Top 5 Property Upgrades - Episode 5
Carl Moore:
Welcome to Meaningful Capitalism, I'm Carl Moore and I'm here with Brant Greathouse.
Brant Greathouse:
Hey, hey hey.
Carl Moore:
We are talking about the top five changes in an asset. If we buy a property and we're only going to do five things, what are the top five things? What are the high five?
Brant Greathouse:
Well, guys, there's only so much to a mobile home park. You've got roads and utility infrastructure, you got people who are living there and you got the homes that they're living in. So one of the easy, low hanging fruits is utilities. If you're buying a property where you are in the utility business and you are paying everybody's water bill, and you're paying everybody's electric bill, and you're paying everybody's trash bill, and you're paying all these bills. That is because you bought a property from somebody who's been operating it like back in the 1950s.
Brant Greathouse:
Today, it's the industry standard for people to pay their own utilities. However, when a park or a property owner has been paying for everybody's utilities for so long, it just becomes normal to them. And it just becomes a standard that they get to stuck in. And so there's been multiple times where we'll buy a property, and the park was paying for everybody's water bill, we'll simply install some meters and we'll start billing back their water. Or get it converted to where the city starts billing their water, and that's the ideal scenario.
Carl Moore:
Absolutely.
Brant Greathouse:
So that's what I'd say number one is. What would you say for number two?
Carl Moore:
I don't know if I would call this in order number two, but one of the things that just kicks off right away as a place to save money is insurance premiums. But by getting your insurance premiums lower, you're actually saving money in other ways. And one of the main ways that, anytime that I meet with our insurance, they say, "Hey, send me over those rules and regulations." I want to know what you're enforcing on these residents. Are you allowing swimming pools and trampolines and bulldogs? Because if you are, you're going to have a higher premiums. Also park owned homes, if you have a lot of park owned homes, you're going to have to pay insurance premium on all of those homes.
Brant Greathouse:
So what's a park owned home?
Carl Moore:
It's a home that the park owns instead of the resident owns. Ideally in at least our situation, I've heard of other investment ideas around this, we don't want to own any home. We want to finance that back to the next person that moves in if it's left to us and we really want to have a mobile home parking lot. Not so much an apartment on wheels. And so I really think that one way that you can drastically reduce your expenses, or one of the top five, are make sure that you have a good insurance policy, that covers all the essentials. But that you have the rules and regulations and the leases and all of that over to them so that you can have those affordable premiums.
Brant Greathouse:
We've had insurance policies that have been cut in half because we've done some of these things.
Carl Moore:
Absolutely, one by $19,000 this year, we cut $19,000.
Brant Greathouse:
19,000 a year. That's a big premium to be saving.
Brant Greathouse:
So number three, and like he said, we're not listing these in a particular order, but these are on our top five lists for sure. And number three, I'd say is market rents. First of all, if somebody is paying for the same product, but it's grossly under the rest of... Everybody else in that area for market, it's like, why haven't rents gone up? I know that your taxes has gone up. I know that insurance has gone up. I know that other things keep going up, costs and materials and labor and payroll cost. Why aren't the rents going up?
Brant Greathouse:
Well, if you're going to be running a property and doing a good job, you're going to go broke if you don't raise the rents. So analyzing other class B apartments, that's your direct competition. Analyzing what the demographics of the average incomes for people in that geographic area are earning and what they can afford. And determining also what other mobile home communities are charging for their lot rents, their home rents. And then compiling that information and deciding, okay well, our property compared to these other properties can easily justify raising the rents to X. And by raising your rents, it's raising your revenues and putting money into the bottom line of your company.
Carl Moore:
Yeah. So number four, and I really believe this is directly tied to what you were just talking about, market rents, is the roads and the entrance. Because that is the number one thing that we do when we buy a property, we intentionally buy these properties, raise the capital to go in and put in those really nice, smooth roads that you can roller skate on, that you can bounce a basketball on, because those are the things that are going to attract quality residents. And if you have market rents, if you're sub market, just to get people to move in often what you're going to end up doing without realizing it is, attracting a clientele that's going to keep your property at that B or C level instead of holding a higher standard. So as a community, put in the high standard, we're putting in these white Kentucky fences, we're putting in a new big sign with our phone number on it.
Carl Moore:
We're going to proclaim to everybody, "Hey, this is who we are. And this is what we do." And one of the things we also do in that whole roads and entrance transition is we stop using the word park. It is now a community.
Brant Greathouse:
Yeah.
Carl Moore:
We are group of people in a similar effort with the same mindset to live in a safe, clean, and affordable way. If you are not bringing safe, clean, and affordable into our community, you're not welcome here. And we do all of that through holding these market rents, through paving these roads, through creating these welcoming entrances. And...
Brant Greathouse:
Not only that, but you're going to have an annual expense of fixing potholes every year. And that expense annually, that comes out of your bottom line. So that's going to devalue the value of the property overall. And isn't it interesting. I think every property we've bought with the worst roads, I think we bought them from a guy who runs a paving-
Carl Moore:
Two different buyers we bought from that had terrible roads. And both of those guys were road guys.
Brant Greathouse:
They were road paving, like that's what their business was. And the roads in their own properties were terrible. They were the worst in the-
Carl Moore:
Oh, you're right. I forgot about that.
Brant Greathouse:
So anyway roads, that's a very big one I wanted-
Carl Moore:
Okay what's the last one, number five?
Brant Greathouse:
Number five, the last one is occupancy. That's the easier way to increase the value of the property. Easy way to increase just the feel of the community, is having people move into all those vacant lots. First of all, you don't want to be mowing the grass and maintaining a vacant lot. That's an expense, that means that lot has zero value. But as soon as it starts generating revenues, now it's a valuable lot. Now it's going to increase the value of the entire community.
Brant Greathouse:
And there's lots of ways to do it. You can have people who own their own home, move in their home. You can buy homes and sell them off through various types of financing, third party financing, or an internal form of financing to the resident where they can buy it on payments, or they can pay cash for it. So there's a lot of ways to fill lots. And that's going to make a big difference on the aesthetics, on the evaluation of the overall value of your asset. And it's going to make it... And ideally, you're going to be bringing in the right kind of people who are going to really have pride of ownership, pride of being able to be in that community instead of the people who are junking up their yard and stuff.
Carl Moore:
Absolutely. Hey, let's give them one more.
Brant Greathouse:
What do you have?
Carl Moore:
Right along with that, we advertise on tons of platforms. What's the number one platform we get leads from?
Brant Greathouse:
I'd say Facebook Marketplace.
Carl Moore:
Absolutely. I agree a hundred percent.
Brant Greathouse:
We do so much marketing on Facebook Marketplace, and that fills probably more than 50% of our lots. There's lots of other forms of marketing that we do as well, and that accounts for the remainder. But Facebook, I would say more than 50% of our leads come through that.
Carl Moore:
All right guys, there you have it. Our top five wrap up. I'm Carl Moore, this is Brant Greathouse. Thanks for listening to Meaningful Capitalism.
