Meth lab explosion into explosive profits:

5 Replies

So I come home one evening and proudly boast to my my wife, "I bought a trailer park for a really great deal today!" She says, "Well it better not be the one on the news that had the meth explosion!" I think to myself, "Out of hundreds of small parks in our county, what are the chances of that?" I guess my chances were pretty good, so let me back up and start from the beginning.

About 3 years ago an assets manager at a local bank called me says they are foreclosing on a 17 unit trailer park the next day but don't want to take legal title of the park due to some legal and regulatory reasons so they are offering me a great deal, basically the value of the land less the cost to remove the trailers. The terms were $225,000 5% interest 20 years amortization, with a 5 year balloon and they would provide 100% financing. Banks never give 100% financing on commercial property especially after the financial crash. The only catch I have to sign in the next few hours. I was intrigued but actually I knew nothing about trailer parks so I called in a buddy who owns a few.

We go by the site and the trailers range in age from late 1970s to newer 2000s model homes. We can tell it has been abandoned for a while all the appliances missing, coper striped out of a few, broken windows, kicked in doors, and possible sqauters. One obviously had a recent fire and caution tape all around it. On a positive note there was a new town home development going in across the street and it was close to the beach, so I'm thinking tear down and put in duplexes but my soon to be partner sees a diamond in the rough. Current zoning laws don't allow any new parks and lower income housing is not reasonable due to high land prices near the coast, and everyone wants to be close to the beach. I think worst case we tear it down so we close the deal at the bank that day with no real due dilligence.

We do find out in the next few days that it was the park which had the meth explosion just one day before we bought it and it was all over the news for several days because sadly a 4 year old girl was severely burned. The bank did not want the bad publicity or the any liability of a chemical contamination hazard and never disclosed any of this to us. I talked to an attorney and considered trying to get out of the deal but my partner convinced me to stick with it trying to convince me we stumbled on a gold mind.

We mowed the waist high grass $200, pulled all the trash and carpet out of units $1,250, fixed the broken windows with plexiglass and silicone caulk $750, copied the logo off the Sheriff Office Web site and made some official looking documents that said area was being patrolled by Drug Special Interdiction Unit $.15. We hired a big mean looking guy from one of my partners other parks to move into the best looking trailer for 6 months of free rent as long as he would run anyone off $0. He would walk through the park at night with a big spot light which quickly got rid of our unwelcome guest. Fixed a crushed sewer line and fixed lift pump $1,800. We hauled off the meth exploded trailer $1,100 and worked with the health department to insure no contamination from the meth lab. Instead of fixing up the trailers we sold them as is from $2,000 all the way up to $12,000. We offered $500 down with 10% interest and charge $250 a month for the lot rent. With this strategy we have no remodel cost or maintenance cost going forward.

Honestly I though there is no way someone would pay $2,000 for a 1970s trailer with the coper striped out. Well, they did and it was amazing to see how the new residents helped each other fix up their homes. They would get free or severely discounted building materials from remodels like someone getting rid of perfectly good white cabinets and white appliances to upgrade to cherry wood and stainless, and just wanting someone to remove them and hall them off.

My partner was right the, we stumbled on a gold mind we sold all the trailers within three months and even a couple of buyers paid all the cash up front for the trailers. What little money we put in we were able to pull right out with the down payments and cash sales. Further the park continues to spin off cash flow of an average of about $4,100 a month after all expenses including professional property management. This is because even though many residents have paid off the financing of the trailers, we have been able to steadily raise the lot rent.

Can you replicate what I did? Probably not, this was a very unique set of circumstances; however, you can copy how I was able to set myself up to find this deal. I don't want you think this all just fell in my lap. I have personally met with all the executives at our local banks that are in charge of handling foreclosures, letting them know I am looking to buy. I make a point to stop in or call every few months, so they will hopefully think of me first. I build relationships with other local investors that have skill sets different than my own. Many times cold calling them offering to take them to lunch just to pick their brains. Thats how I found my Trailer Park Expert. A lot of work went into setting up the right "people assets" to take advantage of this deal. I remember my Dad, a business owner, would say, "to grow your business care about making relationships not making money, and the money part will take care of itself." If you want to build your real estate portfolio and find those highly profitable deals, don't spend all your time searching for that next perfect property. Make sure you focus some of your time on building some business relationships and the deals will find you.

Thanks for sharing. What a great story. And I love how you visit the local banks every so often to connect with lenders there. I'm gathering tips for creating relationships with local banks - I'm definitely including this one!

What a story. Thanks for sharing. I am new at this and I need all the help I can get. Anybody in Sacramento want to share what they know and grow, we can do this together. I will still be willing to help when I get my third or forth deal. Lets stay connected to ride this wave together.

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