Sign North Dakota Banking Living Will Mobile

Industry sign banking north dakota living will mobile

[Music] welcome to the passive mobile home park investing podcast with your host andrew keel this is the podcast where you can get the education you need to invest 100 passively in the highly profitable niche of mobile home parks welcome to the passive mobile home park investing podcast this is your host andrew keel and today we have an amazing guest in mr skyler lichty schuyler is a third generation mobile home park owner and a founding member of american dream communities during his career he has overseen numerous types of mobile home communities including stabilized turnaround and value-add opportunities he has held manufactured housing retailer licenses broker licenses installer licenses in texas oklahoma missouri and kentucky skyler has owned communities in texas missouri oklahoma kentucky and kansas with a total pad count of nearly 5 000 spaces wow the portfolio is currently comprised of over 2 000 home sites placing it in the top 100 of park owners in north america the most recent american dream communities fund was a 15 million dollar equity fund wow skyler thank you so much for coming on the show thank you for having me andrew i really appreciate this opportunity wonderful let's jump right in here and get started with the questions would you mind starting out by telling our listeners a little bit about your background and you know how you got into manufactured housing sure absolutely so as you mentioned in my introduction i'm a third generation mobile home park owner and operator i acquired my first community in 2001 2001 2002 we kind of started in our path within the family and when 2009 when we formed american dream communities that was kind of the movement outside of the family portfolio into more institutional type syndication assets awesome and i just wanted to chat with you a little bit about this because you know not many mobile home park operators you know had a you know a business back in 2008 2009 and could you tell us a little bit about that time and the recess recession resistant you know on and on characteristics you saw at that time in this asset class sure so i think like anything andrew is one of those things where depending on what region you're in what market those are going to have those are going to impact uh communities differently our communities um through 0.809 we really didn't see much of a hiccup you know collections as with this covet situation remain relatively stable we had a couple of move outs we went out and did what we do now bought new homes replaced those lots you know resold or released those homes so again i think it's one of those things that the guys and gals in the industry who are paying attention knew what they had to do tend to tend to go through the recession fairly well i think it'll be the same thing here with covid the guys again who's paying attention and know what to do they'll do just fine in this asset class awesome awesome tell us skyler what is the hardest part about this business in your eyes so i'll tell you it's interesting because we were chatting about this right before we went into the interview here it's in our judgment and in my judgment the hardest thing is finding the right people you got to have the right people on your for us for our corporate team for our on-site team whether we whether we want to admit it or not whether we like it or not we're in the people business whether it's hand working with our team whether it's working with our residents our vendors i mean that's just really what it is so um what's interesting is kind of flip side of that equation is once you have the right team in place i mean it's it's it's amazing because you could do things you you really didn't think you could do when everyone's flowing together i mean you just sit back and say wow this is this is how it's supposed to be type of deal totally and so do you guys have your own management company yeah we do so so our management company we manage the deals we own and then we also have a third party management platform so that's something that we're pretty selective on who we manage for uh we really feel like on our third party platform we want to be good partners to the people that were managing their asset everyone has a different viewpoint of how the asset should run how it should be managed so for the for the groups out there that we manage um we're really good partners with because it's the same vision it's a shared vision so yeah we do we do both we manage our own assets and then we do third party management as well wonderful wonderful and tell me skyler what does the perfect community look like in your eyes and you know what are the what do the communities look like that you prefer to manage okay great question so you know there's kind of a kind of a two two-part question right so one what's it what's the perfect asset you know it's a 100 occupied 55 plus retirement community in florida just picture perfect no tenant issues ever so that's i mean that's what the ideal community looks like now what that also means is it's very challenging to get a current yield when you buy assets like that now that it can be done but it's a challenge so i would say from a investor standpoint from a yield standpoint you know we're going to look at a a good market maybe it's a primary secondary market big msa we're going to find an ugly park or a park that's completely mismanaged and those are the deals we want to buy we want to put the right management policies into place we want to fix what needs to be fixed and that to us is something that a lot more challenging i think the rewards are are a lot bigger on those type of those type of projects totally and this this may be you know market specific but what cap rate you know do you look to pay on on those primary market kind of mismanaged assets yeah good question so when we when we look at a cap rate i think a lot of times people maybe don't fully appreciate as you and i and the other investors out there i mean a cap rate is supposed to be a reflection of the risk so if you're buying a deal that has that has been mismanaged uh you know you're gonna you're gonna pay a different a different cap rate for because you've got a different risk profile the flip side of that also is if you buy a property that is really mismanaged maybe the owner doesn't keep up with the repairs doesn't you know keep up with the market rent um in today's market you may find on current numbers you're buying an ultra low cap rate so um you know just you know for example we bought a property in tulsa oklahoma um it was a little over a hundred a hundred unit park uh about 35 vacant vacant home sites in it and what we were able to do is go in uh do the repairs uh and fill up the vacant home sites and take that asset from call it you know mid 200 lot rent up to about 400 lot rent which is a market rent so for us that was a that was a really good illustration of the deals we'd look for so current cap the current cap rate on that i think we paid you know a two cap but it really didn't matter because you you when you step back and look at what the asset had the potential d that's kind of how we underwrite it as well so it's not just always you know hey going in we're going to buy a 7 cap on current income stabilized deals full market full boat i mean yeah you know you're probably probably today's market depending on what mark you go into call it you know four to a six cap in a major market great yeah thank you for sharing that yeah so you you put a lot of value uh upfront on you know what it's going to be you know post the re uh post the rehab you know post the renovation work and improve it right right right okay very cool yeah uh so as we talked about you know prior to this uh recording you know a lot of our listeners are passive investors and other asset classes you know multi-family self-storage et cetera so what are the most important things you think that those passive investors need to look out for when investing into mobile home parks you know what are those big risks that uh you know that they should be aware of if they're not familiar with the asset class entirely right good point so i think the first thing is probably like any investment you want to you want to be comfortable with the sponsor you want to make sure that they've done it before you want to make sure that they're invested in the deal you want to make sure that that they're willing to do the industry normal stuff such as if you buy a project that's going to require a lot of fill those homes mean you're going to have to sign on on full recourse debt so sponsors who aren't willing to do it don't invest in their own deal have no track record doesn't make it a bad deal doesn't you know doesn't make them an incapable sponsor just those are the things i think the the limit partners really should should look into i think that's a really big key to it simply you know we've seen deals out there and guys who say hey we can we can do you know 30 40 50 home sites we can fill 50 home sites a year and while they may be able to do that industry data out there doesn't support something like this i think the more seasoned sponsors are going to put out projections that that are closer to reality yeah that's uh that's an interesting point that i'll i'd like to talk a little bit more about you know when you guys bring in homes for infill i mean yep on all of our previous interviews everybody has said that infill is like the toughest part of the business like it's the most expensive time intensive process uh in terms of any sort of value add right and the easiest is raising rents you know to market yes so with the infill process you know do you guys prefer new homes uh have you ever done used homes and you know what are some of your tips uh or maybe just overall feelings on that process uh you know for for investors so they're aware of what's involved yeah yeah so so good question so i think everyone knows really in this asset class there's primarily two ways that you can increase valuations one is infill the second is raising grants you know we've we've done well at projects doing both sides of it we're a little bit different in our when we buy when we buy an asset that's a pure rent in escalation play we look at it we say okay what's wrong with this community that we can fix right because i think most people don't mind paying market lot rent if the community looks away it should look right so we bought a property here in texas last year we went in it was about 200 under market rent we went in we spent about 300 000 on streets put in a new playground fixed all the stuff that needed to be fixed we i mean we did a very large rent increase and most of the people said thank you so which is which is different because you know if you go in and you just say hey we're gonna we're gonna crank grants to market we're gonna put no capital back in i don't know that you'll get the same response from from your residents so totally agree you know on the on the fill side of things i mean that's absolutely correct that is one of the most challenging uh value add propositions simply because when you buy a home you bring it in so for us it's all new homes we've gone down the used home route truthfully i think that's a fool's errand to try and source a bunch of used homes sourcing one or two for a park no problem but what we consistently found when we tried to source used homes is by the time you buy it move it in rehab it you're within about 15 of the new home and it's a lot more brain damage trying to source them fix them go through that whole process compared to buying a new home the other side of that is you know kind of as we've talked about with the value add when you're moving in brand new homes the rest of the residents view that as a as a as a shot of lifeblood into the community they view that as okay someone's really sitting up paying attention they want to bring this community back to a nice great place to live so there's a lot of benefits with with going in with the new homes compared to the used homes but yeah it's it's it's definitely a challenge a challenging piece of it when you buy the new homes you bring them in you don't know how long it's going to take to deck them and put on skirting and all those components you don't know if the city is going to change the rules on you which has happened to us we brought in you know 15 new homes to community and they said well our setbacks are actually x we said wait wait wait during diligence we got it in writing exists they said well they misunderstood so you gotta comply to this so you got all sorts of unknowns but i mean the the flip side of that is a huge value creation if you can pull it off totally yeah totally agree with you there so you guys currently have a fund right uh correct would you mind sharing a little bit about that and and kind of what your outlook or business plan is uh through your current fund yeah sure so all of our funds we're we're wrapping up our second fund right now uh we anticipate launching a third fund probably by the end of this year first of next year all of our funds are a 10-year time horizon the the difference of our fund and some of the other funds out there i'm not saying theirs is bad i'm just saying ours is different for our limited partners they get a seven percent preferred return on all their dollars that go in of the cash flow 100 goes back as a return of capital so meaning as the sponsor as the gp we have a management fee in place and some other fees as far as acquisition fee disposition fee the typical things there but from a from a profit center there's no profit to the gp until 100 of the equity is paid back at the fund level meaning we have eight a communities in a fund we don't just say oh we paid back equity on deal number one now we get half of the cash flow it's at a fund level which is which is different than a lot of the guys out there that are doing funds um and then after that it's a it's a 50 50 cash flow split and then it's 50 50 on the upside so yeah so great so yeah so so again like our our thought process is this if we get into deals we hope they're going to go the right way most of them have gone the right way because we have the right partners we have the right structure if the economy just tanks as it has been right and the deals go the wrong way you know what's what's the worst case worst case scenario is our our limited partners lose money so we've really structured this deal to try and get everyone's equity back it's as quickly as possible so that's done through cash flow that's done through refinances so some of our deals are big value adds so we can move the needle pretty quick in a period of time go from a bridge to a permanent debt situation and do a cash out there once they're stabilized great yeah there's a there's a pretty similar model across the board that a lot of operators use including myself you know the okay the buy fix up and uh refinance uh model so but yeah no those those are those seem very competitive your your terms of your phone there quick question before i forget what is your your thoughts on the park owned home model versus the tenant owned home model so i think if you could buy a park with all park owned homes you're going to have less turnover your expenses are going to be more stabilized if they're all you know tenant owned homes whenever you get into the park owned homes you know your expenses look different you have some up and down in the revenue but i think the reality is there's very few parks out there that are all tenant owned homes i think the reality about in our industry is it's there's park on home components now i think there's a difference between buying a park that's you know 30 35 park owned home compared to buying one that's 100 park owned home that to me starts feeling very much like like a hybrid of an apartment complex so i think that model is different um that's not really a model that we've dabbled in we tend to like to buy deals kind of on the outside at 40 to 45 percent park owned homes and then what we do is we'll go in we'll try and convert those to people to have home ownership so whether we can convert them from a rental to a lease to own model whether we convert them from a rental into a con umer finance through some of the groups out there the objective for us and it's really how we you know why we call our company american dream communities is you know the american dream is home ownership so our objective on the park owned homes is to get people in a position to own as quickly as possible yeah that's great and that's that's similar to what we do as well uh would you mind shedding a little bit of light on like your lease option program or what's worked for you on some of the communities that you've purchased in in how you've converted those park owned homes maybe you have some percentages it's kind of like industry uh i don't know if it's a myth i guess where they say you know a third a third a third you know your park owned homes a third of them are going to want to stay rentals a third of them will convert to a lease option or similar and then a third of them will move out would you say that's accurate or would you you know say you've had different numbers yeah so i think i think that's a a broad brush right yeah so what we have found in in the communities we go in that have for example we bought a small community here in texas about 60 units of that 45 or park owned rentals predominantly 80s and 90s vintage on the homes we when we went in i think this is about two years of ownership now i believe we've flipped about 75 of those so we went in and you know pitched everyone on hey we want you to be homeowners because that's what our objective is at a at a corporate level not many people i think we had one or two of the 45 that signed up for it the rest of them when the end of their lease came up they moved out we made them ready and all the new people we've put into lease options so i think for us we've been very successful with vacant units putting them into a lease option the conversion from rental into a lease option uh the reason i think that we have trouble and i don't know if it's just that maybe it's just us i don't know but a renter is a different mindset than someone who wants to own the home yeah so it's a tough it's a tough mindset conversion of hey your rental you don't have to take care of any of the repairs at all to we're going to convert you into a lease option where you're going to have some responsibility on repairs you're going to have some responsibility on upkeep so i think that's the biggest challenge that we've seen and we've done it in texas we've done it in missouri we've done it in kansas we've done it in oklahoma so either it's us or it's the mindset of the renter compared to someone who wants to home own yeah no i i agree we have parks across 11 states and it's very very similar across where we own as you know just that mindset like you're saying you know they're just they're not used to owning things they're used to renting and you just get a different outcome uh would you say you know there's like a set percentage uh or is it just variable depending on the park yeah it's i it really is variable depending on the park uh you you know it may be a situation where you get get more buying on the front end and part of that i believe is also the ownership you buy it from if you are buying it from an ownership that is treating everyone fairly is trying to make improvements to the community you will have more buy-in right because the the guy renting the home looks around says hey community looks the right way this is somewhere that i really want to stay on the other hand on the deals that are the heavy value ads where you got infrastructure issues you got tenant issues you got all those things going on even when you start doing the improvements it's still a tough conversion because someone who's willing to live in a c minus asset when you bring it up to a b plus it's it's a different tenant profile so it's that that's one of the things i think if if you went into you know a or b community and it was a lot of rentals you definitely are going to get more buy-in some of the senior parks in florida you know they have programs where they rent to the rent to the 55-plus they rent it for a year they convert them into ownership and that's because that type of an asset they're looking at do i like the amenity package do i like the manager do they have the right events so they want to try it and they're eventually going to buy it i don't know that that translates over to the family parks the same way though or all age parks should i say totally yeah yeah i agree you know with us we make it very very attractive to people that you know when we come in and buy and there's some park owned homes just the path to ownership kind of like you were mentioning earlier we make it where it's like it's a no-brainer you know we're not trying to like you know get rich off selling these homes uh right and i think when once we kind of show them that you know they they kind of become more interested in it and interested in in owning the homes but but yeah it's very market specific you know like we had a park near memphis that was completely different than a park in uh up near grand forks north dakota so yeah i think i think that's important so quick question on you uh and in your your fun do you guys put money into uh your funds do you also like sign recourse if that's required yeah good good question so in all of our in all of our funds all of our pre-fund investments we we really started the evolution from a single entity asset we had investors who said hey i want to be able to identify the park that i'm involved in uh which that that's worked out okay for us the fund gives us the ability with the investors to smooth out the right of the value ads right so we have some stabilized deals that produce a nice cash flow and then we have the value add deals that you know you could be two to three years with no cash flow because it's you know it's a huge lift job so all of our deals we do invest in um every single one of the deals we have either recourse on the park recourse on the homes so i think recourse to us we've we've become comfortable with that function of debt in this in this space um i mean i think everyone would prefer the non-recourse debt on the park but value ad deals i just i don't see how you can do that so our typical model on the value add has been a a bridge to a permanent so maybe it's a local bank maybe it's a you know regional bank or a lender they give us a couple year bridge that gives us the time to go in fix it fill it lease it get rinsed to market make it look the right way and then go into the permanent market great yeah no that's that's fantastic uh i guess what's your uh what's your plan for 10 years from now what do you what do you think that looks like skylar yeah so so our internal objective is to go to 10 000 spaces uh it's going to take us a couple more funds but that's where we're that's where we're headed to as far as an exit you know i think our our funds are structured on 10 years and at the end of 10 years i think we'll ask the limited partners what they want to do if they want to sell everything or they want to you know ride along for a little bit longer so we we haven't fully defined in our minds what the tenure exit plan looks like gotcha you mentioned a little bit earlier about the gp lp splits for your fund right but would you mind just shedding a little bit of light on the typical fees you know acquisition p dyspo property management you know just and just what those look like and what they cover yeah sure absolutely so um on the acquisition fee we charge three points of an acquisition fee and that is a typical real estate brokerage commission i shouldn't say typical because some brokers out there you know they charge up to 10 of a commission so the one thing that is is predominantly different about our group is all of the deals we have bought to date have been off market they've been principal to principal transactions so those deals uh require i'm not gonna say more effort but different effort so we have deals that we've been working on buying for the last 15 years this year is going to be the year that they come to fruition so as far as the ongoing fees six percent management fee property management fee there's a disposition fee which is three percent uh other than that we try and keep the fees you know skinny down right so acquisition and management the way we look at it is within our fund if we went into the on market deals there would be a there would be a potential commission to pay if we outsource the third party management there would be a fee to pay and from our point of view yeah i i i'm not exactly sure how a syndicator can outsource management and have her the same grasp of what is going on on the grounds i know there are guys out there who do it and they do a good job of it but it's for us we really want to be in the weeds with everything going on at the property level yeah and i think that's uber important and i i do the same thing how many employees do you have on your property management so right now we have when we're fully staffed so i'm not sure if we're fully staffed today or not but we're fully staffed for about 55 employees wow so big operation it's it's a big operation so we have everything from you know district managers area managers community managers assistant community managers um maintenance guys all the way from regional guys to lead make ready guys because that's i'll tell you that's that's an important component of of any park is if you have park owned homes you got to have make ready guys who can know what they're doing they can put the product back together if there's any turn i think that's one of the things we found on uh the mom and pop type operators or even the small regional type guys is they they miss that component of it's i mean make readies can eat your lunch if you're not paying attention to it if you're not putting them back in service as quick as possible if you're not leasing them i mean it can turn a profitable park into an unprofitable park very very quickly yeah no i agree uh real quick would you mind sharing uh a case study uh of something that you know a negative case study and a positive case study you know break it down like what maybe you had one park and and some really bad struggles with that park maybe you can elaborate what those were and then you know share uh sure a good one as well so we could see the opposite side of it yeah absolutely so the very first deal we syndicated was a park in missouri we drove through the town town looked good the park looked good you know the sweet old lady who had managed it for the last 15 years for the out of state owner everything looked exactly like it should so we got into the deal we found out post-closing that the manager had been titling a bunch of abandoned homes into her name she had been running so basically we had a uh a partner we didn't realize we were going to have in the deal so we worked through that our our biggest that was our first deal our biggest mistake we made there was we structured it wrong meaning first still out of the box friends family neighbors everyone who invests with us like look guys we're gonna give you the money but if you can't make it work we're not putting anything else in so we didn't structure capital calls appropriately and i can't emphasize that enough any syndicator you don't want to be under capitalized you don't want to try and juice the returns by not raising enough money you got to have the money because there's a hundred percent of time unexpected stuff so that was that was our first deal we structured it wrong um over about a six-year run you know it was about an 80 return of equity so we we had a loss on that deal it's the only deal we've had a loss on today and again we structure things completely different now we've moved into the fun model which is um which is a much better structure i think it spreads out risk so that's that's kind of the bad deal we did the very first deal um you know we have a couple of deals right now that we're working on refinances that we've done very well on so you know we're talking a little bit about you know the value add whether it's a rent increase whether it's a just a feel so just you know one of our properties for example is in tulsa it's 60 units we bought it i i'm surprised that he hadn't condemned it i mean it was the streets looked like they had never been fixed never been repaired i mean almost every home that was there was like halfway dilapidated i mean it was just a train wreck so we buy the property we spent about two 000 on street works the off street the new asphalt we put in 40 new homes we leased up 40 new homes wow so we took an asset that looked condemned and we you know we basically 5x the value we paid for it over an 18 month 18 to 20 month period so that's a i mean that's a challenge to do that's a lot of heavy lifting we have another deal here in texas we bought same type of deal it was um it was extremely under market rent but it was full and that you can understand the streets were in really rough shape no one had done any repairs so that the residents were okay living there because hey it's the cheapest ride in town i don't mind driving down the streets and my you know popping tires every week because everything's all jacked up it didn't matter to them right so we went in we spent about four hundred thousand dollars on street work wow increase the value the rental rates to market rent we we over the last 14 months we've just about got a 3x on valuation on that deal wow so again it's it's raising rinse is easy but doing the street work is not easy as a principal you got to be on site making sure hey if you pay for two inches of asphalt you're gonna get two inches they're not gonna do just a thin enough layer where it looks good you got to make sure that they you know do the proper radius so you don't have pieces break off i mean it's it's a lot of work and so so that deal obviously it turned really quick for us um the resident cleanup you know we're still in the process of the resident cleanup right now but you know i'm i'm hopeful we'll we'll be able to complete the cleanup without much loss of residence at that property man that's fantastic but see those are the those are the ones that get give you the the goosebumps man because that's i mean not only is it a win you know as a investment but also you made that community look better it probably hadn't been touched for 20 30 years you know so correct for you to be able to you know fix that deferred maintenance you know i'll never forget one resident in salem ohio we one of my first communities i literally moved with my wife and my daughter into the community there's a house in front of this community we moved into it for three months and we did a ton of work to it one of the residents came up and literally was tearing up because she was like you know i was embarrassed to live here for so long i've lived here for 20 years but now i feel good when i come home you know it it it just it and that you can't beat that you know that's the other side of the business that just just absolutely warm fuzzies and and that's it people come out they're so appreciative that even even taking rents to market they don't care because they're not embarrassed anymore we we hired a an assistant manager here recently of one of our properties and it was a big turnaround deal and i was talking to her last week and she said you know i i hated driving through this community it was like the worst part i was embarrassed to tell people i even drove through it i don't even live here and she's like it's it's a totally different deal it's a totally different deal it's the best the analogy we use around here is when you're done with it you clean it up you fill it up you do the capex it's like giving bread to the hungry i mean residents are just so appreciative of it and you can't you're right you can't beat it i mean it's a good feeling it's a win all the way around totally totally well skylar thank you so much for taking the time to to come and uh be interviewed on this this podcast and and for just adding value you know to our listeners uh if any of our listeners would like to get a hold of you what is the best way for them to do so yeah so the best way is uh through email my email address is skyler s-k-y-l-e-r at american dream communities dot com so that's kind of our investor facing website so there's more information about us there as well awesome well thanks again skyler that's it for today's show thank you all so much for joining us thanks andrew would you like to see mobile home park value ad projects in progress if so follow us on instagram at passivemhp investing for photos and awesome videos from our recent mobile home park acquisitions once again that's at passivemhp investing on instagram see you there [Music] you