In many parts of America, you’ll find mobile home parks located next to sewage treatment plants, cattle feed lots, airport runways and railroad yards. These can create massive noises and odors on a daily basis. So what is the impact of these on mobile home park success in both operations and valuation?
Loud noises vs. privacy
Many of the factors that cause noise – such as runways and railroad tracks – have an important offset. That positive is greater privacy except in those few moments when the train goes by or the plane goes to takeoff or land. The rest of the time there are no neighbors on the runway or train track. As a result, we have had little pushback historically on mobile home parks located next the source of loud noises. In fact, a mobile home park we owned in Kentucky had three streets with one backing directly on to a train track – and that was the only street that was at 100% occupancy when we purchased it. If you talked to those who lived on that train frontage they would tell you that they were more than happy to have to deal with loud noise for a brief moment a few times a day when the rest of the time they had total privacy. And when the appraiser comes by, or the banker or future buyer, it’s possible the noise won’t even occur or – if it does – it’s brief and not of great concern.
Bad smells vs. ?
While loud noises have the offset of beneficial privacy, bad smells have no such positive attribute. The problem is that the source of the odor – whether it’s a treatment plant or a bunch of cattle – never goes away and permeates every home in the community regardless of location. As a result, having foul odors is never a blessing and is a much greater setback. When a potential resident looking at a new home for sale in the park says “my gosh, this place smells bad” what do you tell them? “It’s really not that bad if you jam an air freshener up your nose” or “smelling is over-rated”? Of course, this puts a negative force on everything from your ability to sell homes and retain tenants to obtaining a strong appraisal, bank loan and future buyer.
There’s no way to solve either
Contrary to what some mom and pop sellers may tell you, there’s no solution to either noise or smells. I remember when a seller told me that all you had to do was sneak in and pout a gallon of Clorox into the sewage treatment plant to stop the smell. Those are the type of desperate statements a mom and pop start to generate when they realize that they are going to have trouble selling. But there simply is no way to lessen noise or odors. The only way to escape the problem is simply not to buy the park. There’s no soundwall you can build, nor is there a Glade air freshener flavor that can mask a one acre pond of raw sewage before it gets treated.
And it’s not really a cap rate issue
When a park smells bad it doesn’t really solve the situation if you negotiate a price reduction. The problem is bigger than money – it could jeopardize every aspect of the business model. That’s not to say that a zero down, non-recourse seller loan can’t solve just about anything, as it gives you the ability to test the property out without any personal risk.
With smells, wind direction is important
If the problem is a bad odor, then the one additional issue to consider is the general direction of the wind. In most of the U.S. the wind blows normally from west to east. If the park is located to the west of the source of the smell, then it’s possible that the property will be saved from problems except when the wind blows the other direction occasionally. I’ve personally walked mobile home parks next to municipal sewage treatment plants and you would never know it because the wind was always blowing away from the property.
Mobile home parks are a very hardy real estate sector that can overcome many threats that other real estate niches cannot possibly handle. One that comes up from time to time are parks with extreme noise or odor issues. Understanding the impact is key to evaluating these properties.