Stress can contribute to many health problems, such as high blood pressure, heart disease, obesity and diabetes. Some of it is the normal condition that comes with taking risk and achieving success, but a huge portion is simply created by your own actions when better options are available. In this Mobile Home Park Mastery podcast we’re going to focus on what causes stress in the mobile home park business, how to manage it, and how to reduce it.
Welcome to the Mobile Home Park Mastery Podcast where you will learn how to identify, evaluate, negotiate, perform due diligence on, finance, turn-around and operate mobile home parks! Your host is Frank Rolfe, the 5th largest mobile home park owner in the United State with his partner Dave Reynolds. Together, they also own and operate Mobile Home University, the leading educational website for both new and experienced mobile home park investors!
Webster's define stress as pressure or tension exerted on a material object, but we all notice something more, we know it as something that contributes to health problems; high blood pressure, heart disease, obesity, diabetes. Stress is just a very, very bad thing and all of us should spend as much time as we can and as much effort as we can to reduce the stress out of our lives. This is Frank Rolfe with Mobile Home Park Mastery Podcast and we're gonna be talking about reducing stress from community ownership. Now, let's start off by saying you can never eliminate stress from the physical act of buying a mobile home park. Now, why is that? It's because there is risk in everything you do in life and risk creates stress. Sam Zell, who is the largest owner of mobile home parks in the United States, is obsessed with this whole idea of risk and dealing with risk. And he has this matrix that I think is even in the back of his business card, which he talks about you only wanna do deals that have low risk and high reward, or if you've done a proper measurement of how it all works out, high risk and high reward, but you never do something which has high risk and low reward. And what that means inherently is there will be stress in any deal that you do. It's just a by-product of anything that successfully goes and requires you to gamble and to take some degree of risk, it will ultimately lead to stress.
So we can never really take stress completely out of our life. So then you might say, "What's the point of talking about it then if we can't eliminate it?" Well, there are many things we can do to try and reduce it, to make it more manageable, and that's the key thing I wanted to discuss with you. So let's first acknowledge in life, there is good stress and there is bad stress. Good stress is the by-product of taking chances to try and make money and have a higher quality of life, but then there's something else I would call bad stress, and bad stress is stress. It does not come from the act of trying to make money and be successful, bad stress comes from not doing things the way you should do it, because most of the bad stress, the stress that is unusual, that is outside the typical boundaries of buying and operating a mobile home park, much of that can be eliminated. So let's go over what those kinds of stresses are. What kind of stress do you have out there as a mobile home park owner? Well, you have some very natural and normal stress factors. You've got the weather, for example. If you own a mobile home park and you're in almost any part of America, you run the risk of a tornado or a hurricane or a fire.
There's many things that go on today in the world of weather that can damage your mobile home park. So how do we deal with that stress? Well, that stress comes from selecting mobile home parks, for example, if you don't want a hurricane, don't buy in a hurricane zone, if you don't wanna worry about having snow 10 feet high, don't buy something on the Northern border with Canada. So some of the weather we can choose, but a whole lot of it we can't. We just have to run that risk perpetually that, yes, a tornado might hit. But we can try and remove or reduce that stress through having proper insurance. Also, if you've ever owned a mobile home park that's hit by a tornado, you know that typically what happens is the federal government comes in to try and solve the problem by giving money to your residents whose homes were destroyed to buy new homes, as well as giving money to people in the city who did not have insurance on their stick-built homes. So as a result, mobile home parks typically do fairly well in the aftermath of a tornado, and even in the cases of a hurricane, the government will step in and try to do the best they can, although not quite so successfully, to alleviate the problems.
But the best thing to do about weather is just to make sure you choose an area that's appropriate for your appetite of risk, have plenty of insurance, and then trust in the fact the government for decades has stepped in typically to help those who do not have insurance on their mobile homes. And then you have issues with your residents. There's always risk with your residents, some of them can't pay the rent.
Well, the only way to reduce that stress is to eliminate, to weed those out who can't pay the rent and replace them with ones who can. And the best way to solve that is with no pay, no stay evictions. When you don't let people live in your park without paying rent, it sends a clear message that everyone has to pay rent every month. Those who can stay, those who can't are ultimately eliminated to the eviction process, and then replaced with ones who can pay. And if you stick with no pay no stay for any period of time and you're relentless about it, pretty much the entire stress of collections kind of goes away. Then you got issues with rules enforcement, same story. Obviously, people need to live in the community to the betterment of their neighbors, that's how you build a sense of community, and you can't tolerate people who refuse to follow the same rules that everybody else does. Once again, you'll do your best to keep and train the resident, these are the important things that you must do as a good neighbor, but in the event you fail and it doesn't happen very frequently, but if you should, you can honor and do the person's lease and replace them with somebody who does and remains mindful of the rules of society to be a good neighbor. And so once again, you can pretty much remove that level of stress.
And then you have city inspector problems, it's not rampant, but sometimes you have a case or an inspector at the urging of the city manager or the mayor, who will go in and try and harass you, maybe they wanna have fewer people in your park, whatever the case may be. But again, you'll know this through due diligence, if you do good due diligence, do you get a certificate of zoning from the city?
Normally, most of those cases where people get stressed from the inspector happened when they did not do a good due diligence, so if you do a good job on the front end of checking the park out, normally you can side-step those issues and if one should ever pop up on you, you can go to your State Mobile Home Association and find a good municipal lawyer to fight the city. And typically the park owner always win, so that's something that you can have a little stress, but you again... You can deal with that. And then of course, you have market conditions, that's something none of us can really control. We can't control the big employer in town leaving. However, we can, once again, try and work around that by avoiding areas in which you have one single employer that dominates the entire economic landscape. We prefer to have employment from three main sources; healthcare, government and education, which we call recession-resistant. But even if you don't have those three pillars, try and pick areas where there's not one single employer that holds all the jobs. So that stress can be eliminated somewhat by just the selection of the market that you decide to buy your mobile home park in.
But then there's other stresses that are more man-made. Those are all natural things that may happen that we don't really fully control all the players, but then there's other things that we completely control, that can cause stress as a park owner. One is your water and sewer system. You've gotta always be mindful, since water sewer's your largest line item, that you're minding the store and making sure if you have any leaks, it's addressed almost immediately, because water sewer, if left to it's own devices, can rack up really, really big costs. And then you have such issues as home readiness, making sure that if I have homes that belong to the park, that those are being properly addressed and fixed up and put back in service as quickly as possible.
And home readiness is something that you fully controls as the park owner, you typically delegate it down to your manager to make the calls to the vendors and to get the bids, but are they making those calls? So you have to stay on top of home readiness all the time, and even better yet, let's not have any park-owned homes and then we side-step the entire home readiness issue in its entirety. Then you have property condition in general, just the act of trying to always groom and improve property condition. One way to reduce stress on that is to have your managers send you, monthly, an HD video of the property. Get a GoPro camera with a suction cup mount, put it on the roof of your car pointed forward, have them turn it on outside the boundaries of the park and that way you can see not only the entrance, but everything that happens inside, unlike traditional still photography, you can't really cheat with a video, so you know exactly what your park will look like. That allows you to critique the manager on their successes or failures and property condition and that helps you make sure that that stress is a little less in your life.
Now, we find with managers, a lot of times that stress is created on the man-made objects because of procrastination or not knowing what to do. So the key is to always make sure that your manager doesn't fall on the trap of either of those two items. Make sure they do know what they're doing. We've had great success in recent years doing a lot better job of training our managers so they know exactly what to do, they know what the playbook is for everything that may occur on a daily basis in the mobile home park. And additionally, you have to make sure that they don't, as most Americans do, start procrastinating and putting off till tomorrow what they can do today, because that time can create stress. The longer that home sits empty, that puts stress on you, the fact that your park is not looking it's best, that puts stress on you. So once again, you've gotta make sure that you're not creating man-made stress because man-made stress is never good. And the best way to conquer our man-made stress objectives is by simply creating systems and monitoring those systems. The systems for a successfully run mobile home park include a collections dial to make sure that all the collections work is being done on a perpetual basis.
A water sewer meter to make sure that all of your water and sewer is properly running and build. An occupancy gauge to make sure that all of the mobile homes that you should own, if you own any, and vacant lots are consistently being improved and put back together in a manner in which you can obtain a lot rent from them.
Also, you've gotta make sure that you have a monthly budget, actual difference meeting with yourself to make sure that everybody and everything in that park is running on what you mathematically determine the budget to be. A budget actual difference, meaning there's nothing more than taking your budget for the month, showing the budgeted numbers, the actual numbers and the difference, and then focusing on those things that are not going according to plan. That's like the GPS system of your car that always gets you back on track. So you always wanna make sure that you are marching towards the target, that same target you promised your bank and your investors, if you had investors, that you can only hit the target if you know exactly where you stand, your relation to the target and are making forward progress. Also, it's just always important at any given moment as a park owner that you always look at risk mitigation. Whenever you go out to your property on a regular basis, look for things that can cause you to be stressed, things like concrete that does not align, that someone might trip and fall on, things like unlocked electrical boxes that provide a safety hazard. All these various things are, again, man-made stress points that you can solve if you proactively attack them.
And then if you've got anything in the park that concerns you, maybe you have private water or private sewer, you need a plan B for all of those issues. That plan B is gonna be your playbook in the event of a crisis to tell you exactly what to do, exactly what to call, exactly what it will cost. So you don't have to reinvent the wheel when you're in your panic mode, but instead know at all times, 24 hours a day, you have a nice safe file that tells you exactly what to do. And don't forget that one of the greatest ways to reduce stress as a community owner is just having plenty of insurance and the proper insurance. And for that you need an insurance professional who's used to ensuring mobile home parks, who can help guide you as to which types and amounts that you need. The bottomline to it all is stress is very, very bad for you. It's bad for you physically, it's bad for you mentally, and so it goes without saying that all mobile home park owners need to always be very proactive, very observant in everything they can do to reduce stress. And of course, the good news is, if you follow the tips I've given you here, you can really narrow that stress down very, very significantly. Now, you'll never fully eliminate it, there's no way you can own a mobile home park ever in the absence of stress.
It just goes with the territory of trying to make money with basically a parking lot for mobile homes, but that's the thing we're not trying to eliminate, we need to embrace that risk, we need to appreciate the risk, we need to pat ourselves on the back for taking that risk. But what we need to do instead is eliminate all of that bad negative risk that isn't part of making money, but it's just made of actions that we could do a better job of. This is Frank Rolfe with Mobile Home Park Mastery Podcast. I hope you enjoyed this. Talk to you again soon.