Walk into any room of mobile home park investors and ask one question: “What’s the most expensive lesson you’ve learned?” You’ll hear the same answer, over and over. It’s not bad tenants. It’s not vacancies. It’s not even a bad market.

It’s water.

Utility infrastructure — aging water lines, failing sewer systems, and master-metered parks hemorrhaging thousands per month in untracked water loss — is the single most underestimated risk in mobile home park investing today. I’ve seen investors lose their entire first year’s NOI to a single water main failure. I’ve seen parks with 90% occupancy and negative cash flow because the master water bill ran $12,000 a month on a 60-lot park.

After operating 50+ mobile home parks across the Southeast and Midwest, I’ve developed a framework for evaluating utility risk that’s kept us out of more bad deals than any other piece of underwriting we do. Here’s what you need to know before you write your next LOI.

Why Utilities Are the #1 Hidden Risk Right Now

The mobile home park market of 2025–2026 looks very different from 2019. Interest rates have doubled. Loan-to-value ratios have tightened from 80% to 50–60% at many lenders. The margin for error is thinner than it’s ever been. One bad infrastructure discovery can turn a break-even deal into a cash-burning nightmare.

At the same time, we’re in a buyer-heavy market. There’s more capital chasing mobile home parks than at any point in history. That competition pressure leads investors to cut due diligence corners. They want to get the deal locked up before the next buyer calls. They trust the seller’s utility bills at face value. They skip the camera inspection because “the pipes look fine.”

That’s exactly how you end up buying someone else’s problem.

The Master-Meter Trap

If you’re evaluating a park on city water but still billed by a master meter, your first question should be simple: where’s the water going?

In a properly functioning master-metered park, utility expense as a percentage of gross revenue should typically run 8–15%. If you’re seeing 20%, 25%, or worse, that’s a red flag. The seller will tell you it’s been that way for years. What they’re really telling you is they’ve been absorbing massive water loss and calling it normal.

The source of that loss is almost always one of three things: a mainline leak somewhere underground, a tenant with a leaking toilet or broken valve who doesn’t care because they’re not paying the bill, or aging infrastructure that’s failing slowly but hasn’t catastrophically failed yet.

A proper utility due diligence process on a master-metered park should include:

• A review of 24 months of utility bills, not just the trailing 12
• A comparison of total water purchased vs. estimated usage based on occupancy and household size
• A visual inspection of all service lines and meter pits
• Pressure testing on the main supply line
• A conversation with the utility company about complaint history

This alone will catch 80% of the landmines.

The Private System Problem

Parks with private water wells and/or private sewer systems (septic fields, lagoons, package treatment plants) are a different and more serious category of risk.

Let me be direct: in today’s lending environment, any park with a private wastewater treatment plant or lagoon system is extremely difficult to finance through agency debt. We won’t buy them at Keel Team. Not because they’re universally bad businesses, but because the risk is simply not underwritable at scale. One DEQ violation, one overflow event, one failing lagoon liner — and you’re looking at $300K–$800K in remediation plus potential regulatory shutdown.

If you’re evaluating a park with a private system and still want to proceed, your due diligence must include:

• A licensed engineer’s inspection with a written report (not just a general inspector)
• Lab testing of water quality from multiple access points
• A full review of regulatory compliance history (most state DEQ databases are public)
• A capacity analysis: can the system handle the park at full occupancy?
• A replacement cost estimate: what does it cost to connect to city utilities if the system fails?

If the seller won’t allow this level of inspection, or if they’re resistant to providing permits and compliance documentation, walk away. Sellers who know their systems are clean cooperate fully. Sellers who know their systems have problems stall.

Sub-Metering: The Fix That Pays for Itself

For investors who already own master-metered parks, sub-metering is one of the highest-ROI capital projects in the MHP playbook. The math is simple: install individual meters for each lot, begin billing tenants for their actual water usage, and watch your utility expense drop 50–70% within two billing cycles.

The typical payback period on a sub-metering project runs 18–24 months. After that, you’ve permanently added to your NOI — which adds directly to your park’s value at sale.

Most operators who haven’t done this assume it’s too expensive or legally complicated. In reality, the hardware cost runs $200–$400 per lot, and the regulatory landscape in most states supports pass-through billing when done properly. The key is getting your leases right and communicating clearly with residents about the transition.

The Reserve Calculation Nobody Gets Right

Industry convention says to reserve $50–$100 per lot per year for infrastructure. That number is almost universally too low for parks with aging systems.

Here’s a more defensible framework: instead of a per-lot figure, look at system age, material type, and local replacement costs. A 40-year-old galvanized water main in a 100-lot park in a frost-prone state might need full replacement within 5–7 years at a cost of $250,000+. That’s $35,000/year in reserves, or $350/lot/year — three to seven times what most buyers model.

Build your reserves based on what it actually costs to replace the infrastructure, not what the industry convention says to set aside. (Our MHP Due Diligence Playbook includes a full infrastructure reserve worksheet you can plug your own numbers into — it’s one of the most-used tools in the whole guide.)

What This Means for Your Next Deal

The investors who are winning in MHPs right now aren’t the ones moving fastest. They’re the ones doing the deepest diligence on the things that actually matter — and walking away from deals that don’t pass a genuine infrastructure review.

That kind of discipline is what separates operators from speculators. And in this market, with this much capital chasing this asset class, discipline is the edge.

At Keel Team, we’ve passed on more deals because of utility risk than any other single factor. Every park we’ve passed on that we were excited about for other reasons — we’ve never regretted the decision once the full picture emerged.

Do your homework. Get the engineer on-site. Camera the lines. And when the seller says “it’s always run fine,” trust the data, not their memory.

Andrew Keel is the founder of Keel Team, a mobile home park investment and management firm operating 50+ communities across the Southeast and Midwest. For more on our acquisition process and underwriting standards, visit keelteam.com.