The average community is not the kind you see on the cover of industry magazines–with a clubhouse and pool and immaculate yards surrounding doublewides. The kind of community that most people buy and sell is straight up affordable housing; not very pretty but does the job at a low cost. And when you first buy one of these low-cost communities, you can find some pretty nasty stuff going on, a lot of which you are not mentally equipped to handle. But there is a scientific way to clean up a nasty community, and it can get the job done in a relatively short period of time.
Secure The Community From Crime
If you have got criminal activity currently going on in your community, no other part of the turnaround will work until this is eliminated. Your community must be safe for the good people to live in and for you to walk around and inspect. Even though you don't live there, it is your responsibility to your tenants to make it a nice place to live. First, right out of the chute, send a letter to the tenants stating that criminal activity will no longer be tolerated, and that you will do whatever it takes to stop the problem, including evictions. This lets the good residents know that the Calvary is coming to save them, and the bad residents know that the game is over. If crime still persists (drug dealing in the street, etc.), which it almost always does, it's time for step two. Go to your local police department, and tell them you want to eliminate the crime, and ask for voluntary additional patrols or better yet, could a policeman do his paperwork while sitting in his car inside the community. This step has a immediate effect – it hurts the criminals' ability to do business inside your community. After all, criminals have businesses to run, albeit illegal ones, and anything that reduces the customer traffic is a real problem.
If the crime still persists, it's time to pull out the guns. Hire an off-duty policeman to sit in the community every night, in his police car, from about 10 pm until about 6 am. This will cost you about $250 per day or more. However, here's what happens. The criminals' business goes to about zero (they can't sell drugs or anything else with a cop sitting in the front of their street), and now things get real interesting. The bad guys have to either wait you out, or move. If you keep the policeman there about a week (total cost $2,000 or so), they normally give up and leave. They think that you have enacted a new deal with the on-duty police to sit there, and don't realize you are paying to get this done. I have never had to have an off- duty policeman stay more than a week to scare everyone off, and I have done this many times. One note, this process does not work with a regular security firm. I've tried it. Only a real policeman, who can arrest them on the spot and carries a gun and call for back-up, works. Don't waste your money on security companies.
Demand Pride Of Ownership
Now it's time for a new letter to your residents. You are now demanding from them the intangible duty of “pride of ownership” What this means is that their home may be ugly, and their car a piece of junk, but there is no excuse for their yard to be messy, their grass too high, and so forth. You can't enforce your tenants to do things they can't afford (they are poor after all), but you can make sure they do the many important things that are free. Give them a list of standards that ins not too high a bar to jump (no big trash in yards, no non-running cars, touch-up paint their homes), and sit back and see who is going to obey. You may need to have an all- community trash day, and bring in a commercial dumpster, to help them out. After a couple of weeks, send follow-up, personal letters to each on what you want done. After thirty days, it will be apparent as to who is going to clean up and who is not.
The next step is tough but necessary. Pick out the words offender in the community, or a couple offenders, and evict them. Send them a letter not renewing their leases. And see what happens. They will either immediately clean up, or do nothing. If they do nothing, carry forward with the eviction to make an example out of them and get them out of your community. This may shock the next worst offenders in to immediate clean-up mode. Continue this exercise until everyone has cleaned up their act. If you have to kick out six tenants, than odds of getting a good sale down the road or refinance are about zero. It hurts to give up a little cash flow bow, but it will pay big dividends down the road.
Do The Finishing Touches Yourself
Once everyone has cleaned up and the crime is gone, it's time to finish the job. Make a list of all the things that look bad to you, such as missing skirts and bad paint jobs. Add in necessary landscaping and fence repair. Now go hire someone to do these things. Go to each tenant who needs the improvement, and tell them you are going to fix it and bill it back to them spread over twelve months or so. They will never get these things done on their own, and you will die of old age before they save up the money to do it. So jump step out and get it done now, and then bill it back to the tenants.
Now Reward Yourself For A Job Well Done
Does your community look better? Are you proud of it? Then it's time for a rent increase. Send a letter to the tenants letting them know that you have expended serious cash in getting the community nice and now you must raise the rent a few dollars. Remember that raising rent is the best way to increase your cash flow, and you earned it. Now you have a more valuable asset, and some extra money coming in. Life is good.