If a seller can’t fill up a park, what would make me think I can? That’s what comes to my mind whenever someone wants to sell me a park with a low occupancy rate. As a mobile park owner, operator, and buyer, one of the biggest impacts on what I’m willing to pay for a park is how many people are currently paying rent in that community.
If you’re ready to sell your park, but can’t fill it up, take my advice. When I want to increase occupancy at one of my parks, I focus on working with my existing tenants—and finding ways to help new tenants with financing. Max out your parks occupancy and you will max out the value of your sale.
Empty Parks Cost Money
A full park is a valuable park. That’s the first thing you need to know. When someone wants to buy your park, they’re probably looking for a ‘turn-key’ operation, or a park that requires very little maintenance with a lot of active, paying tenants. Every vacancy reduces the value of your park—empty spaces are worth less than half what full ones are worth.
- Owners don’t make money from empty spaces
- Empty lots still require basic maintenance
- Owners have to pay to advertise the empty spaces
- Empty properties drive down the value of the other properties
Of course, filling up those spaces is easier said than done. After all, if you could find a paying tenant, you wouldn’t have an empty property. Most of the time, when you’ve had a property that’s been vacant for awhile, you need to start buying homes and moving them and selling them.
Financing Future Tenants to Incentivize Occupancy
Not a lot of people would choose renting over owning if owning was more affordable—it’s usually either because they don’t have cash for a big down payment, or because they can’t get a traditional bank loan. In order to fill up a property, you must consider selling homes on a contract.
When you sell a home on contract, in essence, you become bank for the sale. The buyer pays you a down payment up-front, and then continues to make installment payments for a set period of time. This allows tenants to buy a property they may have thought they couldn’t afford and, at the same time, creates an incentive for them to stay and make your park home. As they’re making regular payments to eventually own the home, they’re probably not going to leave the park any time soon.
But remember, cash is still king. If there is a situation where the tenant may be able to afford to pay cash rather than simply enter into a contract, you must consider lowering your asking price to meet their needs. If I had a choice between accepting 10k in cash from a tenant to buy a home or 15k on contract, I’d go with the 10k cash offer every time.
If your tenant owns the property outright, rather than just on a contract, they’re far more likely to stay put. Sure you might take a small loss, but that loss can be made up for over time in lot rent. It doesn’t work the same with contracts, as a tenant can walk away from a contract sale.
Working with Tenants to Improve Desirability
Just like you’d clean your house if you were selling it, you want to make sure the homes in your mobile park are as nice as possible to increase occupancy—after all, you’re trying to “sell” your park to new renters. Take some time to go through your park to view what areas tenants are responsible for, generally their own property and the land directly around it. Look for rule violations like:
- Properties which are damaged or in disrepair
- Large junk items in yards, like old tires, appliance, etc.
- Pet waste and other small debris like cigarette butts
- Unapproved outside structures, like fire pits or kiddie pools
- Parking violations, like vehicles parked in the grass or an excessive amount of vehicles on one property
When you see violations, start by sending a friendly reminder regarding the problem and give the tenant a reasonable amount of time to correct the issue. Community cleaning days can also be a good option, especially if you’re offering to cover the cost of trash removal. Tenants may be more apt to help you beautify your park if you offer to help them in return by removing heavy items they can’t get rid of themselves.
By cleaning up your park, you’ll make the neighborhood more appealing for future tenants. No one wants to live next to the house with trash in the yard, or that looks like it’s going to collapse in on itself. They want to live in a clean, well-managed community. Increasing your curb appeal is the key to maximizing your occupancy.
One of the biggest selling points for me when it comes to a park I’m buying is the occupancy ratio. However, I’m experienced enough to know that some people who own parks just don’t have the resources to maximize their occupancy before they sell. If that’s the case, then shoot me an email or give me a call. If I can’t buy it, I can at least give you some tips to help you make your park more appealing.