Why Vacancies Will Destroy Your Mobile Home Cash-Flow 2x Faster Than You Realize? Here’s Why…

Welcome back,

At the start of my mobile home investing career I would rent or sell mobile homes to high-risk tenant-buyers. A high-risk tenant-buyer means that these buyers had a likelihood of not paying or staying the full 5+ years to pay off the clean and nicly updated mobile home. The appeal to this method of filling homes with anyone that was approved by the park was a quick sale and some money in my hand, plus a tenant-buyer that is happy with the agreeable terms.

I say “filling” homes in the above paragraph instead of selling homes because my default rate was 100%. Everyone I was selling to was not remaining in my investment properties for longer than 3 years. I would get the home back, typically in better condition, and resell it for the same or more value.

Disclaimer/Tip: Some investors make their business model one that revolves around tenant-buyers that have little ability to pay. These investors hope to get properties back as the buyer can’t afford the home after a few years. If this is you I encourage you to change your attitude. In fact, your business will likely profit more with an attitude to find people that will pay off your homes and helping the local community.

After a few years of this revolving door constant turn-over I had had enough. Where I was approving anyone before, I was now requiring all potential tenant-buyers to:

• • Perform a few actions, and complete these actions when they say they will. Example: Go by the home to see it. Show up on time. Call you back. Apply at park. Apply with you and fax you a completed application correctly.
  • Pass a background check: Looking for violent crimes, sexual crimes, many credit cards in collections, income, debt, assets, cleanliness of current home and car, repos on file, evictions, credit, etc. Some of these are passable, and others are a mandatory decline.
  • Pass the Park's background check: Many times our background check is more strict than the parks. For good reason, the park owns the land and we own the home. We, as the home investors, have more to risk as our home can be damaged.
  • Personality test and trust: How do you like the potential tenant-buyers? Do they yell at their kids in front of you? Do they talk bad about others or their past landlord? Are they respectful? Do they have the skills to make the needed repairs? Do you want to build a 5+ year relationship with these people? If Yes, then proceed. If not (even if it's a gut feeling), then pass and say next. Never discriminate.

Related article: Prescreening Your Tenant-Buyers and Other Tips

In the video below we show, Why Vacancies Will Destroy Your Mobile Home Cash-Flow 2x Faster Than You Realize?

What you should have learned:

• • Lot rents are charged by the park every month.
  • If our tenant-buyers do not pay us, then it is our responsibility to pay lot rent or a loan payment.
  • Set the first 3 months aside in the event a tenant-buyer has to leave early.
  • Most low-risk tenant-buyers know that if they can't pay, then they can't stay. Many times you will be alerted ahead of time of the buyers departure from the home and arrange a convenient time to meet for keys. Part ways with kind wishes and a good referral.
  • Even with many properties, only a small portion need be vacant to lose 100% of your monthly cash-flow.
  • If your mobile home is on private land and/or has a loan, then this loan payment amount must be paid monthly as well. This is another negative payment per month while the property is vacant.
  • Have fun investing and improving lives 1 at a time.
  • Bonus: For the first 3 years of collecting payments it is advised to pay lot rent directly yourself, and collect the amount from your tenant-buyer monthly. In parks where the water/sewer meter usage is added per home, have the monthly bill emailed to you the month prior so you may cut the lot rent check with the correct amount of water/sewer charges. Example: Have April's lot rent bill emailed to you as early in March as the park manager can, ideally by 20th of March or as soon as she reads meters.

In conclusion, this vacancy issue is not something to be worried about. I say do not worry because you now know that screening must be done on every adult (18+) tenant-buyer in the home.

• Prescreening = Safe
• Not Prescreening = Risky

It is better to have an empty home than your investment filled with high-risk tenant-buyer(s). Prescreen your folks and you can predict and eliminate your headaches, do not prescreen your folks and the risk is yours.

Now, stop reading and get outside to help local sellers, buyers, managers, park owners, other investors, Realtors, and MH brokers in need.

Love what you do daily,
John Fedro

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