5 Things You Should Know (About Your Manufactured Home Community) Before Investing
You are investing in and developing a manufactured home community.
Before you buy, it’s a good idea to collect as much information about the infrastructure as possible. But what questions should you ask? How can you avoid being blind-sided by costly repairs, or possible trouble with regulations after purchasing? At JD McGee, Inc., we help clients make the most informed decisions possible. In this article, you’ll learn 5 questions to ask before investing in a manufactured home community. You'll learn some of the risks involved, and how to succeed in spite of them.
1) Show Me the Plans
When you enter a deal, you'll be interacting with the current owners, managers, and staff of the community. The first question to ask is, “Are there an as-built plans?” As-built plans are typically created by an engineer after the final construction or development of a project. This means they are your best shot for understanding the layout of the facilities: including lot dimensions, water, sewer, storm drains, electricity, etc. If there are no as-built plans to be found, it may be possible to find older design plans or permits for the facilities.
Now, there may be no plans at all. In some cases, an owner or manager may not even know what's going on with their facilities. In cases like these, a contractor or surveyor can help you discover where utilities and structures are located.
2) We Have Water, Right?
Manufactured home communities need a way to provide running water for their residents—where does this water come from? There are basically two options. Option 1: the community is part of a city, and gets its water from the city water main. Option 2: the community is self-contained, and pumps well water up from the ground.
In the case of city water, setting up a new system can be expensive, but once connected there is relatively little maintenance required. Since you are looking to purchase a developed property, your interest should be focuses on the on-site pipe system rather than the water source. With well water, however, you'll need to ask, “do we have the rights to use this water and is the system operating within health department standards?”
Many states have a department of water rights, an agency which regulates the use of natural water resources. Because groundwater is a limited resource, water users need to prove that water is going towards “beneficial use.” If your community uses more than 15,000 gallons per day (in Oregon), you will need a water right. Be aware that long-time use of domestic water wells within the community does not guarantee that you have the legal rights to use the water. If your community has a private water system, you should also make sure it is operating within the health department rules. The bottom line: check on the water rights and health department records and requirements before buying the property.
3) Where Does Sewage Go?
Like Water sources, sewer lines may be hooked up to a city sewer system (the big pipe) or may be connected to an on-site septic treatment system. Generally, municipal sewer systems are not much of a concern for property owners. On-site sewer systems on the other hand should be scrutinized before you purchase the property. You should have the entire on-site system inspected to make sure everything is running properly. Broken septic lines can cause environmental issues and make people sick. Old or run down systems will need to be repaired or replaced, and that can come with a hefty price tag. Find an expert in wastewater treatment to help you inspect whatever system your facilities use.
4) Can we Expand?
You may want to develop more home sites to improve the value of your property. To do this, first you need approval from the land use planning department. Every jurisdiction is a little different, but in some cases there are local groups and citizen planning organizations which will have a say in your approval. So how do you get approval? Hire an expert in land use permit applications. Often the approval process can take months or years, and the last thing you need is to be denied because of an application submitted improperly.
5) Remember your Residents
Your community is home to a lot of people. One of the most important reasons to be informed before investing is simply to smooth the transition for everyone involved. New ownership, large proposed expansions, and increased rent can all create tension throughout a manufactured home community. As the new owner, you can save some headaches by getting off on the right foot with the residents. Be careful not to expose yourself to complaints. These can quickly become cumbersome, if not show-stopping, issues when county and state agencies are involved.
Manufactured home communities are a great investment opportunity, but just like any investment, look before you leap. And if you don't know what you're looking at, find someone who does. The money you spend on a professional report can save you tenfold in future expenses.
Hopefully we've given you some valuable information. To learn more about how JD McGee has helped developers make sound investments, click here: Manufactured Home Communities