I know a lot of you folks prefer public water and sewer and TOH for a lot of reason I get that.
But for all of you who would consider a park similar to mine here is my experience to make it work
You get a whole lot more cash flow when you own the trailers. I understand the maintenance component but what trumps a lot of the issues is a well ran park manager and maintenance team.
From my experience the added cost for the POH nets me more then the expenses involved by at least 50%. Example my lot rents are $275 and my POH rents for $600. Out of the excess $325 I am keeping a minimum of $170. And this is not just regular maintenance. I actually put back $$ into improving the trailer like changing windows, skirting, roofing etc…
In terms of the private utilities I was able to recoup the cost of hiring the operator by charging each tenant $60 a month for water and sewer fee. This not only pays for the operator but also a reserve to replace pumps, fluids etc… I will admit there will be leaks that pop up here and there but the cost is taken cared of. We just don’t patch up leaks we replace whole sections with PEX. And in due time when your property is stabilized with rents you can start thinking about replacing all the piping in sections. This may seem expensive but again this goes back to maintenance team.
Yes the waste water plant may fail but as long as your operator is very experience and give you excellent feedback on condition and a contingency plan you will feel a whole lot better.
Also I personally would only consider doing this all over again only if the location is prime which my current park is. People are line up for applications as the city is getting to expensive to rent.
I understand the whole majority of TOH and city utilities for the financing aspect, upside and BRRR strategies but to have the one I have that I plan on keeping and passing on to my kids is something I will never regret acquiring.
It may sound like I perfected my acquisition with my strategy but I actually went through a lot of growing pains and losses through the process.
I just wanted to share this so people who are not familiar with this side can have a better understanding
We have the same experiences. We own a 100pad park with 85 POH. We also have the private well and treatment plant - we maintain both with our Maintenace staff We have done quite well with POHs.
Thanks for sharing. We are looking at a Park that is well and waste water treatment plant. It’s been very daunting trying to understand it and the possible costs associated. Can you tell me how much you put into Capital reserve yearly to cover issues with the treatment plant and how hard is it to get liability insurance on a Park with these systems?
Thank you in advance.
First of all I would find the closest company who can build a similar system and get the follow 3 quotes
replace the whole system. You would want this for insurance purposes
replace the major parts which is what you will likely do when you notice the system is deteriorating
emergency back up patch up plan that needs to be done if the system fails
Its worth paying for these quotes during due diligence. I would reserve the whole cost of #3 and add 10% a year to the cost of #2
also I would suggest you inquire about getting some kind of small business equipment loan and have it as a back up in case you need the funds immediately because insurance won’t be paying you the next day and the health department can’t wait around either.
You need to hire an experienced operator who is familiar with the system to evaluate the cost to up keep with system and their operating fee. What ever number it is I would keep a 10% additional for reserve
Getting insurance for liability and for the water plant is not difficult… Its rather easy…
Make sure you pay the money for due diligence because you need to know the current condition and it will also help you with negotiations with the seller. Every dollar you spend here on professionals pays for itself
I went through trial and error until my 3rd park manager became my guy. If you have a big enough park you should have a lot of candidates that can be that guy and hard working guys who want to be apart of the maintenance team…
My park manager is an older fellow that hired a bunch of younger guys between 20-25 who are desperate for work… And you don’t have to pay these guys a whole lot. They don’t need experience at all you just need hard workers… But that begins on how much character and experience your park manager has to spear head the operation.
You promise him a place for him to stay and guaranteed work. He will work his tail off day in and day out to provide for his family…
I know the biggest question is trust… You will know this by the conversations you have with him. I knew he was my guy when he started firing people for not working hard enough and constantly provide suggestions on improving the park cost effectively… You take care of them they will take care of you…
You will stumble across a few scum bags but who doesn’t…
Most of my guys are people and family from the parks. I only have one guy I outsourced who lives down the street who I found on craigslist who turned out good…
Just make sure you are on them from the get go on a daily… Taking pictures of progress…
i just bought a 20 pad park with a treatment plant im doing all poh’s but there seems to be alot of drama with the plant and permit for it so im currently prepping for septic tanks and leech field. found a tree guy that is doing a 50/50 deal on alot of my acreage he does all the work and sells them that should pay for the new system and give me some extra to boot.
nice to see others doing rental houses instead of just tenant owned.
A good manager and Handyman makes a world of difference for sure! I’m in the middle or switching a park from park owned homes to tenant owned homes and I have a perfect handy man that lives right in the park. I cannot imagine doing the job without him!
@Hshape Thanks for sharing that insight. I am currently in talks with a park owner that has all POHs. Park is on City water & Sewer.
I am trying to run the numbers to see if it makes sense. Does age of the home play into the amount of maintenance & repair costs? Currently his expenses are at 69% of GPRI, with Maintenance & Repairs a large park of that. Also this owner pays for water, sewer, & trash/snow removal. Do you make your tenants pay for water/sewer?
My concern is that all the homes are older, pre 1980’s and if I try to convert to TOHs is the age going to be an issue?
Yours and others insight is welcomed. Thanks in advance.
PG what is your exit plans? By having all poh are you limiting your buyer’s pool and we have noticed older units tend to have high utility bills–and thus LESS money for pad rent increases. At the time we are planning on buying a property we have in place an exit plan.
After I made capital improvements on roads I charge $50 for water, sewer and trash and that covers my trash bill and water operator as I have private utilities…
I would calculate what the monthly cost is and charge it back… before you think about doing that would this action force a lot of people to move out with the added cost? You may have to lower the rent somewhat because your ratio will be more favorable to you?
Great to hear others finding success beyond the TOH + City Utilities model - especially given the stigma surrounding waste water plants and the ‘high expenses’ associated with POH upkeep.
If you don’t mind sharing, what are some parameters you utilize to determine whether a location can be classified as ‘prime’?
Also, do you see this particular model being replicable in ‘non-prime’ locations?
BRRR stands for Buy, Rehab, Rent, Refinance. It’s an investing strategy commonly used in the single family home world. The refinance step funds your next investment property.