Being Soft on Collections Does Not Help Anybody
|When I first got in the mobile home park business, I was very inexperienced in collections. My natural instinct was to be nice to my customers and never offensive. So, when I first encountered customers who would not pay their rent, I did not want to offend them by filing evictions. Instead, I tried calling them or sending reminder letters. |
Time marched on. After they promised to pay several times and still never did, I realized my methods were not working and that I would need to "toughen up" and change my ways. I started filing evictions as soon as I could once they had failed to pay on time. You know what I discovered? I discovered that this was the best thing for all parties involved. Here's why:
Some people need strong direction. Just like kids in school, some people need a firmer hand. Your filing of eviction may be the trigger that the tenant needs every month to pay his rent.
Once you let a tenant get more than one month behind, they are doomed. I learned early on that most trailer park residents have great trouble saving money, or showing a surplus from their paycheck. If you let them get more than one month behind (and one month is pretty bad too), they will never be able to get caught up. You are actually doing them a disservice if you let them get behind. They can adjust their spending priorities or borrow from relatives and get current if you get tough early on. Think of your own mortgage. If you let yourself get three months behind, could you get current overnight?
Being tough on collections trains all of the tenants on the correct spending priorities. Those priorities should be their taxes, housing, auto payment, insurance, gasoline, utilities, and then all the other fun stuff like food, beer, etc. Not to sound like there is some great, "bettering the world¨ angle here, but maybe their lives will be better because you taught them this lesson.
It is not fair to the other tenants if their neighbors don't pay rent but still get to live there for free. Not only will everyone stop paying eventually when the word gets around, but it is just not morally right. Being tough on collections, believe it or not, is the only fair way of dealing with the issue.
If the tenants don't pay you and you can't pay your bills then the park will shut down and nobody will have a place to live. Or, they will have to spend $3,000 moving their trailers to a new mobile home park.
Most everyone flourishes in consistency. If the tenants know the rules of how things operate, they are better at meeting the rules and feeling secure. This is true in any enterprise or relationship. If the tenant knows the rent is due on the first, late on the 5th, and they get evicted on the 15th, then they know what to do. When you make payment plans and are soft one month and tough the next, everyone is confused and unhappy.
It is also important to remember that a tenant who does not pay their rent on time, but does ultimately pay their rent, is your most profitable customer; assuming you have a significant late fee! You should not become discouraged if many people do not pay on time, you should be enthused! Those late fees are straight profit.
So, don't be afraid to be tough on collections. You are really just following the natural order and it will be a win/win solution for everyone!
|Dave Reynolds is a successful real estate investor that has specialized in the purchasing of Mobile Home and RV Parks for the past 12 years. He has the keen ability to quickly assess deals, cut through hype, measure upside vs. downside risk, and make sound decisions. He has owned and operated over 55 Mobile Home & RV parks over the past 12 years in 16 different states. He currently owns over $10,000,000 in mobile home park real estate.|
Dave Reynolds received a B.S. in Accounting from Mesa State College in Colorado in 1992 and attended graduate school majoring in Accounting and Taxation at Colorado State University in 1993-1994.
Frank Rolfe was born in Missouri, the "Show Me" state, and has been starting up businesses since high school. He has had two big successes: a billboard business that he sold to a public company in 1996, and a mobile home park business that he sold to various buyers beginning in 2004. He always has several start-ups in the hopper - currently an old time photography business, a web-based educational products business, an art school, and a return to the billboard business. Frank Rolfe holds a B.A. in Economics from Stanford University.
Dave Reynolds and Frank Rolfe have combined forces to bring the real estate market a better perspective on the multiple successes you can have with Mobile Home Parks. Together they have a combined experience of 20+ years and over $100,000,000 worth of deals under their belt.
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