SELL YOUR MOBILE PARK DIRECT
Having been in the mobile home park business for 25 years, I know why people want to sell.

Is a Property Manager Worth It? How to Choose a Property Management Company for Your Mobile Home Park

“Is a property manager worth it?” is a question I usually get from people who are sick of the daily tasks involved in running a mobile home park. I can’t blame them. It’s a lot of work to run a park. When an MHP owner is done dealing with the day-to-day, they’re going to consider hiring someone to do it for them. If you’re wondering how to choose a property management company for your mobile home park, there are a few things you need to think on.

The biggest consideration is cost. Sometimes, that property manager is going to eat up your profits, meaning you’re barely going to break even. While they do a lot for you, you’re going to pay for it. Before you consider hiring a property management company, you should do the math. If you sell your mobile home park to a direct buyer, who will keep your park open, it might be a better option. Sometimes, it’s better to cut your losses than to spend money you don’t have.

When Is a Property Manager Worth It to Run Your MHP

Property managers run the gamut from boots-on-the-ground live-in managers to full-service agencies that do just about everything for you. Let’s focus on property management companies that essentially turn your park into a turnkey, hands-off operation. Some of the tasks these guys manage include:

  • Accounting: Full-service park management companies usually provide complete accounting services including rent check collection, maintaining earnings statements, preparing and filing tax documents and financial statements, and following up on past due payments.
  • Legal issues: The biggest legal issue these companies deal with is evictions. They’ll manage the required paperwork, as well as when tenants file lawsuits or complaints with housing authorities. Keep in mind this isn’t entirely hands-off. For example, as the property owner, you’ll likely need to go to court if a tenant being evicted fights it, or if you’re named in a personal injury lawsuit.
  • Onsite resident relations: A property management company will hire a local, or even someone living in the park, to manage onsite maintenance issues. This person will also be responsible for keeping an eye on properties and ensuring tenants are compliant with lease provisions. This individual is going to cost extra on top of the fee, and you’ll have to cover that.
  • Advertising: If you have a vacancy, the property management agency will oversee filling that space for you. They’ll do the advertising in local publications, as well as online to fill that empty spot. They’ll also be the ones who give tours to prospective tenants and set up open houses for when there’s a park owned property you want sold. They aren’t going to cover the rent in the meantime, though; you’ll have to take the loss on that, so make sure they stay on top of getting vacancies filled.
  • Third-party hiring: The property management agency will generally contract with a wide range of third-party providers to handle things like major maintenance, landscaping, and legal work like responding to lawsuits or complaints from tenants. The cost of the contractors will be covered by you. The property manager just sources them.

These are all the things that a full-service agency is going to offer. If you’re looking for someone to manage your park entirely, then it might be worth the cost. This is especially true if you’re out of state and can’t manage the property yourself. However, not all agencies are created equally. Really, you get what you pay for. If you try to cut corners, you could wind up signing on with a bad company. When that happens, you’re the one who must answer for everything they do wrong.

How to Choose a Property Management Company to Mitigate Risks

Your property manager is your representative. That means they have the authority to make decisions on your behalf. When you have a good property manager, that’s a good thing. When you have a bad one, all of their mistakes are going to blow back on you. Here are a few of the things that could happen if you hire the wrong company:

  • Little to no contact: If your property manager isn’t returning your calls and emails, and you’re the one paying them, then it’s unlikely that they’re returning your tenants’ calls either. Your property manager should be contacting you on a regular basis, as well as to let you know of any issues.
  • You don’t get regular inspection reports: A good property management company is going to give you a planned schedule of inspections so they can deal with problems proactively. If you’re not getting reports on those inspections, chances are those inspections aren’t happening.
  • Evictions go up: If evictions are going up in your park, it’s because the wrong tenants are living there. A good property manager should be completing background, income, and credit checks to ensure any new tenant will be able to pay the bills.
  • Your tenants call you direct: If a tenant isn’t getting a response from your property management company, then they’re going to bypass them and call you instead. And that kind of defeats the purpose of having a property management company.
  • Their price creeps up: When you sign a contract with a property manager, that contract should include exactly what you’ll be expected to pay, usually as a flat rate percentage. If they’re charging that and then tacking on a bunch of fees, they’re not being transparent in their business practices.
  • They can’t handle mobile home park-specific issues: Most property management companies either manage apartment complexes or rental houses. They don’t typically specialize in mobile home parks. Mobile home parks are a different beast altogether, though. They’re going to have to deal with abandoned property, home repossessions, and a completely different set of rules for evictions. If they don’t have mobile home park experience, then they’re not going to understand the issues those parks face.

The problem with hiring a property manager is that you’re doing it under a contract. It’s a bit like quicksand. Once you’re in, you’re probably not getting out. By the time you start having problems, it’s going to be a challenge to end that contract early. If you really want to find a property management company, I recommend getting personal referrals, rather than picking a name out of the phone book. Also, before you sign on the dotted line, you need to make sure your park can sustain the additional cost.

How Much Does a Property Manager Cost?

One thing to know is, the cost of a property manager is going to change based on the type of property to be managed. For a mobile home park, the property management company is going to cost you 5 to 6% of the gross on a yearly basis.

To decide if spending that amount is feasible, you need to look at your park’s total revenue as well as its operating cost. The revenue is easy to figure out. It’s the total gross amount of all rents received. Operating costs are a bit more complex, as they incorporate a lot of different expenses. Some to think about include:

  • Landscaping: Chances are, you aren’t going to be the one mowing the grass or pulling weeds, so you’re going to need to include that in your overall budget. In addition, you need to consider the cost of irrigation. If you run sprinklers regularly, it’ll pump up your water bill. Generally, landscaping is going to cost you from $5 to $20 per square foot, depending on the complexity of the design.
  • Parking lot maintenance: This includes the need to lay new asphalt and fix holes, and hiring someone to plow and salt during inclement weather. This is going to vary widely depending on where you’re located. A Florida mobile park owner, for example, needs to consider the costs of repaving the lot every few years, while someone in Oregon or Washington state may need to do that more often due to frequent rain and snowfall.
  • Park-owned structure maintenance: Amenities are expensive in mobile home parks. If your park has a swimming pool, expect to spend about $10,000 per year keeping it up. On top of that, those amenities are going to increase your overhead when it comes to liability insurance because they make your park a higher risk to insurance companies.
  • Yearly tests and compliance requirements: You’re going to have to deal with yearly inspections if you manage the water and sewer for your park. That means hiring certified individuals. You can expect to pay about $425 per sample for well and septic testing combined. If your tester needs to take a lot of samples from different areas of the park, that’s going to add up.
  • Reserve set-asides: I recommend keeping your reserve savings as part of your yearly costs so you won’t be tempted to operate without them. For that, I’d recommend setting aside about 5% of the rent for each space to ensure you have a good reserve for major repairs.
  • Insurance premiums: You’re going to need insurance on your park. If you don’t, you’re setting yourself up for failure. Liability insurance for mobile home owners is essential to protect your neck. It only takes one slip-and-fall to wipe out your savings. The insurance premium you pay is going to vary and will be impacted by everything from park size and location to your own insurance history, like prior claims that could classify you as a high-risk business.
  • Vacancy costs: When setting your gross income for the year, you’re going to want to reduce it slightly for potential space vacancy. You’ll need to spend money filling those vacancies and making the space user ready when the time does come. At a minimum, reduce your gross take by 10% to account for this.

This list is by no means comprehensive. There are a lot of costs that most people forget about when operating a park because they think, “Well, I don’t own the homes so how expensive could it be?” The truth is, pretty darn expensive. If your mobile home park has a loan on it, then you must make those loan payments too. In the end, you might not be grossing very much overall. Now, consider the cost of that property management company.

Sure, your park may be grossing $100,000 per year, but with loans and expenses, you might only pull in $10,000 of profit after the mortgage is paid. If you’re paying a property management company, you’re only paying for the management—not the expenses for the park too. That means that $6000 is going to come out of your profits, leaving you barely earning anything on your investment. Really, property management only works if your park is highly profitable and you have money to burn. Otherwise, all your earnings are going to get eaten up in expenses. An alternative might be to consider selling your mobile home park to a direct buyer.

Selling Your Mobile Home Park to a Direct Buyer

Some owners aren’t particularly worried about the profits from their park when they hire a property management company. What they’re really worried about is keeping their park open and running smooth. If you’re in this position, where you want to sell but fear your park will get shut down if you do, selling to a direct buyer can be a good alternative to outsourcing park management. This is especially true if you’re in a position where you can’t afford a property manager because your park expenses are too high.

Direct buyers who focus only on mobile parks don’t buy parks to shut them down. They buy them for the purposes of collecting income from the park’s operation. As these people are experienced park owner/operators, they know how to reduce the expenses in a park by leveraging their experience and funding.

This means that they can afford to offer a competitive price. In some cases, this will allow you to pay off any outstanding loans on the property while also walking away with a profit. This is much different from selling on the open market, where you have to pay to list the property, and choose a realtor, agent, or broker to sell your mobile home park–and pay them too. In addition, you don’t have to deal with the hassle of managing the day-to-day operations of your park.

joe-tobin

If your profit margin is already pretty small, then you’re best off selling to a direct buyer rather than hiring a property manager. In the long run, you’ll see a better profit than if you’d simply stayed in the park and hoped for things to turn around. I’m an experienced mobile park owner/operator who’s been able to buy many poorly performing parks and make them profitable again. I’m upfront about the factors that affect your selling price, and I can give you a fair price for your park. For more information, give me a call or shoot me an email.

Your Name (required)

Your Email (required)

Your Message

Start typing and press Enter to search