Are you struggling to make a profit with your mobile home park? Are your profits inconsistent throughout the year, making it difficult to make the park financially stable? Trust us; you’re not alone. Running any residential community is no easy task, and you deserve bonus points just for trying and making it this far.
In this article, we want to help you turn things around with a few tips on how to make your mobile home park profitable.
Raise the rent
Old tenants remain faithful
Most mobile home parks are still stuck with prices from 20 years ago. Thus, demand is criminally overpriced and the value of living in them. This is mostly due to a large number of mom-and-pop mobile home owners.
Additionally, these owners have been operating parks for the last few decades. Most of them simply never bothered to raise rents regularly like most other types of accommodation.
When you read about mobile home park success stories online, you will find no shortage of people who bought a mobile home park where the lot rent was still extremely low. They could double (or even triple) the price within one year and rarely lose any tenants. Why? Because the simple fact is that even at triple the usual price, it’s still virtually impossible to find other housing at the same price.
Choose what suits you and your profit goals
That doesn’t mean that you should exploit people. However, you also shouldn’t let yourself be exploited.
Just like any type of housing, mobile home park prices can vary significantly from location to location. You can expect to pay a lot more for an ocean-view park in Florida than for one in South Carolina. The cheapest states have an average lot rent between $100-$200 while the most expensive states are around $500-$600. The average rent for a lot and home is only $700.
Where can you get your own piece of real estate to live in for that price range?
Get rid of unruly or unreliable tenants
Hold onto legal grounds
Tenants that don’t pay their rent or don’t pay on time create the biggest frustration. Ask any landlord or management of a residential community and they are bound to agree. It makes managing your income and maximizing your profits extremely difficult.
Luckily, regarding this, the law is relatively clear and on the side of the landlord. Evicting a tenant is rarely easy but having legal grounds can make all the difference.
It’s a bit harder when the tenant contravenes a rule within the lease agreement. Unless it’s crimina, a tenant usually can’t be evicted for a first offense. Whenever the tenant breaks a rule, you should record it, inform them of it, and give them a warning. If they repeat the offense within a small amount of time, you can then take it further and give them a notice of eviction.
The bad may stay and the good may leave
It’s very important that whether it’s about money or about paying rent that you record all the necessary details and inform the tenant. If you can get them to sign a warning, that’s even better. All this will count in your favor later on.
Unruly tenants or tenants that don’t take care of their home affect your bottom line. Moreso, if you do nothing about it, it will start to affect your other tenants and may cause some of them to vacate. The stereotypes surrounding mobile home parks are also not helped by individuals like these. Here is a useful guide to evicting tenants.
It can be much harder to get rid of tenants once they are in than to refuse them entry in the first place.
Start a process to screen new tenants
Do what is advised of you to do
If you are stuck with tenants that don’t pay rent on time, it may be a sign that you haven’t been doing your due diligence when screening new tenants. Chances are that the danger signs are there if you do the effort of looking closely enough. As a landlord, you have the right to expect being provided with evidence that a tenant is reliable and financially capable.
With that in mind, it’s very important that you don’t accidentally illegally discriminate against potential tenants according to the law. The Fair Housing Act states that you may not discriminate against a tenant based on :
Practice your rights as the landlord
Some of the things you can ask a new tenant to provide before you allow them to sign a lease agreement are:
- Proof of income
- Contact information of their employer
- References or contact information from previous landlords
- Criminal record
- Credit score
You can also obtain the last two from public records online. If any of these are not up to scratch, you are allowed to refuse a tenancy to someone siting the strong possibility they may not pay their rent. It’s very rare that a tenant will try and argue against your decision based on this, however, if they try to take it further, you will have some evidence to present.
Look at your local demographics and target the right people
This is a mistake frequently made by too many first-time mobile park owners. No matter what you sell or what kind of services you provide, a demand for it must be present. Furthermore, it has to be priced according to peoples’ ability to pay. The same goes for a mobile home park.
In fact, getting to grips with your target demographic is a crucial part of creating a business plan that you need in order to get financing or investment. Targeting a specific group of people and delivering on their needs and wants is simply the best way to do business and ensure at least some customers.
Do a little brainstorming and research
To help yourself, it’s helpful to start by asking yourself a few questions:
- Where is the park located?
- What’s the average income in your local area?
- Are there any big industrial plants or factories with many employees?
- Is there a university with a large student community?
- Which demographic (according to age, level of income, etc.) isn’t adequately provided for currently in your area?
An easy way to look at it is according to mobile home communities that target specific age groups. For example, 55+ age communities are popular in general and becoming more so in the shape of mobile home parks. That’s because, currently in the U.S., a large percentage of the population have not saved up enough for retirement according to federal recommendations.
That has left many people nearing or at the age of retirement in need of more affordable housing options than real estate.
Provide based on your targeted demographic
Another lucrative group to target is young people. In contrast to popular belief, young adults (19-28 years old) are the largest group of mobile home inhabitants. These are either young, working-class adults or those fresh out of college.
This is just one way to look at a target demographic. It’s all about looking for opportunities, and often it takes a combination of characteristics to find your group. If you decide that your park needs to change direction, you need to look at what these people can afford.
Consider if your park is conveniently located according to their needs (care center for the elderly, work opportunities for the rest) and what amenities they appreciate. Then you should slowly start moving in that direction.
Look at your lease agreement
Be knowledgeable about your agreement
Your lease agreement can play an important role in how profitable your park is. Additionally, this document defines the relationship between yourself and your tenants and the terms that relationship is based on. It’s an essential document that you hopefully had professionally prepared.
To a certain degree, your lease agreement will enforce most of the points we have just talked about. Alongside the price of your units or rent, it will play a huge roll in how prospective tenants will qualify or not.
For example, the lease agreement will say whether or not you allow tenants to run a home business or if they are allowed to sub-rent. Both of these could be deal breakers for people who work from home. Those who can only afford a home or lot if they rent it out may also be affected. Nonetheless, there are plenty of other considerations to take into account.
First and foremost is how allowing this will affect the running of your park, the other tenants, etc.
Set the rental periods wisely
Another important factor is the rental periods you allow in your lease. This will determine how often you can raise the rent, how long tenants are (almost) guaranteed to stay, and whether or not the period suits potential tenants.
- Month-to-month lease: The most unstable type of lease agreement, however, will attract people that cannot make long-term commitments. You can also increase the rent at any time with 3 months notice.
- One year lease: The most common type of lease guarantees you a tenant for 1 year. You can also increase the rent on a yearly basis with only a month’s notice. Most tenants like this option because it provides flexibility but not too much commitment.
- Long-term lease: In this context, we mean a lease longer than 1 year. However, it could mean a very long lease of 10-20 years. With this type of lease, you and a tenant are making a long-term commitment. You can state in the agreement that rent will be raised on a yearly basis or you can raise the rent at any time with 3 month’s notice.
Other important and “tenant-attractive” considerations
Lastly, there are the smaller considerations that help make up tenant’s minds whether or not to join a certain community. Do you allow pets? Are utilities included in the rent? What services are available? Who maintains the homes and carry the costs for this maintenance? To what extent are tenants allowed to decorate or improve homes?
Focus on occupancy rates
The math is simple. The fewer people you have renting in your park, the fewer people pay rent. Consequently, the less money you collect every month and year. Running at a high occupancy rate is therefore critical if you are going to run a profitable mobile home park. If it isn’t currently looking great, re-evaluate and think about the major reason(s) why.
Some of the points in this article are aimed at restricting who you should let occupy in your mobile home park. However, you also want to run it as high an occupancy rate as possible. That means that you will always need to try, find, and maintain a precarious balance between the two.
Strategizing is key
What will certainly help you find that balance is to come up with a proper strategy and business plan. Along with that comes finding your target market (like we talked about earlier). Once you know what kind of potential business you can rely on, you can start to develop a profit-driven framework.
This will also further motivate you and help increase your occupancy rates while not compromising on your standards.
Get creative in marketing and advertising
After you find this balance between being stringent and accepting, you should then also take your lease agreement and average lease terms into account. This will help you establish at what occupancy rate you will be running for the foreseeable future.
If you feel that your park merely isn’t drawing enough attention and receiving little interest, you might need to put some extra effort into how you advertise your park. The most obvious thing to do is to advertise homes or lots on sites like MH Village and MobileHome.net.
Another obvious route is to place ads in your local papers or distribute flyers to local stores and business places. A pro tip is to go to your local real estate agents. Try to find any local mobile home real estate agents and give them your flyers or park information.
Think of it as an opportunity
Well, we hope that these tips have already given you some insights and ideas into how you can turn your mobile home park profitable. Don’t get discouraged just yet, with a little bit of work and research; a mobile home park can be an amazing business opportunity.