Industry sign banking florida rfp mobile
this is Mitch and welcome to the real estate investor summit podcast I have a very special guest kevin buck and he's with sunrise capital investors and this guy's had a long you creative career about 16 years of figuring out what's the best cash flow for him I think we all go through some stages I think he's been through single family and then he went to apartments and then he did some other stuff and then now he's really really really excited to be doing mobile home parks which is a fantasy of a lot of people out there to get a mobile home park and get it all run in and get it all straightened out and make that cash flow so we're gonna talk to Kevin bump in just a minute but I need to talk to you about tax free futurecom if you're not investing through a tax deferred or tax free account man you have no idea what you're missing please check out tax free futurecom there's about 37 videos over there explains how you can take a little bit of money to a lot of money pretty quickly a lot of case studies and the main reason you need to check out tax free futurecom is because you will not believe what your financial advisers are not telling you okay got that out of the way so how you doing Kevin Mitch I'm doing awesome I appreciate you having me on the show man uh you know you're partners with mr. Hartman right Jason no I'm not I know Jason quite well but I know we are not partners okay well there's our first cut fine no worries five four three all right we got the money-making part out of there got the sponsors added in Kevin how you doing today Mitch I'm doing awesome I appreciate you having me on the show me I'm looking forward to it alright so you know I love this topic I've had some experience in the mobile home arena but I never owned a park myself always wanted to I'm actually my cash flow vehicle of choice myself ended up being self storages and boat storages dry storages but man I always like these parts one is you could kind of the way I saw you get kind of double-dip you you get your Park and then you could also owner finance the box on top of it you could have like two kind of things going but let's digress a little bit 16 years of figuring out where the cash from the best cash flow is tell us a little bit about that journey yeah and it's actually ninety I need to update that that that's the one the one sheet that it's been about 19 oh yeah I know I'm getting older I just aged myself there but I know I got introduced to real estate when I was 19 and bought my first single-family property when I was 20 and started like a lot of folks do and I started buying rundown properties this was in Pennsylvania where I was born and raised and kind of cut my teeth doing that my mentor at the time really focused his business on cash flow he had lots of single-family and smaller multifamily properties and he he built a lifestyle around that he was about 22 or 23 years older than I and so he was much more further along in his and his in his life and so he had the the luxury I guess at that point of whatever he bought he kept I couldn't follow his model immediately and so I bought and flipped you know I bought fixed and flipped build up some capital and it started holding as much as I could and then ultimately it was in Pennsylvania doing this like two years and at that point realized I hated the cold I just was done with it and I wanted to move somewhere sunny and warm and move down to Tampa Tampa Florida which is where I still live today and I started really that's really where my business took off you know it was a much more active market lots more going on lots of just a larger market in general more progressive area and I started buying single-family properties but up a pretty big portfolio of single-family rentals also got a quite substantial mortgage company but back then and it was doing well leading up until 2008 and 2008 absolutely crushed me and lost just about every single family property that I owned in addition to about 500 apartment doors that I didn't lose but ultimately had a hard time meeting the balloons when they came doing getting new debt in place and so ramped up really fast ramped down really fast and ultimately was introduced to mobile home parks a couple years after the crash happened in 2011 and and studied it for about a year bought my first Park in Atlanta really distressed deal and bought the next one then the next one now today we own parks in 13 different states and this is all we do we own and operate mobile home communities a lot of times we'll buy distress ones that for many different reasons might not be operating efficiently could be the operation it could be the the tenant base which typically go hand in hand could be they got a lot of vacancies could be that the rents aren't you know at the market and we go in and fix them you know we go in and fix the problems and it's it's treating us quite well and we really really like the niche so well it's not it's not like most it's not unlike most businesses you're buying someone's problem and then you got to turn it around right that's it you gotta have an inkling of an idea where that turnaround is I think that's where the money is made in real estate in general if you can figure out how to be an excellent problem solver and it doesn't matter if you buy mobile home parks or single-family properties or commercial or apartments whatever it might be you can figure out how to identify the problems and then figure out the solution better than the next guy I think that that's really where the wealth is made anyone know by a fully stabilized property at a five cap right anyone can do that there's no there's no brilliancy I've captain be good I see these mobile home parks oh yeah I see these mobile home parks go under like four caps and I'm going boo then who the hell buys this stuff at a four cap I mean I mean that's assuming that their that their financials weren't fabricated at all that it's a four cap you know if there's any fabrication in the in the profit loss on that by the seller then it's not even a four cap you know and everybody seemed gonna write their numbers to their favor so that would scare the living hell out of me Stan sir that to answer that question who's buying the forecast at Steve there's lots of institutional money in our space now that wasn't here only five years ago and their cost of capital is much cheaper than your capital or my capital and so depending where their sources and they can they can make numbers work at four and five caps unfortunately we can't and I'm assuming you can't either that's just that's a little too skinny for us I mean oh I'm gonna ask you about a theory there lately but that I've been thinking about lately it's not I'm not proud of the theory that I've come up with but you know you get a little older and you get ready check out you're running different kinds of numbers you know so but I suppose that's the hedge funds and those people they're parking money same thing in storages you know you look at it fully you know ninety percent full storage place I mean they they're not giving them away by any stretch of the imagination they want like every drop out of them yeah what's the secret defining the distressed the distressed properties or maybe you don't want to share that secret but yeah III don't think there's a silver bull but I will say that most of the hedge funds and institutional guides of private equity firms they don't like they don't like buying problems they'd rather place you know 100 million or five hundred million dollars worth of capital and stabilized assets that they need to buy it scale and you can't buy it scale if every single property you're buying has underlying issues that need to be solved and so I think that's one of the big benefits at least of how we approach the space is we like finding the problems the problems that the institutional guys don't want to deal with you know we fix those problems and then ultimately our end buyer at that point can then be a an institutional buyer that can pay very very low cap rate so we by institutional grade parks that would meet institutional standards maybe three or five years from now and we ultimately put the plan in place to to get them to that level so that not necessarily with the plan of exiting but just knowing that we do have an exit plan in place that there's someone on the back side that's willing to pay very aggressive prices for the product that we created as far as finding them you know this uh this industry is still very fragmented it's I kind of compare it to probably what self storage look like fifteen or twenty years ago you know back then there were only a handful of a big players I think public storage and what was the other big one that came in right after public storage I can't recall not but in any event it's different today there's multiple multiple rates multiple traded companies that are in the self storage space tons of private equity your twenty years ago wasn't recognized as a commercial asset it was kind of like a redhead stepchild now it's included on all the different commercial investor reports that are put out on a monthly and quarterly basis it's the real deal and so mobile home parks are kind of going there I mean it's it's it's it's it's happened at light lightning speed again Carlyle Group a Blackstone all the big PE names that everyone's familiar with there in our space now they're in it in a big way and they're consolidating and so with that being said there's still fragmentation that we can take advantage of we can find those mom and pops that are aging out of communities they've owned it for 30 40 years maybe they haven't run it as much like a business as you or I might run it Mitch and we can get in there we can we can bring rents up to market we can fix the the infrastructure issues that they've been dealing with that maybe I've been keeping new residents away from moving in we can do a better job of collections you know which I see is a common problem with mom and pops they become friends with the the residents they give everyone a break they don't do great at the collections that's pretty easy to fix we got a very black-and-white no pain no state policy so we fixed the problems and then ultimately have something that a big end buyer big back and buyer like a REIT or a private equity firm would have an interest in purchasing yeah and you said one thing earlier that you left out and that last run was the quality of people that are in there because sometimes yeah I start over with with in raise the bar a little bit you know and and the quality of them that are in there because sometimes the homes are really really old and it makes the whole place feel downtrodden you know people just by the way people my bankers have asked me you know why the hell would you invest in mobile homes I mean they're there they're not gonna be worth anything in a few years and I said that's not true I mean mobile homes will be worth something as long as you paint them and keep a roof on and stop the leaks just like your million dollar house you don't fix a hole in your roof on your million dollar house ain't gonna be worth anything pretty soon either the problem is I think why mobile homes have that stigmatism that they fall apart is I think a lot of people that live in some economic levels in mobile homes don't have the the sophistication to keep up or the finances to keep up with them yeah you know what I mean because what I have I still collect notes right now to this day on a 1978 you know double-wide mobile home you know yeah wouldn't it's beautiful you wouldn't know because this one's been taken care of it kept tossing you know what I mean yeah we are mean we have some homes in our communities that are from the 60s that have been maintained over the years and you know there the outside look good they're not all dented in rust they've had new roofs put on them they've had new windows put in over the years just like you would upgrade a normal single family home that's 4050 years old the same thing occurs oh we've even changed completely reconstructed floor plans and some older community or older homes the older homes that might have been a 3-bedroom they had really small bedrooms we'll break it down to two bedrooms and make normal sized bedrooms out of it in a more modern floor plan yes so you're right I mean a lot of it as far as like mobile homes have an actual economic lifespan to where they're not necessarily usable or their complete obsolete that's not the case but a lot of times it goes to the type of resident that's living in it whether or not they have the means to actually maintain the home so you make a very valid point there but at the other day they are personal property you know just like a car though that mobile home will never be worth more today than it was when it was new however with that being section 2 that statement yeah I was about to give my one objection to that statement is there is a you know there's you know there's always those anomalies that occur I've seen some communities in very high-end expensive markets to where homes older homes fetch a higher price today then they would have you know 20 years ago and it's more of the local market that they're in like there's absolutely zero affordable housing and people are just clamoring to get anything get their hands on anything that is remotely affordable so California that happens a lot floor that happens a lot so anyway give me your objection because I you didn't say what I thought so this is gonna be a great addition to what you said but you're talking about like a market market I'm some of nad a value like a real like a value that that's gonna be that the Blue Book did they have for me yep yep okay so I buy these houses when I see I once went out and bought a hundred and forty mobile homes in six weeks after reading half of a Lonni Scruggs deals on wheels book I read half the book you're not excited there was some things going on in the state of Texas that had bankrupted the mobile home industry they passed some laws in the name of consumer protection and they they made a law where you couldn't finance the home and the dirt separate from each other that they all had to be in one loan which meant now every mobile home buyer in Texas qualify for the loan so they all went bankrupt and all the mobile home dealerships went bankrupt there were 70,000 repo'd mobile home state of Texas and you know being an entrepreneur I had my nose in the wind and I smelled that said you know what I was buying them for six thousand dollars a piece of about 20 at a time and they do depreciate on paper so and if I'm going out to speak to private individuals I bring the NAD a book and then I go she ate my price based on what the book says it's worth and and that usually people buy off on that more or less and then I take that book and I throw it in the trash can and I offer owner financing it on a used mobile home where no one offers financing on a used mobile home no one I know except for me and some other private guys I mean you probably could get one if you had an 880 credit score and you had a personal relationship with your bank but you know who does that so I'm buying them at six I offer to own or finance them at eighteen it at the time fourteen and a half percent because the interest rate was high because the balances were so low it didn't matter and so what made the house worth more than it should be or would normally be thought of is because I gave I offered terms it's just like or something I mean that sofa is not worth thirty five hundred bucks I'm telling you it's not but they give such great financing terms that people will buy the sofa for thirty five hundred bucks and that's what happens so I did that I borrowed a million bucks about a hundred and forty homes didn't touch most of them an owner financed them for at least double sometimes triple sometimes quadruple and created four point eight million dollars at 14 and a half percent in eighteen months Oh my problem was I didn't own the dirt underneath of them and I could have been in a lot of trouble there if someone would have sold that part to put up a strip center or something you know door I heard horror stories about that I knew a guy th
t had 90 houses and a part and they sold it to build you know the big Home Depot yeah anchored strip center and it just collapsed is business you know overnight pretty much uh yeah there's been some other big changes that have happened over the last five years there actually is some decent consumer financing now I wouldn't say that it's it's great by any means and you don't need a you know what you needed years ago is you know seven or plus credit scoring at that person at seven or plus credit score they just buy a house right they wouldn't be buying a mobile home most of the time most you're right but there have been some changes there are there's actually a lot of banks getting into the space now but neither here nor there one of the other big changes that has occurred is you know you know the dodd-frank and the safe act with as far as loan origination is concerned so it makes creates a lot of additional challenges with truly being able to actually owner finance those notes and not fall within the radar of the the government and so we don't do that what we do is we and you really we're buying these parks for the value of the land like the revenue that the land actually creates there is value to the homes but it's not real it's not where the real value it's at least being the the park owner so what we'll do is we want someone in at home we want them to own it we don't want to get it back and so we'll make it very easy we'll put together what's equivalent to like a rent rent credit program which is like a frequent flyer Mario there it's it's kind of gets around you know say fact and dodd-frank and essentially allows them between three five or seven years depending on the age of the home and the value of the home to if they make their payments on time to actually own that thing free and clear you know we will get our money out of it and then let them sail off into the sunset and be a lot renter we know if once they own that home outright they're not moving any time soon I mean we've got some residents that live in our communities I think our longest tenure residents like thirty eight years and we've got a lot that are 20 plus years we've got hundreds that are 20 plus years so we know that once they own that home outright there's no cheaper place that they can live in that market pick any of the markets we own and there's no cheaper place that individual can live so we want to get them to homeownership as fast as possible even if it means we actually lose some money on the mobile home so if we if we if we're into that home for ten thousand we get a buyer that comes in with six grand cash and we run a background there clean they got a solid job I will lose $4,000 on the home because I know that once they own that thing they're not going anywhere and it costs too much for them to move it and so we look at it a little bit differently through some different lenses but uh that's really where the value from our perspective is especially in the backside a lot of these institutional buyers and most buyers in general don't put hardly any value on the on the notes associated with the mobile homes or on the value like the NAD a value it's a it's not an attractive part on the the buyer end or the financing end for a new buyer to come in to buy the park itself so we always focus more so on the the dirt than anything else but yeah there's I mean there's a just like anything Mitch's a million different ways to make money you know and yeah you gotta kind of you know one of the things is you gotta master your niche that's one of the things you wanted to talk about is you got it really you got to really focus on the one thing you know because you can get spread super real thin real easy especially I don't make up many quotes but I think I think I coined this one I hadn't ever heard it before but the hardest thing an entrepreneur will ever do is find one great idea and finish you know and I actually happen to sell my I had I created a hundred and forty notes on those those boxes I sold those notes to UM Clayton Williams 35 of them for seven hundred and fifty thousand and then I sold another thirteen or fourteen or fifteen for three hundred fifty thousand and I paid back my million dollars and I had a hundred hundred fifty thousand in the bank and I had 90 house 90 mobile home notes free and clear but I don't know that that could happen again you know what I mean like times change he had just sold to Buffett he had a vertical company and he just went right he took that money went right back into the mobile home business him you know so yeah I mean timings everything I mean with different strategies I mean you capitalize on an opportunity that that doesn't exist today as far as like a lot of repos in fact now it's complete opposite it's very challenging to find use quality homes at reasonable prices meaning that if I've got a 50 vacant lots in my community and any any market and I want to go out I want to find 20 used homes and actually get them at a reasonable price it's very slim to none chance that that's gonna happen and unless you get very creative you can't just go to local dealer or a local banking at their repos now you got to get really creative and you gotta utilize you know the we buy houses strategies and you know market and campaign direct owner in different communities and find the folks that need to sell their you know need to sell their homes they need to move or whatever it might be and actually buy them that way you can't just easily go to a bank and ask for their list of repos because it doesn't really exist unfortunately I'm trying to buy one right now as a place for on-site manager to live on a storage place and you're right it you know there's no more six seven thousand dollar mobile homes that are in any kind of condition at all right yeah there are but they're just really crappy consideration but so so what I what I've been doing was just going to the parks and saying look let me know when you got one that you're getting is a trade-in and you instead of moving it to your lot just move it straight to my place you know we'll save that double move you know if we can but it's still they want twenty five twenty eight thousand dollars for those double wides you know that used to pick them up for ten yeah one of the best places we have found to actually find use mobile homes you got to be on it and you got to be you got to have someone dedicated to it on a daily basis is get on Facebook marketplace and then most of the most of the sellers on there there's a portion that are slightly motivated because they have to leave but yet they don't want to continue paying her a lot rent while their home sits there and so they get very motivated very quickly as time goes on they start asking 20 for it you'll find very quickly that they're willing to take 15 or 12 because they've got a $4 a month lot rent that keeps you know accruing and they can't move to whatever their next stage saves your life might be and so face book marketplace has probably been one of the better places that we found use homes but again you got to be on top of it you got to be willing to to pounce very quickly when you find someone that's willing to sell for a you know discounted price and you gotta have cash and make sure they got the title and make the transaction happen quickly and it also quickly move that home off that lot so that you don't have to start paying the lot rent to that community because your profits your discount go away pretty quickly if it sits there for a couple make sure you run the serial number check for any past due property taxes you know go through the whatever Authority like down here it's the TD HCA Texas Department of Housing Community Affairs in Austin but um talk about that's a hard place to deal with too it's probably I wonder if it's like that in every statement let's talk about the power of affordable housing because people think that that when when when you and I are people like us are dealing in mobile homes that we're scraping the bottom of the barrel and that it's a war zone and that we're slumlords and all that stuff it's simply not true or doesn't have to be true I mean I'm sure I know there's a lot of people that are slum lording it in this arena but it doesn't have to be like that I'm sure you're with me on that ya know and I'll give you the example this is the example I always like to use when someone brings up you know kind of negative stigma associated with not just affordable housing but mobile home parks is like you know where you live Mitch you could go and you know there's really rundown rough neighborhoods that are the war zones and on the other end of that spectrum there's really high in a class neighborhoods where all the executives live and then there's everything in between right the good hard-working folks that just want to live in a good school district have a roof over their head and have a clean safe and quiet place to raise their family right same exists in apartments you got slumlord apartments that are in the wrong side of the tracks really bad elements drugs sex and rock and roll and you got the really high-end newer build apartments that you know the executives live in and you got the B and C great stuff where that you know the the average Joe lives in again want the best for their their family and their kids savings just in mobile home parks we've got some really rundown stuff that's not where we really participate you know those are really identified to me as trailer parks I mean they've got their in the wrong side of town they've got bad elements in place more of a transient crowd like the motel dweller type crowd and then there's some really high-end mobile home parks I mean especially in places like Florida and California and Arizona you know we like to call those lifestyle communities those are not affordable housing you know that the communities that have you know three swimming pools and palm tree-lined streets they've got activities directors you know the lot rents are eight hundred nine hundred dollars a month most of those are second homes for folks that live up north right there winter homes so that's not affordable but it's a higher end demographic and then you got basically everything in you've got the good hardworking folks that when a good affordable option in that particular market they live in they want a safe community and that's who we cater to that's the one I want to talk about because ya know one is you usually have a fence or wall around these communities and you can be the island of paradise inside of a rougher neighborhood and be the place like people want to go to and the last but not least I always looked at it like this and I always felt very safe in that that place because if you can't live in one of our very nice mobile homes in a nice park then you're under a bridge because there's nothing you don't get much cheaper than this you know without going to a friggin war zone you know and you know even that you know that that life might look cheap but when you get your car stolen in your air conditioner stolen the rent it's not so cheap anymore so yeah that's it so that's our goal our goal is to have the nicest community and be slightly below what the rest of the market so we give the best you know the the best option for folks in that particular marketplace and give the nicest best price nicest community our turnover is it's next to none in fact the only time we ever get people that leave or they might pass because of age or like they're forced to move out of the area due to a you know job relocation or whatever a family event that's about it very really we don't get folks at Lee because of price right that's not a Price shopping issue to where they can get a better deal in a nicer location in another part of town or in another community just doesn't exist so yeah you know you're absolutely right and we love the space I love I love serving that that you know that demographic and really if you're really good it's all about your management style I mean if you're really good and you have a good screening process in place on the management end you can filter out the bad elements and this this this really exists in whether you're renting to a class folks or you know D or F class folks or everything in between right have a good filter system implies make sure that your screaming residents and your eliminating the folks have got felonies and they're that are you know convicted murderers and and drug dealers and things like that there's plenty of good folks right in that middle range that are in that you know that our nest socioeconomic class in need for housing that are folks they want they really want to do well they want to pay their bills on time and they want a quiet place to live and that's that's who we serve and it's great because you're as you had mentioned if they can't afford to live there they can't afford to pay the $300 lot rent which is basically the average across the country we've got some parks that are 500 some that are like in the low twos but 300 low 300 is kind of the average there's no we're cheaper in that market that they can live that you can't live anywhere 300 bucks a month it doesn't exist so let's talk about this special leverage that you have because there's a definite leverage that a park owner has you can you you could lower your rents everything to get your Park full but once they're in there it's not easy for people to leave and so you can start and I know you're a great guy and they you're going to have some compassion for these people but there is that potential that really you have to kind of place yourself because you could raise the rents at that point once people get in you kind of have them encapsulated but you know if you raise the rents what do you do have a traditional every year everyone's rent goes up five percent or three percent or yeah you know once we I like to answer it this way once we get to whatever you know within range of what the market rent is for that given area and then we typically follow CPI which is you know today it's like I don't know one half percent but you know historically you know three percent give or take and so that's kind of the annual model so like once we get to a market rent stamp let's say markets 350 maybe when we bought part goes to 50 so we might a little bit more aggressively over the first couple years get to that 350 mark but once we get there we have a normal annual you know 3% give or take increase that comes into play it comes into play and that's what you'll find this is common across the industry typically somewhere between 3 and 4 percent and it just it keeps going from that point moving forward and yeah obviously taxes go up you know cost of operations go up everything goes up and your with inflation and so we like just to maintain and stay in line with current inflation so yeah what so tell us what are your best victories you know tell us about a part that it was just you know beyond here beyond your wildest dreams ever yeah we've had a lot we've had a lot of them but I'll give you one that you know we went full cycle and we don't sell much so not we're not buyers and sellers we like to buy and then fixing the hole for the cash flow but I'm I'm always a seller at the right price and typically the right price means like a number that doesn't make sense like I would never ever buy it for that but someone altom Utley is willing to we bought a park it's been about three years now up in Virginia Richmond Virginia market I picked it from a guy that owned it for 30 I think thirty three years he was a actually a very intelligent successful attorney in Washington DC had to practice did really well did a horrible job at managing this park kept it up so very unique and that he kept it up spend a lot of money putting improvements into the park over the years he owned it but did a horrible job at the operational side his payroll was way too high had like four full-time employees this is like a fifty-two space park it was not big it really it really needed like half a full-time employee right one part-time employee to run this thing and in addition that he had no screening process someone had money and they could fog a mirror he let him
ove in so they were turning homes on average like two and half times a year they'd move him and they'd pay they would stop paying after the first month they'd have to a victim they trashed a house if go and renovated so they were losing money like crazy so we bought the park the year we bought it had a annual and annual gross income of I think $240,000 but the NOI was like twenty-eight thousand I mean their expense ratio was like 82 or 83 percent and so we went in immediately we saw the opportunity we bought the park and a fairly aggressive calf rate based on the NOI but I knew I could fix it very quickly and so we bought it like a five cap based on current in oh why we paid 650 for it I believe and within literally three months we had that thing on track which the first year we ended up with a no I have like $160,000 so we increased it by you know hundred thirty thousand dollars just by firing majority of the staff that were just standing around collecting a check putting a screening process in place so that you know if you had money you also had a path pass a background and prove that you had a job that you could continue paying when she got in there and that you weren't a drug dealer and things change very quickly literally in three months we were stabilized and we turned around sold that park the middle of last year for just under 1.9 million I think was like one point eight seven million paid 654 put about forty thousand into it because it was nice in good shape it just was run horribly their expenses were way overloaded right yeah so that was go in and it made on an annual basis after our debt service and everything it netted just at about a hundred thousand dollars a year so after debt service and all the operational expenses I think made a hundred thousand dollars a year for the first two years we owned it and so it was a huge it was a big one we've had a few others like that but that one was for a small park it packed a big punch on the back side let's go the opposite side of the spectrum which one which one hurt you the most and why yeah with on giveaways and we're gonna give away twenty twenty one biggest mistakes people make when purchasing their first mobile home part so I want you to go to our investor summit com forward slash deal finders that's deal finders plural and get go over there to the show notes and grab that that a report so let's talk about the downside I hate it when people talk about but they don't talk about the downside I'm absolutely stories right yeah yeah so this is one that we actually I put some my own personal money in but it wasn't a deal that I procured myself we were kind of working with a wouldn't calm a student is just another investor that was getting into the space the deal was a little too small for us to take on operationally from from a company standpoint but I thought it was a good deal I did minimal due diligence my and I only put I think I think about forty thousand dollars my own money into it so it wasn't a huge amount of money and and kind of coach this individual through the due diligence and this one had a the purchase price of a friend it looked like it was a no-lose endeavor I mean I'm talking we got like owner financing with ten percent down we're paying two thousand for the park I think we put ten thousand down and it needed about another forty thousand dollars of capital improvements it was a I believe it was a fifty space park was in Pennsylvania there was like thirty eight of the lots that were occupied a lot rent currently at that time was like two eighty a month give or take but they were running it through the ground they don't know for like forty plus years the catch with this one it was on municipal water but it had a master septic system that fed the entire park so all the sewage flowed to the back of the park had a large you know multiple different leach fields and septic tanks the municipal sewer was at the front of the park so we knew that a connection was there and we an idea what it will cost to connect to it and we just we thought you know that's a back-up plan if we can get five or ten years out of the septic field perfect we'll work on you know basically holding back reserves so we could connect at a later date the company we hired to do the due diligence on the septic I'm pretty sure they just didn't do it I was a local licensed company they didn't they didn't do it so within a couple months realized that the septic system one of the major one of the two leach fields was completely fail it wasn't failing it was failed and that there was an illegal pipe that the old owner had put into the side of one of the tanks and essentially was disposing of effluent to the back of the park I mean basically flowing out to the back park not into a leach field and so that was a big one that was a massive undertaking with a hundreds of thousands of dollars of connecting to the municipal sewer source many years sooner than what we had anticipated and it was really due to a lack of due diligence not I don't want to blame on the buyer but there should be an additional verification in place for him to determine that the inspection had been done because it would have been identified that uh that the the if you do a load test in the leach field you can quickly identify that it's failed and then also this illegal pipe that was plugged into the side of one septic tanks was a big deal and so we again I've got money in the deal and he's still working on this today you know doing the connection he's the park has made no money probably lost money month after month for going on now two and a half years so you know I'd say that the the private sewers and in the private water systems are a big risk we own a number of communities that have that that we personally own in our portfolio but we spend a lot of money on engineers during a due diligence process we hire licensed professionals I mean we spent a good deal of money before we ever even buy the park make sure that what we're buying is in good shape or if it's not we have an idea of the life expectancy but also the different costs that we might incur over the next let's say one three five seven years and we budget accordingly we underwrite that into our number so that we have that necessary capital from day one to inject into those improvements so that has been the horror story I've heard is that the municipalities just force you to go hook up to the city sewer yeah this was a little different to municipalities making they're the ones that are making a very tough they're making a bad situation even worse they're finding it as a way to basically bleed the park dry that they're not allowing the connection to happen very easily it's literally it's been you think you would they be looking to collect their impact fees and their connect fees and all that and they're making it incredibly difficult and really the only thing I can talk it up to is that this is a this is the the opportunity for them to the pounce in and shut this place down they had not been happy with the old owner that owned it for you know 40-plus years basically the husband died 10 years ago the wife took it over and she wasn't really into the running of a mobile home park and source for ten years the thing this went downhill and they didn't like it the municipality hated it and now's her chance so yeah municipalities really don't like mobile homes and like we've found some land that we thought would be good for some parks and the city just doesn't want us on it for that and I I guess I don't I got mixed emotions I mean I know from past experience how things have been and I could see why the way parks were in the past but you could set up good bylaws or whatever in mm-hmm and make sure that the park that's going in has a certain standard which is a standard that you and I would want anyways for the most part but municipalities traditionally don't like mobile home parks so just be aware of that if you're listening out there yeah lava has to do with the old owner you know that the prior ownership I mean did they comply did they keep up with the park the day and you know or they just slumlords and I mean it's we've gone through multiple situations where we we always try to meet with if it's a smaller town we try to meet with like the mayor and their council you know city officials before we buy if we bought if we're truly buying something that we feel has a negative connotation within that either that particular marketplace we try to meet with the city officials letting know who we are show a mark on our game plan showing that we're going to inject a lot of money back into their community we're going to prove the you know the the quality of living for the residents that are there and provide a better place for other residents to come you know those that need affordable housing again get a pulse of whether they're gonna be on board to help you you write half the time that half the time they're not bored they're so fed up with how it's been run they don't believe that a mobile home park can be nice and the other half the time they're compliant and they work with us and we've had some battles we've continued we we had one instance where the the mayor literally threatened us that if we bought it that he would even make it more about his job to shut us down and for us to lose our investment and we ultimately bought it anyway and a year later he called literally called me and apologized and and uh and and even one of his I think one of his staff member actually lives in our Parker they did live in our Park for a couple of years so he apologized I wrote a letter of recommendation to another mayor that we're having issues with in another state good job turned it around and had the good fortune to have one of his own staffers maybe living and you know you got these guys all wrong this park is nice well that's it in his mind mobile homes were the problem and that you can never make them nice and we showed him quite differently that with with a you know a plan clear plan in place we spent a lot of money improving the park and put a screening process and so we got rid of all the riffraff and only let good koi people live in there would be a drain on the resources you the police didn't have to go there once a day or multiple times a day he quickly realized that it wasn't mobile homes it was more so the operator that's the problem and we and we fixed that yeah so we're probably gonna wrap it up I could talk to you probably for a week and we could never public again because you very experienced been around but you know mobile homes are a good place for some newbies to start you have to understand that there's certain licensing you have to understand dodd-frank if you've got an owner finance make sure that you're compliant but one thing cool about mobile homes is you can get into them you know financing mobile homes pretty pretty cheap I think it's cheap as you can find an investment vehicle probably that really has a great rate of return I bought you know I bought my first hundred houses on credit cards and they weren't mobile homes but this was 20 years ago in San Antonio but you can still buy mobile homes on credit cards and owner financed them and a lot of times you know fundings half the battle right and if you're not to the point where banks or private lenders or you are really willing to finance you but you have good credit you know I still know people right now buying mobile homes with credit cards and then owner financing and get him set up getting them straightened out and now starting to go back and find the private lenders to get the credit cards paid off and give more of a more of an amortized note but it's a way to do things absolutely again as we've mentioned there's a thousand plus ways to make money in real estate you just got to pick pick one and then master it your folks really a one more really important question you when you went into this and you were buying your first mobile home park did you get a mentor or were you with someone who had done a lot of them for or did you just freewheel it I'm gonna guess you had a mentor but I don't know no I didn't have a mentor in the mobile home park face but yeah I I had owned hundreds of single-family renovated and also had a large portfolio hundreds of single-family properties so I had built that business and I owned just shy of 500 partment doors and I owned some other commercial real estate over the year so it was just through trials and tribulations of that other stuff you know mobile home parks were not rocket science there's nothing there's not necessarily anything that's overly unique about them if you've got a lot of other experience and other you know rental housing I should say and so know I went through some training read some books and you know I didn't have a mentor per se I had someone that you know I guess a form that I kind of was on with other mobile home park operators that way I would ask questions and things like that but Mosul is really hey this is pretty simple I mean this is straightforward let's let's buy this Park it's run-down it's a great market let's get in get a stabilized get units rehab you know rent them sell them get a manager in-house here on site and let's make it happen here's our pro forma here's how we think we're gonna get there and let's figure it out along the way and that's ultimately what we did so I have had many mentors my life so I don't want to act as though we did it you know alone but I've so I've had many mentors but nothing specific just mobile home park so you went in when you're very sophisticated you're already very sophisticated 500 doors I call it sophisticated I know way more today the way I miss down a couple opportunities that probably if I would have had a mentor that I wouldn't have passed on you know some girls we had tied up that I just getting it comfortable with because I didn't know enough and I probably missed out on a couple million dollars worth of opportunity from deals that we passed or killed because we couldn't get comfortable with certain aspects that experienced operator but unlike would have been like Kevin you're crazy you know there's an opportunity here and here's how you here's how you realize it and those risk that you're assuming just throw them in the trashcan they don't exist in here's why like if I had someone like that telling me I probably would have you know been even further along in the business so mentors incredibly important maybe I'll stop her and I don't know I thought that I knew if you had a crystal ball need to go back in time to find out if a mentor would have caught that septic tank issue you know that septic issue I knew a good bit when we gotten that deal I just wasn't intimately involved in the due diligence it was more of me putting my money into it and uh and and with somebody that you know it was it was their second park and you know I was kind of overseeing it from 10,000 foot view while I'm running my own business and so if I would have been intimately involved our company we have a very checklist process that we go through through diligence we sure would have caught it like it's inevitable it just this was a different situation it's unfortunately because it's a very expensive lesson that that this person learned did you have any recourse against the inspector no because yeah it's a long story but no we no we did not because they never actually documented the the inspection process nor was there funds that were documented it was paid in cash I mean it was just a bad situation all the way around right yeah yeah and so no we we didn't and we ultimately should have in a normal situation we when we high when we do due diligence we hire engineers engineers at our actual legitimate company we get we get bids we get invoices we pay via check or you know electronic transfer and so there's documentation of emails of funds of everything you know and again another lesson learned for this person is that every single step of the way assume that what you're being told is a lie always everything that's it that's it well so I really want to take time to tell everyone out there that you know when you're talking to someone as experienced as Kevin I don't know find o
t what form he's on or what reform these other experienced multiple park owners are on it get on those forms and learn there's a look there's always a lot of nuance in the minutiae no matter what strategy you pick and you got to drill down and drill down and drill down until you actually become an expert at it and once you're once you've been through it all or seen it all or hurt at all you have a really great chance of not making those mistakes learn from other people's mistakes as best you can this is Mitch Stephen with the real estate investor summit podcast I want you to go to Ari investor summit com4 slash deal finders and there you can get the report 21 biggest mistakes people make when purchasing their first mobile home park but also that's going to get you over into the show notes part and you have some courses and some mentoring available for this kind of thing yourself don't you or am I wrong about that's correct yeah absolutely yeah we've got a what I like to cause our business in the box and it's really our entire process from your finding deals to negotiating them to funding them to operations on the back side and it's called the deal finders formula yep and they can find that on our website on the mobile home park Academy website well you know what I was going on earlier in the conversation is is if if this is what you want to be and this is who you want to be but you don't have someone around you get with some kind of pro that's yeah or the money that you spend will will fail in comparison ninety nine nine percent of the time because you know you can always measure a good coach by how much money they make you but you'll never be able to measure how much money they kept you from losing if they've done a good job and there's nothing that you've lost but you you know I've had students call up say you know I'm not really sure that the mentoring was worth it and I'll say no wait a minute let's go back you were fixing to buy two houses that I told you not to buy cuz you're fixing to lose them we all came to the conclusion I said you know you're trying to measure by how much I made you you're not measuring by how much I kept you from losing that's it in your career may be dead right now because if either lost on those two houses that you were gonna buy back-to-back from that guy you might you won't be in this business anymore because your wife would have shut you down a hundred times after that and your life would be miserable and they're like Oh I didn't think about that and I go yeah it's not all about how much money you make uh we get a good a good professional mentor or coach will keep you trying to keep you out of trouble try to keep losing money and then if you're you know really do well you'll be able to measure by some extra money that they think they pointed out in places that you couldn't see and you can measure by that as a stick but a lot of mentoring and coaching is about keeping it from losing or keeping bad mistakes because I was only one more mistake away from being out of a career that I've been in for twenty four years and I was only one more mistake away because I lost on a couple of deals they had put me really thin and if I have made one more mistake I'd have been out of this industry forever I hired a mentor he straightened me out and I was actually trying to get out of the business when I called him and he taught me how to stay in the business that was 24 years ago and millions and millions and millions of dollars ago and I didn't even hire that guy thinking that he was going to help me stay in I hired him to help me get out and he showed me what my problem was and so please go to Ari investor summit com4 slash deal finders and see what what Kevin buff has to offer you know if either one of that business I'm gonna call you that's what I'm gonna do I'm gonna call you alright my friends thanks for stopping by to get you some Kevin buff we've been talking about mobile home parks and cash flow cash flows King they say cash is king but really cash flow is king because cash goes away cash flow just keeps coming right back every month anything you want to say to the young investors out there before you wrap it up Kevin no probably the last thing I'd say just your first four most myths thank you for having me on it's been an absolute pleasure being here and hopefully your listeners you know were able to extract some good value from our conversation but I'd say this and this doesn't matter what what you choose how you choose to make money in real estate but you know find that focus and find that one niche that you think is the best fit for you that ultimately can help you achieve your your end goal whatever that might be everyone's got their own individual goals and then focus on it you know don't get pulled in a million different directions you know that happens especially when you're you're surrounded by you know social media there's always different events god I get on Facebook and I see at least 20 times a day a different you know training program being touted and that's fine I'm not you cry make money and every single one of those but pick the one that you think is best aligned with your interest and your personality and then give yourself you know a lot of period of time let's say 12 months 18 months to master it to learn everything you need to know and actually prove the concept you know put it to use and ignore everything else it's really hard to do but focus and I really think those that focus in a particular niche and specialize in it and master it are the ones that are the most successful in those individual niches that doesn't mean you can't go do something else in another point Mitch you know once you get that business up and running like I know you've got multiple businesses but upstarting like three things at one time like I'm moving to flip houses I'm gonna buy a mobile home parks and then I'm gonna develop self-storage like good luck if you're starting all at once he's gonna get pulled many different directions and probably find some type of failure and in every different one of those areas because of lack of focus goodness said it better myself you guys again I want to give a thanks to my sponsor tax-free futurecom please go there watch the 37 videos on how to grow your your investment or your retirement tax deferred or tax-free you will not believe what your financial advisers are not telling you tax-free futurecom all right Kevin thank you so much I appreciate you and I will talk to you soon by the way you're going to be interviewing me on your podcast right that's correct just so you know kevin has one of the most successful podcasts on iTunes it's called the real estate investing for cash flow podcast and I'm gonna be over there talking about I think we're gonna talk about many storages of self storages and boat storages right yep absolutely looking forward to it cool just a different form of that cash flow you know you chose parks I chose that they're both great you know figure out which one you like the best and drill down all right you guys we're out of here care guys
