When you buy a mobile home park, one of the first decisions you have to make is whether to keep the existing manager or to replace them. Legacy managers often come with a book of knowledge but their potentially bad traits may make them toxic to your park’s performance. In this Mobile Home Park Mastery podcast we’re going to review the science behind making that choice correctly.
Episode 382: Should They Stay Or Should They Go? Transcript
Every time you buy a mobile home park, you are inevitably faced with the question, should I keep the manager that's already in place on the property or should I replace them? This is Frank Rolfe with the Mobile Home Park Mastery Podcast. We're going to talk about making that critical decision of whether you should retain the existing manager or cut them loose. Now, we've bought more mobile home parks than almost anybody, and I can tell you from experience that that is a very, very critical and crucial decision that you need to make during due diligence, because you always want to start off on the right foot. The minute you buy that Mobile Home park, you're gonna start probably doing your turnaround steps, instituting new collections practices, rules practices, and you'd have a really good leader on the front end. You can't afford to go in with a weak leader, particularly when you first buy the property. Years later, once it's on cruise control and running fine, you could maybe have a weak manager and it won't do you that much damage. But on the front end, it's very, very critical that that first person you have is a George Patton kind of a figure that can really help get the job done.
So how do we decide whether to keep the manager that's there on the day of closing or let them go? Well, the first obvious answer is, what's the current condition of the business? Because if the mobile home park is in magnificent condition, fully collected, no rules violations, great pride of ownership, great sense of community, well, we'd wanna keep that going, right? Of course you would. So if you're buying a property and the management is perfect, why would you change it? And we have many examples where the answer was, no, we're not gonna change it. This is a very well run business and we're happy to buy it. And that's one of the pluses of buying it, is we're buying something that's already running well. So in those cases, you would always keep the manager, but you rarely get that right. That happens in a very small percentage of the time. So if the business isn't running optimally, the next question is going to be, you know, are the shortcomings of this business owner related capital constraints or are they truly manager issues? For example, if you've got someone who's got great manager ability, but mom-and-pop owners won't give them any money to, for example, fix potholes or remove dead trees, you can't really blame the manager for that. They had no control over it.
So instead, what you're gonna look for are cases of the things the manager can control. How are they doing on those? For example, collections. It doesn't cost a lot to file an eviction, and very few mom and pops are going to deny the manager the money to pay the court cost to evict. How's that old collection sheet looking? How many people are paying every month and how many are months or even years behind? Because it would be very unusual to have a good manager who would allow the collections to get that out of control. Rules violations don't cost any capital. How are they doing on that? Does the park look good? Does it look bad? What have they done to get that solved? And then, of course, just the way they interact with the customers. It doesn't cost any money to have good people skills, smile a lot, solve problems, build a sense of community. So in that realm of issues that the manager does control, in the absence of any input from mom-and-pop, how are they doing on those things? You could have a park that's in horrible physical condition, and is that way simply because mom-and-pop is starving it for cash.
But I've never seen a park starve for cash. It still fails in attributes which the manager controls that don't cost any money. Also, what can you afford? Because when you're buying a mobile home park, particularly in a turnaround state, and there's a manager already there, typically if you bring somebody else in, not always, but most of the time, it's going to be far more expensive. Can you really afford to replace the manager, or do you need to stay with his existing manager at the lower price point until you get the park turned around with greater revenue and more occupancy? So that would be yet another consideration, is just the money side of it all. Also, does the manager really understand what needs to be done? Can you walk around the park with the manager and tell them, "Okay, what do you think we need to do in here?"Listen to what they say. If they point out all the correct things, all the things that you yourself know need to be done. If they say, "Well, we need to get rid of that giant pothole right there, and also that hole right there where the tree removal company left the giant hole. I've been telling mom-and-pop, the owners, we need to refill that with earth. It's a potential safety hazard. And yeah, that tree limb there, it needs to go, it's clearly dead", then those are all the right answers.
But if you walk the property with the existing manager and you say, like, what needs to be done and they kind of give you a Kamala Harris, well, nothing immediately comes to mind answer, then they're probably not the right manager because if they can't spot the problems, how in the world are they gonna get them fixed? How are they gonna be a partner with you in trying to get this thing turned around? Also, and we talk about this frequently, the number one criteria of a good manager today is people skills. People skills have gone on from not that important 30 years ago to probably the most vital trait. And when you walk around the park with the manager, how do they interact with the customers? Do people wave and say, "Hi, Sandy, how's it going today?" And Sandy says, "Yo, it's going great. How are you doing? Your yard's looking terrific". Or do they just kind of look at the ground because they're afraid of Sandy or fearful that Sandy's gonna say something mean or rude to them? You can kind of feel the vibe as you go. I've never seen a situation where the residents hate the manager on a turnaround if that's a good thing.
Typically, a manager with good people skills even denied capital, even denied the ability to go ahead and get a lot of these CapEx projects done that the residents so dearly want, they still should have enough people skills to maintain a positive relationship with them. Also, does the manager have a mastery of the business? If you ask them, "So how does the evictions process work here?" And if they can't tell you, "Oh, yeah, well, on this day of the month, I do the demand letters. On this day I file, and when I file, I go down to the courthouse and it costs me this much", it's probably not gonna work out, because a good manager has to do what Dave Thomas and Whitney said, ride the wave. They need to see visually into the future. They need to be proactive. They need to know when you do things in advance of what you're trying to get something accomplished. And if they don't understand the business or how it even works, they'll be of no help to you in riding the wave. They'll just hold you back if they don't realize that, "Oh, it's starting to get warm, I need to get the mowing bids now", then they can't really manage the property and probably you need to go ahead and get a different manager going then.
Now, let me give you some examples of managers on the front end that we thought, okay, that's a keeper. For ones that we thought, oh, well, that's not. There was a Mobile Home park we bought in the St. Louis metro, that when I pulled into the park, the manager was out there with those old manual hedge trimmers. Look like giant scissors, right. They were trimming some bushes going into the park. They had no idea I was gonna show up. They were just out there doing that. So I said, "Hey, are you such and such?" And they said, "Oh, yeah, yeah, that's me". Like, why are you out here with the manual hedge trimmers? Well, because I like to keep the hedges trimmed. Well, but you know, they make electric ones or gas powered ones that do the same thing. It would probably save lots of time. And they said, "Yeah, I know, but the owner won't give me any money to buy them". And as I walked around the park with this person, they knew exactly what was going on. They were able to point out to me every single problem in the park. But when I would say, "Well, then why don't you fix it?" They'd say, "Well, you know, the owner won't give me any money to do that".
And when I got over to the office, I found there was a bulletin board right where you go in. And we were approaching Valentine's Day, and they had this very elaborate construction in the bulletin board on, "We love our residents. Be my Valentine", they put so much effort into it. They cut up little construction paper. It was very professionally done. I say, "Did you do that?" "Oh, yeah. Yeah, I did that". We went in the office. The office looked fairly nice. I said, "Wow, how come the office looks so nice? The rest of the park looks so bad?" They said, "Well, because I did the office myself". "Well, how'd you do that?" "Well, I went around, I got some paint at the hardware store and I painted it and. And I just fixed everything up. I changed the fabric on the chairs myself. I went over to Joanne's fabrics. I got a staple gun". And so this manager was really trying to do the best they could do with what they could control. They didn't have a lot of money. Mom-and-pop starved them for capital, but yet they were part of the solution. They were making that property great. There was another park we bought in Wisconsin, and that park was running perfectly. It had everything in the world going for it. It had perfect property condition, perfect rules, perfect everything. It was just such a nice property.
And even though the manager didn't seem to really have the greatest people skills, they're kind of grumpy. The bottom line to it was that they really were an asset to the community. And they'd been doing this job for like 20 or 30 years. So we thought, you know what, we've got to go ahead and retain this manager. And that manager was so good that we held that manager on that job until we went and sold the property years later. And that was a property where I don't think we ever even filed an eviction. They had that thing running so well. So those are examples of managers that you would keep. Ones that are doing such a phenomenal job, you just can't even believe it. And then ones that really want to make things happen, and they have a great heart and great energy, but yet they're starving for capital. When you unleash that capital, then suddenly the park will turn around. But then here are some that didn't go so well. We looked at a park in Illinois and we came to find out just in going through the park, they were obsessed with only things that mattered to them. They put a huge amount of effort into a playground. Playground was way, way overly expensive for what it should be. But yet there was a burned up house, three or four lots down, and it was still sitting there, having never been torn down, even though it'd been sitting there burned out for two or three years.
Everything about the park, when you walked around and got the tour, it was all about them. They lived in the park and everything focused just on those things which were their private interest. So when they should have torn the house down, no. What did they do instead? Oh, they went out of beautification process. But it seemed to revolve just around where the manager lived. This manager was not going to be a partner in getting that park fixed because they were completely selfish. They didn't care what was going on. And then we had a park over in Kansas City area where the manager is making $100,000 a year on a park that wasn't that large. It had probably about 60 occupied lots. In fact, the manager was making more money with the park than the park owner was. Manager knew that. I'm sure they had to know that. They saw the books, they saw the money coming in. But to them, this was not a team issue. This was just all about them. And gosh darn it, as long as they were making 100 grand a year, they didn't really care. There wasn't even any loyalty to the business from this manager. It was once again all about them. The bottom line to it is that if you really go out to the property and meet with the manager and walk around and talk to the manager, it will typically become very apparent whether or not they are a keeper.
But don't for a minute think that all managers must go. There are good managers out there that are typically poorly managed by mom-and-pop, that are given impossible circumstances to work under, not being given the necessary capital to run the property, and you can't hold that against them. So always keep an open mind in your selection, because some managers definitely should go, but other managers definitely should stay. This is Frank Rolfe with Mobile Home Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.