Last year I inquired about a mobile home park. The asking price was 649,000. There are 58 lots in which 42 are rented. The trailers are owned not by the park but the tenants. Lot rent is 118 and most take the storage building at 12 extra per month (required to use their storage building). The streets and parking spots and pads are all concrete. There is public water but no public sewage as it has it’s own sewage plant.
What would the value be on this park? If I do not get certification to operate the sewage plant then how much would my cost be to have someone else operate it? Is there any type of insurance that one can get in case the sewage plant would no longer be allowed to be operational in the future or need serious upgrade?
42 x $118 x 60 = $297,360. If you add on the storage building fee – and the kitchen sink – you’re still not going to hit anywhere near the asking price of $649,000. The only change to this assessment would be if the market lot rent is $250 and you can increase to something like that day one (file the notice day one, and get the new rent day 60).
But even then, the sewer plant is a big problem potentially. You cannot get insurance against its failure. And sewer plants can cost $500,000 and up (a 100 space park we just bought had a $750,000 new sewer plant installed before the sale). You will have to figure out the cost of replacement, the remaining life, and factor that into your numbers. That one issue alone – even if the numbers on the current park were great – could potentially kill the deal as it could knock your cap rate down by half.
You do not want to probably get certified on the sewer plant, but let somebody who is a pro handle it. If you make a rookie error, the penalties could be enormous including environmental clean-up.
I am trying to get an idea of the cost of having the plant treated and maintained but cannot find in a search online of a local plant operator that can perform that function. Is there a place online that I can search for them or a certain way that I need to perform that search? Perhaps the plant can be evaluated before purchase to see how well it is performing and the life expectancy of it. The local water company has it in their 20 year plan (as of two years ago) to bring public sewage into the area so it is going to be a while. Are there companies that take over sewage plants and cover anything that goes wrong with them for a flat fee each month or bills the tenants monthly for the service?
My park with a sewer plant costs about $600 / month for the operator, and probably $1000 yearly for the chemicals. Then another $ 2000 yearly for calibrating equipment, hauling off sludge etc…
I think it is more expensive to run a packing plant then to pay utilities, so unless you are passing back on the hard costs of running your water / sewer operations, you should adjust the expenses costs upward of 40%- maybe 45 or 50% depending on how long your chlorine season is and the cost of the certified operator.
So when you hear ‘certified’ you have a clue to where to find people- certified by ‘who’. The ‘who’ is your answer. Some part of the state will oversee this operation, and that office should be able to provide you with a list of the operators in your area, and their certification level. Make sure you know what type of plant you have, so you know what certificate your operator needs.
I made a ton of money buying homes out of this park because they closed down because the cost of sewer plant construction. Luckily I had an inside track on this deal and cashed out flipping them to dealers. Now I am thinking I should have kept about 15 of them.
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