In this article, you’re going to learn about Lot Rent for mobile homes. You’re also going to learn when to pay Lot Rent, when not to pay it, and how to avoid it altogether.
What is Lot Rent?
Lot Rent is the price of the land that the park owns. That’s what the mobile home sits on. Since the owner typically owns a mobile home and doesn’t own the land, they rent the land. So the tenant is responsible for paying a Lot Rent fee each and every month.
That runs typically somewhere between $200 and $500 a month. It depends on your market though. In California, it’s a lot more than that. It can go up to $1,500 a month in California. So it just depends on your market, but expect to pay somewhere between two and $500.
Are you responsible for paying Lot Rent?
So if you’re looking to actually resell a home and you need to do some renovations to it, you are going to be responsible to pay the Lot Rent. Until those renovations are complete, and a new buyer takes over.
What we do is we use a storage agreement. We don’t like the park asking us to fill out applications because we know we’re not living in the community and we don’t want our credit checked each and every time we go and buy a new home.
So what we do is we basically sign a storage agreement with the park. And that agreement states that we are responsible for the Lot Rent until we find a new buyer who’s going to be living in the community. That buyer will then go and put in an application with the community.
When to not pay Lot Rent
When you sell the home on payments and you have a new buyer in there you should not be paying Lot Rent. It makes everything way more complicated.
WE know a lot of investors out there that have their buyer pay them their cash flow and the Lot Rent each and every month. But that creates another job for you as an investor of not only collecting that cash flow each month but going and making sure that Lot Rent is paid each month.
So do not pay the Lot Rent in this situation. Stay focused on what you’re good at, which is finding homes and negotiating with buyers and sellers. And then have your buyer that’s going to be living in the home each and every month pay the Lot Rent. And pay it separately to the cashflow that you’re going to be collected from them for 4 to 6 years.
How to avoid paying Lot Rent
So here’s what we like to do whenever we know that we’re going to go in and fix the home.
Some of these homes might take a little bit more time than we want. We’ll go and talk to the park manager and try to negotiate 2 to 3 months of free Lot Rent while we’re fixing the home up, bringing the home up to the community standards, and even going out to find a qualified buyer or a qualified tenant for that community. So that’s one way you can avoid paying that rent.
The other way is if you can do a strategy that we call ‘Wholesaling’ the property. This is where you never have your name on the title. You’re never responsible for the lot. You just have an agreement with the seller saying “Hey, I’m going to help you find a buyer for your property.”
And until you find that buyer, whether it takes you 2 months or 4 months to help that seller find a buyer, he or she is still responsible for paying the Lot Rent each and every month. And your responsibility is just going out there and finding a buyer for that home.
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