In our previous article, we dived into some lot-rent expenses to keep track of. We also covered the do’s and don’ts of underwriting. Let’s pick up where we left off! We were discussing the difference between private and public utilities. Both carry expenses.
Take water for example. We’ll typically underwrite a well at $10-$15 a tenant per month. But if it’s public water, it’ll be $15-$25 per tenant per month. Usually, public water has good expenses. You can request the last 3-4 months of bills. And if it’s billed back, ensure that the amounts are reconciled well. No income should be made on water or sewer charges. That’s unless you’re a private-licensed municipality.
Managing Water Utilities
In most cases, you’ll want to underwrite the water services to what the actual is. The private systems are around $10-$15 per lot, while the public systems are around $20-$25 per lot, per month. The public charge can also impact this. That’s the best case scenario. There’s also always the occasional leak that you’ll have to be ready to address.
Sometimes leaks can go unseen. That’s because they often happen in unassuming places before becoming a bigger issue. I.e., the bathtub, sink, and such. Luckily, the water and sewer expenses can also tell you a lot about the state of the park. If the expenses are closer to the $50-$60 range, it’s likely that there are many leaks. This also indicates that the utilities are being included in the rent. As such, it’s important to understand the per unit per month charge for water and sewer.
Keeping You Park Clean
Trash can be all over the place too when it comes to lot-rent expenses. Sometimes it’s a service within the municipality’s tax bill. This often isn’t the case though. Usually, a dumpster will be between $5-$7 dollars a month per tenant in the park. Individual curb service can cost between $15-$20 per tenant a month, which you may be able to bill back. It’s a pretty straightforward effort, Glenn notes. “It’s close to a wash on bill back with trash.”
Keeping The Lights On
Electric is almost always directly billed. That’s not to say it can’t be a bill back. But, doing so does bring about some new concerns. For one, most people want to avoid any electric that isn’t billed publicly.
Management Expenses At MHPs
Management falls into two different categories. There’s on-site management, and offsite, third party management. On-site management can include boots on the ground and office managers. The pair should equal 8% to 12% of total lot rent revenues.
On-site management usually comes out to around “$15-$20 per occupied lot per month. It’s around 5%-6% of total revenue “. You can underwrite third party management around 3%-5% of the total revenue. Other managers may charge more, but this is a good baseline.
The MHP Expert
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