Posted by Tony Colella on September 08, 2005 at 10:51:10:
When investing in small mobile home parks, yes I do it myself and get 100%. Not hard, stop by around dinner time and/or early on a weekend morning. At each closing I tend to end up with a grand or two more than the seller initially claimed to have accepted in security deposits. I also find out if rent has been overstated.
Having the seller do this for you is, in my opinion, only half protecting yourself. In some respects it is little more than accepting his pro forma numbers, especially if he only gets 50% returned.
I also want to see inside the homes and meet the tenants while we discuss the form. It lets them know who I am and who to pay next month. The condition of the house and repairs will indicate to me what type of tenant I am buying into as well.
I also don’t want to walk into the park right after the closing and have repair suprises, bad or fictitous tenant or stated rent and deposit figures to sort out from reality.
Whatever you are more comfortable with but the old saying sounds loud in clear in my ears, “no one cares about your money as much as you do.” That seller could care less if you get those forms, in fact he may prefer you don’t.
1st MHP- questions about existing lot renters, etc - Posted by Kevin
Posted by Kevin on September 05, 2005 at 11:16:04:
After months of watching this board and reading most of the books, I finally purchased a small MHP. 10 spaces, 5 full, no park owned homes.
Out of state owner has virtually no records, and has 1 vacant bank owned mobile (he doesn’t know which bank owns it!). Any thoughts on finding this out, please let me know.
The question in this post is how to approach the current lot renters. He has no copies of leases and said there are no security deposits. How can I aproach these people? Is there a copy of an estoppel letter anywhere I can use?
Also considering sub metering. On city water and the former owner paid it all. Any ideas on approaching renters?
Re: 1st MHP- questions about existing lot renters - Posted by Tony Colella
Posted by Tony Colella on September 05, 2005 at 12:35:04:
Preferrably those questions would have been answered prior to closing. But for what its worth, here are a few suggestions.
Find and read your landlord/tenant act. Pay specific attention to the termination of leases for mobile homes. Many states require longer periods of notice if you are simply kicking tenants out who own their homes (this does not usually apply for upaid rent).
If the leases no longer exist, expired or were merely verbal, then the default to a month to month lease (this could vary by state however). Provide the tenants with notice that you are taking over the park and that new leases will be signed between you and them effective (as soon as your laws allow). Hopefully next month.
I would also ask them if the owe rent, what amount of security deposit they paid the seller and since you did not collect any from the seller, I would provide the tenants with notice that they must seek a refund from the prior owner.
Chances are you will have a few tenants press you to see how far the can go. Terminate their tenancy immediately. You will need to make a statement and get the paperwork squared away before you can begin to operate this park safely.
Once you have all new leases signed you will be back in the driver’s seat. If they don’t sign the new lease, give them notice to vacate. In most cases, they will come around to your way of thinking but now is NOT the time to be soft.
Posted by Tony Colella on September 06, 2005 at 07:42:15:
Sorry I had thought you already closed. Since you have not, I would type up a quick sheet that states what each tenant pays per month in lot rent (a fill in the blank form). How much they paid the seller for security deposit. If any lot rent is owed and if there are any repairs needed in the homes right now (the ones the park owns). If it is just lot rent, ask if any repairs to the property are needed. Also write that you should be taking ownership as of a certain date and any rent due for the following month must be paid to you and will not be credited if paid to the seller. Have the tenant sign the form.
This way your closing agent can prorate rents properly (you will leave the closing with cash). You are due the rents owed for your portion of the month as of the day you take ownership.
You are also due the amount of security deposits.
I have found that in most “mom and pop” type cases, the sellers often fail to keep records and now is when it comes to haunt them a bit. It is hard for them to argue with these estoppel letters. Sure the tenants may fudge (but not often). Leave it to the seller to produce the receipts to the contrary.
This also helps if once you take ownership the tenants cannot claim the property is in disrepair or that they paid the past owner for this month etc. (trust me on these)
If they later move out and trash the place, you have their signature stating that the place had been in good order as of the date of the letter.
This form also helps you determine what repairs are needed immediately and what can wait. Tenants will take notice if you show up promptly to repair safety hazards or other repairs. It will help you establish yourself with the park. You make repairs quickly and expect to be paid on time.
After you close you can then begin to switch both old and new tenants to your lease. This is the time for you to raise rents as needed.
As for sub-metering water, you may want to take a look at the bill to determine the need. Some small parks may have city water but private septic systems. These water bills are not that high. To install a water meter you are likely to pay around $100 per meter. Then you have to go out each month and check the meter and bill the tenant separately. This may or may not be worth you time. It may be easier to raise the rents at first and later pay the $1,000 or so to install the meters.
In my last park closing the seller was responsible for getting the tenant estople letters filled out and signed. He chased tenants for a month to get it and in the end only had about 50% of them. It turned into a negotiation chip. Got $3000 out of the “Unknown condition of the homes” at the last second of closing. There were a few suprises but only to the tune of about $500.