About to begin due diligence on a small park with all POHs that we want to convert to TOHs ASAP…going to try and meet as many of the tenants in person as possible and be very upfront about how the park has to be converted from POH-to-TOH to be viable going forward. Is this a good idea? What is best course of action when inspecting the site? Thank you in advance for your feedback!
I would not be transparent at all with the tenants during due diligence. Your main goal if you talk with any tenants is to find out what problems the park may have. Does the sewer back up? Are there frequent water issues? What problems might be at the park that you may not be aware of?
I’ve done due diligence on and purchased 6 small parks. Making commitments to early in the process can be troublesome later down the road. If they start asking questions, I would just say we are looking at the park and it is too early to tell at this point what may change.
After closing is when I would tell the tenants what is going to happen. No reason to get ahead of yourself. Remember you are there to learn about the park and collect info. That is your goal until after closing.
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That is the exact opposite of what I would do and I think it is a very bad idea. You will anger the seller and the tenants before you have legal right to change anything. I would be discreet and not give any indication that the property is for sale.
The best course of action is to perform your Due Diligence. Not to communicate a new business plan. Be discreet. If you happen to see a tenant and they ask why you are there just tell them you are onsite to do a property inspection.
Once you own it you can do whatever you want, but if you have never done this before, you will find that POH to TOH conversions can take years. So if you definition of ASAP is years, then your plan works. Some tenants will refuse the conversion. What will you do if 50% refuse? Force it? Will you evict 50% of your tenants in the first month if they don’t purchase the home? I hope not. Your goals is to maintain cash flow and you need to support existing customers until you can churn the holdouts, which takes time.
Why even look at the property if your intentions are to convert to TOH. The conversion is time consuming and any such change causes irritation for tenants. DD is not a time for that discussion but as stated time for inspection of utilities, and general operation of the park
Thanks all for your feedback. Tenants know property is for sale but it makes sense to remain more vague & noncommital.
Carl I don’t understand your question “Why even look at the property if…convert to TOH?” If you were converting an apartment to condos of course you’d want to see each unit. Wouldn’t you always want to see as much of what you’re buying as possible?
Transparency about transitioning from park-owned homes (POHs) to tenant-owned homes (TOHs) can cause immediate pushback or tenant turnover during due diligence, so pacing that conversation carefully is usually safer than leading with an aggressive conversion ultimatum before you even own the property.
During site inspection, the best course of action is to focus heavily on the physical infrastructure—inspecting water lines, electrical pedestals, sewer hookups, internal roads, and the actual condition of the existing POH units to accurately estimate your capital expenditure before closing.
One thing we’ve seen on due diligence trips is that the site visit can tell you a lot that won’t show up on the rent roll. We usually pay close attention to the condition of the homes, utilities, roads, vacant lots, deferred maintenance and the overall feel of the park.
I’d also be careful about setting expectations with residents around a POH-to-TOH conversion before the deal is finalized. There can be a lot of details that come up during DD that change the plan.
Yes, these visits are telling. But you don’t need to actually talk to the tenants to obtain this information. The good, bad, and ugly are fairly obvious.
Thank you again everyone for your feedback, appreciate it!
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