Why do we do new R.E. development projects? The simple answer is that we do new Real Estate (R.E.) development because that is where the profits. There are 2-investment spaces that we like.
1. Mobile home parks and
2. light industrial warehouse building parks.
We like these 2-types of R.E businesses because they have higher cash returns for the dollars invested when compared to other types of real estate.
When we take a piece of land and add improvements that people are willing to rent, we have created cash flow, that cash flow adds value, that value is wealth creation. Some organization that needs steady cash flow to meet their contractual obligations will pay for that cash flow, I.E. insurance companies, retirement systems, REITs etc. The reason you see so much R.E. development going on is that the wealth created with R.E. development allows investors and developers to make double-digit returns with limited risk.
Why do we build Mobile home parks?
For Mobile home parks (MHP) the conventional wisdom is to buy older parks and update them, raise rents, and hold for cash flow or sell for quick returns. The problem is that finding older MHP that you can buy at a low enough cost that you can add value to is exceedingly difficult because of all the competition from investor groups buying up all the older parks. The other issues are finding existing parks large enough to have economies of scale, located in good growth locations, and having market rents high enough to justify the cost to buy the park and make improvements while still providing a good return to investors.
When we develop a new MHP we can choose a good location, in a growing area with high monthly market rents. Development costs for a class “A” park with full amenities are about $48,000 per rental space. Done right a new park can provide investor returns of 14% to 22% annualized over the (7 to 10-year) life of the project. A new park is easier to manage, has lower operating cost and has a higher resale value when it comes time to cash out. That makes for reduced risk with more predictable cash flows.
What keeps people from constructing new MHP developments is they need experience and, it takes longer to get the park started, it can be difficult to get a park approved (entitlements) and there is no cash flow until the park is built and leased up. Besides putting together an experienced team the developer must have sufficient financial resources to put the project together and that can be considerable.
We also like MHP because in good economic times and bad economic times MHP offers an affordable alternative to the high cost of housing. They produce a better return on money invested then most other R.E investment property types and that gives us the ability to offer our investors double-digit returns.
Why do we build warehouse business parks?
The short answer is the need is there and they are profitable rental properties; all over the country, in high growth areas large warehouses are being built that cater to large corporate clients. These large facilities are great but there is a market segment that gets left out, small local businesses needing 5,000 to 10,000 square feet of space. If you do a search of the commercial market you will find a shortage of warehouse-type buildings in the 3,000 to 12,000 SF size ranges. When you do find them they often have older buildings that lack what businesses are looking for namely: Tall wall heights 16’-30’ high, natural lighting, modern electrical and utility infrastructure, loading docks, fenced truck yards, and good highway access. With the new development, we can provide what the market is looking for.
By developing new warehouse business parks in the 12 to 25-acre size with 20 to 40-buildings in the park we have the economies of scale to offer rental rates that compete favorable with older warehouse stock that lack the amenities and features that new buildings can provide. We can offer competitive rental rates while getting good monthly cash flows that enable us to provide our investors with double-digit returns.
Our development and management team has designed our business parks to provide our investors with good returns and limited risk. Taking into consideration, property location (high growth areas), park size (economies of scale) existing market rental rates, amenities and building features desired by commercial tenants, lot and building sizes, the business structure, financing structure, and title structure to maximize exit strategies and return on invested capital.
Interested parties please contact us.
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