Tips on selling POH to tenants and prospects

mobile home university
#1

As Ya’ll know I’m in the process of buying a turnaround park with about 70 POH that I do NOT want to own one day more than I have to.

I’m literally just getting started as I haven’t closed on the park yet, but will very soon. I’ve started advertising to get leads, so far most just want to rent.

  1. What tips can you smart people here offer to convert both existing tenants and new prospective tenants to owners?

  2. How much work do you do to homes that need rehabbed? As a former turnaround expert in housing and apartments, I tend to go a bit too far in making things nice. Where is the line? I hear Frank talk about doing the bare minimum, but what exactly is that? I do plan on making the EXTERIORS very nice as it sets the tone for the park. But what to you do to interiors?

  3. What do you do to the interiors of “handyman specials”?

Thank you.

#2

Doesn’t all of your questions directly relate to your specific market and what you desire your community to be ultimately?

My way of viewing what to do:

If your goal is to maximize monthly cash flow, then the minimum amount should be done, IOW only what has to be done to make a unit functional and safe.

If your goal is an upscale community, then you might consider replacing your older rentals with newer units that would be much easier to sell.

Personally, I am concerned even with the quality of some of the newer manu homes. case in point the materials used in the Tru homes per their spec sheet. Please keep in mind that my viewpoint is tainted by a severe lack of knowledge of MH construction and longevity.

#3

  1. Selling to an existing tenant is as simple as sending out a letter that says you don’t do rentals anymore. Assure them that their payment will stay the same, but their responsibilities as a homeowner are now X, Y, Z. Explain the rent credit, or whatever program you plan on doing, and get ready to answer some phone calls. This is going to be a bit of a chore, but you should be able to start converting the park over time. You might even give them credit for previous rent (up to a certain amount) if you feel compelled to accelerate the process.

  2. Minimum habitability. Paint the exteriors, put skirting on the homes, put shutters on them, and ensure that the decks are in good repair. As for the interior, minimum habitability. I would also go through the extra step of fixing anything that is obviously in disrepair. You don’t need to stage these things like you would with an apartment or a sfh. You will also need to make sure that it is clean inside before you show it. Plug in a few Glade plug-ins as well. Especially at the front entrance. Your goal is good curb appeal, clean on the inside, smells nice, and no obvious or large repairs.

  3. Repeat number 2 for the exterior, but you can skip repairing anything obvious on the interior. Just make sure it passes minimum habitability. You’ll likely be doing the park in stages so you should have a few of these available throughout the renovation process.

Always sell them when you get them to the park. Or rather, have the manager sell them. If you want to run a sales ad that’s fine, but you need to be running a rental ad too. Don’t try to sell them a home over the phone. Just get them on site and then go through the sales process with them then.

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#4

@Coach62

  1. Look for Lonnie Dealers in your market. Sell them properties on payments. If I am not wrong If you are business and selling to a business you do not fall under SAFE ACT and Dodd-Frank. Also, I recommend not to sell handyman specials. We had one mobile home for sale in good market which we tried to sell for $800. Nobody wanted. We fixed it up ($3000 invested) and sold it for $8500.

  2. I agree with @CharlesD. Here are critical renovations we do inside: sub-floor (fix any soft spots), patch any big holes in walls, plumbing should be in good working condition, electricity should work, appliances. Outside we power wash with water and bleach. Roof - make sure there is no leaks.

  3. First of all, as I said I do not recommend to sell them as handyman special. Another example, I had mobile home for sale in another market and listed it as handyman special and all potential client told me it is not handyman special it is “move-in” condition mobile home.

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#5

I agree with Andriy_Boychuk on his recommendation of not selling handyman specials with one caveat. Considering you’re going to have uncompleted renovations on homes through the turn around process, why not try tell sell them as is. I would suggest not allotting certain homes to being handyman specials, but if you can sell someone a home that hasn’t been renovated yet, then why not give them a try. If they fail at it, then you don’t really have anything in it anyways. (I remember you saying your purchase price didn’t place any value on the inventory). Also, if they fail with it, then you’re likely back in the same place you started at plus you’ve at least got the money they paid for it with a few months of lot rent. It’s not a huge risk in my opinion.

#6

Here’s what we’ve been doing on Handyman Specials:

  1. Advertise your best home at the highest monthly rent.
  2. When the customer comes to look at it, after showing it to them, ask them if they’d like to see something less expensive.
  3. Have two Handyman Specials ready to show: one that is perfect except no carpet or paint, and one that is really rough and needs everything done to it.
  4. Show them each with a compelling price difference as you stair-step down.

What’s going to happen is that some people are going to deliberately choose the roughest home, having done the math and seeing that it’s the best deal and they can finish it out to their taste and not yours.

What you’ve accomplished is to take customers who have the money to do the renovations and made them interested, as opposed to advertising the home for $1 and attracting deadbeats to look at the home.

Remember that not all people want the same thing, and there are customers who want to buy a home that is 100% ready to go, and those that want a complete rehab project (it’s the same story with SF, right?). But it takes money to rehab a home, so you need customers with the financial capability to pull it off, and you can’t find them by advertising junk homes “for free”.

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#7

Coach62, as per your question:
“What tips can you smart people here offer to convert both existing tenants and new prospective tenants to owners?”

You also indicated:
"…I do NOT want to own (POHs) one day more than I have to."

I totally understand your desire not to own POHs longer than need be.

However, PLEASE do NOT rush into selling your POHs to your existing Tenants on day one.

Take a couple of months and watch the actions and the pay schedule of your existing Tenants.

Find out what kind of existing Tenants you have.

You could have the most wonderful Tenants…the best out there.

However, they could also be the worst Tenants ever.

When we purchased our second MHP from an Estate, we also desired to sell off all the POHs as soon as possible.

After about 6 months we did indeed sell 2 of our POHs to existing Tenants. However, they were NOT the Tenants living in those POHs.

The Tenants who were initially living in those POHs were not good Tenants.

We had to evict one of the initial Tenants. This Tenant was a “hot head” who lacked respect.

The straw that broke the camels back was when he clubbed the neighbor’s little chihuahua with a golf club until the chihuahua bleed.

Thankfully, the chihuahua went to the vet and was ok.

However, that was NOT the Tenant we wanted in our MHP.

Had we sold the POH to this initial Tenant on Day 1 we would have caused ourselves additional work and grief.

The other initial Tenant (who even did some work for us and was a hard worker) was ultimately not stable enough to even afford the rent. This initial Tenant moved out of the POH because he recognized that he could not afford it.

After closing on your MHP sit back and watch your Tenants and their actions.

Before you sell anything make sure that you are selling to a ‘Good’ Tenant and not a bad one.

We wish you the very best!

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#8

If you do not want to deal with 70 POH

in one park why would you consider buying the property?? There are nice parks available without POH for a reasonable cap rate. It seems nearly half of the discussion on this board deals with this situation and since we NEVER went down that road simply because of age of homes, questionable tenants and tremendous time involved in the process–what is your time worth. I know there are people filling up vacancies with homes to turn around and flip–for example if I look at most of the parks recently listed in Michigan the realtor is saying buyer must buy all the homes with notes investor has recently purchased in order for a deal. As per Clayton Homes bonanza the Achilles heal for the park industry is the lack of tenants bringing in new homes to parks and thus forcing SOME park investors to spend thousands of dollars to fix this problem that is not going away. This pass week tenants brought in (3) 2014 homes but we are in a niche market that we discovered 30 years ago—water front properties, retirement, second homes etc. It would be interesting the numbers of new home bought into parks by tenants and look at the geography area, age group and income level. .

#9

Thank you to everyone for their input. I went to the park today and we sold 4 of the vacant homes to surprisingly good quality tenants.

I sold the first one in front of them to kind of give them a feel for the pitch. 30 min later my manager sold one, then my maintenance guy sold one, then I closed another on the way home.

Granted, it ain’t a sale until they show up with the cash (2 already have) but it’s very encouraging.

Kristin, good input. My manager and maintenance guy know the park and its tenants so we’re already getting a list of who to sell to and who to evict when the time comes.

#10

Coach,

You are doing well with this and with 30 years of experience, you have the appropriate knowledge base to assume this risk. The 70 POHs this park has is where the opportunity lies. You are able to capitalize on this because so many others are fearful of it (and subsequently passed it up). You know the market, your park is in a good location, and you seem to already be making a sold impact on turning it around. I’m glad you passed on the piece of crap you had under contract before and waited until you got this park! Good luck to you on this venture and please keep us up to date on your progress. We own three parks in FL (530+sites) and I feel like the state gets a bad wrap around here. I sent you a PM by the way, I’m all for connecting to other locally based investors.

Chuck

#11

Do not assume the new owners will ever upgrade the exteriors of their homes, they will not. If you do want to upgrade the overall appearance of the community you should do the exteriors of the homes yourself before you sell to the tenants. Otherwise the appearance of the community will not improve.

#12

That’s exactly my thought Greg. The exteriors will be done by us and done right.

#13

Coach62, great job on:
Selling 4 of the Vacant Homes

That is fantastic! Way to go!

Coach62, Greg has a great point (which you agree with):
“The exteriors will be done by us and done right.”

When we sold 2 of our POHs, we included in the sales price new,exterior stairs and new, white vinyl underskirting.

We then paid to have the exterior professionally upgraded.

It was a win / win for both us and the new Owners.

We wish you the very best!