Are you aware of the differences in septic tanks and sewer systems?
This small piece of due diligence can cost you a ton of money if not done correctly. Recently we were in contract to purchase 4 Mobile Home Parks in North Carolina with a total of 233 lots. These lots each shared a septic tank therefore totaling 117 septic tanks. These properties were in three different counties and each had an health department associated with them.
The cost to have these tanks inspected would have been $29,250 which we knew was worth it, but wanted to ensure that we were not going to waste time or money on tanks that were already bad. We decided to call the local health departments to see what details they could give us on the tanks. Each one told us that the permits were current and for anymore details you would need to go into their office to pull the permits for the property/specific tank.
Since we do not live local this was out of the question right at this time. We tried one more time calling the health departments to see if there was any other information we could get. This time we asked to talk to the department head within the health department. He got on the phone with us and asked what he could help with.
We explained that we were looking to purchase 2 mobile home parks in his county and wanted to know the status of the tanks. He then explained to us for the next 90 minutes exactly why we should not buy the property, all the past issue’s, all the issue’s he has seen recently, issue’s we will have in the future, and issue’s we will have getting new permits when we purchase the property.
We were blown away at how different the secretary to the department head gave us the information they knew. He was such a big help we sent him a thank you and a gift card! We figure the cost of replacing all those tanks (which he ensured us he would have made us do in the next 1-2 years) would have been $520,800. Not including the lost revenue of moving everyone out of the park.
We have now added in our criteria that the property MUST be on sewer or 15 years or newer. If we know the cost is coming in another 15 years we can plan for it and factor it into our long term numbers. If we would have gotten that expense in 1-2 years I do not believe that we would have survived, because that was only 2 of the four parks and all of them had the same owners and same age tanks. I am not saying do not buy if it is on septic, but instead just be a little more careful when you are looking to buy something on septic.
Ensure you know the replacement cost, pumping cost, and when the inspection is done ensure they check the drain field, float switches, pump station (if applicable), and tank. When you are purchase a property with a sewer check to see if you are responsible for the line or of the city/county is responsible.
The cost of replacement could be just as overwhelming if you need to replace the sewer pipes on a property. Ensure that you perform adequate due diligence on everything and every system you are purchasing. Ensure you have strict criteria on the property type and utilities available at that property.
By Thomas Dault
Bio: Thomas Dault is a Real Estate Mentor/Coach to many. He has been investing in real estate for 4 years focusing on residential short sales, lease options, and buy and holds. Last year he made the decision to move into commercial real estate and decided on Mobile Home Parks.