All Forum Posts by: Adam Johnson

I am considering relocating to TN.  Haven't decided on an exact location yet, looking at northeast TN for now, but that may change.  I'm experienced in multi-family, mixed use, and mobile home park investments in NY.  We own/manage around 100 units currently.  For now, I'm just looking to get a general flavor for similar investments in northeastern TN.  

Questions I have to start:

• How are the landlord/tenant laws to work with?
• For a multi-family, what is a general range of cap rate?
• Specific experiences/knowledge in mobile home parks (prefer 40+ units) in the area
• Is appreciation a factor or are values steady but cash flow is king?
• Any other thoughts/feedback that you might think would be helpful for my consideration

Thank you in advance!

@Craig Sloan this is our only park so far.  I'm very comfortable operating it.  I've owned rental properties going on 13 years now and have had hundreds of tenants teach me well, lol.  The rules are different in mhp's vs. apartments, but not impossible to adjust to.

@Frank Rolfe I was hoping you would chime in.  This is a great starting point, thank you.  Do you use any kind of contact manager to track leads and where they are in the sales process?  I recognize that we went off-road somewhere, which is why I want to start over.  The previous owner made it easy for us to look like rock stars when we took over, he did virtually nothing.  We came in with an army of people, removed over 100 tons of garbage from the park (literally, no joke), tore down homes that were too far gone, started mowing instead of bush hogging, etc.  That was always the first part of the plan and we accomplished it.  We fell on our face with the second part of the plan - increasing occupancy.  We did increase it some, but have stalled.  I'm almost certain that is due to our broken process, not so much due to a weak market.

Where I went wrong was with the person answering the phone.  He was a very good mechanic, which was also needed since the infrastructure dates back to the 1960's.  Initially, we also had him answering phone calls and showing homes.  We realized that didn't work and tried to change it up.  Ultimately, he figured a way to work himself into every potential prospect.  He helped sell many of the handyman special homes, but as we started bringing in newer/nicer homes to fill vacant lots, the buyer profile changed and didn't match well with his saltiness.  We couldn't keep him out of the way until he was ultimately fired last summer for other reasons.  That was totally my fault, I let it happen and tolerated it for far too long.

I truly appreciate your response.  This gives me a great starting point.  This isn't rocket science, I've just been off road for so long I've lost my way.  Thank you.

@Daniel Ryu we generated leads through MH Village, Craigslist, Facebook, our website and adding a sign with a phone number at the park entrance.  We also had a LOT of drive by leads, people cruising through the park as it improved, interested in learning more about how to live there.  Our roadblock was the former manager.  He was a great mechanic, but not a warm and welcoming salesman.  I don't even want to think about how many leads we lost to my mistake, probably hundreds.  I can't keep looking backward though, have to start looking and moving forward.

Experienced investor here.  Bought a park 6 years ago, distressed property, about 2 hours from my office.  High vacancy, poor condition, poor management.  I started off great the first couple of years.  Was staying nearby during the week at times, working a full week to revive it, really had strong forward momentum.  Early efforts were aimed at cleaning it up, removing some abandoned homes in terrible condition, etc.  Tenants became very happy with the progress.  Generally, we still have good relations with tenants, but still have high vacancy.

Shortly after taking over, we switched managers .  We made a mistake, that was corrected last summer.  That manager had a tendency to inject himself into EVERY aspect of operation.  I would instruct one way, he would disagree and do it his own way anyway.  Long story short, we were developing a ton of leads for prospective tenants to move homes in and/or buy homes that we owned and were selling (we don't want to do rental homes).  We converted almost zero leads.  We hired Realtors to help sell homes, same result, usually after he became involved somehow.  Since replacing the manager last summer, we have found a Realtor that is responsive to leads we send, does very well with responding to messages, etc., but doesn't know manufactured housing more than what we have taught him.

Our experience is largely in turning around distressed rental properties.  All of our other properties (multi-family) are closer to home and were purchased distressed and usually completely vacant.  They are all stable and run very smoothly at this point under our direct management.  The mobile home park is lagging way behind where it should be big time.  My problem is almost completely a sales/marketing problem.  

Here's my question/need - I want to start from square one with sales/marketing.  Somewhere I really botched up along the current path, so I want to go back to the beginning and figure it out.  Can anyone give pointers or referrals to a person/company that start with market research - to determine if the market WANTS our product?  Secondary - after we accomplish step 1, I could use some pointers or referrals to a person/company that can develop and help implement a marketing plan.

Thank you in advance.

Mike has offered some great thoughts and is far more experienced in self storage than I am.  I wanted to chime in with a few thoughts as well.  All of my projects so far involve some form of distress, many have started with 0% occupancy, so that is where I am coming from when I comment.

First and foremost, stabilize before you spend ANY money on growth.  If you spend $ 50-110K to work with the back acre, you have just increased the amount of space that you DON'T have rented yet.  Bad move.  Fix what is there and broken now, then use the cash flow that work creates to help fund expansion.  Remember, projections and penciling out numbers all sounds great, but until you have rent checks in your hand, they have zero real value.

I 100% agree with Mike, don't change the size of the existing units.  Couple of reasons - 1)as Mike said, your customers need a space to put their things, that's why they call.  They don't care if there stuff fits through the door and they aren't renting way more than they need, then they will buy.  2)You have no idea what size unit the market wants from your building, so why change what's there until you know?  The 2nd point also goes to your thought about putting up another building.  On paper, it sounds great to have all 5x5 units because the rent per sq. ft. is higher.  BUT, if your market needs 10x10's, you will likely lose potential leases.  People won't necessarily rent (2) 5x5 units instead of a 10x10, paying more per month overall, if they can go somewhere else and get a single 10x10 and pay a more fair rent for their needs.  So, if you have all 5x5's, your choice may become to rent them at a discount if the market needs larger units OR accept a higher vacancy rate.  Either way, reality doesn't match up with your pencil predictions.  

While I don't think the parking area is bad, I think rushing to do it right away is not a good idea, primarily because you have 0% occupancy with what already exists.  I would put 100% effort into fixing and leasing up the existing space before I spent money developing more vacant space.

"Crunching the numbers I'd like to get it to 12-15K sf rentable as soon as possible because right now with only 6,600 sf a lot of the potential profit is being eaten away by the expenses. Any thoughts, feedback or new ideas anyone has is greatly appreciated." - This concerns me a little bit.  Your immediate problem after acquisition is not the fact that the expenses are inefficient in relation to the income, the problem is that you don't have any income at all.  Inefficiency will be a problem after you stabilize the property and you can deal with that problem then.

Use the existing building to learn the market and learn the business.  Let that success/challenge help guide you through future growth.  Pay attention to what people are calling and asking for, that is the market telling you what the need is.

It wasn't a wasted effort pursuing it.  I'm sure you learned something from it and the only thing you are out is a little time.  Some of my best deals were ones that never closed because I learned so much going through the motions.

Most likely, yes, you crossed the line (I don't know Florida law, in NY definitely).  Less objectionable is to put a notice on the door that due to lost communication, you will use your key in 24 hours.  If you think there may be a health issue, doing a wellness check while escorted by a local police helps cover you against claims of theft.  If you think they bailed, put a piece of clear tape up high or down low over the door to the frame. Not strong tape, you want it to break or pull free so when you return later, you know if the door was opened or not.

Don't wait any longer than legally required to serve notices to pay or quit.  You can always cancel if you get paid, which is the goal.

The larger issue, in my opinion, is buying at an 8 cap if that is the "feel" of the park.  Trying to improve the overall feel of the park will take time, money and effort.  You should be compensated for that in the form of a better purchase price.  I own one park, so I am not an expert.  However, this size park does not appeal to most larger buyers (too small).  But it is priced as if it will be purchased by a larger institutional buyer.

Before you or anybody can answer this question well, look into the zoning regulations for the property.  Self storage and mobile homes are possibilities, but if the zoning as it stands now doesn't allow those uses, you have an uphill battle already.

The first thought (after checking allowable uses) that comes to my mind would be to look at creative ways to get the most out of the existing building.  With 8' doors, the open space is somewhat limited, but could be used for motorcyle and/or boat storage in the winter, or perhaps classic cars.  Depending on how the space is configured, you will likely get 4-5 cars max. in there.  Per square foot, you might find you get more by targeting motorcycles. 

You might also look at a storage conversion to the open space to make the existing building a self storage to test the water.  You already have walls and a roof and I assume a floor slab, use that space before adding more buildings.

Is there a way to rent out small single offices instead of the whole office to one user?

Just a couple of thoughts.

This will vary from one municipality to another.  Safest bet is to contact the local building department and/or check the local codes

Probably the best you can do is to base an offer on the information provided, then use the due diligence period to flush out details.  I've found it common that DD flushes out WAY more truth than what is presented by the seller/listing agent.  If you decide to write an offer, give them a short window of time to present information to you, then a longer period of time for you to analyze it.  For example, they have 7 days to present you with XYZ, and you have 30-45 days to review said information and may withdraw/change your offer based on the information provided.  Be sure to write in that you reserve the right to cancel at any time during the DD period for any reason with right to a full refund of any earnest money deposit, or something to that effect.  Consult with your own attorney for exact language to use, not giving legal advice here.  

In short, leave yourself an escape route in case reality is different after they give you all of the facts.  The numbers will either work or they won't.  The actual unit mix is less critical IF the market is absorbing the available units and making it a wise investment.  Numbers look better with a lot of smaller units, but if the market isn't renting them but is craving larger units, you could have a problem.  I wouldn't get too bogged down by unit mix, focus on the dollars and cents of the deal first, along with what occupancy is telling you.