Park Size too Small

I recently enrolled in mobile home park course and am hoping to do a bootcamp sometime in the near future. As I’ve been reading, I have been actively scouring through possible deals.

As I have been reading and making my own observations, it is clear infrastructure is of primary concern. My question is: what is the park size that makes the utilities nightmare worth while?

Let’s first identify what the key utility issues are that should be of concern. City water and city sewer are great, and require no thought or worry. Private wells, septics, and packaging plants require careful diligence. Lagoons require phenomenal diligence. Gas and electric that is billed directly to the customer by the utility provider should be of no concern. Gas and electric and are master-metered require careful diligence.

All the forms of water and sewer line construction are fine, except for orangeburg sewer lines and maybe schedule 20 PVC – but both are fairly rare.

So really, if your park has city water and sewer, no mater-metered gas or electric, and any sewer line construction other than orangeburg, then you have nothing to worry about (assuming you followed basic due diligence) and there is no “nightmare”.

To a certain extent, you “control” the utilities in that you can accept, reject, or require the seller to fix/upgrade them. What you have absolutely no control over is being regulated by a government agency. I’m in fracking country and that means trouble for wells. If the EPA says that all water must be tested for certain chemicals, I don’t have to worry about it because the city provides my water. If you provide water, YOU are not responsible for testing and possibly filtering out those chemicals. As far as treatment/disposal of waste water, when have you ever heard of EPA regs getting more lenient?

Orangburg pipe is not the only sewer line problem you can have. Clay is a PITA and there’s still lots of it out there and even Sched. 80 pipe can flex and dip. Look into sending a camera down the mains.

One item regarding DD that no-one ever picks up is having a certified arborist come in and check out any big trees that are near homes. I stopped counting after I took out my 200th tree and DawnA on this site has her own horror stories to tell. Trees are great and I’ve spent the last 5 years putting appropriate ones back in but know what you’re getting into.

Rolf

Wheat Hill

Okay “nightmare” was extreme. But based on your answer if a 30 space park has strong cash flow then utilities shouldn’t be a concern if hey check out well in due diligence?

Right, but there is no question that you have greater risk with private utilities than you do city utilities. That risk may look a lot less appealing on a 30 space park than a 130 space park, as you have less number of pads to “rationalize” the cost. For example, let’s say that the cost to replace the packaging plant is $200,000. On a 30 space park, that’s almost $7,000 per space – a huge percent of value. However, on a 130 space park, that’s only around $1,500 per space – a much more attractive number. Due diligence is key, to see what the useful life of the item is and what it will cost to replace.

Of course, no matter what the utility construction, it’s really all about the numbers and terms. At a 20% cap rate and 0% down, probably anything looks attractive. And at a 6% cap rate and all-cash, nothing looks very attractive.