Valuation & 40% expense ratio too conservative for septic parks?

Hi all,

Been to the bootcamp (highly recommended by the way) and I understand the risks with septic parks. During bootcamp, a 40% expense ratio was recommended for septic parks. I know there is a replacement risk (tanks were installed between 1978 and 1995) at some point.

Park is in a major metro. Here are park stats:

  • 73 spaces, 71 occupied
  • Lot rent $305, market is $350
  • County water, individual septic for each pad (common for the area)

So NOI would be calculated as 71 x $305 x 0.6 x 12 = $156k.

Sellers are a private investment group and showing 2015 NOI of $216k. They have a price in mind, but are flexible because they want the deal to close.

I’m considering using a 35% expense ratio to determine my upper limit on price, rather than 40%, and would like to get some more season opinions.


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What exactly is the full septic set up. Tanks are not an issue other than the cost of pumping every 3-5 years but where does to effluent go to, Is there a septic bed or some other system of treatment.

Seller is feeding you funny numbers. Noi of 216,000 represnts 17% expense ratio. Park is taking in 259869 with 71 lots at 305. Have they given you actual P&Ls?

There is a septic bed. No, I haven’t seen P&L yet but should be getting it soon.

Forgot to mention, owners bill back for water usage.


Your expense ratio needs to take into effect the maintenance of each of those septic systems. it’s fairly easy to have a big septic system cleaned and inspected, but doing that for multiple systems in the same park can cost a bit more.

Four year period, 50 lots on individual septic, would be one pumping a month on average, is that right? How much does a small pumping cost?


Likely about $165 min charge like a 3 bed rental I have. Unless they, like the guy I had, never deposits the check. Lol


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Individual tanks on each lot with one common septic bed… Tanks require pumping once every
3-5 years depending on number of individuals occupying each home. Cost to pump each tank depends on size of individual tanks and local pumping rates.