Some people buy just one mobile home park and others buy … seven. What makes the story even more interesting is that all these properties were acquired over just the past two years.
We interviewed Andrew from Texas to discuss how he found, financed, and the turn-around plan on each one. It lasted about an hour and there are a ton of lessons learned in this discussion. So we thought we’d share with you the recording of this Lecture Series Event.
Frank Rolfe is the moderator and that means that the information is fast-paced and factual with no question taboo.
If you are interested in learning more about mobile home park investing – consider following the same path that Andrew did. He attended our Mobile Home Park Investor’s Boot Camp as the first step to getting into the business. It’s a three-day immersion weekend that shows you the correct way to identify, evaluate, negotiate, perform due diligence on, renegotiate, finance, turn around, and operate mobile home parks. It’s 100% live yet 100% virtual so there is no travel time or cost, and you get a complete recording of the event that you can refer back to at any time. The event is Q&A throughout with no questions left unanswered.
How A Star Wars Fan Became A Mobile Home Park Jedi - Transcript
00:00
Frank Rolfe: Welcome to our lecture series event. We've got Andrew from Texas on here. We've titled this one Lightspeed Ahead, How a Star Wars fan became a Mobile Home Park Jedi, because Andrew is very much into the Star Wars franchise as many people are, but he is also into Mobile Home Park. So we're going to tell you his story of how he got into parks and what he is done with them. And we thought the name Lightspeed ahead was apt because in around two years now, he has bought seven parks, sold one, so he owns six currently. So this is a story not of the past, this is a story of the present and the future 'cause this all happened real time very, very recently. So, Andrew, are you here with us? Can you see us and hear us?
00:39
Andrew: I am. I'm here with you.
00:42
Frank Rolfe: Well, great. Well, thanks for taking some time with us. So let's start off with the initial question of, what made you ever even think about buying a mobile home park? It's obviously off most people's radar screens due to negative stigma, et cetera. What made you even consider that something you would ever wanna do?
00:57
Andrew: Well, like a lot of real estate folks, I kind of first went down the single family rabbit hole, and within about six months of doing that, I realized that it was not for me, and I wanted to do something else. I knew I wanted to do real estate, just not single family homes. So, kind of started doing some research on alternative asset classes. And at the time I was very focused on cashflow. I wanted to free up my time, get out of my W2 job that I was in at the time so that I could focus fully on real estate, and this was back in around 2018. And Mobile home parks kind of came up as one of those alternative asset classes that has really good cash flow. And so I just kind of started going down that mobile home rabbit hole, read some popular books in the space. I attended your mobile home park university or one of your events, and that's kind of how I got started in it. I always really liked the asset class was... I thought it was a really good place to be in.
02:10
Frank Rolfe: And out of curiosity, what did you not like? Many people don't like, but what did you not like about single family and apartments?
02:18
Andrew: What I didn't like about single family was difficult to scale. At the time I was living in California, which has a very high cost of living and a high barrier to entry for investing. So I was looking out of state at investments, and just kind of very quickly realized I don't have the time off from work to go visit a market a whole bunch. And it's really hard to manage from out of state when you've got one house, two houses, three houses that maybe 15, 20 miles away. The management really was the big pain in the butt there, plus, when you're dealing with a single house, you got one tenant moves out, you're a 100% vacant. And that's a problem when you don't have a lot of cash in your pocket to absorb that kind of stuff.
03:16
Andrew: Repairs are much tougher at that point too, especially since I was looking at buying lower cost homes. So one of the appeals of mobile home parks for me was that I could get multiple units at one time. And from there, I also kind of realized like, oh, I don't have to buy it myself. I could have some friends or partners come in to help me with the capital needs and then we can all own a piece of this larger asset, management's gonna be easier, risks are gonna be lower just... I mean if you have an unexpected repair in one unit, but you've got 50 other units that are still paying, it's much easier to absorb that cost. Or if you have one or two vacancies, but 50 other units that are still paying, much easier to handle those things as they come up.
04:05
Andrew: So I really liked the scalability. I liked the fact that there is a need for that product, prices are kind of up and down and all over the place in California sometimes, especially with market cycles. And around that time in 2018, there was a lot of grumbling of, oh, is there gonna be a recession? What's gonna happen? And I didn't want to get stuck in an apartment building or some asset where rents were potentially gonna drop, occupancy would be going up, or occupancy would be going down, and there would be issues there. I like the fact that with manufactured homes, it's affordable housing for people. There's a huge need for that right now, probably more than there's ever been at any point in history. And so, people don't really have many other places to go. People are less likely to say, I'm gonna move out of this mobile home that I have a great deal on into another one somewhere else. The way people do with apartments, they're not gonna say, ah, my 12 months are up on my lease. I'm gonna move somewhere else with a better pool. They're gonna say, this is my home and I'm gonna stay here. And I like that sense of reliability.
05:19
Frank Rolfe: Now, look, on the seven parks that you've bought so far, let's go through each of the seven, just focusing on three items. Number one, how you found it, number two, how you financed it? Like was it a bank or seller financing or whatever. And then number three, what the turnaround plan was or is on them?
05:37
Andrew: Yeah, definitely. So I actually... I made, I'll say three acquisitions. I bought two, three park portfolios, and then one single park.
05:49
Frank Rolfe: Gotcha.
05:50
Andrew: So the first two parks, we closed on those back in 2022. The deal was found by one of my partners in all of these parks. I have two partners. We have our company Distance 3 Development. We're all equal partners. We each have a role to play, and we acquire and manage parks together. So one of my partners found the deal through a connection of his that he, I think he met him at the gym. It was also in real estate, here in San Antonio. And so they got to talking, this guy was I think looking to, 1031, the money into some other assets. So he was looking to sell these properties.
06:30
Andrew: They're a little bit smaller, so one has or two of them have 12 units, and then one has like 28 units, I think. So altogether, I have 50 something units on there. So we financed them together as a portfolio. The owner, seller financed us. I believe it was 30% down, so we had an investor who had invested with us before in some of our other deals. He came in and put that 30% down, and then my partners and I have contributed sweat equity to that. The owner financed back I think 70% on a two year seller finance note that would give us time to execute the turnaround plan. And really, the turnaround plan with that, we basically took a page straight out of your book, Frank, where all of the units were rentals up until that point.
07:26
Andrew: So our business plan was, we're gonna come in, we're going to allow anyone that wants to finance the units to stay in or finance them as is. They can stay in, anyone that doesn't wanna finance the units, we let them know, Hey, we're only financing you now, so if you're just wanting to rent, we're not doing that. And so over the last couple of years, we've worked on that. I think we only have one rental left on all of those units. So we own or finance the units back to those who wanted them, anyone that didn't want them, we served them with the notice to vacate. They moved on, we rehabbed the units and the rehab units, we were able to finance for quite a bit more, usually about 200, 300 bucks more than we were getting in rent.
08:17
Andrew: So we did that. There were a few vacant lots as well at one of the parks. So we called up the dealers in the area Clayton Homes. And there's another one, I think Palm Harbor Homes was another one, and they had some clients that were interested, so we just finished filling in those last four lots, I think. I think we had five to fill to start with, so we just filled the last one. And we're mostly done with that turnaround plan right now. The thing we did not do is there are two single family homes, one in each of the smaller parks, we did not sell those off separately. I know, as you recommend to do. So.
08:58
Frank Rolfe: No, not always. If it doesn't fit with the entry and stuff, then you probably just keep them in random because they're still real property income, but...
09:09
Andrew: Exactly.
09:10
Frank Rolfe: Okay. And then, and what part of America was that in?
09:12
Andrew: That was on the outskirts of San Antonio.
09:17
Frank Rolfe: Gotcha. Okay. All right. And then what was the next multi-park package? How did you find and finance that, and what was that turnaround plan?
09:26
Andrew: So the next package was another portfolio of three parks, also on the outskirts of San Antonio. That was actually brought to us by a multi-family broker that we knew from previous work that we'd done. And he kind of got this deal and was like, I don't know what to do with it. I'm not a mobile home park broker. But he knew my partners and knew that we were buying parks, so he was like, here, do you know what to do with this? And so we were able to work out a deal there. Similar situation I believe it was 30% down, the seller financed a note back to us for four years actually. So we got a four year seller finance note on that.
10:13
Andrew: And it was just a similar, similar business plan where, Hey, we're gonna come in, we're gonna increase the occupancy, we're going to raise the rents, up to market and we're gonna finance out any park owned units which has worked pretty well in two of the parks. One of the parks, it didn't work quite so well. The market, at least what we saw in the market, we thought that we could achieve some rent bumps there, but ultimately, it's a very small town. That kind of doesn't have a lot of great press out there due to some kind of endemic issues just with the population and with the the city and the people in charge.
11:06
Andrew: So we weren't quite able to execute the turnaround in the way that we wanted. We always knew that that one was the weak link in that portfolio. We knew that going in, the other two parks are really solid ones. Those were the ones we wanted, and we kind of figured, eh, we're gonna get two good ones and one not so good one if we can do what we want with those two, that'd be great. We'll see what we can do with this third one, but maybe it'll work, maybe it won't. So that weaker one, we ultimately ended up selling just for note value, just to get the liability off our books and stop having to deal with it. So we've retained the other two which are going pretty well.
11:50
Andrew: We're still working on increasing the occupancy there, but we were able to achieve the rent bumps that we wanted with the existing people, and now, we're just pushing occupancy. I think we financed off the park owned units, and so now we're just filling them up, so same business plan on that. And then the seventh one or I'm sorry. So that second part portfolio, we bought that in July of 2023. So we had one in December, 2022, then the next one in July of 2023. And then the seventh property we bought, that was in November of 2023. So that one's our most recent one, and that one's actually in RV park, which is here on the outskirts of Austin. And that, it's a 64 spots, and we've got an extra 10 acres. So we were able to execute a mild rent bump there. It was already fairly close to market, but there was a small one that we did. And then mostly the business plan on that one is developing out those additional 10 acres.
13:04
Andrew: We have a private well, private septic on that site, but our well is oversized. So we have enough water to service, I think four times the number of spots that we have. So plenty of water to fully develop out the rest of that property, which in that market is actually a big deal because the county is not approving new commercial wells at this time. So because we already have that in place, it allows us to develop more, and that should effectively double the size of the park and double our income there. So that's the business plan on now. And we're in the entitlement process now for that development.
13:46
Frank Rolfe: Gotcha. And we've also done multi-park purchases, just like you have three park portfolios. We did one in St. Joseph, Missouri. We did one in St. Louis, Missouri. And in both cases, just as you found in the second set, you normally get a really good park, an average park, and a horrible park. That's the three park portfolio deal. So we found that the best course of action, normally the terrible park, it's just hard to turn around because it is got like, everything wrong with it. So we also, like you did on the second group and we just sold the weak one off, because it was so far under the median of the other two. We were at, like, one park was 85% occupied, one was like 65% and one was like 15% and it just didn't make any sense 'cause the local market was so bad. We're like, well, why even attempt it? So we did it exactly as you did. We just sold off the bad one. And of course, the sellers sell them that way because they know they could never get rid of the bad one individually, so they always stick you with it. But yeah, it's often better just to ditch it. So now let me ask you, since you came out of the multi-family, single family world now into mobile home parks, what have you found some of the key differences are operationally in a mobile home park versus the other two asset sectors?
15:12
Andrew: Well, so I don't have much experience with lower class apartment buildings, and so my answer might be different if I was dealing with DRF apartment buildings. Mostly, I've dealt with I'd say probably B class apartments, so the difference between B class apartments and manufactured homes, one of the big things is the tenant base. The tenant base is just very, very different. There's a lot of people that come in and out of manufactured home parks that... They just don't have any money. So if they're not paying their rent, sure, you can go all day and evict them and get some big judgment against them, but it's gonna be a hollow victory, 'cause then you got some judgment you can't collect on. So you just gotta be really, really diligent about making sure that people pay, not letting them go too long and get some big balance run up, because you're never gonna see that money.
16:09
Andrew: My experience in apartments was more that, I mean, somebody might fall behind on their payments, maybe they lost their job, they need a couple of months to get back on track, but they're really worried about ruining their credit or having some adverse thing, getting an eviction on their record. Like they really care about that and they're really gonna try to avoid that, and that is some leverage that you have. That leverage doesn't exist with manufactured home tenants in my opinion. Or I haven't found it to be the case. I do have some good tenants. I will say that would probably be very concerned if I had to evict them. But a lot of them, maybe it's not so much that they don't care, but they can't do anything about it. If they don't have the money, they just don't have the money.
16:55
Andrew: And in fact, I'm just dealing today. I have somebody that had... She had lost her job, fell behind on rent a little bit. We worked with her for a couple of months to try to get her caught up. But she had made us a promise that she was gonna get fully caught up by the end of May, because she was starting a new job and all of this and actually fell another 200 bucks behind in May. And I just kind of had to give her this ultimatum in June, like, Hey, I need you to make this payment by what was effectively yesterday, or I'm gonna have to evict you. I don't wanna have to do this, but I can't just let you stay in the property for free. This has been almost three months now of you being behind on payments and had to serve her the notice to vacate. She was actually very kind and actually just left. I didn't actually have to evict her. She just said, I'm sorry, I can't pay it, but I'll be out. I cleaned the place and I left it as best as I could, as quickly as I could. And that's the best case scenario, but it happens and you just gotta be firm and cut it off before it gets too out of control.
18:06
Frank Rolfe: Right. And the affordable housing industry is all about obviously dealing with people that don't have or make a lot of money. And so to deal in it, you have to endure the somewhat culture shock of mobile home park residents who are often particularly based on what your normal business life has been. But normally, in business, we deal with people who, except for casual Friday, might wear a suit to a meeting or drive a decent car. Or if you said, where are we going to lunch? They would pick a restaurant other than Taco Bell. And then, when you get into mobile home parks, of course it is a definite cultural awakening, 'cause I had never, and you may have also never really had much exposure to that subset of customers. And it is a very large and growing subset. It's about a third of the US population. So there's about 100 million people that fit into that subset. What are some of the techniques you've used to try and re-adapt to the cultural reality that the affordable housing industry is geared around people who don't have a lot of money? Have you conquered those initial culture shock yet, or are you still enduring the only with that, or how is that going?
19:26
Andrew: I think for the most part I've conquered it, although my wife will tell you that sometimes I just come down, irate and like I can't believe this person's doing this, this is so aggravating, but for the most part, I'm over it. I will say one of the things that I found is you also have to work with these people. You have to learn how to work with them. You can't just be, or at least in my opinion, in my experience, you can't just be a complete hard ass where you're just going in there and say, rent's due on the first, it's late on the third, no exceptions. If you don't pay me on the first, you're evicted, no ifs and it's like, you can't take that approach because you don't have the leverage of them giving a crap if you have to evict them and if you and you're talking about a lot of people that they may have some kind of substance abuse issue or even if it's not a very serious one perhaps they're drinkers or maybe kind of float between jobs or have some issue. And it's oftentimes, and I hate to just paint everybody with a broad brush, but oftentimes it's people where if you take that kind of macho approach with them, they're just gonna match the intensity and just come back with a middle finger and well, F you then.
20:52
Andrew: And so it doesn't get you anywhere to act that way. They're not really intimidated by you trying to act like a hard ass with them. And so you have to find this very fine balance between being firm, setting rules and sticking to the rules, but also working with them and providing them a game that they can actually win. Now with that, saying one of the favorite lines that I like to use in collecting rent payments is we have really exorbitantly high late fees that we assess. So for us, it's rent's due on the first, it's late on the third, it's 50 bucks a day for your late fees, which I know is probably too much for anyone to pay. Most of the lot rents on my parks are around 550 bucks a month. So if they go an entire month without paying, and I charge them the full late piece, that's more than their lot payment. And they're probably just gonna move out if they get stuck with that. There's no way they're gonna be able to make that up. So one of the things I like to do is, I know I have that card that I can play. But if it's somebody that has usually worked with me, and you got to go person by person.
22:17
Andrew: There's gonna be people that are really gonna make an effort. And if you work with them, they'll pay you off, and they'll make good on it. And then there's people that don't care, the people that don't care, you just can't do anything with them, don't extend any grace to them, just get them out. But the people that will work with you, but are just financially challenged I'll do something like, hey, it's the third, I haven't seen your rent payment come in, when can I expect to see that? I don't wanna have to take any additional steps, but, can you let me know what's going on? And they'll come back with something like, Oh, my God, I'm so sorry. I can't pay it today. I can get paid by Friday, which would be like the seventh or something. If I pay it by Friday is everything gonna be okay, and I'll say something like, look if you can commit to making your payment by Friday, I'll go talk to my boss. And I'll see if I can get those late fees reduced or waive those late fees for your... Something along those lines.
23:15
Andrew: And nine times out of 10. Oh, my God, yes, that would be so great. I promise I'll pay on Friday. That would be so awesome. I don't have another $150 for late fees, please, please, please, can you help me? And they typically do it. And so it's finding how to work with them that way, how to apply that pressure of like, I could do this, but I'm not going to 'cause I wanna work with you. Maintaining a separation between the person that's talking to them and the owner. I'm the owner and the manager. So, but they don't need to know that. To me, I'm, like you, I'm Andrew from the regional office. I'm just here talking on my boss's behalf, I'll go talk to him and see what he says. And so just finding a way to work with those people. And you'll see, you'll learn over time, who's gonna make good on it. I have another lady who was also behind on her rent for about three months. She had a family member die, had to pay for the funeral, was behind a few hundred bucks, took her about three months to get caught up, but she got caught up.
24:23
Andrew: She worked with me the entire time. And I was fine with it, because I knew that she had a good payment record. I understood what she was going through. She was really making an effort, when she said she was gonna make a payment, even if it was a partial payment, she made that payment. So, I knew that I could rely on her to do that. And she wasn't falling further behind. So, it's a case-by-case basis, also is the other thing. You can't just apply a uniform brush to every single person. 'Cause people struggle. This subset of the population are those people that you hear about don't have 400 bucks for an emergency expense, you see those stats or whatever that the studies that they've done whatever percentage of Americans don't have that, that's these people. So when they come to me and say, Oh, my God, my car broke down, I had to fix it because I need my car to go to work. And I'm 200 bucks short on my rent payment, but I'll have it paid on my next paycheck in two weeks. I mean, it's not gonna do you any good to evict that person, because then you're gonna go pay 1,000 bucks for the eviction, they're gonna be stuck in there for three months or for three weeks, at least here in Texas until it's done.
25:33
Andrew: They're probably gonna be so pissed, they're gonna trash the unit. So then you got to rehab it and then you have find somebody else. And you probably just lost three grand there between all of that plus time. So it's work with the people. You have to. That's who these people are, you have to work with them. That's not the law, but that's what I found out.
25:54
Frank Rolfe: Yeah. Well, when you say that people skills right now are probably the most important ingredient in dealing with residents. We try and only...
26:00
Andrew: Definitely.
26:01
Frank Rolfe: Get managers with people skills don't even care their background. No real estate experience needed. It's like if you if you've got great people skills and you are a high school dropout, working at Taco Bell, that manager will succeed far greater than one with the Harvard MBA, who has awful with people, 'cause how you approach people, and approach situations with people. It's just the optics of how you do it. It's all in your approach, you get the same end result, you either get it done happily and faster, because you're a good people person, or you might get that same result much later through all kinds of legal expense into the problem. So I agree, you got to be a happy people person to make it work. What would have been some of the biggest differences between what you thought would the mobile home park business would be like and what it actually is like, 'cause that you probably had some initial theoretical theory of what you thought would occur. How is it different in reality than what your initial thoughts were?
27:02
Andrew: Well, I guess, one of the things has been how popular mobile home parks have become over the last I guess, 20 years, or 25 years, or whatever it's been. And I guess I probably shouldn't be surprised by that, because they're a great asset, they're an asset that's in demand. So of course, interest was gonna run into this asset class at some point. But I've been surprised at how much some people are willing to pay for parks. And that's part of the reason why it took me four years, almost five years to actually buy my first park. I went under contract on a lot of parks back in 2018, 2019 before I moved to Texas. Some of them I even called you about, and we talked about while I was in due diligence. And it was just couldn't find deals that penciled. People just wanted way too much. And I'd tell them, they're crazy. But then the next thing I know, some other guys bought it for that price. And I'm thinking, okay, well, I just can't compete with that I'm not gonna make any money on it. So, it took a while. And I think one of the big things that really provided an avenue for us to buy is the rising interest rates. When money was free, people were able to buy parks at a higher premium. But what we ended up finding was some sellers that kind of missed the boat to sell when the market was really high, but they still needed to sell. And so we were able to negotiate seller financing with them and that allowed us to actually make a good acquisition.
28:48
Andrew: And then the combination of the seller finance, which has low interest rate, longer term interest only that gives us the breathing room to execute our turnaround plan. And increase the value of the park, and then we can refinance into some kind of bank debt probably won't refinance and pull out all the investors money, but we'll still have a good cash flowing asset. So that was a big thing for me. And that's actually one of the reasons why I went into apartments after my first foray into mobile home parks, 'cause I'm looking at parks trading at like a two-cap, or a three-cap in some of these large markets. And I'm saying, apartments are trading at a two or a three-cap, if I'm gonna go pay a two-cap for an asset, I'll buy an apartment building because I have a lot more security in it. And unfortunately, with mobile home parks, and one of the things I don't like is that if a tornado comes through and wipes out all the homes, you're not gonna go get insurance money to rebuild all of those homes, the tenants own them, and they're probably not gonna go buy another one and move it back into your park in a reasonable timeframe. So you could more easily have your income stream wiped out in an event like that. Whereas a tornado hits your apartment building.
30:10
Andrew: Well, you can get insurance proceeds, rebuild the building, get tenants back in, it's less of an issue. Now, we've started to see a lot more expansion in the cap rates on parks, which have expanded more than what we've seen in apartments. And that's provided a buying opportunity for us now. So that's one of the things. On the complete other side of it, one thing that I've been shocked about is the behavior of some of the tenants and the things that they think are rational in their minds, and the lengths that, and the hoops that some of them make me just jump through in order to collect rent. I have one guy, for instance, where this was on the second portfolio that we bought, where he would not pay his rent. And it was this routine every single month, where I sent him a message on the first your rent's due, please make your payment. It's the evening of the third, Bruce, I haven't seen your payment come through yet. When are you gonna make your payment? And he'll say some bullshit about how he's angry about the electric bill or whatever weird thing that he made up?
31:28
Andrew: I don't know, there's a divot in his front lawn that he wants us to fix. And he's not paying rent until we fix it, or some BS that he's made up. And it's like, all right, Bruce, if I don't have your payment by the time I check my software in the morning, I'm gonna have to post a three day notice to vacate, you'll have three days to pay or get out of the property, blah, blah, blah, blah, blah, blah. And like clockwork, I talked to him on the first I talked to him on the third, he wouldn't pay, I'd have a notice to vacate, I'd have my manager go post it. And then he would pay like, hour 71 and 59 seconds and he'd make his rent. And it was like clockwork every month for like six months where I'm like, do I have to keep doing this every month? My manager has a stack of NTVs filled out for him five months in advance, 'cause she's like, I know next month, I'm gonna have to post the NTV for Bruce to get him to pay his rent. And I just sit there and I think you pay every month, you always pay what would end up being the evening of the six. Why don't you just pay? Do I really have to jump through all of these hoops? Every single month for the same outcome? Come on. At this point, he is paying, he pays by the third now, 'cause after six months, I think he got tired of it. But it's just that kind of stuff. Where it's like, man, I couldn't believe that somebody would think that this is a way to behave.
33:00
Frank Rolfe: Yeah, I used to have a tenant who paid late every month. And between court costs and late fees, it was more than the actual rent. But we did this every single month. So after four to five months, I called the guy up and said, hey, how would you like to save half of what you're paying to live here? He said, great, great. How is that? I said, all you got to do is pay on time. So I got a plan for you. I said, you pay late every month that we have to file eviction every month. And then you suddenly pay us when we go to court. So how about you just start paying it ahead? Well, how would I do that? Well, I don't know, you'd have to go out and get a part time job. And you'd have to make $300 one time only. Then you pay us the $300. Now you're ahead. And then just keep paying on the date you have been paying right now every month. And it would cost you half of what you're paying. The guy said, that's utter genius. I'll do that. I'll go get a job, a part time job.
34:08
Frank Rolfe: I'll earn $300. I'll give it to you. And you know where that story goes. But years later, he still that was the standard procedure. He could not get his life together enough to ever get ahead on $300. And at some point, you just realize it's not your job to try and understand the complete absence of logic. Early on, I was thinking it was curable, but it was really more just of a mathematical cultural issue with the guy. He just could not. Apparently, going to court for eviction was his trigger to pay. The same as most Americans are triggered to pay is actually just get the bill from MasterCard, fill it out. His trigger was the actual eviction and he could not live without the trigger. That was what made him work. Also on your tornado, I can tell you from experiences, we've had one park completely wiped out and two others with partial tornado. The thing on tornadoes today is that ever since Katrina, mobile home parks are the go to for FEMA and the Red Cross. When your park gets wiped out, they refill you in no time flat, not just with your residents, but they got to rehouse everyone in the town that got hit. Because many people, even in the stick builds, they don't actually carry insurance, which is crazy. If I owned a stick build house, I would think I'd have insurance, but it's shocking how many people don't. They normally will rehouse you in the tornado. At least that's been our experience so far. Let me ask you this.
35:39
Frank Rolfe: What are some of your lessons learned about parks at this point? If you were telling a manager or somebody else, and they said, okay, what are the three main things I got to do? What are the three main things that you got to do to be successful, do you think?
35:54
Andrew: Three main things I would say are, well, there's a level of acceptance that you have to come to. You have to accept that you're gonna put up with a lot of bullshit. And that just comes from territory. So just accept that and it will be a lot easier to get through it is one. The second thing is, you got to learn how to work with people, and you've got to learn how to remain calm. You cannot match these people's energy and come to a favorable outcome. You have to work with them, you have to remain calm. If you're a hothead, you're not gonna have much success. The third thing I would say is probably that repairs and turnover are very, very costly in manufactured homes. And so you really rentals I mean, they can add some more income, but they don't add much value to your property. And it can be good in some markets. But these people are so hard on units that the repair cost will just eat you alive. And when you're already only renting the entire home for eight, 900 bucks, 1,000 bucks, like some guy moves out and you got to like fix all the leaks and the holes in the floor.
37:24
Andrew: And it's just, it will cost you so much money. So just don't deal with that. Finance the units to them, make them responsible for the repairs. And if they wanna trash it, it's their problem. We get a non... Well, when we owner finance our units, we get a non-refundable option fee upfront, we do a lease with option to purchase on whatever term we wanna finance it over. So for us, it's generally seven or nine years, depending on the condition of the home, the crappier home seven years, the nicer ones will do it over nine years. And we do that with 10% interest, we kind of look up the value and try to match it to what they would be paying otherwise, and obviously, if we can, we don't wanna give the homes away. But, we try to match it as best as we can. And make them responsible for the repairs, 'cause if they wanna trash it, well, we collected that option fee. And so if they screw up and have to move out, well, we've got that 1500 bucks that we can go in and rehab that unit with.
38:37
Andrew: And if not maybe they see it as something that they can take pride in. So, I mean, I found that that's the recipe for success. I mean, and it's a page straight out of your playbook. But we've found that that is the most successful thing. And probably I think every single tenant that I've had has fallen into one of those two categories. Either they don't give a shit at all, and then they move out, in which case we've got our option fee. So we've already collected the money to rehab it if we need to. Or there's somebody that sees an opportunity and they do a really good job. And we've got a number of people that have come in. A lot of them are actually since we're in the outskirts of San Antonio, a lot of them are immigrants from Mexico or Central America, and they've got great handyman skills and they not necessarily highly educated, don't speak great English, but they understand the value in owning their home or having something that's theirs, that's important to them.
39:39
Andrew: And they're very happy to buy a crappy rundown mobile home for a really cheap price and to fix it up themselves. And we we got one guy that's great, and he's actually our handyman on the property now. He bought our crappiest house. This other guy, we we had to a victim and he just, the thing was just practically gonna fall apart at the seams. And this guy came in, he's an immigrant from Honduras, and really handy good guy, young guy. He is he is married, he is got a couple of kids, I think he is 25 or something like that. And he came in, he financed the unity. He fixed it up and now it's the best looking house in the whole park.
40:20
Andrew: And he takes really good care of it. And he ended up getting some of his family members to move in. I think two of his cousins ended up moving in and did a similar thing. And he's our handyman for the park now. He fixes everything first and keeps an eye on stuff and he is great so it's one of the two it's either good people that just don't make a lot of money or it's people that just completely don't have their shit together. And it's just a mix of both.
40:50
Frank Rolfe: Now I'm assuming, do you self-manage all these seven parks?
40:53
Andrew: Yes, we do. We have onsite managers, but we handle basically all the management ourselves. So we have an onsite person at each of the parks. There's only one park where we don't have like an official person that we pay. We don't really ask her to do anything. We use the rent manager software and we have our payment system integrated with it. So on one of the portfo... The first portfolio we bought, we got everybody on to that program. So they all pay online every month. No money orders, no cash, no anything, which I know is highly unusual in this space. But we were able to actually successfully do that on that portfolio. So at one of the parks we have one of the residents, she just kind of keeps an eye on stuff. She doesn't collect rent or do anything, but she will give us a call if she sees something out of place, and then we can go and handle it.
41:50
Andrew: And that one, that park is, it's just about a mile from our other park or from one of our other parks. And that other one, we've got a guy, he he gets free lot rent and keeps an eye on the place. He's a handyman. So he can fix little stuff for us. We've got electric sub-meters on that property. So he does the meter readings for us. He'll pick up some trash, he'll do little repairs and he gets free lot rent. And we do everything else. At another one of the parks we've got this this handyman from Honduras, so he doesn't get free lot rent from us, but we'll give him rent credits for doing repairs around the property. So there's no like, recurring thing that he gets. But I don't know water spigot breaks or someone ran over a sewer pipe or something and whatever it is, he'll do that little stuff.
42:46
Andrew: So he's generally probably getting 300, 400 bucks a month in work credits, which he's fine with. And again, he doesn't collect rent or anything, but he keeps an eye on stuff. He'll let us know if something's out of place. If we have a problem, we can call him up and say Hey, we got a report. This thing was happening. Have you seen anything? And sometimes there's something we had one guy there, or one lady who's, I think her son came to visit and he was like out there at two in the morning shooting shit in his yard and whatever. People were all freaked out, oh, he is gonna shoot one of my kids. So we had to call Elias, and like, Hey, is somebody shooting his gun off over there?
43:27
Andrew: What lot is it coming from and have to deal with all that. In the second portfolio that we bought, we had an onsite manager at each park that got free lot rent. We were not able to get many of the people in that portfolio to use the online system. Now the wifi and everything in that area is a lot weaker. It's a little farther out from San Antonio. So the unreliable wifi, I think was part of it, but also just the tenant base at those parks it was a lot of people that were kind of they're afraid of the government micro chipping them and oh, if I have an email address, then the government's going to be able to see the inside of my house. Just they those kinds of people.
44:13
Andrew: Where they don't want anything to do with technology. They just can't handle it at all. No matter what we did, they weren't gonna do it. Most of them don't even have a bank account 'cause they're so paranoid. So we were not able to get people onto using the online system. What we do on those is we do accept money orders or checks. Our official policy is no cash, but occasionally we get a couple cash payments, but it's money orders checks or we actually bought those square card readers. So we have those and the managers have them in the office. And so people can come in and pay with a credit card or a debit card if they want. It's just a high fee. So most people, I'd say 75% of people are paying with money order or checks.
45:04
Andrew: And we have a good system worked out with the managers where they have an envelope every month. They collect the money order. They write down a line on the envelope that says this lot paid on this date, this amount of money, this was the payment type check or money order. And they shoot me a picture of the envelope with the writing on it and a picture of the money order itself. And they do that for everything that they collect. And then at the end, and then they also have a sheet that they check off I've got rent from this person, this person, this person. And every day they send me a basically a picture of that sheet so I can see, okay, this is who's left. And then once everything's collected, they shoot me a final picture of the envelope.
45:49
Andrew: They take that envelope to the bank, they deposit it in our bank account, they shoot me a picture of the deposit slip so I can verify the deposit slip against the picture of the envelope against the picture of the rent roll against my system and haven't had any issues there. And we do that on the RV park that we bought as well, that same system. So it's kind of quadruple checking everything. And we always catch everything. We do regular drive-throughs of all the parks unannounced. We, I mean for me at least I don't even think I've met the manager at one of those parks in person, but I drive through it and she doesn't know who I am. All she sees is a truck doing a drive through and so I can just go and verify and see like, Hey, is everyone still here?
46:48
Andrew: Is stuff really messed up? And I mean, that's worked pretty well for us so far. And then we do all the rent collection and the accounting and the notices and all that kind of stuff in-house, my three partners and I'm the asset manager. That's kind of my role. So I'm primarily handling all of that. One of my partners handles the maintenance on everything. So if something's broken, something needs to be rehabbed, he is the one that's got that good relationship with the people at the parks. And that provides some level of separation for them that they're not always just going to one person. They kind of know, Hey, there's a few people that are looking out for us here. There's more than one set of eyes on this. And I think that that also provides a level of of scrutiny that they're aware of.
47:32
Andrew: So they kind of know like, Hey, I can't get away with much here. There's multiple people watching me. There's multiple tests that everything is going through. So stuff is gonna get caught. And eventually, and I've even had some things, right. There's like a missed payment or something and I didn't catch it for a couple months, but then I, but they know I always catch it [laughter] no matter how long it is, I'm always gonna catch it. And we do our we do monthly accounting, we do quarterly accounting, we do yearly accounting. So that we're always double checking.
48:11
Frank Rolfe: What do you see as the as the future plan? Like how many parks do you wanna own? How big do you wanna be? What's the long-term goal here?
48:21
Andrew: The long-term goal is to own good assets and good markets. So it's kind of a vague statement. I guess we don't really have a target number of parks or anything like that I mean, one of my partners, he likes to say a million bucks a month for each of us. That's the goal whatever we gotta do to get there. So we'll see if we get there at some point. But for me I don't have a specific number that I want to top out at. I just wanna own good properties. One of the things that I have learned, and this is another lesson, is that you buy small rundown parks. You can make some good money turning them around, but it can be a it's a slow process and it takes a lot of your energy and your time.
49:21
Andrew: And so I think our focus at this point isn't so much buying extremely heavy lift parks in marginal areas. It's like, let's buy a park that is a medium or lighter lift where we can achieve some good returns, we can achieve some good growth, but if we can do that, we'll be able to scale this crappier park that we just sold off. I mean, that park by itself took more time to manage than the other six combined. It was so management intensive that we're sitting there saying, we're never gonna buy another park because we don't even have time to go out and talk to anyone about acquisitions. 'cause we're spending all of our time on this one park that's just still losing money. Like, we don't have time for this.
50:11
Andrew: We're just gonna cripple our ability to grow. So we're still actively acquiring, but we've defined our buy box a lot more stringently now. So we're looking for good markets, growth markets at this point point, we're only looking in Texas. And I think that we we'd like to grow to own several thousand units at least, if not several, tens of thousands of units to where we've got a good team. We're not self-managing anymore to where we're focusing more on growing our business and our portfolio to where we can slow down a little bit and stop taking those calls at 10 o'clock at night and just grow to a point where we really do have time and financial freedom. I mean, that's my partners and I main goal so it's kind of hard to put a number on that or a number of units. 'cause I mean, you can own 10,000 units and be working 100 hours a week and I mean that's not much of a life either, [laughter]
51:22
Frank Rolfe: Right. Let me ask you this. You're a Star Wars fan, so it means you're into futurism in an industry that is very old and antiquated. You have not seen any substantial redesigns of Mobile Homes since 1990. The parks themselves all date from the '50s to the '70s. So where do you see the industry? What will a Mobile Home park look like in your futuristic mind 10, 20 or 30 years from now? I mean, we're all in agreement. The homes are not attractive on the outside. They did, they've done a lot of good things on the inside. I don't know anyone in the industry who does not behind the scenes say, man, how come the outsides do not match the level of professionalism of the insides? Do you see changes in home design? Do you see mobile home parks in the future not even being filled with mobile homes or filled with 3D printed homes or some other kind of product that takes advantage of those, the ability to have such high density lots. What do you, where, give us the Star Wars perspective on the mobile home park model 20, 30, 50 years from now.
52:35
Andrew: Well, if Elon gets his way, I think it's all just gonna be parking for our spaceships. Okay. Was my answer. Answer more seriously though. I will actually disagree with you on the point of the homes not being as attractive because one of the things that I've seen here in Texas is there's a lot of people that are trying to develop mobile home parks and RV parks everywhere. So which is interesting to me. 'cause when I attended your bootcamp one of the things that was said is they're not making any more of these. But I see a lot of people pushing to develop more of them in Texas. And I do see.
53:17
Frank Rolfe: I have to give you one footnote on that because we have I think maybe five small expansions going in Texas right now. So for the first time, we actually hired the guy who's the guru of park development, and he has all these roles of plans of all these proposed parks. I said, well, how many of these roles of plans have actually been built? And he said, none. So it's like all these guys have all of these visions of development. But so far I think there's the one tiny home community near Austin, but that's really old at this point. That was built back. I mean that's, well pre covid. But a lot of the people who have still failed to ever get the permitting or financing, which is weird to me 'cause there's spent so much money on making up all these plans. But I'm digressing Go ahead.
54:08
Andrew: No, no. I mean, you're correct there. Financing is a huge, huge issue in this that first portfolio that we bought two of those parks actually were built in the last 10 years completely. And it was by the guy that we bought him from now not big parks. Only 12 units. And basically what he did was he bought a single piece of property that had a single family home on 10 acres. And what he did was he just he subdivided the 10 acres, he carved off the single family home onto its one little acre thing. And then he added or I think he, I don't know, maybe 12 acres, but whatever it was. But he just sectioned it out into one acre lots. This was out in a county probably I don't know, 30 something miles outside of San Antonio.
55:04
Andrew: So really small county, really easy to work with. They don't really care much if there's a mobile home park in the middle of nowhere, it's not near anything. They don't care. So I've seen little stuff like that be able to work. But you're right. I haven't seen, I guess a lot of big parks come in. I have seen expansions. Expansions are the one things that I see happening. But I am actually developing a manufactured home community just north of Austin now, this is not a rental community. It's not one that I'm gonna hold. Essentially I bought 46 acres, I subdivided it into 50 lots. Again, it's out in a county, very small county. There were a couple caveats on it but it is approved, it is approved for manufactured homes.
55:57
Andrew: The only thing was they said, and I can't remember the exact specifics, but they said no manufactured homes, that it's either older than 20 years at the time of install or older than 1990. I can't remember exactly which one it was, but it's one of those, so they're like no crappy old pieces of junk. But basically if you wanna buy a new home and put it on here, you can do that. And my father actually lives in a manufactured home now 'cause he bought a ranch about halfway in between Austin and Houston. And as we were kind of developing that I was like, Hey instead of building this crazy big stick built house, why don't you buy more land and then put a manufactured home on it? Because as you said they've made some good strides in it.
56:47
Andrew: I mean it's not the prettiest home. He bought a base model, but his plan is to, he is gonna kind of refinish the inside and kind of make it exactly how he wants. So we got a 1500 square foot three bedroom, two bathroom house. And he is happy as can be. He is out there, he is off the grid. He is got his own septic, he is got a, well, he is got solar panels happy as a clam out there. And I see a lot of people that like that model. The dealers that I've talked to in the area and I've talked to I've talked to the big guys, I've talked Clayton and Titan and Palm Harbor and those guys. And I've talked to the smaller dealers that buy from those guys and buy from other smaller dealers.
57:31
Andrew: And one of the things that they tell me is that their volume is just crazy. Right now, the number of people that are buying manufactured homes is just off the charts. The problem that they're having is that they don't have any place to put them and they're like, look, I got a person comes in, they've got the money to buy a home, but I don't have any place to send them. And a lot of those people don't necessarily want to buy some big chunk of land. They can't afford to buy a big chunk of land and develop it themselves. So they are looking for lots in parks or they're looking for land that they can place it on. So what I've done is I bought this 46 acres, I subdivided into 50 lots.
58:17
Andrew: Those 50 lots are between 0.75 and 1.25 acres each. They're approved for manufactured homes. I'm selling them around 75 to 100 bucks a pop. They've already got roads in, they've got all the utilities stubbed out to the site and with interest rates the way they are with the prices of stick-built houses going up, which here in the Austin area, I mean, I think the average home price is like 450K now with many new builds being 600,000, 700,000. I mean, people just can't afford that with the interest rates. But what they have figured out is, well, if I can buy a lot for 100 grand and I can buy a manufactured home for 100 grand and I can get a loan for both of those together. And there are companies that do these land home combo loans, Hey, I'm buying an acre of land and a new home that's 1500 square feet for 200, 250K, I can afford that.
59:15
Andrew: So there's a lot of people that that is kind of the solution that they've come to. So I mean, like you've said before there's a cap to how much you can charge for lot rent I mean, even if there's a lot of demand, people can't just suddenly pay 2000 bucks a month for lot rent. Like, it's just not possible. Now I think that we are gonna see some good bumps with all of the money printing that's happened with covid and everything and inflation the way it is and wages rising across the board. I think inflation is gonna push lot prices higher, probably in 10 years. I think that people probably are gonna be paying 800, 900, 1000 bucks a month in lot rent. However the I'll call it the effective minimum wage.
1:00:13
Andrew: Those people are going to be making 20 bucks an hour instead of 10 bucks an hour like they were making before. And I own a business in Austin also where I have like 15 something employees. And I mean it was 10 years ago they were getting paid 12 bucks an hour. They're making 21 an hour now, and they won't work for less. So it's, the dollar amount is gonna go up, but the value of the dollar has gone down. So I think it's an equilibrium that's gonna be maintained as these people make more money, they're gonna be able to pay more money, but they're still not getting they're not getting more value for it. They're getting $20 an hour in 20, $30, not 20 $10.
1:01:02
Andrew: I mean, hopefully they develop some more parks. 'cause I think they're needed. I think a successful model is going to be developing lots for buyers of the homes, the people that buy the homes. I see a lot of people that are wanting to actually own the land that their home is on as opposed to putting it in a park. So I think if that's a problem that you can solve, which is another thing that I'm trying to do, I think that's going to start becoming a much more popular business model and no large part because like you said, they've made some improvements to the interiors of the homes. They're a bit nicer now. You can do double wides, triple wides, they've got these like custom thing you can get custom bay windows and things like that in them now.
1:01:49
Andrew: A lot of the nicer ones have granite countertops and sheet rock and kind of that exposed wood beams and stuff like that. So they actually look quite nice and if they kind of get their heads out of their butts and make the exteriors look a little bit better to where the exterior looks more like a stick-built home and not a manufactured home then I think there's gonna be a lot more buyers there. I do think that that's really only possible if you're doing double wides and triple wides though, because no single family home is as narrow as a single wide, unless you're buying a shotgun shack in Ohio. And in that case, most of them are two stories. So it really doesn't look the same. So that's kind of where I see things going, I guess.
1:02:40
Frank Rolfe: Okay. Well, we're out of time, but again, I wanna thank you for taking the time to be here because time is valuable and we also know that everyone here at this lecture series discussion also, you had a lot of different uses for your time. So hopefully everyone got a lot of good information from this. We think it's important to talk with park owners on a regular basis because everyone has their own life experiences and you can only learn from reality. We hate, I hate theoretical anything. 'cause the theory isn't the practical knowledge you need in life. It's only talking about real stuff. That to me that matters to me. Like five seconds of driving my car is superior to 5,000 pages of a owner's manual. So [laughter], right. We appreciate you taking the time to be here. So that wraps up this lecture series event. But again, we appreciate everyone's time for being here and thanks Andrew, and we will talk to everyone again soon.
1:03:37
Andrew: Sounds good. Thanks for having me, Frank. I appreciate it.
1:03:41
Frank Rolfe: Thanks a lot.