Q. “Are any land lease community owners/managers concerned about raising rent in this kind of economy/housing market? In AZ, a hard hit state, I notice park rents still on the rise…” Question posted on Linked In Land Lease Professional’s Group
A. From Michael Power
In a word, …. “Depends” . …. One of the axioms that I learned early on in my R. E. career is this. “All real estate markets are LOCAl.” Of course there are some broad brush rules of thumbs or assumptions that apply and the odd exception.
Did you know that although Nevada has been hit the hardest in this real estate crash. A bigger drop in home values and job loss than even Michigan. Interestingly, Nevada still had significant population growth over the real estate down cycle. You think people would have migrated out of the state? Go fiqure.
So even with the overall MH Industry and economy being in decline if you buy or own a L.L. Community and the rent is below market you can raise it. If you add value to a community by dramatically improving curb appeal including zero tolerance on the enforcement of resident policies (no junk, clutter, crime or noise) then you will be able to raise rent. If you are in a localality where market rents are hovering below their potential you can raise rent. For example. Your markets rents are in the $150 range and 30 minutes away they are at $250, then you can raise rent. What is the local affordability index? There is a ceiling in every rental cateqory whether Apt.’s, SF Homes, Mobile Home Lots and Mobile Homes with Lot Rent. Find those ceilings’ in your market (s) and identify the quality pockets within them. The quality pockets will always support a little higher rent level.
If you are a run of the mill operator and that is your operating plan then hover at slightly below market rents. My suggestion is to look for opportunities to provide added value to residents and then expect to be rewarded for that value. You take that reward by raising rents.
If you have Park Owned Mobile Homes that you rent or sell on a lease own option you will need to know what your competing local park pricing is. Other parks’ asking, combined lot and home payment total begins to give you some ceiling price you can charge for park homes. Remember you can mark up (or down) to a certain degree based on the desirability of your location and the quality of your community.
Today you have to look more closely and the rental costs of the stick built single family housing market. With the drop in home prices some SF Homes can rent at or near the costs of some parks lot rent only. If that is the case and you have vacant lots to fill and homes to sell you will have price your combined lot and home payment at similar levels. Look at it this way. If the the lot is ‘homeless’ your income is zero. You may have to use your total payment to retire the debt on the home 1st with no lot rent or some combination of that. Once the home’s debt is retired then keep the payment the same with all of it being applied to lot rent again. (Any questions or for further explanation send me an email.) You have got to get those vacant lots occupied ASAP for the overall financil health of your LL community (MH Park).
Plan, implement and execute and then you raise rent. If you can deliver on execution then don’t be worried about rasing a ‘few eyebrows’. And no, it is not just about the economy. Find the “current” ceiling in your local market and then earn the right to exceed it.
Michael Power
Michael@MobileHomeParkDepot.com
BusinessCoach@YourBoardMember.com
LinkedIn: http://www.linkedin.com/in/mobilehomeparkdepot
www.MobileHomeParkDepot.com
“Reinventing MHC-GOLD NationWide”
“Finding Discount Homes and Investors To Fund Them”
Michael Power: 22 years in Manufactured Housing Industry as a community owner/operator, creator of the the “Complete On-Site Manager” and consultant to both newer and experienced community owners, nationwide. Built based on a “franchise model concept” my systems can put manager(s) on Auto-Pilot so that the owner or the regional supervisor can focus on the critical and important issues in running your operation.
Need systems to help find discount “Good Used Mobile Homes” to fill vacant lots, find local investors to fund them and people to live in them? Have a park that you want to sell or one you want to buy? I can help with my effective but affordable systems and on-going support.
