1. Mobile Home Park Collection Tips
    

2. Park Owners... Could you use some Extra Cash Flow?
    

3. Updates and Other Announcements
    

4. Questions and Answers with Dave
    

5. Tell us what you think and send us your articles!

Mobile Home Park Collection Tips:

One of the most difficult and time consuming tasks of a mobile home park manager is in the collection of rents.  It has been my experience that about 50 percent of your residents will never have a problem paying on time.  Then about 25 percent may be late on occasion and are also not a major problem.  It is the other 25 percent that will take most of your time and efforts. 

It is this last 25 percent that will often make or break the deal.  This is usually the money that is left over after you make your loan payment and cover the other operating expenses.  So what is a manager/owner to do to make sure that these slow paying residents get motivated to pay?

Here are a few strategies I have used.  Of course, make sure that any of these programs are legal in your state.  If you have any other thoughts I will post a followup in the next newsletter.

1. Rent Discounts.  Using a rent discount program, I set the rent a little higher than I typically would and then reward those that pay on time.  For example, I might set the rent at $220.00 per month and for all of those residents that have paid by the 1st of the month, they will receive a discount of $20.00 for a total of $200.00 per month.  Taking this program further, I have had a rent schedule that goes something like this:  Rent of $200.00 by the 1st, $220.00 by the 5th, and $240.00 by the 10th and so on.

2. Late Fees:  Whether used in conjunction with the discount program or as a stand alone program, this program will charge late payers a penalty for not paying the rent on time.  In most of my parks, this will be a late charge of $20.00 to $25.00 if the rent is not paid by the 5th of the month.

3. Taking Credit or Debit Cards:  In the world of plastic, many people do not carry cash or checks anymore and by adding this convenient payment method you may be able to increase collections.  Many times in the past I have had someone fall behind and in order to avoid an pending eviction, one of their relatives will call with a credit card to catch up the balance.  I have even taken this to the point that a few of my residents have their credit or debit card on file and we automatically charge them on the first of each month.

4. Send out Invoices:  Even if the rent is exactly the same every month and there is no utility billing, sending out an invoice is a good way to get your rent bill on the pile, so to speak.  People are more apt to pay the bills with an invoice first.  Using self-addressed stamped envelopes are also an option.  In the world of high tech, you might even be able to accomplish sending out the invoices via email.  By using a mail merge on excel and word this can be done within minutes.  There are also software specific programs out there that will do most of the work.

5. Sending out Late Notices:  It is important to send these out on time every month so your residents know that you haven't forgot about them.  You should be persistent and follow-up with phone calls and in person visits.  This way they know you mean business.

6. The 3,5, 7, or 10 day notice:  If they have not paid then send them the legal notice to pay or vacate.  This should spur some action and after a few times of having to pay court costs, the residents will get the picture that they have to pay.  The rent bill should go to the top of the list.  The longer you let the resident go without paying the less likely they will be to get caught up.  If they don't have the rent money in May, then they probably won't have the May and June rent in June and so on.

Collecting on delinquencies is probably the least enjoyable part of managing a mobile home park but ranks up there with the most important parts.  When you find the strategy that works best you should follow it every month like clockwork.  You want the residents to pay their rent before they pay on their cell phone bill and other un-necessities.

The first Frank and Dave Show was a success.  We had a lot of fun doing it and have some great ideas and feedback to consider for future shows.  You can still sign up for future segments here.  Mobile Home Park Teleconference

I thought overall the call was excellent. The great thing is that it is well rounded. Real life examples are great with the why(s) behind it. I think it is a fantastic value.

The show was excellent-powerful, straight talk.

Mobile Home Transporters/Movers:

We are in the process of creating our lead system to bring you more customers.  If you want more leads and customers from MobileHomeParkStore.com then email terri@mhps.com for more information.  You don't want to miss out on this as the spots are filling up fast.

Are you a manufactured home owner or community owner with homes or lots for sale or rent?

If so, then you can list your new and used mobile homes for sale or rent and lots for sale or rent for FREE at MHBay.com

Our traffic continues to increase so if you are looking to connect to potential residents and sell or rent more homes, then place your FREE listings on MHBay.com. 

Q&A with Dave

Question: 

Dear Dave

1)  How much does a typically Phase 1 Environmental Study run?

Bret

Answer:

I have paid anywhere from $1,500.00 to $3,000.00 for a Phase 1.  Most of them have been about $2,000.00.

Thanks, Dave

Question: 

Hi Dave,

 

I bought a few MH to fill vacancies.

 

What do you prefer, Lease purchase or purchase, and why? How do you stryucture the deal, and what about tax ramifications?

 

Thanks, Steve

Answer:

Steve, in the past I have used many different versions of Lease Purchase and Rent-to-Own agreements.  However, now that I understand the laws and have been called on a few of these agreements, I almost always use a Bill of Sale, Promissory Note and transfer the Title into the Buyers name and insert my company name as a lienholder.  In most states, this is the correct way of selling homes.  Of course, I would rather sell for cash.

The tax ramifications on this are that you recognize the sale in the year of sale if you are considered a dealer under IRS guidelines.  Generically, if you buy homes to resell then you will be under these guidelines.  So if you sell a home and have a $5,000.00 gain on it you would recognize it during the year of sale even though you are collecting monthly payments over several years. 

Thanks, Dave

Question: 

Hi Dave,

            I am curious about the improvement ratio that is defensible and typically used when buying a MHP.  Assuming it is an older park that has seen 30 or 40 years, the assessor’s cash value will be behind current values with cap rates so low at present.  However, since most of the improvements are below ground or horizontal, what depreciable ratio is common or proper?  Also, I would think 27.5 years is proper, but I see a lot of reference to 15 years.  Is that typical for MHPs? 

Thanks in advance,

Paul

Answer:

Paul,

I typically allocate 20-25% to land and 75-80% to land improvements(utility lines, roads, pads, etc).  If there are structures like a clubhouse, then you need to allocate a portion of the 75-80% to that.

Land Improvements are depreciated over 15 years.  Mobile Homes and Site Built Structures are over 27.5 years.

That is how I do it and the way I see most other people in the industry doing it as well.

Thanks,

Dave
 

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Please send your comments, questions, articles, and ideas for upcoming issues to us at:

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Until Next Time!

Dave Reynolds
MobileHomeParkStore.com
18923 Highway 65
Cedaredge, CO 81413
PH: 800-950-1364
FX: 970-856-4883

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