Posted by Shawn Sisco on December 21, 2010 at 11:03:24:
This posts get buried pretty quick, you’ll probably need to start a new thread. Be sure to use the archive search, there is a lot of useful information to be found here.
Park under contract need management advice - Posted by Rob Wilson (SC)
Posted by Rob Wilson (SC) on December 17, 2010 at 15:40:39:
Our company owns/manages around 160 single family/mobile home properties right now. We have a management team in place and we are familiar with the business, been at it for 15 years.
We currently have a mobile home park under contract that has 187 pads and has 123 park owned homes. The park currently has 1 full time park manager, 1 part time park manager, 1 full time maintenance main, & 2 part time maintenance personnel. This is a 100% park owned home park, so the maintenance personnel I understand. The management is my problem. This seems like too much personnel for this park. The wages for the full time park manager is 40k per year. The part time worker is getting 15k. This is 55k per year in management. This seems outrageous. Am I right?!
I’m looking to find the most effective way to manage this park with ONE on-site personnel. Is there a book that someone would recommend? Or someone I can speak with to help me get this thing started on the right foot. I want to learn from the experienced people who’ve owned and management mobile home parks of this size. I know its a totally different animal than our current business and I’m hoping to learn from some your experiences.
If I were to get rid of the current manager, would it be best to do it at the very beginning? Wait a few months? Whats the best way to make the personnel transition on a park of this size?
I have talked with Michael Powers about his management system, has anyone used it?
Also, I’ve thought about buying one of George Allen’s books (www.community-investor.com) which is in some of Ray Alcorns materials. I do own all of Lonnies books and both of Ray Alcorns, but need more insight on management.
I look forward to any and all help that can be offered.
Thank You,
Rob
Re: Park under contract need management advice - Posted by Lin (NC)
Posted by Lin (NC) on December 19, 2010 at 08:35:03:
I am not familiar with George Allen’s books, and I only know of one person who owns Michael Powers’ system.
Ellen Brenn is probably an excellent person to talk with about these questions as they relate to mobile home parks.
I would definitely get a job description from each employee and ask them to break down the time spent on each activity by hours spent per week. Having the number of rentals you do, I’m sure you’ll be able to assess whether their allocations and descriptions are reasonable or there’s fluff in there. Personally, I think it sounds reasonable to have a full and part time person if your turnover is relatively high.
As Tony mentioned, a bonus structure may help you improve the bottom line. I’d incentive things like quick turnaround, on-time payments, improving collections rates and expense reductions.
I’m trying to relate this to my self storage management, and I’m pretty sure what you’ve described is not out of line, though the wages seem high for SC. If you’ve got a good, reliable, honest team in place it’s probably not worth rocking the boat for awhile. That said, I fired all the managers at the 3 self storages I bought within 2 months of ownership. I’m happy to talk more about my experiences if you want to give me a call.
Those of us who’ve been at this for awhile have many, many horror stories about bad management and theft and how much THAT costs.
Congratulations and good luck,
Lin Bennett
SellFastCarolina dotcom
Re: Park under contract need management advice - Posted by Lin (NC)
Posted by Lin (NC) on December 19, 2010 at 08:09:50:
I am not familiar with George Allen’s books, and I only know of one person who owns Michael Powers’ system.
Ellen Brenn is probably an excellent person to talk with about these questions as they relate to mobile home parks.
I would definitely get a job description from each employee and ask them to break down the time spent on each activity by hours spent per week. Having the number of rentals you do, I’m sure you’ll be able to assess whether their allocations and descriptions are reasonable or there’s fluff in there. Personally, I think it sounds reasonable to have a full and part time person if your turnover is relatively high.
As Tony mentioned, a bonus structure may help you improve the bottom line. I’d incentive things like quick turnaround, on-time payments, improving collections rates and expense reductions.
I’m trying to relate this to my self storage management, and I’m pretty sure what you’ve described is not out of line, though the wages seem high for SC. If you’ve got a good, reliable, honest team in place it’s probably not worth rocking the boat for awhile. That said, I fired all the managers at the 3 self storages I bought within 2 months of ownership. I’m happy to talk more about my experiences if you want to give me a call.
Those of us who’ve been at this for awhile have many, many horror stories about bad management and theft and how much THAT costs.
Congratulations and good luck,
Lin
SellFastCarolina dotcom
Re: Park under contract need management advice - Posted by LarryK
Posted by LarryK on December 18, 2010 at 20:29:56:
Although this park is definitely an animal to itself, it seems that you could figure on needing near the same amount of management as you are using on your current portfolio, with adjustments for things like increased maintenance due to older homes and more common areas or more administration due to higher turn-over rates and complaints. If you are going to “absorb” the additional 123 units into your 160 that you already have, I would think you could get by with a good office person and 1 or 2 maintenance men. It all depends on how self-sustaining you want the park to be. The current staff seems reasonable but the pay does seem high. It all depends on the results. I may rather pay $25k per year for average results than $40k per year for slightly above average results but may be tickled to pay $45k for phenomenal results.
Re: Park under contract need management advice - Posted by Tony Colella
Posted by Tony Colella on December 18, 2010 at 17:13:04:
Rob,
Your post is quite interesting as it combines two unique and not often related, niches.
For most of my time investing I have listen, read and had drilled into my head that one should never own a park with park owned homes. In recent times the park of your size have had to accept rental units as a means of survival as dealers and owner/occupants no longer line up to fill lots.
I chose to swim upstream and own all the homes in my parks but my parks are very small in size (10 units or less). I would not wish to over-extend my advice by applying the small, rental park experience to your much larger property but I with that said I will happily suggest some things for consideration.
If this were a 123 unit apartment complex, would you be able to effectively run it with one manager? (No right or wrong, this is a honest question).
If this were 123 rental units in an apartment building would you be able to stay on top of repairs and remodels with one full time maintenance man and 2 part time helpers?
As the guy that does everything for my properties with one handyman I would find it quite difficult to remodel homes, make repairs, maintain common grounds etc. so you may well have quite a gem in this person.
I submit this for your consideration. I have known too many people who own multimillion dollar properties who then, in a effort to cut expenses, employ and $10 an hour type employee to run it all. This nearly always turns out badly from what I have witnessed.
There are of course many ways for you to provide incentives for the manager to increase their income as they increase yours.
It is my hope that you may find others who have properties like this one. I don’t know many with that number of park owned on one property but you may find that guys like Steve Case, Rick Ewing etc. may be able to provide good insite into how you may reduce the number of park owned homes while still keeping the cash flow coming in (I would imagine them to suggest lonnie type dealers as well as seller financing but I defer to them). I have found both of these guys to be quite candid. They have another website which I am sure you will have no trouble finding but I don’t wish to create a stir by mentioning it.
I would also hope that others who lurk here may be able to post or email you with suggestions as well.
Best of luck.
Tony Colella
Re: Park under contract need management advice - Posted by joe–ga
Posted by joe–ga on December 18, 2010 at 13:12:32:
you own over 160 parks and your asking for advise?
WOW…
Re: Park under contract need management advice - Posted by Tony Colella
Posted by Tony Colella on December 18, 2010 at 21:33:13:
Like Larry and what I wrote in the other response, I think a point of interest would be how to compensate the existing management with a bonus/pay for performance type profit share. Good people will need a decent basis of pay or they may be tempted to find money themselves (ask owner’s who have had employees embezel or outright steel).
Theorizing here, a good employee who can see the potential to make more money by creating more and/or better business (cut unnecessary expenses and increase income as well as adding additional income streams such as renting sheds etc), might find a great deal of motivation (especially in a recession) to do more that makes you more.
It is ok to pay more if you have good people and manage/monitor them well.
Tony
Re: Park under contract need management advice - Posted by land-o
Posted by land-o on January 03, 2011 at 11:04:11:
Rob I agree with Tony, I need 2 full time maintenance guys for 130 units and I still use roto rooter and refrigerator-furnace vendors, and hire a landscape contractor to mow in the summer, maintenance cost me 14% of the gross. Although admittedly that figure includes installing a few new trailers every year.
Sounds like a fun project though, I would figure 20-25% vacancy, although in this economy that figure may be a little high, in a regular time when people can afford nicer housing, your vacancy will increase. Management should cost you about 10% including office costs, (I figure 6% base salary) But if you already have a good manager for your other stuff you ought to get that managers advise, and give her a great raise, and just let the one go that you got with the park. It gets complicated to take over a park with the old management in place, unless it is very professional management. Plus on site management is not a great way to go with a rental type park, to many midnight catastrophes. I would figure a base salary based on the the value of the space rent alone and then give an incentive of a certain % figure (say 5% over the base salary figure) which is motivation and incentive for the manager, to keep the houses leased up.
Does the manager manage the maintenance as well or do you have a maintenance manager as well? with the size of your operation you could pay a great salary for both. How well does the manager keep the property up? Is there dogs and busted cars, strange colored houses and weired fences all over it, with a general feel that you ought to lock the doors as you drive through it, or is it clean and nice looking, attractive to prospective tenants that aren’t druggies? If the non payers are out in a timely fashion, and the park is well kept, keep the manager, but an off site manager is better than an on site one, because management needs a break. Then have an on site office with dependable hours say 9-5 tuesday-Saturday works real well. If you have one manager for your other units as well and another office you may want to divide the residency of the manager, or since this park will be your problem child for the next few years bring the manager here and tel the other tenants to come to the new office for services.
One good professional manager may well be able to manage all your rentals, ours manages 140 units and could easily take care of another 60.
In my area all the family parks with non park owned houses are loaded with empty spaces just like the one you are buying, the logistics of owner owned houses makes the park empty out as the people want to leave. I have chosen to run it all park owned for that reason, because I have more control over the empty spaces, keeping a house sitting on it. As an added plus, management for park owned houses is considerably simpler for problem tenants, since all they have to do is leave instead of also having to get rid of their trailer. If you sell the houses and run it owner occupied you may want to check out your area and see how many full parks there are that are ran that way, because you will probably lose a lot of houses as they get paid off.
There is a 104 space park here that was full a few years ago,The owner loaded it up by offering 2 years of free rent and when the first month of full rent was due 2 years later he sold the park to some California dreamers, and now there is 40 empty spaces, I even got a couple of trailers out of there!
Another park has 54 spaces and 10 of them are empty, and one other park with 100 spaces has 20 empty spaces.
Filling the space is one expensive and time consuming and complicated thing to do and is not to be taken lightly, for it involves multiple sets of complicated and sometimes difficult circumstances. The permits alone can cost upward of $1000, (Plumbing, electrical and building)
High space rent (compared to local apartments) means the owner gives the trailer away when he leaves, and if he gives it to someone that wants to take it somewhere else then you have just lost your space rent forever until you spend the money to put another one in.
Hope things work out well!
Re: Park under contract need management advice - Posted by Rob Wilson
Posted by Rob Wilson on December 18, 2010 at 16:20:39:
160 single family homes and mobile homes… Not parks
Re: Park under contract need management advice - Posted by Rob Wilson (SC)
Posted by Rob Wilson (SC) on December 20, 2010 at 08:38:14:
Tony/Larry,
Thank you for your input. I’ve always really enjoyed the thought of paying personnel through a bonus structure. I’ve had thoughts of doing that here at our current office, but just haven’t pulled the trigger.
The long term goal of this park is to make it a land lease community and all of the homes being sold on a sales contract. I’m having a hard time trying to understand the need of a full time manager if the homes are sold and they don’t need the constant maintenance. Assuming the park doesn’t have any maintenance on Water/Sewer, doesn’t it stand to reason that beyond the collections & lot management of cleanliness, that this park is just like a neighborhood? The management at that point should be minimal, right?
Thanks for your input,
Rob
Re: Park under contract need management advice - Posted by Tony Colella
Posted by Tony Colella on December 20, 2010 at 13:57:58:
Shawn Sisco is also someone I would highly recommend and should have done so from the start.
Tony
Re: Park under contract need management advice - Posted by Shawn Sisco
Posted by Shawn Sisco on December 20, 2010 at 13:19:45:
Rob, If your current manager is just there to collect rents and deal with compliance issues, then yeah $55k is out of line,a lot of parks overpay for management in my opinion. While I agree with your goals of having less need of management in a lot lease MHP, Do consider that much has to take place to get to that point.
You can probably get several current renters to convert to sales, but then what? I doubt you will want to evict everyone, so the conversion will probably take a while. So, maybe a transition team that won’t be the permanent management team would be in order.
And I’ll also add this; MH sales in your park will be ongoing, from now on, as long as this MHP exists, this is not a negative - it is opportunity, nevertheless you are going to have need of someone to show and sell - maybe you can find a good Lonnie dealer - or develop that relationship - but with a 122 space park, were it stabilized 20+ homes would need to be resold/financed each year to maintain occupancy. Couple that with the transition from rental to homeowner - you need a salesman.
Re: Park under contract need management advice - Posted by Rob Wilson (SC)
Posted by Rob Wilson (SC) on December 21, 2010 at 08:23:46:
Shawn,
Thank you for your feedback. This all makes logical sense to me. I see your 20+ number, do you usually plan on about 20% turnover annually on Lonnie type deals?
Thanks,
Rob
Re: Park under contract need management advice - Posted by Shawn Sisco
Posted by Shawn Sisco on December 21, 2010 at 10:45:42:
Rob, I have posted on this forum before on this topic and really haven’t come to a “rule of thumb” turnover percentage.
But here is what I have been able to ascertain that are widely accepted numbers: As of 1990, Americans homeowners moved every 6.5 - 7 years. I would imagine that duration has shrunk some. I would also imagine that MHP residents stay shorter duration than US average.
From my experience in a MHP with 77 occupancy, each year I have lost at least one and up to 3 residents who died. I have also lost some each year due to job transfers, and due to no longer being able to care for themselves, and due to divorce. These are all just life events that really are not unique to any particular socio-economic group. I live in a pretty nice 24 home subdivision that targets pretty well established homeowners, I have lived there for 10 years now and all but 4 other homes are now owned by another resident than those who resided in my subdivision when I moved in.
So you see even if you never have a repo among your financed sales, there will be a considerable need for re-sales to keep up your occupancy.
Many who frequent this forum report that their LD customers never do break out of a renters mindset and move every year or less. I keep telling myself that my residents stay longer, but by looking at my records, I sure do have a lot of folks who stay less than three years.
Resident retention is pretty complex topic, is affected by screening issues, local market conditions, and yes, how well we as MHP operators do our job.
Keep us posted on how this project progresses Rob.
Re: Park under contract need management advice - Posted by Rob Wilson (SC)
Posted by Rob Wilson (SC) on December 21, 2010 at 10:59:30:
Thanks for the quick response. I will be glad to keep you guys updated/seek advice throughout this process. If the subject matter is different, but still belongs to this park, should I start a new post or just keep posting underneath this one?
Thank you!
Rob