949-392-1999
SHOW NOTES FOR EPISODE 485: SYNDICATING MOBILE HOME PARKS
One real estate asset class with the highest returns is mobile home parks, also called manufactured housing communities. Successful mobile home park investor and owner of Keel Team, LLC Andrew Keel shares why mobile home parks are such good investments and some of the ways investors can get involved, including syndication.
What You Will Learn
- How to get started in mobile home investing with only a few thousand dollars buying used mobile homes
- Why he doesn’t want to own any of the mobile homes in his manufactured housing communities
- Where the best parts of the U.S. are to invest in mobile home parks and why
- Why he started syndicating to purchase more parks
- How to fill empty spaces in a mobile home park with used trailers increases the park’s value exponentially
- Why tenants in mobile home parks nationally have only a 5% possibility of them leaving
- A simple secret they do in every one of there parks that adds new life to their parks
About Our Guest
Andrew Keel
Andrew Keel is the owner of Keel Team, LLC and his team currently manages over 20 manufactured housing communities across ten states. His expertise is in turning around under-managed manufactured housing communities by utilizing proven systems to maximize the occupancy while reducing operating costs. He specializes in bringing in homes to fill vacant lots, implementing utility bill back programs, and improving overall management and operating efficiencies, all of which significantly boost the asset value and net operating income of the communities. In order to successfully implement his management strategy Andrew or his team usually moves on location during the first several months of ownership to implement their management plan.
More About Andrew
- Started out flipping houses in Orlando, FL
- Unfortunately, it provided inconsistent income – he’s close a deal and would have to wait 2-3 months to get paid again
- Flipping was also becoming more competitive
- He got a lead on two manufactured homes in Ocala, FL built in the mid 1990s
- He was able to buy them both for $2,200 cash
- He didn’t know what he was going to do with them
- Went home, got on YouTube and typed in “How to Make Money on Mobile Homes”
- A guy named Lonnie Scruggs popped up and he wrote a book called “Deals on Wheels” that talked about making “mailbox money” with mobile homes
- He cleaned up the homes, did minor improvements, spending less than $1,000 on each
- He put both up for sale and was able to sell both for $2,500 down and $250 per month for 5 years
- The park has to screen and approve tenants so he’s likely not to have defaults on his payments on those sales
- The demand he had for the homes was off the charts and that attracted him to the manufactured homes space
- He did quite a few more of those deals
- He eventually met a park owner who told him he should invest in the entire community because there’s tax benefits and more leverage when you own the community instead of just the individual mobile homes
- He went home and wrote with a dry erase marker on his refrigerator that he was going to buy a mobile home park
- That was in 2015
- He then started going to the mobile home park boot camps (Mobile Home University or MHU), read the books and any other content on the subject he could get his hands on
- From his flipping/wholesaling background, he knew how to generate leads
- He created a data base and started mailing letters to mobile home parks across the U.S.
- He got a lead on a park near St. Louis
Buying His First Mobile Home Park
- He contacted someone who attended the MHU boot camp with him who agreed to finance the acquisition
- Andrew was the “sweat equity” partner
- He moved to St. Louis
- He was able to bring in 8 mobile homes for the empty spaces at the park
- They made some other improvements to the community staying below budget
- It ended up being a home run of a deal
- They refinanced within 2 years and the investor got all his money back plus a nice profit
- The investor said, “Let’s do some more!”
Expanding His Mobile Home Park Portfolio
- They proceeded to buy 4 more mobile home park communities together
- After that, he was able to bring in some friends and family to invest in other acquisitions
- Today, they syndicate to purchase mobile home communities
- They mostly do cold calling, also utilizing VAs (virtual assistants), to find off-market deals
- He buys parks, adds value and gets their money back in 5 years through a re-finance, but he continues to hold on to the parks
Their Approach to Ownership
- They never want to own the individual mobile homes
- If a tenant is renting their mobile home, they try to get the tenants to buy the home and will set up very favorable terms for the tenants to pay-off the home in a year or two
- A lot of your operating expenses are reduced this way
- If a tenant owns the mobile home there is only a 5% possibility of them leaving
- This reduces your overall operating expenses and maintenance and repair expenses significantly
- They just want to own the land
- If there are empty spaces, they will fill them with other mobile homes
- A lot with a mobile home is valued at around $30K
- When they bought the 8 mobile homes they paid $15K for each of the homes and that included the transportation
- Making $15K in that transaction
- A lot with no mobile home on it is worth nothing
- They buy their parks, do improvements and re-finance after 5 years, and continue to paying dividends for perpetuity
- And because mobile home parks have the second lowest default rate of any commercial property, Fannie/Freddie agency loans offer great rates, and banks are interested
Mobile Home Parks as an Investment
- There is a strong stigma that goes with mobile home parks, compared to apartments and other commercial assets
- That artificially raises the cap rates for the parks
- Cap rates are generally 3 percentage points higher than any comparable multifamily investment
- That allows for significantly higher cash-on-cash returns
- 80% of the mobile home parks in the U.S. are owned by mom and pop owners who’ve owned the assets for 20-30 years and are not maximizing the net operating income
- If a lot goes vacant, they just leave it
- They’re not as motivated to operate these assets at their full potential
- As a result, there is a lot of deferred maintenance because mom and pop are using them as retirement vehicles to provide income
- When is company comes in and puts up new fencing and signage and clean up the landscaping, trim the overgrown trees, it really has a positive effect on the residents
- It sets a new tone for the new management and how they’re going to run things
- One of the biggest reasons Andrew likes this asset class is that the number of mobile home parks is declining across the U.S.
- If you look at it statistically, the demand is off the charts for affordable housing but the supply is shrinking
- The reason the supply is shrinking is:
- Higher and better use for the land – you can put apartments or other multifamily on the property for a much higher
- There are more mobile home parks being torn down and repurposed than there are mobile home parks being developed
- It’s also difficult to get mobile home parks approved for zoning purposes because of different initiatives like “not in my back yard”
- Mobile home parks generate low tax revenue for municipalities because the taxes generated by a family of 4 in a mobile home is maybe only $100 a year
- It’s also the most affordable form of non-subsidized housing in the U.S.
- It could be the answer to our affordable housing crisis
Biggest Mistake
- They made many mistakes in learning the asset class
- One of the biggest was not raising enough capital upfront
- They planned to use cash flow to cover capital expenditures (i.e. infilling vacant lots, etc.) but it just took too long
- It hand cuffed them from getting the asset to full stability mode as fast as they should
- They now come in fully capitalized, ready to execute the business plan
- It just accelerates the whole time horizon to re-finance and return of the initial capital
- They planned to use cash flow to cover capital expenditures (i.e. infilling vacant lots, etc.) but it just took too long
Biggest Success
- One thing they do on every one of the properties they purchase is to put in three-rail white vinyl horse fencing across the front of the property
- That has brought life to all their communities
Advice for Old Dawgs Looking at Real Estate Investing to Help Them in Their Retirement Years
- There are various opportunities for people over 50 to invest in mobile home parks
- On the passive side:
- Manufactured Housing REITs – highest performing REIT in the last decade
- Investment funds – Investing in the purchase of 20-30 mobile home park communities over a certain time period
- Syndication – His company does this. A group of investors pool funds to purchase a certain property
- On the active side:
- Flip Manufactured Homes (Lonnie Scruggs model) – If you want to invest in mobile homes themselves, be cautious on repair and maintenance costs. You won’t find replacement items at Home Depot. You need to special order and they are expensive
- Purchase a Mobile Home Park – Not as management intensive, nor as costly with maintenance and repairs as single family and multifamily properties, especially if you follow Andrews model and only own the land under the mobile homes. It’s also vert tax-efficient. Mobile home parks are depreciated over 17 years as opposed to other asset classes at 27.5 years
Current Business
- He is going to continue buying mobile home parks and expanding his team
- They have a goal of acquiring $100 million in assets in mobile home parks over the next 10 years
Rap-It-Up
- Favorite real estate book: Forever Cash by Jack Bosch
- Favorite business book: Clockwork by Michael Michalowicz
- Most valuable web site for success (other than your own): BiggerPockets or YouTube
- Favorite app: Slack
- Favorite quote: “The harder you work, the luckier you get.”
- If you lost everything – all your assets – and had to start all over, knowing what you already know, and you only had $1,000, what would you do to launch your real estate investing business? I would spend it on educational material, seminar or something to further educate myself on his asset class and skillset. Then he would go and try to find properties and raise funds to purchase mobile home park investments.
How You Can Reach Andrew
IF YOU LIKED THIS PODCAST, we would love if you would go to iTunes, Stitcher, GooglePlay, iHeartRADIO and Spotify and Subscribe, Rate & Review our podcast. This will greatly help in sharing this podcast with others seeking to learn real estate investing as a means to achieve a successful retirement.
Check out our other podcasts at olddawgsreinetwork.com.
Get a FREE copy of our 3-Minute Rental Property Analyzer at olddawgsreinetwork.com.
Additional Episode Sponsor: Meno Studio – menostudio777@gmail.com
