There are several risks that you need to be aware of when entering the mobile home park industry. The MHP Expert is here to guide you through these scams, and help you make the right decision!
Knowing The Scams With MHPs
The first is, of course, being swindled. This is especially the case in off market deals. As with every industry, not everyone is who they say they are. Some don’t mind stooping to unethical levels to turn a profit. It’s an unfortunate fact of life, and trust us, you never want to be on the short end of that stick!
To note, it may not always be that a person has a particularly insidious agenda. Some sellers may just not be aware of their shortcomings, or lack the bandwidth to address them. When pursuing an off market deal, understand that it should come with a “buyers beware” warning.
Does A Contract Help?
One way to get as much tangible information as possible is the inclusion of contracts. While not a complete fix, it does help cover your end. But at the end of the day, you still should approach deals with a degree of skepticism. Assume they aren’t telling you the whole story. In fact, it’s likely that they’ve inflated rent rolls and income, while the expenses are being moderated.
Ask as many questions, and dig as deep as you can to get a more accurate read on the situation. A solid understanding of the underwriting process will take you a long way here. Another good suggestion is to expand your network beyond the owner and broker. Build a solid rapport with third party vendors that operate independently of the broker or owner. Their insight may be the boost your efforts need to keep you on the upside.
Don’t Ignore The Red Flags
We have a client who came to us after buying a deal from someone with a bad rep and a seller that’s been absent. The new owner is now losing money hand over teeth, and is finding himself on the verge of collapse. The only people that will continue to earn more money on the deal is the owner and broker.
This is all because the client took a few too many people’s word on things. The red flags were there, but without knowing to look for them, it was a set up for failure. It’s shaping up to be a million dollar loss!
Avoid The Frauds!
To avoid scams, always ensure that your broker or consultant is a reputable one. Also, make sure the seller is being fully transparent. It’s okay if they aren’t experts, but they should at least be able to provide you with enough context to get the job done!
That’s it for today’s segment. Have more questions for us? We’re happy to help. Contact The MHP Expert today!