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Joint Venture Opportunity - Mobile Home Park with big upside - $600k - $800k investment required

Kyle Green of Green Mortgage Team

Kyle Green
REIN Member
Joined
Jun 15, 2016
Messages
2
Joint Venture Opportunity

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The Ask
My client has a trailer park tied up in the interior of BC and he is looking for a cash investor to fund the down payment and closing costs. Estimated funds required to close are $600,000 - $800,000 for down payment and closing costs depending on the strength of the partner.


The Property
The accepted offer price is at $2,225,000 and the appraisal on the property came back with a valuation of $2,375,000, a lift of $150,000.
There are 41 mobile home pads and 33 RV sites, 1 cabin and 1 double-wide mobile home for the property manager.



Ways to increase the income and value

Increase the mobile pad rentals

They are currently $288/mo, but market value is $350/mo as per appraiser and market research. In the Residential Tenancy Act there appears to be a way that the rental income can be increased with sufficient proof that the market rents are $350/mo.
The increase in Net Operating Income would be $30,000/yr, which at a 6.5% cap rate is an increase to the value of $461,538, at a cost of $0 to the partners.

Increase the RV rates

Currently the nightly rate for the RV sites is $35/night. The plan is to increase the rates by $5/night during May 1 – June 15 and Sept 16 – Oct 31 rates, and June 15 to Sept 15 by $10/night to test the market during 2021.

RV sales and RV vacations have seen a significant uptick since the inception of COVID and many RV rental companies were fully booked during summer 2020.

It is recommended that upgrading the website and developing a better marketing plan for the RV’s would be beneficial for increasing the occupancy, and this is something that is apparent the current owner who resides in the lower mainland has not paid a lot of attention to.

It is recommended to install 50 amp services to RV sites to command a higher rental amount. It appears as though the market price for a 50 amp service RV site is about $50/night. This cost would be about $5,586 to upgrade 10 of the sites to 50 amp (recommended to only do 10 per year to gauge demand).

Using 2020 occupancy numbers which were 60% (7085 nights booked), at an average of $7 extra per night will generate an additional $49,591 in income per year. The increase to the value of the property with this adjustment would be $762,938, at a cost of about $15,000 for upgrades to 10 RV sites for 50 amp service, a revised and updated website with a better SEO presence and a small marketing gameplan.

Purchasing the neighbouring property to increase the number of RV sites and amenities

About 30 additional RV sites could be placed on the neighbouring property as a reasonable cost. The partner is still negotiating with the owner of the property and so this is entirely speculative at this point, but if the owner is willing to sell there is huge income potential to double the rents from the RV part of this venture which will significantly increase the value of the asset.



The Plan
The plan is to purchase the asset with about 35% down, possibly 25% down if possible (reducing down payment by $225,000), to improve the asset and then to refinance once the work is complete and the financials reflect a higher NOI. With a strong partner, 25% down payment is more attainable from a financing perspective which will bring down the cash commitment.
The current partner will be the working partner and is committed to being on site as much as possible to ensure that work is carried out to improve the asset quickly and efficiently.



Documents
There are a number of documents available upon request. Please email me if you have any interest in the project and I will connect you with the JV partner, get an NDA signed and supply additional documents to back up this deal. [email protected].
 

Attachments

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