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!
There's been a lot of items in the news recently regarding the Department of Governmental Efficiency, also known as DOGE, which is being headed up by Elon Musk. And the concept behind DOGE is to try and find all of the waste and corruption that we know inherently is set into the American economy through the various government programs. And it's a fact, because we know that the government itself has admitted that they thought there was at least 50 billion of waste going on. DOGE is saying it's much, much higher than that. I don't know the real number, but I know that the very principle of trying to eliminate waste is very valuable even for all mobile home park owners. This is Frank Rolfe, the Mobile Home Park Mastery Podcast. We're gonna talk about applying the principles of DOGE to your own mobile home park. And let's first make one overarching observation, and that is, there is no perfectly run mobile home park. You could always do things a little less expensively. You could always maybe get your rent up a couple dollars more. So all of us are on a quest, but we can never really ever finish the quest.
It's never happened. It's like in the movie Ford versus Ferrari, where they're trying to figure out how to run the perfect lap, but yet you can't ever have the perfect lap. It's unattainable because there's always something you could fine tune and tweak to make things a little better. So, when you own a mobile home park, the first thing you want to do on a regular basis is to do what we call budget actual difference. It's a pretty simple exercise. You have your budget by line item. When you bought the mobile home park, you have your actuals on financials. You produce and should produce every month. And then you have the difference between the two items. Sometimes the difference is good. You budgeted X in revenue. The reality was Y and Y is bigger than X and you're happy. You celebrate that you had more money coming in than you thought. But then sometimes it's bad. Sometimes you budgeted X on repair and maintenance, but Y is the reality. And in this case, Y is greater than X. And that's to your detriment. If you have that exercise every month, what's gonna happen is it's kind of like the GPS on your car.
It will always help return you to where you hoped to go. So if your budget was what, when you bought the park, was your roadmap to where you wanted to be. The concept of BAD budget, actual difference is to tell you where you've strayed from that map like your GPS system does, and then tell you how to get back on the correct path. So every park owner should definitely do that. And when you do it, if you don't have a whole lot of time, it's a good exercise to take a couple highlighters, let's say a green and an orange, and anything that's running better than you hoped for, highlight it with green. Anything that's doing worse than you planned on, highlight with orange. And then just focus on the orange because the good things will take care of themselves. It's the bad things that you really need to focus on. Now, if you're gonna go ahead and apply DOGE to your parks numbers, while that BAD helps redirect you to redirect your efforts towards what the ultimate goal is. But the reality is you've got to really work on each and every line item. Even the things that you're on budget for, you probably still might be able to get a reduction in cost.
Those things that you budgeted on the revenue side, you could always potentially do better. So never feel like you can just take your your BAD exercise and ultimately have green lines through everything and stop doing it. Just say, no, I'm doing great, I'm right where I wanted to be. You could always improve on that. So what are the categories with a mobile home park you traditionally can improve on? Well, there's basically eight different categories I think that most park owners with greater thought, greater focus, could probably do a little better job on. The first category is insurance. Now, we are seeing rising insurance rates throughout America, but most specifically on the coast, California, Florida, anywhere where you have recurring weather events. And as we all know, the recurring weather event on the East Coast are hurricanes, and on the West Coast have now become fires. So insurance rates are going up. But even in middle of America, where we don't have fires or hurricanes, you still may see rising premiums simply because the insurance companies refuse to lose money and they've had a number of really terrible years in a row. So they have to make it back somehow and they're gonna to make that back by rising their premiums.
Now on insurance, one of the key items on insurance I have found, because you have to carry lots of insurance, you don't dare reduce down your amounts of liability or property insurance, but you may be able to lower those premiums a tad based on your deductible. So if I was performing a DOGE exercise on insurance, my question to my agent would be okay, what would it be if I was to have an even larger deductible? Let's say your deductible is $2,000. You'd be surprised at the price differential if you went to 5,000. Now, you'll have to think through though, is it really worth it? But you may say, you know what? I rarely have any claims. I might not even go to the insurance company if my claim was lower than a certain amount for fear that I might lose my insurance by having too many claims. But think that one through. So sometimes deductibles can be the secret. And even a small change in your deductible to a very reasonable level may still get your premium down.
Another one is your manager. It's an endless issue with mobile home park owners and has been for the last half a century of how much you really need to pay the manager to get the job done. And what happens a lot of times in mobile home parks are as time goes on, like a rocket ship, you have different stages. And the early stages of park management are much more rigorous, much more time consuming than the later. When you're turning the park around, you may have a lot of contractors in there, a lot of homes to remodel, people who aren't paying that you have to retrain to pay. But down the road, you may find that that park can be managed with a much greater reduction of time spent, and that may allow you to go ahead and pay less for the manager. In fact, the manager you start out with may not even be appropriate as you approach the end of the movie, because many of the skill sets the early manager had really are not necessary. Then some skill sets that you need when you're simply to an autopilot, keep things full stage. That personality type of the manager may also be completely different. On the repair and maintenance issue. A lot of times where we need to DOGE on that topic is are you getting a sufficient number of bids?
'Cause it's basically a fact of life, most park owners pick one contractor, one vendor, and then they don't do bids after that. They just stick with that person no matter what. And that person realizes it. And they realize that money's not everything anymore. And what happens is their prices go up and you don't even know it. It's just human nature. It's very hard in a post-COVID world to get three bids. So three bids may be an impossibility for you, but you should at least try and get two bids. And even if you can't get two bids, I would occasionally see if you can negotiate down whatever you're paying with the contractor to let them know that you do care, you are running a business and you're trying to stay on budget. Then you have your water and sewer issue. Now, most park owners today are striving to recapture water sewer. So they may use a cam system or a rub system or individual meters. But the goal is to do a 100% recapture of water sewer. But yet, in many mobile home parks, you're not at 100%. You might be at 80%, 90%, you might be at 70%. Now, we really need to apply DOGE principles to try and figure out, okay, why are we not at 100%?
The reasons could be many. Maybe you're using the wrong rates for water sewer, and the old rates are lower than the current rates for water sewer. So when you bill back, you're not even billing back the right amounts. Maybe your meters aren't working. Maybe your manager, if you have the old style park where they read the meters, maybe they're not writing them down correctly, maybe they're underreporting them just to help friends of theirs in the mobile home park. So that's one item that if you put a real DOGE introspection on, you can probably find some savings there. Then you've got trash. You know, we all take for common trash. Whether you're a dumpster or curbside, it seems to be off limits in many people's minds for negotiation. But that's simply not true. If you go to the trash company and remember that mobile home parks are fairly large trash customers, just say to them, hey, you know, can I get a break? I've used you guys for a while. Or if you need to raise the ante, say, yeah, I'm getting multiple bids right now. I know what your best bid is. Even if you can shave off just a tiny amount, just a dollar a month on a hundred space park is $100 a month. So, take a look at trash, see if you can fix something there.
Then you have your interest rate. Now, the interest rate on your mortgage may be variable, it may be fixed. But if you got that mortgage even a year or so ago, you may be able to refinance now to a lower rate. Rates have come down about a point or so at many of the lending, particularly the lending brokers. So you might want to look and see, hey, is there a way I can get that interest rate down? It doesn't hurt to at least take the exercise to do that. Then you have bank fees. Bank fees are one of those things that typically if you talk to your bank, you may get it reduced or eliminated. Many people have never even asked, and that's in a clear violation of the principle of DOGE. And then finally, be sure and audit your park constantly for fraud. And one of the biggest types of frauds that happens in mobile home parks today revolve around park owned homes. What will happen is that the manager realizes that they can tell you the home is empty when it's actually full. So a customer comes in wanting to rent a home and they say, oh yeah, I can rent you this home, number 14. Just, you know, pay me in cash, under the table, I won't report it. The normal rental rate is 800 a month, but hey, under my basis, just give me 500 a month cash and we won't tell anyone.
And then when the manager is concerned you might be coming out to check on it or might be getting suspicious, then they cleanly say, suddenly claim that they've rented it. How do you battle back on that one? That's one that is best used by FaceTime. FaceTime is a wonderful auditing tool. Call up the manager and say, hey, put me on FaceTime. Now walk over to that vacant rental home on Lot 6. And if the manager does anything but that, then you know there's fraud probably being committed. When you go out to check on your park every six months or so, one of the key items you need to do is to walk through that park with your rent roll and make sure there's a home on every lot and that every home is accurately portrayed as being vacant or occupied. But that can really add up to a lot of money. If you had just two park owned homes in there that you were being told were vacant when in fact they were truly occupied, that could be $1,000 a month.
And that is a lot of money to be lost. The bottom line to it all is that the very principles of DOGE taking politics completely out of it are very sensible and have been a part of American business for at least a couple centuries. Big companies are constantly doing what are called audits, trying to get to the bottom of where things really stand. And you need to do that yourself with your mobile home park. And if you say, well, but gosh, my mobile home park is done, it's doing great, it's a cash cow, I don't really wanna spend the time doing it. Well, we all have our own opinions of what is significant money and what is not. But most of the time, there's something noble and with good purpose to try and make sure that you eliminate waste in your business. And I would hardly recommend that you start thinking about maybe applying a little DOGE to your own property. This is Frank Rolfe, Mobile Home Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.