Any New York State park owners out there? Has anyone heard of the new regulations put into effect in June? Basically limiting rent increases to 3 % per year or 6% with just cause such as infrastructure improvements?
Will that make NYS parks less attractive to prospective buyers or possibly change cap rate?
Thoughts?
New York state parks were already less attractive for the exact reason you mention. Political risk is a huge factor in blue states as they tend to legislate in favor of tenants and they tend to not take business owners needs into consideration. There are certainly great opportunities in those states, but the political risks can be significant.
This is a challenge, however because rents are generally significantly higher in many states things like higher taxes and tenant friendly laws can be over come. I’ve successfully run many parks in New York and actually like doing business in the state once you learn the rules.
I think it’s a little too early to tell exactly what the impact is. However, my prediction is that yes it is already impacting many “would be” park investors from buying in NY due to the tenant friendly environment and now this insane law that can’t possibly help anyone. I expect it will command higher cap rates if all other factors remained equal. However, there are also many “investors” in NY (ex. a lot of folks with larger discretionary income than most" so it’s hard to say if the cap rates will be any higher than most other states. I’d say they will most likely stay lower than average simply because no matter how terrible the climate for buying parks is in NY, there will be many people that will continue to buy properties here simply because of the convenience of location.
If you contact Kathy Burke at the NYS Manufactured Housing Association she will e-mail you some memos on the recent law changes. They are a good summary of the changes. Or, I can e-mail them to you if you DM me.
I am negotiating a contract to purchase a park in NY. I am not scared off by the rent control because the park rents are close to market for that area and the park is stable. Then again, just like the other poster mentioned, NY is in my backyard so would I be looking there if I lived in any state that is a plane flight away…probably not.
I can see the law changes being a problem where a buyer is trying to realize upside either through raising rents or billing back utilities. The 3% cap will make that pretty difficult. Also, you won’t have an exit strategy that involves selling the park to a developer who will seek to change the use of the property. The new laws make that possibility extremely unlikely.
That said, if you find a good deal in a decent market then you will likely make money. Overall, in the state of NY vacancy in mobile home parks has historically be very low.
Thanks for the feedback! I guess as long as rents are close to market and park is stable, shouldn’t be that big of an issue!
Appreciate the comments!
Rent control will mean that buying a park with rents below market will no longer be attractive. Mom and pop are going to pay the price for not continually raising rents. The nature of park tenants being generally long term will lead to rents dropping below market over the long term devaluing your investment. My market has had rent controls for a vary long time and as a result 2/3 of my tenants are below market. 1/3 are below 50% of market.
Rent control discriminates against new tenants as they will be paying market rent and carrying the burden of expenses on the park. New tenants rents will need to be pushed much higher to compensate for the tenants below market that are getting a free ride.
Tenants moving out eventually becomes a blessing rather than a burden.
Our company owns apartments in New York State and it has already had a dramatic effect on evictions already. It went from getting people out in about 3 - 4 weeks to not 6-8 weeks.
Do you know where I can find the rules?
Landlord tenant regulations should be on line. A google search will bring them up.
All landlords are responsible for knowing and understanding all state landlord tenant regulations before they begin business. Arm chair investors must rely on their PM to know the regulations.
Section 233 of the NYS Real Property Law governs tenants’ rights in manufactured home communities. I tried to find an updated version of Section 233 that reflects the law changes from June, but could not. I’m sure it is out there. Make sure whatever version you find online is amended to reflect the recent law changes.
The best was is to google New York Landlord Tenant Laws. There are 4 different statutes that apply. That is the easiest way.
Rent control is only in 4 counties not the entire state.
The new Rent control law applies to all mobile homes / mobile home parks in NY state - The 4 counties you are referring to are for apartment rentals .
Frank always says there is a right price for every park