Well, we broke down


#1

and rented 9 of thirteen empty rentals this weekend. This will bring in 6450 this next month and the money will be welcome.

We have tried to always rent with first, last,and deposit but every month we had empties…

To fill up these units we had to try new things. A typical 2/2 on it’s own small lot typically rents for $650 per month…we reduced to $595. A typical 3/2 doublewide on it’s own land is typically 850-950 per month, we reduced to $750 -850. Typically, we ask for 500 deposit, on 5 of these rentals we accepted 1/2 now and 1/2 in 30 days. We abolished last month rent on all we rented.

Sound kind of draconian? Had $10,040 that would NOT be collected without some huge change in February. Risky? You bet. The one thing we did do was rent to the cream of the crop. We verified employment, credit, references. Our market is not changing, it is totally changed.

I post this not to scare investors here, I do it to share a dynamic that is real and pressing. some of these rentals have been vacant for 4 MONTHS!!

I try to post the good the bad and the ugly here. I often learn more from posts that show mistakes were made…and make no mistake, we took our time responding to this changing marketplace.

I get in a “comfort zone” and don’t want to change. It took my vacancy rate going to 18% to make me do some new things. will this be a huge success? I don’t know, but to watch vacancy rise without trying SOMETHING is just poor business in my book.

I am seeing late pays and partial pays on some of my Notes also, rather than waiting for skips, I am trying to work with two couples to keep them in their (my) homes. For one Note person Feb. 1 I will forego payments in Feb and March and add 2K to back end of lease (try that on a financial calculator). He broke his wrist (roofer) and won’t be back to work for 6 weeks. These folks have been in their home 3.5 years and one late and one partial (Jan 08) in all that time. The other couple need a cheaper home and they will move out of their 4/2 double on 3/4 acre and move into a 3/2 16X80 on 1/4 acre lot. Pyments will go from 887 to 689 per month. I feel these folks will not be able to weather this…they both are working part time and she is 4 months pregnant! But these folks bought my second L/h I put together for resale and i feel I need to try and keep them paying. In 4 plus years they have paid 17 late payments…

Clearing up these two problems will make my life a lot easier. A year ago I would have booted both and resold the packages, today I try to keep folks with decent track records in MY homes. And even the 17 late pays folks are great Buyers, I have never forgiven a late charge, and these 17 lates put over $1500 in my pocket…

Anyone else had to get creative to keep units full?

I’m starting to get used to the taste of “humble pie”, tastes like chicken! LOL

Greg


#2

Greg, you sure made entry a lot cheaper for new move-ins - I sure hope it works out for you. I currently have 1 vacant out of 19, I sold a used house in the park today 1996 Dutch 16x70 2-2 $8,500 down pmt. $8000 amt. financed for 36mo. 36 % yield. (Hoorah!) I’m always interested in other operators screening criteria, and have always wondered if just easing up a little bit might help accelerate my business without opening up too many troubles. It sounds like you made a big adjustment - but it seems to have been effective. Question: were these changes driven by your competitors or your knowledge of your applicants. Keep us posted how these new residents perform.


#3

I am right there with you Greg as it looks like I have finally resold the one lonnie deal I knew I never should have done (and can’t get rid of). I was itching for a deal and the home was decent but still had a gut feeling that I should walk away. I know listen to that feeling more as I have had the home 19 months and it has been bringing in income only 3 of those. The rest I was stuck with the lot rent. I will have to double check but I believe I have around $8k in the home and am now selling it for cash for $3300. I collected around $1000 from the buyer who flaked out on me so it is a costly mistake. I had to change my thinking as payment buyers just kept looking and leaving, so decided to sell for cash and drop the price. Of course this took 6 months of lot payments to get it hammered in my head…

Lessons learned:

Listen to your gut

Don’t be a motivated buyer

Always consider carefully the condition of the park (it has run off some buyers)

Always try and get free lot rent or factor in a long holding time just in case

Just my 2 cents,

Jad


#4

Hi Greg,

I think you did the right thing.

One thing I’ve learned is that this is a numbers game. You do the best you can with the info you’re given, and hope that you put good people into your homes. I’m not a fan of the “gut feeling” over numbers and data, but I have seen that some of the folks who just skated by when I put them in turned out to be very house-proud: keep their place really clean, pay on time, want to move up.

Others who “should” be good payors (well-paying job, two-parent family) turn out to be totally irresponsible.

I bet a couple of your people with less than stellar aspects to their application turn out to be good risks.

good luck,

Anne


#5

conditions pure and simple. There were 477 for rent ads in our daily Sunday paper. Before the drop in move-in costs we had 6-7 calls per week. with the amended ads, we started getting 40-50 calls per day.

As Anne notes below, it really is a numbers game…and I’m very tired of having these dollars NOT rolling in.

I see both sides of this issue, higher rents bring in better folks, helps offset damage and repair, and makes a balance sheet shine.

The other side of the coin? A 850 per month doublewide on land vacant for 4 months loses 3,400 of rental income, plus 60 per month utilities, so in round numbers 3600 of income. Makes more sense to rent even for 650 per month and keep it full. We are keeping a very close eye on these 9 (now 10) new rentals and I’ll post in 2 months how we did.

What did it for us was the realization that full houses are less trouble. no utilities to pay, grass stays mowed, folks home. We had a water heater stolen from an empty home in Dec.

I hope this works out…


#6

Greg

I will always take the cash flow over non cash flow. I would have done exactly what you did if needed. I agree with Anne this is a numbers game and I dont make gut decisions. I make experience ( knowledge) combined with a plan decisions.

Anne some of my best tenants like yours did not have the cash but they checked out with great credibility on monthly bill paying.

Rick


#7

Same boat different state… very high vacancy rates for the last 4-6 months until I discovered I really didn’t like the after taste of prideful pie.

Sold 5 LD units this week but took a steep cut on the total contract prices.

2k - 1k down 100/month 0%

9k - 800 down $225/month 15.5% for 60 months

9.8k - 0 move in to current tenant, note on Jeep (2nd) for $750 (paid off today) $225-month 15.5% for roughly 72 months

8.6k - 200 down /1800 deferred net 45 0% secured by a 1st on their truck, $175/month on balance for 60ish months at 15.5%

9800 - 3k down (WOW) balance payable $160/month 15.5%for 60ish months

I didn’t get nearly what I would have a year ago on the contract price but the result is we created $885/month in cash flow vs. the $685 in lot rent we were paying for a very real net gain of $1570/month to the bottom line.

rented 2 units:

$325/month 0 deposit, no last months rent… ended the 4 month vacancy with a sold SSI tenant! (should rent for $375+)

$325/month 0 deposit, no last month… ended the 2 month vacancy with a good tenant. (should rent for $350)

Even though I didn’t get what I’d have liked, we are 100% on rent ready units and I can now start working on the rehabs that I’ve put off due to the lack of cashflow for the last bit… All in all it was a good week and as you said, humble pie ain’t half bad. =)

Best wishes,

Ryan Needler

BTW: I also tried the Chris sign bit in addition to regular ads and owned one of the above LD’s for all of 3 days, might not work every time but sure lit the phone up this time round!


#8

more yesterday(one as i was talking to you and the A/C guy was there!) and i now have 1 rent ready waterfront home available to rent. Usually get 1K per month (you were in this home) and i am showing it at noon for 895 per month.

We do what we have to do to get the cash flow flowing…

These deposits and rent checks are going to help us finish up two L/H’s we are within a whisker of bringing on-line. One needs Pergo and base, one needs fridge, stove, dishwasher and decks. They will rent for $850…ooops $795 per month. Get these rented we are FULL!!!

I will probably not start any more L/H packs this year unless it is a true bonafide slam dunk bargain. Prices for resale need to stabilize to make these cash effective for me again.

There are only so many homes Owner’s are willing to rent for 1/2 the mortgage amount, and I am starting to see the demand for affordable housing beginning to grow in my area.

A year ago, I would have sold these two new L/h’s on contract, now I will rent until the market comes back up…

Thanks to all that responded,

Greg


#9

“These deposits . . . are going to help us finish up two L/H’s . . .”

Rental deposits are not the landlord’s to spend, and this can get you in some serious hot water if it ever comes to light that you are spending the tenant’s deposit money for other than damages/security related to THAT tenancy. By most (all?) state’s landlord-tenant laws, deposits must be held in a unique account, and not spent/used except following move-out to compensate for damages and/or unpaid rent/costs.

Reviewing FL LLT synopsis:

Section 83.49, F. S.

A landlord has the discretion to collect various deposits as well as some rent in advance. These advance payments generally vary in range. You should be careful about making any deposit unless a definite decision has been made to move into the unit. A tenant who puts down a deposit but then decides not to occupy the unit, MAY NOT be entitled to a refund. If a deposit is non-refundable it should be stated in the rental agreement.

A damage deposit is the most common requirement of landlords. At the time of the pre-rental walk-through with the landlord, you should make note of damaged items or areas, worn rugs, broken fixtures, etc. and give a copy to the landlord. Keep a copy for your files, which may help eliminate or minimize disputes later.

When you move out, the landlord must either return your deposit within 15 days of termination of the rental agreement, if the landlord does not intend to impose a claim upon the security deposit; or justify in writing by certified mail, to the tenant’s last known mailing address within 30-days upon termination of a rental agreement, as to why they are keeping a portion of or all of the deposit. If the notice is not sent as required within the 30-day period, the landlord forfeits his/her right to impose a claim upon the deposit, unless you fail to give proper notice prior to vacating.

By what this says, it seems that if your lease/rental agreement states that deposits are NON-refundable, FL will apparently let you get away with it.

Careful there.


#10

Greg, I agree that the market is fluid and despite the general belief, rents do not always go up. There are downturns in markets, though most may not be nearly as drastic as what you are seeing. It sounds like your market has fallen under the perfect storm (not pun intended) with foreclosures high nationwide, insurance issues, non-professional investors paying too much for rentals in your state while living north, then of course storm damage.

The professional investors have to take corrective measures as you did and to be honest it is probably going to be a trial and error approach until the market corrects itself.

I also agree that at some point we just need to do what normal businesses do in hard times, cut expenses and endeavor to increase income. In our case we don’t necessarily lay off workers but we may have to relaxe our rental demands in order to cut holding costs and get income coming in.

That income source may be more temporary than we would normally like (or it may turn out these tenants actually work out) but it allows us to put that new net income to better use in other units, increase cash reserves some if need be or attack other expense issue so as to elimate future high overhead.

It is hard to swallow lower rents but I find that our greatest risk is the nickle and dime costs that eat most of us alive. If we think about it, most of us would hate a one time huge bill but I am willing to bet we would find a way to pay it if it kept us going. On the other hand the small expenses and un-rehabed rentals kill us slowly each month to a point that we are cooked before we realize someone turned up the heat!

The best we can do is just that, the best we can do under each set of circumstances. If we keep income coming in and attempt to decrease damage potential and use the net income wisely, we can not only weather the storm but also set ourselves up for higher net incomes in the future. If rents grow slowly but we take the time to address recurring expenses so as to eliminate or reduce them in the future we are planting seeds to harvest tomorrow just as if we bought more deals. The real nice part is that the future income will be truly NET income.

Great posts folks.

Thanks,

Tony


#11

Steve,

Greg said “deposits and rent checks…”.

Where I am, my bank is willing to lend me money for deals against the funds I hold in escrow. From their point of view, the money is mine, and makes me a better loan (LOC) risk.

Anne


#12

We have different deposit structures. all rented houses have a $55 non refundable pest spray deposit. Rentals with carpet have a $65 N.R. carpet cleaning deposit. Pets are 250 fully refundable deposit per pet. Security and key deposits are fully refundable (I LOVE to pay these back).

We don’t co-mingle ref. deposits…they go into an escrow acc’t. We recently established a LOC for 10K for prudent reserve…had to use our own credit for 1 year to get this done, then they use 70% of average monthly cash flow for a revolving credit line. The Park throws about 16K per month now, so this will go up some. Anne brings up a good point…I’ll ask if escrow account is included in daily balance, we have over 9K in deposit account.

In Florida, the smartest move is to return deposits that are paid and folks don’t move in. We keep only the portion we can show was used. IE I pull my advertising and have to restart and X amount of days off the market at X dollars per day. In small claims, judges can go either way…this has proven to work for us.

It is rare we are asked to give back deposits. We feel we need to increase these amounts…

How is that Park deal going?

Greg


#13

I understand; obviously, you know what you’re doing. It just flagged for me to see a comment about using deposits for investing - others may not understand what is right or wrong about that.

Park deal: working on it . . . sounds now like the landowner wants a bigger piece of the pie, so it may be a non-deal. Still, going to the Salem Manufactured Home Trade Show Feb 27th - oughta be interesting to see what kind of deal a dealer can get . . .


#14

Has anyone else had a shift in demand for buyers vs. renters, and any possible explainations as to why? I have really seen a change, as over the past 4 years rentals in the park were much quicker to fill than sales,I had to either rent units or have them sit vaccant long term between sales, then during he past 3 months, just the opposite. I had really slow fall sales, and once the weather got cold - sales picked up - I’m sold out at the moment - I’ve been dealing MH for 18 years now, and this is unique. No complaints.