Annual Rent Increases

mobile home university
21

We do annual Rent increases. 3-5% is the most common.

I did a historical analysis of my Parks over the past 20 years and we averaged out to a 4% annualized increase. Some years we didn’t raise rents (2009 Financial Crisis and 2020 Covid). Maybe a few more years here and there that I am forgetting. I remember one year in 1991 we actually lowered rents due to a severe recession.

I see lots of comments on a dollar amount. IE $50 etc. Our largest jump ever was $150 per space. The rents went from $1000 to $1150.00 I don’t think using the dollar amount makes sense, percentages should be your focus.

I have found that raising rents 5% a year works out to be a very good proposition. Both for the Residents and for the property owner. If you require 3 x the rent to move in and someone is on a fixed income they can most likely live out their days in the park without being pinched by rent increases.

$500 for Rent means $1500 Minimum Income to move in.
5% of $500 is $25.00
3% of $1500 is $45.00

It takes 32 years before the Rent Increase is equal to their Annual Income increase.

(note I ran this scenario with rents from $150-$1000. Incomes set at 3x’s rent and they all ended up about 32 years before rents outpaced incomes)

Rent 5% Income 3%
1 $500 $25 $1,500 $45
2 $525 $26 $1,545 $46
3 $551 $28 $1,591 $48
4 $579 $29 $1,639 $49
5 $608 $30 $1,688 $51
6 $638 $32 $1,739 $52
7 $670 $34 $1,791 $54
8 $704 $35 $1,845 $55
9 $739 $37 $1,900 $57
10 $776 $39 $1,957 $59
11 $814 $41 $2,016 $60
12 $855 $43 $2,076 $62
13 $898 $45 $2,139 $64
14 $943 $47 $2,203 $66
15 $990 $49 $2,269 $68
16 $1,039 $52 $2,337 $70
17 $1,091 $55 $2,407 $72
18 $1,146 $57 $2,479 $74
19 $1,203 $60 $2,554 $77
20 $1,263 $63 $2,630 $79
21 $1,327 $66 $2,709 $81
22 $1,393 $70 $2,790 $84
23 $1,463 $73 $2,874 $86
24 $1,536 $77 $2,960 $89
25 $1,613 $81 $3,049 $91
26 $1,693 $85 $3,141 $94
27 $1,778 $89 $3,235 $97
28 $1,867 $93 $3,332 $100
29 $1,960 $98 $3,432 $103
30 $2,058 $103 $3,535 $106
31 $2,161 $108 $3,641 $109
32 $2,269 $113 $3,750 $113
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22

I haven’t read every detail of your post, but if you are telling me you rebuilt the park with 600k in CAPEX and you rents are below the nearby comps who are inferior, I would jack it up sky high. A $5 monthly increase is nothing for somebody putting in 600k in capex.

For example on a recent $75,000 paving project for 30 tenants we assumed a 15 year life, or $5,000 per year, which is $417 per month. Dividing the $417 among 30 tenants is about $14 per month per tenant. So we increased rent by $25 per month and everyone was happy and liked the new roads. Roads are paid for in the increase, and we have more margin.

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23

@mPark @SDGuy Thanks for the great feedback and analysis guys. Everything you said makes total sense and validates the direction I was planning on heading. I made a pro forma for my park last week and tweaked it a little bit using the feedback from everyone responding to my questions and things are looking very good.

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