Currently have 2 parks I’m evaluating but both have septic treatment plants. One is for 52 homes and the other is for over 100.I’ve heard some investors say stay away and some say no big deal. What are your experiences and do you adjust for a higher cap rate?
As a former owner operator of the system I prefer septic tanks over the treatment plants–you will have 1 to 4 motors operating up to 90% of the time (costly to maintain and repair—you need a state approved license to operate and an operators ($500 to $2000 per month)—you will have an outflow that has to be tested to make sure you are in compliance with EPA and more testing. The outflow generally flows OFF the property and now neighbors can contact the EPA with nuisance calls to make your life difficult since any compliant must be addressed within 24 hours!!! Even the sand filter system is easer to deal with than the aeration plants.
No doubt they are more trouble and there is potential liability, but should they be avoided completely or should they be considered at the right price and with proper due diligence?
I am NOT an expert, and my park is on city services, but I believe the experts here would agree that if you don’t know the science of this service COLD: how does it work, what are the components, what can go wrong, what is likely to go wrong, what to fix and how much it will cost, the city/county/state laws regarding it, etc, etc,…I’d stay far away from it. My understanding is that repairs, particularly to a large system, can cost hundreds of thousands of dollars. I would get a real education on the system, then make an educated decision. Just asking here for a quick opinion could be financially deadly.
One more comment, I will never consider another system since the regulations as per EPA are constantly being increased and what is in compliance today will in 5 to 10 years probably be not in compliance You have a moving target that you will never be 100% sure if when you sell in 5-10 if it meets what the new regulations are. Sewage is a very nasty subject that you never want to be in the local news about. When you are not in compliance which does happen the fines are very high–remember there is liquid from the plant that is on the surface flowing to a ditch or stream (fish are not tolerant of high chlorine levels or low oxygen levels) If you have more question–ask them.
Over half our parks are on private utilities and we have been very successful in our 14 years in the MHP business. Yes it is extra work, but it is possible to make nice cash flows on those parks. Each waste water plant and drinking water plant must have a licensed operator (in almost all states), so for sure you want to talk with the current operators to learn more about the history and performance of the system.