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SEPTEMBER 2015 22 THE JOURNAL Why The Customer Is Not Always Right BY FRANK ROLFE COMMUNITY CONSULTANT Classic sales and management training revolves around the concept that "the customer is always right". However, that's not always the case, par- ticularly in the manufactured home community business. Sometimes, what's good for the cus- tomer is the opposite of what they desire. Here are some of the most significant examples. Lower rents often lead to re-development Customers always want low rents. If it was left up to the customer, the average lot rent in the U.S. would be about $50 per month. What's wrong with that? At low rents, manufactured home communities vanish and become other de- velopments. There are plenty of competing uses for land, and that's the reason why so many man- ufactured home communities have disappeared over the past few decades. Recently, two of the largest communities in Hollywood, Florida were torn down to make room for apartments. That's only the tip of the iceberg if rents do not stay high – and climb higher. Low rent is the first stage to homelessness – unless you can afford a $ 1,400 per month apartment. (that's what those apartments in Hollywood, Florida start out at). Or, of course, you can buy a stick-built home, with the U.S. median price of around $200,000. Or maybe live in your car. Weak collection systems lead to the customer getting so far behind they can't catch up Many mom & pop owners of manufactured home communities are way too easy on collec- tions. All they hear from some residents is that "I'm having trouble paying this month, so can I pay you two months of rent next month?" Because they are kind people, they agree. But here's what we've found happens when you buy that mobile home park. That same resident is now two years behind in their rent, and does not have a prayer of paying up when you file for eviction. They always end up homeless. Are you doing what's right for them by letting them get so far behind? No. A good landlord forces them to pay every month. We call that policy "no pay/no stay" and it forces the customer to make the right choice and prior- itize rent paym ent over entertainment. Allowing residents that misbehave to remain on property endangers everyone Some residents want to do anything they want, anytime they want. From loud parties after mid- night to target shooting, their wish is for you, as the landlord, to let them run wild. If you give them what they want, you will end up with no other tenants, a couple lawsuits, and no insur- ance. We have bought communities that were terrorized by a single tenant who mom & pop would never stand up to and kick out. That's ridiculous, and unfair to everyone else. We call that policy "no play/no stay" and it means that if you will not play along with the rules like everyone else, you're gone. Managers that favor their friends and relatives create an atmosphere of unfairness for everyone else Most of our managers live inside our communi- t ies, so they are both managers and residents. And one thing that can never be tolerated is to allow them to show favorites with their friends and family. They may like to play the part of the bigshot that is the benevolent benefactor of a few select people that they hang out with, giving them vacant lots as extra yards or looking the other way when they hold wild parties, but that's never ac- ceptable. Any manager that does anything of that kind needs to be fired immediately. Bad looking homes and yards hurt everyone All the time we hear from certain residents "I like my home and yard that way, and it's none of your business what it looks like". They want to be left alone and allowed to destroy the park aesthet- ically. Once again, this customer is always wrong. It is not fair to the other residents – who have clean yards and attractive homes – to look out on that pigsty 24/7. And if you don't care about your residents enough to make them stop, then what about your pocketbook? What do you think the appraiser and banker and buyer are going to think of your property? A few terrible looking homes and yards can cause a spike of as much as one point in your perceived cap rate. And many lenders won't finance properties that do not show a "pride of ownership" on the part of the tenants. Lower rent often means lower repair and a lower quality of living Going back to lower rent again – because that's the issue that residents complain about the most – there's a certain disconnect between giving the customer what they really want, and giving them what they really want. Most of the residents want a clean, safe place to live, with solid infrastructure and professional management. Smart ones under- stand that you only get what you pay for, and higher rents are necessary to deliver a quality product. Most of the manufactured home com- munities that we buy need significant deferred maintenance to bring them back to life, and that costs money. And professional-grade manage- ment costs a whole lot more than what mom & pop were providing. Our opinion is that manu- factured home community rents need to double in the near future to allow for the quality of opera- tions that are commonplace in the apartment in- dustry. The national average apartment rent is around $1,150 per month. The average manu- factured home community lot rent is around $275 per month. Even at $500, we would be half of apartments. Conclusion If you ever truly believed that "the customer is always right" then stop – or change careers. Be- cause the customer is often terribly wrong in the manufactured home community business. You have to watch out for the general welfare of your residents, as well as your bottom line. While it's a great thing to have nothing but happy cus- tomers, the truth is that some customers should never be made happy, because what they are ask- ing is in nobody's best interests. Do yourself – and your community – a favor and just say "no". Frank Rolfe has been a manufactured home community owner for almost two decades, and currently ranks as part of the 6th largest community owner in the United States, with more than 17,000 lots in 20 states in the Great Plains and Midwest. His books and courses on commu- nity acquisitions and management are the top-selling ones in the industry. To learn more about Frank's views on the manufactured home community industry visit www.MobileHomeUniversity.com. T J