Why submetering water and fixing trash billing can outperform a straight lot rent increase in a manufactured housing community

Where did the $95k come from? Your own cash, a reserve the lender required, or an equity slug from someone else? It's worth understanding how private capital actually shows up on deals this size, and a 96-lot park at $3.4M sits right at the boundary where an operator either writes the check personally or brings in two or three people and suddenly needs documents.

The submetering install being done by your own crew is the part I keep rereading. $41k for 91 meters is about $450 a lot including labor. What would a contractor have charged? I ask because I'm looking at the service side of this and if there's a real gap there it's a business.

I'd push on the going-in cap. You reconciled seller NOI of $242k down to $198k and then paid a price that implied 5.8 on your own number. So you paid full retail for the improvements you hadn't made yet.

That can be the right call if the improvements are near-certain, and water submetering in a park buying 1.1 million gallons a month is about as near-certain as it gets. But you were also carrying a permitting risk on the billback and a construction risk on the install, and you funded both out of a working capital account that turned out to be short by 58 percent. If the meters had come in at $60k instead of $41k, what happens? Do you have a credit line behind that or were you genuinely five weeks from a problem?

@angela_burke the trash fence is the highest return item in the whole post and it deserves more attention than it is getting. $6k spent against $14.9k a year recurring is a 250 percent annual return on the spend, and it capitalizes into value at whatever cap the exit eventually happens at. The same pattern shows up at smaller scale too. Once the dumpsters stop functioning as a public amenity for the surrounding neighborhood, volume typically drops by roughly half.

Nine residents raising a $30 increase, what was actually said to them in that conversation? It is worth holding two ideas at once about this asset class, that it can run without a second job most months, and that reading a post like this means the operator had nine difficult conversations in one month.

@priya_n21 that's the part I've been sitting with too. The chapter is direct that residents who own their homes face thousands in moving costs, so they stay. Which means the rent increase lands on people who mostly can't respond to it by leaving. @angela_burke handled it with notice and a letter, and one person still left.

I don't have a conclusion. I just notice that the thing making the returns durable is also the thing making it uncomfortable.

On @chriswalton8's question, the boundary isn't the dollar amount, it's whether the money is one's own. A single check, a purchase agreement and a loan stays outside securities rules. Money from other people for a share of the profit puts the deal in securities territory regardless of size, which calls for a securities attorney rather than a template. That is not a step to eyeball. @angela_burke, separate question. The letter explaining the water submetering separately from the rent increase, was the billback disclosure and the rent increase notice in the same mailing or two mailings? A single mailing tends to read as a flat increase plus a new bill, which is the outcome worth avoiding.

$2,850 a month for two yards of dumpster service is absurd, and the question worth asking is whether the seller was overpaying or the neighborhood volume was really that high. If it was contract terms, that is a line to check on every park before the offer goes in.

Thin margins are my whole life so the five weeks of choosing between the road and the meters is the sentence I recognize. I've been there on a much smaller scale and it's how people end up taking money at 14 percent.

The honest question is what the road patching bought you. $19k of deferred maintenance in month seven. Could that have waited to month eighteen? Because if it could, your cash crunch was self-inflicted and the meters would have gone in with room to spare.

@angela_burke did you check the water billback rules before or after you priced the deal? Sequencing is the whole lesson in a situation like this. A permit or utility question that gets asked in week six of diligence has killed plenty of deals that were priced in week one. If your $34k of water income depended on a state rule you confirmed after closing, a meaningful share of the purchase price was resting on an unverified assumption.

Long holds are my thing so I'll say the part that matters over ten years isn't in your list. You now own private roads on a 96-lot park and you patched $19k worth in year one. Patching isn't a solution, it's a schedule. At some point that's a full resurface and on a park that size you're looking at a six figure number.

Same for the water mains you didn't mention. You put meters at every lot, which means your crew was in the ground 91 times. What did the pipe look like?

That settles it, @dmitri_248, and thank you. The line is other people's money rather than the size of the deal. One more for @angela_burke. You said DSCR moved from uncomfortable to fine. What was it at close? Because if a lender funded a 96-lot park where the borrower's own reconciled NOI was $198k, it is worth understanding what they underwrote to, and whether they were looking at the seller's $242k or yours.