3 Ways to Increase the Value of Your Manufactured Housing Community

There are many actions that you as a property owner could take to increase the value of your rental property. Common manners many choose is to raise the rent rates or occupancy, both causing a higher gross return. Another is to decrease operating expenses, allowing the net income to rise. Generally speaking, these are the most frequently seen strategies in the manufactured housing industry today, however they are NOT the only options you have to expand your community’s worth.

One idea that could save you some money in the future is to ensure you have a clause in your leases that permit a pass-through of increases in real estate taxes. As your property’s value increases, your real estate taxes will most likely rise as well. What this small lease clause would allow you to do is raise the rents in the community to make up for the increase in taxes. Even many jurisdictions with rent control measures let property owners pass through taxes and other governmental assessments through rental increases.

From a lender’s perspective, this one is pretty big, but it’s also a little confusing. Homes owned by the community (or you) come with both equity and the liability of higher expenses (read this Bigger Pockets Article for more clarification). Because of this, there’s some tricky math involved with helping lenders figure out the value of a community. If your community has park-owned homes, then you’re going to want to account for lot rent and the park-owned home charge separately. What this means is, if your lot rent is $200 and you have a community-owned mobile rented at $500, when you collect that money, $200 should be accounted as lot rent and $300 accounted as a park-owned home charge. Why is this important? Because lenders are frequently cornered to underwrite rents supported by the rent roll. If you didn’t show $200 going towards the pad rent, it’s likely the entire $500 be scratched from the operating income and thus devaluing the property.

Now if you aren’t able to count park-owned home income, it makes sense that expenses revolved around cleaning, repairing, maintaining or renovating community-owned homes not be counted towards the NOI as well. So as a result, some of the expense for payroll or repairs & maintenance and even materials are reduced from the operating expenses (counted as non-operating), and therefore the underwritten value of the property is increased!

Now these are only a few strategies to increase the value of your manufactured housing community and still don’t provide a full picture of how lenders evaluate mobile home parks, but it’s definitely a step in the right direction to add value to your rental property.

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