Posted by Mike Cheatwood on October 10, 2005 at 12:22:24:
Thanks for the additional information.
Lets first break this into “improvements to bottom line” and “capital improvements/deferred maintenance”.
Separating a master water meter into separate unit water meters (as well as getting individual trash cans for each lot/tenant) will make the most difference to your improved bottom line/positive cash flow and in the shortest time. While my MHP was already separated and is on city W/S/T, I have separated water meters on 10+ Apt Bldgs and have found the payback to be 1-2 years. I understand that several “posters” to this forum use the company “National Water and Power” as the mechanism to achieve this result (although I have not used them personally). Since your tenants are on M-2-M rental agreements you would be able to buy/master lease the MHP, immediately give them a notice that says "new owner but no rent raise planned - however we do plan to make some improvements to the property (clean it up, etc…) and plan to repair the water/sewer lines. A follow-up letter/notice can then be sent out/delivered that says the “repairs” will include going to separate meters and that once completed each tenant will have 30-60 days, etc… to go to the city water office and establish their individual account. You can also stand ready to receive phone calls once this is done when they get their first water bill and that running toilet (that they are now paying for in your rental MH) finally catches their attention…
Curb appeal issues - You will not be able to attract higher paying tenants until the MHP looks better (neat, clean and tidy). To get to this point to have to establish standards and get this word out to the residents. I did this by developing a “Manufactured Home Community Rules & Guidelines” hand-book that was distributed to each MH and then reinforced with a public meeting (with free pizza) at the nearby High School. Once the “word was out” and proper notice given - I started towing “junker” cars (29 in all) by working out a plan with a local towing company. I also held a couple of high visibility evictions of the worse offenders (funny how the ones that do not pay you on time also seem to accumulate the most interesting “yard art”). On the lower level problems, we talked with these tenants, gave them reminder notices to repair skirting, cut grass, etc… and in a few cases cut their grass and billed them for the service - The point is the word gets out if you establish standards and evenly enforce them. The people that do not like it and fight you on the changes are the ones you generally do not want anyway (this becomes “thick skin” time). My MHP was about 80% owner-occupant and is currently down to 9 renters (I grandfathered the existing “sandwich landlords”/renters assuming they always paid on time, maintained their lots/homes and caused no problems with neighbors/Police).
Capital improvements (roads, sewer lines, etc…) - These are items that must be accounted for as they must be repaired/replaced over time but that generally do not give you any “payback” in increased revenue (i.e., you cannot usually raise the rent due to paving the roads). Your cash flow must also allow for setting aside a maintenance reserve to fund these projects over time.
Your main concern questions -
1 hour away from MHP - This is a question that concerns your investment plan and how directly involved you will be in each aspect of the MHP turnaround as well as your current job situation flexibility. I am 5.5 hours away but my MHP is large enough to afford a manager and I have been job free for 5+ years (RE investing).
Better customers - It seems like you already know the answer - clean it up/improve the curb appeal, get rid of bad tenants and carefully screen/select better tenants.
Value - Definitely will improve if you increase your NOI by separating water meters/trash cans to the tenants responsibility. And a “neat, clean and tidy” MH Community (might want to consider changing the name of the Park to ---- Manufactured Home Community (instead of “Trailer City”) will help attract better residents…
Hope this helps.