Mobile Home Parks with Private water/sewer

[Christopher Stanis]

Hey BP community, 

This is for my fellow mobile home park investors out there. I'm looking into buying my second park, what's different on this is that it has private water and sewer. Have you had either good or bad experiences buying parks with private water and sewer? If you were considering buying such a park, what constitutes due diligence? 

Thanks, and very best, 

Chris

[Account Closed]

Chris,

One big thing that seems to get ignored is sacking away enough money in your numbers to handle the Capital Reserves.  Think of a property where the owner reports no R&M.  The numbers look great, but they are unrealistic of what is potentially sustainable.  Be sure you are building an appropriate budget for this in diligence.  Reserves should never be considered a part of your returns.  We use roughly $150 per occupied lot/per year in our initial evaluations on properties with well/septic combos.

On the septic side of things, most owners don't have them pumped as often as they should so these expenses are rarely reflected in the numbers you get from them.  When you are in diligence I would do the following:

1. Check to see that it is not in a flood plain or in an area where flooding happens

2. Check with the health department for past violations - past violations can steer you directly to any trouble they might have.

3. Check to make sure there can't be any new developments nearby that can affect future run off.  We are putting a mound in on one of our properties because new construction has caused drainage issues for our septic.

4. Have a thorough inspection done by at least two to three professionals.  Have them recommend a routine maintenance schedule, advice you on existing issues, and give you an idea of what might happen in the future based on the systems you have.

On wells, you will essentially follow the same steps but you will be using a plumber.  In addition, you will want to do the following:

1. Talk to the person who was doing the testing and get the test results from as far back as you can.

2. You will want to make sure the property has at least two wells.  A primary and a back-up.  If the park operates both wells (some do to side-step testing requirements) then you will want to be sure that each well could carry the park at full occupancy by itself.

One thing to watch for on properties that operate both private water and sewer is the potential for sewage to get into your wells.  You will need to get comfortable that this doesn't have the potential to happen on your property.  We've looked at three parks that have had this happen and the one common denominator in all three was flooding.  Again, flooding is bad!