New to the community and giving myself a crash course in MHP’s.
I am analyzing some financials for a couple of MHP’s. I have experience in MF and Comm but haven’t dealt with the nuances of MHP’s yet. I’ve been given 1 year of T12’s and a budget comparison only.
My questions are;
What would you do with just a T12 and budget comp?
Is there a way to tell from the T12 whether or not the property is on well/septic? If so, how?
On on one of the properties, they just started charging for water & sewer mid year and there seems to be a correlating drop in lot rental income. My guess is they started metering the sewer. Is that a reasonable explanation or am I missing something?
There’s a garbage income of $15 000 and expense of $9000. What is the likely situation there? Buying the service in bulk and selling to the tenants for a profit?
notwithstanding #3, in most cases the expenses for a utility (ie water and sewer) are less than what is coming in for income. My thought is that maybe they aren’t sub metered but not sure.
T12 is pretty useful. Just use your cap rate and you’ll have a good idea of the price you are willing to pay.
Yes, Look for a Bill Like “City of AnyTown Water and Sewer” VS a Bill for XYZ Pumping Service and XYZ Monthly Water Sampling service.
You just need to ask how they started charging for water and sewer. It sounds like they gave a rent raise with the intent to charge for water and sewer but offset the rent by the same amount. IE. Next Month you will be charged $25.00 for water and Sewer, but your Rent will be Lowered by an equal amount.
Depending on the state that is likely illegal. I would not Cap out that income.
You’ll have to dig a little deeper to find out.
One thing to ask for is a copy of the Rent Bills that are actually sent to the residents.
Thanks @SDGuy I definitely did not think about the garbage thing being illegal.
Which kind of raises a stupid question: Does it tend to be illegal to have a monopoly on the utilities for your park and charge a fee for them? ie marking up garbage, or putting in a 400a or bigger electrical room and then meter each lot and markup the kwh electrical?
You are welcome.
I think the answer to your question depends on which utility and which State you are in.
For example, I have a master meter park in CA (several Actually). We are only allowed to charge the Standard SFR rates to our customers. I get a small discount from the Power Company for running my own lines etc. I do make a profit on the Power. Here’s how. I get 400 kWh/Unit at $00.16285 for Tier One usage.
After I go over that usage amount the price goes up to $00.26467/kWh.
So if Grandma Susie only uses 200 kWh but the Jones’ next door has 5 kids and uses 600 kWh. I am able to sell the Jones’ power at $00.26467 when I am only buying it at $00.16285.
Now multiply that out by a ton of people. I make $500-1000/month per park on this arbitrage.
My master meter Bill rarely goes into Tier 2, but I charge Tier 2 rates to a lot of people every month. This is a perfectly legal way to make money from Master meter Utilities.
I also have 2 parks with Well Water. I can basically charge WHATEVER I want for water. I do keep it fair as the overall cost of living in the park must be considered, but the water is definitely a nice profit center. I’d say I make $1500-2000/month in profit for supplying Well water.
These same two parks I also charge for Septic Services. Not as good of a profit margin, because I have to pump the tanks etc. I probably make about $500/month in profit. I would gladly trade this profit away to be on City Services.
Overall, the markup you could make by providing private utilities and a master meter electric system is not worth the headaches. We are in the Land Rental business.
So for utilities it’s best to get out of the way and direct meter if you can. Failing that, sub meter and try and make a bit extra for your time, expense, and hassle. Easy breezy.
You got it.
The extra money is not really worth the hassle of supplying utilities.
In 2022 we had two significant failures at 2 different parks. It cost me well over $40K between both incidents.
That will take YEARS to recover based on the few hundred dollars a month we "make’ by providing the utilities.
There is another “Gotcha” to watch for. Some parks have direct bill Electric but the Meter panel is in a central location. As the park owner, you/me are responsible for the connection from beyond the meter to the point where the resident’s home is connected. I still prefer having this set up to the traditional sub-meter/master meter setup.
Why? Look closely at the Meter Blank and lock. As a Park owner out here in CA, if I provide sub-meter electricity I am not allowed to shut off the power for nonpayment. They Guy in space 12 stopped paying both his rent and utilities. The power company came out and locked out his power!
