ARA’s National Manufactured Housing Group Executes Sale of Park Terrace MHC

 Buyer Acquires a 158–Site Community in Lansing, MI Lansing, Michigan

(July 21, 2014) — Atlanta-headquartered ARA, the largest privately held, full-service investment advisory brokerage firm in the nation focusing exclusively on the multihousing industry, is pleased to announce the sale of Park Terrace Manufactured Home Community in Lansing, Michigan.

ARA National Manufactured Housing Group’s Andrew Shih and Brian Vita (based in Austin, TX) and Todd Fletcher and Jon Shay (based in Denver, CO), represented the institutional seller in the transaction. The property was sold through Auction.com to MHP Funds, LLC managed by Dave Reynolds, who was attracted to the management turnaround potential.

“It was a rare opportunity to acquire a well located, REO community with positive cash flow and public utilities,” said Shih. He added, “The receiver did an excellent job stabilizing the property and positioning it for sale.”

“The interest from investors was significant.” said Fletcher, “They recognized there was a solid existing

tenant base providing great cash flow, yet still a tremendous opportunity to generate higher returns by filling vacant homes and empty sites.”

Constructed in 1970, Park Terrace is a well maintained community comprised of 158 sites and 14 unoccupied homes with a stable tenant base and public utilities. The community is conveniently located less than ten minutes away from Michigan State University, the state capital, and the Library of Michigan. The major employers in the area include Michigan State University (~11,100), the Sparrow Health System (~7,000), General Motors (~5,800), and the Auto-Owners Insurance Group (~3,700). The community is in close proximity to several options for shopping and entertainment, including the neighboring Southfield Shopping Center, the Lansing Mall Cinema, the Spare Time Entertainment Center, as well as several parks. The residents of Park Terrace enjoy easy access to major thoroughfares such as Interstate 496, which runs through the heart of Lansing, MI.

To schedule an interview with an ARA executive or for more information about ARA, nationally please contact Lisa Robinson at lrobinson@ARAusa.com, 404.990.4900 or Amy Morris at amorris@ARAusa.com, 404.990.4902; locally, Allison Blount at ablount@arausa.com, 512.637.1229.

 

Mobile Home Park Investing Tips – 6 to 10

Our Weekly Mobile Home Park Investing Tips.  Along with comments from investors.  Enjoy!

 

Mobile Home Park Tip #6

Another important question that I receive quite often is do you treat your managers as employees or as independent contractors?  The answer to this question is almost always that I treat them as employees.  You can check the different ways the IRS gives you to choose between an employee vs independent contractor but in 99 out of 100 times the typical manager should be treated as an employee.

If you treat an employee as an independent contractor and get caught you are liable for penalties and interest and the back taxes.

Most people that are asking this question want to hear a different answer because they would rather just write on check to the manager and be done with it.  Some people may only give their manager free lot rent.  They don’t want to have to set up state and federal payroll taxes which they are responsible for as an employer and hassle with all the reporting.  I will admit that I didn’t like the answer either but it is the right way to do things.

If you want to take your chances with the IRS you may never be caught but there is something that is more important to consider other than just the hassles of setting up the payroll taxes.  This has to do with the potential of your manager getting injured on the job.  Even though you have them sign an independent contractor agreement and it states that they are not an employee, what happens if they get hurt performing their ordinary management duties?  That agreement will often be thrown out in court when it is determined that they meet all of the IRS guidelines (or state guidelines) of being an employee.  So not only will you then be responsible for the back taxes, you will most likely be a defendant in a lawsuit.

Since you treated them as an independent contractor you probably failed to get worker’s compensation insurance and will now be held liable to pay for their medical bills, lost wages, and other damages.

It doesn’t matter whether you give your manager $50 off of their lot rent or $2,000 per month, you need to setup your payroll correctly and obtain valid worker’s compensation insurance.  The risks are not worth taking.  If you don’t want to hassle with the payroll, there are services out there that will do everything for you.

 

Mobile Home Park Tip #7

Comment from Last Tip:

Dave – I really enjoy these tips also.  We are out of town owners and we have a park manager that lives in our park.  We have a local bank account and all of our residents make their deposits directly into our park account.  The manager does not handle the rent or security deposits.  We also do all contracts (MH rental, lot rental, home sales agreements) either by mail or in person.  For us it is better if it takes a few weeks for the paperwork to get done rather than have a mistake on a legal document.  This system gives us some sense of control and also eliminates the possibility of theft.  Although we do have to follow up on collections, this is actually rather rare and we don’t mind doing it.  Our bank is extremely cooperative and mails us every deposit slip with the tenant name or unit number.  We also get electronic copies of all deposit slips with our statement – just in case something gets lost in the mail (which can happen).

Thanks! 

Amy

Amy,

Thanks for the comments on the tips and for discussing your system.  It seems that it is working well for you and I have tried similar strategies in the past.  The problem I usually had was with the bank wanting to work with me on this.  I am assuming your park is in a smaller town and you have a small town bank.  Keeping the rent collections and paperwork in your control will definitely cut down on opportunities for theft and mistakes.  If you are not more than a few hours from the park and have the time to do so I would also agree with this system.  Thanks again for the comments and continued success with your park!

Dave

Another Comment/Question:

Dave & Frank,

On the issue of contractor vs employee, perhaps you can also address casual labor. We sometimes use park residents for lawn mowing, snow plowing, repairing park owned homes, and odd jobs around the park so they can earn money and it is usually cheaper for us than hiring from the phone book. Do we have to add all of these people to the payroll even if they only work a few hours per month? I’m guessing other park owners are also in this situation.

Thanks,

 Bret

Bret,

This is an excellent question and I have struggled with this as well over the years.  I have used so-called part time labor many times.  There are really two issues to look at.  The first is whether or not you have to collect payroll taxes on this casual labor.  The general rule for the IRS is that anyone that should be treated as an employee should be setup as such and payroll taxes should be withheld.  In the real world, if you hire the teenager down the street to pick up trash or mow a lawn in your park, you will probably not set him up on your payroll system if it is a one time occurence where you pay them $20..  However, if they are doing this type of work every week, then it would be advisable to go by the letter of the law.  Here is a link to Publication 15 on the IRS website for more info.

http://www.irs.gov/pub/irs-pdf/p15.pdf?legacy=1

The real issue to me is whether or not this casual labor person will be covered in case they get hurt.  If you are going to hire this casual labor then make sure you have worker’s compensation and that your policy will cover this labor.  If you have a worker’s compensation policy that covers your park manager that policy will be assigned a class code that covers certain types of work.  If your manager does only office work and your policy is assigned the class code that pertains to office work, then you may not be covered if you hire other types of work done.  If Mr. Bailey in space 15 is looking for some extra money and says he will go through and cut down some branches or install some skirting on one of your rental homes and cuts off his finger or worse, you better hope that you are covered for this under the worker’s compensation insurance.  My insurance agent in Texas said it all boils down to the class codes of the policy and I would guess most states will have similar rules.

In summary, I would guess many park owner’s out there have these little instances of casual labor and the real issue to me is that I don’t want to risk a large lawsuit just because I was helping out a resident or teenager earn some extra money.  Be sure that they are covered in your worker’s comp insurance policy.

Thanks,

Dave

Another Comment:

Dave,

It has always been my understanding that the key factor in determining an employee from an independent contractor is the amount of control you exercise over their day to day activities. Do you set their hours of work?  Do you direct the method in which they work? Have you given them a guideline of policies and rules that they must adhere to?  If so, they are probably an employee.  In my parks, my involvement is basically in setting business objectives and reviewing results.  Are my rents collected?  Is the park clean and safe?  Are the homes in good order?  Are expenses in line with my projections? My managers work as they deem necessary to accomplish the objectives, are given no instruction on how to accomplish their tasks (unless help is solicited) and are paid straight commission on the rents they collect.  It may sound like a loose run organization, but for me, it has been effective.  The key and the challenge is in finding the right manager who is experienced, self disciplined and honest with a strong work ethic.  If you do the hard work on the front end of hiring right, and you may have to do it several times before finding the right fit, your manager would pass muster on an IRS review of their independent contractor status.  The primary benefit though is not in the ease of pay and being able to forgoing withholding, etc.  The primary benefit is the peace of mind derived from having a competent individual who absorbs the headaches for you.

As always, I enjoy reading your tips and find the thoughts expressed interesting.

Best regards,  

Brian

Brian,

Thanks for the comments and you really hit the nail on the head.  If you find and hire the right person for the job, you will be on the right track.  Just as in buying the park, you need to spend the time and diligence on finding the right manager.  In my experience, a good manager will be the determining factor of whether or not I enjoy owning a certain park.

Great comments and insight!

 

Mobile Home Park Tip #8

Comment From Last Tip

Dave,

The next step from Amy’s rent collection system is to have each resident set up an automatic transfer from their checking account to the owners on or before the ‘rent due date’ and, of course, give them a discount on the rent for their help in doing this.

Glen

Glen,

I agree this is a great logical next step.  It seems like many people already have their bills automatically withdrawn from their checking account already, and it would be great if we could have all the rent in by the first automatically.  Thanks for your comments!

Dave

Another Comment:

Dave,

As always, I enjoy your tips and all you do for the business. One issue that owners should be aware of. When you treat a manage or anyone that only works under your direction, that is not licensed. If they ever go to collect unemployment benefits, the state will make you go back and pay all the taxes (even the employees share) not sure if all states apply to this.  With my experience I have all of my employees on payroll.

Thanks,  

Duane

Duane,

Great point and another reason one should make sure they follow all the laws Federal and State!  Thanks for the comment!

Dave

 

Mobile Home Park Managers… Continued

How Much Should You Pay the Manager?

First and foremost, the answer is that you should pay them enough to keep them motivated to complete the jobs you expect to be done.  If you want them to keep office hours for 40 hours a week and be on call every night and on the weekends, they should be making at least as much as if they were working full time as a receptionist in a typical office.

I think the first step that you should take is to decide what you expect of the manager.  The basic duties will fall into office and maintenance.

In the office category this will include such things as collecting, logging, and depositing rent, answering questions and dealing with emergencies, calling plumbers & electricians, renting lots and homes and filling out the paperwork.

In the maintenance category this will include preventative maintenance (caps on sewer drains, filling in potholes, heat tape, etc), routine maintenance (mowing, cleaning up trash and tree branches, fixing small plumbing problems, etc), and in some cases more specialized maintenance (digging up water & sewer lines, running a sewer auger, trimming trees, and so on).

For the office category, I will typically come up with a level of time that I feel needs to be spent on this item on a monthly basis and then multiply this by $8 – $10 per hour.  So, if I feel like a 100 space park will require 80 hours per month for office work, the pay would be $640-800 per month.

For the maintenance category I use the same rationale but increase the pay rate to $10-$12 per hour.  So, if on average the park will need 40 hours per month of preventative and routine maintenance, then the pay would be $400 to $480 per month.

If the manager or maintenance person is qualified to do the more specialized maintenance, I would not have a problem paying $15 per hour on this type of work.  A typical plumber will charge at least $100 for a visit and one hour of work.  The key here is that you only have your maintenance personnel do this more specialized type of work if they are QUALIFIED and your carry the proper Workman’s Comp.  I have done this both ways in which I would put them on a salary based on the average extra work they will complete or else on an hourly wage for these duties.

For the added grief of being on call on the nights and weekends, the manager will typically get free lot rent and possibly some utility allowances.

When all of this is said and done, this all boils down to about 5-7% of the gross monthly income.  In the case that the park has several rental homes, then it may be as high as 10% with the extra job of cleaning and repairing these homes.

One mistake that I have seen many park owners make is to require that their managers hold office hours from 9-5 every day during the week.  I have been into many of these offices and other than the manager playing computer games or watching television, the office is empty.  On most of my parks, my manager’s either do not have designated office hours or they have them for an hour or two a day during the first week of the month.

 

Mobile Home Park Tip #9

Comments from the Last Tips:

Hi Dave,

I have  a small park in PA and I live in NY I send the tenants pre addressed envelopes, I send them 13  envelopes in January of every year, I have a PO Box in NY it works great,   we handle all of the funds.we also use the rent manager computer system to keep track. I have been enjoying  your cds as I drive to work, I noticed you do a lot of park flipping, what about buying and enjoying the cash flow.

Thanks, 

George

George,

Thanks for the comments on the cd’s.  I am glad you are enjoying them.  As far as your comment, I have tried this a few times in the past.  On one park where we had a very limited type manager, it worked great.  I even had a few people send me 12 checks for the year all dated the first of each month.  They must have liked the extra 11 envelopes with postage.  Most of my parks now I have a manager collect the rent.  However, in your case as with many other owners, this can be a good way to collect the rents.  As far as the Rent Manager program, I have used it to varying degrees of success.  When we ran it from my office it worked well.  When I had to train the managers to run it, it was not as successful.

As far as keeping some parks and not flipping them, I will eventually find a few parks I really like and take it easy.  But for now, I am having too much fun with all the challenges of turning them around!

Thanks again for the comments!

Dave

Another Comment:

One person suggest automatic transfers from the resident’s account to the parks.  Beware that if an automatic transfer is set and there is no money in the account, both the park and the resident’s accounts may be charged bank fees.  And the charges are steep-could be $40, a lot for a $150 rent.  Many residents don’t always have money in their account on the 30th depending if it falls on a Thursday.

Rob, thanks for the comment and observation.  The automatic transfer option would work a lot better when you have responsible residents and this is not always the case.  You would have to educate the residents and make sure they authorize the transfers in writing and agree to pay any bank fees if the money is not in the account.  Great Observation!

Dave

Another Comment:

Dave,

Re: employee payroll,

This is a frightening subject for almost all employers – – – – as well it should, be due to the “alphabet soup” of gov’t requirements and timeliness of making the tax deposits.  The risks involved when people do their own payroll are very high for the employer.  Especially if a disgruntled employee or contractor wants to cause a problem.

Suggestion: Have owners look into using a Professional Employer Organization (PEO) to administer their payroll services.  [Google PEO]  It can be a very pleasant surprise for both the employer as well as the employee(s).  The PEO will handle all the necessary reporting paperwork, W2′s, tax deposits, Workers Comp insurance and claims and, very often, can offer a complete benefits program as well.  (This may take a little shopping around because most PEO’s want clients w/ an employee base of 10 employees or more.)

Very few people take time to truly understand the concept of PEO’s and the protection they give to small business owners.  Please keep in mind this is NOT “just a payroll service” that writes checks.  When payroll is outsourced to a true PEO, the PEO really become the HR department for the employer.    

Lee

Lee,

Thanks for another great comment.  I have used a company called Paychex (at Paychex.com) a few times in the past and have been very satisfied.  This or a similar PEO is a great way to take the nuisance of payroll checks and other HR issues out of your day-to-day operations.

Thanks again for the comment and participating.

Dave

 

Mobile Home Park Down Payments – From Steve Murden of Star Capital

The source of down payment funds to purchase a mobile home park is a question posed by a number of investors on a regular basis.  There are many creative buyers looking for ways to acquire a property with as little out-of-pocket as possible.  The general rule in commercial lending is the funds for down payment must be in cash, 1031 exchange accounts, or open lines of credit and evidenced prior to closing.  The closing attorney or title company will require that the funds required for closing determined by the settlement statement are to be deposited into their escrow account in order to record the note and disburse funds.

We have seen many investors use equity lines or business lines of credit as their source of funds for down payment, closing costs, and reserves.  These are considered equivalent to cash in a bank account.  There is typically no seasoning requirement on these lines as long as they can be proven to be accessed by closing.  Since mobile home parks are an income producing property and the net income they generate is typically required to support the debt service, the additional personal liability the borrower will be taking on by accessing the line of credit will not affect underwriting and is taken into account when the final approval and loan commitment is issued.  We have closed loans in which the property does not support the debt and we take into account the borrower’s personal income and liabilities to approve the loan.  In this instance, the additional monthly payment on the line of credit does have an impact and must be considered in the debt-to-income calculation.

Many times a borrower will ask whether they can collateralize unrelated real estate that they currently own.  This is not an acceptable structure in traditional commercial loan programs.  A local bank may consider this on a case-by-case basis.  We suggest that the borrower work with their bank to create an equity line or cash-out refinance on their property prior to closing.  Based on the current lending environment, there is very little “out-of-the-box” flexibility when it comes to the amount of cash in a purchase.  Prior to the sub-prime mortgage problem, a few lenders would consider up to 10% of the purchase price to be collateralized by an unrelated property as a note created by the seller.

In circumstances where the borrower will take title as an LLC, partnership, or other corporate entity, lenders are able to take into account the total liquid assets of all members/owners of the entity.  We have closed loans where one or more of the members of an LLC want to contribute a portion of the down payment funds, but do not want to be personally liable on the note.  If these individuals have less than a 10% ownership position, we do not require that they sign as a personal guarantor, but will evidence their liquid assets and use these funds to meet the down payment requirements.  The borrowers with 10% or greater ownership will be documented and will sign as guarantors.

We are continuing to finance smaller parks up to 90% LTV at higher than market rates where this makes sense from a cash-flow basis.  For competitive interest rates, expect to have 20% to 25% in cash at closing for the down payment.

By Steve Murden of Star Capital Corp – 1-877-297-2230

 

Mobile Home Park Tip #10

Comments From Prior Tips:

Dave,

I noticed some of comments and questions this week were about Leases and Rules.  We purchased a park from Dave almost 6 years ago and he had in place the best set of Rules and Regulations and an excellent Lease.  I have used almost sentence in them for my benefit in applications, moving homes in, evictions, going to court, automobiles, pets, junk, yards, leaves, water etc.  They have been looked at by the County Attorney and he says it is the best he has read.

I have attached them for Dave (in case he forgot which ones he left here).

I would recommend them and use them to the 9th degree.

I also have a great plan for asquiring abandoned mobile homes in Kentucky.  We have taken over at least 7 abandoned homes through the court system with no problems.  Other park owners who have been here 30 and 40 years come to me and ask how to go about acquiring an abandoned home.  It’s working!

I have forwarded the Lease you left in place here and the Rules.  I have forwarded the Lease with Option to Purchase also, BUT, have changed it and removed all the words that said, buy or purchase, as that was a real source of contention with the Judge and with the Kentucky State Manufactured Home Inspector.  It cannot contain any words that refer to purchase or buy.  Can only say Lease with option and that it can be sold for $1 at the end of the lease.

Just thought these things might come in handy.

I really enjoy the tips and comments emails…..they are great.

I don’t quite agree with the commentary on being softer on the Rules.  We have been hard and it’s worked and we haven’t lost anyone.  And we have been able to really clean up the park since we have been strict and our abiding by those Rules and not backing down.  It gets them out if they don’t want to be clean….

Just a thought. 

Sharon

Sharon,

Thanks for taking the time to respond to the tip program and for the great comments.  I appreciate you positive feedback on the Leases and Rules that I left at the park you purchased.  I need to take you and the county attorney out to lunch!!!

I can’t take all the credit for the lease and rules as I had a prior manager and an attorney help in writing them.  I have revised them a little over the years and usually to conform to different states.  As in your experience, I have never had a problem in court with the language.  I have also removed the language you mentioned “buying or purchase” in my lease options.  While I never had a problem in court, I found out that language was not appropriate in most states.

As far as being hard on the tenants I agree with you that you need to lay out the law and set an example for people to follow.  You had quite a bit of work to do when you bought the park and maybe I will be able to visit and see how the park has come along.  It was a nice piece of property for sure and I learned alot from my experience in owning it.  My biggest mistake as you are aware was in looking entirely at the low down payment aspect and not really thinking about the other terms (especially the long term prepayment penalty) with the previous seller.  I will apologize publicly for that one.  I wish you continued success with the park and look forward to your comments and insights in the future.  I am sure we would like to hear more about your program for acquiring title to an abandoned home.

Thanks,

Dave

 

Raising the Rent when the Rent is Way Under Market…

I have purchased several parks in the past in which the rent was way under market.  For example, the rents in a park that I am buying are $110.00 per month.  The average rents in the market are closer to $185.00 per month.  For the sake of comparison, in the park I am buying, the residents pay all the utilities.  In addition, in the comparable parks, the market rent of $185.00 per month also assumes that the residents are paying all the utilities.

The first issue is how much should I increase the rents and when?  While there is no right answer I am planning to raise the rents on day 1 to just below the market rents ($175.00 per month).  Next year I will raise them again $10 to $15.  The only reason that they are not up to market in the first place is that the prior owner’s never implemented a standard rent raise program and soon were outpaced by the market.  Their last rent raise was last year ($10 per month).  Before that, they had not raised rents in 6 years!

I am not worried about losing any of the residents for a couple of reasons.  First of all, why would they move to the park down the road that is already charging $185+ per month?  Most of the parks are comparable in the area and the occupancy is high.  Secondly, most of these residents know that they have been getting away with these low rents for years, and while they may fuss a little, they will expect an increase.

I ran into this same situation a few years ago in another park I had purchased and I decided to increase the rents to market in 3 steps.  I purchased the park and the rents were $105.00 per month.  The rents went up to $150.00 right away, to $200.00 one year later, and will be going to $240.00 this coming year.  Then they will be at market.  During these rent raises we have lost about 4 out of 100 residents and have filled those lots from people bringing homes into the park.

 

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By Dave Reynolds and Frank Rolfe

Dave Reynolds and Frank Rolfe are mobile home park investor and together own and operate over 100 parks. Frank also leads regular Mobile Home Park Investing Bootcamps through www.MobileHomeUniversity.com.

Mobile Home Park Investing Tips – 1 to 5

Our Weekly Mobile Home Park Investing Tips.  Along with comments from investors.  Enjoy!

 

Mobile Home Park Tip #1

You need to make some initial changes to your thinking and behavior to improve your chances of successfully removing the obstacles to mobile home park profitability.

First, you need to slow things down.  You will notice that a lot of your tenants demand instant response to their problems.  They call you at 2:00 am and demand that if you don’t respond in ten minutes, they will call the authorities to complain.  You have to immediately end this “rapid response” program.

Many of these tenants make these threats because they know you’ll make a bad decision in their favor if you don’t have time to think.  You have to slow the business down.

The only problem in a mobile home park that you need to respond to immediately is a dire threat to safety, or a problem that could rapidly escalate into a significant expense item.  For example, a water leak, other than the rupture of a main line, can wait.  In my markets, water costs $3 per 1,000 gallons.  While waste is bad, a water leak is hardly a reason for immediate attention.  We never repair water leaks on weekends or at night because the extra cost of doing so (plumbers charge significantly more during these times) is always more than the cost of the water usage itself.  A sewer, back-up, however, requires fairly immediate attention because, if left alone, it could cause you a big clean up bill, and even penalties from the city.

There is no tenant issue that demands instant service.  If your tenant demands quick service, then suggest to them that they move to a Ritz Carlton hotel and the concierge will be happy to jump through hoops. 

 

Mobile Home Park Tip #2

At your park your new policy is that you will get to things slowly and methodically, using proper decisions.  To help you in your “slow things down” program, make yourself less accessible.  Don’t ever answer your phone for a tenant (caller I.D. is required), and let all of their calls go to voicemail.  And then don’t call them back for a day or so unless it is super important.  This will gradually send the message that you won’t be rushed any more, and that you are not that interested in 24/7 servicing.

While you are slowing things down, you have to prepare yourself for making tough, unpopular decisions.  You need to develop an alter ego who enjoys confrontation and unpopularity.  If you are like me, you have enjoyed a fairly prosperous life surrounded by intelligent, rational people who abhor unpleasantness.  So to get in the mood for being the reverse of your natural personality, you need to develop a “Hollywood” quality alter ego of “Mr. Nasty”.  Initially, you may need some crutch to put you in the mood.  Mine was an old WWII army helmet.  When I had to make unpopular decisions and phone calls, I would put the old helmet on (in the privacy of my home), psych myself up, and start making nasty calls that would shock George Patton himself.  Once you have established your alter ego, the need for the props go away, but you can still keep it around as you laugh about those bad times later down the road.

The next adjustment you need to make in your mind is to assure yourself that you are the boss.  You own the park.  The tenants do not.  Despite your bank loan commitments, you have the right to shut it down if you so desire, or at least to evict each and every person in the park if you get such a whim.  And don’t ever forget it.  When a tenant gives you perpetual grief, you can tell them that it’s your park and you’ll do as you please, as long as it’s within the law, and you can kick them out if they don’t stop bothering you.

 

Mobile Home Park Tip #3

Comment from Previous Tip in this Series:

Dave,

I have to disagree whole heartedly for a number of VERY good reasons.
You never need to get nasty.  Why get nasty when it is never your fault.  “I wish I could help, but it’s not up to me.  It was not my decision.  It was owner.  I would love to help, but there’s nothing I can do.”

Why get nasty.  Who needs that stress, and who needs to put themselves in that kind of danger.  I know a real estate investor whose property manager was stabbed in the heart when confronting a tenant over rent.

Another, even better, reason to take this approach is and I hope property owners know that they MUST own the park in an LLC, Corporation, or limited partnership, NEVER in their own name – if everyone knows you own the park, then guess who is the first to get sued?  If you are “just the manager” for ABC Park Management, Inc. who happens to manager the park for Sunshine Properties, LLC, then when someone trips and falls, you are not the first one they think of when the lawyer starts suing.

So, you never say you own the park.  That way all the unpopular decisions are not your fault, they are the fault of an unknowable, distant, unreasonable, and unreachable owner who must be appeased.  There may be times when you can even be a good guy and bring a case before the owner on a tenant’s behalf.  There should never be a reason to be nasty.  It’s stressful on you, on them, on the properties they leave behind, and it can be dangerous, physically and financially.

Ben

Ben,

I appreciate your comments on this tip series.  I agree completely that it is always better to start with a more civil approach and see if things can be resolved.  If the resident does not respond with the civil approach then you may have to move on to other means of enforcing the rules or rent collections.  But always be smart about it with you or your manager’s safety in mind.  The context of the Mr. Nasty approach was if you are in your office (as the owner) making phone calls from a distance.  Maybe this approach would be better labeled as Mr. Firm.

I have heard similar stories of property managers and owners that have been threatened and in some cases harmed physically like the property manager you mentioned.  In one case, the owner was actually shot and killed over a problem with a tenant.  Your advice is right on point and it is never worth putting yourself or your managers in danger over rent.

Your thoughts on owning the park in an LLC, Corp, or other entity is also very important.  We will have an entire series of tips on this point but for any investors or owners reading this, never buy an investment property in your own personal name.  Many investors still do this and are sorry later when they get sued.  That extra shield definitely allows me to sleep better at night on my properties.  Great advice and 100% right on.

You last comment about not telling people that you are the owner and making the owner sound like a distant and unreachable entity is also a great idea that I have used ever since my first few parks.  I will be the first to admit that when I was first starting out, it felt good to walk around the park and have people come up to me and say things like “you are so young and must be rich to own the park” and similar things.  However, that good feeling would have changed quickly had I been sued.  I am satisfied now to visit my parks in small rental cars and old jeans.

Thanks again for the great comments and disagreements!

 

On to the next part of this series…

I bought a park once where the tenants had been terrorizing the former owner, calling him at home at all hours of the day or night complaining that the neighbor was making too much noise, etc.  This owner had let the tenants run all over him, and in doing so he had empowered them to get the feeling that they owned the park and he was their servant.

When I took over, I got sick of these people almost immediately. I told anyone that called in that obviously they weren’t happy and that they needed to find a new place to move their trailer.  Of course, it costs thousands to move a trailer, and pretty soon the roles changed and I became the boss, constantly threatening to have them move out.

The final adjustment you need to make before starting my program of redemption is to swallow your ego and stop being the owner at least as far as everyone in and related to the park will know.  To start your plan, you will need to announce to the whole world that you have a new partner, or have hired a consultant to make major changes to the property.  This will already get them braced for some big shake-ups to come.  It also allows you to slow things down even further  now you have to ask your phantom “partner” for his approval.  Then you can blame the new partner for the most unpopular decisions  even to city inspectors.

Once you have made these four mindset adjustments, you are ready to begin the process of reclaiming your property and sanity.

 

Mobile Home Park Tip #4

Comment From Last Tip:

Dave,

Thanks for the tip regarding the property manager / phantom partner.  Your approach is one that I’ve been using successfully for years now.  There are only a hanful of tenants in all my parks that know I’m the owner (or for that matter even know me).  Of those tenants who have somehow discovered that I am the owner, I always let them know that I am the managing member whose sole responsibility is to protecting my “partners” interest.  I let them know that my partners ownership interest far exceeds mine and that I answer to them.  It has been an effective strategy in diffusing some situations and also in enforcing park rules (such as strict adherence to timely payment of rent).  For those people who like the recognition of being the owner, I would suggest asking yourself  if you’re in the business for the notoriety or the money.  For me the answer is always the money.

Brian

 

Finding a Manager for your Mobile Home Park:

When I am taking over a park and need to find a manager, I always start by asking the previous owner if he knows of someone that he would recommend that currently lives in the park.  This is a question that he will not have a good answer immediately but if given some time to think about it he/she can usually come up with a few recommendations.

In the rare case that he has no recommendations and you can’t find a suitable current resident to run the park (by sending out a letter or posting a flyer in the park), then you will have to look elsewhere.  Of the 100 or so managers that I have had, I  went outside of the park for a manager on only approximately 10 occasions.

I have three places that I currently use and have never had a problem finding several qualified managers for each position.

  1. Place an ad in a local newspaper advertising the position.
  2. Place a Free ad on MobileHomeParkStore.com under our employment section.
  3. Place a listing on Craigs List.

If you need someone fast the best avenue will be the local newspaper.  If you have some time and want to find a manager or management couple that has previous experience, then the MHPS.com and CraigsList.com will bring in the better candidates.

 

Mobile Home Park Tip #5

Comments From Last Tip:

Dave,  

Great series of tips,

The absolute best managers I have ever had were a park residents.  They were a couple that lived in the park for several years and really enjoyed the life style our park offered.  Their enthusiasm was transmitted to the other residents, especially when they started to hold monthly community cook outs,  organized and led softball and bowling teams, with the same name as the park, to compete in a local leagues.

We provided the tee-shirts with the parks name on the front for the teams and hot dogs for the cook outs.  For next to nothing we found the best source of local promotion that we could ever find, current resident excitement about being representatives of their community. 

Keep those tips commin’…your making e-mail something to look forward to again.

David Oxhandler

THE MANUFACTURED HOUSING GLOBAL NETWORK
www.MobileHome.com

Thanks David I appreciate your comments.  If you haven’t ever visited David’s site… www.MobileHome.com you should visit it.  He has many great articles and other resources for the Industry.

 

Mobile Home Park Managers… Continued

Once you find a potential manager for your mobile home park, the work is still not over.  Questions such as background checks, credit checks, how much to pay them, what their responsibilities will be, are they an employee or contractor and others still need to be answered.

Should you obtain a background or credit check?  The right answer to this question is probably yes.  Does everyone do it?  No.

My personal thoughts on this are that you should obtain these background checks if you suspect any reason to do so.  I have only performed a few background checks over the years and have been fortunate in finding good managers for the most part.  I currently have some excellent managers that I am sure have terrible credit.

When I am interviewing potential managers and making my selection I rely on my gut feelings more often than not.  If the potential manager needs this job in order to survive that has been a good indication that they may not be a great manager.  They will constantly be looking for a raise and if they need money that bad, then it opens the door to theft.  My worst managers have been the ones that did not have at least one spouse working elsewhere and their compensation was only from running the park.

Other indications that I have found of poor quality managers have been those that are constantly talking and say they know how to do everything.  They have worked in every trade known to man.  Once they get the job, you find out that they don’t know how to send a fax or replace the inner workings of a toilet even though they may have been a plumber for 5 years.  I would much rather have someone that knows their limits and is not afraid to disclose those limits up front.

So, a background check is a good idea but the real key is interpreting what they say they can do and forming your opinion of how well they will do it.

One other note on the background checks…  The reason that you should obtain this stems into potential future liability issues.  You don’t want to hire someone as the manager that may have had issues in the past as sex offenders or other crimes that can come back to haunt you.  If you hire an offender and then he/she has a problem with one of your residents, you don’t want to face a potential lawsuit.

 

To see a list new and used mobile home dealers.
Click Here

To view the newest Mobile Home Parks for sale.
Click Here

To get a fast quote on Mobile Home Park Financing.
Click Here

By Dave Reynolds and Frank Rolfe

Dave Reynolds and Frank Rolfe are mobile home park investor and together own and operate over 100 parks. Frank also leads regular Mobile Home Park Investing Bootcamps through www.MobileHomeUniversity.com.

Mobile Home Park Financing Alternatives

Announcing New Alternative Loan Programs!

Financing for Parks Not Serviced by Conventional Lenders

 

  • Development Loans for Acquisition and Improvements
  • RV and Mobile Home Hybrid Parks
  • Alt-Bank Financing

 

Development Loans – Acquisition and Development Loans enable investors to unlock income potential of underperforming parks. Loan-to-Cost financing allows additional funds to be added to the initial loan amount to make needed improvements. Bridge loans provide interim funds to develop and stabilize the park to eventually be refinanced by a permanent, conventional loan with attractive and long-term features.

 

Development Loan Terms:

60% to 70% Loan-to-Cost (LTC)

5.50% – 6.00%, 3 to 5 Year Fixed Rates with 5 Year Term

Adjustable 5.25% (Prime + 2.0%) for 5 Year Term

20 Year Amortization, No Prepay Penalty

 

RV and Mobile Home Hybrid Parks: (>50% + short-term and transient rentals required).This loan offers an innovative use of SBA financing for RV Parks with Mobile Homes. Program provides high leverage and low rates and funds for improvements. Can include park or tenant owned mobile homes, motel units, resorts, cabins, RVs. Government insured loan program allows for more flexible underwriting.

 

Hybrid Park Loan Terms:

75% LTV, 5% ARM with 25 Year Amortization and Term, 3 Year Prepay

 

Alt-Bank Financing – Portfolio lenders with liberal underwriting guidelines and loan programs. The park income, quality and strength of borrowers are main qualifying criteria. No restrictions on unit type or operating structure: park owned, contracts, RVs and lower occupancy rates can be accepted.

 

Alt-Bank Loan Terms:

60% – 70% Loan-to-Value (LTV)

5.50% Fixed for 5 Years + 5 Years ARM @ Prime + 1.0% for 10 Year Term

Adjustable Rate 4.50% (floor) @ Prime (currently 3.25%) + 1.0%, 10 Year Term

25 Year Amortizations. 5 Year Step-down Prepay Penalty.

 

Getting Started

 

Property and Investor Profile Forms (attached)

Pictures, Rent Roll, 3 Years of P&Ls + YTD 2014

 

For a Confidential Review, Call or Email

David Harley, Mobile Home and RV Park Specialist

(415) 250-5300 ●dharley@ipcap.net

NMLS 243624; BRE 01334092

 

Investment Property Capital (IPC) provides financing, investment and analytical services for Manufactured Housing and RV Community Investors and Industry Professionals. Loan programs are available through our nationwide network of banks, financial institutions and private lenders. David Harley has over 10 years of industry specific experience.

 

 

Investment Property Capital ●701 De Long Ave, Ste. H, Novato, CA 94945 ● www.ipcap.net

ARA’s National Manufactured Housing Group Executes Sale of Lake Bryant Manufactured Home Community in Florida

ARA’s National Manufactured Housing Group Executes Sale of Lake Bryant Manufactured Home Community in Florida

 

Buyer Acquires a 180–Site All Age Community in Ocklawaha, Florida

 

Ocklawaha, Florida

 

(June 16, 2014) — Atlanta-headquartered ARA, the largest privately held, full-service investment advisory brokerage firm in the nation focusing exclusively on the multihousing industry, is pleased to announce the sale of Lake Bryant Manufactured Home Community in Ocklawaha, Florida.

ARA National Manufactured Housing Group’s Andrew Shih and Brian Vita (based in Austin, TX) and Todd Fletcher and Jon Shay (based in Denver, CO), represented the institutional Seller. The property was sold to a private owner/ operator.

“It was a rare opportunity to acquire a Recreational Vehicle (RV) Community in Florida that also has a Manufactured Home (MH) component all in the same property,” said Shih. He added, “The MH side provides stable, annual cash flow to help with the slower off season months when the RV side slows down.”

“With over 15 offers on the property, there was tremendous interest from investors wanting to acquire

this REO asset due to the outstanding management turnaround opportunity. The community was offered at an attractive basis with the potential to improve RV operations through a comprehensive marketing effort,” said Fletcher.

Constructed in 1969, Lake Bryant is a large, scenic, low density, REO community with 84 MH sites and 96 RV sites and has the potential to expand. The property is situated on beautiful Lake Bryant in the heart of the Ocala National Forest which offers 383,000 acres of pristine forest land and home to more than 600 lakes, rivers and springs. Amenities offered to residents and guests include a private on-site beach with lake access, a new boat ramp, a spacious clubhouse built in 2004, a community store, shuffleboard, horseshoes, volleyball, and basketball.

The residents of Lake Bryant enjoy Easy access to Ocala, FL, 22 miles to the West and the Village of Ocklawaha, only 10 miles to the South, offering options for dining, cinemas, bowling and golf. The community is in close proximity to some of Central Florida’s most popular vacation destinations, including Daytona Beach 60 miles to the East, and Disney World only 75 miles to the South.

To schedule an interview with an ARA executive or for more information about ARA, nationally please contact Lisa Robinson at lrobinson@ARAusa.com, 404.990.4900 or Amy Morris at amorris@ARAusa.com, 404.990.4902; locally, Allison Blount at ablount@arausa.com, 512.637.1229.

 

 

 

PRESS RELEASE: The Madison Group Facilitates a Non-recourse Commercial Real Estate Loan a Mobile Home Community in Dodge City, Kansas

Date: 6/3/2014    

The Madison Group (TMG), a commercial broker and loan consultant, has facilitated the financing for a 79 unit mobile home community in the rural community of Dodge City, Kansas.   TMG was able to bring a non-recourse loan of $1,200,000, rate of 5.75%, with a ten year fixed rate on a 30 year amortization.

 

Although the park is located in a small market, the occupancy was historically strong and we were able to get a large amount of cash out for the sponsor.  The owner had previously had issues with the financing of the park due to size and location.  TMG analyzed the information provided and were able to find the right lender to fit with the specific needs of the owner.

 

“The property is located in a small market, but because of our experience with this property type, we were able to facilitate the most favorable terms to meet the clients goals, said Angela Kesselman of The Madison Group who originated the financing.  “The borrower’s needs were to secure a 10 year term at a lower rate than his existing loan, while getting maximum proceeds. The borrower is now looking to purchase other parks with the proceeds”.

 

The financing was arranged by Angela Kesselman Associate Director of Finance at The Madison Group.

 

The Madison Group (www.madisongroupfunding.com) is a commercial loan broker and consultant specializing in financing for investor properties nationwide. TMG provides flexible and reliable capital for real estate acquisitions, refinances, and re-capitalizations for a variety of property types including:  multifamily, mobile home parks, credit tenant NNN net lease, office, retail, industrial, self-storage and other commercial properties in the United States.  Established in 2001, The Madison Group’s intention is to provide highly competitive loan products through its superior capital market expertise and quality sources of capital.  TMG works efficiently and effectively to get the transaction closed and funded.

 

The Madison Group and Angela Kesselman can be reached at 435-785-8350 or by emailing Angela at angela@madisongroupfunding.com.

ARA’s National Manufactured Housing Group Executes Sale of Whispering Sands Manufactured Home Community in Nevada

Buyer Acquires a 78 –Site Age Restricted Community in Las Vegas

Las Vegas, Nevada (June 3, 2014) — Atlanta-headquartered ARA, the largest privately held, full-service investment advisory brokerage firm in the nation focusing exclusively on the multihousing industry, is pleased to announce the sale of Whispering Sands Manufactured Home Community in Las Vegas, Nevada.

ARA National Manufactured Housing Group’s Andrew Shih and Brian Vita (based in Austin, TX) and Todd Fletcher and Jon Shay (based in Denver, CO), represented John Mitchell with Special Servicer LNR Partners. The property was sold through Auction.com to a private owner/ operator attracted to the management turnaround potential.

“It was a rare opportunity to acquire a well maintained, age restricted community on public utilities with a central location in fabulous Las Vegas,” said Shih.

 “The activity from investors was significant, and shows that even older communities still experience very high demand from buyers when they have attractive, in-fill locations in desirable markets,” said

Fletcher.

Constructed in 1963, Whispering Sands is conveniently located less than 5 miles from Downtown Las Vegas, internationally renowned for its gambling, shopping, fine dining, and nightlife. The community is in close proximity to some of the area’s major retail destinations including the Las Vegas Premium Outlets – North as well as numerous attractions and golf courses including the Las Vegas Natural History Museum and the Desert Pines Golf Club. The residents of Whispering Sands enjoy easy access to several major thoroughfares such as Interstate 515, Charleston Blvd., and Fremont St., which leads to the original Downtown Las Vegas Casinos. The community also features mature landscaping and trees providing a peaceful respite for residents.

How Much Money Can You Make With A Mobile Home Park?

An article I wrote recently, telling the story of my first manufactured home community that I purchased for $400,000 and sold around ten years later for $1,525,000, raised the ire of a self-styled industry “guru” who contended that such amounts cannot be made with a manufactured home community. Of course, a community we closed on a few weeks ago in Kentucky showed an appraised value of over $1,000,000 more than we paid  so it doesn’t seem that unique to us. But it does raise the question of how much money you can realistically expect to make with a manufactured home community. Continue reading

Investing in Mobile Homes

There are over 60,000,000 Americans with household incomes under $20,000 per year. To this giant market, a mobile home is the only form of detached housing that they will ever be able to afford. And, as a result, the demand for mobile homes has never been higher. But how can you take advantage of this opportunity? Continue reading

ARA’s National Manufactured Housing Group Executes Sale of Jade Isle Manufactured Home Community in Florida

Buyer Acquires a 102 –Site Age Restricted Community in St. Cloud, Florida

(April 22, 2014) — Atlanta-headquartered ARA, the largest privately held, full-service investment advisory brokerage firm in the nation focusing exclusively on the multihousing industry, is pleased to announce the sale of Jade Isle Manufactured Home Community in St. Cloud, Florida.

ARA National Manufactured Housing Group’s Andrew Shih and Brian Vita (based in Austin, TX) and Todd Fletcher (based in Denver, CO), represented the institutional Seller. The property was sold to a private owner/ operator.

  It was a very rare opportunity to acquire an age restricted, REO community in Central Florida,” said Shih. He added, “Jade Isle offers a peaceful environment for residents with water views and mature landscaping, which perfectly positions it to capture the exploding number of Baby Boomers seeking affordable, retirement living.”

 ”There was tremendous interest from investors wanting to acquire this asset. We received double digit offers and it just shows how much capital is out there looking to acquire manufactured home communities,” said Fletcher.

Constructed in the 1970’s, Jade Isle is a well maintained, age restricted community with municipal utilities situated in the attractive retirement market of Central Florida. The community features a clubhouse, library, sparkling swimming pool, shuffleboard court, bocce, and a private canal with access to Lake Runnymede and East Lake Tohopekaliga (the second largest lake in Osceola County).

The property is conveniently located on the south side of the Orlando MSA off of Florida’s Turnpike. It is 31 miles from downtown Orlando, FL, 10 miles from Kissimmee, FL, and 24 miles from Disney World.

To schedule an interview with an ARA executive or for more information about ARA, nationally please contact Lisa Robinson at lrobinson@ARAusa.com, 404.990.4900 or Amy Morris at amorris@ARAusa.com, 404.990.4902; locally, Allison Blount at ablount@arausa.com, 512.637.1229.

About ARA

 Atlanta-headquartered ARA is the largest privately held, full-service investment advisory firm in the nation that focuses exclusively on the brokerage, financing and capital sourcing of multihousing properties including conventional, affordable, distressed assets, notes sales, seniors, student & manufactured housing and multihousing land. ARA is comprised of the country’s top investment professionals who leverage a unique and fully integrated cooperative business platform of shared information, relationships and technology driven solutions. ARA’s unified enterprise approach ensures that clients are delivered the broadest asset exposure, effective matching of buyers and sellers, and the shortest transaction timeframes in the industry. The combination of resources, unparalleled market expertise and nationwide presence in the multihousing marketplace has resulted in an annual production volume of more than $10.2 billion in real estate transactions in 2013. For detailed information on ARA’s extensive multihousing investment services, visit www.arausa.com.

By Frank Rolfe
Frank Rolfe is a mobile home park investor and owns over 100 parks with his partner Dave Reynolds. Frank also leads regular Mobile Home Park Investing Bootcamps through the MobileHomeUniversity.com.

By Frank Rolfe
Frank Rolfe is a mobile home park investor and owns over 100 parks with his partner Dave Reynolds. Frank also leads regular Mobile Home Park Investing Bootcamps through the MobileHomeUniversity.com.