Is there a benchmark or rule of thumb for water/sewer/electricity/trash expense per lot? I’ve heard 7-8% of revenue for water/sewer, I’ve also heard $50/lot/mo. For electric I’ve heard $2-7/lot/mo, and for trash I’ve heard anywhere from $15-30/lot/mo…but these calculations all vary widely. [These are for gross utilities expense, prior to any income from tenant reimbursement.]
I know these expenses will vary depending on whether it is public or private utilities. Would appreciate any guidelines if people have any. This would also be helpful to understand if there might be a water leak or abnormally high water/sewer usage at a park…
What about for utilities income when it’s billed back to tenants? I’ve underwritten a number of parks where utilities are billed back, but from the seller’s financials it looks like only a ~60-65% recovery of the total expense (i.e. utilities income = 60-65% of utilities expense).
If we’re just doing a back of the envelope estimate, but want to be more granular on expenses than simply using an NOI margin of 60-70%, what’s a good assumption for each of the utilities expense items?
Every park is going to have differences based on how each utility is delivered and administered. Location of the park, the homes, number of residents in each home, park amenities, etc- the variables can be substantial. I would think with the wealth of knowledge here there is a ‘ball park’ number per space that some could proffer up based on owning dozens if not hundreds of parks. If you are looking for a granular number though I think you are going to have really get into the weeds on each park you underwrite.
Maybe rather than seeking single total utility value per lot the better way would be to break it down by utility and how each utility is delivered and then depending on the individual park being funded build your number from there.
For example what is the average water bill back for city services vs private well"
What is the average garbage with private service or with dumpsters?
Sewer- Septics vs. sewer vs community systems
Get your averages from each then build your number based on the park’s individual utility footprint.
Maybe? Just a thought…
Thank you! You’re right, it would be very helpful to get ballpark / averages for the different types of utilities. Hoping that people with big portfolios and/or significant experience can provide some guidelines on how to think about and estimate the expenses below:
Water expense - municipal
Water expense - well
Sewer expense - municipal
Sewer expense - septic
Electricity (common area only)
Trash expense - if door to door pickup
Trash expense - if dumpster pickup
Of the above expenses, how much can typically be recaptured through tenant reimbursement income?
Asking this so that we can more properly estimate utilities early on in the underwriting/bidding processes where the broker/seller might not be providing much info. Knowing this would also help to identify parks where there might be a potential water leak or over-usage happening.
Any advice would be much appreciated. Thanks in advance!
Water expense—municipal—We have parks from $35/space to $100/space. Metered parks tend to break even, but unmetered parks can get dicey quickly. All it takes is one person to turn on their tub 24 hours a day or let a leaky toilet go forever. My worst “loss” was $6500 over 2-3 months due to a big common area water line break.
Water expense—well—We charge based on usage plus a flat fee. It depends on whether treatment is involved. An untreated system (no chlorine) is pretty cheap to run, but the pricing increases once you install treatment. The EPA is pushing all systems to be treated, so if you own a well water park, be prepared to install some form of treatment. The average bill back is $35/space.
Municipal sewer expense: $22/space to $80/space. Some areas charge a flat fee plus usage based on water consumption.
Sewer expense—septic—Traditional Septic is pretty cheap to run, but you must include a sinking fund in your charges. They run relatively maintenance-free until they don’t, and you have to spend $20-100K upgrading. We are now required to do quarterly inspections and reports to the State. This costs us about $500/month, plus extra pumping per the inspection. Plan on pumping once a year. Pumping charges vary depending on your location.
Electricity (common area only)- If you have a pool this can be expensive. Without a Pool, it’s pretty cheap. zero to $200/month
Trash expense - if door-to-door pickup - $60/space
Trash expense - if dumpster pickup - $35/space
My “highest” expense ratio park was 65% of the gross. This was due to a very high water and sewer charge (municipal).
It’s $6200/month for a 30-space park. When we bought the park, Water, Sewer, and Trash were included in the rent. We now bill back for all three (RUBS), so the expense ratio is back to a normal range of 45%. I suspect once we get water meters installed, the water usage will decrease.
This is amazing and exactly what I was looking for, though I’m surprised at the large range of cost for each item (which explains why I’ve seen such a variation).
Do you bill tenants back for Septic?
Also, confirming these are cost/reimbursement per lot per month?
Attached are sample bills.
SoCal Park is Well and Septic - Sub Metered for Propane, Electric, Water
Central CA Park is City/City (Rubs Park) Not Submetered we use RUBS for Water/Sewer
NorCal Park is City Water/Septic - Rubs for Water -
