Updated: Nov 11, 2021
Tidbit – If you’re a fan of Ozark, the well-known Netflix series, you would know that the show takes place in the Ozarks of Missouri. How great is that!
You may wonder, what’s so great about the Ozarks besides the fact that a world-renowned show pays an ode to it? Let’s start by dissecting our top choices. First, we have Springfield, MO, which boasts a thriving economy, amazing school districts, and a bustling community with great neighborhoods. Additionally, the population of Springfield, MO is on the rise (455,000 people and counting), the median income sits at $43,000. Now, let’s talk about Branson, MO. Branson, MO displays a promising population of 86,000 people and a median income of $38,000. Sprinkle a load of recreational activities and an ever-increasing tourist appeal, and you have another amazing neighborhood and community. But, what’s missing?
Solving a Housing Need
The median home price in both wonderful neighborhoods come to $156k. That means that the average homeowner must come up with at least this much to settle in the Ozarks. Unfortunately, not everyone can afford to pay the down payment to secure such a mortgage. Moreover, not everyone wants to pay that much to have a roof over their head. We live in an era where downsizing and mobile home communities are gaining traction as an affordable, yet comfortable way of seeking housing.
What’s in a mobile home community? Many people relate mobile home communities with trailer owners who park for a while and are gone the next month. However, that has changed. Mobile home communities now feature every amenity you would find in a conventional home. They have yards, swimming pools, garbage pickup, grounds management, and utility connections. Mobile home communities are no longer temporary bases to park than move to the next lot. Instead, the bases have become permanent lots where mobile homeowners can park their homes for eternity.
As an investor, the term ‘mobile’ may scare you. Although, it shouldn’t. Moving a mobile home is a big task, most homeowners will only settle on a lot where they are sure they are willing to stay for a long time. In some cases, they sell their homes rather than move them to another site. Again, moving the homes comes with added costs. The goal is to make the communities attractive to appeal to and retain mobile homeowners.
You might also be wondering, ‘how can you be sure there’s demand for mobile home communities?' It’s a good question. Rather than assume that people would be willing to live in mobile home communities, we conducted a survey that revealed more people were looking into mobile housing. Many people responded to our ad, asking if the advertised mobile home was still available, demonstrating that the project was feasible. Recent market surveys align with this need.
Introducing Our Portfolio
We have four mobile home communities lined up:
· Rolling Meadows,
· Fairfield Acres,
· Suburban Acres, and
· Cedar Lane.
So, what makes each community a good deal?
We have already done the math and know that each community is available to the market at a far much lower price than the market lot rent. Take Rolling Meadows for example, currently available at $215 per month and the market rent is at $300. Once we rehab the community, we will acquire the extra $85 per lot, per month. The same holds for Suburban Acres, Fairfield Acres, and Cedar Lane, which have differences of $102, $100, and $92 per lot, per month.
Additionally, we know that these communities can house more lots than they currently do. With rehab currently in the works, we should be leasing out more lots and capitalizing on the gaps presented above. These are a few of the key factors influencing our choice of communities.
Nevertheless, there is the financial aspect. All the communities were purchased off the market from three different sellers. We received them at an average of $14,000 per community, which was quite a good price, considering they were already equipped with infrastructure. Each community had also undergone the zoning process, leaving us with the lighter part of the load.
Investing in Mobile Home Communities
Are you sold on the idea of mobile home communities? We are too! That’s why we want to break down how you can also be a part of this journey. When examining the budget, we have estimated it to be $5,705,750. From the budget, $500,000 (at a 5% rate) will be through seller financing from the Rolling Meadows seller, and $4,005,750 (at a 4% rate) will be from debt. Furthermore, $1,200,000 is set aside for equity financing. It is estimated that we will put up an average of $250,000, covering about 20% of the equity financing and leaving 80% available to potential investors. This total amount will cover the following expenses for all four mobile home communities:
Home Purchasing and Rehabbing
Closing and Financial Costs
Due Diligence Third-Party Reports
Acquisition and Loan Guarantee Fees
We assume an occupancy rate of 68% in year zero, which will gradually build up to 74%, 81%, 86%, and 89% in years one to four. In year five, we expect to have reached a 93% occupancy rate, placing us in a position to have returned all investor capital, at which point investors start receiving a return on their investment capital. Year six and seven have estimated 97% and 99% occupancy rates as we hit our target mark of 100% in year eight and maintain the same in year nine. We have projected that we will be able to sell off the mobile home communities at double the investors’ purchase price in year ten.
The Debt Aspect
We have been lucky to work with a lender based in Springfield, MO who has managed Rolling Meadows in the past and has a keen interest in mobile home communities. It has enabled us to access an 80% loan-to-cost ratio. Meaning, the lender will recover 80% of the project’s capital costs, seeing as it was valued on an as-completed basis.
The seller financing, available at a 4% rate, has a payment term of three years. The debt from the lender has a ten-year payment period with a twenty-five-year amortization schedule with one year of interest.
The Tax Aspect
If you would like to defer tax payments on your return on capital, we are happy to inform you that you can invest through a 1031 exchange. Please note that we accept minimum investments of $250,000 for any investor hoping to take this path, due to the overhead and legal costs.
Moreover, mobile homes depreciate faster than conventional homes with a period of fifteen years. For example, assume you invest $100,000. Our cost segregation estimates have at least $60,000 of your investment coming back to you as a paper loss in year one. This depreciation expense will enable you to write off any cash flow for the next five years as a return of capital (untaxed). Once you start receiving your return on capital, you can bring in the depreciation aspect. You can then move to a 1031 exchange to further defer your tax payments by investing your returns from this project into another one.
The Liability Aspect
Limited partners are only liable for as far as their investments go. Indicating that if you have invested $50,000 and the project faces a lawsuit, you would only be liable for your investment. You could lose your investment in the worst-case scenario, however, you would not be personally liable for any other outcome. We take on any other additional risks as general partners and will not pass down the liabilities to you.
Are You Ready to Take the Next Step?
We would love to work with you on this new journey. To do so, here are the steps you can follow:
1. Watch the webinar available on YouTube, where we break down the investment opportunities and our offer.
2. Log on to www.suncrestcap.com and create an investor profile and detail the investment you would like to make. At this point, we will receive your reservation details and we will get back to you.
3. Read through our operating agreement and the terms of our PPM, after which you can sign off on this venture.
4. Fund your investment with a minimum of $50,000 and get started on your investing journey.
5. Access your monthly distributions 6 months from the time of closing.
Once you have registered an investor profile, you will have access to an information desk where you can access resources about our mobile home community investments. We would love to hear what you think about this project and answer any questions you may have. Feel free to reach out!
About Suncrest Capital
Founded in Boise, Idaho in 2020, Suncrest Capital is passionate about building generational wealth for investors and their families. Suncrest focuses on mobile home communities to enhance the lives of residents by improving the quality of the communities, adding additional homes, and technology. Through these strategies, Suncrest can dramatically increase the value of the community without impacting the cash flow of current residents. Suncrest currently owns and operates 13 communities, located primarily in Idaho and the Midwest.
Want to learn more about Suncrest Capital’s open partnership opportunities? For inquiries contact: firstname.lastname@example.org