One thing I learned from my years in construction is that I don’t handle high levels of stress for an extended periods very well. I’m also aware that easy jobs don’t pay well. If due diligence is handled properly and there are no big surprises, what are some of the more difficult (or challenging) aspects of the business?
The most common ways I’ve seen newbie MHP owners get in trouble are:
- Buying a property on private utilities and getting hit with maintenance bills on that. So for your first park (and probably all your parks) just stick with city water and city sewer.
- Buying a property with a lot of POHs, and inevitably once you, the new owner, enforce no-pay, no-stay, you then evict 30% of the residents because the previous owner did a lousy job of screening for tenants. If there is a big difference between the way the seller operated the property and the way you will operate it, you’ll have a lot of turnover. Anyway, that can mean you suddenly have to come up with $5k cash per home to get them renovated, and that can drain a bank account pretty quickly. So be sure you know what you are getting into and don’t overpay for the homes. There is nothing wrong with having a lot of turnover if you have the cash to rehab the homes and put them on RTO contracts and know what you are doing. But if that sounds like a lot, then just buy a park with (nearly) all ROHs.
- Continuing to not enforce park rules, no-pay, no-stay, and/or tolerating druggie/bad tenants that drive out any remaining good tenants. Run your test ad, be sure you are getting at least 20 responses/week (we prefer to buy MHPs that generate 50+ responses/week), and then you know you can replace bad tenants with good.
Hope this helps, and I look forward to hearing what others have to say on this thread,
My big disappointment with this business is if (when?) you get a home back from the owner who just walks away from it. It’ll be in crappy condition, and it’s up to you to decide whether to rehab it, or go through the hassle and expense of bringing in a new one, setting it up, and getting it sold. I rehabbed one which was in horrible condition, and it was a horrible job. I’ve also demoed one and brought in a new one. Also a huge job. My “mentor” who induced me into this business sorta neglected to inform me of this “Achilles heel” of park ownership. This is the big reason I’ve elected to get out of the business. I have a small park and, while I may never get another home back, the fear that I may is enough to motivate me to move on and make a different type of real estate investment.
The most challenging/difficult aspect of being a landlord is the tenants and/or managing anyone you have assigned the responsibility of dealing with tenants.
There are basically two types of tenants …good or bad. The good tenants you never hear from and you barley know exist. The bad tenants are a continual irritation that only stops when you can get rid of them.
Personally I do not stress over getting rid of bad tenants as it is just part of doing business.
For myself the most stressful part is screening applicants. This is the point in the relationship where you are 100% responsible for insuring to the best of your ability that you are not getting a potentially bad tenant. It often can place you in the difficult position of having to bend the landlord tenant regulations to reject a applicant that legally should be accepted but that you know down the road will likely turn out bad. It depends a lot on your regulations. As a example I reject all applicants on government assistance, which is illegal, but I am forced to do so because if they default on their rent payment I have no way to collect any money they may owe. For me breaking the law is stressful but unavoidable in order to protect my business interests. It is important to remember when screening that you are not simply screening to determine if they can pay but more importantly can you collect.
Berlantliu, the most stressful aspect of the industry is:
However, any job is going to have some type of stress and probably ‘People’ would be one of the stresses.
I agree with Greg:
‘There are basically two types of tenants…good or bad.’
I also agree with Greg that screening applicants is stressful.
Again, it goes back to People.
A Mobile Home Park is basically made up of several factors:
- Land: Visual
- Mobile Homes-TOH: Visual - Exterior
- Mobile Homes-POH: Visual & Physical - Exterior & Interior
Thus, if you do not like nor desire to deal with People, the Mobile Home Park Industry would not be a good fit.
If you have Rules and Regulations (such as: No Pay…No Stay), you will have a much easier time.
We wish you the very best!
Those are all great observations. My only addition would be that you can greatly reduce your stress by hiring somebody as a “shock absorber” so you don’t have to deal with the people. You should have an on-site manager that deals with the tenants, and you should have no interaction with them whatsoever. But then who deals with the park manager? If it really bothers you, you can probably find somebody who will deal with them for a flat fee per month. I’m not talking a property management company. I’m talking a retired military person or somebody who has decent people skills mixed with a stern discipline. You can probably find someone off Craigslist or maybe you already know a candidate. You tell them what to do, and they call and relate that directly to the manager, and act as the go-between when the manager calls them. I did this with an old, retired apartment manager named Dee when I got to my fifth park. It improved by quality of life enormously, as talking to park managers is not much better than talking to tenants, since they live in the park and have unusual views on life most of the time. I was happy to pay Dee to listen to mindless chatter on the latest movie they saw, etc. and be completely anonymous to tenants and staff.
This is great advice - Frank.
Could you elaborate a bit on this arrangement? Like how to determine the “flat fee”, the work scope etc. I am sure they varies for different parks/regions. I just feel this is a great way for potential investors who doesn’t even want to deal with the on-site managers
I bought my first park a few years ago and found it a fairly stressful experience. There are dozens of moving parts in a mobile home park operation, and no amount of self study can teach you everything. At some point, you have to jump in and take the punches. If you’re worried about stress, I would strongly encourage you to partner with an experienced investor on your first deal and not try and wing it on your own. An experienced investor’s knowledge and confidence will go a long way toward giving you piece of mind.
I agree with Frank. We recently bought our 3rd park. The first and second were 20 space parks and too small to financially support a manager. Consequently the residents drove me nuts. The third is 50 spaces and we trained a new couple using Frank and Daves program and my 15 years managing my apartments and parks. We do not answer calls from residents. The managers are doing a great job and we sleep nights. We offered incentives to the managers and they sold 14 RTO homes in 2 months. I would encourage anyone to start with a park with a minimum of 35 - 40 spaces, and hire and train a manager. The management training program is worth every dime we paid for it.
With our niche markets I enjoy my residents and they KNOW my phone number and where we live–it depends a lot on the quality of parks you buy and some of us also personally manage. No hiding or fake names or aliases.
We tried the regional manager route for awhile and it did not work so well. Possibly we hired the wrong person. It is a big plus if you have several parks close to each other so that person can make the rounds and be onsite once in awhile. Maybe we will try it again.
Sorry Charlie 35 years of ENJOYABLE experience and loving people does not mean we hate money. Being successful is being defined differently but have always enjoyed our paying tenant and still do today and receiving thank you, hugs and just listening and being helpful is very rewarding for some of us who have done very well. According to higher ups in Wal-Mart the greeters are back and are realizing the personal touch is rewarding and helps their bottom line. The idea that managers and owners are just money counters–hope you understand their are still people who own outstanding properties and love the people. Charles we have never experienced the problems you mentioned plus there was a lady selling a park on this website that called me today but her park is to small for us but spent an hour with her finding solutions to selling her park and we both at the end were in tears for being able to help her in her difficult situation. Our days are numbers enjoy them by helping others and put a smile on there face–there are still lots a great people at least at out parks.
While some on this site may agree with your personal approach, the Walmart analogy of “personal touch” is inapt. The greeters are back solely to decrease the “shrinkage” (merchandise walking out the store). Of course, it is helpful to Walmart to characterize it as “personal” if they can.
Frank is very successful and very knowledgeable.
I respect Frank and I respect Frank’s advice.
However, Frank is in a different category in comparison to my Husband and myself.
My Husband and I own two Mobile Home Parks.
We are just a small Mom and Pop Business.
We are very hands on in both of our MHPs.
Our Tenants are very aware that we are the Owners of the MHP (not in a bad way…but in a good way). Our Tenants know that we care. We care about them…we care about the MHP…we care about who moves into the MHP…we care about what happens in the MHP.
Our ‘Good’ Tenants are actually Great People.
Yes, we have some not so good Tenants, but that is just part of life.
We do not live in either MHP. We also do not hang out with our Tenants.
We are just hands on to help our investment grow.
NO ONE will take care of your investment more than you will.
We wish you the very best!
I have never understood why people are so afraid to stand up and say they are the owner(s) and the buck stops with them. For every single property I have ever owned, I make sure everyone knows I am the owner and I make it easy for them to reach me at any time. They cannot call me directly because I live in China, but they all have my voice mail and personal e-mail address. I get very few calls or e-mails. One piece of advice that I got from Frank that actually worked is to be “friendly but not friends” with all residents. This has served me well. I am very tough with everyone but also fair and, after evicting the scum that came with the park, have simply never been bothered with stupid BS like some people seem to be. In fact, most of the contacts I have gotten have been residents warning me about something I need to be aware of. This helps me greatly and I will take contacts like that any day of the week.
I guess the bottom line is I am proud of what I have done with the park, my tenants don’t have to like me but the do seem to respect me, everyone know I put time and money into making the park better, and best of all, I have very, very few management problems Why shouldn’t I be upfront about being the owner? What I say goes so I can give an answer quickly and everyone knows I will abide by my word. Problem resolved.
Do what works for you but be careful about hiding behind facades is my advice.
Rolf is correct and really we have pride in what we own and the people we serve and have mutual respect but they know we mean what we say and have no favorites. To hsschwar we have family in the upper management at Wal-Mart headquarters and it is not about shrinkage but Public Relations plus raising wages–sorry pal. This has become a very interesting discussion.
I’ve never had any tenant tell me anything that couldn’t be relayed through a manager. It’s certainly great to be in the business of handing out hugs and making everyone feel good, but I certainly don’t need the brain damage of having every tenant know how to reach me and feeling like they should any time they want. For instance, if you had something major (like a temporary loss of a utility) would you rather get one call from the manager or would you rather get 100 calls from tenants? Having to reassure 100 people personally does not get the utility fixed any faster and gets in the way of you doing your job as a property owner. I understand that there is a vast difference of opinion here, but being involved with your tenants isn’t a scalable model and more often than not it results in landlords becoming burned out and hating their properties.
This thread clearly points out that the most stressful aspect of the business is highly dependant on how you actually chose to operate your business.
If you are a hands off business owner then the only stress you will have is managing who ever it is that manages your business and in doing so insuring it is profitable.
How you chose to relate to your tenants depends on what you as a individual consider stressful and how large your tenant base is. Mom and pop parks have successfully operated for decades but with the growth of corporate ownership it is understandable that a corporate mentality approach to this business will become more common over time. It is no different than the comparison between the single owner operated corner store and the corporate owned grocery chain.
There are many excellent replies regarding disclosure of ownership here. Doesn’t boil down to how large your operation is? If I have one park with 100 residents and that is my only business, I have the time to deal with everything a resident can come up with. If I have multiple parks and 10,000 residents, I don’t. It gets even worse if I have other business interest as well.
There is also another aspect to the problem.
When I was developing parks I was very careful to create a maze to conceal my ownership. In one state I was the largest operator in the state (at that time) and even though each park belonged to the state association, the Executive Director of the association had absolutely no idea that I existed and I preferred it that way.
Contrast that to my very dear friend, Bud Zeman, who chose to be very well known as the owner of his parks and other operations. At some point as he grew in size and success, every time there was a tenant dispute, some of the liberal news outlets would write stories about him as the “multi millionaire landlord growing rich on the backs of ordinary people”. They even went so far as to publish pictures of his home in Park Ridge, Illinois and once even published his address.
Who wants tenants showing up at their home without an appointment? Who wants to stir trouble when they raise the rent in a park and some of media remind people that the owner of the park lives in a much nicer home than the people paying the rent increases? Not me. I go to great lengths to keep any involvement private and my actual residence(s) even more private.
Bud came to realize his mistake but it was too late to fix. It haunts his son who has been running the business since his father’s passing to this day.
Even for the Mom and Pop operations, the disparity of income can complicate things. I have a friend who hides his better vehicles off premise and drives around in an older vehicle in the area he owns parks in. I have other friends who actually live in homes they don’t like to cover up their affluence. I have one friend who lives in one of his parks in a 16x80 part of the year, and his 4,000 square foot home in Scottsdale during most of the winter.
Like most things, there is not often a single answer for everyone.
The most frustrating aspect of our park businesses is the lack of communication from some of our tenants. Trying to work with them to make repairs or improvements to the park and not getting call backs. Not a big deal… but just my only real frustration. We also keep the ‘operations/communications’ side of the business with me; billing and late fees stay with my office manager, Ranae… my daughter