/2 singlewide on private 1/4 acre lot for 500 rent per month for 1 year (usual rent 675 per month)

No deposits, no last month rents. Sounds like I am getting the shaft but I worked hard to put this together for these reasons:

A DLF saves me 1600 in Legal, and three months time.

I hang onto two very clean, respectful, PAYING buyers (now tenants)

Will have 4/2 ready to show by 1/1 (our busy selling season)

I’ve collected 40K in Payments and down.

I’ve made no enemies in the deal, and created some good will even.

A year ago, I would have booted ‘em and moved on with rehab and resale but as my business has tightened up some, I have really started getting involved in keeping paying, decent folks around. Renters or Buyers they are valuable to me and my goal is hangin’ onto 'em! I predict more Owners will be fighting harder for good tenants the next few years…

Regards Anne,

Greg