Wednesday, July 15, 2009

Lot Rent Fees

I've had a lot of people ask me about lot rent fees and how much they should be in the parks and/or areas they choose to work. People have told me different prices of lot rents in their areas ranging from $75 per month on the low end, to $400, $500, and $650 per month respectively on the high end. Most recently, I've heard $1000 per month (per one of my "tweeps" @pmjohnson99).

So, what should be the target range of the lot rent for the parks you decide to work in?

The short answer - it doesen't really matter. Honestly, the amount of lot rent a park charges should not have a large effect on your decision whether or not to work in a particular park. Why not?

It's more important that you work in a park where you know the demand is there and you can find a buyer. I've said this before, it's very important to know your market. Each area is different - knowing your market and knowing who and what your buyers want, including where they want to live, is extremely important.

On my first deal, I was also concerned about lot rent. It was pretty high - almost $400 per month, this park had one of the highest lot rents in the area. Though, once I researched the market I got a feel for the demand in the area.

Driving around the area around the park, I could tell this was an area that was growing and had a lot of demand. I found out this park was in high demand - a lot of people wanted to live in this particular park. It was a nice park in an extremely good location. People wanted to live there and there was not much affordable housing in the area. There were apartments up the street that were almost at full capacity and the rents were steadily increasing.

So, I decided to move forward with the deal based on my market research and knowledge. Had I not done my research and known the area, it could have been a very risky deal as I would not know what I am getting myself into. If I did not know the market, I may not know what people are willing to pay for a home in that area and/or what types of features they are looking for.

Common mistakes people make who are not familiar with the market include overpricing and/or underpricing a home, asking for too high or too low of a monthly payment, not knowing what features people are looking for in a home in that particular area, selling "as-is" when most people in that area want things fixed up or vice-versa, etc.

All of these mistakes cost both time and money. And let's face it, time is money. That is why it's extremely important to know your market before you go into a deal. It's very dangerous to start investing without knowing your market.

Knowing your market is extremely important - I cannot stress it enough. Knowledge is power.

(If you would like to read more about getting started in mobile home investing, check out these tips).

Happy Investing!

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