I’m looking at a 50 lot park and there is master metered electric. The only way I would be able to sleep at night is if I had the electrical system re-done to each home directly from the utility company. If you have experience with this and can please share the steps to get this done and approximate cost per pad that would help me before I move forward with an offer.
Thank you
This is often very difficult to do, so you should contact the electric company before you go forward, if that is an important item to you. Here’s the problem: the power company already serves these people and only has to invoice one person (the park owner) to get paid. What you are asking them to do is to spend the money to rewire the park, and then send out separate invoices to a bunch of trailer park folks (many who won’t pay) in order to collect the exact same amount of money they are collecting now. They makes no business sense for them. So most of them will tell you to go jump in a lake. But, that being said, we recently had a power company agree to make the conversion, as long as we paid for the new service – but that’s the only time I’ve ever had a power company agree to the conversion. If they are agreeable, they should be able to give you a cost estimate for the conversion that will be far more accurate than you can calculate.
We just converted a 40 pad park, in texas with overhead power to distribution centers- each feeding 4-5 homes. We had to pay for everything including trenching to each home, all the overhead feeders, and some of the primary power extension. The total cost was about $2,000 per pad.
I should note- we could have saved some cost if we just ran UF (underground feeder) wire, but we pulled conduit between each meter and home- so we could upgrade electric without retrenching.
So we went underground to 40 homes, pulled new wire to each home, installed 3 primary power poles and 2 transformers.
A few things to note-
You must understand the code- for instance- can you have a power wire over a home. Many older parks have the wires over the houses which you can not do any longer. Also- the power company in our case could run over the houses- but the city needed a 5’ drop on each side of the wire. Also- ‘secondary’ power can only be pulled for certain distance- this is the power after the transformer. So you need to lay out your transformers so they power the most drops you can. In some cases- I got the power company to ‘back feed’ secondary power on their poles, and then jump back out to one of my drops. So be creative in your layout…
Thank you both Frank and Jim for your response. I did call the electric company and they need to charge $5k design fee before they can give me an official estimate, but they did say about $6300 for every transformer and pedestal and that should be fine for about 5 homes - plus a few additional items like the trenching, so Jim’s estimate of $2k per home sounds about right.
2 other questions on this matter:
Am I wrong to have big worries over this and rush to want to “fix” this. Is there a cap rate that might make this easier to swallow?
Another park I have come across (w master electric) the owner is charging a higher rate to the tenants, thereby making approx 30% profit, which could help cover any repairs. I am sure the regulations on this varies city and state by state but wanted to see if anyone had seen this done?
I would be extremely concerned about making a profit on the electricity. Many states have laws that do not allow you to make a profit from the usage you bill back to tenants. If you do this on water & sewer, in Texas for example, the penalty is three times the amount you over-charged, plus one month’s rent as further damages. You need to get this 100% figured out before you would want to go forward with that plan. Just because the old mom and pop did it, does not make it legal.
As far as worrying about fixing it fast, I’ve had a system go bad, and it is a total nightmare. I had electric lines catching fire in the air – and then breaking in half – several times a week. For these systems to work, you have to have sufficient amps to service the park and a tenant base that respects the rules.
You must read the laws in each state to understand how chargebacks are managed for each utility in each state. I sub meter water in one state that allows up to a 9% surcharge, though the same is not true of electric in the same state. In any case- if I were buying a park I would check the utility bills against the billing, and I would tread very careful if the charges were more than the state allowed. This is a great example why you would not want to buy the entity that owns the property, and you always want to start clean with your purchase. I once looked at a park where 50% of the NET income was utility surcharge on gas- when I called this to the attn of the owner and said I was interested at the REAL net income- they told me to pound sand…
When looking into a changeover like this you need to know the inspectors requirements for wire etc. For instance, while it might be “legal” to drop power to each home, the rules inspectors run by are “legal” but also in the best 'Life and Safety" interest as well. The park I did in Texas showed it was legal and way less expensive to do overhead drops to each home, but the inspector wanted the whole park to have underground power. I fought back a bit and got overhead to each 4 homes. If you must go underground for the entire park, the cost probably increases by 50-75% depending on the secondary power runs after the transformers.
Part of my due diligence walk is a “what if” scenario… what if I had to replace gas lines, what if I had to repower the park (really check the service to each home, we now look for 225amp service to each lot), what if I had to replace every home. To do this, you need to know what the rules would be, like are there new setback requirements, or home footprint requirements, or power requirements… or a BIG one for me- time requirements. If you’re in an older park, the rules might be different.
I will share a story I used to tell when I presented at the bootcamps Dave and Frank put on- one of my parks, older park, built in the 60s, had a setback rule in the city code that stated the homes had to be ‘setback’ 8’ from the front rented property line. The lots were about 70’ deep, and I also needed a rear set back of 5’. There were side setbacks also- but they do not play into the story. I wanted to pull in a 3bed / 2 bath 66’ home. Quick math - I need the home length plus 13’… so I rewrote the lease, renting the 8’ of on street parking in front of each home. I called out the city inspector and read the rule with him, we agreed on the ‘rentable lot’ part of the code, then I shared with him the painted line in the street showing the 8’ of rented parking- and in went my home with a foot to spare…
I know this is about electric- the point is- read and understand the code… local, county, state, federal, utility etc…