Mobile home park on private utilities

[Kellen Driscoll]

Hey BP, I am a little hesitant pursueing this park due to it being on private utilities. The well is in good shape and up to code and the current guy that is doing the water testing said that he can’t see it going dry but it did then i woule have to connect to the public water system. The pumps and electrical equipment have all been replaced. The other concern for me is the septic systems. There are 7 total and they all have new pumps. The 3 largest that service most of the park have been completely overhauled...tanks, drain fields and all. The sewage piping from the homes has also been replaced. From anyone experienced does this seem like a as big of risk as I think? Thanks!

[John Jacobus]

Many investors are afraid of private utilities without recognizing how widely they’re utilized and how they’ve withstood the test of time.  There can certainly be increased liability, potentially higher operating costs (keep in mind that some private systems can actually be cheaper than municipal systems, especially if bill backs are implemented) and an increased management burden associated with operating private utilities but I feel many investors immediately eliminate MHP investment opportunities from consideration due to the sole fact that they’re running on private utilities.  Hundreds of thousands of homes run on private wells and septic systems in the US.   They are proven and can be operated successfully with the right professional help.  While I would avoid lagoons and waste water treatment plants, for sewage management options, the presence of water wells and/or septic systems should not be a deal killer, in my view, especially in light of the fact that the investors are bidding up prices for parks on municipal utilities.   

You are taking the right steps.  It's key to get professional opinions from well/septic operators to assess the nature of the private system.  In addition, check with the state/county department of environmental health and/or environmental quality to see historical records associated with health violations.  Also, to the extent possible, inquire with residents to determine if they've experienced reliable service from the private utilities.  

With thorough vetting and inspection, private utility systems can be perfectly OK and represent opportunity for investors who are willing to dig in and develop a better understanding of how things work.