We are looking at a park that has an average monthly lot rent of $210 with the market rent sitting at $309. Our test ad resulted in over 60 calls in 5 days using the market pricing on rental homes ($600). Initially, our plan was to bump the rent halfway to $260-$270 in year one, then go to market in year two. Based on the test ad, are we crazy to think we could just go to market right away?
It of course is your choice and decision, but IF I had to make that decision, I would first compare my community to competitors. Then IF my community was as nice or nicer than them, I would take it all the way to match immediately. Then after some improvements and cosmetics, maybe next year bump it a nuisance amount to reflect the better place to live.
However, IF it were not as nice, I would bring the community up, them bump rates to match, but not more than 60 days after management change.
I believe @frankrolfe had the similar deal and he talked about it in the home study course. As far as I remember he raised the lot rent to the market rent.
However, I agree with @jd585 's point as well.
It’s probably a dumb question because I think we have convinced ourselves just to do it and see what happens. Ultimately, I am looking to hear about specific market conditions that would make this unadvisable. Here are our pro/cons:
- There are 15 total vacant lots in the county across all of the parks. 10 of them are in our park leaving a total of 5 across all of the other parks.
- Our park is every bit as nice as any in the market. In some ways it may even be more appealing.
- The demand is very strong
- The market next door to us is at $270. However, it is less desirable in our opinion. High crime (ours is low), High unemployment (ours is reasonable), and our schools are rated higher. The neighboring market has more than enough vacancy and a few of these parks are only 10-15 miles away.
Should we worry about this neighboring market? Or are we just being silly here? I should also mention that our park is in a very small metro market and the neighboring market would likely be considered a mid-sized metro market. Many of our residents may work here.
Charles, studies have shown that most people spend their entire lives within a 5 mile radius of where they live. These studies of course did not consider the commute such in large cities that can be 1 1/2 hour drives each way.
The bigger issue here is “Why do you have 10 vacant spaces?” Especially when considering the points you made. Is it simply people don’t know you exist?
Are these 10 spaces a blessing or a curse?
To find the answer to that question, you need to have others, preferably from here, look at non-identifying photos of yours and the other communities-- then provide feedback. If I can help with temporarily hosting the photos let me know.
It would also be nice if this site had a poll feature, so that people could vote.
Our 10 vacant spaces are a result of both of our sellers being almost 100 years old. The internet is scary and foreign to them. Using the fax machine for sending financials was equally as horrifying so we settled for getting them by snail mail. Needless to say, their marketing is a tad dated.
@brandon_reynolds Is there a wish list where we can add this?
I would like to piggyback my question to this thread
I bought a park a year ago where the oldtimers pay $330. The vacancies I filled are for $400 each without any complaints
I still have vacancies which I did not market aggressively yet as I am still busy upgrading the water system and roads
The ratio 3.2 to 1
How much should I increase the $330 rents, 350 375?
A neighboring park manager told me it is not fair to have a two-tier rent. I however, don’t want an uprising and revolt on my hands
Your input is appreciated
Best To All
The site actually has polling built in. You can create a poll using markdown. Here is a link to further instructions on how to create a poll.
We recently bought a park and moved the rents from 240 to 365 in the first month. We did not receive one complaint. People are not going to pay $5,000 to move their home to another park to save a few bucks a month. Don’t be afraid to bring the rents up to the market. The tenants expect a rent increase when you purchase the park. Based on what you paid for the park this is what you have to charge for rent… A year later if you jack up the rent then you are the bad guy. Not that being the bad guy really matters.
Great bunch of posts, as they are all accurate. Raising rents is as much an art form as a science. As suggested, you need to really, really know your market – every park, every lot rent and what utilities they include. Then stand back and give your park an honest assessment. If the homes are old (1980s and older) they can probably not be moved, even if the customer wanted to, as they probably would not survive the transport and, if they are 1976 or older, they would not be allowed in to any other park as pre-HUD and are grandfathered. You can be more aggressive in that type of park. In addition, if the homes are newer, it’s possible another park will try to steal your customers, and pay their cost of moving, so it’s critical to also know the occupancy in the other parks, as well. When you call to comp their rents, ask the manager “would I have many lots to choose from if I brought my home into your park?” and see if the answer is “only two” or “over 100”. So you need to lay out the chess board completely before you even begin to figure your course of action.
As for how much to raise rents, the market rent is the market rent. If you’re park is $100 per month and the market is $300 per month, then you need to raise it to $300. What’s at issue for most park owners is how fast to move it to market. We try to make a significant move when we first buy the park, as the residents typically expect some type of increase. We then will move it again annually until we catch up. Once we are caught up, we raise our rents around 5% per year, which is in line with everything from Disney tickets to postal stamps to college tuition.
Some people will say “raising rents is a terrible, mean, horrible thing”. These people are idiots who know nothing about what they’re talking about. If you do not keep your mobile home park lot rents high, the park will eventually be re-developed into a more profitable use of the land. It’s happening all over America right now. In the last few months, Menlo Park lost its last mobile home park and Hollywood, Florida lost two of its largest parks. Why? Because apartment rents in the U.S. now average $1,150 per month and most mobile home park land is a prime candidate for that other multi-family use – and one that has rents about four times higher! If tenants are unhappy paying the market rent, they may be even more unhappy being homeless. The only reason you never read about apartments raising their rents (which go up constantly and far higher proportionally than mobile home rents) is that the government steps in and pays the difference through Section 8. It’s interesting to note that there are more Section 8 apartment renters in the U.S. than there are TOTAL mobile home occupants in the U.S. (about 20 million folks are in Section 8). So apartment rent increases are quietly swallowed by you and I (the taxpayers). For those not on Section 8, they never get any media attention about rent increases because 1) apartments are huge newspaper advertisers (so they don’t dare criticize them) and 2) nobody cares about what happens to the American middle class anymore (just look at what’s been going on in the nation for the past decade for proof of this).
Another point I’d like to throw out on this topic is the mistaken concept that the park owner has to “trade” park improvements for higher rent. This is not true. If a park is under market rent, then it needs to be moved to market, PERIOD. I think I went to McDonalds this morning and found my 99 cent item is now $1.20 – but it tasted just the same. The pricing of a product or service is considered to be dictated by the free market system. That’s why we are a “capitalist” country and not a “socialist” or “communist” one (I will add that those last two economic policies have proven to not work in a big way).
One final point: all good landlords are hated. We collect rent. Tenants hate to pay rent. If you are after being popular with your tenants, then you should sell the park and go into politics (I think they need one more candidate, don’t they?). The tenants should stay in the park because it’s a great value BUT GREAT VALUES ARE NOT ALWAYS THE LEAST EXPENSIVE. You should be offering a great location with decent roads and working utilities. The common areas should be well-mowed and the entry attractive. The rules should be reasonably enforced. THE PARKS WITH THE LOWEST RENTS SELDOM OFFER THESE THINGS. Don’t focus on your rent level, focus on your value to customers. When you no longer are a good value, you’ll know it, as your park will be empty.
Good post, Frank.
Recently came across a site that has MHC stats databases for sale. Don’t know how accurate they are, but they might be lots more time productive than calling around or physically viewing competitors. Here is a link to them:
Also Mark over at the WordFence blog just posted about commuting and some of his points could be used in your marketing. If you want to read it, here is the link:
Those MHC stats are interesting, but don’t trust them. They get those from having people call parks and the managers spot them as false immediately and screw with the data they give them for fun. They have their employees say “excuse me, sir, but do you have any manufactured home community lots available at the present time?” or even worse “hi, I’m doing a market study and can you spare 5 minutes to discuss your park’s rental rates”. The only ones who provide data to these companies on a consistent basis are mostly REITs and larger owners – and that’s why the lot rents are shown as being much higher than they really are. The REAL comps you need are the neighboring moms and pops, and they are never shown in the reports.