Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host, Charles Carillo. Today, we have Jason Postill and Tyler Lekas. Jason got started in Real Estate after ending his professional baseball career in 2015 and joining a Publicly traded Real Estate investment firm that transacts over $46 billion annually. He then started a full-service commercial brokerage in 2019, specializing in multifamily throughout the Southeast, before partnering up with Tyler. Tyler began his career at First Investors, where he honed his skills as a Financial Advisor. In 2017, he pivoted towards the niche of mobile home parks, marking his entry into real estate by acquiring a 55-unit park in Florida in 2018. Tyler and Jason have strategically expanded the company’s holdings to 697 units across the Southeast. This growth has positioned their firm as Arkansas’s foremost private owner of mobile home parks. So thank you so much for being on the show today, guys.
Jason:
Hey, thanks for having us, Charles. Really appreciate it. Thanks,
Tyler:
Charles. Appreciate you having us.
Charles:
Yeah. So gimme a little background on each of you. I know I just went over there briefly, but about what you guys were doing personally and professionally prior to getting involved with real estate before we kinda dig into your business.
Jason:
Yeah. So you know, my background you, you touched on a little bit there, the, the brokerage. You know, before that, briefly just outta college, I, I played professional baseball for about five years. You know, I knew that wasn’t gonna be a, a forever career, right? And I knew probably coaching wasn’t the route I wanted to go after and always had a passion for, for the real estate. You know, and I, I heard a, I didn’t have friends family in, in the space really, but I, I heard a big leaguer my last year plan. He said he didn’t make his millions playing baseball. He, he made ’em owning a thousand units in South Detroit apartment buildings. And I was like, oh, bingo. You know, and, and so that naturally got me. I always had a passion just for, you know, the skyline and the commercial buildings, but that, that really hit home like, oh, hey, after this I, I like that idea.
Jason:
You know, we’re in the cities, we’re seeing all these apartments, I’m just counting the windows, like, oh, 2002, two, you know, I’m just like, who owns these things? You know, you start asking those questions. But yeah, got into the brokerage side. I learned that wasn’t necessarily the route to where I ended up wanting to be, which is owner operator you know, and build the passive income. But it, it was a great experience to, to cut my teeth and, and learn the ins and outs. And yeah, about 20 2018, I, I did go independent and, and on, still on the brokerage side, but wanted to get in owning these, you know, I’m finding all these deals for everybody else, and I say, Hey, it’s, it’s time to start building mine. I don’t have a 401k, or, you know, a big savings. And it was time to get, get busy. And, and that’s where I met, met Tyler. And, you know, the long story short, we yeah. Land our first 68 unit in, in 2020 and caught fire. And, you know, here we are. So
Tyler:
Yeah, and I’m I’m, my name’s Tyler <inaudible>. I’m one of the other co-founders over here at MHCI group. And kind of where I got my background is you know, I I started out in the financial world, so I did I did, you know, basically I was a retail financial advisor over at first investors that you mentioned Charles. And then I moved up kind of the rung to an institutional financial advisor. So I was still managing my retail book of business. And then what I was doing was I was I, I took on more like an institutional role. So I was working with bill banks, hedge funds, and I, I mostly did fixed income and, and debt. And then, you know, I was working 120 hours a week doing that stuff trading, you know, different kind of global markets.
Tyler:
And and I knew there had to be kind of a, you know, a better you know, bang for my buck, so to speak. Right. and so my dad ended up actually sending me an article about mobile home parks. Back in 2015. I started looking into the asset class a little bit ended up putting my job, you know, shortly after that started looking at deals, you know, et cetera in the asset class. I thought it was a super interesting asset class because it seemed like there was lower operating costs than apartments or town homes or kind of your traditional rentals. And then but you had this, this asset that was owned by the resident, and that’s the reason for the lower operating costs, but they also seem like stickier overall income as well because, you know, they, they have got skin in the game, right?
Tyler:
We’re an apartment complex. You’re just renting it. You can move from one apartment to the next, to the next, to the next. So anyways, it seemed like to me that that was a, you know, a really advantageous piece of real estate. So again, I started driving assets, kind of looking more into it, made my first purchase in, you know, 2018, met Jason shortly after that. And a pretty funny story. And maybe we’ll go into it later. And and then you know, we you know, we basically, you know, we hit it off and got our teeth kicked in in Florida for a little while, and then eventually you know, bought our first park together in, in 2020 and in Arkansas, and, you know, the door, because we came and under contract right now and 281 units in Arkansas. And looking to solidify that spot is kind of the largest private owner there. So,
Charles:
Very cool. Very cool. So tell us about your firm now. Are you guys primarily focused on Arkansas? What is really your investment criteria and strategy?
Jason:
Yeah, yeah. I’ll, I’ll touch on the strategy, everyone hopping, why we chose ar Arkansas. I mean, for us it’s, it’s been, you know, from 2020. Tyler had already owned a park, but you know, when we started our, our search down here in, in Florida, like Tyler said, we were getting our teeth kicked. Yeah, a year and a half. We just could not get a deal done. These cap rates were compressing just cash. Quick close. These guys were coming in day one hard. No non-refundable, a hundred grand. It is just, we, we just could not get, get a deal done. And then, so see, TAH had a while here in Arkansas. We’ll let ’em elaborate on that market, but you know, the, the distressed underutilized assets just mismanaged mom and pop, right? We really capitalized on that opportunity early on just picking up those 30, 40, I mean, our largest asset to date is 122 units, right?
Jason:
But those 40 units, 18 units, they’re no institution’s looking at ’em, right? Arguably under probably 3, 4, 500 units. And then the private investor, I call it weekend warrior, love them, right? They’re making it happen. They’re doing it, but do taking down a 40 unit on their own. So sometimes challenging, right? Not impossible, but, so we just capitalized on, on picking up all those and, and grew that. And all those are again, mom and pop in a secondary, arguably tertiary market where you’re not getting a million brokers calling in. You know, yes, I have some broker experience, but you know, we’re hitting these guys direct seller and they’re just, they’re thinking we’re offering them some insane price. And then we’re over here seeing these price per pads or cap rates, whatever metric you wanna look at, that to us is home run, you know, every deal. So yeah, finding, finding those, those mom and pop just mismanaged and, and just really distressed, you know, these, he’s been long owned a long time that that’s really been the, the criteria. But yeah, small midsize, that’s, that’s what we’ve been on.
Charles:
What are each of your roles on the team right now? How do you guys break it up?
Jason:
Yeah, there’s a lot of overlap.
Tyler:
Yeah. I’m, I’m more on the the operations side. And as Jason was, was about to say there’s a, there’s, there is a hell of a lot of overlap. I, I’ve gotta say because we’re, you know, really, you know, as you know, you may know Charles employees normally care you know, they’re there for a paycheck and they kind of move on. You really have to kind of incentivize employees at a, in a pretty big way for them to really start to kind of feel like you know, the the terminology is golden handcuffed to the job, you know, where they’re really starting to kind of like, you know, think for themselves in the, in the business and, and really starting to add value. And we’re, we’re not quite there, but but yeah, I mean, again, my primary, primarily my primary role is really on the operations side.
Tyler:
And, and kind of where I bring the most value to the, to the business is really gonna be with since we do so many heavy turns the, the construction side is really what’s gonna make or break those heavy turns initially. And what I mean by construction is really rehabbing the existing mobile homes or getting new homes on pads in a cost effective way. Like, I’ll just give you an example. You know, we have a very stringent pace schedule for our contractors. There was a subcontractor of one of our main GCs that threatened to sue us today. ’cause You didn’t get paid. I had to <laugh> one of the main reasons I was initially kind of behind on schedule today. And he was screaming at me at one of the properties and yada, yada, yada.
Tyler:
And he threatened to put a mechanical lien on our property, et cetera. So that’s where I kind of add value. And it, and it doesn’t really take somebody very much you know, intelligence, just some organizational skills and hard enough head. And that since my head looks like, Hey, Arnold, I got a pretty hard big head, you know that I can I, I can usually do well with those guys. You know, I can just tell ’em no, and good luck and, you know, you’re not getting any money out of us without progress and, and the project being done and we pay on a weekly schedule, et cetera. So that’s kind of where I drive value. And then obviously all the mid nitty gritty in between, I’m on site, on properties you know, dealing with managers that quit or dealing with managers that we had an issue with the manager that stole all the appliances and all the cabinets out of the home she was living in. So I deal with all those kind of, those, those nuances where, you know, you can’t really pay an employee enough to kind of drive around and do what I do for, at the scale we’re at right now. So that’s kind of my job.
Charles:
Yeah. Yeah. It’s interesting. The it’s, it’s one of those things that with dealing with contractors, you can, I mean, you have to keep them on track or they will take advantage of you. And I’m not saying like all contractors are like this. I’m just saying that certain ones that you have to, you have that schedule and you have to stick to it, whatever kind of progress they’re making. And yeah, I don’t know. It, it can be difficult. It’s a little daunting the first time through. But it sounds like, Tyler, you’ve, you’ve done this a number of times but one thing that you mentioned is that which I kind of want, this is always one of those nuances that I hear from mobile home park people when we have ’em on, is you talked about renovating homes and about homes, putting homes on property.
Charles:
So is, I mean, when you’re buying properties, what, is there usually a high percentage of these homes that are there that you guys are actually buying? And you’re, what, what is your business plan there? Are you renovating ’em, trying to find people? I mean, I imagine you’re not trying to just rent them out, you wanna sell them to people. How does that usually work in your business plan? And I mean, ’cause I imagine you can’t have it every time perfectly. Everyone is rented out, you know, you don’t own any of the properties. I imagine you own some of them and you’re renting some out, you’re trying to sell some on and on.
Tyler:
Yeah. Yeah. So, I mean, oh, sorry, Jason. Go for it, man. Yeah. Go ahead, man. Well, yeah, so basically, I mean, you know, there, it’s, it’s a, it is an interesting, it’s definitely an interesting question. And that’s the, that’s what’s gonna make or break most operators, right? That question right there unit, what is the unit count in each one of your properties and how is that unit count broken up? And what is your plan to get that, those units, whether you own, whether it’s a park owned home, and just for your listeners out there, and Charles, if you don’t know yourself a park owned home is a rental home. So that’s where the operator actually owns the home and they own the dirt underneath the home, right? So that’s, and you, you take care of all the toilets and issues and maintenance and everything else that goes on in the house.
Tyler:
And then there’s a different type of home, which we like better called a lease with option of purchase home or a rent to own home. That’s where you basically say, Hey, for a blow down payment, you basically get to lease with option of purchase this house. However, the lease, it’s like a triple net lease almost, where, hey, you, you get to take care of the repairs and maintenance of this house until month 60 or month 48 or whatever it is when you own the house yourself. And then really the repairs are on you, you just pay us lot rent and we move on. But again, those, those types of nuances really make or break because, you know, the, a lot of the parks we bought that a lot of other people didn’t want to touch, and then we got a really good discount to, to par discount to what other people were buying stuff at was, ’cause we took on park owned homes.
Tyler:
‘Cause People hate the rentals and they hate the rentals for a good reason because the people that live in mobile home parks that are in rentals are the worst type of renter on the planet. Hands down, I’ll take a d class apartment building any day of the week and we can have that debate. But so we try and convert those. And the conversion is difficult. It takes, you know, a specific type of patients and kind of longevity and you gotta have a really long time horizon. And you gotta have you know, kind of a system of going around and, you know converting those renters and pushing that on ’em, kind of like a drip schedule just like you would with a potential investor or, or a lead that’s looking to sell a a property. So again, those things are, are those nuances will make or break a deal.
Tyler:
But you are correct, majority of the properties we bought in Arkansas have had a lot of rental homes on ’em. We have done a decent job of converting those rental homes. About 12% of our property, or our portfolio right now is park owned homes or rent to own homes. And so you know, about 88% is, you know, tenant owned homes. And we do own one deal that we bought for it was 122 spaces we bought, it was a hundred percent occupied, a hundred percent tenant owned homes. And that property operates at about a 23 to 25% expense ratio. The rest of our portfolio, just to give you a heads up, operates at about a 40% expense ratio. So if you can go in and buy a tenant owned home or a tenant owned home property, the reason those properties are gonna be trading in five or six caps, ’cause everybody that’s trade buying those knows there’s no headaches, right? And the management is just super, super low, right? So if we can find more of those deals, we’ll, we’ll jump on ’em, but they’re, they’re far and few between. So Jason, hey, did I miss anything there?
Jason:
Nailed it, man. <Laugh>,
Charles:
Jason, when you’re, when you’re dealing with investors, when you’re talking to them, I mean, and you’re, you’re gonna get investors that are in all different types of asset classes if they’re within commercial real estate. So why just high level, I mean, why choose mobile home parks over other asset classes? Like why do you see that you’re someone that was involved in multifamily before selling multifamily? So obviously you believe in that asset class as well. Yeah. And then you’ve pivoted to this. So tell me about why, you know, how, how do you sell this to an investor and what are some of the perks that you see that maybe are left out of other asset classes?
Jason:
Yeah, no, I, I get asset frequently. ’cause You know, we all apartments a sweetheart, right? Lenders, every, that, that’s always been a sweetheart. That’s how I cut my teeth. But, you know, just really analyzing I still love apartments. It’s just, you know, just really analyzing and, and just looking at, okay, what’s the most recession? Nothing’s recession proof, right? But like, just looking at, okay, our average lot rent across our portfolio, $350 lot rent, right? You can slap that on a credit card. It’s tough for some of these, if you know, affordable, they might not even have, you know, if they’re paying 2000 a month on a one bedroom, that’s not affordable, right? So just, just looking at the demand, we always hear solve the, the affordable housing crisis. And then what, what are they doing? They’re trying to condemn parts like cars and bulldoze and put up an a class apartment that’s, that is 2000 a month for one bedroom.
Jason:
So just, just really analyzing the, the different asset classes. I mean, storage is a top one, but, you know, just seeing that these big boys coming in and crush you with a pay per click if, if you’re a smaller guy, like run you out of business, it’s just again, this is a subjective, it’s an opinion, right? But just, just really studying it. You know, housing that, that was at least the major food groups, right? Retail, industrial, just we’re behind food, water, and shelter. Here we are, right? So just narrowing it down, that was really what, what sold me. And, and just seeing probably early on it was to a competition deal, right? Everybody was after the, the apartments, then I was saying, okay, this might be a lower barrier, a barrier to entry. And, and now it’s obviously a more hyper competitive asset class.
Jason:
But the, it was a combination, but yeah, it just, the affordable housing and, and the demand, I mean, that, that just was a feel good asset class for me, for sure. And the last note on that is after analyzing all these apartments and different asset with these expense ratios, just originally hearing, oh, you just own the dirt for your listeners, that’s not the case, by the way, right? This is a very active role, <laugh>, so it’s not, but it sounded good and it made sense when you hear it like, oh, you don’t own any of the homes that the tenants own ’em, and we just collect on the dirt. And I was like, oh, yeah, that sounds amazing. And that is, that’s far from the truth. But it’s, it’s a good concept. And, and yes, when you do eliminate the park owned homes, there is a less management. I mentioned our portfolio. That’s that, that’s a superstar asset. 24%. Usually when I see that in a broker package or an owner tell me, I’m like, bs you’re full of it. There’s no way. But it is possible having those, those all tenant owned homes, direct build and combination, combination of things for sure.
Charles:
No, that’s great. Like when Tyler was explaining it, he was saying, and he said then 12%, and I thought how he was explaining it, it was gonna be a lot higher than 12%. 12% I would think is very low. But you know, you’re compensated by the value add and that’s in any asset class or any business. So, you know, you guys are going in there and you’re taking on trouble problems. And Tyler’s out there you know, making things happen in the fields getting these things sent, sold over to people, you know, to people at tenant that are already in there. So that’s great. Do you have money sitting in the stock market and you’re worried about it? Or worse, you have money sitting at the bank not keeping up with inflation? My name is Charles Carillo, founder and managing partner of Harborside Partners.
Charles:
And since 2006, I’ve been investing my money and my family’s money into income producing properties. These are real assets, real properties with real addresses that produce real cash flow. At Harborside Partners, we provide passive investors who love real estate with a turnkey investing solution. If you want to put your money to work in real estate but can’t find deals, don’t have the time to get funding. And the last thing that productive people want to do is manage real estate. We find the deals, we fund the deals, and we manage the tenants, the termites and the properties. Partner with [email protected]. That’s invest with harborside.com. Go to invest with harborside.com. If you love real estate, you like the idea of passive income and believe that income producing properties will appreciate over time, go to invest with harborside.com. That’s invest with harborside.com. So one of the things I see is that when I hear from mobile whole park investors, one of the other challenges, so you have park homes, homes, the other thing I see is that like, infrastructure on these properties. So are there maybe going to that slightly and then also like what other challenges are you seeing out there? I don’t know if Tyler, maybe you can explain more of this. Whatever it is that you’re seeing with Holt home parks that maybe you have to be really aware of and that you’ve gotten more aware of over the years.
Tyler:
Jason, you want me to take the utilities?
Jason:
Yeah, yeah, yeah. Take the utilities.
Tyler:
That’s not okay. Alright. Alright. Yeah, so, you know, private utilities, those really scared us initially. I have to say, we actually just got a property, so I did a whole LinkedIn post about this. If you’re looking to, you know, for a bedtime story, I did a whole piece about private utilities and I ranked them by risk level and, and everything. So if, yeah, if you’re looking to looking to go to bed feel free to read that. It’s on our, it’s on our LinkedIn page, M HCI group. So but basically, you know, your, your least amount of risk obviously is your your city utilities, you know, city water, city sewer. The city is going to charge you obviously more for that, for being on their utility system, but there’s little to no risk. You know, I would say that just kind of going to your second question, and you know, segueing into that, you know, you, you gotta be, you gotta look at the infrastructure of your asset.
Tyler:
You’ve gotta do a sewer scope before you buy it because we’ve probably replaced between all of our properties now, we’ve probably replaced 25,000 feet of sewer line, maybe more between our, our 700 units, because, you know, and I was, I always, you know when this was happening, you know, I was, it wasn’t so funny, but looking back on it, it’s kind of funny Now, I remember taking a photo of JA to, and sending it to Jason and this video, we were doing a $3,000 sewer project, like four or five months into our first deal that we ever bought. And we had to spend like $6,500 on it. And it was like breaking us, it was like breaking the bank. Like we didn’t, like it was not part of the plan, we’ll put it that way. And we found in that we found Orangeburg Clay tile cast iron scheduled 10 PVC, and oh God, what was it?
Tyler:
And cement cement sewer pipe. So we found five different types of sewer lines in basically you know, 3000 feet of, of line. And it was, it was wild. So the sewer infrastructure, even if it is on, you know, city water, city sewer, you gotta do a sewer scope on it because they’re, a lot of these parts were built in the fifties and I think a that catches, and it caught us, but our pants down, a lot of operators off guard on that, right? But again, it’s still the safest type of utility system if you had to pick one, right? The next one down from that is gonna be septic tanks. We have a park with septic tanks on it, so it’s on city water, but it’s on septic tanks. And then again, the septic tanks to us are, are pretty low risk, especially if the, the, if the septic tank blows up and not the leach field, it’s really easy to replace it.
Tyler:
The leach field blows up and you’ve got a really strict health department like you’re in California. You gotta be really wary of that. But again, they’re pretty easy to kind of swap in and out. It’s not gonna be a deal killer. You know, for you, you know, kind of the next one down from that is gonna be a package plant. A package plant is really where you almost act like the city, right? So you’ve got your own like, you know, wastewater treatment plant package plant that actually filters and cleans the water. Then it comes out a little tube usually into like a, a stream or, or something. And what happens is, is that the, the, the, the, you know, basically you, you’re cleaning the sewer on site. Again, though, one of those blows up that could be, you know, 500,000 to a million dollars.
Tyler:
So that could kill your, your project especially if it’s a 50 space property, right? I mean, think about that. You know, you spend a half a million dollars on sewer infrastructure for 50 space property paying you $300 a month. Like the property, the property may not, may only be a couple hundred thousand dollars more than the actual sewer infrastructure. So you really gotta dive down deep on due diligence on those. And then the, the most risky is gonna be a lagoon. And we’re actually under contract on a property with a lagoon right now, but we have, you know, we’re getting it at a crazy low price per space, and we’re gonna raise the capital to go replace it if need be. And the due diligence we’re gonna do is gonna be, we’re gonna, like, we’re gonna do every piece of due diligence.
Tyler:
We have to on that lagoon and dive down the deepest you could possibly go when it was built. You know, all the, the mechanisms that basically, you know, lagoon is really just like a big, you got solids that float to the bottom, liquids that float to the top, they burn off. And then you gotta get the suit that basically the, the solids cleaned out every once in a while. So it’s a pretty you know, Fred Flintstone way to collect your pretty caveman way to, you know, collect your sewage of your property. But it’s definitely it’s, and it’s very risky ’cause a lot of, a lot of cities are getting rid of them. They’re actively getting rid of those. And if you don’t have city sewer near your, your place, they’ll make you connect. So if it’s a couple miles away that’s multimillions of dollars, you’re, you’re gonna default, right? And they’re gonna tear the park, the park down. So Jason, did I miss anything there?
Jason:
<Laugh>? No. The sewer, yeah, it, it can be a nightmare situation. So if you’re not, if you’re not doing your due diligence, then yeah, you could run into some, some big problems. So yeah, we’ve definitely done both. So we, we do the sewer scopes. And
Tyler:
Jason, did you wanna elaborate on
Jason:
Oh, other, other problems? I’m sorry.
Tyler:
Sorry, I was gonna say, Jason, do you wanna elaborate anymore on on the, you know, the pieces that maybe operators miss, you know, due diligence or otherwise?
Jason:
Yeah, yeah. I mean, something investors too. I think the second piece Yeah, what, which investors look out for, right? Like, I’m sorry I if you hear that noise here. But yeah, I mean just even, even on the, the, it depends is the man is the investors, he trying to be a mobile home park owner or just an investor as a, a limited part, right? Because those are, those are obviously two big lenses. You know, if they are trying to acquire a mobile home card for themselves, again, realize this isn’t just some passive investment. If you’re trying to be active and just think, I mean, we buy a lot of these from doctors and high net or guys that think like, oh, hey, I’m making a lot of money, here we go. And then they just, it’s mismanaged and it’s not as a passive role, right?
Jason:
So you know, on that side, just really understand it’s not, and if you are investing, just look at your operator, right? Never own an apartment building, right? So I’m not saying it’s an easy, but the, if you do the old Google search on management companies, there are a dime a dozen on apartments. Well, in mobile home park land, not so much, right? So we’ve had to vertically integrate that team, which is very challenging, right? Because it is I mean, financially really, it doesn’t even make sense when you’re taking five or 10% on $300 lot reno opposed to 18 or $2,000, right? It just from a business standpoint doesn’t make a whole lot of sense for third party. So, you know, that that’s one thing as an investor even just looking to invest, like, hey, are these, are these guys just operating off some pro forma deal?
Jason:
Or are they operating off a, a true property management plan, right? Because that is the lifeblood of this business is you, we love deals, we put ’em together, but it’s how is this thing getting managed? It’s not just we’re painting a, a built in putting, you know, increase rents. There’s a lot more moving pieces, right? Selling the homes to the tenants, the park owned home. That’s probably one of the bigger challenges is that conversion, right. That we touched on earlier. So yeah, I mean those, those I mean during due diligence, yeah, I mean that’s the big one is, is just the, the sewer, I mean, other big problems you know, just, just seeing if what the seller’s telling you is accurate, right? I know that sounds like common sense, but you know, sometimes they don’t even know. For example one of our top perform assets, it was a smaller 33 unit, well that was originally a 39 from the seller, you know, he said, oh, it’s 39 sites.
Jason:
Tyler goes, walks, he goes, this is weird. There’s 33 pads. So there’s, oh, well, I don’t know, that’s weird. It’s like, oh yeah, that is weird. You’ve owned this for 25 years. Where, where they just vanish. You know? So that’s a big, that’s a big change in your underwriting. So you know, just, just really not just taking word for it, right? And, and just really diving in. And I guess the other thing is just yeah, I mean cash pay, I mean, bring this up department guys I’ve talked about a couple times, it’s not even a thought like, oh, payment switching, right? But it’s not even thought about. Usually in apartments now, everything’s online pay, but you know, where we’ve had our, our first deal was all cash, and we said, and it, it wasn’t even in put in the bank. And we said, well,
Charles:
How,
Jason:
You know, how, how do we do this? Well, Tyler and I had to fly there, sit in lot three where everybody was coming in from the third to the fifth, and we literally had to watch cash change hands because how do you confirm that otherwise, right? Like, there’s just, there’s just things where you’re not really thinking of that you would have to do. And then you get in these situations, and if they write down on a note card that Sally pays 400, how do you print that? Right? So just, just those little nuances are you a big deal that goes overlooked sometimes, but you learn, learn quick what to look for, so,
Charles:
Yeah. Yeah. Not all the cash is making it to the bank, so it’s difficult to do that due diligence when you’re doing it. And I’ve worked with apartments like that before and it’s, it’s difficult. I mean, it’s, it’s, it’s a difficult way of trying to confirm that. And there’s only so many ways you can do it. But yeah, that’s Jason, you mentioned earlier on about how you’re finding a, how you’re finding mobile home parks. And I imagine a lot of this is since you are kind of nuanced in working with brokerage, and I imagine going straight to owners is one of the things that you guys do, and I imagine that goes hand in hand with how you’re financing these deals. So if you mind just you know, briefly going into how you normally find deals and then, I mean, what are the lending solutions available to home parks to today, mobile home parks?
Jason:
Yeah. So yeah, that, I mean, our approach is always direct. Yeah. And having the brokerage background, obviously going direct to seller, we know how to get ’em on the phones. And it’s still to this day, a tagt EO I’m Cole calling, setting the meeting, Tyler’s meeting. I mean, we still are to this day, two man banding. We are obviously leveraging brokers and, and, and some other resources. So we’re working, trying to work on the business, right? Instead of in it so much. That’s, that’s always tough, right? ’cause I enjoy part of that, putting the deal, you know, Tyler’s meeting him and but yeah, I mean that’s, that’s really 80% of our deal has been, you know, once we landed that first 68 unit that ended up being an owner finance. So I’ll probably blend some of the financing and, and the acquisitions.
Jason:
And Tyler, you can hop in here too with the, the banking. But yeah, it’s, it’s, once we landed that first one, just, you know, my always assignments was, Hey, first deal, then the easiest call is next door, right? You start just calling the block, calling around the block. And now that you own, now you’re, you’re aligning yourself. It’s not just a broker call, right? They’re not just getting indated with, Hey, I wanna sell, Hey, I got a 10 31 buyer. Or hey, like, it’s like, Hey, I own right across the street from you. That’s a way warmer call than, oh, hey, I wanna sell your park or have a buyer say, Hey, I own down the road. I wanted to introduce myself. And we own, we’re neighbors and oh, just, and when you’re ready to sell, we’d love to send you a strong offer.
Jason:
Oh, really? Well, and then that’s how it started. And then it was the next, I think five deals. They were individual sellers and it was literally just cherry picking just around the block. Again, a direct call. Tyler would meet them. You know, the good old boys club, they, it’s not like down in Florida in New York where they’re used to it, you know, just on the phones. It’s a, Hey, I wanna shake your hand and meet you at the table and, you know, have a beer or whatever it is. So that’s really how, how those got got started and, and they’re tough to finance, right? So that’s why that first one was an owner finance 50% down. We, we raised, you know, the equity brought in and some of our personal capital and, and got the deal done. And then we realized that every other deal isn’t always gonna be financed.
Jason:
So we started building those relationship with small banks because most lenders won’t touch a, any, you know, 500 thou or we had one deal. It’s 22 units, 248,000. Where are you getting that loan from, right? It’s, it’s a mobile home park. There’s some park going homes, it’s 250,000. Who wants to spend time on that as a lender? It’s not worth their time. So we, we started developing relationships with local community banks where we, they started seeing, wow, you guys have a business plan. You’re here writing us where Tyler’s in town meeting ’em, I’ll come in every quarter or six months, you know, I’m probably in the way more anything, but it’s good to, you know, see some, get some face time and, and yeah, those, those small community banks has really been where we’ve, we’ve grown because they see the deposits, they see, you know, Hey, these guys are making payments on time, like what they’re doing. And a lot of other guys aren’t lending. So these small banks actually love that, that opportunity to even get those those deals done. So Ty
Tyler:
Yeah, I mean yeah, I mean it’s, it’s you know, the, the lending, the lending situation was interesting initially really building relationships with those, those other kind of local and, and regional banks. Really it was the only way we got our first couple of deals done. Without those local banks you know, we never would’ve got a deal across the finish line. The amount of times we got told, oh, it’s a $2 million minimum asset price, you know, minimum purchase price. So $1.4 million loan. I mean, the, the nobody wants to lend on a $200,000 you know, mobile home park. And you know, this really awesome we still gotta relate, actually, we’re getting a line of credit from him shortly. But he was the lead lender at this bank called Gateway Bank here in Arkansas. They got two branches and he goes, we love 200,000 deals.
Tyler:
He goes, we don’t wanna lend any one person or any one organization more than 1.2 million. So in total, total, right? And so it was, it was great, you know, it was it was, we still have a good relationship with them. And the other interesting thing about caring kind of below those local and community lenders is they they’re gonna take, you know, a lot of your underwriting at face value and kind of what, what, you know, where you kind of see proformas, they’re not the most sophisticated bunch. So it allows you to kind of kind of dictate the terms that you want, construction loans, et cetera. And they’re really malleable. If you, if you put together a good presentation, I’m sure you’ve dealt with this Charles as well, so I’m, I’m saying this more for your listeners. There’s people that will let you, you know, kind of hear you out. Like if you, the smaller the bank, the more chance you have to kind of go to the, the top dock. You know, they probably only have one guy that underwrites deals and he probably has never had any experience with mobile home parks, right? So it’s, it was definitely those local and community lenders where saved us at the beginning there. It’s, it’s good. So
Charles:
Yeah, it’s one thing that I have found, and when I speak to, if I’m mentoring someone or whatever it might be, and in my experience, anything, you know, you go with some of these larger, larger banks or your you know, government sponsored entity type lenders, agency lenders, and they want a stabilized deal, million dollar loan amount, all this stuff, right? If you’re dealing with any type of unique property, and I would consider, you know, old mixed use properties or small apartment buildings or mobile home parks as unique properties. ’cause That’s what I used to buy a lot. And it would be something that it was they would work with you, they knew the area, they’d come and see the property, right? Like, you’re never gonna, like, people are like, oh, I found this lender online. That lender is not coming to your house, they’re not coming to this property.
Charles:
They don’t care about it. I’m dealing with someone and it’s usually like a a three person credit committee, like local, they’ve driven by the property, they’re gonna stop by on their way to lunch. I mean, this is how you build relationships. And these community banks are instrumental to properties that are smaller commercial properties that are maybe don’t fit the box of the traditional lender. And like, so anybody out there that’s trying to finance anything, build, you know, speak to local banks, credit unions and you know, see if they have an appetite and if they do open up your accounts, like they do their bank accounts there, LLC accounts, all your stuff there, build that relationship. And that’s, I mean, that’s how you’re gonna get great. That’s how you’re gonna get great financing for your properties. That’s just my take on from my experience.
Jason:
They wanna lend money. That’s it. I mean, that’s their job, right? So they, you find those new banks and they’re hungry and they see somebody else hungry that has a good business plan that they can execute on. I mean, even if you didn’t have a track record, right? There was a time we didn’t have that track record. So it was showing ’em and, and just yeah. Build, building that relationship. So it’s worked out.
Charles:
So as we’re kinda wrapping up here, guys, I just wanna say like, you know, you had some great advice about doing about your, you know, doing due diligence on properties, finding deals, getting ’em financed. What would be, you know, high level, maybe give me your couple top main advice or key takeaways from your experience over the years that you might give to a new investor that wanting to actively purchase a mobile home park or possibly act passively invest in one just kind of food for thought.
Tyler:
Yeah, I mean, you know, one of, one of the big things that, that I would say is, you know, if you’re buying, you know, heavy value add so you don’t have some big institution behind you or some big private equity shop, your last name, you know, isn’t, you know, gates or Zuckerberg then you know the, you’re gonna have to go after those higher yielding assets ’cause you’re gonna have to deliver something to your investors, right? That’s just the, the way it’s gonna have to happen. And if you’re buying heavy value add or even light value add, you’re gonna be dealing with park owned homes. And you know, again, if you are in Orlando, Florida, Chicago, Miami you know, Los Angeles, the big primary markets, park owned homes fly off the shelves. They do, right? You can go sell handyman specials all day because the single family home prices are so freaking high.
Tyler:
So if you find a good deal in one of those markets, by all means you don’t, don’t take this advice. But if you’re buying in Little Rock, Arkansas where you know it’s more tertiary and you’re gonna have to put a little more work in or, you know like Ann Arbor, Michigan or Indianapolis, right? Little less stronger, you know, probably secondary, tertiary markets where a lot of guys get their start, you know, you’re gonna have to go out and over raise on the capital expenditure side, especially in your first deal because you are gonna run into a number of problems with heavy turnarounds and you’re gonna have to over raise for that, or you’re gonna have to, you know, take money outta your piggy bank to make the deal hole because you’re gonna run into sewer problems, you’re gonna run into water problems. The, the costs are gonna be more than your contractors told you initially because, you know, they were high that day or they just got outta jail or something.
Tyler:
You know, they’re the worst contractors. The, you know, they, you know, you’re gonna have to build out subs. Things are gonna take longer, right? So if you think it’s gonna take eight months, build in 15, if you think it’s gonna take 15 months, put in 24. If your investors are not comfortable with that, or that doesn’t work for your timeline, then pass on the deal. ’cause You’re always gonna need more time and you’re probably gonna have to build in a 15 or 20% margin as well for your capital expenditures. So I, that’s what I really recommend. That has been thank god Jason and I had enough capital in our own accounts, kind of our, for our first deal because we ran into a number of those problems and we fed that deal when we, when we read over, but when we went over budget and you know, thank God we didn’t put anybody else in the line of fire on that, but it was, it was it was an eye-opener for us and then we really dialed in those costs, right?
Tyler:
Another thing I’d recommend, you know, besides just the regular due diligence is if you’re buying a small park, you better have either an operator on the ground that’s an owner that can act as your manager, right? Or you better have scale within the area to build out it. Because a small park is never gonna be able to support a manager a 50,000, $40,000 a year salary. Again, you guys, everybody, all the listeners out there you know, you guys can do your own math, but at 20 space property paying you $300 a month, right? The entire net operating income probably for the entire year would go to your manager then, right? So that’s not including debt service or anything. So it’s just the, the economy’s a you need economies of scale to then build out that management team. And if you’re looking to buy yourself a job, again, don’t take any of my advice on that, but you, you gotta have economies of scale in this business.
Tyler:
‘Cause The lot rent is just not enough to support any sort of living wage. And trust me, if you’re building any sort of scale, you want managers on the ground that wanna keep their job that are interested because having bad managers makes your life a nightmare. It makes your life a living the hell. We’ve had, you know, we have, we’ve had managers that threatened to burn down our, our houses. They’ve been living in pour concrete in their sewer lines when they were leaving steel stuff, et cetera. So you, and we underpaid those managers, right? And we underpaid ’em ’cause they, we didn’t have economies of scale at the time. So those are kind of my key takeaways. Look over raise, give yourself more time and, and have some economies of scale in the business if you’re looking to build a portfolio.
Jason:
Well, Jason, anything to add while we while we close up here? Yeah, I mean the short one on my end is, I mean, really it just come buy, right? Right. We talk about that all the time is we buy, right? And I can see how guys can get desperate, right? Where, I mean, especially those two years we were getting our teeth kicked in. I mean, it’s almost like, oh, we wanna overpay or oh, and just, we, we have not done that. You know? And, and we got asked actually the other, a couple weeks ago, investor where we got a big raise right now. Hey, have you lost any money? Anybody’s money? No, thank God, right? <Inaudible>, have you guys had a capital call? No, thank God. Right? So it’s, we’ve done that by buying, right? You know, and, and not getting, you know, I’ve had a mentor kind of sticks in my head is you know, greed, it’ll make you bleed, right?
Jason:
And, and that kind of stuck home and, and, and you also coupled out with, hey, a bear will always make money and a bull will always make money, but a pig will always get slaughtered, right? So just understanding, hey, don’t get desperate to a deal. Don’t just make emotional decisions here because I, again, going back to that doc and guys that are trying to get into this, it, it’s, it’s competitive and, and sometimes it, some emotions can take over just to get that first deal done. But yeah, buy, right? I mean we just, we just make sure, you know, we’re buying, right? And whether you’re an investor buying your own deal or investing with an operator, just really understand what the deal is and not just focusing on some, you know, three x multiple and some pie in sky IRR that is so subjective, right? Five years down the road. But yeah, by, by, right? That’s that’s it.
Charles:
Fantastic. Well yeah, that was the first thing one of the first things my dad taught me in real estate was the money is made on the purchase. So thank you so much you guys for coming on today. If how can everybody learn more about you guys company and what you guys got going on?
Tyler:
Y yes, you
Jason:
Could mh i group.com, you know, we’re always on email. Yep. [email protected]. Colorado h group.com and
Tyler:
Oh yeah, you could. We’ve got, you know, MHCIGroup.com and we also have a a LinkedIn, you know, like I said, we have, I think we post some pretty funny content on there and some pretty interesting stuff. You know, Jason’s kind of more on the, the investor side of things. So syndication structures, what you should know as an lp, et cetera. And I’m kind of more on the, the operation side, so I tell, you know, funny stories on there. Sometimes, you know about, you know our tenants that are female that look like Brian Lacer or Mike Tyson to try and take a swing at you and fall in mud puddles and, you know, some other stuff like that. So people might find it entertaining as well as insightful and kind of what you have to do on heavy turnarounds. So you check out our LinkedIn pages you can just find us on there and then you can also email us at, you know, Tyler at MH c group or Jason and Mh CI group. So,
Charles:
Alright, well, sounds great guys. Thank you so much for coming on today. I will put that information, the contact information in the show notes and I’m looking forward to meeting you guys sometime face to face here in the near future.
Jason:
Likewise Charles, thanks for having us, some really appreciate it.
Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.
Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar, LLC, exclusively.
