I have a 73 space park in NM that is master metered for gas. Long story short, the gas company discovered a leak on Sunday and turned off the meter serving 1/2 of the park yesterday. We dug up the 70’ of line where a leak was indicated, replaced that section this morning, and then failed the subsequent pressure test. So essentially the entire distribution system needs to be repaired/replaced. Nightmare scenario - tenants without heat, hot water and cooking with no easy or quick solution.
Here are my options. Maybe you folks have more.
The Gas Co can install a new distribution system and own/maintain it. 5-6 weeks best case scenario and major amount of money. Plus they say all homes will need to be brought up to code (must have mobile home water heaters instead of Home Depot, gas lines under home need to pass pressure test, etc). Most of these homes are from the 1970’s so probably not going to meet current code.
My plumber can install a new distribution system at major expense but it can happen in 1/2 the time. Once again, very costly.
Amerigas can install (2) 120 gallon propane tanks in tandem adjacent to homes. No trenching. Aside from cost of converting appliances furnace and water heater to use propane, very minimal upfront cost. 2 weeks to complete.
I’m leaning towards Option #3 but it may be more expensive than natural gas. Since my tenants pay all utilities, and most are low income, I’m worried they cannot handle the increased cost. However, with a gun at my temple, I think this may be the best solution.
One of Franks parks did this if im not mistaken ( maybe more) I remember him I think option 3)
I know maybe not on the forum or if you want to throw It on here to weigh them all out put dollars here so we can weigh them cost and benefit on everything for how much you will save.
Ill also add option 4.
Have you inventoried every single home with what appliances are gas to know what your exposure is for switch out to electric for say stoves then running 220 instead of 110 if the homes is capable of it along with heat ( Im assuming you have to swap out the whole unit instead of that? Im not too familiar with NM weather but maybe you are in the clear to be able to coast on the heat aspect for the home. Put in temporary measures with plug in camp stoves so people can at least cook on stove tops instead of ovens etc? I would def look at that and evaluate what the cost is for getting yourself out of the gas loop entirely in this scenario to see if this Is feasible.
And regarding your question on option 3 regarding affordability. Im sure you can do some internet searching , figure what propane usage will be consumed on this , figure what propane will cost and then do the same with estimated gas costs and companies them. Instead of wondering what the cost difference will be , put some pencil and paper to it and best guesstimate the numbers on this so you can make your best decision.
The other advice in this thread seems good. I’ll second that providing numbers would be helpful.
I have a park on propane and it isn’t so bad. It’s definitely inferior to natural gas and is more expensive to operate, but not hugely so. If an HVAC pro tells you he can do the conversion for most of the homes, you may want to crunch some numbers on how much more a typical resident will be paying monthly for propane vs natural gas service, and then apply a cap rate to that increased cost. (if any homes can’t be converted you may have to buy a new furnace or water heater)
I have one home in the park that is all electric and the cost to heat/cook/provide hot water is at least 25% above the cost of gas + electric for similar units. Every affected home has gas range/water heater/furnace so the cost to swap out with electric would run in the $4500 range per home. Plus the cost of upgrading electric service to 200 amp for each home.
Until we have a solution, I am renovating an abandoned home in the park to use as a “shower trailer” so the residents have a place to get a hot shower. Also buying hotplates and electric heaters.
Should I be considering a “rent holiday” for the affected or just ask them to tough it out?
It’s up to you, but I view providing basic utilities and services a necessary duty in exchange for lot rent. If it were me, I would seriously consider waiving lot rent for next month. This will earn you plenty of good will, and allow residents to use the money to better prepare and accommodate the circumstances. If you end up in any regulatory trouble it seems like this could work in your favor too, charging lot rent while not providing a safe environment could look bad.
Also, not legal advice, but my hunch is if any residents don’t pay you and chose to fight it in court, you’ll lose, and the judge will hate you for the rest of his career.
This discussion indicates an area that needs a buyer to be very careful with owning a gas system either Natural gas or propane being very nasty on the expense line. Try to go to individual tanks that are the supplier’s total responsibility. Have been in a similar situation and also a flood plain–never again owning either situation–never!!
Received bids for replacement of gas lines vs.converting to propane. Based on bids, I am going to abandon existing gas line and install new. Cost will be in the $2000 per home range. Was considering propane but propane bidder required all water heaters be replaced with new + cost of conversion of furnaces and ranges (range of $1200-1400 per home). Really tough time to be faced with a big infrastructure emergency but no option to defer.
On a side note, none of my tenants in 3 states have called to say they would be late with April rent. Hoping for the best
Stressful times for sure, good luck! $2000 per home doesn’t actually sound too bad cost wise.
This is far from my expertise, but if you’re installing all new lines you may be able to stick the utility company with owning and maintaining the lines from here on out. (at least this would be common procedure with water lines)
It gets you out of the master metered gas business forever.
It also gets you out of the gas credit business – tenants have to buy their own propane and you’re out of the loop.
Changing over the aperture of the appliances proved not that hard on the appliances when I did it 20 years ago.
That being said, you also need to do the following if possible (and ASAP)
Make sure the city will not block you from installing the propane tanks.
Provide everybody a radiated heat (not forced heat) space heater (the kind that simply heats up water on the inside so it can’t cause a fire. Make sure that you are 100% sure the homes can handle the power drain (need to probably be set on low setting). Have them put it in the bedroom and stay in there (it can heat up a bedroom pretty well).
Electric hot plate so they can cook and heat water for baths, etc. (again make sure the home can handle the power).
Engage in games and stunts to make “fun” of the predicament such as “my homes the coldest” contest. Also create activities such as pizza parties and bonfires with hot dogs (all on your dime).
As those first homes get the propane and heat back on, encourage residents to be good samaritans and invite their neighbors over (particularly kids).
This is a very stressful moment – believe me I know since I lost THREE master-metered systems in my career – but you can make it through with a positive attitude and in a couple months it’s life as normal EXCEPT THAT YOU ARE THEN DONE WITH THE MASTER-METERED GAS BUSINESS (WHICH IS AWESOME).
Thank you for the sound words of advice. Space heaters have already been distributed, a “shower trailer” set up for hot showers, and rent eliminated for as long as the gas is off.
The route I’ve chosen is a hybrid solution. The gas company is eliminating the master meter and providing 5 service lines from the main in the street to my property line. These new service lines will terminate in banks of multiple meters (one meter for each lot). My plumber will then take the lines from the individual meters to the homes. The gas co has already marked the location of the meter banks, and my plumber is starting to trench tomorrow. While it’s not optimal (I still own the new lines from the meters to the homes), it is the most cost effective solution and the tenants will now have individual service in their names.
Never be the owner or provider of any gas utilities. The liabilities are extreme and the payback is very questionable. As a buyer when it is time to sell the potential buyers will be diminished. The smart money generally is made at time of purchase, try to own the fewest possible liabilities also never buy a park in a flood plain–if you disagree about flood plains–we experienced the problems and the only way (after a damaging flood–that was NEVER suppose to be damaging) we could sell it was to include a very nice 4 star property. Normally in the north older parks with gas for heat also have 100 amp service or Less. One at Dike, Iowa we made an offer on had ONLY 60 amp service and the changeover for 100 amp service was costing over $1,000 per meter connection. Presently expanding our park ownership in Florida–if you have a +55 park you are thinking about selling we have cash!!
Frank’s reply is brilliant as usual. I echo his #3 option since it may be tough to convert during these times. I have had a bad and good master gas experience. The bad gas experience could have been ok if it had not been for a tenant base that wanted to protest anything possible for reduced rent. It can be a nightmare depending on how understanding and ethical the tenant base is.
However, I have also had an excellent experience. I purchased a master gas community in McAllen with excellent performance and upside out of the gate. A few other investors turned it down for the gas reason. My plan was to convert it to electric as soon as possible. More than half of 90 lots were on gas. As luck would have it, after owning it for a week, a drunk driver ran through the barrier into one of the three master gas meters. No explosion luckily, shut off immediately, and this accelerated our conversion. There was a used appliance store nearby that did a deal with us to sell ovens for half price of that at Lowes/Home Depot). Large store, we purchased about 40 ovens. We audited each home for what appliances were on gas. For the homes that had central air on gas, we provided split ductless units that work fantastic and all tenants love them (note - this is about the only type of AC used in Europe). We had to upgrade many pedestals at a cost of $1200 each. I budgeted 50K for the conversion which I was hoping would not sky rocket to 75K+. Turns out actual budget came in at 40K for full conversion. Huge win and tenants were fantastic to work with. Many of the tenants are primarily Hispanic and our handy man had no problems working with everyone. Everyone understood that the conversion was to reduce liability for a safer community. It is a VERY successful community with happy tenants. Note, the whole conversion took 2 months as it was done 2-3 weeks at a time to do different groups of homes based on what they had running on gas. Since we had 3 master meters we were also able to stagger upgrades. The conversion kits were not a big deal. Depending on how some items are done - for example by an apprentice that does not have to pull permits for particular items vs a mainstream vendor that charges 4x, the total cost can vary quite a bit. Hope this gives you some ideas for conversion.
Great discussion. It seems to me that having a park on gas should not be a deal breaker as long as it is built into the purchase price. If this was the case for a park I invested in, I would move forward with the purchase but have a very solid plan in place so that when the gas lines failed I could quickly convert the units to have individual tanks or go all electric.
This same would hold true with well water. I know of a park that is right outside the city limits and could connect to city water. What I would do is continue to use the pump but create a plan in place so that if the pump failed I could act quickly to hook up to city water, sub-meter the park, and take advantage of the situation to change over.
Don’t assume on the well water, I have looked at a lot of parks now that have outrageous tap fees that add up to an amount that does not make sense to convert to city. Depends on the size of town and if the city wants to support tie in. One of the parks we did was 500K to tap into city. ~ www.DueDiligencePartners.com