Hello,I am trying to put a value on the following park:65 lots53 paying tenants at 170. City water - tenants are billed for water Septic system - they are very common in this part of the countryDirect billing to tenants for gas/electric - nothing is master meteredNo park owned roads. City/County pay all road repairs. I have heard if you don’t have to service the roads you will have a lower expense ratio. So 53x170x12 = $108120 annually. What would the expected expense ratio be?Thanks!
You might hit 30%, but let me throw out a few observations:1) you need to make sure those septic fields and tanks are in good working order, because that’s probably the biggest single cost you face2) city roads are great, but just watch out for setback issues, as the city can sometimes override grandfathering on setbacks when it’s proximity of trailer to city street.Based on the size and occupancy, I don’t think you’ll be able to break 30%.
Parks with private utilities are generally for sale specifically because of a hidden problem with the private utilities. I’d pass on this park, especially if you are a first-time buyer.We purchased a park on septic last year and it got a clean bill of health from a certified septic inspector and from the DEQ (both in writing). It is now less than a year later and the DEQ has said that we need to do about $3k in work to the septic, and the septic inspector is shrugging his shoulders and saying ‘you never know for certain…’ We got the park at a good price, so it’ll work out in the end, but you just never know what you are getting yourself into with private utilities. Sellers often aren’t honest, and government is just plain incompetent, so there really is no way to do adequate ‘bullet proof’ due diligence on private utilities.My 2 cents worth,-jl-
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Jefferson, certain titles that people have make them no expert or when trouble happens who pays the bill??? From 40 years of experience and watching the so-called uneducated people one can EASILY know if the septic system has future trouble free service. I becoming a believer that I might have information that has value since if I only have septic systems and no trouble except one park that had metal tanks. The people with book knowledge will never be the experts and I have learned first hand their methodology is lacking COMMON SENSE etc. With over 136 units in 16 years I have not pumped a tank and in the next 15 still will not. The design and gallons of effluent determine the life span. We operate a senior and second home park where the usage is about 100 gallons per tank per day but was designed for much more. The problem for many family parks is the EXTRA people moving in that management has not figured out and as long rent is on time WHO CARES??? I have put the hammer down on adult children trying to move in with their retired parents–another sign of a major issue that is happenings–thank the WH for their QE that helps Wall Street but the working class is suffering from lack good paying jobs and cost of living which is not 2% but more like 6% which also affects how we as owners have to watch our P AND L. For me septic’s are a blessing ( I spend $125 total last year) since I understand their limitations and when buying I know what to look for!!! Sorry for employing ??? people–we understand the risk and enjoy the greater return year after year!!!
Oh, Jefferson my park with private utilities is for sale and has NO PROBLEMS AND NO DEFERED MAINTANCE and yes SOME owner operators really have outstanding parks that are CLASSY not the ordinary cookie cutter parks with rentals and eviction.
I also have a park with septic similar to Carl. I spend approximately $1500/year annually pumping six tanks. I have 4 septic pumps each worth approximately $1600 that generally last about 10 years and a septic bed the size of a football field with a average life extinct of 25 years costing about $100,000 to replace.
Expected annual costs to maintain over 25 years are approximately $6100/year. Gravity feed with more or less tanks to pump will directly impact this annual cost. If I do not need to replace the septic bed during my ownership I am looking at an annual cost of $2100/year.
Replacement of tanks and repair to buried lines is another additional cost not included in this number but is easily included in the annual 30% expense ratio.
I personally do not view septic as a negative as I am fully aware every home located outside of a city operates on well and septic and this is not generally a deterant to home buyers or to my business plan. It is simply another factor in determining value and cost to operate but may be a factor to those willing to pay more upfront as opposed to considering the costs as a ongoing business expense.
I believe parks with septic are better left to small or single park owners where the owner is more in tune with the operation of their business first hand. Corporate owners are not generally on top of daily operations and therefore more willing to pay more up front to avoid actually having to deal with such issues.
For the small operator I believe there is more profit available due to having to manage a smaller initial debt load.
Greg, totally understand you system and in certain rural areas what you mentioned is demanded by their regulations. I had looked at parks with that system and I passed on the property partly because the need for aeration motors (lots of electricity) and changing of sand filter etc. In Ok. the local DEQ will still approve non-aeration system with a regular septic tank and lateral lines and noticed a new Dollar
General store next door with a plastic tank and using the large box trench system. As to corporate owners I totally agree since my park is for sale and explain my system they thing the efficiency level is bogus until they see the books but most of the big BOYS want to be in large cities so there Craig list shows large demand. What is so amusing is our new residents are from all over the USA (retires) and never from our local town. As with all things when the big boys mess with the park business the relation between tenants and actual owners will become more and more distant Vr. owner operators that KNOW their people and I really like the relationships and how their families are doing!!! I do know with two equal parks their return is much less than owner-operators–maybe need five parks to equal our one and by the way I own more than one parks but operate them both with lots of free time. I really appreciate another owner-operator taking the time to reply. I have never owned a park in the city nor intend too since we own exception property that attract people of means.