My First mobile home park - Need Guidance

[Sandeep Tyagi]

Here I am going to write what all I did with the exact numbers (in $) and looking for expert comments on overall process and guidance on how to take it forward from here.

In 2020, I bought 59 lots in a mobile homes park (has around 200 total lots so around 140 lots are primarily owned by other individual primary owners) for $430k . This park is in my local area Tallahassee, FL. My buying reasons were:

Positives:

1. Out of 59 lots, 36 lots had mobile homes ( from 1980’s) but only 18 were occupied.
2. Area is within city limit, close to a gas station, dollar general, church, bus station. With-in 2-3 miles we have 2 big university with around 75000 students combined. 70-75% jobs are related to either university or various government departments. City has around 300k populations and population growth is 3-4%.
3. All the lots have city water and sewer, but road is private. City road ends at park entrance.
4. Considering the land price, infrastructure setup cost each lot cost was coming around $7300 which was very attractive even though most of the houses on them were old and needed good repairs.
5. All other lots except the 59 were in considerable good condition and our due diligence showed that whole park value is going down due to these 59 lots mismanagement for 40 years.
6. As per owner rent collections were around $7200 per month and most of the tenants were very long term (average rent $400 per home) which he receives in cash so bank rolls available to validate.
7. As per our estimate, each house needed 7k to 8k repair to make it livable.

Negatives:

1. These homes/lots were owned by same owner for 40 years and he neglected everything which includes tenant quality, infrastructure (such as overgrown trees, bad homes still in the park which should have been removed years back, 3ft- 4ft potholes on the road since its privately owned).
2. Most of the tenants were convicted or had some big felony, these houses were famous for drugs cartels in whole city.

After buying we realized things were way worse than what we assumed in due diligence:

1. People staying there actually were involved in gang wars, prostitution, drugs etc. Crime was way more than it was shown in city database as most of the things were never reported.
2. Actual rent collection was only $4200 by 18 tenants
3. Park had very bad repo in area (Which was known to us)

What we did after buying:

1. Worked on road (new milling road), removed extra trees, cleaned 40-50 dumpster of trash.
2. Worked with city development agencies to remove bad tenants via evictions or stationed police officers on weekend to deteriorate drug traffic, incentivized good tenants to provide us video /call cops with videos so that cops visits are frequent.
3. Removed bad homes and brought in 7-8 newer homes from other parks.
4. Repaired around 19 houses in last 18 months and brought up average rent $680 per home. As of today, total rented houses are 28 with around $19000 monthly rents.
5. Park repo improved, and average time to rent a house now is 2-3 days. Our tenant’s selection criteria are No eviction, No felony in last 7 years and household income at least $2500. All tenants are on lease and now there is almost zero crime.
6. Our repair cost assumption was wrong, and we ended up spending $15-$18k on each house to repair and bring it to rental condition.
7. After buying, we have spent around another $475k to bring the income from $4200 to $19000 and for various cleanups.

Currently, I have following issues:

1. On an average, we are having around 15% evictions and around 30-35% tenants do not pay before 5th as stated in lease, but they do pay with late fees and lot of follow-ups. This increases management cost.

So my question to experts are:

1. In overall process. What mistakes I made or things which could have been done better?
2. This place still has around 5-6 homes which needs to be repaired and rented, and around 21 empty lots which needs home. Any idea to get homes cheaper considering I can’t get more than $750 so buying brand new home may not be a good idea.
3. How can I reduce eviction rate and bring tenants to pay by 5th of every month (I am thinking about selling the homes to residents and collect lot rent but most of the residents can’t afford to $12k outright for homes and I am not sure rent to own or owner financing is allowed for 28 homes by government). Lot rent in the area would be $375.
4. Any other way to increase income?