The biggest mistake I see new mobile home park owners make in Washington is underestimating how hard it is to fill a space. Usually, it’s because some slick-talking broker sold them the park and said “well, you just have to fill six spaces and then the profits will start rolling in.” Sure, and you just have to win the lottery and you’ll never have to work again. Take that ‘just have to’ with a grain of salt. Nothing is that easy in the mobile home park business.
You must ask the question: If the prior landlord, with all their experience, couldn’t maximize occupancy and increase the value of their mobile home park, how can you expect to? If you’ve invested money into a park that isn’t full, you’re going to run into a lot of trouble trying to get tenants. Never underestimate how expensive it can be to fill up a park. If you do, you could wind up taking a loss on that ‘sure-fire’ investment.
Why It’s Hard To Fill A Mobile Home Park In Washington
Washington is a popular place with high demand for real estate, but that doesn’t mean filling a mobile home park is a breeze. The thing is, it’s expensive to replace tenants who leave. When they leave, they take their houses with them. If you have a completely empty space, it’s not as easy as finding a tenant. You must find a tenant who already has a home to put on that space. If the spaces have been empty for a while, you’re going to have to look at the reason. Most of the time, you’re going to have to take a loss to get that space filled. There are four main reasons mobile home park spaces stay empty:
- The rent is too high: Market rate will change based on demand, so if everyone in the neighborhood is selling a space for $400 a month, and you’re trying to get $450, you’re going to lose. Your own empty spaces in your park are going to cause your market rate to drop. It’s like trying to sell your house on a street where four other houses are for sale. Your competition is high, so your price must go down.
- They can’t get a loan for the home: Mobile home park tenants must be able to buy a place to live on your lot. If lending is tight in your area, it’s unlikely they’re going to be able to afford to buy the home. If they don’t buy it, you might have to.
- You may have to provide the home: Expect to take a loss of about $10,000 if you must buy a home to put on the land to get it filled. That’s the minimum cost of a decent used home and you’re not going to make that money back overnight.
- It takes time and money to fill a space: The longer a space has been empty, the more expensive it will be to fill. That’s because the longer it’s empty, the more time you have to invest in a space that isn’t making money. You’re going to have to advertise it, take time out of your day to show it, meet with people, process applications and cover any utility costs or maintenance fees for the space.
When you buy a park with a high vacancy rate, you’re buying a burden. That’s probably the biggest mistake I see Washington’s mobile home park owners make. They think that they can work with a vacancy rate. They also need to know how to fill those vacancies without having to spend a lot.
Lower Cost Ways to Manage High Vacancy Rates
If you’re in this to make income now, then you can’t afford anything higher than a 10% vacancy rate. Otherwise, you’re barely going to break even. Between the cost of filling and advertising the space, as well as the reduced value in your lot, you could even wind up taking a loss. If you made the mistake of buying a Washington park with a high vacancy rate, there are a few things that you can do to reduce your costs, but you’re still going to have to put in the time:
- Advertise on free and low-cost real estate sites: There are a lot of places online like Craigslist or Loopnet where you can list your property for low or no cost. Take advantage of them.
- Advertise in your park: If you have tenants in your park with relatives looking for a place to live, let them know about your vacancy. Inside your park might be the best place to look for prospective tenants, as your residents already know the minimum rental criteria.
- Work with a home seller: If there’s a local seller of mobile homes, let them know about your empty space. After all, if someone’s buying a mobile home, they’re going to need a place to put it.
- Contact housing non-profits: There are a lot of resources at the state and city level in Washington where people can find low-cost housing for low-income mobile home owners. Some of these places might be able to get you a tenant for your space, through a high-need housing program.
While you can give all the above a shot, you also need to know when to cut your losses. If you made the mistake of buying a park with spaces you can’t fill, then you’re just going to keep losing money. Your best bet might be to put that lot back on the market.
Know When To Walk Away From Your Mobile Home Park
I’ve often said that mobile home parks are an expensive hobby. Some brokers or get-rich-quick investment types make it seem like all you must do is buy and the park will start turning a profit. That’s not the case. Empty spaces cut into your bottom line. If you can’t fill those spaces, you might want to consider selling.
I’m always willing to give a quote on a park and if I can fill it, I’ll buy it. If you’re in position where you just don’t know what to do about your low occupancy rates, give me a call or shoot me an email. I might be able to take that park off your hands.