Raising Rents Through a Maintenance Fund

Hello! Thanks to fellow forum member Jefferson Lilly and his awesome podcast which I stumbled upon a few months ago, I decided to join the insanity and purchase my first MHP this week. It is a small 1.5 star 19-pad park which could use some TLC. Almost all the pads are occupied by a Lonnie Dealer. The Lonnie Dealer always pays on time even when one of his homes is vacant from tenant turnover. Lot rents are priced at $200 which is average for that market, but the market should be higher (around $250/month) as most other MHPs in the area are at 100% occupancy and average 2BR apartments go for $500/month.

On to my question: I was thinking I would send out my welcome letter with all the things I plan to do to fix up the park. I will then segue into telling them that I plan to achieve this through a maintenance fund which I will be setting up by raising rents $35/month. All money from this rent increase will go into this maintenance fund which will be used to maintain and improve the park over time. Thoughts on this strategy? How do you think the Lonnie Dealer would respond?


Did you get an environmental survey before you bought the park?

The Lonnie dealer will be upset because that 35 comes out of his pocket x’s however many trailers he owns.

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I don’t think you should give anyone any idea how you allocate your money. It’s great to say your intentions for the Park and that rents are being raised to market to support that, but anything more is unnecessary.

As far as this Lonnie Dealer you need to consider the likelihood he / she will pull homes to go somewhere else. If you’re still at or below market at your new lot rent then he can complain and threaten you all day, but after running the numbers will know staying put is still the best decision.

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You said lot rents is 200 which is avg for the market. That sounds like the prevailing lot rent for that market . 1/2 of lot rent relative to a 2 bed is a benchmark for the industry but you are not in a situation to be a pioneer.

Typically , a deal like this, you want to have the risk factored into the pricing. Maybe there is something you can do like a first right of refusal but deals like this ultimately someone else can have leverage on you.

Def get to know your market, are there places he can bring these homes should he be able to (vacancy)?

Is he renting the home or has them on owner contract. If they are owner carry, they are seasoned, with perhaps small balances remaining, this can look different than if they are all newer deals and or rentals…

Forget the fund idea. Your Lonnie dealer will not fall for that trick. Raise the rent if you want but for the most part you are at the mercy of the Lonnie dealer.
If he wants he can simply refuse to pay and back you into a corner. One person with that much leverage is in control if they choose.