Larry Abramowitz went to Mobile Home Park Boot Camp in 2020 and now owns 16 mobile home parks in North Carolina, South Carolina, Illinois and Kansas. What they all have in common is that he used the classic textbook turn-around plan of buying them cheap and pushing rents and occupancy – and it has paid off handsomely for him.
In the Lecture Series Event we discuss how he found these parks, negotiated them, financed them, his lessons learned, and everything else you’d want to know. If you’ve been interested in mobile home park investing – particularly turn-around deals – then here’s your opportunity to hear the story of a veteran of this business model.
The host is Frank Rolfe, who asks the questions you want to know the answer to and keeps the material moving quickly. He also offers his own opinions since he’s no stranger to mobile home park turnarounds.
The Textbook Turnaround Artist - Transcript
Frank Rolfe: Welcome to our lecture series event. We're very pleased you're here. We always feel that these lecture series are very vital to anyone looking at buying into the industry because there's no greater idea of performance, no greater idea of what it's really like to own a mobile home park than hearing from those who do own them. And so with that spirit, we have Larry Abramowitz from Miami, Florida with us here today. He's got an amazing story of his massive success in the mobile home park industry. So we thought this would make a great case study for those because he's been in the business only about four years yet is already the proud owner of about 16 different parks. So Larry, are you here with us?
00:42
Larry Abramowitz: Yes, Frank. Thanks for having me. It's great to be in shape.
00:46
Frank Rolfe: We're very, very happy to have you here. So let me start by asking Larry, obviously you're a guy who has a very tasteful office. How did you ever think about mobile home parks, of all things? How did the mobile home park concept ever come to mind?
01:04
Larry Abramowitz: I've done a lot of different asset classes in real estate. I was doing here, I live in Miami and I was doing single family homes, flipping homes. I was doing a land place, industrial office, retail. I did a little bit of everything. I moved to multifamily and that was my first indication when I moved into multifamily. I was in 2018. Before that, I wasn't raising any capital and I was looking for more deals to buy multi and it got very competitive. I couldn't really find deals that made sense for my returns, my targeted returns.
01:44
Larry Abramowitz: So somebody told me about mobile home parks and they said, if you're going to get into the business, you got to go to mobile home park university. So I actually went to your class in Charleston, South Carolina. I think that was like in 2020, you had it there. And I remember you saying, well, most people that get out of here will not buy a park. And I said, well, I'm not going to be one of those, I'm going to go for it. So I analyzed a bunch of deals and eventually found my first deal. Started looking in Florida because I wanted something close to where I live. And the deals were tighter cap rates than what I was finding in multi and multifamily. So I started looking in other States and I found my first deal through a wholesaler in Wichita, Kansas.
02:39
Frank Rolfe: And Larry on that very first deal in Wichita, was it a turnaround? And if so, how tough a turnaround, what kind of deal was it?
02:47
Larry Abramowitz: Yeah, I was always used to buying tough deals and before I got into this business, into the mobile home park. So I always bought foreclosures or things that were hard to turn around and the returns were always better that way. So I bought a deal that was only, I would say maybe 10, 15% occupied. It was a park that was pretty much abandoned by the owner. He inherited from his dad. He didn't want to run it. And the park was in pretty distressed condition. The city wanted it shut down. And it took us about six months to close the deal just because there was a lot of negotiation with the seller and the city. And I was able not only to convince the city to keep the park, but to actually rezone it and took it from 62 to 79 lots in the rezoning, given that I will implement a business plan with paving the roads and getting rid of all the abandoned homes and doing a lot of landscape and signage. And we really brought the park up to a different level, right. We already brought in about 40 parkland homes in there. Sorry, 40 new homes that we set up at the park. And it's been what, three, almost four years since I bought that deal. And it's doing very well right now.
04:14
Frank Rolfe: And Larry, how did you finance that? It was so empty. Was it seller financing or bank financing?
04:18
Larry Abramowitz: Seller finance, they finance about 90% of the purchase, but it was only a three-year balloon. It had a very low interest rate, so it made the deal work. I just had to move quickly to be able to ReFi before that long balloon. So, unfortunately, I had to ReFi last year when rates were at the peak, but it still worked out well.
04:44
Frank Rolfe: Right. And from that first deal, how did the first deal go? Has it worked out well for you or are you on target with that?
04:52
Larry Abramowitz: It's worked well. It took longer than what I expected or what I planned just because it was a learning curve for me. I was doing a lot, going to Wichita once a month or twice a month from Miami. So, I did a lot of traveling for the first three years until I was able to have a manager full-time because the deal couldn't afford it. So, I had a manager to live in the park. She's still with me and she was helping me run the park. The beginning was very little pay just because there wasn't a lot there, but then I was able to buy two more deals in Wichita to be able to afford a full-time manager and maintenance. So, that really makes a difference. I mean, once you have enough sites to... So, I guess the hardest thing is having that volume to be able to afford manager if you're not, if you don't live near the park.
05:50
Frank Rolfe: And was that, were those parks number two and three then also in Wichita?
05:55
Larry Abramowitz: No, actually not. My number two park was in East Peoria, Illinois. That was also a deal through a wholesaler and also a very distressed park. So, it was 146 lots, but it would only 50 occupied and out of those 50 occupied, about half the tenants had to leave, had to go in and demo about 35 homes to clean up the park. Same thing, fix the road, street trimming, fix water lines. And, I did a lot of the stuff, Frank, that you told me not to do in the class, but actually I saw the opportunity, so I went for it. This is also private utilities, wastewater treatment plant and well, but, the park is in a good location in Peoria where the higher price homes are and higher income just needed to be turned around.
06:52
Larry Abramowitz: The same story, the kids inherited the park from the dad. He had it full at a certain one point and they just drove it to the ground. A lot of issues with, drugs at the park and drug dealers and crime and the police were there, two or three times a day. And, same thing, we turn it around. We, that park, it's at the same occupancy, but now we have 50 paying tenants that are good that keep... Park is quiet, no crime issues. We have people come live at the park that said that when they were kids, they lived at the park and the parents wouldn't let them play outside because it was so dangerous. And now, this girl, this lady bought a house at our park to move back in because she loved what we did with it. So it was very nice to see that, but that was number two. Sorry. Go ahead.
07:44
Frank Rolfe: That was number two seller... Was number two seller financed again Larry, or did you have the bank on that one?
07:49
Larry Abramowitz: Sellers.
07:50
Frank Rolfe: Okay.
07:50
Larry Abramowitz: Those were not financing...
07:52
Frank Rolfe: And strategies number one and number two, same strategy by a park in terrible condition on the cheap seller finance, bring it back to life. That's the model. Okay. How about part number three? How did that work?
08:04
Larry Abramowitz: That was also in Wichita. That was actually bank financing. I use a local bank and it was a little higher price. And that one's been, I would still say it's been my challenging park as far as turning it around just because it's been slow to sell homes. And we're finally got all the homes that we brought in occupied. So same kind of story. We cleaned up, we demo a bunch of homes, got rid of a lot of the crime scene there, paved the roads. We added a bunch of streetlights, landscape and the park now looks beautiful. And finally we got it, we're changing the image of a park like that takes a long time. Because people still remember how rough it was and the crime and the issues of the park. So it's hard to get people back into the park, but what I've learned, it takes, two to three years to really change the image of these, really rough parts, from what it used to be.
09:07
Frank Rolfe: Right. Okay. And so what was park number four then?
09:10
Larry Abramowitz: It was another one in South of Wichita. And that was also through, these are all wholesale deals and that one came in, it was an older lady in her eighties and she was running everything as parkland homes. It was about 68 sites, but she was doing all the repairs herself. She was, when I got there, she was changing a floor in one of the homes with she had an assistant and they both did all the work, but they were getting for both parkland home and lot rent about four to 500 a month. And my lot rents are all my parks were already at 400. So our strategy there was to basically take all these homes and just tell the tenants that you can have it for free or for a thousand dollars. And, but your new lot rent is 375.
10:03
Larry Abramowitz: And we were able to sell at this point, I think we're, we have about three homes left and that park now is all tenant owned home, direct build utilities. So it's been, I would say, even though it's in a small town, South of Wichita, it's still been one of the probably best performers as far as profitability, just because it's very low cost to operate.
10:26
Frank Rolfe: Okay. So your first four parks are all pretty much on the same business model.
10:32
Larry Abramowitz: Correct.
10:33
Frank Rolfe: On that Park number five, but five, also another.
10:36
Larry Abramowitz: Those four parks I did on my own just to learn the business, didn't bring any investors. And I just wanted to really understand the business and learn it. It took me after three years of doing that. I decided to raise a fund and was able to raise a fund and we bought with the fund right now we're at 12 properties. In the last, it's been two years since I launched the fund and we have two more on the contract.
11:06
Frank Rolfe: And Larry on the 12 that you've done since you started the fund is the, and since you have 12, tell me just by a percent of those 12, how many were found by a broker, wholesaler, cold call, direct mail? Give us an idea of the breakdown on that, on those 12.
11:26
Larry Abramowitz: First five where the seller posted it on Facebook. We moved pretty quickly on that. And we had it for some reason, I couldn't sleep. And I was on Facebook like at 1 o'clock in the morning. And I saw the posting. He had just posted also at middle of the night. And I texted him and we had the person who was running acquisitions, went there the next morning and met with the seller. And we were able to put an LOI the same day and locked it in pretty quickly before anybody else. So that was, so it was a five-part portfolio in South Carolina. And then the next one was a broker deal. That was my first broker deal. It was five parks North of Raleigh, North Carolina. And then the 11th park was the neighbor that was off market. It was a neighbor, one of the parks in North Carolina.
12:26
Larry Abramowitz: And we were able to... The father passed away. We were able buy from the kids. So that was, it was semi, they had it listed, but we were already talking to them before. So we kind of had an insight and we're able to pick that up. It was a no brainer for us, it was next door. It was actually exactly next door to one of our parks. And the last one we bought was off market through relationships. And that's also going to be a big turnaround. That's going to be a park with very low occupancy. It's in Illinois, north of St. Louis, and it's... We bought it also with about 10% occupancy, but all the homes are there. So now we're fixing park on homes and the park has great bones. It just needs to be turned around.
13:24
Frank Rolfe: So of all these deals you've done so far, Larry, which one is your favorite deal and why? And which one is your least favorite deal and why just so far? And again, every mobile home park I have found is like a sports game. There's momentum, it's going good, then something pops up, water issue, who knows what, then you recapture momentum and drive on again. So again, these are all still fairly early, but just so far early in the game, which of the players do you like the best and which of the players do you not like as much and why? What's it look like?
13:58
Larry Abramowitz: I would say that my parks that are all tenant on home seem to be my favorite. As you talk about that in your course and you learn in real life is that they are a lot easier to manage, less headaches and it takes a lot less of your time. So I would say that the park south of Wichita and Winfield, even though again, it's a small town, that's been a pretty good performer. There's really, we don't do a lot with that park because it's all direct build tenant on homes. My other park in Wichita, which was my first one, now I also put it on my favorite list, even though we have a lot of park on homes there, we haven't been able to sell the homes. The brand new homes don't sell that easy.
14:45
Larry Abramowitz: So we ended up renting them for cashflow and it still performs very well with the rentals, even though our goal right now is to sell most of those homes. Now that the park looks really nice, our next step there will be to sell those homes. Least favorite, the South Carolina portfolio, because they're mostly park on homes.
15:11
Frank Rolfe: Got it. Are you going to try and convert them over to tenant owned at some point, or?
15:15
Larry Abramowitz: Yeah, we have been converting some. It's slow. It takes a lot longer than what we planned, but we're converting, especially the older homes, because it has a lot of brand new homes or two, three-year-old homes, but the older homes are usually the ones that we want to sell first. So we're working on selling those. We sold about 10 this year and ideally we sell all the old inventory first and then start going through the newer stuff as we can. But yeah, the park does great still. I mean, cash flows and everything, but it's just a matter of, it's a lot of work. It takes a lot of our bandwidth to manage. So different than multifamily, multifamily, you have all your apartments in one location with one manager, one maintenance here, and they're all the same. In this case, you're running, all the homes are different. So when something breaks, you got to go and find that part for that specific home. The doors are different. The appliances are different, which makes it a lot more challenging than running a multifamily rental community.
16:22
Frank Rolfe: And Larry, normally these heavy lift turnarounds, they go through stages like a rocket ship. So the first stage, of course, is just law and order. In other words, getting people to pay rent, getting rid of the people who can't live in a civilized world because of dogs and debris, et cetera. So for people who have never done a heavy lift turnaround kind of a park, on the first phase, which is the law and order phase, how long are you finding it takes you until you can establish law and order as far as people have to pay or they have to leave and they have to follow the rules or leave? Is that a 90 day phase, six month phase? How long is phase one?
17:00
Larry Abramowitz: I think it takes about a year to clean up a park. Like to really... Because even though you want to get rid of some residents that are causing problems, you still have to go through the legal process and send a notice of depending on what type of lease they have, send a notice of non-renewal or just send an eviction because they're violating the rules. But first thing we do when we buy a park is we put everybody on, we use rent manager and we're putting everybody on daily so they pay directly. We're trying not to touch any money. That's the first thing we do. And we implement that day one. We don't... We just tell the residents from day one with a welcome letter is that, what our plan is with the park.
17:45
Larry Abramowitz: We expect everybody to sign in a lease and we tell them how are they supposed to pay the rent and that we will enforce rules and evictions and all that. And then we try to go by the book. If it's a five day notice, we send it by day. Whenever the notice expires, we file an eviction. And before you know it, people start understanding that we're not playing games. If they don't pay, they're going to leave. And eventually you get everybody respecting most of the rules and paying on time, but there's always going to be issues like any other. It's never easy.
18:25
Frank Rolfe: Right. And Larry, your geography right now, sound like you are in Illinois, Kansas, North Carolina, South Carolina. Am I correct?
18:36
Larry Abramowitz: Correct.
18:37
Frank Rolfe: Those four states.
18:38
Larry Abramowitz: Yes.
18:38
Frank Rolfe: And of those four states, what do you think of those four states? If you were to rank those four states, as far as states you like and don't like, what's your favorite of those four?
18:52
Larry Abramowitz: I like Kansas a lot in North Carolina. Kansas is pretty good at, enforcing... They're very landlord friendly. You gotta evict somebody. It's pretty quick. There's no stories, no delays, it just happens quickly. The same with quiet titles. And it just seems to move very well through the legal process. North Carolina, like the demand, at least in the area we're at. But I still feel like evictions and quiet titles are taking a lot longer than what I would have liked. But it's still, I would say those two are my favorite.
19:30
Frank Rolfe: And if somebody is watching this and says, well, gosh, Larry, why didn't you just buy your parks in Florida? Tell people why you didn't buy parks in Florida, 'cause we've only ever owned one in that state. It's very, very hard to find good deals in Florida to us. Is that you have had the same experience or what have you found in Florida?
19:47
Larry Abramowitz: Oh, we have two in Florida under contract right now. I haven't been able to buy, but, we were able to get two under contract. I like to stay possible away from the coast. So, you have the insurance issue, you gotta make sure the park is insurable because of the wind coverage. And if you have a bank loan, you need to be able to get loss of income insurance. And it's challenging in this market in Florida with all the, disasters we've had.
20:17
Larry Abramowitz: So you gotta look at that first, if it's insurable. And then second, if the numbers work right. It's been, 'cause we all know Florida is one of the fastest growing in population in the US. It's a lot of migration so there is a lot of demand for, investors are looking for all types of real estate here. And it's been it's just been crazy what's going on here in Florida with the demand for real estate. But when you're filling these slots, you typically buy new homes or used homes.
20:52
Frank Rolfe: And how are you how are you selecting the homes you buy? I used to buy used and I ended up, I figure out that by the time I spent looking at the house and moving it and fixing it, I was almost at the same cost as buying new. So especially with used homes went up in price so much during COVID that it got crazy to buy used homes. So I just decided to buy new and not deal with all the headaches of the used homes.
21:17
Larry Abramowitz: Unless I find a really good used home that doesn't need a lot of work, we'll consider it. But I brought a lot of used homes in my first park and I kind of stopped doing that. And it worked well, before prices got crazy it was... We did very well with the used homes. You just have to find the right ones. And it takes a lot of time. When I used to go to Wichita, I used to even, I drove two, three hours to look at homes in the park that was shut down, about three hours away. And they gave me a house for free, the city, and I brought in like four or five homes from that place. And there were a disaster.
21:54
Larry Abramowitz: It was, I didn't, I was still learning the business. I didn't realize how much money it took to move them them. And, the repairs were pretty high, but we got rid of all of them and sold them. And now they're all tenant owned homes and, they look really nice. We put a lot of money into them and we're able to get the money back out of them. So it was, it worked very well, but I think it takes too much time and too much effort to work with used homes.
22:20
Frank Rolfe: Hey, Larry, a lot of these parks, when you bought them, obviously the lot rent is significantly lower than it would be today, on average, when you're buying them, what's the lot rent? And then on average now, four years later, what's the lot rent roughly?
22:36
Larry Abramowitz: The lowest I've seen was the one in Winfield. There were some residents at $83 lot rents, which is ridiculous. You couldn't even pay the taxes on the property or the insurance with that money. So we're now at 375, some of those residents that were very low, we didn't bring them all the way up to 375 because it was tough for them. A lot of the people in fixed income. So, but we already, by this year, we should have them there.
23:06
Larry Abramowitz: Most of the parks I bought, they were like 220, 250 lot rents. We're at 400 to 500 in most of them at this point. But, we try to come in and do some work to the park and fix it before we just raise the rents. That's kind of our, make the park a better place to live. And, we got to gotta justify the increases unless they're way under market. Like with North Carolina, those parks where half of where the market is, and we've just been increasing every year to get to market.
23:39
Frank Rolfe: Right. So your turnaround strategy is the same that we use, which is basically raise rent, fill lots, and then cut unnecessary costs. Pretty much the same model.
23:49
Larry Abramowitz: Yeah, build back utilities, fix the water leaks if there's any, those are kind of the, we try to stay focused on the value-add plan.
24:01
Frank Rolfe: Right. Have you had any news groups or anyone who have harassed you so far saying, oh gosh, you've raised the rent so much? And have you had to deal with any of that kind of problem?
24:11
Larry Abramowitz: No, and we don't go crazy either. I don't usually go in and do, crazy increases. We try to do it every year. Usually the first year is it's, if they're really under market, we'll go up a lot more year one, but we try to keep it, always try to be under a hundred if they're way under market, but our typical raise is 50 a year to 75. It all depends how below market they are. If they're really below market, we try to go up, 70, 80 until we get to market.
24:49
Larry Abramowitz: And then we usually end up with, 30 to 50 increases depending on demand and market conditions. But we, it's at the beginning, it's usually harder, but we never go in and like, we'll double the rents or, go $300 or anything crazy like that. I mean the... I think the highest we've done was like $90 in one part that was way below market.
25:13
Frank Rolfe: Right. Which it makes complete sense because your rents are crazy, ridiculously low when you're buying those things. So even if you went up the rents by a 100% you're still insanely cheap. You're a lot rent plus home, either mortgage payment or home rent. What is that typically at? Are you at like a thousand or 1,500 or how much is it per month?
25:36
Larry Abramowitz: Brand new homes plus lot rent, they end up being 1,000 to 1,100, with the mortgage, with the chattel loan. Yeah, it's about 1,100, I would say, in a brand new home.
25:46
Frank Rolfe: Right, which is still insanely cheap. In an America where the average house is 400 grand and the average apartment is two grand a month, it's still massively, massively cheap.
26:00
Larry Abramowitz: It's still very competitive, yeah. And they're getting a... The brand new homes are really nice. They come with all, usually the island kitchens and, just open floor plan and they're very nice.
26:11
Frank Rolfe: Right, so let's talk for me about working with the cities 'cause obviously when you do those kind of heavy lift turnarounds, you have to have a very good skill set of working with cities who are obviously concerned that you're not gonna bring it back to life and you're gonna continue on with the odyssey of it being a poor condition. What have your interactions with city officials been? What are some of your lessons learned from going to a city, I mean like in the one case where you got the city to rezone you and add spaces on, that was a masterful stroke. So what have you learned about working with city halls in these cases?
26:44
Larry Abramowitz: I mean all these cities, they need affordable housing is what I've always found out when you talk to them. They need the affordable housing. They just don't like the stigma with the mobile home park. And a lot of the ones we end up buying, they're rough. And they're not happy with that because it makes the neighborhood look rough, and they usually want them out for that reason. But when you explain to them what your business plan is, and actually came in and presented the... Showing the homes we're buying and showing the floor plans and what they look like and how much we're gonna sell them them for. And, you get them them excited. They didn't even know you can buy homes that look like that. They never thought a mobile home would look the way the ones I presented because they've never seen it. So when you approach them as what your business plan is and what you're gonna do, and you present it in a way that it's on their best interest to keep the park going, that's how we did that. The first deal was in...
27:40
Larry Abramowitz: And when I went there, they told me I was the seventh buyer that was already trying to buy that park. And they all walked away because the city gave them, had a, they changed the regulations and the rules for mobile home parks in that city just for that mobile home park, because they wanted it out. So they said anybody that wanna change his hands, you have 90 days to pay the roads, to add driveways, to add streetlights, to, it was impossible to do what they wanted within 90 days. So I explained to them and said, I can do this, this is my plan, but I can't do it in 90 days. You gotta give me at least 18 months. Because it's gonna take a long time to fix this park.
28:21
Larry Abramowitz: And they agreed to it. And when they actually saw that we came in and brought these brand new homes and demo the old homes and did all this stuff, they, build a relationship with the city where when I approach them them and say, by the way, the lots are too big, your zoning says they have to be 5,000 square feet. If I hired a surveyor and I said, if I put a 5,000 square foot lot on every home that's here, plus the ones we're bringing in, I can get to 79 lots.
28:47
Larry Abramowitz: And she said, well, draw it and we'll get it approved. And it was a pretty easy process to get that rezoned to 79. So that was a, I was very happy with that achievement. I mean right now we're having another deal like that where the city wanted the park shut down the last one we bought. And we were working very closely doing due diligence with the city and telling them what our business plan is. And they actually were very excited because they wanted to keep the park for affordable housing, but they just didn't want it looking the way it was in distress conditions. So they're working with us on, very closely and they're super happy that we're buying it and actually started fixing it.
29:29
Frank Rolfe: Right. So how many times have you had to bring in like a municipal lawyer to like get what you want? Or is it pretty much just been through simple negotiation of you talking to the city and saying, hey city, you're stuck with the park, it's not going away. I can make it look nice. I can make the homes look nice. I can bring in decent affordable housing that you need. Has it been therefore happy interactions or has it been contentious at points or how has that worked out?
30:00
Larry Abramowitz: So far it's just been us directly with the city. We haven't really had to bring in attorneys. We're looking at a deal in Florida where they wanted the homes removed and they wouldn't let every target wanted. They said they couldn't bring any more homes in. And we talked when they were going to bring an attorney but the deal didn't work out. So we didn't get to that point but that was the a plan was to bring in an attorney because by law here, the park has been zoned as a mobile home park, your grandfather in and you should be able to bring in homes even if the city says you can't. Legally, they can't enforce that. So it was more, but that was more to bring in legal to make sure that they understand that. But we didn't get to that point in this deal.
30:41
Frank Rolfe: Correct. So basically you go to the city with a plan, full transparency, here's what I'm gonna do. And most cities will work with you. Because they think, well, rather than have some kind of giant legal battle, it's easier on us just to go ahead and work with the new owner to go ahead and make it a nice place to live again. So it's not... Some people watching this might say, oh gosh, well, Larry must be in court all the time fighting the cities, but you're just doing it by just as you are now, just calling them up, being honest and saying, hey, here's the facts. Here's what I'm gonna do, here's my plan. And they're saying, wow, that plan, that sounds pretty good. Go ahead, Larry, go do it. That pretty much how it works?
31:16
Larry Abramowitz: Yes, and you wanna get it in writing. From an official, that's the main thing that at least, if you don't have to bring an attorney that they agree, you wanna get something in writing, an official paper that says you're gonna be allowed to do this before you move forward with the deal.
31:28
Frank Rolfe: Right.
31:33
Larry Abramowitz: But yes, that's how we've been approaching it so far.
31:38
Frank Rolfe: And Larry, why do some of these parks get run down like that? I mean we've owned mobile home parks and you go in the office, you go in a cabinet, there's a framed picture from the original founder of the park when it's 100% full and looking fantastic. We've been in horrible turnaround parks and then lo and behold, we opened some cabinet out in the garage and there's a stack of brochures and the guy really cared when they opened. And it was a top of the line property, top of the line location, all the homes were nice, all the yards were nice. So how does it get from that point, which is probably back in the '60s or the '70s to where it is today? What do you think happens to these parks to get them so run down?
32:22
Larry Abramowitz: I think it's management and you gotta always invest money back into the park every year to keep it looking good. And a lot of these owners either just want the cash and don't put money back into them or just milk the park. And then it's usually management. If you're not enforcing rules and evicting people, a park can get run down very quickly. I mean if you have a bad manager in a park and you don't pay attention, in a couple of months, they could run it down pretty fast. If you're not on top of it, I mean we stay on top of it daily, on collections, on infill, on leasing, on, it's a daily business. It's not hands-off type of business.
33:09
Frank Rolfe: And Larry, how do you educate the sellers who obviously it's gonna need a lot of education 'cause you're going in and the property is run down, which means that you're gonna have to get a low price and seller financing typically. How do you approach them on that? I mean often I'm assuming you're buying these not from the original mom and pop, but probably from the next generation down 'cause they probably have died or they're no longer decision makers. How do you say to people, hey, look, love your property, but it's really screwed up. It's gonna cost you a lot of capital to fix it. So I'm gonna have to get a price where I can add in all the capital. And oh, and by the way, I'm gonna pay you kind of a low price and you're gonna have to carry the financing. How do those discussions work? Like, how do you lead off on that?
33:56
Larry Abramowitz: Well, a lot of these already came with a signed contract from a wholesaler. So they had already negotiated that, but we've had to renegotiate financing terms or and you just the same thing. You go with an open book and say, listen, this is the list of capital expenditures the park's gonna need. We can't get bank financing. We explain why, 'cause the numbers are not there. And then it's a matter of convincing them and say, listen, this deal, if you wanna get this kind of money, we're gonna need you to carry a large piece of the loan or a high leverage just to get the deal to work. And sometimes if they want, they have a number in their head and a way to get to that number sometimes is, we need time to implement our plan. So it's getting a high loan to value at a low interest rate.
34:45
Larry Abramowitz: And it all depends what the seller wants. Sometimes they just want a number. And the question is, how do you get to that number? And sometimes it's like 3% interest rate, 30-year amortization, all interest only, then give me five years to fix this park and then we'll refi and give you the money. And sometimes it's not about the number. You gotta figure out what works for both parties. It's always a, how do you get to a win-win?
35:14
Frank Rolfe: And Larry, obviously to do what you're doing, you have to be kind of a visionary. Because to do turnaround mobile home parks, it's kind of like being a great chef. You have to look at the ingredients and decide, can I make those ingredients into a delicious dinner or not? So when you're looking at these parks, what are you looking for that gives you the confidence that you can turn the park around and that you can make it a successful deal?
35:40
Larry Abramowitz: We do a full due diligence. So when we have it under due diligence, we look at market comps, comparative lot rents, other parks, what are they renting homes for, look at what are apartment rents, what are home rents, home selling for, median income, can people afford it? So we look at a lot of the demographics to make sure that what we're underwriting makes sense as far as if we're bringing in new homes and we need to sell them for $70,000 a single wide, can we sell it? What are single families selling for? And what is the comparative analysis of financing a single family home, which gets better financing than a mobile home versus that mobile home, what's the monthly cost of each for a buyer? How much money down? What is the monthly cost to own it versus what they're paying to buy a house? And we wanna make sure we're very competitive compared to buying a house. Usually we wanna be priced at half of the cost of buying a house. Mobile homes tend to have lower property, even if it's personal property tax, depending on what state, they have a much lower tax than a home.
36:55
Larry Abramowitz: Some states actually tax them the same, like South Carolina, was very surprised to learn that they actually tax the homes at the same valuation as a single family or is there any real estate so that they're harsh with that. But in some other states, you're paying the same as a DMV for a car or you might be paying in Illinois has a super low. It's the lowest I've seen for mobile homes 'cause they do it per square foot. So it's a very low personal property tax. So we try to compare and depending on what we're buying, how does that cost of ownership compared to other options? And we wanna be very competitive.
37:38
Frank Rolfe: And Larry, when you look at these deals, obviously it all revolves back to money. Just from a very 5,000 foot elevation, what kind of return levels are you looking for when you're buying a park? I mean just very generally. I mean are you trying to hit... Obviously it's not a 5% return because that's not... That wouldn't make it worthwhile. So what kind of return targets are you looking for?
38:01
Larry Abramowitz: We're targeting, for our investors 14 to 16% net over a 5-year hold IRR, and usually doubling the equity in that whole period, that's usually what we target when we're looking at these deals.
38:23
Frank Rolfe: Right. Which is obviously very, very reasonable. It's pretty very similar to what we do. And do you know of any other, 'cause you obviously you're well-versed in real estate, you've been in a lot of different little niches of it, do you know any other sector of real estate that you can hit those kinds of targeted returns today? 'Cause I mean I get sent deals all the time on apartments and triple net leases and commercial buildings. I don't know anybody who hits numbers like that. You've also find that? Is there any other sector of real estate that could compete?
38:52
Larry Abramowitz: I mean multifamily is a little bit lower now. I mean it's tough to make the deals, pencil in. Industrial has lower leverage, so sometimes also it's a little tougher to look, you know when you're looking... I look at industrial, I mean, when I was looking at mobile home parks and usually because there's lower leverage and the loans are only the term of a loan is usually a term of your lease of the who's occupying the warehouse...
39:20
Frank Rolfe: A risk.
39:20
Larry Abramowitz: A lot higher risk unless you can lease that warehouse as soon as the other person, the other tenant leaves. So I mean really if you look at the performance of mobile home parks, it's up there with industrial. I mean those have been the two best performing categories like in the last 10 years. But yeah, it's tough to find it these days to get those returns in many other asset classes, but it does require a team. I mean we have a... Locally, a really good team and it's all about operations, which I also say the returns are higher, but you need, I think it's a higher barrier to entry because operating these deals is not easy. You need a team and you need a skill set and we self-manage and I think that being able to manage these parks to get the returns that we need, that's the key recipe. Is having the right team to manage it. I mean it's all about operating these parks efficiently.
40:21
Frank Rolfe: And Larry, how do you sell the sellers on carrying the paper on it? How do you create the seller financing model when you're buying it? Do you just say, look this thing is so screwed up I can't get a bank? So you'll have to carry or do you sell them on the benefits of carrying or how do you normally get that done?
40:39
Larry Abramowitz: Yeah. I mean you can sell them on the benefits of carrying where they will only pay the capital gains on the principal they receive every year. So that's sometimes they like that. They like the stream of income instead of just getting it all in one shot. They want to get monthly checks. They like that. The last seller... During one of the last seller financings we did is the seller just wanted a number in their head and they wouldn't take less, and I said well, the only way to make this work you're gonna have to give me a, I think it was a 6-year interest only at 5%. And first they said no and they couldn't find any other buyers that would do the deal with the low rents they had. So, at the end they accepted our terms and that's how we're making the deal work. I mean and it's been great. I mean now our rents are about 60% higher since we bought it a couple of years ago and we're still way on the market.
41:44
Frank Rolfe: Right. Larry, you have... Obviously, you have a lot of parks. You have a lot of managers, excuse me, on your team. Tell people about the attributes of a park manager that you find successful and which attribute to... What attributes are not successful. Like what is your... What are your most successful managers? What do they look like on paper? Like what's their background and skill set and stuff?
42:14
Larry Abramowitz: Oh, it's... We have... All the managers are different. I mean I would say that you need people that are disciplined, that are not afraid to talk to people about violations or collections. They need to be able to approach the residents respectfully and enforce the rules. They gotta be detail-oriented about checking the... Filing the right papers with, we have to with the court on evictions, the notices. So they have to be very disciplined following our procedures. And also be able to manage projects if we're doing a lot of project management. Sometimes we have parks with where you're setting up homes, you're doing roads, you're doing changing water lines, adding water meters. I mean you need managers that can deal with all these different projects that are going on. Of course with the corporate support, but they have to execute.
43:08
Larry Abramowitz: So we look for managers that can execute these business plans and it all depends on the deal. Some deals you need managers that are very strong in leasing. If we're gonna do a lot of lease up, if we have a lot of collection issues, you want a manager that has experience in collections. So a lot of it has to do with the deal that we're turning around. What's the business plan and what do we need for that business plan?
43:33
Frank Rolfe: Okay. And how important are people skills to you as far as the managers having people skills, being able to go to residents and mediate problems, things like that?
43:40
Larry Abramowitz: I mean, I think it's very important they know how to deal with people because you're gonna have all different types of personalities in a residence and some are very easy to talk to and some can get aggressive. So you gotta be able to manage situation and assess it. And again, we go by whatever the local law is. So if the law says, you file this day and you evict this day, we just follow the process. We try not to let the managers make a lot of like side deals and change what the rules and laws are, but they have to be able to work with a resident. If a resident is willing to work with us, we'll work with the resident on a payment plan or whatever it is that they need if they're actually approaching us in a positive way and saying, I wanna stay here, I wanna work with you guys and let's figure out something so I can stay here. That's a different approach than people who just ignore us and would not pick up the phone or to answer a text or an email. That's a whole different conversation.
44:47
Frank Rolfe: Larry, before you got in the business, had you ever actually been in any mobile home before buying a mobile home park? Did you have any prior exposure to the industry at all?
44:57
Larry Abramowitz: None. I mean, my first park, I bought the first brand new home, made it the model home office, and those my... Where I stayed when I went to, to learn the business and turn around my first deal. I was living in, a week every month in that park. So that's been my involvement as far as living in a mobile home park. But again, parks, they are cleaned up and they're well-managed, I mean, they're great to live in. I mean, it was a great house and I...
45:30
Frank Rolfe: And that's gonna be my... My question to you was, based on the stigma most people carry about mobile home parks and trailer parks, etcetera, how have you found the reality being different from the general stigma that most Americans have?
45:47
Larry Abramowitz: I mean once you fix it, it's... I mean, that you can get rid of that stigma. I mean, the ones I bought have the stigma for a reason. I mean, they've been, what people call the typical trailer park, which is not, I mean, they're called that because that's what, they look pretty rough. When I buy them. But once you fix them and they're a safe, nice place for people to have a nice place to live with their family and kids and you make it a safe and beautiful community, I mean, they're great places to live. It's a great option for people to have an affordable housing with, they can park in front of the house, have a yard and, live in a beautiful community, safe. I mean, it's... I think it's the best feeling when you see these parks turn around and you see people moving in and having, the kids running around and biking in the park. And it feels great. That's where we're...
46:41
Frank Rolfe: And you've done a lot of deals at this point. So what are some of your top lessons learned about doing mobile home park deals with the mobile home park industry? What are just some of the top takeaways so far from this business?
46:56
Larry Abramowitz: Number one, again, I've said it, but it's operations. You gotta be able to run the operations or have a team to do operations. So, if you're thinking about getting into the business, I think try to buy something. If you don't have a team or you're gonna self-manage something that's close by that you can be there, especially at the beginning every day, make sure you're following the local laws as far as, evictions and notices and all that. And, keep the rules enforced as best as you can. But I think ideally you look for parks where you can afford a manager, I mean size-wise, which is what everybody's looking for. So it's more competitive, but you need either one large park or buying clusters in an area where you can actually add enough where you can eventually have a full-time manager to help you run the parks.
47:53
Frank Rolfe: And Larry, there's an old thought on the industry as you grow, which is, efficiency versus diversity. And clearly you're, Right now you've mastered both because you have efficiency, for example, down in Wichita where you have multiple parks. So you have management efficiency, yet you don't have all your eggs in one basket. You're in four different states. So you have diversity geographically, you have diversity from weather events, you have efficiency in the markets that you're in. What are some of your thoughts on that? In other words, as you grow from four states, are you gonna continue to expand in those states? Do you see diversifying out of those? I mean, you're adding Florida, that'd be a fifth state. Like what do you think the map looks like going forward for you? Like where will you be going geographically?
48:48
Larry Abramowitz: I mean, we would like to add parks in the Southeast, just closer to home if possible. But I mean, if we find a good deal in a market that it can afford a manager and the numbers make sense and we can actually get to it in maybe a direct flight or easy to deal, we'll look at it also. But ideally, again, my ideal purchase today is near my other parks because it's just an add-on and it's a lot easier to manage. You might not have to hire a new manager. Maybe you can get away with a part-time assistant manager or a full-time assistant manager, but it's the efficiency there. If you already have a maintenance staff, you can just use the same staff to do the lawn mowing or whatever you're doing in-house. So yeah, it's key to be able to have those efficiencies. I mean, it's always tough when you're going into a market because like these deals we're doing in Florida, they're medium-sized, but they can still afford a manager, but not a full-time manager. So we're starting with a part-time and these are not heavy value deals, so they might not need a full-time manager. And part of our team lives nearby, so they can actually go to these parks weekly and look at them, so that that makes sense for us. But yeah, I think buying in areas or clusters where you're already at, it makes life a lot easier as you grow up.
50:17
Frank Rolfe: Okay. And Larry, what kind of lot sizes are you after? Because we own stuff of all different sizes. We own as small as, oh, probably down to 25 lots. We've owned as big as 750 lots. Pretty big difference. So when it comes to lots, do you have any minimums you won't buy under or do you have a target size or what are your thoughts on lots?
50:40
Larry Abramowitz: I mean, ideally you want about 70 occupied lots is where we've seen that the manager makes sense. So we try to stay around that number, but we've looked at deals under that and sometimes it's still work. If the rents are high, you could get away with smaller lot counts, but yeah, ideally our target is over 70, around 70 lots or higher.
51:07
Frank Rolfe: And Larry, it sounds like from the number of parks you have, which you're closing in on 20, so you already would be a top 100 player in the industry. How big are you trying to be? Like what is the goal here? How many parks do you think you'll buy going forward? What does the future look like for you? What are you trying to do there?
51:30
Larry Abramowitz: We have a target to get to about 7,000 lots in, well, now it's in eight years. So we have a plan to buy close to 1,000 lots a year. That's kind of our goal, but it needs to make sense. If we don't get there, it's okay. We're more concerned about the deals that make sense more than just adding parks to our portfolio. I mean every deal we buy, we wanna make sure it hits our returns. I'm not just buying it because we wanna hit a target number of lots, but yeah, that's our goal is to be around that size.
52:08
Frank Rolfe: And you're in Florida, and so you're in the Southeast, but the Southeast has suddenly come on strong as the new hotspot of America for mobile home parks. So, the states that people used to not focus on, suddenly is where most people wanna be. States like Alabama and Georgia and South Carolina, which you're already in, North Carolina. So do you see a greater emphasis on the Southeast 'cause you're kind of there, it's in your backyard, and it's an area that a lot of Americans, for example, Dave and I were in the Great Plains in Midwest, 'cause that's where we live, but you live in the Southeast, which has become a great place to invest. So do you see more Southeast activity coming on in the future, or are you thinking other geographic directions?
53:00
Larry Abramowitz: Well, we like the Midwest also, so we're focused on both Midwest, Southeast. We'll look at deals in both markets. Midwest is also a strong performer. You just have to be in the right market, and I think it's more of a steady market. You don't see the exponential growth or your high growth you're seeing here in some states like Texas or Florida, but I mean they're still solid. They still grow every year slowly, and they're consistent, and you don't have a lot of these swings like we have here. I mean I've been living in Miami since 2000, and I've seen this market go up and down, like a yo-yo, throughout the cycles. It goes up very fast, it comes down very fast. We've seen it happen a few times, which you usually don't have in the Midwest in both markets, because they're kind of steady. But I think Florida now is different.
53:55
Larry Abramowitz: I mean people are actually moving here for the long run to live, and a lot of businesses are moving here from New York, large investment banks, and I think it's different this time around. Before it was more cycles from any political situation in South America, people would move here, and then when the country got fixed, they went back. So we always have these cycles in the Southeast here in Florida, and now it's more, I think, people are here to stay. So it's just become a very hot place to invest. It'll be tougher to find deals, I would say, in South Florida, but I mean you could still find some deals that make sense, if you're looking all the time in the... But yeah, we like both markets. I mean we're... As long as population is growing, we like it. There's jobs and population, we'll consider the deal if it's in a strong MSA.
54:52
Frank Rolfe: And then Larry, where do you see this industry heading itself? Not just your part of the industry, but the mobile home park business model itself, looking forward 20 years, 50 years, 100 years, do you see parks changing at all? I mean obviously, we're looking at you, looking at the background, you're obviously a very tasteful guy. So in an industry that is not known for being tasteful. So, do you see, where do you think parks will look like in the decades ahead? I mean, from our perspective, we are seeing a better class of customer than the industry had for the longest time. So in many of our parks today, if you drive through them, we have much nicer cars, much nicer homes, much nicer yards. We have people who have jobs that pay more.
55:43
Frank Rolfe: So clearly, the industry has turned the corner on the old stigma of trailer park, because we're seeing people who would never fit into the trailer park stigma image at all. But how do you see this all evolving? This is an industry that started off lofty, hit the skids back in the '70s and the '80s and the '90s, bouncing back. How high can it go? Where do you think it's going? What do you think the demographic profile of customers will be one day? What do you think the rents will be eventually? Where do you see this whole crazy expedition going?
56:20
Larry Abramowitz: Well, I think that the parks that are being bought out, they're gonna just look better than what they do today. And that's happening as we get more consolidation with bigger corporate buyers getting into the business. They're coming in and managing them more professionally, bringing in new homes. So they're gonna look nicer. And I would say at least the ones that stay around, I think that you will see a lot of them, fortunately being redeveloped. Because again, at the end of the day, it's real estate and it's the best use of land. So if you're in a market that's growing very fast, and there's no land, these are definitely, I would say the easier targets to redevelop if there's no empty land. It's easier to probably move these homes than to sometimes demolish a building or something like that. So I think that we'll see a lot of redevelopment on these parks, unless the zoning changes from the local authorities or governments. They're building very few of these. So we're in an asset class where it's diminishing supply, which is... It's very unique. Most real estate asset classes, they're building one across the street every day and these very few parks are being built in the US. So we're definitely... I think we'll hit a point where there's a lack of supply and we're probably the only affordable housing left other than government housing, which is also very limited.
57:52
Larry Abramowitz: So, I mean I think you'll see both. The parks that stick around in maybe more rural areas, they'll be around and they'll probably look a lot better than they would do today as people bring in new homes and we get a different, I would say, resident type in the parks as people, these old residents have been, they retire older or are not there anymore, you're gonna see, we're seeing that in our parks already. You have a lot of young families moving in with kids and buying their first new house and it's a great option.
58:25
Larry Abramowitz: It's definitely a great place to live for these small families or these starting families that need a place to live and they just want a beautiful house. So we'll see a lot of new homes put into these parks in just, I would say that we're going to have a lot, maybe we'll not see that stigma anymore, maybe 10 years down the road as all these parks get turned around.
58:54
Frank Rolfe: Do you think, Larry, the homes will look the same 50 years from now? Do you think the actual look of the homes will change? I mean there's 3D printed homes and different things. Do you think homes are the best they can look or do you think from the exterior the homes could look different going forward?
59:13
Larry Abramowitz: I think that things are always changing and improving. I'm not, I guess, an architect or designer to know what's achievable but, I mean I'm sure there'll be new technologies and new ways to build that will make the homes always look better. I don't know, two-story homes or what else can you do with these and I don't know if they're around already but, you might be able to do two-story homes or maybe a lot of modular homes. I think that's a way of the future seeing these modular homes come into these communities. The cross lots, which have better financing, so that's always an interesting business plan to look at in these communities. My first community was so vacant that I thought about doing that, bringing in these modular homes and putting them on a foundation and being able to sell homes that was about $180,000 for a three or four bedroom brand new home double wide versus homes that were selling in that market for $400,000. So that was gonna be my first deal. I actually did the numbers to redevelop it into a modular home community and it was... I mean the returns were not much better so I didn't go for it. It was a lot more work and the returns were not there but I think, I mean you're seeing that more.
1:00:33
Larry Abramowitz: There's a deal I just saw, I think, a few months ago. The developer bought an old mobile home community and took all the homes out in, I think, near the Hamptons in New York and they're building these modular home community and it's supposed to give affordable housing to the people that work there. So it's always a great option to look at all these new homes that are being out there, that are being developed by the manufacturers.
1:01:01
Frank Rolfe: Right. Well, Larry, it's been great having you on here because I look at you and it's like looking in a mirror only of a better looking, more sophisticated me or something, because you're doing the exact same model that we have done which is your classic textbook turnaround model, which we've always been huge supporters of because it's not only very lucrative but it's a win-win for everybody. Customers are happy, the city is happy, surrounding neighborhood is happy, 'cause we basically buy old broken things and bring them back to life. And the beauty of that niche is you really can't go wrong because when you buy it inexpensively, just through the act of raising rents, typically, you can make it a profitable asset and if you can fill it great. If it doesn't, if it takes you longer to fill than you thought, you're still fine.
1:02:01
Frank Rolfe: So, it's literally the classic trying to buy an Apple computer at dollar a share and even though that version of Apple computer may not go to a hundred a share, if it goes up to $2 a share, you still did great. So that's why we've always been attracted with the heavy lift turnarounds is because if you have the bravery to do it, you seemingly always get rewarded. You rarely hear of people doing heavy lift turnarounds where things go bad on them because it's really hard to go bad. When you buy it super cheap, even if you can't get the loan renewed, well, you can sell it at a huge profit. So you'll always have this edge on most people when you're buying things that are in trouble because that's the big profitability is in the act of having the vision to go in there and fix it. So I fully understand. Even the markets you're in are many of the same markets we're in. We're also in Kansas. We also had parks in Wichita.
1:03:05
Frank Rolfe: We also had parks in Peoria. So we have a lot of parks in South Carolina. Only state you mentioned that don't currently have parks is North Carolina, but North Carolina is a great state. Maybe even the best of those four states. In the end, we don't know really yet how the movie develops, but North Carolina is doing great economically. But we really appreciate you taking the time to be here because, again, it's a very small group of people who do this crazy business. It's someone you don't normally meet in your everyday life. You don't go to a cocktail party or a school function and someone says, oh yeah, I'm in the mobile home park business. Just never happened. So we kind of have this loose fellowship of park owners. So it's great having you on here to tell your story, which is an amazing story, because that's how people learn the truth about the business. And so much of the media today is not based on the truth.
1:04:00
Frank Rolfe: It's based on nothing but false narratives that people have developed about the quote trailer park unquote industry. But it's great having these kinds of discussions 'cause it helps dispel those myths and falsehoods and get people back to the straight truth on it. So you know we really appreciate you taking the time to be here with us and telling your story, which is an amazing story of your vision and your bravery in getting into the business, but also, I think will help others to understand the opportunity that is there if you're also willing to be contrarian and get involved in something that most people are afraid of, which is kind of what the trailer park story is all about. So again, we really appreciate you being here and taking the time to be here. And if anyone has any questions for you, I assume they can reach out and you'd answer them if we were to forward questions or comments to you, you would have no problem in responding?
1:04:57
Larry Abramowitz: Sure. I'd be glad to.
1:05:00
Frank Rolfe: Okay. Well then, anyone watching this, if you have any questions for Larry, by all means, just email them to Brandon here and we will happily forward them on. And again, thanks for taking the time. We know you have lots of uses for your time. And again, we appreciate you being here, Larry, and we appreciate everyone else for being here too. So thanks a lot, everybody and we will talk to everyone again soon.
1:05:22
Larry Abramowitz: Thanks for having me, Frank.
1:05:24
Frank Rolfe: Thanks, Larry.
1:05:24
Larry Abramowitz: Good to see you.