I have heard the metric of lot rent half the rate of a 2 bedroom apartment before. I know its just a metric. But more just a “philosophy predictor” type of question. The markets that have a spread meaning lot rent is substantially below 1/2 of a 2 bed apartment, do you think those are positioned for higher/faster rent growth? Or is it just a variant?Kind of like when you look at historical housing for prices to be 3x household income then you see they trend toward the average given the time if they are low/ or high. Thanks
Yes, the bigger the spread of 1/2 of a 2 bedroom apartment rent is from the lot rent, the greater the amount you will be able to push lot rent going forward. Denver, as an example, has one of the lowest spreads in the U.S., with lot rents around $700 and 2 bedroom apartments renting for $953 – which means that the spread is actually $700 vs. $477, which is a pending disaster if you are in the affordable housing business. The U.S. 2 bedroom average rent is $957 and the U.S. average mobile home park lot rent is around $250, so you can see that there is a healthy spread in most of the nation – but not in Denver. LA has the same problem, with a $1,426 apartment rent vs. a $1,000 per month lot rent.
Interesting to know on Denver. Thanks for the response frank. We are looking at a market where the current market lot rent is 200 and 2 bed is 713 and have seen a few other markets with thee same or even closer to 3x lot rent to 2 bed spread so wanted to see what everyone else was coming across.
Those ratios are actually probably too high. I noticed the best places average rents seem to be on he high side , maybe they are factoring on houses there versus when you actually check straight apartments