mobile quarterly vol 2 no 3 summer 2015
TRANSCRIPT
The magazine
for and about
Mobile Home
Park Investing!
In this power packed issue, the Marcus & Millichap team tell-all about: The septic issues that are lurking silently beneath the surface Doing the math for the time value of money How to determine the best from others before you even hire them How a balanced approach led an MHP investor to success What’s hot in mobile home park ownership TODAY! AND MORE...
Vol. 2, No. 3 (Summer 2015)
THE MOBILE HOME PARK OWNERS & INVESTORS MAGAZINE
MQ SPECIAL REPORT: LCSS, CLASS V WELLS, AND ADVICE FROM THE MHP SEPTIC EXPERTS!
Getting The Best Part II
Septic Failure Red Flags
The Cash-On-Cash Return
Five Crucial Insurance Facts The EPA Facts for MHP Septic
Q&A: An MHP Mortgage Broker
MQ INVESTOR PROFILE:
Rick Melero of HIS Capital Group
Reveals His 40-40-20 Strategy
Courtesy of Team Mobile
525 North Tryon Street Suite 1600 Charlotte, NC 28202
You may have noticed a few changes with
MQ...you spoke and we listened! Great suggestions,
readers! We also appreciate all the 1-year anniver-
sary kudos we received and are glad to hear the con-
tent has been exactly what we aimed for: timely,
educational, entertaining, and visually stimulating in
one package. Our first year we did a year-long spe-
cial report on the 1031 Exchange and in this, our
second year, we have decided to bring you four spe-
cial reports on topics a majority of owners/investors
are asking about. In our summer issue we are focus-
ing on MHP septic since no one wants a septic prob-
lem in the heat of summer! We’ve consulted with
multiple experts in MHP septic to bring you the best
and most current information as a springboard to
your own due diligence. Next issue we will focus on
sub-metering and getting those expenses down even
further!
For the first time in MQ history a reader
has shared an actual authentic document with us and
gave us permission to discuss it for the benefit and
education of all readers. Be sure to check out Curt’s
“Ask Curt” column and the snapshot on page 5 to
get the scoop! Our guest investor for the investor
profile has fantastic advice and real life proof of
how reevaluating portfolio strategy can not only
create financial freedom but a financial fortress. We
will also delve into part II of getting the best from
others as a primer of more yet to come!
Team Mobile thanks you for being our
readers! We can’t wait to bring you bigger and bet-
ter and more dynamic content with every single is-
sue we produce!
- Blythe H. Chambers, M.S.
Editor, Mobile Quarterly.
The Marcus & Millichap Team:
Curt Baker
A pioneer during the nationwide eco-nomic and real estate crash of 2008 at a time when lenders were unprepared to handle rec-ord-setting numbers of “short-sales”, Stephanie McAnuff made a name for herself in the area of residential distressed debt workouts and nego-tiation as a Certified Short Sale Specialist. Her unique experience and expertise led her to be-coming an Associate with Marcus & Millichap and partnering with Curt Baker to form Team Mobile with an emphasis on mobile and manufactured housing communities. A New York native with Carolina roots, Stephanie relocated to North Carolina in 2000. While Stephanie’s primary focus is the South-east, her territory spans nationwide, and her ex-pertise is understanding the unique requirements of the sale and marketing of manufactured home communities. With her alignment with many professionals in the industry she is considered a “one-stop shop” when it comes to selecting contractors, used mobile homes, movers, and park management. She is a member of Toastmasters International, The North Carolina Manufactured Housing Association, and the North Carolina Board of Realtors. In her free time, Stephanie enjoys athletics, cooking and reading, but her heart is committed to giving back to the community and volunteering.
Stephanie McAnuff can be reached at : [email protected] (704) 831-4600 ext. 4628
With over 30 years of sales experience, including 9 years as a mobile home park broker and investor, Curt’s extensive knowledge and expertise is at the helm of Team Mobile for Mar-cus & Millichap’s North Carolina office. Curt also owns a portfolio of mobile home rentals in South Carolina and, therefore, understands first-hand how parks operate, best practices on man-agement, and how to successfully work with park residents. As an industry veteran, Curt also enjoys many longstanding relationships with lenders in the southern region. Curt is originally from Albuquerque, New Mexico but is a graduate of Georgia State Uni-versity with a B.A. in Business and a minor in Language with fluency in Spanish. After graduat-ing he lived and worked in Mexico as an international sales consultant. Curt is also a member of Toastmasters International, The North Carolina Manufac-tured Housing Association, and The North Carolina Board of Realtors. In his free time, Curt is also an entrepreneur who owns a local surf-shop and catching some waves at the beach is where you can find him when he’s not making mobile home park deals for Marcus & Millichap clients.
Curt Baker can be reached at: [email protected] (704) 831-4600 ext. 4631
Stephanie McAnuff
Editor’s Desk
Marcus & Millichap presents our listings for...
In This Issue:
Interested in making your property one of MQ’s Featured Properties? Call Curt or Stephanie for more information!
Dear Stephanie...……………………………...
Taming The Septic Monster…...............
EPA Septic Fact Sheet...........................
Septic & Insurance .....…………………....
Ask Curt………………………………...……...
Doing the Math: IRR……………………….
MQ Investor Profile………………………….
Psychology: Getting The Best II……….
Representation: Mortgage Broker…….
OUR COVER PHOTO “Wouldn’t It Be Nice?” Our Editor’s own artistic and
graphic rendering of a photo of a vintage Airstream fea-tured at www.getcampie.com.
Dear Stephanie,
I read a few mobile home park investing and education forums regularly to stay
connected with other investors and talk-shop. I have noticed there seems to be this
almost black-and-white divide on which is the better route: parks with park-owned
homes or parks that are purely land-lease. I have both kinds of parks and all are
profitable but certainly come with their different issues, the biggest one for me
being operating cost. Is there a rule of thumb on operating costs for a park with
park owned homes vs a lot rental only park?
` - Walking The Line in Walla Walla
Dear Walking The Line,
As MHP brokers, generally we see that expenses can vary considerably depending on
how the park is managed and run and the amenities offered to the residents. Expense
ratios for parks with park-owned homes range from 40-50% of effective gross reve-
nue to 60% of effective gross revenue. Parks that are 100% lot-rental, called land-
lease properties, are more along the lines of 30-35% of effective gross revenue. Per-
centages that are much higher than this tend to attract closer scrutiny by investors and
lenders. This can cause longer sales cycles and, sometimes, pressure on owners to
reduce the sale price when the park is on the open market. The bottom line is that
having a thorough, professional analysis done on your park is one of the smartest
things you can do to know where you stand, how your property fares next to the com-
petition, and areas where the option of maximizing profitability is available.
Send your questions for Stephanie to:
Dear Stephanie... ….p. 2
….p. 3
….p. 4
….p. 4
….p. 5
….p. 5
….p. 6
….p. 6
….p. 7
Located in Knoxville, Tennessee, West Knox Mobile Home Park, built in 1972, is a clean 59 space community nestled among mature trees in the foothills of the Great Smoky Mountains and comprised of all land-lease sites with 21 of the homes owned by a single third party and leased to tenants. Residents enjoy sub-metered city water/sewer, on-site man-agement, and new signage. There are three vacant park-owned mobile homes recently turned back over to ownership which are now for sale. The current NOI $82,547 with a gross potential rent of $148,680. Cur-rent cap rate is 10.01%.
Knoxville, Tennessee was the first capital of Tennessee and is seat of Knox County. It is one of the largest cities in the Appalachian region and is home to the headquarters of the Tennessee Valley Authority and corporate headquarters of several national and regional companies.
Current total ROI is 19.5%. The property is being offered for $825,000.
Please contact STEPHANIE MCANUFF (NC Lic. 270402; GA Lic. 358467) [email protected] or (704) 831-4600 ext. 4628
The North Georgia R.V. Park, built in 1971 nestled among 21.83 acres of majestic Georgia pines in Commerce, is a popular and reputable R.V. and camping park and the only in Georgia with a salt water swimming pool. The 61 R.V. spaces can be rented daily, weekly or monthly, and the park also has one log cabin and 5 tent sites for rent comprising a scheduled monthly income of $17,008. An additional 14 acres of beautiful raw land must be sold with the park for $125,000. The park’s office/recreation building is pictured above. The current owner has also recently increased marketing efforts with the de-velopment of a new website located at www.georgiarvpark.com. The current NOI is $68,498 with a current gross potential rent of $204,096.
Commerce, Georgia, Jackson County, is an outdoor recreation destina-tion city located 90 miles northeast of Atlanta, and home of the highly popular brand-name outlet shopping mall, Tanger Outlets.
Current total ROI is 9.59%. The property is being offered for $1,100,000.
Please contact CURT BAKER (NC Lic. No. 275726) [email protected] or (704) 831-4600 ext. 4631
West Knox Mobile Home Park North Georgia R.V. Park
hen it comes to water and sewer there are two kinds of mobile home parks: those on city water and city sewer and those with LCSS or Class V Wells, as defined by the Environmental Protection Agency (EPA). If yours is the latter your septic, if not well maintained and monitored, can create a monster of epic proportions that can drain your income and even kill your investment plus result in criminal charges and fines at the extreme. Septic systems are designed to transport all of your wastewater from the mobile homes on your property into a tank that pumps the liquid out the other end into a drainfield after going through a filtration process. Let’s review this process and what happens with the process fails:
The solids will fall to the bottom of the tank and, under the right conditions, will break down into a sludge and eventually become the consistency of water and flow out into the drain field. However, the fats, oil and grease your residents feed the septic monster, not to mention cigarette butts and other frequently-flushed septic killers, will float at the top causing clogging and preventing proper function of the system. These components do not break down at all or at best, very slowly; therefore, it is critical that you have your tank pumped on a regular schedule, and enforce policies with residents about what can and can not be flushed or poured. The gray-water in between the grease and other gunk at the top and the waste solids at the bottom flows out into the septic drainfield, but the longer the sys-tem goes without being pumped the narrower the gap for the water and the closer the grease and waste solids get to each other, thus spawning the birth of the septic monster which will grow silently beneath the surface and eventu-ally start to migrate into the septic drainfield, drain lines will become clogged, and the system starts to fail. At the point of failure, the “septage” overflows in the tank, causing the pump to seize. When this happens toxic wastewater backs up and needs a place to go, but the only way out now is back into the home from whence it came.
When your septic system fails, the damage can be absolutely devastating. Unfortunately, once you begin to see the signs of a failing septic system it is already dangerously close to complete failure and swift action to fix the problem is critical. Not only is it costly to replace an LCSS septic system that has been damaged from owner ne-glect, tenant abuse, and over-use, but it can also cause extensive damage to the mobile homes you or your resi-dents own and much worse: if a septic system overflows, the septage that backs up into the mobile homes could be considered a health risk by the Environmental Protection Agency, which has recently tightened regulations of LCSS and Class V Wells, and you, as ownership, are opening yourself up to public safety violations and lawsuits from the city, county, state Attorney General’s office, EPA, and/or tenants. If your septic troubles result in a state health code violation then total condemnation of your park, if not addressed promptly, is a hard reality and once a violation no-tice has been received you are given very little time to act! Ignoring the realities of the septic monster and not pump-ing your septic on or ahead of schedule to save a few dollars now is literally flushing your profits down the drain.
Let’s say you haven’t pumped in a while or aren’t sure when the prior owner last pumped; what should you be on the lookout for? Listed below are the most common red-flags. Remember, some are noticeable, some hidden beneath the surface, and some you won’t know about unless a resident complains or you inspect inside homes:
Toilets will start to make gurgling noises when you flush
Sinks, showers and bathtubs will drain slowly
You may smell a sewer odor in or around drains
Continued on Page 7...
MQ’s pulp rendering of a still frame from the movie “Septic Man.”
By: Betty Houston of
Lentz Septic Tank Service
An MQ reader’s question
inspired this quarter’s
special report when they
shared this real violation
notice with Curt. See our
Ask Curt column for
more information!
FIVE SEPTIC FACTS
ABOUT RISK AND INSURANCE YOU AREN’T THINKING ABOUT...YET
By: Kurt Kelly, JD
President of Mobile Insurance [email protected]
When contemplating the purchase of a mobile home park that has a septic system(s), it’s vitally important to understand how septic systems affect your insurance premiums and liability, as well as the probability of having to replace the system. Here are five key, read critical, things you should know while you are evaluating and doing your due diligence on a park with septic systems:
1) Your park insurance usually does not cover septic system damage / problems. As septic systems are almost completely underground, they aren’t susceptible to perils covered by most property insurance policies such as wind, hail, and fire. Flooding can damage septic systems but you generally can’t purchase flood coverage on a septic system;
2) Simple septic system failure is NOT covered by insurance; 3) Pollution-caused losses aren’t covered by General Liability insurance
policies. Most states legally define sewage as “pollution” and thus contamination claims aren’t covered. However, water/sewage back up damage may be covered (ex. Sewage backs up into 30 tenant owned homes resulting in 30 floors having to be replaced at $7,000 each);
4) You can usually purchase “Pollution Insurance”, but it’s generally so expensive ($5,000 to $10,000 minimum per year) that it’s not a feasi-ble option for a park owner. Uninsured pollution losses aren’t un-heard of, but they are rare; and
5) Park specialty insurance companies that give you the best insurance value usually charge a little more for a park with a septic system vs one without one.
History suggests that the biggest risk of owning a park with septic systems is the failure of the systems themselves. That potential problem is both expensive and largely uninsurable. Therefore, careful inspection of the system plus sales price considerations prior to purchase and a reserve of capital for potential future problems after the acquisition are the best methods of managing this risk. Go forth with knowledge...invest wisely and prosper!
The Environmental Protection Agency has cracked down with tighter regulations on MHP septic systems, particularly LCSS and Class V Wells. EPA is regulated by the Safe Drinking Water Act (SDWA) to establish minimum federal requirements for Underground Injection Control (UIC) Pro-grams to protect underground sources of drinking water from contamination caused by underground injection. Protection includes the oversight of construc-
tion, operation, and closure of injection wells. This EPA fact sheet is a quick intro to keeping in the clear!
WHEN IS A SEPTIC SYSTEM REGULATED
AS A CLASS V WELL? A septic system is required to meet UIC Program requirements and is consid-ered a Class V Well if either of the following are met:
The septic system, regardless of size, receives any amount of industrial or
commercial wastewater; or
The septic system receives solely sanitary waste from multiple family resi-
dences or a non-residential establishment and has the capacity to serve 20 or more persons per day (known as large-capacity septic systems—LCSS)
WHAT ARE THE MINIMUM FEDERAL REQUIREMENTS
FOR CLASS V WELLS? Owners or operators of LCSS must meet both state and federal requirements. The minimum federal requirements for Class V Wells are: 1. Obey the non-endangerment performance standard prohibiting injection
that allows the movement of fluids containing any contaminant into under-ground sources of drinking water, if the presence of that contaminant may cause a violation of any primary drinking water regulation or adversely affect public health; and
2. Provide inventory information (facility name and location, legal contact name and address, ownership info, nature and type of injection wells, op-erating status) to the state or regional EPA UIC Program.
Stay in the know! Go to www.epa.gov for more information
Follow along each quarter as we take you step by step
through the 101’s of a critical math equation in your
property financial analysis….
nternal Rate of Return (IRR) is the flip-side of Net Present Value (NPV), our equation last issue, and uses the same math. With IRR your objective is to figure out what interest rate attached to your invested capital over time (a dollar yesterday is worth more than a dollar today because of an interest rate) will bring the NPV to zero. When an investor says “This park could earn 12.4%!” they are referring to IRR. Both NPV and IRR are used to analyze the potential of an invest-ment, and surveys have shown that despite a strong academic preference for NPV, investment executives prefer IRR over NPV and find it intuitively more appeal-ing to evaluate investments in terms of percentage rates of return than dollars of NPV. However, you will need the NPV to figure out the IRR. Generally speak-ing, the higher a project’s IRR (the higher the interest rate on invested capital to get NPV to zero), the more desirable it is to undertake. While it is a viable way to analyze potential it is important to note that IRR is a true indication of a project’s annual return of invest-ment only when the project generates no interim cash flows - or when those interim investments can be in-vested at the actual IRR. In short, IRR is the “cash on cash” return, or the yield of the investment and is essentially compound interest in reverse, AKA dis-counting. IRR will also be higher for investments that are partially financed with debt. Let’s break it down...
Hi Curt, I have an on-site manager at one of my MHPs where there have been a lot of necessary repairs. When I acquired the park I knew it needed work and the improvements have been very good for both the residents and for the profits. Then in May my manager received a surprise fax that the septic system is in violation of EPA regulations and there is sewage on the ground, but he not only did not tell me about the septic issue but failed to tell me about the violation notice. I’m facing hav-ing my permit pulled if I don’t get it repaired within a tight timeframe. The residents are up in arms and bypassing the manager to call me directly. I was about to list the property but no one wants to acquire a park with bad septic! What do you make of this and how can I get it in listing shape fast? - It Hit The Fan in N.C. Hi It Hit The Fan, This is a serious issue with multiple moving parts that must be addressed immediately, with the most serious being a public safety violation which typically receive the most severe penalties in a court of law particularly if negligence is determined as the cause. The first thing you should do, besides call your attorney, is contact the individual agent who wrote up the violation to demonstrate that you are more than willing to get this remedied immediately, especially since you did not get the notice as soon as it came in. The second thing you should do is call a septic expert and have them come out to the property immediately and meet them there instead of relying on the manager any further for such a serious matter. As for your man-ager’s negligence, be sure to follow along with Blythe’s investing psychology series about “Getting The Best” which will go into hiring next quarter. While the septic expert is on the way, assure your residents that the situation is being fixed as quickly as humanly possible, and live up to that promise. At this point you will be “putting out fires” so to speak, and then fixing the damage. Unfortunately, as Kurt Kelly points out in his insurance article, septic pollution is not covered by insurance so this is going to be expensive depending on the extent of the damage and where on the spec-trum between pumping the tanks and replacing the entire system the issue falls. But, refusal to comply with what is mandated by your local agency and the court could result in what recently happened to a Mas-sachusetts MHP owner who was fined a civil penalty of $250,000 and forced to fund nearly $3M for the cost of a new LCSS. Considering a majority of MHP’s are listed between $900K and $2.5M not addressing this issue now could cost you more than your park is worth! The fastest way to get it into listing shape is simply not delaying and doing whatever is necessary to remedy the problem before the court gets involved. Then, ensure your next manager has the septic sys-tem on regularly scheduled pumping/maintenance and I suggest visiting the property more often. Things go better when the boss is in town.
Get the difference for yourself!
Call or e-mail Curt today at:
(704) 831-4600 x4631
Ask Curt...
The Quoted Corner: “You can’t climb
the ladder of success with
Your hands in your pockets.”
- Arnold Schwarzenegger
Defined: Internal Rate of Return is the return rate that can
be earned on the invested capital. Ask: what interest rate on my invested capital will bring the NPV (the time value of my money) exactly to zero? That percentage is the IRR.
Key 1: When you think IRR, think judging an investment’s potential ROI when:
Analyzing one property to see if it potentially meets your
pre-determined return threshold/goal
Analyzing multiple potential acquisitions to see which has
the highest IRR and, theoretically, the best bet
Key 2: When calculating IRR, first you need the following basic ingredients:
First, the NPV must be calculated or known
Second, determine both your money out (investment) and
the money in (return) over the identified period of time you wish to analyze
Third, “guess & check” which interest rate will calculate
the NPV to zero and plug in one by one til you get it
Key 3: The IRR should be higher than the cost of funds. Ex: if it costs you 8% to borrow the funds, then:
IRR < cost: Not profitable (not wealth building)
IRR = cost: Breaking even (why invest?)
IRR > cost: Greater potential ROI (wealth building)
Example: You’ve located two MHPs that are true hum
dinger mom & pop appreci-
ating assets. There is a $50K difference between the two.
Your required return after
considering the cost of funds
is 12.4%. Based on the IRR
analysis done in your
spreadsheet to the right, which is the better invest-
ment: the MHP bringing up
to $90K cash-in year 1 or the MHP bringing up to
$70K cash-in year 1?
MQ Investor Profiles: Rick Melero Principal of HIS Capital Group, LLC
MQ: You studied theology in college then got into residential investing, but a serendipitous meeting with a successful commercial investor at exactly he right time turned out to be a game changer for your career. Tell me about that turning point and your first MHP investment. RM: Yes, the timing couldn't have been better when I met a very affluent inves-tor. At that time I’d been in the residential space about 10 years. This investor inspired me to diversify my capital and efforts into income producing commercial real estate. I followed his advice and one of my first commercial ventures was a passive investment in a Mobile Home Park. I am very thankful that I made that prudent decision because about 18 months after owning some commercial assets, the market collapsed and my residential busi-ness diminished in a matter of months. Had I not been diversified, I would have lost everything. That experience has formed the basis for committing to a balanced approach to investing which I call my 40-40-20 Plan.
MQ: What is the 40-40-20 Plan and where is your portfolio right now within this approach? RM: Today I look at every investment opportunity as a chance to add to my portfolio, but first it must fit my balanced approach, which is the 40-40-20 Plan. This means 40% of our investing capital is dedicated to appreciating assets, which are assets that we purchase distressed and at good discounted price. The other 40% of our capital is focused on income producing assets, such as mobile home parks and or other cash flow projects. Lastly, we look for higher risk/ higher reward opportunities that should never exceed 20% of our holdings. So the needs of our portfolio will determine the level of interest I have at the time. Based on balancing our current portfolio, we are actively seeking to add approximately 20-40 single family rental properties and one or two more com-mercial income producing assets. Since we are currently launching one of our luxury developments, we want to strengthen our rental portfolio with assets that can quickly be sold off and liquidated, if need be. The plan helps me to never become emotional about a project and never purchase an asset in a rush. Now, I do believe in fundamentals so when I evaluate an income producing asset it must produce a minimum of $1.50 of income to $1 in expense. Also, if the asset
has already been fully stabilized, I am not interested.
MQ: To achieve this highly disciplined approach I imagine your portfolio is quite diverse. What percentage of the portfolio is comprised of mobile home parks? RM: We are very diverse. I think the most unique asset that we currently have in our portfolio is a historic castle in Ireland. As for the percentage of mobile home parks, I’d say we are close to 20% of the total holdings.
MQ: Clearly you have a keen eye for future trends to be able to accommodate fluctuations in the market and choose the right assets to offset others. What do you see in the future for MHP investing in gen-eral? Trends? RM: Learning from my previous mistakes as an active investor, I vowed that I would find a way to avoid getting caught by a market shift as I did back in 2008. So I did a lot of research and met an economist who predicted the economic depression we experi-enced two years prior to the collapse. He now generates an eco-nomic report for us. Based on the most recent report, our econo-my is just barely starting to recover and we have a few years to begin the growth stage. I feel that mobile home parks will be a strong investment for any investor looking to diversify over the next 5 years. As for MHP trends, the first I see is more aggressive funding offerings because of how well this asset class performed during a depressed market. The second trend I see is more luxuri-ous mobile home parks with better amenities and stylish looks.
The only way this trend will pick up however is if the price points remain afforda-ble and offer the middle class more space for the price they would pay. The third trend, which took me by surprise, is the Millennial generation’s interest efficient, modern, and affordable “tiny-house” living ranging from 150 sqft to 700 sqft. For a copy of our economic report please email [email protected].
MQ: We have found that the most successful people read books and take to heart words of wisdom passed down from those before them. What about you? RM: Yes, I’m currently reading “The Book on Leadership” by John McArthur and my grandmother said it best: “Tell me who you spend your time with and I will tell you who you become.”
hen Rick Melero was just a young boy in Puerto Rico he was asked what he wants to be when he grows up. “ To be like my grandfather ,” he said, “retired!” In 1991 Rick moved to Florida and began pursuing his retirement dream and sought out an industry that would allow him to become finan-cially free. But, when the market crashed in 2008 and his residential home investing business diminished in mere months a fated encounter combined with his positive attitude and tremendous faith turned obstacles into stepping stones and he drove HIS Captial Group into the future with a highly strategic and strictly adhered balanced approach they call their 40-40-20 Plan. Rick has aligned and surrounded himself with experts who challenge him and HIS Capital Group to new heights, and today his portfolio is stronger and more diversified than ever. With Rick Melero you can always be certain that he walks the talk!
y this time in your life it is likely no mystery that your beliefs are at the core of everything. If you’ve made it into the investors circle your beliefs got you here. Your beliefs were the fuel that drove you to the starting line. We’ve already been pumped-up about beliefs, motivated about our beliefs, and been inspired to change our beliefs so this column will put a different angle on things. We all know it’s not that simple to change our beliefs; they’ve been with us since we first began to conceptualize ourselves in the world, and while we may feel reprogrammed for a brief moment they creep back in when we are tired or weak or triggered. This will be our critical focal point, particularly when it comes to others who you rely on day to day in your business: beliefs will determine actions when faced with the unexpected, and life is full of the unexpected. You can manage the expected and write a clear operating handbook with policies and procedures, but your property manager will be faced with the unexpected all the time and how will their core beliefs enable them to handle the situation? You must know this. Will they quit? Will they handle it like a boss? Will they fly off the handle and cause more problems? Or, will they master their emotions and solve problems with confidence? Will your manager’s beliefs position them as being respected by your residents or being seen as someone who is a push over? In some instances you can train someone out of old, limit-ing beliefs, such as training a person of small stature in the art of Wing Tsun Kung Fu. But what about beliefs you can’t train out? Well, you will need to eliminate candidates who reveal detrimental belief systems during the interview process, which is a highly over-looked aspect of recruiting, especially if you go through an agency that’s working for their percent.
The main reason this is overlooked is because the person doing the hiring simply has not been trained in how to do it, including professional recruiters who are actually in sales (they earn a commission) not in organizational de-velopment. If you want to get the best from others who work for you, not only do you have to be the leader people want to follow (your beliefs) but you have to hire people with core belief systems that are complimentary to your core business objectives, the current status of your mobile home park today, and where you want your mobile home park to be in the future. Don’t hire someone who believes passive-aggressive behavior solves problems best when you need to do a lot of collections. Don’t hire someone who believes impersonal is best if your population is elderly. Don’t hire someone who believes their life is a series of unfortunate events when you need to improve the property. Don’t hire someone who believes the rich steal from the poor when you plan on doing long overdue rent increases. Think about what you need to do with your park and hire based upon the kind of be-liefs that will propel the actions that need to be handled opti-mally, and this is going to take some time and thought and perhaps an examination of your own beliefs. The way some-one speaks will reveal their beliefs, so when you are hiring someone to manage your mobile home parks pay close attention to the answers they give to behaviorally-based interview questions which you should carefully craft within the confines of what is relevant to the job. When you are on a treadmill do you feel like you are on a hamster wheel or do you feel you are on a stage showcasing your athletic prowess? The belief will determine the result. I will delve into crafting
these questions in the next issue. ■ DIG DEEP ■
By: Blythe Chambers, M.S. Applied I/O Psychology
MQ Investing Psychology: Getting The Best From Yourself & Others II
Senior Broker,
Marcus & Millichap
Tampa, Florida
Look for our Fall 2015 issue & MQ special report on
SUB-METERING FOR PROFITS!
Thank you to our sponsors! If you would like to advertise with us, please call Curt Baker at
(704) 831-4600 ext. 4631 or [email protected]
The Power of Representation... Presents a special two-part Q&A with a
Pierce Redmond
Security Mortgage Group LLC
Based in Rochester, NY
Servicing the U.S.
www.securitymortgagegroup.net
Pierce Redmond has been in the MHP mortgage brokering business
for over 10 years. In this Part I Q&A we get to know Pierce better,
earn more about lender desires, and criteria for MHP’s.
MQ: Pierce, you graduated with an MBA from the Rochester Institute of
Technology and have been working at Security Mortgage Group since as a mort-
gage broker with a focus on MHP’s. Why did you get into the MHP mortgage broker biz?
PR: I was for tunate to work with two businessmen, the founders of Security
Mortgage Group, who I look to as mentors and the rest is history!
MQ: So, you’ve seen MHP mortgage brokering through huge fluctuations in
the economy during those years.
PR: Yes, when the mar ket tanked lenders were very conservative, but as
things improve they are becoming more aggressive. I would say “safe but ag-gressive.” For instance, what we are seeing now is max LTV is at 75% and lend-
ers know a lot of people were dinged credit wise and are recovering, so mini-
mum credit score most lenders look for is 680 but they tend to want net worth to be at least equal to the loan amount.
MQ: Are the lenders you work with open to new investors then?
PR: Yes, of course exper ienced investors with a tr ack record make for an
easier deal but as long as the criteria have been there we have brokered quite a
few first MHP investments.
MQ: Let’s talk more about criteria. Can you give me a starting point?
PR: First, the minimum loan we broker is $500K. Lenders now tend to
consider these as “non-flexible’s”: paved roads, occupancy, utilities, park-owned
homes, and location. Aside from paved roads, which is either yes or no because that is a “quality-issue” with lenders, and desiring less than 20% park-owned
homes, there are no hard-and-fast rules but rather lenders look at the combination
of these factors.
MQ: W hy is having over 20% park -owned homes undesirable and why do
lenders not count these towards total income of the park?
PR: It comes down to “is this a reliable income for the park?” In other
words, homes can be easily moved or converted to tenant-owned, so park-owned
home income is considered to be unreliable.
MQ: W hat are you seeing as today’s typical loan terms on an MHP loan?
PR: For loans above $1,500,000 we can typically do a 10 year term, 75%
LTV, 30 year amortization, non-recourse. For deals under $1,500,000 we can
usually do a 5-7 year deal, 25 year amortization, 70% LTV, and recourse.
Look in our Fall 2015 issue for a continuation of this Q&A including
trends and what Pierce wants you to know for your next deal!
...IT’S ALIVE! continued from page 4
There could be a wet area around your septic drainfield, usually the area will
stink and often it will have a black mud in or around it. That black mud is proba-bly not oil, black gold, Texas tea…it is waste from an overflowing septic tank, or clogged septic lines
But, it doesn’t have to start with red flags. Prevention should be a regular part of your routine for all your mobile home parks to tame that monster before it grows into a beast. Proactive prevention includes setting community rules and regulations with fines at your community, in addition to these pro tips:
Have your tank pumped every 2-3 years, and if your population is generally
elderly be aware that certain medications create a chemical reaction in tanks that delay or stop the breaking down process
Institute park rules or institute a septic fee for each resident to pay for the dam-
age caused by flushing plastics, baby wipes and “flushable wipes”, paper tow-els, condoms or tampons
Get creative & offer incentives/rebates for residents to purchase and use one-
ply “safe for septic” toilet paper from you or at the management office
Ban residents from pouring grease down drains
Inspect mobile home interior drains for sinks, toilets, and tubs twice yearly
Educate and incentivize residents for saving food scraps in compost cans, in-
stead of using garbage disposals, for a community compost that can be eventu-ally used as rich potting soil by residents or the community which will in turn beautify landscaping
Your very best scenario is to use as many of these prevention tips as possible in conjunction with never skipping recommended pumping to keep your septic system operating efficiently for many years! As the saying goes, “An ounce of prevention is worth a pound of septage.”
To contact Lentz Septic Tank Service please call (704) 876-1834