Well/septic seller financing vs bank risk spectrum

I’m well aware well/septic is not ideal to buy. But any way to quantify how much less of an aversion you might have doing a well/septic deal (newly updated) with very attractive seller financing vs recourse? How much can you cover yourself with insurance? Think this answer might be not too much given sewage classifies as pollution so the recourse vs non-recouse answer might be that it doesn’t move the needle much on the risk spectrum. Would love to hear any thoughts.

With regards to insurance, general liability insurance isn’t a great protector as leaks are too often excluded under the pollution exclusion that’s in every general liability policy. However, many states have ruled that untreated sewage isn’t pollution - Louisiana is an exception. Poop is just poop, not artifical not chemically created. You can purcahse pollution coverage for a mobile home park but it usually costs too much ($5,000/park min on a stand alone basis - less if you spread it over multiple parks).

You can insure above ground utility infrastructure like power pedestals, street lights, above ground sewage tanks, pumps, pump houses, treatment plants… But underground utility infrastructure is hard to insure as the perils that damage it (flood, earthquake, degradation…) aren’t covered by most insurance policies. Thus, your primary risk with owned utilities of any type is them failing over time.

All that said, we see hardly any liability claims against our park owners relating to septic issues - even less than I’d expect.

In summary, owning a park with septic systems or sewage treatment plants can be just fine. However, it is one more operational risk you need to account for and a risk that insurance doesn’t address well. An annual capital set aside for future system replacement is another way to mitigate risk here.

thanks very much kurt