I am looking at a park where 80% of the homes are owned by an investor who rents them out. Anyone have any thoughts on this and if it is advantageous to own a park with investor owned homes?
Could be a disaster. If they pulled them out you’d be screwed, so they can effectively block you from raising rent, etc., – kind of like a labor union. One solution is to have them sign a long-term lease that still allows you to raise the rent. Otherwise, it may be too risky (and even then, you have to make sure they abide by the lease, and don’t pull them out anyway). It may also cause you banking trouble, as banks hate it when a third party owns more than just a few homes, for the same reason given above.
To add to Franks concerns you need to know what his business practices are concerning managing tenants. In effect you have one tenant for 80% of your homes. Does he run a strict ship or are you going to have trouble with 80% of your property due to one tenant.
Your tenant management practices must aline with his or you will be butting heads on a ongoing bases.
I like to manage my property by applying pressure to the worst tenant as a example to others but if your worst tenant is this owner unfortunately he will have all the leverage.
I would have a serious sit down with the guy and put your position out there based on the appearance and upkeep of his properties. Also check with the present owner regarding his rent payment history. Make sure you are not collecting the rent directly from his tenants.
Thank you Frank and Greg for you response. After reading your comments and spending some time thinking, I am no longer pursuing this park.