If you were just starting out, what advice would you give your “younger self” just starting out? How would you start your MHP investing career? Did you wait until you have large amounts of money to put down and finance the rest? Did you start out small and add a park at a time? Did you use creative strategies? I am interested to hear how the pro’s here did it.
I started out with one park, Glenhaven, in Dallas. Total dump. Paid $400,000 with $10,000 down and the seller carried the rest non-recourse. Then I figured out how to turn a park around and bought another one, And another. All parks were bought with seller financing for the first 5 (over 500 lots total). Then I had a good story to show banks thereafter. I think anyone should start off with one park, gain experience, and then buy another. If I had it to do all over again, I would:1) Not buy parks with master-metered gas or electric2) Not by parks in Louisiana3) Enact no pay/no stay and other systems that we now take for granted4) Not spend as much time in my parks as I did early on, wasting my time on meaningless trivial items
No pay no stay should be the rule. In management, you can’t feel bad for people. You don’t have to be heartless, but you can’t get sucked in. You must abide by the rules and regulations you set forth for tenants, and can’t change them because you feel bad for someone. I have many, many, many years in multifamily property management, whether you are at an “A” property or a “D” property (tax credit, section 8), the rule is the same (the stories are the same too). If you bend the rule for one person, you have to do it for everyone. Another rule we have is if a resident bounces a check, we will no longer accept personal checks from that person during that lease term. I will have no problem running my own management company…just need to find the right park with the right creative financing! Frank, if I remember correctly from the home study course, you kind of fell into your first property because of the billboard business, right? That was a lucky find!
There’s no question that Glenhaven was sheer luck. But it was not that great a park, so there were probably 1,000 other parks that would have been a better first-time experience. Glenhaven had tiny lots, master-metered gas AND electric, and was located in the worst part of town. I did learn a lot from Glenhaven – never buy a park like that again, And I didn’t. The good news about mobile home parks is that you can turn even a park like Glenhaven into a winner.
Thank you for this Kahart and Frank…Many things answered here for people just starting out.
I would tell my younger self:1. Get into this business 5 years sooner when I had the capital.2. Pay more like a 15% cap for a dirt road MHP (not an 11% CAP).3. Run background checks on all tenants. (I actually rented to one lady after just meeting her in person and thinking she was ‘a good person.’ Then 8 months later when she did not pay rent for the second month in a row, and skipped out on me in the middle of the night, and only then did I discover the damage she did to my home, I had no SSN or Driver’s License to get her served for court because I had just met her in person.)4. Get a website up and running ‘day 1’ (rather than in the 2nd year of park ownership). Use Squarespace.com. Hire someone to do it for $300. Find this person on Elance.com. Use my websites as a model: www.tuttleestatesok.com and www.nobleestatesok.com.5. Outsource phone answering, accounting, and general contracting much sooner. (Still do it all yourself for the first few months/projects so you learn the ropes - but not much value add to keep doing it after that.)6. Secure (lock up) any homes you buy from Vanderbilt, 21st Mortgage, etc. if they are in the field. They may well get vandalized and stripped of copper prior to your being able to move them into your community next week.7. Number all mobile homes in your community with reflective signs (like street signs) both for resident safety (fire/police/ambulance will need a house number to respond to in an emergency), and it’ll make it easier for prospective residents to find a house with a number on it when they see your ad on CraigsList (as opposed to advertising 'the blue house - third street on your left, forth house on the right…)8. Only pay contractors the amount agreed to up front, no matter how much they whine along the way or at the end of the job about how ‘it took longer to complete than thought…’ Mobile homes are simple to bid. They don’t change shape or size during painting, flooring, roofing, etc. Accept no excuses from contractors. Don’t even pay a contractor anything if they don’t fully complete the job, and only pay what was agreed to up front. Give them a break if it takes a few days longer (but not weeks longer). Never hire any contractor to do work on an hourly basis.9. If you regular-rent mobile homes, rent at about a $100/month higher than your RTO price. The rent and RTO price should never be the same, or everyone will just rent. Price the ‘renters premium’ yourself for your market, but the higher turnover and damage done by renters vs. RTO-ers is significant. Do both, just price it correctly.10. Realize that you are NOT a ‘mobile home park owner.’ You are a small-time ‘investment banker.’ What you are doing is combining equity investors (usually high net worth individuals) and debt providers (banks, private lenders, conduit) and acquiring, developing, and selling investments. You can start earlier in life and with $0 capital if you have this perspective.OK, those are all the ‘newbie’ mistakes I’m willing to admit to in a public forum such as this. Take me out for a drink sometime and I’ll tell you some the other 147. ;)-jl-
Thank you very much for your input Frank and Jefferson… your (hard-learned) lessons are invaluable to all of us.