When I started in the mobile home park business, I had absolutely no idea how to get tenants to pay their rent. My first park was a run-down dump with the lowest-class tenant base imaginable, but I was trying to collect from them in the same manner that you would collect from the Junior League. My ridiculous letters and weak phone calls probably produced more humor in the park than the Hee-Haw reruns. Despite all of my attempts, every time I went to check the P.O. Box, it was empty. I was a total failure at collecting. At the same time, the park's bills kept piling up, without any funds in the account to pay them. Something had to give and fast.It was in this era of total frustration and cash flow shortage that I forged my collections system which I call: “no pay—no stay”. It's really quite simple. The git is that if you do not pay the rent each month when due, I simply kick you out. I don't chase after you. I don't send you nice notes reminding you that the rent is due. I simply file for eviction, and have the constable throw you and your stuff out on the street. Here's how it works: Invoicing the tenantsOn the fifteenth day before the month in which the rent is due, I send the tenant an invoice telling him how much rent is due and that it is due on the first. In that invoice is a return envelope with the address already on it. Any late fees from the prior month are shown on the invoice, as well. That ensures that the tenant knows exactly what to pay and where to send it. The address is a P.O. Box, so that there can be no excuse that he “put it under the manager's door and it was lost”, etc. Due datesStarting on the first, and up until the 5th, the rent is on time. Tenants who pay in this time period receive no late fee, and I do not add late fees until the rent comes in with a postmark after the fifth. The postmark is what I use in court should a late fee ever be questioned.Any tenant who has not paid his rent by the fifth will receive a ten-day demand notice, as required by Texas law (check the laws in your state to know what the notices are and when they are to be sent). Any tenant who has not paid after five more days receives a five-day demand notice, again in accordance with the law. This notice tells them that if they do not pay the rent immediately, an eviction will be filed. Evicting a tenantAt the end of the five days, an eviction is immediately filed with the court. It asks for a judgement in the amount of the rent, and that the tenant be removed from the park. Normally, the court schedules a court date within a week or so.Following the court appearance and subsequent winning of the case, and following the required waiting period for appeal, I file for a writ of possession. I then call and follow along with the constable to make sure that the writ is processed as quickly as possible. With the writ, the tenant is removed from the park, and my deadbeat is gone. Make timely payment a priority for everyone—no exceptionsSo what is so magical about this process? The key step is that I do not attempt any further tenant contact. The tenant is the one who is chasing me to try and make payment arrangements. And the other important step is that I never accept any payment plans other than the full amount right now. I will only stop the writ upon receipt of the rent plus late fees and court costs. Sounds pretty heartless, right?It's not really heartless at all. For some reason, mobile home park tenants think that everything is negotiable and that the landlord is more than a businessman. The landlord in a park is expected to be a fairy godmother who puts the good of the tenants ahead of the park's finances. I don't know any other creditor who is expected to be put in this position, do you? If you don't pay your car note, it gets repossessed. Don't pay your light bill and you have no electricity. So why should a park owner be any different?What I have found in over a decade of using the “no pay—no stay” system is that it really works. I have driven bad debt down to a fraction and, in some parks, none at all. More than anything else, I have changed my tenants' priorities on payment—and I always come first. Even at minimum wage, the tenant can afford to pay the $200 or so park lot rent. When they don't pay, it's not a matter of shortage of funds, but instead of priorities. If you are not an aggressive collector, your rent ends up as a new waterbed. Mobile home parks require “tough love”Going back to being “heartless”—I would argue that the landlord who does not aggressively collect rent is the real problem for the tenant. If you let the tenant get several months behind in their rent, they will be unable to ever catch up. If you allow them to lose their priorities and then finally force them to pay five months at one time, they end up on the street with the whole family living out of a car. Tough love is a good thing on mobile home park tenants. Ensuring that they pay their rent every month ensures that their kids have a roof over their heads.So the next time you are left with a pile of bills and a long list of unpaid rents, consider my “no pay—no stay” system. It really, really works. And if you stick with it, you can make that list of unpaid rents non-existent, as well as that pile of bills. And that's a great feeling to have.
No tags for this post.