Need to increase cash flow on your properties? With real estate investments, you typically either raise rents or tighten the belt on your expenses. The first option is hardly ever popular. Plus, it could put you at risk of losing tenants. This is less likely in a mobile home park since it costs residents thousands of dollars to relocate a home.
However, you won’t score any brownie points if you raise the community’s housing costs when the economy is struggling. Sharp rent increases from investors have also prompted mobile home park residents to band together. Some investors successfully buy back parks from investors to keep their housing costs down.
Mitigating tenant dissatisfaction and preventing an uprising is possible if rent raises are implemented carefully. It all comes down to good communication and reasonable increases. But, as an investor, there are other feasible ways to boost your cash flow from a mobile home park. Let’s run through them.
Add Premium Amenities
Spending more to add premium amenities doesn’t sound like a win at first. How will additional expenses increase your cash flow if you’re not raising rents? Still, improving the aesthetic appeal of a community eventually pays off because it adds value. You’ll keep residents happy when communities look inviting and have the amenities everyone wants. The natural draw will also keep attracting new residents, making it a desirable place to live.
Most cities have neighborhoods that are nearly always in top demand. Homes in these communities often sell at a premium because more people would rather own property there than in other neighborhoods. Premium amenities in mobile home parks could include gates for added security, playgrounds, workout facilities, and pools.
Regarding mobile home parks, Lifestyle Investing expert Justin Donald encourages investors to consider Sam Zell’s examples, saying, “I would imagine most people would want to live in half the properties he has. We’re talking gated community mobile home parks. He bought these on the coasts, so each side, right? These are gorgeous. These are overlooking the ocean. They’re just super high-class luxury living in many cases.”
Premium amenities could also include an on-site golf course, even if it’s smaller. Additional ideas include community grilling areas with patios, well-kept gardens, and paved walking trails. Anything that causes people to rethink their preconceptions about mobile home communities can add value. Like single-family or condo communities with premium amenities, you may be able to recoup costs through a smaller HOA/common area maintenance fee.
Optimize Operational Efficiency
When was the last time you looked at your recurring expenses? Landscaping, maintenance, and property management contracts may need to be renegotiated. Shopping around for different vendors might get you a better deal. Checking your insurance policies and seeking quotes for comparable coverage could yield savings.
Besides examining your contracts, look at your operational model. Do you have onsite property managers and maintenance staff? Are there inefficiencies you can eliminate or reduce? For instance, it may make more sense to contract these responsibilities than maintain full-time staff. There may be some overlap and redundancy, but you can streamline.
Sometimes contractors are visiting the property too often. Say your landscapers show up weekly year-round. Maybe they don’t need to unless it’s the peak growing season.
Cutting down on the number of visits will reduce those fixed expenses. Perhaps they also turn on the irrigation system for the greenbelts later in the season. This one simple change could significantly reduce the park’s water bill.
Consider Utility Bill-Back Programs
Utilities can rack up hefty expenses in no time. Natural gas, electricity, and water are essential services. But these costs can increase exponentially if you don’t find ways to manage them. In a mobile home park, you can control utility expenses and increase your cash flow through utility bill-back programs.
With a utility bill-back program, you charge each resident for their calculated portion of the community’s expenses. You could do this based on lot size, trailer size, or the number of bedrooms in the mobile home. Calculating each tenant’s share is similar to what commercial property managers do for the common area maintenance expenses.
Managers figure each tenant’s percentage based on their square footage compared to the property’s total square footage. One caveat is that bill-back programs aren’t allowed in all jurisdictions. Double-check state and municipal laws before you implement them.
Another option is to install submeters for each lot. This route will increase your short-term expenses. Simultaneously, it can prevent animosity among tenants by isolating each person’s actual utility expenses. Submetering also makes it possible to quickly identify where water leaks or unusual usage is coming from.
Change the Business Model
Typically, mobile home parks operate under one of two business models. The homes are either owned by tenants or the park. If you’re operating under a park-owned model, consider converting to tenant-owned. You can increase your cash flow because you’ll reduce your maintenance costs for those homes. You’ll also receive the income from selling the trailers.
Park-owned mobile home parks increase the costs for investors because they’re responsible for everything that goes sideways. When appliances break, skirts need replacing, and roof damage happens, it’s your pocketbook on the line. You might be able to charge a higher rent for a lot. Yet, home repairs and maintenance unpredictability don’t always make it worth it.
Putting ownership back into the hands of tenants means less upkeep and more predictable expenses. Converting to a tenant-owned model makes the park easier to finance and more attractive to other investors. If you want to sell or re-finance down the line, a tenant-owned park may remove obstacles.
If you’re concerned about tenants’ abilities to assume ownership, you could implement a lease-to-own program. Such a move will help transition existing tenants at a less drastic pace. Lease-to-own programs give residents time and the financial means to become homeowners.
Increasing Cash Flow Without Raising Rents
Adding to a property’s bottom line means increasing revenues or reducing expenses. Sometimes, you can do both, but boosting revenues without raising rents requires thinking long-term. You may have to invest in a mobile home park’s aesthetics, infrastructure, and amenities. Streamlining operations and transitioning expenses like utilities to residents are other ways. Whatever approaches you choose, remember transparent communication is key.
