I have a park with 36 Lots, and its not separately metered. I have owned the park for about 2 years, and never had any major water bills. The average water bill is about $1000. Is it worth it to sub meter the water with such a low monthly water bill? I plan to sell the park in a couple years, so im wondering if it makes sense to sub meter the water to help with selling the park?
I would guess it depends on a few factors. How much is the capital cost to install water meters, what costs will you add for reading and billing back vs increasing the rent and staying on a master meter?
I am looking at a very similar park with 37 lots however the “water bill” is only one portion of the city water/sewer bill. I don’t know if you have city sewer, septic, etc. Or if your water bill of $1000 is combined water/sewer cost. If its a combined cost, I think Frank has said that you want to be around $40 a pad. You would be under that and its probably not worth the additional costs of sub metering and billing. It would not appear that you have water abuse so I would not invest in submeters.
My park is 44 lots and the water/sewer cost is less than $1000/month. I am installing meters because utility bill back raises my property value enough to make it worth the time and effort (per a price opinion done by RE Broker who specializes in MHC). The billing process through Rent Manager is simple enough that it makes the effort worth the increased property value to other investors.
If you spend $1,000 per month in water and you eliminate that expense by submetering, then in theory you raise the value of the park by $120K, assuming a 10% cap. I recommend looking into it.
I believe there is a rule of thumb that makes this simple. If you do the math and the average water consumption is lower than $40.00 per month, then go with a rent raise instead of metering. Obviously if it’s above that, take a look at installing the meters.
I did a cost benefit analysis for my own park and it made a lot more sense to raise the rents $30.00 per month because the average usage per tenant was only $27.00 per month (Alabama water is ridiculously cheap).
Our park is also relatively small and I had the same approach until the last quarter when the water usage doubled, with no obvious source. This year, we are installing water meters. It may be a tough transition, though our lot rents are relatively low, and we will not increase the base rent for at least one year,
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If it were my park, I would submeter it. You could submeter it for $10-$20,000, but it would add over $100,000 to the value of the park depending on the cap rate at which you sell. Sub metering is one of the easiest and cheapest ways to add value to a property and it can happen within a few months.
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