We are looking at situation thats all POHs . I know this has been discussed before but wanted to revisit. Say average rental is 375 ish.Avg lot rents are 200 in the area. Planning on putting everyone on Rent Credit. Two parts. The first one, is do you set the lot rent above market and if so how much? Since it will be a bit before you have a homeowner , do you say lot rent is now 215, or even say 250 or just set it to say 205? . (risk is in 3 years once you start getting homeowners , the lot rent still may be above market). The other part is the overall rents are still slightly low. So do you bump them 400 , 425 on the from end for all the POHs since your goal is to get out of them but you are going to ideally get additional income on some for a while until you start getting some conversions into tenants. Thank you
We purchased a park with similar characteristics last year. The lot rent was $200/month; we felt $225/month was FMV. From our test ads, we knew the economy was strong (e.g. our ads were pulling >3/day). So we:1. Raised lot rent from $200/month to $225/month.2. Raised house rents on the lowest-priced homes. These were not necessarily the smallest or worst homes; they were the homes that the tenants had been living in the longest. Previous management just never raised rents (not in 16 years in one case…!). So the homes that were renting for $115/month and $150/month above the lot rent we raised to $200/month (e.g. $425/month total including lot rent). Everyone now pays at least $400. It is not possible to make money on the home business unless your delta (house rent only - the amount paid in addition to the lot rent) is at least $150/month, and probably $200/month. So the rent increases meant our home business was at least at break-even.3. We then offered the tenants the option to purchase their homes. Some took us up on it, some did not. We were not desperate to get rid of the homes because the tenants were not calling-in that much for repairs. A few tenants rejected the opportunity to purchase their home - even if we told them that they’d probably get a rent increase. So be it. Some folks just want to rent, or at least can’t bring themselves to think of themselves as owners of a mobile home. We did improve the park - renovated a few badly-damaged homes, started cutting the grass, kicked-out a few tenants with pitt bulls that refused to get the dogs insured, etc. We actually had a tenant call and thank us for cleaning up the property and said they commiserated with us on how hard it is to deal with other tenants.So I’d say your action plan should be:1. Bump your lot rent to $225/month - $250/month. 2. Raise your house rents also to market (sounds like $200/month - $225/month)3. Offer your tenants the option to purchase their homes at the higher monthly payments (e.g. around $425/month - $450/month) with $1,000+ down (but, of course, that just means they’ll own their home sooner), and4. Don’t worry if several tenants refuse your offer and just want to rentAs you tenants naturally turnover in the coming years, be sure to mark-up rental payments at least $100/month above RTO pricing. Encourage/enable people to become homeowners in a relatively short period of time.Good luck,-jl-