Are you on the fence about this market? This is true for many investors. There’s a lot of fear and caution. But we are not. And you don’t need to.
Of course, if you have money, I suggest you use cash. cannot Find the right investment opportunity. but we yes Find them on behalf of our investors and they are the beneficiaries. I’m here to tell you one.
The power of relationship building
Our operating partner Steve (not his real name) and his team acquired a mom-and-pop store mobile home park 2021 in Detroit North. this has been a very profitable acquisition and investors in our previous funds have benefited from its cash flow and may enjoy capital gains upon sale.
a lot of Syndicates that buy undervalued assets from mom-and-pop shops never talk to sellers again. You can imagine why. Some buyers Stretched Get to the bottom of a deal, renegotiate terms at the last minute, or make quick changes to a property that threaten the seller’s estate.
Steve was a man of integrity, so he was able to take a different approach. Steve stayed in touch with the seller. They live near the park, so every time Steve is in the area and he invites them to dinner or for coffee. He delivers holiday gift baskets and makes the occasional phone call.
sound Tacky? Sellers don’t think so. In fact, when seller Recently decided to sell a second park they call Stevee—AND no one else.
this Giving Steve the opportunity to purchase the park at a reasonable price. He doesn’t have to compete with other ambitious buyers. And there are no brokerage commissions, meaning both parties save money.
Mobile home park transaction volume is down more than 80% from 2022 levels, so buy bonus garden not at all It’s a victory.
Some details about the acquisition
this It is a classic park with 137 lots, run by a husband and wife, which offers great advantages to investors. Here are some details:
- The park has been purchased USD 36,500 per lot, This is Well below replacement cost (if construction can be approved, which is unlikely).
- The rent was well below market, so Steve raised the rent 16%, from $365 to $425. this Generated over $100,000 in net operating income. 6% capitalization ratethis Created Over $1.6 million in added value (taking into account margin of safety and potential capital gains).
- The purchase price has been determined Based on only 127 lots currently leased. The seller filled out four forms before completing the transaction. Our operating partner is in the process Four more. this Generated $40,800 in revenue almost immediately, Translated is At a 6% cap rate, the added value is approximately $680,000.
- Most tenants have lived there for over 20 years and will likely continue to rent there for a long time to come.
Our fund is the largest investor in this asset. You and I can’t make an investment like this alone. But by partnering with experts like Steve, we gain the opportunity to produce predictable results cash flow and appreciate—In a weak market, a strong market, or any market.
And by Build diversified portfolios of assets like these and more, With a variety of skilled operators from different regions, we believe we are providing a safer investment for you and us.
A cherry on the sundae
One thing we like about this deal is that Steve acquired it via all cash. Once they complete stabilization, they are expected to increase agency (Fannie Mae or Freddie Mac) debt based on new assessments. this will enable them to redeploy our capital into other acquisitions, which should increase investor returns.
final thoughts
You might think this is a one-time opportunity, but it’s not. this it’s the same type The operator has followed this strategy for dozens of other assets since our acquisition and upgrade have been cooperating with him.
his median internal rate of return Among them, our fund was the largest investor in 12 full-cycle transactions, accounting for more than 50%. I recognize that past performance is no guarantee of future results, but we look forward to continuing to work with him. I believe his strategy will continue to work regardless of good or bad economic times.
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Mr. Moore is a partner in Wellings Capital Management, LLC, the investment adviser to Wellings Real Estate Income Fund (WREIF), which is open to accredited investors. Investors should consider the investment objectives, risks, charges and expenses before investing. For the Private Placement Memorandum (“PPM”) and information about Wellings Real Estate Income Fund and other information, please call 800-844-2188, visit wellingscapital.com or email [email protected]. Please read the PPM carefully before investing. Past performance is no guarantee of future results. The information contained in this communication is for information purposes only and does not constitute advice and should not be construed as an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction where such offer or solicitation would be contrary to any local law. All investing involves risk of loss, including loss of principal. We do not provide tax, accounting or legal advice and all investors are advised to consult their tax, accounting or legal advisor before investing.
Notes on BiggerPockets: These are the opinions written by the author and do not necessarily represent the views of BiggerPockets.
