Lower Expenses or Increase Rent?

If you could only do one thing to increase NOI, would you choose to lower expenses or increase lot rent? Assuming that either one will result in the same increase in NOI.

That is a question that has many depends. Raising rent is the easiest but depends on whether you are already leading the top rental rate for your area.

Expenses should already as low as possible assuming you have had the business for awhile if not and rents are as high as you are comfortable making them then your only option is to cut or reduce expenses.

If your business is operating at it’s max potential then rents should be raised to the max each year and preventative maintenance should have expenses at the lowest.

You would always be better off to cut costs, as that puts no burden on the customer. However, one has no bearing on the other. You should always cut costs. You should only raise rents if you are below market, or as part of an annual cost-of-living increase (assume around 5%).

I am sure no-one would disagree with you Frank, but everyone should also keep in mind that some “costs” should better be viewed as “investments” – doing repairs “the right way” for one. If profit is higher because you defer the maintenance, that will no doubt bite you in the butt at some point.

Generally, saving money in the short term is great but think about what that means for the long term. Getting 3 bids for every project --> good way to save. Discarding all of them because you don’t really need to [repair the road, etc] --> bad way to “save.”


What if a park you’re looking at has both room to increase rent and potential to reduce expenses (submetering).

Submetering AND raising rents seems a bit much too soon, so wondering if it would be better to increase rent first and then submeter or vice versa.

Do one on year 1 and then other on year 2. I would submeter first, then increase rents.

Frank has always said, and I agree to do it all at once and get it over with. I raised rent s some and sub metered and eliminated the free cable the past owner had paid for and only got some minor grumbles. We lost a few residents, but they were all undesirable tenants anyway and were on their way out soon.

I was not suggesting cutting back on capital expenditures. But there are other cost cutting measures that most park owners should always engage in, but many do not. Those are 1) getting control of water/sewer costs by fixing all leaks and potentially sub-metering and billing back to tenants and 2) replacing the manager with someone who is far less expensive. You would be shocked how many parks we buy each year that have a $50,000 to $100,000 park manager and they can be replaced with a better manager at $20,000 to $30,000 per year.