Direct Mobile Home Park Ownership with 3rd Party Property Management is Not Passive
Welcome back to the Passive Mobile Home Park Investing Podcast, hosted by Andrew Keel. On this episode of the Passive Mobile Home Park Investing Podcast, Andrew talks about how direct ownership of a mobile home community with third party property management is not a passive way to invest in mobile home parks. It is easy to be sold on direct mobile home park ownership, but don’t be fooled, direct mobile home park ownership is NOT passive. Make sure you know what you’re signing up for, Andrew goes into the reasons why this is actually a very active form investing. Andrew also addresses his concerns about third party property management in the mobile home park space.
Andrew Keel is the owner of Keel Team, LLC, a Top 100 Owner of Manufactured Housing Communities with over 1,400 lots under management. His team currently manages over 20 manufactured housing communities across ten states – AR, GA, IA, IL, IN, MN, NE, OH, PA and TN. His expertise is in turning around under-managed manufactured housing communities by utilizing proven systems to maximize the occupancy while reducing operating costs. He specializes in bringing in homes to fill vacant lots, implementing utility bill back programs, and improving overall management and operating efficiencies, all of which significantly boost the asset value and net operating income of the communities.
Andrew has been featured on some of the Top Podcasts in the manufactured housing space, click here to listen to his most recent interviews: https://www.keelteam.com/podcast-links. In order to successfully implement his management strategy Andrew’s team usually moves on location during the first several months of ownership. Find out more about Andrew's story at AndrewKeel.com.
Would you like to see mobile home park value add projects in progress? If so, follow us on Instagram: @passivemhpinvesting for photos and awesome videos from our recent mobile home park acquisitions.
00:18 - Welcome to the Passive Mobile Home Park Investing Podcast
00:30 - Direct ownership of a mobile home community is not passive
02:38 - Reason 4: Violations for liability concerns
03:11 - Concerns from third party property management companies
05:55 - This is not a passive business
06:22 - Recommendations for passively investing
06:40 - Conclusion
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Links & Mentions from This Episode:
Bigger Pockets website: https://www.biggerpockets.com/
Mobile Home University website: https://www.mobilehomeuniversity.com/
Kevin Bupp’s official website: https://www.kevinbupp.com/
Sunrise Capital Investors: https://sunrisecapitalinvestors.com/
Keel Team's official website: https://www.keelteam.com/
Andrew Keel's official website: https://www.andrewkeel.com/
Andrew Keel LinkedIn: https://www.linkedin.com/in/andrewkeel
Andrew Keel Facebook page: https://www.facebook.com/PassiveMHPin...
Andrew Keel Instagram page: https://www.instagram.com/passivemhpi...
Welcome to the Passive Mobile Home Park Investing Podcast with your host, Andrew Keel. This is the podcast where you can get the education you need to invest 100% passively in the highly profitable niche of mobile home parks.
Hello, and welcome to this episode of the Passive Mobile Home Park Investing Podcast. This is your host, Andrew Keel. Today, we are going to discuss a fictitious way to passively invest in mobile home parks. And this is through direct ownership of a mobile home community with third-party property management.
I think it's important to note that direct mobile home park ownership is not passive. It's easy to be sold on direct mobile home park ownership because in theory, if the tenants own their own homes, one of the biggest typical landlord headaches—which is repairs and maintenance—should no longer be a worry, right? Well, the answer is a hard maybe depending on the turnover in the community you purchase.
Repair costs should remain consistently lower compared to other asset classes, but your time and money will more than likely be allocated elsewhere to make up for it. For example, in the all-age, affordable housing type of mobile home parks that we own, there are several factors that make this a hands-on business including these four reasons.
Number one, collections must be pursued consistently on a monthly basis from about 5% of our tenant base. 95% usually pay on time every month, but the other 5% they make us work for it.
Number two, filling vacancies may take longer than in multi-family due to the eviction process and abandoned home titling process. Also, possible back taxes on the mobile homes add an extra item to add concern.
Number three, sub-metered water-sewer utility expense recapture must be reviewed on a consistent basis to ensure that large water leaks are avoided. We check our master meter reads daily in some of our parks in order to be instantly notified of high consumption as this could easily equate to thousands of dollars literally flushed down the drain.
Number four, violations for liability concerns like aggressive pets, cars speeding, and poor home maintenance are vital in reducing some of the long-term risks involved with direct mobile home park ownership. Third-party mobile home park-specific property management companies, first off, are very hard to come by. And it's even harder to find a good one that will treat your park like it's their own.
Here are some of the concerns that I’ve heard with third-party property management companies in the mobile home park space. Number one, costs for CapEx projects and repairs and maintenance are typically 25%-50% higher. In our parks, we require three quotes for every project over $1000 to keep our contractors honest. And while a third party, they may go with the first quote they get for convenience sake.
Number two, infield projects take four times as long if they happen at all with third party management.
Number three, high monthly property management fees can throw off your expected expense ratios. And the management fee minimums don't make sense to a lot of communities unless you have at least 50,000 in monthly gross revenue, which only makes sense in much larger communities. Third-party management companies usually charge anywhere from 5%-7% of gross revenues plus $500-$1000 per home sold or rented with a minimum management fee monthly of around $2500.
Number four, third party management will still require a community paid for on-site manager salary in addition to those off-site management fees.
Number five, third-party management may not pursue collections as aggressively as a hands-on equity holder would.
Number six, third-party property management may react slower to water leaks and other errors with the recapture of the monthly water-sewer utility expenses if you have a community that's sub-metered.
Number seven, the property condition may slip based on the attention the third-party management is able to give the subject community through on-site visits—which are very important, rule violations, et cetera.
Number eight, third party management is usually slower to react to tenant-owned home move-outs in different mobile home communities. What we try to do is we try to broker the sale of a tenant-owned home that goes up for sale in one of our communities. We try to broker that sale to a new resident that plans to live in the community. And we found that this saves us thousands of dollars because if we lose an occupied lot, that could easily equate to $30,000-$40,000 to replace that home that now left a vacant lot.
It's important to note that there are gurus right now actively pitching investors on direct mobile home park ownership with the notion that this is a passive business. And that, you only need to write checks a month to keep it running. I want to let you know that this is unfortunately just not true. Even just asset managing these properties is time-intensive and hands-on.
If you intend to invest passively in the mobile home park space, I recommend you partner with an experienced operator that will manage your parks in-house. Since they are vested with equity and rewarded for trimming expenses, your interests will ultimately be aligned. You could sleep better at night knowing that the operator and property manager have your best interests at heart.
That's it for today. Please join us again next week on Tuesday for another new episode. Thank you so much for tuning in.
Would you like to see mobile home park value add projects in progress? If so, follow us on Instagram @passivemhpinvesting for photos and awesome videos from our recent mobile home park acquisitions. Once again, that's @passivemhpinvesting on Instagram. See you there.