$85 increase out of line?

Just bought our 3rd park. Super nice park that does not need improvements.

Is an $85 increase out of line?

$345 to $430

($430 is the market rent for the area -
A few large-parks are at $500 and tenants pay utilities at those ones)

All parks in the area are basically 100% occupied. If someone moves out we have 10 people to take that persons place especially if the trailer is getting sold.

Thanks for your advice!

Focus on the value – is that lot rent a good value in that market? It sounds like it is.

We have always advocated keeping rent increases to around $50 maximum, but that was before the new era of 8.5% CPI increases and $5 gasoline. Perhaps $85 is the new $50.

A good rent increase is one in which you lose no residents. As long as it’s a good value at the new, higher rent, then you should be fine.

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Thank you so much Frank!!! That helps a ton! We have always stuck to your advice of the $50 max increase. Your advice has always been so solid and appreciated!
I know we won’t lose any tenants - we just raised our rents to $430 on our other parks in the same town and We didn’t even get a phone call or complaint.

I did a $100/mo increase at one of my parks this year and plan to do another $50-$75/mo increase in 2023. Tenants pay their own utilities also. I created a lot of value at this park by completely replacing every inch of sewer, water, roads, and replacing every bad tenant with a great tenant.

I plan on raising rents $70 in Sept on another park I recently bought. In this case the park pays utilities (for now). There will be a lot of infrastructure upgrades happening here too but not to the same extent.

I want my rents in the $500 range this year and at least $550-$575 next year. That will be a great value in my area and I doubt I’ll lose many tenants (if any at all). After that I’ll do annual raises to keep up with the market and CPI. It doesn’t sound like you’re out of line raising rents $85.

Thanks MikeO! It sounds like you have some nice parks!

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That can be reasonable if it is market rent. In a rent control state where rents range from $460 to $550 we raised rent from $275 to $460 starting on 9/1. There will be a one-year “Covid Abatement” of $85. This means on 9/1, tenants’ charges will go from $275 to $460 and will be simultaneously credited $85 resulting in a net charge of $375. on 8/31/2023, the abatement will disappear and base rent will be $460 plus any additional CPI change that has yet to occur. When management met with the tenants in our attorney’s office to present the increase justification (which is required by law), nobody flinched. Seems all tenants think it is fair and their free ride has finally ended but was good while it lasted.

This is not necessary in most markets, but with rent control, it can be more challenging.

I’m about to go up $45/mo and my property manager thinks that’s a bad idea. 155 up to 200. Even at $200 I think that’s low. Our lots are fairly large.

I would not put much faith in the property manager’s opinion. Likely, they do not understand the market and the value that you bring. Also, they may not want to rock the boat since they are onsite every day and will hear the grumbling from tenants.

I’m not sure what market you are in, but $155 is pretty low for almost any market.

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Any advice on rent increases given by your on-site staff must be taken with a grain of salt.

We just had a tenant move from one space to another space within the park. My policy is every turn over the new tenant gets a 10% rent increase over what the previous owner was paying or they are brought up to the market rate. Whichever is HIGHER.

So tenant in space A is paying $485/month and sells his place. The new tenant is happy to pay the $533 new move-in rate, but the guy moving from A to B wants a discount. He only wants to pay $510 (a 5% increase).

The manager is totally on the current tenant’s side. I told her yes, he has been here for years, but if we only charge him $510 then we are not able to raise the rent on him for 12 months. So he would be at $510 from August 2022 to January 2024 (we do one raise annually at this park). So he would be getting a huge discount. $23 x 12 months.

She tried to argue that $533 is too high. However, the new guy is HAPPY to pay $533.

The best way to handle this is to ask the manager to do a rent survey for parks in your area. Request they do a report with the name of the park, the name of the person they spoke to, get the Current Average rent for existing tenants, and the New Move -in rate. Make sure the report includes dates of contact and contact information. Also, you need to know what’s included in the rent.

I have found that management and residents know EXACTLY what the market rates are and are just trying to snowball you into keeping rents low for them and all their buddies. I fell for this ONE time. I had a manager who insisted I was charging too much and everyone is going to move out etc. So I paused on a rent increase. Only to later find out we were $80 less per month than the going rate.

66 unit park x $80/month.
$60K a year lost rent at a 7% cap that’s $950k in value. Lesson learned.

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