I totally agree! Thanks to all who posted.
Go sewer if you can afford it. The thing is, you will add so much value instantly to your park with sewer. If you donât save now, youâll collect it back later.
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Great point. Iâll probably convert like 10 lots per year and spread it out over 6-7 years to minimize the financial burden.
Simple way to look at it- make it a math equation.
Itâs going Be to $500,000 to replace on 61 lots. Thatâs approximately $8,197 per lot. How much will doing the replacement make you on a per lot basis, annually? For example, if this will lower operating expenses by $1,000 per lot, you are getting a return on your investment of $1,000/8,197. Thatâs 12% per year. You can determine if you should do this via your return on investment. Additionally, doing the replacement may also give you a lower cap rate. How much will this increase your value? How does that compare to the $500,000 investment?
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I like how you put it in terms of math. The hard part for me is that it costs about $8,500 per year to pump the septic tanks for the 61 lots and $1800/year to pay the sewer bills for the 7 lots that are already on sewer. It would actually cost me more money to have everyone on sewer (unless I got the city to take over billing tenants directly). In terms of money, the only advantage would be an increased cap rate. The whole project is basically for peace of mind knowing the 50 year old septics are no longer a factor.
In terms of math it works very simple when looking at converting. If your existing 7 lots are costing 1800/year for sewer that is 21.50/month per tenant. The 500K spread over 25 years works out to an additional $24/month per tenant (plus interest cost) for a total monthly rent increase per tenant of approximatly $45/month. You determin the pay back time on the cost to convert. Factoring into the equation future increased value should not be included in your decission since you may or may not ever capture that return.
Any expences you can pass along to the city or cover with grants reduces their rent increase. If you are not able to pass the cost along to tenants that is a factor that reduces your motivation to convert. Simple math is the best way to make your business decissions elimination the handy cap of emotions.
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That makes a lot of sense. Thanks Greg
I agree. Our tanks are really old, but it was a leach field that was spent in front of one of the mobile homes. If I remember correctly, it cost around $10k to have new pipes put in, and they had to dig about 6â down to get to better soil.
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35 years of experience; would not change present system unless it is not functioning, or could change selling price greatly. One park we owned the system was 25 years old and never pumped and we were there 16 years and tanks never pumped and the only problems were TREES!!! Presently have one that is 35 years old and tanks never pumpedâmaybe we might although the system is doing great the only problem TREE roots. The last park we sold 2 years ago the buyer that had bought 7 parks in the last 5 months never walked walked the property or did DD on the systemâthey were only wanting to own lots of parks. In a sellerâs market buyer can do some very unusually practices and some crazy cap rates⊠Some information from near Tallahassee, FL The Meadows have new owners and are in the news for giving residents 15 days to move out or buy homes living in that where on a rent to own program. The new owner doubled the rent?? and are creating a storm and story indicated one owner is Derek Vickers. Story to watch!!!
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