During my recent market research for a MHP that I put an offer on, I figured average lot rents to be about $215/per month. This park has lot rents right on target of $215/mo. My question is how much can I reasonably expect to raise the lot rents before my residents begin to flee? When I acquire the park, can I raise the rent $20/mo. even though that is above market and expect them to stay? What are some good things to look at to determine whether I can expect to be able to raise the rents in the future?
Park owners always walk a fine line between reasonable rent levels and pushing the envelope – and get away with it because it costs $3,000 to $5,000 to move a mobile home. However, going too crazy with rents will not help you that much on your exit strategy, as appraisers and buyers will not go along with your rent being $100 more than the market, and will probably knock your rent down to market when doing their calculations. However, $20 over market is not that abusive.
But where do you go after $20? You can probably still increase the rent $10 every year without much pushback, assuming that the other owners follow suit. Other drivers to rent increases would be increases in apartment rents or single family prices. General economic vitality and supply and demand will lift rents in decent markets.
The bottom line is to not to be too rediculous in your rent raises. Remember the old adage that “pigs get fat but hogs get slaughtered”. Of course, I never really understood that, since both end up at the meat packers, but you get the general idea.
Agreed! Also keep in mind that lots of your folks will be getting BIG tax return checks within 90 days. This along with a small loan & you’ll loose them to a competitor or rent to own land deal