Hi everyone. I would like to hear from those of you who bought parks and increased rent significantly (>$50 per month in one single increase) whether to bring rent to market or just to increase it for NOI improvement.
What was your experience in the 6-12 months thereafter? Did you lose any residents, did any move their homes out, etc.?
Thanks!
For about half of my tenants, I increased rent >$50 a month day 1 and didn’t lose a single person. Actually I gained some. Not a single person has moved out since…that doesn’t necessarily have anything to do with the rent raise however.
My thoughts are that if you’re raising to market, why would anyone leave? Are they going to pay thousands of dollars to move their homes across the street just to pay the same amount? Doubtful. That being said, I think if market rent was much greater than current rent I would do the increase over a year or two.
Thanks for sharing Dominic! How did rents at your park compare to the neighboring communities before / after the rent raise?
I’m less concerned about the tenant moving their home than a neighboring owner paying to move the home to their park. Looking at a park that is close to several hundred sites, doing a rent study now but want to understand the likelihood of another owner moving the homes out.
I increased rents $30 when buying my park and no one left… then increased them $15 a year later and no one left. My rents were at the higher end on the market after the increases. Total rent price was $335 for existing tenants. New tenants were charged $370 and I didn’t have an issue filling homes at that price.
What does the neighboring park charge for rent? If it’s significantly less than what you will charge then I’d be a little worried. If the rent is at market or a little higher, I don’t think your tenant will go through the burden of having the home moved to save $15 a month.
As long as you go to market you should not have any significant problems. Worse case some may choose to sell (highly unlikely) but the upside is that with higher rents you may be able to attract higher quality tenants depending on the value of the homes.
I believe going straight to market as soon as you take ownership is the smart move. Pull off the band aid in one swift move. No reason to make them believe you are going to hit them with a significant raise every year climbing to market. They will more quickly adjust to a single large raise and then will accept the regular annual rent increases there after.
coming from Multi Family experience. Fixed minor problems with C class apartments raised $100, nobody left
I have yet to meet anyone who moved a home out over space rent. I have met people who have moved out of a park because the overall cost is too high. But it doesn’t really harm you unless the home itself leaves in my opinion. The real analysis is whether you are missing an opportunity to earn loyalty by explaining your plan to reach market rates but that you are going to do it gradually. Or whether this is important to you.
Sorry I just saw your question. My rents are still about $20-30 below market (probably why my occupancy is 100%). I know it can be intimidating raising the rents significantly, but you probably won’t get nearly as much pushback as you think. Best of luck to you.