Regaining Control

mobile home university
1

I have owned my park for 4 years. I bought it from an owner who had a bad attitude toward life and the world in general. He didn’t care much for the park and complained about everything even to the tenants. This is a small 17 unit park in a small town. The town does have 2 other parks, my park is right in between the other two in terms of appearance and quality of tenant, my park is the cheapest lot rent in town by $40. When I took ownership, I made myself appear as the representative from a large corporation that had just purchased the park. Truth was, it was my single member LLC that had just took ownership. I think this put a bit of fear into the tenants, they seemed to clean up their yards, do the deferred maintenance their home may have needed, I even had 2 “bad” tenants that the previous owner warned me about move out all on their own. This was great! I’d do it all over again. The problem is, after a couple years, and more so now after 4 years, the tenants can obviously see that I am the sole owner. Their actions are slipping a bit, more rents are being paid on the 10th-15th of the month, garbage sitting on the decks, additional vehicles around, pets running loose, etc. for the most part pretty harmless things. I am concerned that the tenants have seen that I can be pushed over a bit and they are doing just that. Most of my tenants are older than me, (I’m 36) I think that maybe a factor as well. I am for the most part managing the park myself, I do have a gal there that does a bit of management, (cleaning rentals, collects rents from those who pay in cash, handles leasing, etc). I put out the biggest fires as they come up. I would give her a more active part of management but she gets a big head and pushes her weight around a bit to much with authority. Some of my tenants go out of their way to avoid her. I try to limit her authority due to this.

My questions are,

How do I regain respect from my tenants? as I have let them have to much rope over the years, I need to shorten that rope

How can I get more out of my “manager”? I would love to get her to run the park almost exclusively so that I can go look for another park. There really is no one else in the park that I would be comfortable with as a manager.

Also, some more things I should add. I will be adding water meters to the park this Spring and will be billing back the garbage as well, so I will be notifying the tenants of these upcoming changes, Should I just send a letter mentioning the changes, include a copy of the park rules, then follow up a month or 2 later on the violators? Or should I man up, have a park meeting and just be upfront and firm about the changes and the rules? If I do it this way, do I do it individually or have a meeting with all tenants at once?

I am interested in purchasing courses from this website, which courses do you feel would cover these items best?

Sorry for the long post and all the questions, I am looking forward to your responses, Thanks!

2

So- I have heard countless people talk about representing themselves as something they are not… I want to move a home for my grandmother, owners representative, I have a 1031 exchange… my first advise- clean your slate and just be honest with people.

If you want control back, enforce rules. If people pay a day late, post a notice to pay or quit. If the time expires, take them to court, add in the legal fees and process fees. One of our parks we pretty sloppy until we evicted, then moved the tenants stuff to the curb of the park. We had tenants calling us telling us they were remembering the violation notice we gave the months back, and they were taking care of it right away. Just hold the line- period.

With water meters- first I would not have a park meeting. I would write an open letter to the tenants. Now- you MUST research what needs to be done in your state to submeter water. Every state is different, so know the law. We- install the meters and offer each resident 1 hour of a handymans time to fix internal leaks. They buy the fixtures and our guy will put them in. About 1/4 of the residents take us up on the offer. We also do 2 test months so people can plan for the bill a bit, and it will also show them if they have a leak. We can post the average bill, and the tenant will know if they are low or high.

manager- without knowing your systems I can not speak to your manager. In short, training, communication, support, backing and information increases a managers productivity. My managers are part of the team, I let them know so. In some ways it is like a quarterback and a coach- I am not on the field much, but I get to call the plays. We use lots of technology to operate the parks:

Dropbox, parksidekick, a forum for communication, teamviewer, VOIP, check scanners, video training etc…

Our people are well supported, and with that we expect quality park management.

3

It’s time for a reality check of what you’re really trying to accomplish with your life. If your goal is to make money, then all you need to focus on is collections, maximizing your rent (including utility bill backs – that’s really just a way of raising rent, right?) and keeping R&M low. You also want to keep the park in a decent enough condition that you can really quickly spruce it up to a high level before you want to sell or refinance it (no different than you renting a tux for a wedding and then going back to wearing shorts later that same day). Being a good owner/operator means accomplishing those things. But you can also be guilty of “micro-managing” the tenants, and that does not make you money, but actually costs you money. Here’s how.

Your time is valuable, as you have the opportunity cost of what you could have done with your time if you were not managing the park. If you have someone with a non-important item like a kid toy in their yard, and you want to make them move it since it’s not good looking to you, the very act of working on that is costing you money in time spent, so you are actually reducing the park’s effective EBITDA. Look at my first park, Glenhaven. I went out to it every day and hung out in the park office from 9 to 5. I painted the laundry building three different shades of green because I didn’t like the color. I knew every bit of gossip on every tenant. I didn’t just remove dead tree limbs, I “shaped” trees and anquished over what more I could plant to improve the street scape. Bottom line: I wasted a ton of time on absolutely nothing that improved the park’s EBITDA, so I was actually reducing the park’s net income by my own stupidity.

Don’t let that be you.

It sounds like you’re doing a good job of operating the property. It sounds, to me, like you’re getting worked up over trivial items that have no real impact on your EBITDA. So maybe you should just relax a little. and spend that time looking for more parks to buy – or whatever else you want to do with your time.

As for the manager, you have to remember that anyone who lives in your park is already flawed as manager material because they live there. A super-successful type A manager would be living on the country club golf course, and not in your park. Understand their limitations. Try to build a model that allows them to be flawed and still get you what you need: the highest level of EBITDA and decent park appearance. Freeing up your time creates value. See if you can loosen it up and free that time without the park losing income or becoming a slum. But perfectionism is not really part of the park business model – nor is it even in the basic DNA of your tenants. The manager might be rude to some tenants. She might offend the old lady in lot 7. But are they really going to move out over that? And what does that free up in time for you, that far outweighs whatever slight negative that they create.

Try this trick. Tell the manager you are going out of town for two weeks. Put them in full control, and see what happens over that period. My bet: nothing bad will happen at all. If you don’t like it, then you can “come back” after two weeks and take over again. That’s a good way to test your theory without having the manager lose face when you take the park back away again.

You can be as guilty of micro-managing the manager as you can the tenants. Set up the categories that you need followed aggressively: collections, basic park property condition, and sales/rentals of homes (if you have any). Then let them do their job and you do what you want to do.

You’ve done this for four years. It has got to be getting old the way you have it structured. Try a new approach and see what happens. If it fails, you can always go back to the status quo.

A couple of other items. NEVER hold a meeting with the tenants. You are asking for trouble. They will compare notes and start thinking in terms of a “union”. Keep them disorganized. And do not disclose that you are the owner. The minute they know that, they will constantly bug you, looking for loans or favors. Better yet, try to not even know your tenants’ names. Your only involvement with them should be receiving rent every month. This is not I Love Lucy and you are not Fred & Ethel, the landlords that hang out with the tenants and even go on trips with them.

As far as items that Dave & I have written, I would definitely buy the CCM course, as your manager probably needs training to understand that this is a business and not a soap opera. I don’t know if you need the home study or not as you have been running a park for 4 years, and it sounds like you’ve got it down pretty well. You might want to come to Boot Camp if you are going to aggressively start buying more parks, as it might help you on finding parks and evaluating them.

But first, go get your favorite beverage, and ponder the meaning of life and what you want to do with yours, as that’s the source of the answer to your questions. I promise that the park will run fine without you, as we’ve got 100 parks that run fine without us. But you’re going to have to mellow out on the details that don’t contribute to your net income, or you’ll drive yourself crazy.

4

Wow, I am printing that one out as a keeper.

5

I sure appreciate your response Frank, it is very much appreciated. I also think you hit a dead ringer here. I have mentioned these exact concerns to my wife many times over the 4 years. She tells me I need to get a handle on it before it gets worse, I always say, well, its not costing me any money, and really, how can I stop it short of being there all the time? I sure don’t wanna do that.

A little more history on the park. I spent the first 2 summers at the park alot working on the park owned homes (2) I filled one vacant lot and then added and filled 2 more lots. The park was looking and running good then. The next 2 years I wasn’t around much as I was working on another business. Not much has changed at the park without me being there much, other than these small items, but again, they are not costing me any money. Again, you are exactly right.

I guess I am doing fine, but it sure feels good hearing this from someone else.

6

“How do I regain respect from my tenants? as I have let them have to much rope over the years, I need to shorten that rope”

That is a tough question to answer and probably of lesser importance than actually determining what type of community you want to own.

If pride of ownership is important to you then you need tenants that share your pride of ownership as well. You need to force tenants to maintain the community to your standards by enforcing community standards. Those that do not share your goals will not have any respect for you as a landlord. Those with pride of ownership will embrace your actions and work with you as well as respect your actions.

If the homes are owned by the residents enforcing rules generally work in your favor. If the homes are park owned you chose your tenants to match your standards.

Training your manager to properly perform their duties and enforce your rules will be a key factor in gaining your ultimate goal. Unfortunately it will be an up hill battle if the manager is not respected by the residents.

I would be training her and sending a notice to all residents reminding them of the rules and letting them know the manager will be enforcing those rules on your behalf.

Respect is nice to have but it should take a back seat to your business goals.

7

I think that’s just about the best post ever here in the Forum.

-jl-

8

If there was ever a bulletin board for new business owners, this post belongs on it. I have re-read this post every day for the past four days, and I’m still blown away with how spot on Frank’s advice is. Very well done! I run into so many people who are clueless as to what opportunity cost is.

“Price is what you pay, value is what you get”

9

Well done Frank. The irony is that most of us are successful because we HAVE paid attention to details in the past, so it is difficult to let go. I also agree big time that the less I get involved in the trenches the easier it is to be in this business. Good example - last week I was out of the office and my wife approved a new furnace ($2000) for one of the rental homes. I was only annoyed for about 15 minutes - If I had to deal with it myself I would have delayed the decision for half a day and scratched my head and finally approved it and it would have eaten up much more time and energy.

I love summer because during golf season, everything else goes to the back burner including all the parks, and guess what - every fall and winter when I get back to “work” they are still there and have been cash flowing all summer.

Bret

10

Interesting point bjy. I think what you say is true and can be boiled down to keeping out of the death spiral. That is what I call the situation when properties fall into such a state of disrepair where they are losing income and accumulating capital needs and the diminished rents can not generate enough income to bring back the property to being economically viable. Add to the mix, that no bank will lend the capital needed to turn things around and there is only one way the situation is going to go. We have all seen these properties and I suspect most of us have bought quite a few of them and profited handsomely from cleaning up the former owner’s mess.

Speaking of apartment buildings, I believe it is because the owners try to run the properties on 30-35% Income/Expense ratio, like all the BS proforma statements state, rather than the 45% that well maintained and managed apartment buildings require. Of course with parks the numbers are different, but the principles are the same.