I just celebrated a significant milestone in my life. It wasn’t turning 44, scoring coveted tickets to Phish in Las Vegas, or teaching my kid how to ride a bike, though I did all of the above recently.

It was closing on the sale of my first full-cycle deal, a mobile home park in Oregon.

What does it mean to go full cycle on a deal? In simple terms, a full-cycle deal is one that you buy, successfully operate, and then sell, having provided returns to your investors and yourself.

The story of my full-cycle deal starts in early 2018. After 15 years as a commercial mortgage broker — aka raising capital for other people’s deals — I decided to try my hand as a real estate syndicator.

I Googled “recession-resistant real estate” and stumbled on manufactured housing (mobile home parks, or MHPs). I bought a book from “Frank & Dave,” some old-school park-biz legends who’d acquired thousands of lots across the country and held bootcamps to teach others the tricks of the trade.

What I had yet to realize, however, was that MHPs were not some undiscovered niche. They were a red-hot asset class. This is due to their high operating margins, reduced management headaches, and the favorable tax code treatment they receive, which allows for aggressive bonus deprecation (aka tax deferral). Buyers across the country were raising piles of dough to buy them at skyrocketing valuations.

Stubbornly — or perhaps naively — I ignored this information. Instead, I assembled a team off Upwork and doled out an assignment: database every mobile home park across the U.S. in stable markets with a $250K+ median home price.

Compiling this database required some detective work — most MHPs are owned by opaque limited liability companies, and we had to uncover who managed the entities. Sometimes this meant tracking down details on hard-to-find people, a process that took months.

The idea was to add each MHP owner to a customer relationship management tool. Then we could reach out to thousands of owners, introduce ourselves and perhaps identify some juicy opportunities. The hope was they’d filter the millions of other calls, texts, emails, and letters they were receiving and somehow decide to sell their family's biggest asset to me.

My strategy sounds crazy, but it worked.

In July 2019, about a year after my initial outreach, I got a call from a gentleman in Oregon. Turns out his dad had recently died and the estate — which included a mobile home community — was in probate. This guy, like many others who inherit a trailer park, had no desire to run the place.

I did the analysis and came up with a price of $2.1M. It represented a 6.7% cap rate based on the property’s anticipated first year of net operating income. Similar properties were trading for a low 5 cap, but my offer was 26% lower than the park would likely fetch on the open market. 

I had spent over a year painstakingly analyzing and rejecting hundreds of overpriced deals. I knew that my first one needed to have a decent cushion and safety net — no hairy value-add projects. I wanted something that checked all the boxes: public utilities, no park-owned homes, located in a good metro. All I had to do was collect the lot rent. Sounds easy, right? Get in line. Thousands of other buyers had the exact same idea.

Lo and behold the seller accepted my offer. And 60 days later I found myself 2,300 miles from home, doing due diligence on my first solo real estate investment all while wondering how I was going to a) raise the capital to buy the park and b) self-manage it. I ultimately chose to partner with a friend who had prior experience operating MHPs.

Our game plan was simple: manage the property well and incrementally increase lot rents from their below-market rate over the next 10 years. The goal was for our investors to receive a 7%+ cash-on-cash return out of the gate and a 13% overall internal rate of return over the holding period.

Despite the recent uptick in rates, we ended up way outperforming this. Not to toot my own horn, but when you underwrite conservatively and choose your investments wisely, it’s hard to lose. Here’s the breakdown of the deal’s metrics:

Deal metrics

Meanwhile on the east coast …

While all this was happening out west, things were also cooking out east.

My partner and I also acquired a park in the mid-Atlantic region that he had identified and was actively involved in managing. After we sold Oregon, I thought he might want to own this other park outright, so I suggested he use the proceeds from the Oregon sale to buy me out.

The mid-Atlantic capital event translated into a whopping 53.4% IRR and a 3.6x multiple on invested capital (MOIC).

I wish I could say there are a lot more deals like these two out there, but there aren’t. However, I do sense there will be opportunities in the not-too-distant future for those of us who exercised restraint during this past cycle. And when they arise, I’ll be ready to go.

Thanks for reading! If you’re an Accredited Investor and interested in potentially partnering with me on future opportunities, please click here to register for my company’s investor portal where we exclusively distribute future offerings.

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