Kangaroo Kronicles 33 – So What Do You Do?
Sunday, November 6, 2011 By Stu Silver ·0
Kangaroo Kronicles 33 – So What Do You Do?
By
“Uncle Zally” / Stu Silver
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If you repeat the title of this week’s blog fast enough, you will sound like a rooster who pecked the cork out of a jug of moonshine.Last week, I completed a new topic about losing a manager, one of a mobile home park investor’s worst fears, especially those that invest long distance. It was a timely, since we lost the manager at our largest park.
Now we have a very clear, up to date vision, of what we do, as owners, and what the manager does, as our on-site caretaker. We were asked by readers, “So just what does an Owner Do?”. The following answers that question, but you must NOTE: THIS IS FOR A LAND-LEASE COMMUNITY THAT IS IN EQUILIBRIUM, WITH LITTLE OR NO VACANCIES AND TURN-AROUND NEEDS.
Your on-site manager’s duties are:1- Walk the park daily and note repairs needed in infrastructure (utilities and roads) and post notices on residents who are messy or violating rules
2- Read the utility meters once a month (if sub-metered)
3- Handle complaints from residents and disputes between residents
4- Post eviction notices
5- Collect rents
6- Oversee repairs to infrastructure by park handyman
7- Make sure trash is picked up regularly
8- OPTIONAL – DEPOSIT RENTS
9- OPTIONAL – PAY BILLS
10- OPTIONAL – INITIATE EVICTION
Your Duties as Owner are:
1- Deposit rents 3 or 4 times a month
2- Pay Bills once a month (water, sewer, trash, gas, electric, salaries, repairs, parts, insurance, real estate taxes, payroll taxes, etc.)
3- Initiate eviction proceedings
4- Oversee manager and park handyman
5- Visit the park monthly, bi-monthly, or semi-annually
6- Pay income taxes once a year
It’s easy to see that if you put your manager in charge of depositing rents, paying bills, and initiating evictions, all you will do is oversee the manager, visit the park either monthly, bi-monthly, or semi-annually, and pay your income taxes. Then it will be as passive an investment as real estate is able to be.Why are depositing rents, paying bills, and initiating evictions optional? Because the chances of theft or fraud increase when you don’t do those tasks yourselves. How?
A manager could collect a rent as cash, and then say there was no rent paid, pocket it, and not start an eviction. Also, the manager could start a new checking account in a name similar to the park, and deposit checks into it for the manager’s own benefit. I heard of a case where a manager created a corporation similar to the park’s name. Instead of Main Street Mobile Home Park INC., the manager formed Main Street Park INC and asked the residents to use that name. Then the manager deposited checks into that account and spent them. It took the owner 3 months to figure out what happened, and by that time, the manager disappeared and made off with over $100,000.The reason paying bills is optional is that the manager could arrange to have a contractor charge $1,000 more for a job, say a roof repair, and then get rebated back $500 in cash from the contractor at the end.
Suffice it to say, if there is a way to cheat someone, some people will go out of their way to find it. On the other side, if you have a manager that earns a high position of trust, managing a mobile home park that is land-lease can be done with visits a few times a year, viewing the monthly income and expense statements for about a half hour, and having your CPA compute your taxes once a year.
What if the park is a turn-around, where you must fill empty lots, and sell or rent mobile homes?
Then the tasks increase exponentially in time needed, such as:
1- Place ads to sell or rent mobile homes
2- Answer phone calls from prospective buyers or tenants
3- Show mobile homes to prospective buyers or tenants
4- Fill out leases or sales contracts for prospective buyers or tenants
5- Supervise contractors fixing mobile homes for sale or rent
6- Purchase mobile homes to fill empty lots for sale or rent
7- Gain possession and title of abandoned mobile homes
8- Pay contractors repairing or bringing in mobile homes
9- Pay for mobile homes brought in to fill empty lots
10- Pay for repair parts
The above tasks are entrepreneurial in nature, and require better management skills than the average mobile home park manager possesses. Also the capacity to steal or commit fraud increases exponentially. That means you, as the owner, will probably have to do them, and it requires time, hard work, and capital.But the payoffs can be enormous! Where else can you make a million dollars in a year or two?
I gave you the blue print to making a million dollars on one park in Kangaroo Kronicles 21 –The Really Big Bucks. This is the strategy where people find parks that are turn-arounds, move in, fix them, and after a year or two, they refinance them, pull out a million dollars, and use that money to buy another turnaround park … and so on … and so on. Read that blog carefully, Grasshopper. Two of the SAM Camp attendees, a husband and wife team from South Carolina, intend to do just that, and I am excited for them. I will let you know how well they do in upcoming blogs.
Until then … Cheers, Mate!
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