Mobile Home Park Mastery: Episode 264

What’s Wrong With Being The Market Leader In Rents?

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While most mobile home park owners take comfort in letting someone else do the honors, there’s nothing wrong with being the market leader in lot rents. However, there is a process to taking that role and it comes with responsibilities and strategic thought. In this Mobile Home Park Mastery podcast we’re going to explore the role of being market leader and how to do a good job of it.

Episode 264: What’s Wrong With Being The Market Leader In Rents? Transcript

Wikipedia defines a leader as the one who is the most advanced or successful in a particular area. This is Frank Rolfe, from Mobile Home Park Mastery podcast. We're gonna be talking about a very special kind of leader, and that's called the market leader, the person who is number one in their market as far as rents. So how do you become the market leader? Well, it's not basically about how much you sell. It's about one item in our industry, and that's what your rent level is set at. So if you have the highest rent in the market, if your lot rent is 500 a month, everyone else is in the 400s, you're the market leader. You're the person who's in the front position. You're the one that everyone else is following behind. Now, that for many people causes anguish. People are afraid to be the market leader. They don't like being at the front of the pack.

They think they make... Makes you the most easy target. They like to be one or two steps behind the market leader. And in most cases throughout America, you'll find that it's not too hard to be in that role of being right behind someone because always at the forefront are your largest public REITs in most markets or other groups that have adopted this position of always being at the top. And if you look at the rent breakdown in many markets in the US, you'll see that the REITs typically are $100 a month more than everyone else. Whether it's a REIT like RHP through Brookfield Asset, which is a Canadian REIT, or Equity Lifestyle that REIT. It doesn't really matter which it could be, Sun Communities. They always tend to be far more expensive than all the rest of us. And if you're in a market like that, they have many reasons why they should be. They typically have a lot better amenities than you have, so it just makes sense if you've got a property and it's got a fitness center and a hiking trail and an Olympic-sized pool, that its rents would be higher.

And I don't think most people mind the fact that since they're higher, we're able to have rents that are a little lower, so we never truly are the market leader. But you can't always be in that position because many markets don't have those participants in them. If you're in a big market like Dallas Fort Worth, sure, you're gonna have some kind of public REIT to go out there and lead the way with a... What seems to you a crazy high rent. But in many parts of America, you don't have that option. There isn't some huge company leading the way with a really giant rent. You can then offer a really good rent, still a high rent and not be the market leader. So if that's the case then you may have to be the market leader. So then the question is, is there a problem with that? Well, the first thing is, no, there's no problem being the market leader as long as you are still a good value. That's all the customer cares about. They look at what they're getting for the dollar.

I always use the example of three hotels at an exit, Tiki Motor Lodge, Holiday Inn Express, and for the third, let's just say is The Ritz-Carlton, it doesn't matter. The Tiki's at $19 a night. It's an old rundown 1950's motel. You see them along the freeway. The neon bulbs partly burned out. The location, terrifying. The customer quality, abysmal. And then the Holiday Inn Express, which all their lights are working. It looks safe, good location. The rooms are clean, good security.

And then, of course, The Ritz-Carlton, which is probably four times more than the Holiday Inn Express, which has an opulent interior, fine Egyptian cotton sheets and even little chocolates that go with it. Now, the average traveler is not gonna opt for The Ritz-Carlton because it's crazy expensive, but they never opt for the Tiki Motor Lodge. They always go with the Holiday Inn Express. Why? Because they like the safety and the cleanliness of it. But what that sample proves is the simple fact that people don't make decisions only on money. If we all make decisions strictly on dollars, we'd always pick the Tiki Motor Lodge, yet no one in America, given that example, would ever go to Tiki Motor Lodge, nor would your customers in the mobile home park. So you can be the most expensive and that's still fine, and you won't lose any customers as long as they feel you're getting a good value for that. So if you wanna be market leader, the first thing is, try to be a market leader in value.

If you're the highest price, then try and have the highest quality of life for your residents. If you don't feel good about it, if you feel like, "Well, I don't know if I'm really the best," what would it take to be the best, patching some potholes, taking the old laundry building and making it into a community center? What are you truly lacking when you size yourself up against all the other folks in the market? And if you're feeling insecure, then do those things. Make yourself a really, really good value. If you're a good value for the dollar. You have nothing to worry about being the market leader.

Also, don't forget that many people don't have a problem equating the most expensive with the best. There was a marketing example given in New Mexico many years ago. There was a jeweler there, he was trying to sell their jewelry, and it was turquoise and sterling jewelry like many other stores sold, but there weren't selling well at all, and the problem was they were the cheapest. Their jewelry was very, very low-priced. So a marketing consultant went into the store and said, "That's your big problem. You think you're gonna sell more by being inexpensive. But when you're inexpensive, it sends the signal that you're not as good as the other stores. Your jewelry is somehow not has much sterling content, quality of turquoise. Raise your price up, higher. Double it. Go up to where everyone else is at, even a little higher. Then people will go ahead and believe that what they're getting is good quality."

That's what they did, and that was the end result. So when you're the market leader, sometimes it actually benefits you because there's some degree in glory to the customers to living in the most expensive mobile home park, because almost all of us define the highest price as the best. When we look at cars, which car is the best? We're always gonna choose the one that costs more, even though maybe it's not the one with the best styling, best handling, biggest engine, because all Americans simply have been brainwashed to some degree to thinking that price is everything. And your customers are no different.

Also, remember that somebody always has to lead. In every market, if you have multiple mobile home parks, somebody has to be the leader. So why not you? Why not volunteer for that job? Is there gonna really matter much if your rent is $20 or $50 a month more than somebody else's? Is that really gonna scuttle your business? No, certainly not. No one's gonna pull out of your park to go to a different one. No one is going to not move into your park simply 'cause you are the most expensive. So embrace that. Don't hide from it.

A lot of mobile home park owners are way too self-conscious. They don't like to be on the radar screen. They don't like the optics of people looking at them studying what they do, saying, "Oh, well, that was the most expensive." But what's wrong with that? Every market has to have a leader. So volunteer for that role. Say to yourself, "You know what, I'm gonna go ahead and volunteer to be the most expensive in the market. I'm gonna try and offer the best value. I'm not gonna hide from it, not gonna shirk my duty as being the market leader." It's nothing to be embarrassed about. The mobile home park industry has been under such a continual battle with the media for so long now, that we're all afraid of our own shadow because we're afraid if we're the most expensive then the media will come after us, and we can't use the excuse, "Well, don't on me, because that guy is more expensive."

Why do we put away... Go along with that? Why do we put so much effort into being concerned about what the media thinks in that regard? So if you're hiding from being a market leader, if you're deliberately suppressing your rent so others are more expensive, simply because you don't want anyone to come knocking on your door, asking your opinion, or chastising you for being a market leader, that's ridiculous. You're losing a lot of money because of the silly optics of something that doesn't matter anyway. So don't let the media take control of you. Don't let them control your actions through this concept of public shaming. There's certainly nothing wrong with being the market leader. Finally, being the market leader simply may be a necessity 'cause there maybe nobody else in that market or no other operator of any equality. In a lot of the markets we're in, particularly the smaller ones, there's simply not that many mobile home parks. Early in my career, I had a virtual monopoly in a suburb west of Long View. There were only four mobile home parks in the entire city, only three of any size, and I owned all three.

There was no way I couldn't be the market leader. By definition, I was the market leader 'cause there wasn't anybody else. And in other markets we're in, there may be some parks, but they're all in really poor condition where the only thing that's been brought back to life. So if I have a situation where I'm the only mobile home park with paved roads or municipal water and sewer, or any type of attractive appearance, that is perfectly reasonable I would have to be market leader. So many times, you can't possibly suppress your rents low enough to make any sense when you only have one other competition, and that's on a dirt road with a water well down by the river. The bottom line to it all is, don't be that upset or that worried about being market leader. There's some good things that come with being market leader, one of which is you know that you are, and therefore you try to work harder to create a good value for the customer and have greater pride in the property, because you know at the end of the day, everyone is looking at you and you are leading the way on rents. This is Frank Rolfe, the Mobile Home Park Mastery podcast. I hope you enjoyed this. Talk to you again soon.