New MHP - Previous owner did not require deposits

[Jordan M.]

Hi everyone. I just closed on a 23 unit mobile home park, almost all lot rentals. The previous owner did not require deposits. I'm trying to decide if I should require all tenants to provide a deposit equal to one month lot rent. I'm already giving them increase letters ($45 increase) on July 1st, effective August 1st. What I don't want is some mass exodus from the park as a result of rent increases and deposits. Keep in mind, this is very low income housing. I would give them 30-60 days to come up with the deposit. Thoughts?

[Ray Hage]

It's a bit of a tough position especially if they have been living there for a long time with the previous owner without having a security deposit. I suppose it depends. If your goal is to keep all the current tenants, it might be wise to avoid it. If the $45 rent increase + security is tough for the them, maybe you can go a little higher with the rent increase and not ask for the security. Either way, it is tough. 

I'd probably lean towards just increasing the rent a bit more than you originally planned and only for new tenants, require a deposit. That way you don't have to immediately worry about a big loss in cash flow starting in Aug.

[Jordan M.]

Thank you Ray - that's well thought out advice. 

[Jordan Moorhead]

I wouldn't. We didn't do it and kept all tenants after the rent raise.

[Jordan M.]

Thanks Jordan. Y'all have me almost convinced to leave it alone. I guess the only other argument would be they're likely to have a deposit+rent wherever they would move. Plus they would have to pay a mover. 

[Wesley W.]

What would a lot rent deposit be used for?

The reason I ask if it used to ascertain damage to something on the lot (water/sewer/utilities hookups or something) and you don't have pics and mutually signed documentation from the lessor/lessee upon each tenant's move in prior to your ownership, would you be able to justify a charge upon move out?

Or is the deposit used to pay a delinquent balance? I don't think tenants would abscond with their mobile homes under the cover of darkness without paying.  Or would they?

[Jordan M.]

They absolutely abscond. 

The main purpose would be as last month rent in case they skip out. Would also cover a portion of any repairs to utility hookups if needed. Can cover damage if they or their child vandalize something and refuse to pay. Can cover legal fees if I need to evict. etc....

[Wesley W.]

Quote from @Jordan M.:

They absolutely abscond. 

The main purpose would be as last month rent in case they skip out. Would also cover a portion of any repairs to utility hookups if needed. Can cover damage if they or their child vandalize something and refuse to pay. Can cover legal fees if I need to evict. etc....

 Understood.  Thanks for educating me.

[Scott Mac]

Quote from @Jordan Mangano:

...a 23 unit mobile home park, almost all lot rentals. The previous owner did not require deposits. 

I'm trying to decide if I should require all tenants to provide a deposit equal to one month lot rent. I'm already giving them increase letters ($45 increase) on July 1st, 

... this is very low income housing. I would give them 30-60 days to come up with the deposit. Thoughts?

You're going to give very low income People 30 to 60 days to come up with the money Yeah and Where are these people going to get this money- robbing liquor stores.

Very low income people tend to have hardly any disposable income

If it were mine I would be very hesitant to do this. 
 
Good Luck!

[Ariel K.]

@Jordan Mangano I own a RV park for low income tenants - 16 pads. What we did was to start rent higher for new tenants, then gradually let the old tenants catch up. For those that didn’t have deposits, we chose not to get one, but absolutely require it for new tenants. Eventually, we got all rents to be the same, but didn’t push the deposit issue. Hopefully this helps.

[Samuel Coronado]

I fell into a similar situation in a park I bought last year. I let the natural turnover happen and as the new tenants came in then I required deposits from them. The rent increases will cause some vacancies. You want that to happen. It will produce an opportunity to reset the park the way you should want it to be done. 

[Nathan Gesner]

Quote from @Jordan Mangano:

I would require the deposits. Paying a deposit is cheaper than the cost of moving their home to another park, if they can even find one. 

I would require new leases, new rent rates, and new deposits all at once. Give them a form to fill out if they want to make payments, so there's a clear schedule of how much they need to pay each time and a deadline for when it should be paid in full.