I am writing this as I close out Q3 for all our companies. Itâs always a busy time of year for my team and me.
We have many entities that fall under our purview, each requiring a full set of books and financial management. As an Operator, I personally believe that one of the least discussed aspects of syndicating Mobile Home or RV Parks is the financial management and bookkeeping responsibilities. For each community we operate, it’s essentially a new business, requiring its own set of books and time commitmentâmonthly closeouts, quarterly and year-end reporting to investors, and tax preparation.
On top of the communities, we have our Capital Raising and Marketing Company, as well as the Property Management business. It not only costs money to manage this financial responsibility but also takes a lot of time. Dedicating hours each week to meetings, financial reviews, expense reconciliations, and comments was never touted as a key part of operating Mobile Home Parks. The pundits talk a lot about cash flow, lot count, raising money, tenants, increasing rents, and funny stories about managing these parks, but they rarely discuss the responsibility of managing each communityâs financials along with the supporting entities.
I can honestly tell you that I completely underestimated the workload and importance of this side of the business. I assumed Iâd hire a bookkeeper and CPA, and theyâd handle it all for me. Well, as I mentioned in my previous article, Behind the Scenes â Accounting: What Every LP Should Ask About, thatâs not how things worked out. I made many mistakes early on that my investors were patient with, and now weâve corrected those to properly provide our Limited Partners the information they need to feel confident their capital is being properly managed.
Our Organization
Weâre a small organization at the time of this writing, with only three communities under management, four employees, two community managers, and a team of outsourced assistance. I handle the bulk of the financial management.
As we scale, Iâm sure larger operators can confirm that this responsibility will eventually be delegated to a dedicated CFO. Thatâs our goalâalong with hiring and building out a broader accounting team. One that handles specific responsibilities like AP & AR, as well as financial accounting. Right now, our bookkeeper handles the bulk of those roles, with myself and our Operations Manager assisting in invoicing and bill-paying.
However, until that time, it’s me and my bookkeeper in the trenches every week. I look forward to the day when I can write an updated article on this topic and show how a large organization handles these functions. But for now, I felt it was important to document what we go through as a small, hardworking organization, navigating and communicating our quarterly reporting to our Limited Partners.
Donât Leave Too Soon!
At the end of this article, I have a link to a questionnaire, and I want to hear from you, the reader. Whether you invest in Mobile Home or RV Parks, or if youâre a lender, loan sponsor, or a Limited Partner in a syndication or fundâthis applies to you. Share your frustrations with communication or reporting, and tell me what you think is missing from your General Partner or Operatorâs updates. You can also share your suggestions on what you wish youâd receive, how often, or what level of involvement you’d prefer. This may be out of the ordinary for a blog, but Iâm genuinely curious about where everyone stands on this issue. If youâve been reading my weekly articles, you know I feel these issues are often overlooked and sometimes tolerated by Limited Partners because they believe itâs the norm or feel that better options arenât available to them. You can even tell me where Iâm going wrong! Any suggestions will be held confidential, and although they may be used in future articles, they will never be connected to the reader making the comment.
End of Quarter Reporting
We communicate to our Limited Partners on a quarterly basis. Many investors Iâve spoken with felt this was the âGoldilocksâ span of time to update them. Monthly and weekly was too frequentâtheyâre busy with their own businesses and jobsâand annual updates left them wondering too much about how their investments were performing.
By the 15th of each quarter close, we aim to have our Investor Reporting Package emailed out, with distributions to follow later that week.
Personally, I also use this blog platform as a way to communicate weekly with them. Each Limited Partner is included in my newsletter, which sends out the latest blog article to keep them up to date on me and my team. I also use social media to show live, on-site operations of all our investments. I believe this is the perfect balance of communicationâitâs not too much, but it’s enough for them to feel confident that weâre actively operating their capital to the best of our ability without being invasive or cluttering their inbox.
Financial Reports
Requests
We welcome requests from our Limited Partners for any financial or operational reports at any time of the year. We actively update our books each week and keep our Property Management software up to date. Initially, we wouldnât have been able to handle these requests, but as weâve built out better financial processes, we can now provide any updated report within 24-48 hours.
Whatâs available, what do we prepare?
We prepare the standard profit and loss statements and balance sheet figures, but we also prepare a customized Weekly Cash Flow Roll-Up for each community. This Cash Flow Roll-Up was designed specifically to track collections and expenses weekly so we can budget more effectively.
Our Property Management software is also capable of producing a litany of reports, from occupancy rates and rent collections to unit and tenant-based reports. While not every LP may want these reports, some more active investors appreciate the updates on how weâre improving and working on the original business plan they invested in.
What weâre asked for:
Our Limited Partners often ask for reports on cash reserves, updates on capital spending, project costs, and rental collection ratios. Some LPs even request updates on insurance coverages, home sales, lease updates, and distribution estimates.
The ability to have all these financial and operational reports on hand and up to date is a testament to the work weâve done to improve our processes. Reviewing these numbers weekly and monthly ensures poor performance can not be ignored, and keeps us focused on increasing distributions and maximizing the Return on Investment (ROI) for our investors.
We can only grow what we closely monitor, and this constant oversight is now helping us grow both our top line and bottom lineâultimately benefiting our Limited Partners.
The Investor Reporting Package
At the end of each quarter, we provide a detailed income statement that shows the investment’s performance. This is included in a larger package, which I call our âInvestor Reporting Package,â sent directly to our Limited Partners to ensure they understand how the community is performing.
In that package, we include the following:
- Community Summary Report
- General Partner Letter
- Distribution Letter
Community Summary Report
Who Prepares It?
Our Operations Team reviews all the data for each community over the past three months. Theyâre intimately familiar with the details and are best positioned to identify the most relevant information for the Summary Report.
Whatâs Inside?
The operations department produces a detailed quarterly summary outlining projects, leasing updates, occupancy rates, and collections. We also break down major expenses, maintenance work, and other community details. Even if the park is operating efficiently, we provide this summary to ensure Limited Partners are fully aware of our efforts.
A quick summary is better than none, in my opinion.
Why Itâs Important:
After the first year of only providing an investor letter with a high-level overview, I realized more detail was needed. Our Limited Partners deserve to know just how hard weâre working on their investment. A letter alone doesnât capture the full scope of work or the actual community performance.
So, we created this 5-6 page Summary Report for each community to better communicate with our LPs. This level of reporting, when combined with the financials, creates transparency and gives LPs visibility into the investment’s health.
Ultimately, this helps protect their capital by allowing them to spot issues or ask questions before problems escalate.
Quarterly Letter
The financials and the Community Summary Report are sent to me by the 10th of each quarter. I review them for questions or revisions, then write a personal letter to our Limited Partners.
In this letter, I share my thoughts on the quarterâs performance, any challenges we faced, and updates on upcoming projects. I also share my personal insights into why we encountered certain issues and how we plan to address them in the coming months. I will simultaneously share my thoughts on our victories, what we did to achieve them and how to continue the success. Finally, I outline our plans for the next quarter, detailing how these projects will affect both the community and the investors’ returns.
Distribution Letter
The final piece of the Investor Reporting Package is the distribution letter. Each quarter, we review Free Cash Flow and make a decision on how to distribute income.
A potential Limited Partner recently asked how I make that decision and whether I ever decide to hold back distributions. Hereâs what I explained:
Our Operating Agreement and Private Placement Memorandum outline how we distribute income. As General Partners, we cannot keep distributable income for ourselves. However, we can elect to hold some back in reserves for future improvements or operational requirements.
This quarter, for example, I elected to hold back 25% of distributable income to bolster our reserve budget and address a few issues that required excess capital. This decision helps ensure we donât run into a deficit, face delays in completing necessary improvements, or worse a Capital Call.
In Conclusion
The final Investor Reporting Package is combined into a single PDF and emailed to each investor. This is how we communicate with our investors every quarter and ensure they have a clear understanding of their investmentâs performance.
Thanks to a strong team and solid software systems, weâve streamlined this process. What once took weeks now takes less time, allowing us to send out reports by the 15th of each quarter. Not only that, but our reporting structure and process enables scalability in our operations. Ensuring our growth and goal of buying 100 Parks does not compromise financial accuracy or communication.
These consistent efforts in communication and reporting are crucial in building and maintaining trust with our Limited Partners. As their General Partner, itâs our responsibility to provide transparency and ensure they feel confident in the management of their capital.
While Iâm proud of how far weâve come, I still see room for improvement. As we grow, weâll continue to look for ways to better serve our Limited Partners and make the reporting process even more efficient.
Managing the financial aspects of Mobile Home or RV Parks is one of the biggest components of being a General Partner. If Iâd been better informed when I started, I may have done things differently. But I believe in the process, and Iâm proud of where we are today. Each mistake and lesson was essential in shaping the organization we have now.
If you want to talk about this article or discuss MHP & RV Park Operations, use this link to set up a time for a Zoom call, and letâs talk!
Lock Nâ Load
-The MHP Operator
Disclaimer: The information provided in this article is for educational and informational purposes only. It is not intended as legal or financial advice. I am not a licensed financial advisor or a lawyer , and you should consult with a licensed professional before making any investment decisions.
