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Successful Strategies For Mobile Home Park Cost Cutting
Anaheim, CA
Thursday, November 06, 2008
SUCCESSFUL STRATEGIES FOR MOBILE HOME PARK COST CUTTING
Mobile home parks are not management or labor intensive. That's why investors love them. However, there are still opportunities to trim costs, if you know what you are looking for and what is required to maintain minimum standards. In real estate, assuming a 10% cap rate, every $100 per month that you save adds $12,000 of value to the property. That's why cost cutting is extremely important – even if your park is already flourishing. Here are some places to look:
Your Manager
Many park owners overpay their manager. How did it happen? Normally, the park owner initially hires the manager at a fair price, but then keeps increasing their wages over time until the management cost is excessive. While it's nice to reward people for hanging around year after year, what did the manager do to warrant more money? Sometimes the answer is nothing. If you feel that you have to give the manager more money, be sure and make it results-oriented, like a bonus for hitting certain targets of occupancy or collections. Otherwise, you are really just compensating your manager out of kindness – and a recession is no time to be kind!
Repair & Maintenance
If you have been using the same plumber, electrician or paving company for a long time, you may get caught in the rut of being ripped off on every project. Why? Because they know that you are not using a bidding process – no matter what they quote, you use them anyway! Start getting three bids on every non-emergency project (and on emergency projects, too, if it's possible) and watch your costs start coming down. It's just human nature.
Also watch out for recurring repair items that could easily be fixed with one quick capital upgrade. For example, a sewer pipe that is in poor condition and requires roto-rooter every two weeks at a cast of $200. Instead of spending $4,800 on that pipe per year, you could probably replace that piece of pipe for $2,000, which equates to a 240% return on investment. Why doesn't your plumber suggest this? Well, he has to make a living, too, and it's too easy a racket.
Always be watching for repair scams. They are very common in parks. Normally, the manager and the contractor make up false bills for problems that don't exist, and then split the money when you pay it. Think your manager is above all that?
Insurance
If you have not bid out your insurance recently, it's time to do it again. I once saved 50% on my current insurance. How is that possible? Insurance rates fluctuate like the stock market (unfortunately, though, not always down like the stock market). Think your agent is going to make you aware of possible cost savings?
For more ideas on cost-cutting, plan to attend our Summit conference entitled "Successful Mobile Home Park Strategies for the U.S. Recession", to be held in Anaheim, California on February 20 through 22. For tickets call (800) 950-1364 or visit www.mobilehomeparkstore.com. The economy may be down, but you don't have to be!
Mobile home parks are not management or labor intensive. That's why investors love them. However, there are still opportunities to trim costs, if you know what you are looking for and what is required to maintain minimum standards. In real estate, assuming a 10% cap rate, every $100 per month that you save adds $12,000 of value to the property. That's why cost cutting is extremely important – even if your park is already flourishing. Here are some places to look:
Your Manager
Many park owners overpay their manager. How did it happen? Normally, the park owner initially hires the manager at a fair price, but then keeps increasing their wages over time until the management cost is excessive. While it's nice to reward people for hanging around year after year, what did the manager do to warrant more money? Sometimes the answer is nothing. If you feel that you have to give the manager more money, be sure and make it results-oriented, like a bonus for hitting certain targets of occupancy or collections. Otherwise, you are really just compensating your manager out of kindness – and a recession is no time to be kind!
Repair & Maintenance
If you have been using the same plumber, electrician or paving company for a long time, you may get caught in the rut of being ripped off on every project. Why? Because they know that you are not using a bidding process – no matter what they quote, you use them anyway! Start getting three bids on every non-emergency project (and on emergency projects, too, if it's possible) and watch your costs start coming down. It's just human nature.
Also watch out for recurring repair items that could easily be fixed with one quick capital upgrade. For example, a sewer pipe that is in poor condition and requires roto-rooter every two weeks at a cast of $200. Instead of spending $4,800 on that pipe per year, you could probably replace that piece of pipe for $2,000, which equates to a 240% return on investment. Why doesn't your plumber suggest this? Well, he has to make a living, too, and it's too easy a racket.
Always be watching for repair scams. They are very common in parks. Normally, the manager and the contractor make up false bills for problems that don't exist, and then split the money when you pay it. Think your manager is above all that?
Insurance
If you have not bid out your insurance recently, it's time to do it again. I once saved 50% on my current insurance. How is that possible? Insurance rates fluctuate like the stock market (unfortunately, though, not always down like the stock market). Think your agent is going to make you aware of possible cost savings?
For more ideas on cost-cutting, plan to attend our Summit conference entitled "Successful Mobile Home Park Strategies for the U.S. Recession", to be held in Anaheim, California on February 20 through 22. For tickets call (800) 950-1364 or visit www.mobilehomeparkstore.com. The economy may be down, but you don't have to be!
Dave Reynolds
Member
Mobile Home Park Store . com LLC
Cedaredge, CO
800-937-6151
970-856-4883
