Lot-Rent Expenses: Things To Consider Part 3

We’re back with the conclusion to our three part look at Lot-Rent Expenses. Last we left off, we discussed both on and off-site management, as well as a host of other expenses. Click here to read Part 1, and here for Part 2.

Today, we’re picking back up with office expenses. These are pretty straightforward. Things like cell phone and cable bills are excluded from this.  Typically, we allot $25 per lot per year on our office expenses. This also includes parks that don’t have an office. This is to account for the extensive clerical work that goes into maintaining the park.

Office Expenses For Lot-Rent Homes

If you do “have a bonafide office with WiFi, and all these other things necessary for the park, then you have to use that.” That number can be all over the place, but you’ll usually use between $25-$50 per lot per year for this.

Another expense accounted for are our legal expenses. For these, about $1200-$2500 is allotted per year. A huge park will naturally have more, while a smaller park may earmark less. Note that this doesn’t refer to our LLC setup. But rather, it refers to the legal fees for park operations. This includes things like evictions.

MHP Accounting

This refers to bookkeeping and end of year tax matters. “We’re not talking about every last little thing,” says Glenn. Usually, a fair number is somewhere around $2,000 dollars for accounting expenses. 

Licensing and Permits

Like with other aspects of the industry, these can be all over the place. Even if they aren’t reported, we still use a $500-$1,000 plug number. If they do report them, we just try to match that exact number. This is not usually excluded from PNLs, unless specific permits are required. But it’s always good to keep account any silent charges that may come up in the future. There are quite a few other miscellaneous expenses to look out for.

There’s always a chance that private utilities may carry additional expenses. Also, some parks may have a swimming pool, which has its own set of considerations and expenses. It is possible to include all of this into your R&M, but that may include raising the amount. This is definitely an area you don’t want to cut corners in. Keep in mind also that regional factors will have an impact on these expenses. Every region will have its own standards to adhere to. It’s good as an investor to be aware of these things when entering a market you’re not familiar with.

The MHP Expert

In all, the key is to separate out all of the POH and Cap-X from whatever PNLs you get. You should just be looking at the parks, utilities and such. Have any more questions about the mobile home park industry. The MHP Expert can help. Check out our extensive blog section, which is packed with informative texts and podcasts. For any further inquiries, feel free to schedule a consultation with us here!

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