The Mobile Home Park Expert is back with another deep dive for our audience. Today, we’ll be answering a lingering question: How much can an MHP landlord raise rents? In truth, it depends. Read on for a full explanation.
If you’re in a non-rent controlled state, your rents can go to whatever the landlord wants to take them to. That doesn’t mean they should, but legally they can. California, New York, Oregon, Vermont, and a handful of other places (mostly in the Northeast) are rent controlled.
The Southeast, on the other hand, is a big proponent of no rent controlling. But even there, they do have to give notice before either trying to sell their park, or raise rents. It doesn’t prevent them from raising rents, bu they will likely have to give 30 to 60 days notice raising.
Our advice to MHP buyers is to redirect their approach. Take us, for example. Instead of significant rent increases on purchase, we underwrite our model so that it doesn’t jam the rent growth down. Filling a vacant lot, a vacant home, or going for an expansion are better ways to improve revenues without having to take aggressive rent hikes. In actuality, it may take giving 16 units a 25 dollar bump for what brining a new tenant in will do.
For legacy tenants, don’t raise rent more than thirty dollars, or 5% at any one time. If you’re buying a park with below market rents, you cant raise them to over market over night for existing tenants. Again, it’s legal, but it’s not ethical. You’ll want to put them on a 5 or ten year timeframe to get them up to market rent. For any new tenants coming in, however, you’ll be able to bring them to market day one.
In a state like New York, landlords can raise rents about 3-6%. The more improvements, the closer you the six percent figure you get. States like Vermont, on the other hand, have wha’t’s known as a uniformity law. This means all the rents in a lot have to be the same.
If you want to do a rent-hike there, it has to be attached to a CPI index. You may even need to get your tenants to vote in approval of the rent increase.
California has some of the strictest laws around vacancy control. Even a vacant unit with an organically new tenant still can’t have rents above the rest of the park’s. This bascially prevents the owner from ever taking the rents up to market. It’s a tough, but necessary evil for places like LA where the population is soaring and affordable housing is getting decimated.
Good or bad, some states allow rent raises, and some don’t. some are unbridled, and some are restrictive. If you’re in a state that has no rent controls you’re at the whim of the landlord. If you are in a state with rent controls, lean on them and find out what’s allowed. For more help navigating, contact us today!