Tuesday, April 27, 2010

Terminology Tuesday - Mobile Home Park (Lot) Lease Agreement

(Note: I think it's important to know the terminology and words used when learning any new business including mobile home investing. I came up with 'Terminology Tuesday' as a way to go over the terminology used in the mobile home business. It's important to know the terminology when talking to people in the business so you're all on the same page).

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Basically, the Mobile Home Park (Lot) Agreement is the agreement between the Mobile Home Park and the owner of the mobile home to abide by all of the rules and regulations of the park including (but not limited to): paying lot rent for use of the lot where the mobile home is located, maintaining landscaping, appearance of mobile home, etc.

In the agreement, the lot rent payment amount for the park including the due date and policy on late lot rent payments will be stated. Usually, there is also a pet policy.

In many family style parks, aggressive dogs such as Rottweilers and Bulldogs are not usually permitted. Also, there may be a weight limit on pets. In my experience, I've seen the weight limit be from 30lbs max - 50 lbs max.

(Note: It's funny. I always joke around with the park managers when this comes up - I've asked a few, "Do you actually weigh the pets?" One of the park managers actually had a scale in the office, what a crazy business!)

Right now (especially with the economy), I'm seeing more and more parks requiring leases signed. In many cases, it's usually a 1-2 year lease agreement with the park. This is a way for the park to retain tenants, while at the same time keeping a set amount of lot rent for the duration for the tenants.

(Note: Since the agreement for the park is a lease agreement for usage of the lot, the mobile home park is considered the "landlord" and the owner of the mobile home is considered the "tenant." The concept is just like a regular lease - there's a landlord and a tenant).

For those who are just starting out, many times the park will require an application on file for investors who do business in their park. This is standard procedure.

(Note: When I first started out, I was a bit taken back and surprised about this policy. Though, I thought about it and understand why now - if I were a park manager/owner, I'd want to know who's doing business in my park too).

Basically, the paperwork will involve the same application for the park - basic information including (but not limited to): landlord, work, criminal history, etc. (It's very similar to a rental application for an apartment and/or home).

The reason for this is many times they want to know who exactly they are doing business with. If for some reason, an investor buys a home in their park and there's a park issue - they want to have the peace of mind they are dealing with someone who they can trust and has committed to working together with them.

In the beginning as a new investor, the park does not know you. So, the only thing they can go on is the park application. If you fill it out to the best of your knowledge and you are honest and upfront with the park, they will learn to trust you.

Will they run credit? Yes. Will they verify all of the information on the application? Yes. If you have bad credit, will they not allow you to work in the park? Not necessarily.

(Note: If the park manager/owner likes you, they may even waive the application fee).

Usually, it will be up to the park manager/owner to make the decision whether or not they will allow you to work in their park. Remember, it is their park - you need to abide by their rules.

If the park manager/owner feels that you are a trustworthy person, in most cases they will allow you to work in their park. For some reason, if there is an issue with credit on the application - they may require you to put a deposit (in good faith) in order to work in the park.

Now, I know what some of you are thinking - this is crazy, I don't want anyone to know my information. But, if you look at it from the park's perspective they need to know exactly who they're dealing with. If you're honest and upfront with them, usually there will be no problems working in the park.

Over time, they will get to know and trust you. At first, it can be awkward. Though, over time they will get to know you and eventually trust you. And, trust and being able to establish trust is the backbone of this business.

Happy investing!

p.s. Feel free to leave comments on any post either here and/or my Facebook Page. Comments are always welcome, thanks for reading!

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