Investing 101: How to Work with Residents When They Stop Paying

As a mobile home investor being in this business for over a decade, it’s unfortunate when I have to take a mobile home back. Though, I’ve come to realize it’s all a part of the business.

So what do you exactly do when your renter or buyer stops paying?

Talk to your residents

Depending on your personality, you can talk to your residents if for some reason they stop paying. There are many mobile home investors I know who do business this way (including Lonnie Scruggs himself).

Try to find out why you didn’t receive a payment from your residents for the current month. Early. Honestly, the sooner the better. Don’t wait too long.

Give your residents the benefit of the doubt. Sometimes it could just be a case of the payment being lost in the mail (which has happened to me personally). Or they’ve had a hard month financially. (In these types of cases, something has changed either through job loss, medical situation, etc).

But this isn’t the case all the time. So prepare yourself for the worst.

Post a Notice

If talking doesen’t work (or simply does not work with your personality), you’ll need to post a notice.

Depending on the laws in your area and the way you have your paperwork set up (buyers or renters), you’ll have to draft up a Notice of Nonpayment.

(Note: If you’re interested, there’s a sample Notice of Nonpayment in my book if you’d like to check it out. Hope that helps!)

Hopefully, your residents will respond to your notice once you have posted it and mailed it (which is what I do). Once they contact you, listen first. Then decide what you want to do.

If this is the first instance and they have a valid reason for being late, then try to work with them. But be clear this cannot be a regular thing. Don’t bend over backwards for people who simply cannot make payments regularly.

(Note: If they are good people and are upfront, usually they will tell you if they simply cannot make payments on the home anymore. In these cases, I make arrangements with them to clean the home, take their belongings, and either pick up the keys or leave them with the park manager.)

Posting notices in writing is my preferred way of doing business. I follow exactly what the mobile home parks do.

In the beginning, I did things the old-fashioned way. I called residents who stopped paying to find out “why.” Though, as my mobile home investing business grew and I started to take on more inventory I changed it up and started posting notices to be more effective on how I spent my time.

File a court petition

If you don’t get anywhere by talking to your residents and/or posting a notice, you’ll need to file a court petition. I’ve done this several times with residents who don’t pay. It’s not a big deal…as long as you know the laws.

Usually, you’ll need to pay a fee and have a copy of your paperwork to file the petition. The court office will set a court date. And you’ll need to show up and be prepared. I cannot stress this enough. Don’t expect to “wing” things. Have your paperwork in order and be prepared to present your case to the judge.

Hopefully, it won’t come to this. Usually, most residents will try to contact you before the court date to see what can be done (they pay!). But there are some, who will show up to court. This is why it’s so important to choose your residents carefully.

If you have to go to court, arrive early and prepare beforehand. Usually, it’s a cut and dry issue. Either they paid or they didn’t pay. Depending on the judge, it will be a back and forth where you present your case and the resident presents theirs.

But I have to tell you, I’ve been to court in the past where I didn’t even say a word. The judge had what they needed (my filing paperwork) and asked the resident if they paid. They said, “no,” and that was the end of that. Case closed.

Update the park manager and/or owner

If your residents are leaving the park for nonpayment, you’ll need to update the park manager and/or owner. Usually, I do this beforehand as I’m going through the process.

Once my residents are late, I make it a point to go and talk to the park manager and/or owner. I check to see if my residents are late with lot rent. If they are, this is a sign that you may need to take the mobile home back.

When it comes to working with residents, you want to make sure you’re on the same page with the park manager and/or owner. Keep them updated on your people and they will do the same.

Conclusion

So there you have it. These are just a few things you can do to work with residents when they stop paying. Above all else, keep good communication.

If you have honest residents who are upfront, you should have no problem when it comes to late payments and/or taking back a mobile home. Honestly, bad things happen to good people. So give them the benefit of the doubt. Work to see if you can make payment arrangements for the short term.

If not, you’ll need to make arrangements for your residents to leave the home in good condition. The same way they first moved in. If not, unfortunately you’ll need to go to court. And prove your case from there.

So have you had any issues when it comes to taking back a mobile home? Let me know! I’d like to hear your experience.

Hope this article helps. Happy investing!