Raising rent over market, billing back utilities

Hi MHUers,
I am closing on a park in about a week and I’m still deciding what to do with the rents. Here’s the deal:
Park is all TOH, no park owned homes.
Lot rent was raised from 300 to 325 in May 2019
Current rents are: $325, water and trash paid by the park
Market rent is $310, water and trash paid by tenant.

We are planning to install metron water meters shortly after closing, and then bill back water/sewer and trash as well. We’re trying to think what the best way to do this is:
Option #1: keep rents at $325 and bill back water/sewer and trash. The logic is that they probably aren’t going to move over an extra $15 in rent.
Option #2: Reduce rents to $310 and bill back water/sewer and trash. So we don’t have people moving out on us.

There are also some RV spaces, which are long term RVs.
RV rent was raised from 250 to 275 in May 2019.
Market rent is $375, with park paying water/sewer, trash
Option #1: Raise to $325 and bill back water/sewer and trash, this is about market
Option #2: Raise to $300 and bill back water/sewer and trash, this would be to avoid them leaving due to a big rent raise.

Thanks for your input,

There is no firm right or wrong answer, and a lot of it depends on the situation and particular dynamics.

For the mobile homes I’d lean towards doing option 1, but couple it with any improvements I can do to make people see that they’re getting value for their money, and I’d then raise rents slower than the other parks in future years

For the RVs I’d definitely go with option 2, with option 1 you’re doing a $50 rent raise and billing back water and sewer. You might be able to pull it off, but even though it’s ‘fair’ you’re going to damage resident relations quite a bit. Even option 2 seems somewhat aggressive to me.

I would go with option 1 on mobiles and option 2 on RVs
You can jump up the RVs rent again next year to $325 after seeing how things go this year with option 2.

Not part of the original question, but should the fact there were rent raises only six months ago matter? How significant were those raises?

How long is it likely to take before meters are in place and billing is possible?

1 Like

@asmith4981 I would go with Option #1, rent were just raised a couple of months ago, let them get used to one thing at a time. In today’s social media world you don’t want to be the story on the 6 o’clock news about being a BIG BAD LANDLORD.
You are already above market rents, now do something for the tenants - put in a playground, picnic area to make them feel better about paying more for things. Just my two cents. Good Luck

1 Like

Wanderer you need to keep a copy of your state landlord tenant regulations handy and learn them to properly manage any rental property. Many states/jurisdictions have strict guide lines regarding frequency of rent increases. Rent increases within 6 months may in fact matter legally. If your state regulations do not make reference to time elapsed between increases then no it does not matter.

As PG points out there is a potential for push back over rent increases however that is common for any rental business In my opinion that doing something for the tenants can also be risky. Not all tenants are stupid and many will see new additions to the community as diversion and a waste of their money. If you want to do upgrades it is best to do it on a ongoing bases not in conjunction with rent increases. Many tenants will prefer lower rents over a ungraded that they will never use or benefit from. If you want to raise the rent do so. If you want to do upgrades do so. Best not to try to disguise one with the other.