Mobile Home Park with well septic valuation and suggestions

mobile home university
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I am looking at a 56 unit park with 50 mobile home pads of which 3 are POH.
3 tiny homes and 3 rv spaces.

3 lots are free rent because they handle the trash, and landscaping

Average lot rent is 200. It is almost 100% occupied. Many tenants have been at the park for 15-20+ years. Market rent is around 225-240. I want to raise rents Jan 1 to 225. I also want to start charging for water.

It is in a rural area but the metro is strong. Closest city is around 6 miles and has a population of 25k and median house price of 125k. The median household income is 45k.

If I look at the metro the numbers are a population of 700k, median house price of 125k, and household income of 42k.

Excluding tiny home or rv space rent, I have came up with a price of 676800 at a 10 cap. 47 pads20012*.60.

The bad is that its on well and septic. The owner lives next door and the well is on his property but he is willing to give an easement for the well use. Public water is available across the street but I am not sure of the hookup fee.

Park has gravel roads, trees, and some homes that do not look that great. Some decks are in bad shape and some skirting is damaged or not up.

Price I have negotiated and about to put under contract is 575k and will have to get bank financing.

Any potential issues that I should look out for? I plan on having plumbing, electrical, inspections and a phase 1.

I am not thrilled about well water but worst case I can switch to public water. What about the electric poles with 4 or more meters on them? Is this a common setup? I assume that the landlord is responsible for the pole that the meters are on and also for the underground wire ran to the mobile home.

Below is a picture of how the electric is ran. I will try to get a better picture in a few days.

Any issues with charging for private well water? like 10 or 20 a pad.

Any advice would be appreciated.

Thanks

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There are lots of well water and septic parks out there it all about what your comfortable with. You need to check with ultity commision and follow the rules to the tee. Just because you can connect to city water doesnt mean it wont hurt price wise. Normal tap fees are $3,000 to $7,000 per lot. Well on owners land can be challenge I hear lots of horror stories about shared wells and wells on other peoples properties.

Regarding septic is there adequate land for replacement. Make sure you have it inspected.

Here is a due diligence list we put together for water systems.

Hope that helps

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Thanks for the reply. The state the park is in has very relaxed well laws and regulations. You are not required to have an operator or even test the water. It is recommended that the water is tested every year. I do plan on having a well expert inspect the well for peace of mind.

Also can you explain why hook up would be so expensive? Can the public utility not set up a master meter and hook into the main water line for the park?

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With 50+ pads the water well should be under EPA jurisdiction as a public water system. This is a red flag if the current owner (or the well owner) does not have compliance documentation all over the place.

The city has these things called impact fees, and then add tap fees, road boring fees, etc. For large commercial customers this can be 10-40K depending on the city and complexity of the hookup…for one big meter.

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5

Any well system with over 14 homes would be under federal EPA standards and would be a community water system. Nearly all states have taken primacy for enforcement of the federal stanards. What state is the park in? The standards are nearly identical across the whole nation as the states are simply the enforcers of the federal standards.

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You probably have to get a certification to operate a community water system. Basically you will need a D1 certificate and IF the water requires treatment a T1 as well. Water must be tested for bacteria monthly, and there are yearly and every 3 year tests, that can be expensive $1,000 or so for the large tests. The water standards are becoming more and more stringent, I recently was forced onto City water. I re-plumbed my park to get the costs down. all my outside watering is on my wells and the City water goes into the mobiles only. Dropped the Bills from $2500 to $500 a month. If you go to individual meters for the spaces, people will not water their plants and the yards will die.

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Some thoughts on private utilities…I own a park on well with the ability to hook up to city water. I have a good operator and have always had clean tests. Even factoring in reserves, maintenance, and servicing, the cost savings allows me to charge a little higher lot rent since the residents don’t have a water bill, and my delinquency rate is almost zero (probably should be charging higher lot rent). Should there be a major issue with the well itself, I would likely just repair it instead of tying into the city. The only case I would tie in would be if I started to have issues with contaminants etc. At least for me, in this circumstance, I’ve had a good experience with well water, but again a good operator and a history of clean tests has been key.
In terms of septic, I had a completely different experience. My park had conventional septic systems and as they started to fail the TCEQ would not allow me to repair the existing system, but I was forced to replace the entire system. I did not have enough space to install the cheaper aerobic system with sprinklers, but luckily I did have enough space to install a lower pressure drip system and keep all of my units. That was a very expensive mistake. Now that I have a brand new system that functions well, and again a good operator, my concerns are minimal but I do factor in reserves for future repairs.

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I have talked to my local well authority and they advised me of what you have suggested. I will need to factor in bringing the well up to compliance and hiring a well operator to manage the well.

I also talked to the public utility and they want 1150 per lot to install a meter and direct bill for each lot. So, it will run around 60k to go to public water.

I don’t see how that is worth if the well is running, and the costs to operate the well should be less than 10k a year. I can likely charge each lot a 10 dollar water maintenance fee or just charge each lot for water.

I also talked to the electric company and the landlord is responsible for everything to the meter including the poles the meters are on.

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In terms of septic, I had a completely different experience. My park had conventional septic systems and as they started to fail the TCEQ would not allow me to repair the existing system, but I was forced to replace the entire system. I did not have enough space to install the cheaper aerobic system with sprinklers, but luckily I did have enough space to install a lower pressure drip system and keep all of my units. That was a very expensive mistake. Now that I have a brand new system that functions well, and again a good operator, my concerns are minimal but I do factor in reserves for future repairs.
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The park had an additional 100 feet of drain line installed last year and all the septic tanks were pumped. What should I be looking for with septic tanks. I plan on having a septic tank inspections.

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Also, I just got the rent roll from the seller and it is not great to say the least.

Many months are missing multiple entries and the latest month has 14 out of 52 entries missing.

It is a mom and pop owner that likely is dealing in cash rent payments and very little record keeping.

At this point, should I just try to verify each lot is occupied and apply market rent and then backout a vacancy rate %?

I have ran a test ad that received over 40 hits in the last two days for a 3/2 mobile home for 550 a month. That shows me that there is high demand even if some people at this park are not possibly paying.

Any advice or suggestions?

thanks

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Talk to an installer and ask them about local codes and what you would be able to repair or what would be required to be replaced. Make sure that you have adequate space in your leach field to ensure that you can keep capacity for all the existing units should the system need to be replaced. Talk to more than one if possible to ensure you are hearing the same story. A good way to locate reputable installers is to reach out to the county environmental office and ask if they have a list of installers that they recommend.

Tanks should be on a regular pumping schedule.

In regards to income verification, you might want to indicate that it is common that park owners occasionally don’t report all of their cash, but it is extremely important to you that you are comfortable that all of the rent is, in fact, being paid. Ask them to deposit everything they collect into the bank for the two months prior to closing so that you can verify that the residents are truly paying.

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I got a diagram of the layout and for 50 lots there are 35 septic tanks with most being 1 tank per lot or some with 2 tanks per lot. The health department has records of the drain fields. The seller added 100 feet of drain line in 2014.

The seller stated that everyone has paid for the month except 2 people.

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The park is in TN. I found out the well is not regulated and is only tested yearly. How long is the process to get the it regulated? Is it possible for the seller to get it regulated and tested in a month or 45 days?

The alternative is to hook to public utility water with a master meter for about 15-20k and pass the cost to the tenants. However, I would not like be able to raise rents for a while if I were to pass the water through.

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Tennessee Environment and Conservation see water quality division in link below.

http://www.tennessee.gov/environment/section/wr-water-resources

You will most likely have to be put on the list of public water systems. You might or might not have to go through plan review for the whole system on an existing system (think engineer and 6 months to review plans). My guess is they will treat you like a brand new system and make you jump through all the hoopes. Then you will have to test for the following before you are approved to deliver water to the homes in the park. Bacteria, nitrates, nitrites, arsenic, inorganic compounds suite about 15 items, synthetic organic compounds, volitile organic compounds. Lab work should be less than $3000 but plan review could be painful and very long if they require an engineer .

Hope that helps

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What happens in the meantime? Are you allowed to continue to provide water?

Should I just make the seller pay to hookup to public water?

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Talk to the water quality division. There are four scenarios: 1 system was constructed after safe drinking water act and was never approved and as such should not be providing water to anyone until it is approved and passes lab tests proving water is safe to drink, 2 system was constructed after safe drinking water act and went through plan review but is not current with testing or operation rules, 3 system was constructed prior to safe drinking water act and is grandfathered in i.e. no plan review needed but will need to get compliant with testing and operation rules. 4. System was constructed before 1986 but warer qualitt division doesnt care and will require plan review and lab work. Water Quality Division should ne able to give you the answer as to which of the 3. Safe drinking water act has 3 dates that are relevant 1974, 1986, 1996. 1974 act was signed into law but 1986 is when most of it came into force so 1986 is the date to think about as far as when the system was built. If system was built pre 1986 you have decent chance of avoiding plan review.

Simplest solution is to have owner to discount price by whatever cost is to connect to city or make owner connect proir to closing. The danger is until all the lab work is back you have no idea if the water from the well is safe… do you want to own the park and be exposed to the liability for water making people sick. If you buy it and the well is still pumping water you now get the liabilty.

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17

Thanks for the reply. The well was built around 1966. If it’s possible to become regulated and compliant in a reasonable manner, would you try to go that route or just push for a public water master meter?

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My main business is operation and maintenance of public drinking water and waste water systems so im slightly biased😀. I would explore getting the well compliant to see what it would cost. If sub $10,000 i would do it and then get a years worth of water usage data to see if the system has massive leaks. I would base my decision on the one year trial run as long as your 100% certain on the option to connect to the city water.
Best case with master meter is when you submeter each home and bill that way. Cost would probably be $200 to $300 per home to submeter plus cost to connect to city. The main danger with master meter that most people miss is when you have a leak it destroys your bottom line where as with your own system your cost of production is very small. I doubt there is a meter on the well so you probably have no idea the condition of the pipes in the ground based on water usage. 1960 is usually galvanized, black poly pipe, or copper usually galvanized though.

You need three components good source (city, or well), good pipes i.e limited amout of leaks, and good pressure. You have to verify all three in due diligence

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19

Not sure are they proposing master meter or direct bill. If they will direct bill for 60k with no master meter to the park I would do that. Just discount the purchase price by 60k and be done with it. If the park is master metered, then each home is submetered and billed by city they will still get you for leaks in the park which is fine if you knew the condtion of the water lines in the park

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That was just the fee for the taps. For direct billing. The cost is around 150k. The public utility wants all new water lines for direct billing or the park can be master metered for around 15k and the park can keep the existing lines.

What do you see the operating costs for a single well to be monthly for 50 lots roughly?