- Target property: 80-pad community under contract at an attractive 9.5% initial cap rate.
- The discovery: the property used a private wastewater lagoon that had operated without state DEP renewal permits for eight years.
- The risk: engineering estimates to reach compliance or connect to city sewer exceeded $650,000, wiping out projected returns.
- The decision: terminated during the inspection contingency period, recovering 100% of the earnest money deposit.
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Case Study 2 · Due Diligence Discipline
Walking Away — The Unpermitted Private Lagoon Trap
A 9.5% cap rate deal terminated in contingency after diligence found eight years of lapsed discharge permits.
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