Upgrading tenants' home exteriors at my expense?


#1

I’m looking at a park in OK with about 1/3 of the spaces vacant. I haven’t seen it in person yet. But doing a Google drivethrough, it appears all of the existing homes look pretty dumpy. (And the Google drivethrough images were dated 2007, so they are probably worse now!) And the immediate neighborhood around the part is also pretty run-down. I know, walk away, right? But, on the plus side, it’s all on city water/sewer, separately metered, and the city maintains (sort of) the streets! Plus, the best schools in the city are right next door. So there is some upside, potentially.

But my fear is that, with the existing homes in such poor condition, I won’t have any luck getting folks to fill the vacant spaces. If I bring in some new homes under the CASH program, they will be placed next to some homes that just look awful. Who wants to live in a new house in a dumpy neighborhood next to a dumpy home? Not many people!

I also don’t see how a local banker would want to finance it after driving through. (Hello seller financing!)

So, my question: Has anyone ever, at the park’s expense, upgraded the exteriors of tenants’ homes? Most need paint and shutters and skirting repairs. Maybe roof shingles. $1000 per home probably gets them looking good again. Seems to me, if I buy it right, spending $30-40K on tenants’ homes would upgrade the park’s image and make it more attractive to new tenants. And therefore justify a rent increase.

Ever heard of the park paying for tenants’ exterior repairs?


#2

We have only provided free paint, and that was either free or very cheap off craigslist left over from another job. When it comes to other materials and labor that’s on the home owner.

I would not set the precedent of repairing their homes. The tenants should be complying with the Park rules, which hopefully have standards for home appearance. Group the issues by home and send out Homeowner notices to have them fixed in a reasonable time - maybe 60 - 90 days or otherwise you will fix it and bill them. Confirm the proper notices and procedures in accordance with your state laws

You want home owners that maintain their property. Fixing it for them is encouraging the wrong behavior. I would take a real hard look at the economics of the area to make sure you’re not competing with affordable stick homes that have more options for financing.


#3

I would not do it. As stated it sets a bad president and will likely lead tenants expecting more. What you should do is inforce appearance standards in your community rules. You can then offer to finance, at a reasonable rate, the costs to upgrade to the community standards.
The homes belong to the tenants and they should be held responsible. You do not want tenants that are not going to take pride in ownership if you are intending to bring in new homes. They need to be taught what is appropriate upkeep.
Set the rules and strictly inforce to your standards. As the owner you determine the quality/appearance of your community that you want and screen tenants accordingly.


#4

Since we had a related finance company to finance homes, we also offered home improvement loans for work done by approved contractors. Of course our separate firm that did repairs and remodeling was an approved contractor.


#5

We’ve repaired tenant’s homes immediately following the purchase of a community. What helps is to properly set expectations. The last time we did this I went to the park and had a meeting with all of the residents. At the meeting, we discussed the rent increase ($80), the installation of water meters (moving away from RUBS), we talked about improvement projects and timelines, and I offered a free one-time maintenance program for all residents. The program included pressure washing, cool seal on roofs, skirting repair, and painting. Our total cost was $17,000 to spruce up the homes for the 53 residents who took advantage of this. This was a rough park and the homes were fairly rough. Since doing this, the park looks night and day different. We’ve also had residents express an interest in paying an additional monthly fee ($35-$40) to have us take care of all preventative exterior maintenance (pressure washing, painting, cool sealing). We’ve yet to do this but we probably will put this in place within a few months. I think the key to doing it is to properly set expectations and communicate that it’s one-time and that moving forward you expect the residents to follow the rules and maintain their home in accordance with the standards of the community. I’ll get you up to that standard but I expect you to keep it there.