There are many her ways to make money as a park owner. Let’s track one of the most successful park owners I ever met to see how he did things. Bill owned a 113 space water front combination rental and condo park. He also owned a finance company, a used Mobile Home dealership, a Mobile Home moving company, a new Mobile Home dealership, a management company, a fuel oil and bottled gas company, a Mobile Home repair service, a sewer and water utility company and a collection company.
Bill had located his park on a small fresh water lake in the middle of an orange grove a mile from the Gulf of Mexico. It was near a large shopping mall, which featured both a movie and good restaurants. His park was in demand both by local residents and winter tourists. He implemented a policy of only accepting ANNUAL RENTS PAYABLE IN ADVANCE IN CASH. These were $4800 per space. Double-wide units weren’t allowed. He figured he could increase the number of units in the park and hold down family size at the same time by permitting only single wide units.
His park was terraced down toward the lake so that everyone had a view of the ‘marina’, fishing dock and boat and RV storage area. He allowed nothing to be stored on each lot outside or beneath any unit. All units had to be fully skirted with an approved covering. No storage sheds were allowed. Each lot was neatly landscaped with a full length 40′ patio.
Units were positioned and blocked up on cement runners. Each lot had a white picket fence, which was installed right after the coach was moved in. The main entrance to the park was gated. The manager’s unmarried middle aged sister controlled access to the park. She made certain that no vendors, newspaper carriers, UPS or FEDEX delivery vans, or anyone else entered the park without her prior approval.
Thereby hangs the tale.
Feature this. Suppose you moved to Florida and found this park. It’s attractive, well situated near local amenities. You apply at the gate and complete a credit application that is processed while you wait. You pay $4800 per year in advance although you only intend to use the park during the winter season. You’re handed a packet of papers containing information about the park and the area as well as the Association Dues and various utility charges. Bill lets the Association handle the work most likely to generate complaints. He takes care of the high profit items.
The first thing you notice is that the park is ringed with cement mini-warehouse units with overhead doors on both ends. These act both as a security fence and a storage facility. If you have excess equipment you can rent a unit convenient to your unit for $125 per month. Otherwise, no outside storage is permitted.
A perimeter access road runs just outside this wall of storage units. Bill rents storage units to non-park residents anytime that he has a vacancy. Non-residents can gain access via the overhead door on the outside of each storage unit. The un-rented end facing the park is kept locked to provide security to the residents.
If you have a total electric home, each lot is individually metered. Bill used to buy and sell electricity until the laws were changed to prevent it. Now you pay for your own. But if you need either fuel oil or propane, you have to buy it from Bill. No one else is allowed to deliver on the property. And when your home is moved in, Bill does it. “His insurance doesn’t cover anyone else.”
Of course, he also sells and installs the “approved” skirting that’s required. He’ll block up your unit and level it for a fee. He’ll sell and install any awnings, patio room additions, carport covers and if you’re a little short of cash, he’ll arrange financing through his company. Anytime something needs repair, Bill’s park maintenance man will handle it for a fee.
Bill’s fees are reasonable. After all, he has no competition, no advertising costs, and no business phones. His sister is always there and residents are invited to drop in and discuss their needs.
You say you want to use the dock and fishing lake. The Association handles that. You say you want to bring your own boat into the park to use on the lake. Sure, but there’s a boat launch fee and a boat storage fee. $40 per month handles most RVs and boats in the special lot that Bill provides.
Bills park convenience store can provide for most emergency purchases at about the same rates as the 7/11. You can buy your newspaper there every day. You can check you mail at the park office, which also provides a mail forwarding service at a small fee. You can have keys made, send UPS or FEDEX, mail fruit for Christmas, buy postcards, etc.
There are lots of things you can learn from Bill. First of all he treats his park like a private town. He restricts the population to only the best applicants who pay in advance. He’s able to do this because of the attractive site and appearance of his park.
Space in the park is constantly in demand and Bill can charge accordingly. His park’s appeal makes it possible for him to impose restrictions and limits on his residents that wouldn’t ordinarily be possible in a less desirable park.
Next, Bill manages efficiently. He does single point collection of annual rents in advance. No collection or credit problems. He combines several operations such as Mini-warehouse units, a security/privacy fence and a restricted access gate with each providing a source of potential profit. He offers extras at reasonable cost to enhance his operating cash flow. But there’s even more:
Bill reserves all the waterfront spaces for his new Mobile Home Dealership. Here’s the cycle. First you can lease a new home with an Option to buy for 3 years. When you exercise the Option, you also have to buy the space. This way you can get a better financial package and Bill can get the top price.
You’re actually paying the new price for the home that you’ve been living in for 3 years as a tenant while Bill has been writing it off. As a part of the loan costs, Bill does the 15 – 30 year loan origination and gets a mortgage broker fee in the process.
There’s a variation on this theme. Suppose you moved into the park with your own unit. The policy letter says no units are allowed in the park over 5 years old. So he takes your old unit in trade and sells you a new one. Or he takes your old unit in as an OPTION to buy a new lakefront unit and lot in 3 years.
Your old unit is non-taxed OPTION CONSIDERATION that he can sell off on his used Mobile Home lot. Of course he provides financing for both old and new units. He’s also an active purveyor of Mobile Home “paper” in the market place. He’s busy making money hand over fist.
So much for Bill; where do you come in? Once you understand park management and ways to generate extra cash flows, you’re ready to embark on an acquisition program. The best way to do this is to lease spaces in a new park that’s still incubating.
The owners are probably anxious and if you present yourself as a capable person, you should be able to make a deal with them to guarantee them a fraction of the rents they’ll be able to get once the park is filled up, but you’re cash flow will start right away.
Alternatively, you might want to start with a small park and master lease the entire thing for a flat fee. Of course, you’ll have to approach the park as a rehab project. Look for a well situated park that is run down and obviously mismanaged.
One that I was involved with over 30 years ago contained 18 Mobile Homes. It had interstate highway visibility with access from a frontage road, but looked scuzzy. I got an investor to put up $7500 advance rent for one year on a lease purchase based upon the park owner’s actual net income as reported on his income tax statements. His rents in his junky little park were $125 per month, but he was only netting $105 on the average on 14 of the units. He’d lost 4 spaces because of a faulty septic tank that he couldn’t afford to replace.
The $7500 we advanced was ADVANCE RENT, not Option consideration, so we had no payments to make for a year. Using our cash flow, we embarked on a program of enhancing park cash flow by replacing the bad septic tank and paving the single driveway between units. We terminated the sloppiest and least desirable tenants simply by increasing the rents to $225 per month. These were easily replaced once we trimmed grass and put in flower beds. This set the stage for raising other tenants’ rents too.
Our new policy letter made tenants responsible for maintaining their lawns. We installed fences around the lots. We eliminated all pets and required kids to remain inside the fences. We put a large sign, visible from the interstate, advertising overnight RV pull-through parking.
By hooking two additional showers and toilets plus a dump station and connecting them to the existing laundry room plumbing we were able to service 5 additional RVs at $9 per night. At the end of the year we’d sold the park for $160,000 and cleared $85,000 over the purchase price of $75,000.