How To Prepare Your Mobile Home Park For A Recession
How To Prepare Your Mobile Home Park For A Recession
Unless youre George Bush you probably already realize that we are heading into a national recession. And if you agree that we are heading into economic trouble then it is worth your while to make preparations to survive and prosper during this cycle. Its important to remember that it takes time to make adjustments in your business plan so you should start making these changes immediately.
Focus on Affordable Housing
The universal desire during a recession is to keep costs low. Consumers are looking to find the cheapest housing they can. Instead of focusing on bringing in newer homes that look nicer in your park instead concentrate on older uglier ones that can be sold or rented cheaply. Remember that old ugly houses have no monthly mortgage payments and that means that your customer only has to pay lot rent to survive. You will have a more solid billpaying tenant base with older paidfor homes.
Be Tougher Than Ever on Collections
When money is tight your tenants have to pick and choose which bills to pay. You must never let them think that the rent can be delayed or missed. You must keep the big club of eviction dangling over their heads at all times. Never miss a beat on getting out your demand notices and filing evictions. And keep pressing with writs of execution dont delay because you are worried about losing tenants during a recession. These folks are not going anywhere. They cant afford to move their homes but they can afford to pay your lot rent. At minimum wage you can still afford the average mobile home lot rent of 200 per month or so. So be relentless and keep your tenants priorities straight.
Keep Raising Rent Annually
Some park owners make the mistake of delaying or eliminating the annual lot rent increase during recessions. The problem is that you still need that annual increase to cover the increased costs of running the park plus ever greater cash flow to meet your budget and reward you for taking the risk of buying a park. There is no way that a tenant is going to be pushed over the edge by a rent increase of 10 to 20 per month. However if you do not keep the rent escalating you may soon find that you are losing your battle and having reduced net income annually. If you do not raise the rent a little every year you will have to make a huge jump down the road and that will be much more offensive to your tenants.
Cut Costs
Question every bill you pay. Do you really need that extra phone line? Can you mow the grass every two weeks instead of weekly? Never write a check without thinking of at least three different methods to cut that cost. Often such as the power bill there is not much you can do to about it. However a lot of times you do have some discretionary control over what you spend especially in repair and park maintenance categories as well as administrative and office costs. Although you do not want to live you life that way it does not hurt to roleplay the pennypinching miser out of a Dickens novel. By focusing on cost control you will spread that gospel throughout your organization.
Approach Loan Renewals Well In Advance
One of the big hurdles of a recession is the sudden disappearance of the usual banks and other lenders. In a world in which Indymac can fail why not your lender too? In that type of environment you need to allow yourself extra time to line up a loan. If your current loan expires in two years you might want to attack that problem starting now. It might take you two months to get our loan package perfected another two months to find the right lender and four to six months to put the deal together. So whats the other year for? Just in case that lender falls apart right before closing and you have to start all over again. I would much rather pay a slight prepayment penalty on my existing loan from starting early rather than be unable to find a replacement loan and end up in foreclosure.
Never Prepay For Anything
You have to look at all other businesses that you do business with very cautiously. In a recession anything can happen. Businesses that have been around for decades can suddenly disappear overnight. So never pay for any project until it has been completed. I have actually had cases during recessions where the contractor disappeared in the middle or even the end of a job. One time I had a guy build a brick and stone entry to a park really fancy and he disappeared when the project was 95 complete. We never saw him again. Prior to running off he had wanted me to prepay him for the project but I had refused to pay him until it was done. By refusing to pay until completion I ended up with a virtually free fancy entry. So where did the guy go? I have no idea. Maybe he ran off because he owed so many people money.
Be More Aggressive on the Acquisitions Side
Some of the best mobile home park buys in history have been made during recessions. That is the exact time when all of the planets come into alignment to make the ideal buy. So start watching and listening for real distress mobile home park deals. You may see pricing that you never dreamed you would see. And that is why it is more important than ever to keep yourself out of trouble so that you can reap the rewards that only a recession can bring.
Conclusion
Recessions are terrible things. However once you get used to them they are like a big rain storm. You want to make sure that you have a big umbrella when they hit and make sure you dont step in a big puddle. But when theyre over everything is cleaner and smells better and if you have put yourself in the proper position you may end up with some great parks you bought for a penny on the dollar.
About the writer:nbsp;nbsp;For over a decade Frank has been involved in all facets of the mobile home park business as an owner/operator of parks in four different states. His experience includes:
Purchasing and operating over 25 mobile home parks as an investor
Performing “due diligence” on hundreds of other mobile home parks.
At one point ranking as the 63rd largest owner of mobile home parks in the U.S. Frank has achieved a highlevel of expertise in evaluating buying operating turning around financing and selling mobile home parks. His experiences are real life and he can provide you with real life scenarios and solutions on almost any issue that you can face as an investor or operator. His knowledge can be yours through the unique offerings at “Mobile Home Park College” as a Faculty Member.
Mr. Rolfe has also authored and coauthored some very informative books on investing in Mobile Home parks to see more books and articles written by Frank Rolfe visit Mobile Home Park Store
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