Introduction

In the quaint town of Crookston, Minnesota, a remarkable transformation story unfolded with the acquisition and revitalization of two mobile home parks: Carman Terrace & North Acres. Spearheaded by the Keel Team and their limited partners, this venture is a shining example of how strategic investments, thoughtful improvements, and effective management can breathe new life into mobile home communities, potentially yielding significant financial rewards for investors.

Acquisition and Strategy

In May 2020, amidst the challenges posed by the global pandemic, the Keel Team, alongside their investment partners, acquired the Carman Terrace & North Acres Mobile Home Parks. With a purchase price of $1,150,000.00, the team set forth on a mission to increase the property’s value through a series of targeted improvement and value-add initiatives.

The initial cash investment from partners amounted to $980,000.02, setting the stage for a project that would not only enhance the living conditions for residents but also secure healthy returns for the investors. A crucial aspect of the financial arrangement was the recourse debt, shouldered only by the general partners, protecting limited partner investors from direct liability.

Improvement Initiatives and Financial Outcomes

The Keel Team’s value-add strategy focused on infilling vacant lots, billing back utilities, renovating dilapidated mobile homes, addressing deferred maintenance and implementing modest lot rent increases, among other operational improvements. These efforts significantly enhanced the portfolio’s operations and net operating income (NOI), culminating in a substantial increase in property value.

From November 2020, the investment began to yield returns, with preferred distributions paid quarterly to investors. Over the course of the next few years, these distributions amounted to $189,004.44, reflecting the success of the improvement strategies in generating steady cash flow.

A Milestone Refinancing Event

The pinnacle of this investment occurred in February 2024, when a cash-out refinancing event unlocked extra proceeds of $1,554,302.10 for the partnership. This refinancing, underpinned by non-recourse, Freddie Mac agency debt, marked a significant milestone. This allowed us to return all of the initial equity and then some, back to the limited partner investors.

Furthermore, Keel Team originally applied for a loan from Freddie Mac of $3,000,000, however, they were approved for an additional $999,000, taking the total refinance loan of $3,999,000. This further emphasizes the quality of improvements of both the infrastructure and lives of the residents, but also the overall value of the mobile home parks.

Return on Investment and Future Prospects

Within a timeframe of 45 months, or approximately 3.7 years, the partnership achieved an annualized cash-on-cash return on investment of 20.99%. This figure not only represents a substantial return on the initial capital but also positions the investors for potentially infinite returns, as they remain in the deal post-refinance with their original equity fully returned.

The partnership stands to benefit from infinite returns, the potential for additional supplemental loans, and the forced savings accrued from the equity remaining in the property post-refinance, estimated at approximately $4,008,000.00. Moreover, the ongoing potential for equity appreciation as the mobile home parks continue to appreciate in value promises further financial upside.

Check out the Crookston Mobile Home Park Case Study for additional information on yet another successful mobile home park investment for the Keel Team – taking their total number of full cycle deals to over 30, whilst having ALWAYS return investor capital, and some!

Conclusion

The Carman Terrace & North Acres Mobile Home Park project in Crookston, Minnesota, exemplifies the potential of mobile home park investing. Through strategic improvements and adept financial management, the Keel Team and their partners have not only provided a viable solution to the affordable housing crisis but have also demonstrated the lucrative returns possible in this asset class. This case study serves as a blueprint for possible success, showcasing the transformative power of investment and management in revitalizing communities and achieving impressive financial outcomes.

Contact us below if you are interested in learning more about investing passively in mobile home parks, and how you can potentially benefit from returns like those showcased in this case study!

Disclaimer:

The information provided is for informational purposes only and should not be considered investment advice, nor a guarantee of any kind. There are no guarantees of profitability, and all investment decisions should be made based on individual research and consultation with registered financial and legal professionals. We are not registered financial or legal professionals and do not provide personalized investment recommendations