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.