Private utility systems can play a major role in shaping the risk profile of a mobile home park investment. While many mobile home park communities benefit from city-provided water and sewer infrastructure, others rely on privately operated well water systems, septic systems, or lagoon-based wastewater treatment. These systems may offer cost advantages in some cases, but they can also introduce operational and financial risks that passive investors should understand before committing capital.

In this article, we will explore how private utilities may influence mobile home park investment risk, and what passive investors should consider when evaluating opportunities that rely on these systems.

Understanding Private Utilities in Mobile Home Park Investments

In the context of mobile home park investing, private utilities typically refer to infrastructure that the property owner owns and operates. This often includes:

• Private well water systems
• Septic tank systems
• Wastewater treatment lagoons
• Private lift stations
• Onsite water distribution infrastructure

Unlike municipally serviced properties, a mobile home park with private utilities may place responsibility for maintenance, repairs, compliance, and upgrades directly on the ownership group. As a result, the operational demands of the investment may differ significantly from those in a city-serviced mobile home park.

Download our FREE eBook on the Top 20 things to know BEFORE investing in mobile home parks!

How Private Utilities May Increase Operational Risk

Maintenance Responsibility Falls On Ownership

When a mobile home park relies on city-provided utilities, the municipality typically assumes responsibility for infrastructure beyond the property line. However, in a mobile home park with private utilities, ownership may need to manage system upkeep directly.

This may include:

• Pump maintenance
• Tank inspections
• Line repairs
• Periodic septic pumping
• Water testing and treatment

Over time, components of a private well or septic system may degrade. If system performance declines, ownership may need to invest in repairs or replacements.

While full system failure may not occur frequently, passive investors should consider how ongoing maintenance obligations could affect net operating income over the hold period.

Compliance And Regulatory Considerations

Private utility systems may also subject a mobile home park to environmental and public health regulations. These rules can vary by state and local jurisdiction.

Ownership may need to:

• Conduct regular water quality testing
• Maintain treatment logs
• File inspection reports
• Meet discharge requirements for wastewater systems

If regulatory standards change, a mobile home park could require system upgrades to remain compliant. These upgrades may involve capital expenditures that were not initially anticipated during acquisition.

Although experienced operators typically account for this possibility during due diligence, compliance risk may still represent an important consideration for passive investors evaluating a mobile home park investment.

Capital Expenditure Risk In Private Utility Systems

Infrastructure Replacement Costs

Private utility infrastructure does not last indefinitely. Over time, components such as septic tanks, distribution lines, or well casings may require replacement. In some cases, ownership may also need to expand system capacity if additional homes are brought into service on previously vacant lots.

Potential capital expenses could include:

• Drilling new wells
• Replacing septic tanks
• Installing updated treatment systems
• Rebuilding lagoon liners
• Repairing underground water lines

These expenses may not occur regularly, but when they do arise, they could impact distributable cash flow in the short term. As we’ve seen over time, even partial system upgrades may involve meaningful costs depending on site conditions.

Expansion Limitations

Private utility systems may also limit the ability to infill vacant lots within a mobile home park community. For example, a septic system designed to serve a specific number of homes may require expansion before new homes can be installed.

This may:

• Increase development costs
• Extend timelines
• Trigger permitting requirements

As a result, the projected timeline for bringing additional units online may shift if infrastructure upgrades become necessary. Passive investors should understand how these constraints could influence value-add business plans.

How Private Utilities May Affect Financing

Lenders often evaluate utility infrastructure when underwriting a mobile home park loan. In some cases, a mobile home park with private utilities may face different financing terms compared to one that benefits from municipal services.

Lenders may:

• Require additional inspections
• Request engineering reports
• Adjust loan-to-value ratios
• Apply higher interest rate spreads

Agency lenders in particular may scrutinize private wastewater treatment systems. While financing remains available for these assets, additional diligence requirements may extend closing timelines or influence leverage levels.

Risk Mitigation Strategies

Thorough Due Diligence

Experienced operators typically conduct third-party inspections of private utility systems before acquiring a mobile home park. These may include:

• Phase I environmental assessments
• Well flow tests
• Septic system inspections
• Camera scoping of distribution lines

These evaluations may help identify deferred maintenance issues or capacity limitations before closing.

Capital Reserve Planning

Sponsors may also establish capital expenditure reserves to address potential infrastructure repairs over the hold period. While reserves may not eliminate risk entirely, they may provide flexibility if maintenance needs arise.

Municipal Conversion Possibilities

In some markets, ownership may have the option to connect a mobile home park to municipal water or sewer infrastructure in the future. However, conversion costs could vary widely depending on distance to existing utility lines and local permitting requirements.

Although municipal conversion may reduce long-term operational responsibility, upfront costs could be significant and should be evaluated carefully.

Why Private Utilities Do Not Always Indicate A Poor Investment

Despite the considerations discussed above, a mobile home park with private utilities does not automatically represent a weak investment opportunity. In certain markets, these properties may face less acquisition competition because some buyers prefer municipally serviced assets.

This dynamic may:

• Support more favorable purchase pricing
• Improve entry cap rates
• Offer potential upside through infrastructure improvements

If sponsors account for private utility risks appropriately during underwriting, these investments may still perform in line with expectations. However, passive investors should understand that infrastructure ownership introduces variables that may not be present in city-serviced mobile home park communities.

Final Thoughts

Private utilities can influence both the operational and financial risk profile of a mobile home park investment. While they may offer advantages in certain cases, they may also require active oversight, regulatory compliance, and occasional capital expenditures.

By reviewing utility infrastructure during due diligence and understanding how these systems may impact long-term performance, passive investors can make more informed decisions when evaluating mobile home park investment opportunities.

Are you looking for MORE information? Book a 1-on-1 consultation with Andrew Keel to discuss:

• A mobile home park deal review
• Due diligence questions
• How to raise capital from investors
• Mistakes to avoid, and more!

Disclaimer:

The information provided is for informational purposes only and is not investment advice or a guarantee of any kind. We do not guarantee profitability. Make investment decisions based on your research and consult registered financial and legal professionals. We are not registered financial or legal professionals and do not provide personalized investment recommendations.