Expense Ratio

I’m looking at a park in which water and sewer, although provided by the city, are not billed separately to the tenants.  Rather, this utility is included in the rent.  In calculating the value of this park, would it be more accurate to assume expenses are going to be closer to 40 percent as opposed to 30 percent due to the park paying for water/sewer?Thanks in advance for your advice.RL

Although there are many variables, normal parks not including water/sewer would typically be in the 35% to 45% range.  You are probably going to be at 50% or higher.

Thanks Erik.  Fifty percent seems high to me.  Can you explain your reasoning?

RL, please provide more info…how much is the lot rent?what is the monthly water and sewage bill per lot/home? 

Lot rent is $210 and it includes water/sewer.  The broker has not broken out the amount of the $210 that is allocated for water/sewer.  Thanks in advance for the help.

RL, the seller should give you a breakdown of the expenses. Check the utility bills.

GJS - water expense (which I will assume includes sewer) was $25,848 last year.  I have asked the broker for further clarification, but I’m assuming this is the water and sewer expense for 2014 for all 35 occupied lots, which averages about $62 per month per lot.

RL,You questioned Erik’s statement that the expenses are going to be 50% or higher and then you turn around and tell us that the park paid water and sewer is $62 per unit (or 35% right there).  The typical home is said to use 5000 to 6000 gallons of water per month.  When the park pays the bills, the water usage goes way up because there is no incentive to be frugal with the use, or any financial savings in fixing toilet flapper leaks.We have looked at the financials of many parks with the park paying the water and sewer costs and it has ranged from slightly under $50 to over $100 per month per unit.  There are several threads on sub-metering the water which you should review as well.Howard

Thanks Howard for your comments and advice.  I will check out the threads on submetering water.

Lot rent = $210, and it includes water and sewage of approximately $62, then 62/210 = 30%

So water and sewage alone already amount to 30% operating expense.

RL,Please attend Frank’s Boot Camp or ready the Home Study Course before you purchase a park!!  It will save you a lot of $$$$.  Best Wishes!Shan