The Financial Strain on Landlords
Maintaining cheap rents in a mobile home park is detrimental to landlords. As expenses increase yearly, the cost of keeping a community operational or bringing it to a stabilized condition rises as well. Low rents fail to generate sufficient cash flow, leading to deferred maintenance and, ultimately, the deterioration of the property.
Trees grow unchecked, becoming hazards to homes and residents. The landscape becomes overgrown, and homes fall into disrepair—rotting porches, cracked parking pads, and roads, along with deteriorating interiors plagued by broken appliances, leaks, and mold, become common issues. Without adequate cash flow, landlords lack the funds to address these problems, and the community begins to look rundown. This drives away good tenants, attracting only those seeking the cheapest rent, often individuals not in a good place in life.
The Distinction Between Fair, Low, and Cheap Rents
There’s a crucial difference between fair rents, low rents, and cheap rents. Fair rent aligns with the market price for similar properties in the area and is the ideal target. Mobile home parks typically offer lower rents compared to single-family homes, providing affordable housing options for those starting out or experiencing temporary financial hardship.
However, cheap rents—those that are absurdly low due to neglect and failure to keep pace with rising costs and inflation—signal a property’s decline. When landlords don’t reinvest in their properties, the community deteriorates, and rents drop. What was once a fair rent becomes a low rent, leading to further deferred maintenance. Over time, this cycle plunges the community into “cheap rent” territory, where the rent is too low to cover basic upkeep. Good tenants leave, vacancies increase, and units that remain are often rented out at discounted rates, perpetuating the downward spiral.
Why Cheap Rents Ruin an Industry
When a community reaches this point, it is bad for the industry. The town or city sees it as a haven for crime and an eyesore, leading to negative perceptions of mobile home parks. Regulations creep in as cities seek to eliminate these parks or prevent the development of new ones. Restrictions make it difficult to improve existing parks, which in turn hurts the valuation of the mobile home park. If a park is forced to shut down or can’t fill vacant lots, it loses value. A once-thriving 60-lot park may now be valued as a 30-lot park, effectively halving its value.
This situation often leads to the park’s highest and best use no longer being as a mobile home park but rather as land for new development or an apartment complex. The owner sells it as land value to a developer, and the industry loses yet another mobile home park. The new development goes up, providing a better tax base and tenant base, further reinforcing the perception that the town was better off without the “ugly” mobile home park, setting their sights on other parks to achieve the same outcome.
When a park reaches this point, it’s bad for the tenant as well. The tenant paying cheap rent is paying an artificially low rate solely based on the condition of the property and the landlord’s lack of financial ability to improve the homes to a level that would warrant higher rent.
What are tenants doing in this scenario? They’re paying $500 or $600 for a three-bedroom, two-bathroom home when other rentals in town are $1,200 or $1,500 for the same size. Are they saving that extra $1,000? No, they are not. They’re still living paycheck to paycheck, like 78% of the rest of America. The money, like in most of America, not just mobile home parks, goes to other expenses and lifestyle creep.
Does a New Owner Change The Mentality?
If the community gets a new owner who wants to turn it around, brings in capital for park improvements, and begins to improve the community, tenants get scared. They know what that means: the rents will go up. They may wish the park and their home were a better place to live, but they don’t want it at the cost of higher rent.
So if a new owner comes in and raises rent after cleaning up, they face pushback, even if they don’t raise rent initially. Everyone knows it will happen eventually, and the anticipation is just as stressful. If the rent that was once $500 goes up to even $900 for the same home now fixed up, what will happen?
Do you think the landlord is within his rights to charge $900 for the newly remodeled version of the $500/month home? Could he ask for more if local market rents are higher? Or should he leave it the way it was?
Here’s where it gets tricky. Even if the landlord doesn’t remodel but keeps the rents the same and does nothing to improve the property, eventually, something will break or leak—a sewage backup, a non-functioning toilet, a roof leak. The tenant calls wanting it fixed, believing that, as a rent-paying resident, they deserve a well-maintained home. Rightfully so. However, we are now back to the issue of cheap rent = cheap home. Cheap rent = poor condition because the cheap rent does not cover the cost of repairs. So if the landlord doesn’t fix it, he’s in violation of his typical role as a landlord. If he does fix it, he’s losing money, as each repair costs hundreds or even thousands of dollars, and at $500/month, he can’t cover his costs. This is why the previous owner allowed the property to deteriorate. So, if repairs are done, the need to raise rents arises again.
When this happens, what will the response be? It’s never good. Why? Well, the tenant can’t afford any more rent.
They say, “Where else am I supposed to go that I can afford at this rent rate?” “You can’t just raise rents on me; this place isn’t worth that much.” And more…
Over time, the tenant has been living in a false reality of what housing costs are and never saved or budgeted for a more expensive housing option. Why would they? No one wants to pay more than $500 if they can just keep paying that!
So now the tenant is inevitably removed, evicted, non-renewed, or even voluntarily leaves the home. Where do they go? How can they afford to go anywhere else? This being the cheapest rent in the area, they have no other options generally. They are left with few to no decent options.
The opposite argument is if rents are raised each year in line with the market and local pricing, the tenant is budgeting for that small, incremental increase. Assuming it is a small increase, maybe 2-5% each year, it keeps the landlord in line with rising costs and keeps the tenant in line with the reality of what market rents are that year. So if and when they leave or are removed from the property, they are used to and can afford to pay going rates for similar homes.
A Real-World Example
I bought the most rundown slum community with crime, delinquent accounts, and cheap rents. The previous landlord was, by all known references, a “slumlord.” People dealt with it. Why? Cheap rents. I mean, this community had a BYOM—Bring Your Own Mailbox—policy. The landlord was so cheap that if you wanted mail, you had to bring your own mailbox.
The examples I gave are true to this location: $500-$600 rents when comparable fair rents are $1,000+. Two-bedroom apartments are $1,500 in this town. Low-rent mobile homes are $800-$900/month in the surrounding area. It is not a wealthy town at all; in fact, it is a lower- to low-middle-class, blue-collar, hard-working, rural town. I knew this going in, but I saw the potential and the demand for affordable housing in this location.
Upon hearing that I bought the community, tenants moved out in the middle of the night during the first week. Why? We mailed letters informing them that I was coming to knock on doors, meet everyone, discuss new management and expectations, and collect rent. Two to three homes were vacated. The next month, we started enforcing rent payments and late fees, getting people current, and explaining that they had to pay. I was out there every week, posting late notices and notices to pay or quit. Another two to three people left.
Then we tackled park cleanup, and we lost people during that time frame. We had people remove junk from their yards—no pools, trampolines, etc. We cleaned up piles of rotting trash and broken appliances, and we removed three rundown trailers. We lost another tenant during that process.
Then we put up security cameras and instituted a rule book—two more people left. More people were unhappy. I talked with the police, and they confirmed that this community had regular drug and crime offenses. Tenants complained of theft, so we put up cameras to deter that. I spoke to one tenant who relayed the concerns of some of the others. They didn’t want to be watched by the owners. She told them if they weren’t doing anything illegal, they wouldn’t care. They did care, so they left.
Are you seeing the trend? Now, I’m generalizing for the sake of brevity for this article. Maybe the timing of them leaving had nothing to do with our Park Improvement Plan (PIP), or maybe it had everything to do with it. Regardless, while our occupancy continued to decline, our complaints continued to increase.
When we took over lawn care for the community, we got major pushback. Why? They were afraid that all these changes were going to bring higher rents.
When we cleaned up 19 dumpsters of trash, the gossip was that we were only doing it so we could charge more in rent.
When we started making people pay on time, they said we were doing it because we only cared about money and not the people.
When we told them we were switching to city water, they were afraid it would mean higher rent.
Now, flip this around. When we got a call about a broken faucet, we fixed it. When we got a call about a bad electrical outlet, we fixed it. Roof leak? New roof. Pest control? Done. Plumbing leak? Fixed. Septic issue? We pumped it. Trash in the park? We cleaned it. The well, which was being illegally operated, was cleaned up, and we hired a well operator to ensure it met state regulations. I talked to the DEP and the city, and we are now connecting the community to city water.
When rents are cheap, it doesn’t matter what you do to the community—many tenants will not be happy because they fear higher housing costs. Does this mean they want the community to stay in the same condition or for their home repairs to go unaddressed? No, they want improvements, but they just don’t want higher rents.
The Effects of Cheap Rents on a Tenant
I had an exchange with a tenant who started as a “late payer” but recently became a “non-payer.” She had been behind on rent since we took over the park. The previous landlord had no records—no leases, no documentation—so with the help of a quasi-manager and a realtor, we pieced together what was needed. This tenant had been paying $480/month, which was raised to $600 at the new year. Our records showed she paid $600 until we closed on the property.
On day one, we sent out letters to all tenants, stating rent rates, payment instructions, and expectations. We didn’t raise rents because we don’t do that when taking over a community; rents stay the same until we improve the property and provide value to residents. All tenants acknowledged the rent rates—except this one, who was already late on payment when I interacted with her.
She approached me at the park, visibly angry and waving a three-year-old lease that showed her rent as $480. This was surprising since the previous owner claimed there were no leases. I explained that our records indicated her rent was $600. She accused the previous owner of lying and insisted we couldn’t raise her rent without notice, citing her attorney. I clarified that we weren’t raising her rent, just charging what she had already been paying. Instead of arguing, I offered her a choice: she could pay the $480 if she preferred, but since she was on a month-to-month agreement, I would issue a 60-day notice to vacate and not renew her residency. The choice was hers, but she was within her rights to pay the previously agreed-upon rate if her paperwork was indeed accurate.
Out of the nearly 30 tenants, what are the odds that this one tenant was being “done wrong” by the previous landlord? That all the other rent raises the previous owner claimed were accurate, but hers was not?
There’s a saying among real estate investors: “Buyers are liars.” Others say, “Buyers are liars, but sellers are worse.” Well, after 14 years, I’ve modified it to, “Buyers are liars, sellers are worse, but tenants take the cake.” So when something like this happens, sometimes the simplest answer is the correct one.
She wasn’t happy but agreed to pay and continued to be hostile. The office worked out installment payment plans and extended promises to pay. Over the next couple of months, she was late each time and needed us to waive fees and be lenient to collect the payments.
Fast forward—she is now two months behind on rent, owing over $1,200. I went with my son to work in the park and post late notices. After nearly four months of ownership, we’ve reduced the number of late notices from 12-14 down to just three, but this tenant was still delinquent.
While onsite, I posted the notice on her door and continued with my work. Later, she angrily approached my car, banging on the window. When I rolled it down, she was holding the ripped notice in her hand. She started complaining, saying she needed a lease before paying rent, despite us having sent out new leases and rule books for everyone to sign. She claimed no one had received anything, which was strange since we were already addressing questions from other residents.
I checked with the office, and they confirmed her lease had been mailed, but she had refused to provide an email address for an electronic copy. Interestingly, her father, who also lives in the park, had already called to discuss his lease. I went to talk to her and asked for an email address to resend the lease quickly, but she refused again, saying her device had fallen out on the highway. She then demanded that I hand-deliver her lease, which I agreed to do but reminded her she still needed to pay her rent. She insisted she wouldn’t pay until she reviewed the lease, though I explained that she was on a month-to-month lease with an agreed-upon rate carried over from the previous owner.
Things escalated as she began yelling about how unfair the rent was, accusing me of not caring about the people in the community and only being interested in money. I informed her that if she didn’t pay, we would proceed with eviction. Her yelling grew louder, and now the landscape crews, neighbors, her child, and my son were all watching. It turned into quite a scene. Her father tried to mediate, holding her back several times and urging her to get in her car while he talked to me. Each time I tried to speak to him, she returned, yelling more accusations. This went on for about 15 minutes, with her yelling at me and her father trying to calm her down. I remained calm, trying to listen and communicate with her father. However, she kept interrupting, insisting I didn’t care and was only out to make money.
At one point, I mentioned that the park needed rent payments to fund necessary improvements. She yelled back that it was my job as the investor to make those changes, that’s why its called an “investment” I do it because its my job and not take advantage of people. When I suggested she could move if she didn’t like what we were doing, she responded, “Well, where am I supposed to go for that rent rate? Don’t you know this is a poor area? Where am I supposed to go if not here?”
There you have it. Cheap rents hurting another tenant who has nowhere to go because they’re so used to paying the cheapest rates in town with no rules or regulations for paying on time.
The Importance of Adding Value
Turning around a community is never easy. There is always blowback, whether it’s a mobile home park, an apartment complex, a tri-plex, or even a single-family home. Cheap rents produce the same type of tenant with the same issues and arguments.
You see, when she said that, I realized her anger wasn’t rooted in hatred toward me; it was rooted in fear of homelessness. She was backed into a financial corner, and when anyone or anything is backed into a corner, they have nothing left to do but lash out and fight back. She couldn’t afford the rents; she was constantly behind. She received a notice stating we were moving toward eviction if she didn’t catch up on rent. I’m sure that got her worked up out of fear. That’s where the argument, yelling, and mean comments came from.
The problem with cheap rents is that they set a bad precedent for what it costs to rent a three-bedroom home. Tenants begin to assume they’ll always pay this low rate, which removes any incentive to work harder to afford higher rent or move to a nicer place. They become content with the rent, the home, and the overall condition of the community. As other rents in the area rise, they find themselves unable to move because they can’t afford anything else.
The psychology of tenants in a cheap rent environment is like that of animals in captivity. These animals become so used to being given food that they lose the need and ability to hunt for themselves. They grow complacent with their situation, whether they are tied to a post being fed or have food tossed into their cage. They are satisfied—no energy expended, no need to rely on their natural instincts. However, when released into the wild, they struggle to fend for themselves and compete in the food chain because they’ve lost their survival skills. To counter this, the handler must gradually prepare the animals, working with them over time to help them regain their instincts so they can survive and thrive when released.
The same is true for tenants. In a cheap rent environment, tenants lose all concept of what it really costs to rent a home and become complacent with the rent and the community’s situation. They may not care if trash piles up in the yard or if a leak causes mold—they’re just satisfied to have cheap housing. But when they are suddenly thrown into the free market, forced to find another place to live, they realize they have no ability to secure housing at a rate they can afford. The going rates might be double what they’re used to, leaving them desperate and unable to compete with tenants who have budgeted for normal market rates.
Just as the handler must prepare the animal for the wild, it is the landlord’s job to gradually prepare tenants for the reality of the rental market. This can be achieved by not allowing rents to remain artificially low and instead gradually increasing them to fair market levels. This approach also involves teaching tenants how to pay rent online, pay by the first of the month, and follow basic community guidelines. By doing this slowly, tenants become acclimated to the current market expectations for behavior and rental costs. When they eventually leave the community, they can compete in the open market, having adjusted to paying fair market prices.
However, not all tenants can be worked with to help them adjust to fair market rents, even over a 3-5 year period, which is the realistic timeframe we set for park improvements and rent increases. We take our time, introducing moderate rent increases each year until we reach market rates. Despite this gradual approach, some tenants are unable to keep up and eventually have to move on.
Where do they go? We had one tenant move back in with her parents; another found a roommate to share housing expenses with. Others, I’m sure, are looking for the next cheap housing option in town.
No matter what we do, we will never be able to help everyone. We will never make everyone happy, and we won’t be able to keep 100% of the tenants while doing park improvements after a takeover.
However, we can help many. We can work with tenants, educate them on online systems and maintenance requests, and get them on board with a safe and clean living environment. There is responsibility on both ends, from the landlord to the tenant. Landlords must live up to their end of the agreement and show residents real change in their community. Tenants must work towards caring for their properties with pride and paying on time. Together, they can solve the problem, but each alone only creates an adversarial situation. No one likes paying a higher price for anything, but we will pay for value. We do it every day, willing to buy one thing over the other even if it costs slightly more because the perceived value is higher. The same is true for rental homes and mobile home parks. As landlords and operators, we must provide value to the community so that tenants can see why the rental costs are worth it as residents of this community.
When we do that, we help the tenant, the community, and the industry.
Do you want to discuss this situation or something else related to Park Operations? Use my link to set up a time to talk to me
-The MHP Operator
