A New Type of Syndication
Hey – It’s Brandon Turner.
You might know me from my work on The BiggerPockets Podcast or author of several popular real estate books.
But hopefully you also know I’m an active real estate investor and have been for 13 years.
And today I’m excited to tell you about our newest real estate fund, Open Door Capital Fund 2 LLC – something I call a “CashGrowth™” fund, which I’m excited to explain more to you in detail in a moment.
But first – a quick backstory on why this was needed.
A Need for A New Kind of Real Estate Investing
Over the past few years, I found myself with quite a bit of extra cash that I needed to put to work. But as everyone knows -the real estate market is extremely competitive right now. So – as I saw it, I really had three choices:
- Sit out and wait for the market to correct itself, potentially losing out on years of growth, that over a lifetime could potentially leave me with millions of dollars less down the road.
- I could invest in my own deals, which I did for the past decade. But here’s a funny story about that. A few years ago I went through a tremendous amount of work, time that I should have been spending with my family, finding this great deal at a local county auction, managed the rehab, tried airbnb, didn’t work well, tried renting it traditionally, had a lot of headache, and after 2 years of owning it, I sold it. And when I added up all the money I had made and compared it to how much I had invested… my return was less than 15%. The same return that I knew many syndicators were offering to limited partners who were doing absolutely no work. Which brought me to my third option:
- Just invest in real estate syndications and let someone else do the heavy lifting. But when I looked around the world of syndications – what I saw got me worried. Syndicators relying on super aggressive rent raises, non-existent cash flow for years, and competition that was driving prices to absurd levels.
And remember: a market correction could, or could not, happen in the next few years, and you want to be ok regardless.
So – what could I do?
Well – when you can’t find a door to walk through, it’s time to make and open your own door.
So I opted to create a fourth option.
After interviewing hundreds of investors and looking at dozens of niches, I discovered what I believe to be the best, most recession-resistant niche there is: mobile home parks.
I know that might sound crazy, but hear me out.
I bought my first mobile home park in 2018 and it’s been one of the best investments I ever made.
Now – not every mobile home park is a winner – in fact, most of the deals out there are terrible. Trust me, we’ve looked at hundreds. And now we’re equipped to help guide your hard-earned money in the right direction.
Our Plan Is To Buy The Right Kind of Mobile Home Parks
Success, we’ve found, comes down to buying parks that meet the ROLLS criteria:
1.) Resident-Owned Homes. In other words, I don’t want to be in the house business, I Want to be in the Land business. Tenants who own their own home, and simply rent the land, are a landlords best friend. They do their own repairs and maintenance on their homes, pay a small amount for lot rent that anyone can afford, and the cost of moving a home is so prohibitive that tenants tend to stay for years.
2.) Opportunity for Infill – What I mean by this is that many parks have been mismanaged for years and years, leading to high levels of vacancy. But the beautiful thing is: when a new tenant moves their home into the park – or we bring in a home and sell it to a tenant – we immediately raise the net revenue of the park without any significant additional costs. This allows for huge NOI growth potential that doesn’t depend on aggressive rent raises – just good management and e-Myth Style Systems.
3.) Large Enough Parks for Resident Managers – We’re not looking at 12 unit parks in the middle of no-where. We’re looking for larger park portfolios that have at least 100 pads – large enough to afford local resident on-site managers who can handle any day to day issues at the park .These resident managers report upward to our Asset Manager for direction and accountability.
4.) Location and Population – Many parks are located in the middle of nowhere in towns where the population is 500 or 1000 people. That doesn’t work for our model. Instead, we’re looking for tertiary markets where we can still find great deals but also populations that can sustain bringing in new homes and new tenants to fill those homes. Ideally, areas with 100,000 or more population within a 25 mile radius.
5.) Sub-metered Utilities – or at least Sub-meterable. One of the most powerful aspects of mobile home park investing is the ability to sub-meter utilities like water, sewer, and garbage onto the tenants. Not only does this encourage tenants to conserve water, it also helps stabilize our income.
To sum up why I love mobile home park investing think about this: what are the three most annoying variable expenses for a landlord? I’ve found them to be vacancy, repairs, and utilities. In most real estate investments, they can vary wildly but with mobile home parks, those costs are stabilized and incredibly low.
The Power of a CashGrowth Fund:
After realizing the power of these mobile home parks, I realized this was the niche I wanted to devote my life to. I created what’s called a “Vivid Vision” for my life and business that’s worth fighting for. A future that involves working alongside financial partners, like you, to help all of us continue to grow our financial positions no matter what the economy does.
So alongside a team of incredibly talented and experienced real estate investors with decades of combined experience, we’re setting out to create a new kind of syndication – something I call a “CashGrowth Fund.”
A CashGrowth Fund is simply a collection of properties hand-chosen to provide BOTH cash flow and equity growth – regardless of the market.
By including several parks within the fund, we are able to diversify within the most powerful asset class in today’s market, mobile home parks, and deliver consistent, strong cash flow returns each quarter as well as offer huge potential for appreciation in the future, thanks to the infilling of parks.
But what about a recession?
This is the real kicker that makes me even more thrilled about this asset class.
During a recession, rental rates don’t just drop, as most assume.
They tend to compress, hitting the high end of the market first. Those tenants in the 3,000 per month rentals tend to tighten their spending and move down to the $2500 per month rentals. The 2500 move down to the 2000. 2000 down to the 1500. And so on. The great part about mobile home parks is the the floor is so low, there’s little room for movement. Even in a recession, almost anyone can afford $250 for lot rent.
And remember- these tenants own their own homes, further solidifying their continued occupancy.
So, don’t let the thought of a recession keep you up at night!
What Is Our Track Record?
We closed on 2 mobile home communities in Fostoria, OH in November 2019 and have had success executing our value-add strategy. Here are some highlights from those communities:
Any park-owned homes we inherited when we closed on these communities have been sold, and are now tenant-owned homes.
We’ve successfully raised rents (slightly – as modeled in our underwriting) to bring the rents closer to market rates. Alongside this increase we’re adding value to the tenants by resurfacing all of the roads. This will take place in Spring 2020 (or as soon as Ohio weather allows).
Our asset management team has established great rapport with the on-site park managers, and we’ve seen lots progress since beginning their training process.
Our team has successfully brought in 6 homes into the parks so far – reducing vacancy and increasing value in just 2 months. We’re on track to bring in 10-15 more homes in 2020. Our goal for all of 2020 was 6 homes, so we’re way ahead here.
As a 506(c) Reg D filing, this fund is available only for Accredited Investors, meaning you’re net worth is documentable at over $1,000,000 (not including your primary residence) OR you earned more than $200,000 alone or $300,000 if you’re married last year and expect that to continue.
We expect to hold these properties for 5-10 years, with cash flow predicted from the moment we own these parks.
As for returns – we’re projecting double digit cash-on-cash returns and IRRs that reach 15%.
We’re currently raising $10,000,000 and space in this fund is going to fill up quick, with a minimum investment of $50,000 for limited partners.
Is This Fund Right For You?
Well, if you are:
- An accredited investor
- Focused on cash flow
- Focused on the growth of your investment
- Comfortable with a flexible exit timeline (because we want to let the ideal market conditions determine when we sell these projects to maximize returns)
- Interested in a diversified, passive investment
So if you’re ready to continue building wealth, while still holding on to your most valuable asset – your time – invest with us! With us. I say it that way because we believe in this too, and have our own skin in the game.
Alright, here’s what you need to do:
Download PPM & Executive Summary.
Login to our investor portal.
Make your investment.
Watch your investment grow.
If you’d like to take a deeper dive into our approach for analyzing deals, you can download the Fostoria projections.
If you have any questions, please don’t hesitate to reach out to our head of Investor Relations – Mike (firstname.lastname@example.org). He would love to connect with you!
We look forward to partnering with you as we grow together.
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