Tuesday, June 15, 2010

Terminology Tuesday - Security Deposit

(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).

According to Wikipedia:

"A (security) deposit is a sum of money paid in relation to a rented item to ensure it is returned in good condition. They are particularly common in relation to rented accommodation, where they may also be referred to as a tenancy deposit or in some places a bond. The owner of the item (the landlord in the case of accommodation) will take a sum of money from the person(s) renting the item (the tenant). If the item is returned in good condition at the conclusion of the tenancy the owner should return the deposit. If the item is returned with damage the cost of repairing that damage may be charged against the deposit, and part (or none) of the deposit will be returned."

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When first starting out and looking for parks to work with, you may be asked to fill out an application for the park as well as provide a security deposit in the parks you choose to do business with.

Do not be alarmed. In my experience, this is standard protocol.

In the beginning stages, it's going to take time to get to know the parks - their managers and their owners. If you think about it, you are a stranger and they don't really know you. Sure, you've come in and established a relationship. Though, that relationship needs to be built on trust. And, trust is something that can only happen over time.

So, when first starting out be prepared to encounter this issue. In this prior post about the Mobile Home Park (Lot) Lease Agreement, I had stated the park will probably run a credit check with the application and verify all the information just like a regular prospective tenant applying for the park.

(Note: Since the park is leasing the lot, it is a landlord tenant relationship between the park and the owner of the mobile home. The park is considered the "landlord" and the owner of the mobile home is considered the "tenant.")

Regarding credit, having an unsatisfactory credit history does not necessarily mean you will not be allowed to work in the park. It all depends on the park manager/ owner and how they "feel" about you.

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.

Again, this will be evaluated on a case by case basis - it depends on the park and their feelings towards you. Remember, this is a relationship - just like a marriage. They need to feel comfortable working with you - it is their park and you will need to abide by their rules.

(Note: On the other hand, make sure you feel comfortable working with the parks you choose to do business with. In the past, I've worked parks and have not been completely comfortable with their protocols. One park in particular had much lower qualification standards than mine which I did not feel comfortable with. Now, I only work with parks with the highest qualification standards as it complements my personality. Again, it's all a matter of personality and comfort level).

Over time, you will be able to build and strengthen the relationships you have with the parks you choose to do business with. In the end, it all boils down to trust. And, trust cannot be given - it can only be earned.

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!


Esi said...

You makes a really good point with trust. Not just in mobile home investing. Even in other SFH investing. If the home owner does not trust you, it doesn't matter how motivated they are, they will not deal with you. You have to learn to create trust right away, be upfront and always tell them the truth even the bitter ones. They will appreciate it a lot. First impression matters a lot in this business.

Mobile Home Gurl said...

Most definitely, Esi!

In most cases, trust is the most deciding factor when folks choose who to work with/who not to work with - it's not always about money.

On the flip side, I also use trust as a gauge when deciding which folks to work with as well. If I can't trust the person I'm dealing with, I won't buy from them no matter how low the price. If I can't trust them in the first place, I can't really trust what they tell me about the home and its history.

Thanks for sharing and for stopping by!