Hi ladies and gentlemen
Joan and I are going to travel to Indiana and Illinois to scope out mobile home parks. We are VERY excited! Over the last few months many of you have been curious about this path. I wanted to give you a couple of reasons to clarify; why parks and why these states. Whether you’re interested for yourself or not, it’s a good bit of information on what goes into our thinking and it’s applicable to any real estate purchase.
We’ve been studying to learn:
What is the most affordable type of multi-family to buy into as an investment?
Where will this get the most return on this investment?
Who else is investing there?
Why do we like this investment?
Our three years of study have included:
- 10+ real estate conferences with experts in the field in Vancouver, San Diego, Denver and Las Vegas
- Case studies, offers on projects, ‘due diligence’ on all kinds of properties and decisions NOT to buy
- Focused research on the affordable housing crisis in North America
- Knowledge and understanding of the economic climate that is impacting the real estate market and forcing creativity and change
- Affirmation of opportunities and solutions and a desire to dive in and NOT be left out
Our research has lead us to mobile home parks, with tenants who pay ‘pad’ rent and own their own mobile home. We will be focusing on acquiring parks over the next year.
With mobile home parks in mind…
We looked at BC, we even made a deposit on a park but have now decided not to invest here for a while. The political climate, added government cash grab and taxes make it unappealing. Too many rules, time lags, and the high cost of entry are very clear indicators that we can do better elsewhere. This isn’t to say that investing in BC won’t pay off, we’re confident that in the long run it will but the cost of entry into the market is very high. This is a factor for many of us starting smaller as our money will go further elsewhere. I’m sure we’ll see exceptions that will get us excited on occasion but for the bulk of our business, the US makes more CENTS:)
What we know about the US…
Even though most of us don’t like DRUMPF we can agree that the economy in the US (GDP – $19.5Tr) is so much larger than the Canadian economy, (GDP – $1.65Tr) Simple population comparisons create more supply and demand for goods and services. In terms of housing, the economic collapse of the 2008 and the subsequent housing value tumble created a climate where development came to a crashing halt. The US has not kept up with the housing demand and the entire country is short of housing as a result. The US is welcoming investors, has a lower corporate tax and has a much lower and easier entry. Here is an example of a pack in BC and a park in Indiana.
Of course, there are many things to consider here, currency exchange, travel time to purchase parks, business set up, rent amounts, expenses and onsite property management. However, I’m sure can see plainly that you can ‘buy in’ with less than $100K! Your Indiana cost per spot (park pad) is about 20% of the cost in BC! This difference in initial cost is why we’re looking at a number of parks. The bottom line is that the cost is MUCH less and we can anticipate a much better ROI.
In real estate speak, from the information documents that we’re reviewing we see:
- CAP rates in BC of 3% to 7% and in Indiana CAP rates of 9% to 15%
- Year 1 and 2 ROI of 10% to 15%
- Cash on cash returns of 19 to 28%
With the research and the pending trip that we’re taking, we’re hopeful that there will be something left when we get there! Over the longer term (with fellow investors or private lenders) we can buy larger parks that will actually be easier to manage. I’ll be putting some information on the website soon and I’ll post lots of video while we’re looking.
We’d love to be on this journey with more friends and family members so please let me know if you want to stay in this group and get the updates or if yoprefer to wait for something different to come along. Our colleague Brad is there now looking at tax liens and auctions, Rae Ostrander is looking at apartment buildings and Steve T, and the mobile home guys are heavily invested in these states.
Stay tuned for the membership portal with WREN – it’s almost ready! Members will get first opportunity on projects that we move on.
And on the money front, get pre-approved if you want to play or think about how much you have ready to invest or lend.