BiggerPockets Real Estate Podcast - 339: 60,000 Tenants?! How Frank Rolfe Built a Mobile Home Empire

Episode Date: July 18, 2019

Over 20 years' experience in mobile home park mastery! On today’s show, Brandon and David interview Frank Rolfe, an experienced mobile home park investor with TONS of great advice to share—and share he does! You won’t want to miss Frank’s incredible tips for using seller financing to buy parks, staying low risk while scaling, and the beauty of owning “small cities”! He also gives fantastic advice for making “stakeholders” out of tenants, describes what the perfect mobile home park setup looks like, and discusses how to find pocket listings no one else is seeing. Frank goes on to share the incredible story of how he bought a mobile home park with a wrestling ring in the back and how he sold it for a $1 million profit seven years later! In addition, he talks about his strategy for finding the perfect resident manager and insuring yourself against embezzlement from your management team. This is one of the most information-packed shows we’ve ever done in the MHP space, and you’ll be blown away by the amount of content here. Download it today! In This Episode We Cover: How Frank uses seller financing to buy deals he never could with a bank How he stays low risk while scaling How he got started with a billboard business How he owns “small cities” The key to doing seller financing correctly How he rents to “stakeholders” not just tenants What the perfect mobile home park setup looks like Why he loves mobile homes (aka "the gem" of real estate) Why mom and pop-type owners love mobile home parks How the average park can be bought and rents doubled year one The win-win opportunity mobile home parks provide for tenants and owners The mistakes he made on his first deal and how he learned to avoid it The No. 1 thing to look for when buying a park His strategy for finding pocket listings from brokers The 5 ways he finds parks to buy And SO much more! Links from the Show BiggerPockets Forums BiggerPockets Business Podcast BiggerPockets Podcast 234: Tenants, Evictions, & The Dark Side of No Money Down with Ryan Murdock 21st Mortgage Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 339. We have about three to 400 employees. If you took a mobile home and put it on either side of the road, that road would go 100 miles. We have 20,000 lots, probably about 60,000 people roughly in those properties. So it's basically we manage a city. That's what it basically means.

You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online. What is going on Bigger Pockets World? This is Brandon Turner, host of the Bigger Pockets podcast,

here with my favorite co-host of the day, David Green. What's up, buddy? What's going on, Brandon? How are you doing over there? Man, I'm good. I'm good. Yeah, life is good. I'm ramped up my real estate investing business quite a bit.

In fact, we're really, really driving. I made five offers last week on mobile home parks. Five offers in one week, yeah. Zero accepted. But you know what I did about that? I cried. And I said, this game sucks. I'm quitting.

And I'm watching a lot of TV now. So, no. Did you have some Dancing with the Stars episodes on TVO to get you through that? Yeah, I did. I had to get through that with some dancing with the set. No, like, it's a numbers game. Like, it's funny, like, I'm working with Ryan Murdoch, right? So he's a good buddy of mine, works with my company.

We're partners on a park already. And he's also part of bigger pockets. Anyway, Ryan's everything. We're talking, and he's like, yeah, man, we got a rejection from that offer we made. And I'm like, great, all right. And he's like, it's funny because, like, it's a different response. And I think most people have is like, great. We got a rejection.

That's awesome because it's one closer to the next deal. And if you can keep that attitude going forward all the time, like every no, is just one step closer to yes. I know I got to make 10 offers before I get one accepted. That's about my rate. So great. Rejection is better than just here and nothing because now I'm just in limbo. Anyway,

that's what's up with me. We share some really good advice on the podcast today, especially make sure you listen all the way to the end where we get into this idea of taking action is so much better than worrying about taking the wrong action. Like writing offers that get rejected is way better than not writing an offer. Even though it sounds like you had the same result, you learn so much more from writing the offers that you get that much closer to the one. I'm kind of going through something similar with my real estate team and trying to hire people.

We're looking for people in the Bay Area that want to join work on my team. And it's really hard, man. Finding good employees is tough and finding talented people is even tougher. But every single time you try and it doesn't work out, you get that much closer to what the right person will look like and the right system and the right training. And then you know that once you hit, you find massive success. And that's one of the things I just want to encourage all the listeners, is listen to this entire show. Because Frank has over 20 years of experience of doing this. and he's learned a ton. He would have learned nothing if he had taken no action in the beginning.

There you go. Well, speaking of Frank, today's guest is Frank Rolf, one of the largest mobile home park operators in the country. Now, if you don't care about mobile home parks, that's fine, listen to the show anyway. We cover a ton of good stuff that applies to everybody, including seller financing,

how to get the best of seller financing, how he was able to buy a $400,000 deal for just $10,000 down with seller financing. Later, you got to hear how much profit he made on this. We actually cover that in the deal deep dive. Incredible. He talks about five different strategies he uses to find mobile home parks, and the same strategies would work for any type of real estate, really that you're looking at. Really good stuff.

Also, he's got a really funny story about how he bought a property with a makeshift wrestling ring at it among some other. It's really good. Lots of good tips on managing properties, on building a team, on just running the numbers, all sorts of stuff today. So again, I think you guys will love this show. But before we go any further, let's get to today's. Quick tip.

All right, today's quick tip. This is huge news, you guys. For the first time in seven years, Bigger Pockets is hosting a real-life in-person conference. It's going to be an incredible opportunity to learn from and network with a ton of big names in real estate investing and a lot of your peers, including people like me. This guy here, David Green, Jay Scott, Carol Scott,

both from the business podcast, Chad Carson, Scott Trench, Mindy Jensen, Ken Korsini, David Osborne, New York Times bestselling author, David Osborne. I'm a huge fan of his. Matt Faircloth, Anson Young, I mean, just and so many more. We're going to be having this conference this fall, 2019, October 6th through 8th in Nashville, Tennessee, one of my favorite cities at the beautiful Opryland, Opryland Resort. And make sure to act fast.

This thing is going to sell out quickly. To get your tickets today, go to BiggerPocketsconference.com. That's BiggerPocketsconference.com. and do make sure to act quickly because this is going to sell out fast. And that is our quick tip today. I am pumped for that thing. But we can talk about that and we will in the coming weeks. Most investors spend more time chasing deals than reviewing their insurance.

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with the man, the myth, the legend, Mr. Frank Rolf. All right, Frank, welcome to the Bigger Pockets podcast, man. This has been a long time coming. I've been looking forward to this. How you doing? Thanks for having me. Yeah. So let's talk about your story.

You know, today I know that you do a lot of mobile home parks, but is that how it began for you? What did you do before real estate? And then why did you get into real estate and then talk about how you got into that first deal? So it's kind of the beginning of your journey. Sure. What is that like?

You betcha. Well, here's my story. I grew up in Dallas, went to Stanford. university, got out in three years with a degree in economics. And back then, if you wanted to go to a prestigious business school, it was recommended that you start a business and you write about that as your essay on your application. So I'd gotten out of college a year ahead of all of my peers. So I had one year to start a business and then sell it or shut it or whatever and write that into my application. So I ask a lot of different adults, what would you do if you had to start

a business for one year with the sole purpose? Having lots of stories you write on to a college application for business school. And the only adult that had any common sense on this idea said I would go into the billboard industry, which I knew nothing about. So I did a little research and I found that billboards was the perfect choice because I didn't take any qualifications to get into it. It was not capital intensive and easy to liquidate. So I thought, ah, billboards is what I will do.

So armed with absolutely nothing but a rough idea of how it kind of sort of worked. I jumped into it and I failed miserably. So for about eight or nine months, I hadn't achieved nothing. I didn't have a single billboard lease, single billboard, nothing to show for it. It did as more failure. And as I was getting extremely depressed, suddenly I scored my first billboard lease. And I then in rapid succession, scored two more. So as it came the end of the first year, I had three billboard leases and permits and I'd started building those three.

but I had another batch behind that because suddenly I'd gotten good at it. So I thought I will delay my application for business school one more year and that way I will get all 10 of these billboards built and then I will sell them. And you can guess what happened at the end of that year I had more pending and then the next year more pending.

Never went to business school. So I just kept on building billboards. I was building a trade of about two billboards per month pretty much all by myself. and when I turned around 14 years later, I was the largest private owner of billboards in Dallas Fort Worth. So I owned about 300 billboards. So I assumed I would do that for the rest of my life. And as soon as I had decided that was it for me, I got a call from a company that had just gotten public who bought me out at a price I could not refuse. And now I was suddenly in 1996 self-unemployed,

having just scored my big sale to the big public company. So the other problem was, was, now what do I do? Because at that point, I was 36 years old and not really ready to retire and hang out with people and play golf and watch daytime television. So I thought, what do I do? Well, I remembered back to the Stanford Day. And I know what I will do. I will ask a bunch of people, what's the hot industry to go into? So I started calling all my old billboard landowners. I had 300 of those. You know, I had everything from Topless Bar owners to Dairy Queens. And as I'm calling around, I called the guy that I built two billboards on who had a mobile home park in Dallas. And on that one call, he said, why don't you just buy the park for me and you'll learn all about it.

I'll sell it to you for 400,000, 10,000 down. I'll carry 390,000 for 30 years. So that's what launched me into the mobile home park business was basically that one conversation on the phone. And that's how I got into it. And from there, starting with that one mobile home park, we have now built up to the fifth largest owner of mobile home parks in the U.S. So it's kind of a repeat of the billboard story all over again, only this time with mobile home parks. So that's pretty much how I got into it. Wow.

So being fifth largest, what does that mean in terms of what's your portfolio look like today? Well, being fifth largest means I've got, we have about three to 400 employees. If you took a mobile home and put it on either side of the road, that road would go 100 miles. That's how much we've got. So we maintain a monitor about 100 miles of roads, water pipe, sewer pipe, electrical line. And we are virtually a city. We have 20,000 lots, probably about 60,000 people roughly in those properties. So it's basically we manage a city.

That's what it basically means. You're like the mayor. I don't know if I'm a mayor. I'm more than a public works administrator. but yeah, it's the same deal. Okay, there we go. Okay, so you got 20,000 lots. I mean, man, I have a goal in the next three years to get to a thousand lots.

I'm like that on a thousand units total in three years, like 20,000. That's a, that is significant. That's awesome. So let's walk backwards a little bit and go, first of all, that many employees is crazy as well, but we'll get there. This is mid-90s. You're getting into this thing. That very first deal.

I'm wondering, like, most people, when they get into rental, properties of some kind, most people end up buying, you know, I'm going to buy a single family house and then later move to something a little bit bigger, maybe, or they stay small for years and decades and eventually get into that. You jumped right into the big things. Do you think that was wise? Do you think that other people should follow that? Do you think that you just didn't know any differently?

What can you say about that? Well, you know, everyone has their own ideas of risk and reward and their own private elements of capital that they have and such. I mean, the mobile home park business, that first deal I jumped into was relatively low risk, right? That was the key. If you look at my mobile home park career, I've always tried to predicate it with very low risk, because I'm a risk-averse person. Some people are highly risky.

I'm the reverse. So what really attracted me to the industry in the early days was the non-recourse debt that the sellers would finance. So, you know, my first deal, 400,000, 10,000. thousand down. My second deal was I think 65,000, five thousand down. Third deal, as I recall, was about two, two 50, I think, with 50 down. And I just kept that progression. So all the time, I felt good about my life because I had a lot of debt, but it was all non-recourse seller debt. So that's really what allowed me to feel good. So you explain though what that means for the

people who are brand new to this and there's a non-recourse seller debt. What does that mean? And I'd love to spend a couple minutes talking about seller financing because that's a fascinating topic that applies to both mobile home parks and regular, you know, other real estate as well. Sure. What happens is that, you know, let's see your mom and pop and you're going to sell your property. If I gave you all cash for the property, the sequence of events would be you have to pay the IRS and you have to pay your state income tax. And let's just say those two eat up about a third of the money, even though I know you got capital gains. You also have depreciation recapture, et cetera. let's just say, you know, 30% out the window.

And then that remaining 70% when you go down to A.G. Edwards or a stock brokerage and tell them, hey, I've got all this money to invest. What can you get me? They'll say, are you a risky guy or non-risky? Mama and pops are always non-risky. And they end up in treasury bills or CDs right now paying roughly 2%. Whereas in seller financing land, I'll pay roughly the same as a bank. So I'll pay them maybe 5%. To as much as 6%. So that's somewhere between two and three times. as much interest as they can garner. And on top of that, when they carry the financing, they don't pay any income tax on the money until it's received. So it's a two-pronged betterment of their position. A, they're earning interest on what they would have paid in income tax. And then,

B, they get a much higher interest rate. So that's why there's so much seller financing in the industry. Another reason would be I talked to an old-timer who owned a park back in the 60s, and I asked you, what was the hardest thing he ever had about the mobile home park business? He's long since retired. The guys ended in his 90s. He said that it was impossible to obtain debt for mobile home parks back in the 60s. And since almost all the parks were built in the 50s and 60s, a lot of these moms and pops just assume there is no debt. And so they often carry because they assume any buyer would have to have carry because you can't get a bank loan.

So those are kind of the two reasons that pops up. The benefit to the buyers, such as myself, is when you have seller-carry debt, number one, there's no banking stress. You don't have to go through a committee. You don't have to do a lot of those same third-party reports. And then the other huge benefit is it's non-recourse, which means the most you can lose if the deal wants to go sour is your down payment. So, for example, on my first deal, the most risk I had at any given moment that I could have given it back to the seller and only lost my $10,000 down. So, again, very large comfort level.

Yeah, I actually did seller financing in my very first, you know, the only mobile home park I own right now, I did seller financing. And it was great. Like, it worked out really well for the seller. It worked out really well for us. And we're definitely looking for more of that because I just find that a fascinating way. And it's not necessarily no money down, though it is possible, right, to do no money down.

But it just gives you that ability to get around the bank and the irritation. It took me nine months to refinance a $50,000 property recently, nine months. refinance a $50,000 property. Like for that reason a lot, I just hate working with banks at this point. It's just too stressful for me. Yes, I agree. You know, and one of the reasons that it's more efficient than using a bank is a bank doesn't want to take your property back because they don't know what to do with it.

That's why it sits in the REO. But if you ran that property yourself, well, of course, you don't want to take it back. But if you have to, it's not catastrophic because you know how to manage that asset class, whereas banks are not in the business of managing property. Frank, one thing I want to ask you about that, something people don't consider when they're either refinancing or when they're taken out financing is the actual closing costs. They are massive, especially when you start to get into higher price ranges. When you do seller financing, are the closing costs less? Are they the same? How does that usually get worked

out between the two sides? You know, when we've done our seller finance deals, we treat them just identically the same as if we were getting bank financing. So we run them through a title company. The seller conveys title to us and carries back the paper on it. And as far as third party reports, We obviously we don't do appraisal. We don't do a property condition report. We do do a phase one. We do a survey, although we can do a much lower quality survey or there with the bank. So we do often a boundary survey.

The bank will often require an ALTA. But there's huge, huge cost savings there. As far as the actual closing costs themselves, again, that's always negotiable. Some moms and pops, they want to split them. Others will pay all the closing costs. And then some want to pay none. And we calculate that end of the deal on the front end. You know, when you work with moms and pops,

there's really not necessarily a playbook of how it works because they've only done this one time when they bought it back in 1960 or built it in 1960 and done this one last time when they sell it. So they're not very sophisticated. So it really is very much dependent on the mom and pop that we have. But our rule in life is we try to be easy to sell to, which means that we work with the seller. We don't want them to ever be unhappy.

We call it win-win deal making. So we work with them. they want to do what we do it. Easy to sell to. That's a really good tip. I mean, a lot of, I think a lot of people

just make it really complicated and difficult to sell to. But I mean, no matter what kind of real estate you're in, that is a principle that should apply to everything. Make it easy to sell to and people are going to want to do business with you. Make it fun. Make it easy.

Make it like to do business with you. And, you know, you'll go a lot farther in life. Yeah. So you mentioned phase one. For those unaware of what that means, can you explain what a phase one is?

Absolutely. A phase one environmental is a report. What you do is you get a license. and insured environmental engineer, and they look at the property, and they report back whether it's clean, which means it has no environmental contamination, or if it's dirty,

which means that if you want to continue on, you'll have to do a phase two to determine how bad is the pollution, and then a phase three, which is your plan to clean it up. In our industry, it's very hard to survive a bad phase one because, you know, we're not at the top of the pyramid. I mean, a big office building, a big hospital.

They encounter environmental pollution. They can remediate it, even if it costs millions of dollars. They just throw that into the loan. So, you know, they had some kind of underground toxin. It cost them $3 million to clean up. Hospital costs $300 million to build, and that would cost $303 million. Yeah. Mobile home parks, when they're dirty, you pretty much have to always walk the deal.

All right. Makes sense. So let's talk real quick about why mobile home parks. we get too much further into this. A lot of people are listening to this show. And normally, you know, like we'll talk to people who, like I said, buy the rental property or the duplex. But what are some of the benefits to owning mobile home parks?

Okay. Well, the key benefits, and there's several, probably the most important and unusual factor of a mobile home park is the fact they don't allow them to be built anymore. So the supply is effectively capped. There's roughly 44,000 mobile home parks in existence in the U.S. and that number actually diminishes somewhat each year. There's about 10 new ones built, and there's about 100 that are torn down.

So there's something exciting, I think, and rewarding about owning an asset that is limited, which makes it thereby precious. So mobile home parks are kind of the precious gems of real estate, simply because of supply. There's just no more being built. So that's a huge attraction for most people, myself included, because that means every mobile home park you own is one of a kind. It's rare.

You don't have to worry about competition, building one down the street or across the street. So that's one really cool part of it. The next part about mobile home parks that makes it kind of unique is that our customers are actually stakeholders in the business because we own the land, but they own the homes. So we're stuck together in this enterprise. Whereas, you know, in apartments, the owner owns everything and the tenant owns nothing. and therefore they don't have often a lot of pride of ownership. Ours are the reverse.

Our customers actually are stakeholders. So that's kind of a neat thing. Another attraction is it's just land. We don't have any improvements in most mobile home parks with the exception. Sometimes you have a clubhouse and a pool, maybe a laundry room, some common area. But in the perfectly run mobile home park, the perfect position would be one in which the tenants all own their own homes. and we on the land, so we're just landowners. The beauty there is you have very, very little repair of maintenance.

So we don't have to fix toilets or doors or anything. We just rent land. So that's, again, a very attractive item. Another thing that fuels a lot of people to be excited about the industry and ourselves included, although I know it sounds politically incorrect, but the lot rents in America are insanely low. They cannot be supported by any form of math. You know, an economist from Duke University named Charles Becker studied them a year or so ago

and determined that based on economics, mobile home lot rents need to be up at least 50% to as much as 100%. And what happened there is if you go backwards, mom and pops never kept up with inflation. So if you take the standard mobile home lot rent in 1960, it was about $60 a month. And in today's dollars, that would be equivalent to $500, per month. Yet our average lot rent in the U.S. is only running about $280 a month. So there's massive, massive room to increase the rent. And obviously, that's a huge driver from a profitability standpoint. It's not, you're not doing it, you know, take advantage with people. You're simply trying to bring the parks back up to where the rents need to be

based on inflation. And of course, in so doing that, it allows you to reposition the park. Because with higher rents, you can now put in new, new capital features and put money back into it. So it's really a win-win for everyone, but it's obviously an attraction for people because they can buy a park in a certain rent, knowing that they can raise it over time to an entirely different rent. So that's an important feature. Another thing people love about the industry is the fact that you're almost always buying directly from mom and pop because of the 44,000 parks only about 4,000 are institutionally owned. So about 40,000 are still owned by the original mom and pop builders. So that's kind of a cool item.

Yeah, that's cool. Cellar financing is good. And then the last item, of course, is the demand for affordable housing, which is off the charts. So those are probably the key drivers that people like it. You know, you mentioned that it may be politically incorrect to mention that rents can be raised. I think you said the average rent's 280. It could be 500. There's two different ways you can look at that.

One, you can look at it like people are entitled to below market rents just because, in which case, you're the bad person for raising the rent. Or two, you could look at it like for 10, 15 years, they've been getting rent at half of what they should have been paying that whole time. So they should be grateful that they had 15 years of really low rent. And now you're just resetting it to where the market is supposed to be. Because even though rents haven't been raising, inflation has still been going on that whole time. So the park owner has been seeing the money that they're getting worth less and less and less, even when they're not raising it. Milk costs more gas customer. Yeah, I think, I mean, you're exactly correct. And then, of course,

the spin we try and give people, of course, is and is the truth. And without higher rents, the parks will all be gone. Because in most of the most of the money, you're going. Because of markets, the apartment rents for $1,000 a month more than our rents. Yep. So it would make more sense to tear the park down to make it an apartment complex. So without higher rents, the narrative is the parks won't exist anymore. Yeah. What's also interesting is no matter what you say or do, there's a certain group of people

that always are always agitated about higher rents. But yet at the same time, you know, the bulk of our customers like paying higher rents and thereby getting, you know, working water and sewer professional management. So it kind of goes both ways. So let's, while we're on top of the topic. of the raising the rent thing. I wanted to make sure we talk about today because a lot of people probably would have seen it, the John Oliver episode. Is that cool? We can cover, talk about John Oliver for a minute. All right. So recently John Oliver, for those who didn't see it, he's the, what, late, late TV, I don't know, whatever, the late night TV guy on HBO. He does a lot of funny little comedy bits. He's a comedian, similar to what the daily show used to be with John Stewart. Anyway, so John Oliver did an episode on mobile home parks. And I had so many people, because people know that I'm in mobile home parks now that I'm excited about him. I'd probably had 50 people send me the link to this. video of him just pretty much tearing apart the industry. I mean, just like really, and he featured you in, and he talked about you a lot in there.

And it wasn't always flattering. So here's what my question is, what did he get right? And what did he get wrong about that, about the, I mean, obviously he's a comedian. This isn't like, you know, in New York Times. But what did he, what did he get right and what did he get wrong? Well, you know, many of his points were valid. They were just taken out of context. number one, he is correct.

Mobile homes do not appreciate. They never have appreciated. Nobody who sells them, which my knowledge has ever told anyone that they do appreciate. The reason people buy mobile homes is in most markets a thousand a month less than the other housing type. So that's really the appreciation. It's actually better than appreciation

because appreciation is what you hope to sell it for in the future to some degree of risk with that. In this case, it's actual cash in your pocket every month. savings. So that was one item he was wrong on. And then, of course, his portrayal on me, it is true. I mean, the first to admit that mobile home lot rents are insanely low and can only go up. I mean, if you look at some markets in America, let's just take Denver as an example. The average lot rent in Denver is now 750 per month, whereas the lot rent there was not too many years ago, about $350 per month. The reason being that Denver is one of the most consolidated markets

in the industry. That's the second largest number of mobile home park operator headquarters are in Denver. So they've kind of consolidated up the market of Denver. And then like any smart business person, they looked around and said, what kind of rents should these be? They ignore what mom and pop did and just say what rents are appropriate based on supply and demand. And at 750 months, those parks are all full. So there's no question the rents are going to go up. And it's portrayal of me as someone who just kind of raises rents haphazardly or opportunistically, that that's incorrect. If he had gotten to, you know, any of the seminars that I teach or any of my writings,

we recommend that people do not raise rents like that. They raise them in slow manageable increments. But, I mean, you know, when I watched it, to be honest with you, I don't watch John Oliver, so I only saw people send me the link. But, you know, I thought part of it. it was funny. I mean, he is a comedian. Yeah. Right. So, I mean, it's satire news.

It's not real news. The only part I thought was unfortunate was that it basically made fun of about 8% of Americans who live in mobile homes. So that wasn't very cool, I thought. And that also he made absolutely no effort to actually get the facts about

what he was reported. And I'm sure he doesn't write those stories. I'm sure they're written by young associates there at a show. But if he simply bothered to call me or anybody that could have easily explained some of the things he had in there, why they were wrong. Yeah, but Frank, then that wouldn't make for good TV. That'd be...

Well, that's exactly wrong. I mean, I would call your attention as you mentioned to the New York Times article, which the reporter actually, you know, went to one of our events and then also lived in one of our parks for a week. And so he was a very informed writer. He was very, very negative anti-business writer. If you look at his writings, his books are always, you know, broke USA, how payday letters ruined America, et cetera.

and he became a gigantic fan, which was really crazy. We never expected that. So he wrote how the industry is the best thing going in an affordable housing. So how we went from the best thing going in an affordable house with John Oliver, I think, is simply because one person put the time and effort in to get the facts, and the other did not. You know, when I watched that episode, yeah, I mean, I definitely thought they pulled out, it's one of those things like if you take all the negative stories of the last 10 years

that you could find about mobile home parks and then put them into one, like, funny story that sounds like it applies to everybody. That's kind of what the show did. I mean, what the show did. So, again, it's entertainment. It was funny-ish. But then I got an email a few weeks later from a guy.

I sent on a message to some people. I think I mentioned it here on the podcast that I was looking to build out a team of people to help me work on these mobile home parks. I got a message from a guy saying that I was being unethical by looking into mobile home parks. He flat out told me that I was unethical and that he would never invest in mobile home parks

because mobile home parks keep people in poverty is what his, I think his exact phrase was. And you realize that that's the craziest comment ever. Explain one. Well, mobile home parks are the solution to poverty. They're not the problem. They're the solution. In other words, without mobile home parks,

you have a huge number of people who are generational renters who are extremely cash strapped because apartments in most markets are far beyond the levels of affordable housing. And the mobile home parks give people a close or as close as they can to that kind of American dream, not only of homeownership, but having your own little subdivision community with your own yard and privacy and those type of items. I get the same comments. I even had death threats after John Oliver on social media from people in Brazil and other countries saying that I was going to be damned to hell for taking advantage of the poor.

And the problem is, number one, we don't deal in the poor. The mobile home part business is not, if you look at the U.S. definition of poor, that is not our grouping. It's kind of an odd classification that we are lumped into that because our typical. household in our mobile home parks that has got an income of probably 30 to 50,000 a year. So it does in no way meets the U.S. definition of poor. And the other thing, which they're completely wrong about, is that people love our product. That's what the New York Times writer found when he lived in the park. It was a 200 space park. He could not find a single person who didn't love living there. That's why he became a huge fan. I think the bottom line is right now,

You know, America is kind of stuck in this cage fight of capitalism and socialism. And so we try and define everything into one of those two boxes. It's either those capitalists or those socialists, but that's not where mobile home parks really want to be or even are fairly positioned. We've just kind of gotten stuck into that bizarre narrative. I mean, to me, the bigger narrative, if people want to get mad at somebody is, you know, when we buy mobile home parks, They're in bad condition and bring them back to life and repave the streets and fix the water and sewer and bringing a professional manager and the rents do go up. There were people when we bought it who were just marginally living there. They really could not afford to live there.

We bought parks where there are people living in all kinds of things. You shouldn't even live in a school bus. We once had a family of four living in a pop-up camper. There's no water and sewer. And if you ask why are you living like this? They'd say, well, because I can't get into any of the government programs. So they'd apply to Section 8, and they were told, I'm sorry, we're full right now, but, you know, don't call this, we'll call you.

So really, you know, people are trying to refocus that anger about those people who are marginally trying to live in America. But that really is a government issue. It's not our issue. I mean, yes, Section 8 needs more funding. I think if you watch the National Geographic thing I was on on Affordable Housing, they went down to Washington and they talked to at that time ahead of HUD. And he admitted, gosh, we just, we cannot accept many people anymore.

I think he estimated that the need for affordable housing through Section 8 was roughly double what they were currently serving. But again, that's not really an issue with mobile home parks. We're part of the solution, not the problem. But for some reason, we get stuck into a lot of different narratives. Well, I think for those who manage their money wisely, a mobile home park is a great solution because it allows. you to save money that you would normally be paying for rent. The example you gave us earlier, people are paying, say, $2.80 a month. They could be paying $500, but an apartment would be $1,000.

So that's actually a way that for someone to save money to get themselves out of a bad situation. Yeah, that's exactly correct. And one of the things that makes mobile home parks unique is like you mentioned, you're a stakeholder with the people that you're renting to. So you're renting them the land, but they're owning the home, which is a better situation for the tenant to be. and if we're going to call them a tenant, it's better that they're owning the home than like when they're renting an apartment,

you own the property and you own the land. Do you recommend that people buy mobile home parks that have park-owned homes, or do you want to try to only be renting the land so that you have more stakeholders that are owning the home? Well, in our case, and let me tell you, when we talk mobile home parks, it's a big nation. There's 44,000 parks spread out over 49 of the 50 states. There's no parks in Hawaii.

but in the south, the mobile homes rent for, let's say, $700 a month, and the lot of rents can be as low as $100 a month. So a lot of the southern mobile home parks, to make money, people actually have to own the homes, and they view those parks as detached apartments because of the low lot rents. And in the parts of America we serve, our lot rents range from about 300 a month up to somewhere in the mid-500s. and so the spread between home rent, which is still the same, probably 7, 800 bucks, the spread is very narrow. So when the markets and the states were in, you don't want to own any of the homes. You want to just own the land. And, of course, owning the land is the best because when you own the land, you don't have to deal with repairs and half what costs on the homes.

So for most people, in most states in the United States, you're better out of not owning the homes. The only exception would be in some states, Mississippi, Louisiana, Alabama, Georgia, some parts of Arkansas. A lot of rents are so low, there really is not a business model unless there deals somewhat in the homes. There's one other thing I will add, which is you can't really be in the business and be afraid of the homes. Because at some point in every park owner's career, you end up owning a home because someone dies and the a errors give it to the park where someone doesn't pay the rent and runs off. You take the home through abandonment. and then you have to go in and renovated and sell it. So you have to be at least a little adept at the home game,

but the ultimate goal is not to own any. So when you look at a park, because right now I'm looking at a lot of parks, analyzing a lot of deals and most of the ones I come across are like, you know, maybe 50-50, park-owned homes, you know, just rentals and where the tenant owns their own home or maybe, you know, 70, 30, whatever. And I'm finding a lot of them, a lot of them have both.

Both. So when you and Conardees, do you just say, no, I'm not going to buy it or do you say I'm going to buy it and then sell these homes off as quickly as possible to the tenant? Yes. What you want to do, and again, every park is different. But in most cases, if the homes are older, you want to, in some states, just gift those to the tenant. Because if you gift it, you do not by the act of gifting fall under some of the regulations regarding title and habitability and items like that. So you really need to know your laws. The first stop is, what are the laws in my state? The good news is there's a state mobile home association for every state except Hawaii. So you can call them and ask what the regulations are in that state. But often the typical playbook is on the older home inventory, 60s and 70s, you would probably try and just give it to whoever's living in it.

On your 80s and 90s based on condition, you know, 21st mortgage, which is the largest lender on mobile home. mobile homes in the U.S. They have programs whereby they will actually finance those used homes as long as the mortgage is about $10,000 or more. So the 90s homes, that stuff actually has value. The 80s homes may or may not have value based on the state and locality you're in. The 60s and 70s, though typically you just want to make them owner's day one if you can, even if it just means giving it to them.

Interesting. Yeah, fascinating. Yeah, because I look at the parks and I'm like, okay, If lot rent is $2.80, let's call it, law rent is $2.80. But if I hold it as a rental property, I can rent it out for $600. That's way more money, Frank. Why shouldn't I just hold on to it then to get the $600 rent it out and forget about the owning it? I'll just own a bunch of rentals and make twice as much money. Well, here's the way you have to look at it.

You know, typically the cost of a mobile home, you're looking on the insurance and property tax, probably about $50 a month between the two. It depends on what state you're in and how many weather events you have. then the rest is all repair and maintenance. It costs you about 100 to 200 a month to keep a mobile home in repair. So you figured you've got a cost of operation. Let's just say in many parts is $200 a month. And that's not even being super conservative.

So if you take the home rent and you subtract the lot rent and then you subtract the $200, then the question is, is that still worth your time or not? A lot of my mom and house, what they do is they don't take out any of the lot rent. So in some of the parks we buy mom and pop on their books, they show that the home resident for 700 a month, and then they take out the 200, and I think they made 500 profit. But in fact, in some of these parks,

a lot rent is 500, so there's no economic gain at all, not one penny to owning and running the homes. Yeah, fascinating. Yeah, I think that the repairs of maintenance, the part that I bought in Maine, that's probably the thing that was most surprising, is how much each of these homes would need,

especially if a tenant left or we, We evicted a few, just how much work. And not that it was about 30, 40, 50, 50 grand, but like they all needed a fair amount of work to fix them up. And because they were all rentals at the time, they were about half. Again, it was about 50-50 when I bought it. They needed a lot of work going into them. And so the repairs surprised me, which has completely taken me over to your side of the equation. I don't want to own the homes because, like, the whole reason I got into mobile home parks is because I don't like doing repairs and maintenance very often.

but I don't like dealing with contractors. I want to do as little of that as possible so that my cash flow is stable. And so, anyway, I've definitely come to aside because the ones that we own as rentals, we just have a lot of repairs. Things break and it's a lot more expensive for us to send a plumber in than for them to fix. Well, you know, I think part of the puzzle is that the mobile homes themselves are not really built very durably. And if you go down to the factories and see how they're built, You can immediately see what's at issue because in many cases when they're building them,

they bring out and put in the carpet and pad, and then they put the interior walls on top of it because in a mobile home, none of the interior walls are load-buried. And then you look how a lot of other things are built. Many of the parts in your home, they're made of metal, and a mobile home are made of plastic. And so you have to take them very gingerly. And some residents are perfect for mobile homes. So you can have, you know, a retired couple in a mobile home, and they've been in there since the 1960s, and suddenly they move away, and the home is immaculate on the inside because they were exactly in tune with the lifestyle that that home requires to stay in good condition. They treat it nicely and they maintain it.

But then you can also have, you know, another family in one, and they just beat it to death because, again, it's kind of like fine China. And it's not, they're not built as sturdy as a lot of other housing types by design under supervision of HUD so they can remain inexpensive. That's one reason that the pair is going to be so bad. So I want to ask you, and a lot of people are kind of worried about this asset class because of some of the stereotypes that come with it. I'm sure there's some truth to it just like there is to every other form of real estate investing. You're renting your house to someone who doesn't own a home and they're not going to have the same pride of ownership that a normal homeowner would have. Obviously, Frank, you've learned a lot over the years of what to avoid, what to look for, how to analyze a deal. Can you tell us a little bit about your first park that you bought in Dallas, Texas?

I have some pretty funny notes here about what you had going on in the back there. And then what you've learned so that you're avoiding that situation in the future. Sure. Well, you know, the first park I bought, I would probably, you know, not have bought today because it doesn't really meet a lot of the profile of things that we normally buy. It was very, very rough clientele. And so I officed in that property every day from probably about nine in the morning until 5 o'clock at night. There was a little single wide trailer in there.

It was my first mobile home park. I knew nothing about the industry. So I thought I better self-manage it. And therefore I would then be more of a master of my destiny. So I drove down there every day from my house and then drove back every night. And, you know, I learned a great deal. The first thing I learned is there, you know, there's a certain customer that you just can't run a business around. And that's what the first park had. It had basically people who were

not gapefully employed, they were not stably employed. And so how can you pay the rent? So I had people that, you know, would bounce around jobs, being employed for long periods of time. So I immediately learned that in the mobile home park business, there's a certain class of customer that works and there's a certain class of customer that does not. And over time, because I made people start paying the rent every month. So the guy that I bought it from had not done that policy. So you could skip paying rent sometimes for five or six months you wouldn't file eviction. Like, I'm not sure how far you could have gone before you would file eviction, possibly in the years.

At the same time, there were no rules or rules enforcement. So when I showed up, they built an amateur wrestling ring in the back corner of the property with little concession stands made a plywood. And the place was just an absolute travesting. people were not, not bothered in taking their trash to the dumpster, but just throwing the bag out in the yard. They had non-running cars everywhere. Just, just crazy stuff. And, you know, when you have people like that, no one who's stable, he wants to live in a civilized society can live around them.

So basically, they kind of created this utopian society of misfits. And it was my job to bring back law and order and civilization. And so over time, I was able to groom the property at those who could not pay red and would not abide by the rules had to go. And I remember one day I went in there and overnight a resident had gotten in a bad mood, had an argument with their girlfriend, and then had taken a baseball bat and knocked the windshield out of three cars of the residents. Well. Right. And I mean, so I told the guy that he had to go. He could not understand why.

We couldn't figure out why that was unacceptable because he told me, you know, he was going to, he was going to come up with the money someday to put the windshields back and they just, no clue that, you know, people demand more out of life than that. And so that was, that was a big lesson learned at Gled Haven is that, you know, the industry really is not about four people and misfits and all those stereotypes you see on television, although there are some parks like that somewhere in America. but you know our industry the normal industry that the industry that houses 8% of the United States population is basically based on high density subdivisions where with people with the same aspirations and goals and pride of ownership as everybody else so that that was my big lesson learned from that very first part was that was exactly not there was a clientele that I thought is what the industry served that's actually not our business model at all interesting so like how you you differentiate there's clientele that are ideal for a park and then clientele there are not?

How do you know, though? I mean, when you're analyzing a park and you get a lead on a park, I don't know, we can talk about that, but you get a lead on a park, how do you know it's the type of tenants that are going to actually pay their rent and that have jobs or have income of some kind versus the owner just put in a bunch of warm bodies to fill to fill lots before selling it? Well, what you do is there's two basic rules of any mobile home park, two policies. We call one, no pay no stay and either we call no play no stay. So no pay no stay means if you don't pay your rent, then we evict you in the very month you didn't pay. So if you don't, if you don't have the rent to us by the fifth, we add a late fee to it and then we send you a demand letter based

in the state's requirements and after that we file eviction on you because it's not fair to those who pay rent to have people living among them who don't pay rent. And the same is true with no play no stay. If you won't play by the rules, which we're not a hundred hundred people. high bar in a mobile home park. They're very reasonable rules. If you can't do that, if you can't follow any form of rules to live in a neighborly fashion with your neighbor, you have to go because it's just not fair to the others. And what we find is when you stick people into that paradigm of no pay, no stay and no play no stay, some people make it and some people do not. And we don't have on the front end, we don't really have any idea.

who will and will not succeed in a structured environment. So one thing we have learned, which is interesting, is that credit scoring in our industry means nothing because many people who do not have large incomes, and so who do have large incomes have terrible credit because all it takes in America today is to have a medical emergency and you end up with a $30,000 hospital bill you can't pay. Or you go down to the car dealer and you get a car and then they lose their job and then the car gets repossessed because there's an overstretch when they when they bought it to begin with. But what we're looking for is what we call the fight co-score, F-I-G-H-T co-score.

And that means how much fight do you have in you to make sure you always pay your rent? And that's proven out through eviction. So when we look at credit scores, what we're really looking for are evictions. And if someone does not have any evictions, even though they may have terrible credit on paper, we are more than happy to give them a try. And when we buy the park originally, and we set about bringing back law and order, those are people who embrace that

and want to pay the red and want to be a good neighbor, then that's great with us. But we've learned over time, we can't really tell any of that on the front end. A lot of parks we buy, we think we have a handle based on the cars. So if they have really nice cars, we say, well, if they have really nice cars,

it must have good credit to get that car. And it may be true. But at the same time, it may also be true that they got the car because they weren't ever paying the rent. And it may also be that they're just making a terrible neighbor because although they have a nice car, they may have loud music at 3 in the morning and who knows what. So that's how we kind of all magically works at once you set parameters of people either fit in that or they don't. Just kind of close out that thought on the no pay, no stay, no play, no stay. one thing that really has attracted to me to mobile home parks,

and I think you'll agree to this, is that there's a lot of badly managed parks out there. From what I've seen, there's a lot of badly managed parks. And real estate in general is like that. But I noticed it with mom and pops a lot who haven't raised their rent, they haven't enforced the rules for a long time. So what I found is that I feel like success is more likely

if I can just manage correctly. And that's a skill that I feel like I have. Like I really pride myself on being able to manage tenants well. and manage property well. And therefore, I've got a better shot than most because most people just don't bother to learn that skills. Do you agree? Yes, I totally agree. You know, it's really sad the condition of some of these properties. We bought properties that are in magnificent locations. We have some that are next to McMansion subdivisions with private skills behind them. And I'm not really sure why mom and pops held on as long as they did because clearly they

lost the energy, you know, years before. I mean, we bought a property. once that had not been mowed in three years. We bought a property once that had not had the leaves picked up in so many years that we could not actually open the door to the vacant homes because the leaves were higher than the doors. Wow. Right. And I think some of that maybe also is to blame with those city governments for allowing

that to occur because sometimes they look the other way because, again, let's all be honest, most Americans have this terrible stereotype of mobile home parks and the people that reside in them. And so they just let those things just get away with murder because they, they don't even want to drive in and take a look at it. But a lot of these parks, there's no excuse for the condition that they're in. I honestly don't know why, again, why moms and pops are not selling these maybe a decade ago or at least when they started to lose interest in the business model they should have sold. Yeah, that kind of leads me to the question I want to ask you. Before I do, I wanted to comment on your credit thing. I just think that's great that you're looking

at more than a FICO score. I really believe that people. people who just look at a credit score is the lazy man's way of choosing a tenant. Because the way that credit scores are calculated is not a government standard. It's just three companies that come up with their own algorithm. You can be really good at paying all your bills. But if you're an own organized person and you get late payments because you forgot you were supposed to pay something, you didn't sit down to write the checks, you travel a lot, whatever, your credit score can get trash just because you didn't realize that you weren't paying it.

The minute you find out it was due, you send in the money, you have the money, you manage your money fine, but you don't manage your books very well. And there's lots of people with really bad credit scores that actually would make a really great tenant. A lot of the consumers that are out there don't realize how whack the credit system is for different people's scores. And I love what you said is I look for evictions because that tells me whether this person's going to pay their rent rather than maybe how organized they are. The other point that I want to mention is for a new person, right? Let's say I've heard this and I'm like, man, I really want to get out there. I want to start buying deals. You mentioned a lot.

of mom and pops should be selling, but they're not. They're kind of just letting their park get run to the ground. What's something that a newbie can look for that they could recognize, ooh, that's an opportunity right there. I should pursue that person. Where can people find deals? Okay, well, let me tell you where we fight our deals because we all find deals in the mobile home park business in the same manner. The first place is online. So if you go to mobile home park store, you'll find typically about 800 to 2,000 mobile home parks right there online. Now, I can caution you on two items. The first is, of the parks online, at least a half of those you wouldn't want if they gave them to you because they're defective on water or sewer delivery or some other

terrible issue. They don't have the permit or the market is terrible. So half of those you'd want to just discard. The other half are massively overpriced. Most people typically ask prices are often enough to double what they actually expect it to sell for. And they do that because they get very bold online. It's kind of like people on eBay who will put something on eBay that they know would never garner $100 yet they ask 200, hoping there's some sucker who will take it. Yeah. Right?

So that's the online dilemma. After online, you have brokers. And brokers is where we get over half of all of our deals. So the typical broker deals that we buy are not the ones. advertise, it's what they call pocket listings. And our industry is very unique because I don't know of any other industry that has so prevalent pocket listings. Here's what happens. Mom and Pop wants to sell. Mom and Pop is big buddies with the manager and all of the residents. They don't dare tell anyone that they're going to sell because they'll hate them. So what they do is they call up a big

broker and they say, I want to sell my mobile home park in, no, Des Moines. But here's the deal. I'll sell it $700,000, but no one can know I want to sell it. You cannot put it on MLS, you can't put a sign in front of it, you can't put it on mobile home park store. You can just store it in your brain, and when one day you meet someone who's got 700 grand that wants a park in Des Moines, call me. And these guys carry, I mean, probably the largest pocket listings I've seen, there was one guy who had 50 of them, but a lot of these people all seem to carry five to ten. And there's about 100 mobile home park specific brokers in the U.S. So it's a tremendous number of pocket listings.

So that's that's our number one source of deals. Beyond that, there's three more worth discussing. One is direct mail, right? You just get the mobile home parks. You get the owner's name through the property records. And you ship them a postcard or letter. We prefer a postcard. It basically says, hey, I buy mobile home parks.

Give me a call. And when you do that, like most direct mail, you'll get typically one to five percent response rate, although if you've sent a really good postcard, you're really lucky people have got as much as 10 percent in that market. Then you have cold calling, which is a little harder because now you're having to stick your neck out and actually dial a phone and talk to a stranger. A lot of people hate that. They prefer direct mail. But the beauty of that is if you do cold calling, you typically score very high. There's not many people who are doing it. And then the final one, the oddest one is where you actually drop by the person's home. We call

it drive and talk, it's a terrible concept unless it's a mobile home park that you really, really, really want because the odds are very low. And often, even though the person will invite you in, they really don't want to sell and you waste the entire day sitting there talking to all. So those are basically the five formats that we use. Again, of those over the last 25 years, the majority of all of our deals came from brokers, the apocket listings. And then the balance that we have, it's probably an equal breakdown between cold

calling direct mail and online. And they're just a little tiny bit of the drive and talk. Wow. That was super, super helpful. What about funding those deals then? How do you typically fund them? Are you all seller finance or a mixture of different things? Oh, that's incredibly easy.

That's the crazy part. When I got in the mobile home park business, I was just convinced that bank financing did not exist. And maybe it did not back in the mid-nities. But today, the financing for mobile home parks is perhaps the easiest part of the process. And I think there's two reasons for that. Number one, at the same time that I was buying my first park and my partner, Dave Reynolds, was buying his first park. There was another guy out there buying his first park, and that was Sam Zell. So Sam Zell, who is the biggest owner of office

buildings and apartment buildings in American history, is also by far the largest owner of mobile home parks. You know, we have about 20,000 lots. He has 160,000 lots. And because he is in the mobile whole park business that one fact has given huge comfort to lenders the world over that it must be a good industry because Zell's in it. He has that much clout. So today, just because Zell buys parts, almost every major bank in America likes parks. The other thing we have going for us is we have the lowest default rate or the second lowest of all real estate. And why that's important is, number one, it gives banks a lot of comfort. But the crazy outcome is it also gives cognitive lenders, a huge amount of comfort.

Because when they sell those conduit pools on Wall Street, it's also based a little bit on risk. So what they will do is they will slam enough mobile home park loans on the pile to offset the riskier loans like hotels and things like that. The final thing, which is brand new, that is interesting about the industry, is I don't know if you guys ever even saw it on TV because, I mean, not many people follow mobile home park trivia, but the Fannie Mae and Freddie Mac got in trouble because they were violating something called a duty-to-serve law. And duty-to-serve means that you have to treat all Americans

respectfully regardless of income, and they were not helping mobile home mortgages. They just haven't supported the industry in decades. And someone suddenly realized that, some congressman, and they had different trials that were on C-SPAN. And in the end, they announced that Fannie Mae and Freddie Mac had to start aggressively making mobile home park loans as the first of a two-pronged attack for utter duty to serve. And today, starting almost ground zero five years ago, agency debt is now more than 50% of all mobile home debt by dollar volume. Wow, I did not know that. Yeah, it's crazy. In fact, it is the only form of real estate within Fannie Mae McEman.

and Freddie Mac that has no boundaries. It's limitless. There's no cap. So we have this huge advantage over everybody, apartments, office, you name it, because of the duty to serve law. Now, the other leg to that which starts this year is they have to start securitizing mobile home mortgages. I think they're supposed to do 20 million this year of mobile home mortgages and then ramp up from there. But that's another unique financing angle that did not exist, not too many. years ago, which is now a huge player in the industry. Yeah, that's fascinating. I did not know that. So I'm going to look that up here and do some research on that later. So very cool. Well, next segment of the show, I want to kind of shift us

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The first one's going to be probably pretty obvious. What kind of property is it? But I'll clarify also. And where's it located? It's a mobile home park, right? Oh, it's a mobile home park. Dallas, Texas. And, well, let's also go when, when was this? Is this recent or older? This is my, this is my first property. Perfect. Awesome. All right.

Okay. How did you find the property? Well, I found the property by calling up the mom and pop owner and he wanting to sell right there on the phone. Perfect. How much did you pay for it? I think you said $400,000. $400,000 down $390,000 mortgage interest rate.

As I recall back then was 7% 30-year amortization. I'm wondering in 96, how much? much was $400,000 in today's dollars, like a little over 20 years ago. That's probably like 1.2 million or so, I'd say. So this was a pretty big park. Okay, Frank, how did you negotiate the deal? Well, basically, I knew when a guy wanted to sell me something over the phone with 10,000 down and carrying 390 for 30 years, there was something wrong with it. So I couldn't really negotiate the price. I simply said, so how much are you losing? And he said, I was in two grand a month. That was the whole negotiations. I said, I'll take it. Let's write it up. Why was he losing so much money?

Well, let's see. He was a terrible operator. He did not collect money from people, but I was able to solve the $2,000 in one phone call. It's a bizarre story. When I finally got his financial records during my quickie due diligence prior to closing, I saw that he had a cable TV contract for the entire park, all 83 lots, and he was paying the full amount. He got no volume discount, right? So what he did was apparently some salesman called him up and said, hey, you want your people to have cable. It would be such a great amenity. And he'd be in a good, good, nice mom and pop said, yes, that's sounding a very nice thing for the people. So they basically were billing him 83 times the regular cable amount, which back then was, I think, 30 or 40 bucks a month. And the crazy

part was the part was half empty. So half of that didn't even, wasn't even using the cable. Of the half, most of the people were on dish or direct TV. So I basically sent everyone a letter that said, we're no longer providing free cable. But if you want cable, contact the cable company. And I shut the parks cable off as far as we still had cable access for those who wanted, but we shut our prepaid account for the entire park off. And I lost not a single resident. I don't think I even got a complaint. And I had solved the negative instantly. That's how screwed up it was. That's awesome.

That's awesome. All right. What did you end up doing with that park long term? Do you hold on to it? Do you sell it today? No, I sold it. I sold the thing. I held it for about seven years.

I raised the rents. The rents when I bought it, I think, were like $1.90 a month. I got them up to, I believe, $3.80 when I sold it. I talked to the guy that I sold it to recently. talked to him in, oh my gosh, a decade, I think. He has, the rents have almost, not quite doubled again, but the Dallas market rents are now up in the five to six hundreds. And I sold it for around a million five.

So basically it was about a million more than what I had paid for it, including in the capital upgrades. That's awesome. How long did you hold it before you moved it? Seven years, seven year hold. So you made about a million dollars. capital gains over seven years plus whatever cash flow you got that's correct not bad and this was the park that had the um that had the wrestling in the back and the uh the women of ill repute

exactly exactly correct yeah kind of an odd odd deal all the way around so you said this was like you wish you wouldn't have bought it right that's not terrible if you take a deal you wish you wouldn't have bought and you made a million dollars over seven years on it well let's talk about that for me as you get older and and and perhaps wise or you also get more jaded that was that was a very tough turnaround deal and i'm not sure i'd be the guy for that again today in other words if someone called me with that deal today i say yeah you should definitely buy it i just don't know if i would be the guy to buy it again today and in that condition yeah i mean it was really really rough isn't that great about real estate though yeah i was just going to say we

talk about that a lot how awesome that it's like different phases in an investor's career are good for different people and so correct like there's investors out there like you frag who have property that doesn't fit your current phase. And then there's up-and-coming real estate investors who it perfectly fits their current phase because they're willing to do the wrestling pit. They'll even get involved and jump in the ring. They're okay with that.

You're exactly correct. Yeah, so I love that. All right. Last question. That's a very good segue to our last question. What lessons did you learn from the deal? The lessons I learned from the deal are that if you will stick with it

and you get in the right niche in real estate you can make almost anything work. I mean, Gluthaven gave me no more raw material than a permit for 83 lots in a not very good location of Dallas at that time in the area is to change somewhat over time. But it was pretty rugged stuff. But, you know, I still had strong winds behind me as far as demand for affordable housing and, you know, a good business model. but I was very persistent with it.

I mean, there were moments early on where I just thought maybe I should just give it back. You know, maybe a resident came in a little trailer and yelled at me. We lost our natural gas at one time that was depressing and had to get retrofitted to propate. So there were moments in there where I thought,

oh, screw it. But I refuse. And so I think persistence is really key. Take it when you're doing turnaround stuff. That's really, really good. That's really, really good. Great deal, deep dive. And now it's time for the next segment

of the show. This is our fire round. It's time for the fire round. All right, Frank, these questions come direct out of the Bigger Pockets forums, and these are people asking these questions. Actually, BiggerPockets members asking these questions, and we pulled most of them about mobile home parks, but some of them could apply to anything.

First question, I'm looking to buy a mobile home park soon. Do you have any suggestions on what kind of percentage of the rent I should set aside for like reserves and capex on a park that's all tenant-owned homes. Is there a rule of thumb? Well, here's the deal on that. Mobile home parks are a little bit like Johnny Cash is one piece of the time because every time someone breaks, they typically replace what's broken.

So even though your mobile home park may have old galvanized metal water pipe and old clay tile sewer, it really doesn't. Underground, if you can look under there, you'd see it's a mishmash of that. Yeah. With a lot of new PVC. So mobile home parks typically don't need a lot of need, a lot of cap X reserve, except if you are in a few of the dreaded positions of bubble home park ownership, and that it comes in the world of private water and private sewer. Yeah. So if you've got a water well, if you've got a packaging plant, you have a lagoon, if you have septic, then you need some reserves.

Now, some of those are so severe, you can't even buy them. For example, if you're going to buy a park with a lagoon, number one, most cities are trying to outlaw them. And number two, just the simple features, if the state comes to you and wants to get, for example, you're able to be good line. That can be several hundred thousand dollars. Wow. So huge amounts. Packaging plants can run anywhere up to half a million to a million dollars, which is way too much risk, obviously, for most mobile home parks.

Waterwell can easily set you aside 20, 30,000 if it was to go down. And then septic costs you roughly $4,000 per leach field. and then also you can have tanks that fall in. So basically, that's if you, I mean, I look at it kind of like there's two restaurants in mobile home parks. There's the, you know, the McDonald's, the Wendy's, the casual dining, the chilies, where basically every time the phone rings, it's all cool. It's not going to be any worse than your car breaking down.

But then you have this very expensive, fine French restaurant where the tab can just be unbelievable. And the bottom line is if you don't have the money to pay the tab, do not. to the French restaurant. So if you can't write big checks, don't deal with private water, private sewer. If you can get away from that stuff, you don't really have to have a whole lot of capex and reserves. In the industry norm, even with the institutional lenders that require reserves, they only charge

typically often $100 a year in reserves. So that's per lot. So it's not a huge amount. Okay. One thing I would say for a first-time buyer, the best thing you could do would be to have in reserves one month of revenue. So if the park has $15,000 a month revenue, it's not a bad idea to have $15,000 in the bank, just in case through some unknown catastrophe, you lose the rent for the month.

It could be that the manager runs off with it. It could be that the residents don't know where to pay it, whatever the case may be. But that, to me, that would be the biggest thing you'd want to have for any day. All right. Beautiful. Cool. All right. Next question.

I'm looking at a mobile home park with roughly 100 units. tenants own their own homes. What kind of management is needed on a park like this? Can a local property manager take it over or do I need a resident manager or a combination of the two? And how many lots did you say it had? 100. Okay. You're right on the cost of what my answer would be. Typically parks that are under 100 lots, you manage it using someone who already resides in the park. So you find the home that's the nicest home with the nicest yard. You go to that person. initially just as a nice little conversation. And you segue into that do they want to be the manager?

And it's a beautiful situation because not only are the stakeholder, but they set an excellent example for the rest of the residents. Right. So that's how many of the parks are managed under 100 lots. When you get to the 100 lot size and up, you now have a second option. You still have the same option of the stakeholder resident. You can also now what we call import a manager.

Typically, the same labor pool, the self-storage uses, a lot of people who, who are retired, retired military, but not always retired people. And you often then house them in mom and pop's old house, or often there is a mobile home there that you designated the new manager's home. But there's some debate over whether that's better or worse than using somebody who's already a stakeholder in there. To be honest, because the best managers we have are traditionally people who already live in the park because they know everybody.

They love the park. They're like the ambassador, the mayor, the police chief, they're everything rolled into one. And when you bring in an outsider, they don't only know anybody and they're also not a stakeholder. So no one is fully in a lot,

the riddle. But at 100 laws, you're right on the cost of going either direction. Next one. It's actually kind of related what we talked about earlier, but it goes on a little more detail. I've heard brokers are the best way

to find deals when searching for a mobile home part to buy. Do you have any recommendations on how to find a broker that have listings, like a real one? Oh, yeah. That's an easy answer. If you go to mobile home park,

store, there's a section on the left. There's a tab that says brokers. If you click on that tab, you're going to find pretty much every industry-specific broker. And there's about a hundred of them. They range everything from Marcus and Milichap, which is the largest. There's Sunstone, MHRE, MHP-360. There's all these different groups. And we contact each and every one of those brokers, because remember, pocket listings are never shared. So if you call Marcus and Milichap of Houston, and talk to, you know, John Smith. John Smith has his pocket listings, but he doesn't have any of the listings of Tom Jones,

who's also in the same office, who is the next office over. So we contact pretty much everybody. But that list is ready at all times if you just go to mobile home park store. Perfect. That's easy. Beautiful.

That's really good. And for those who don't know what a pocket listing is, it basically comes from the days when before the internet, when brokers would have a, he's a paper that how the listing information and they'd put it in the office for everyone to look at along with the other offices listings. A pocket listing was a listing that they didn't share with everyone else in the office. They kept it in their pocket for their own clients. So when we use that phrase, we're basically talking about a park that is available for sale

that is not being advertised through traditional means like Frank said earlier so that not everyone knows about it. Next question. How do you currently collect rent? I know some investors use automatic payments, some pick up cash, which I don't want to do. And some have tenants drop off the rent at a bank. How do you recommend is the best way to collect the rents? Okay, there's several different systems.

First, let's go over one issue, which is most of our residents, or many of our residents do not have checking accounts. So right off the bat, automatic withdrawals are nearly impossible. That's not true across the board. Some of the northern properties in Wisconsin and Minnesota, those do use a lot of automated payments all the way to, where everyone is using an automated payment. But in most of the rest of the parts of America,

the residents do not have bank accounts frequently. And we only take checks and money orders. So what does it mean? It means we get a lot of money orders. And so you have two options to get the money orders. Option A is they do bring it to the manager or put it in a drop box on the manager's door. Option B is you have those mailed in.

So you can set aside a PO box near your home and have those mailed to you because of course they pay many other bills by mail. They pay their utilities by mail, possibly their car payment and everything. But there's a banking issue with a lot of customers in the mobile home park space. And as a result,

although there's all kinds of great internet options, paying online and stuff, our customers are not really big on that yet. Maybe over time it'll change. But right now it's pretty much all about money orders and then some checks. We never take cash. That's one big thing.

Any park owner will tell you never take cash. But we don't take cash, not for the reason you think. We don't do it because of embezzlement. Because most park owners have what's called EPLI insurance, employee practices, liability insurance. And for example, in our case, we are actually insured against embezzlement. So if the manager runs off with the rent, the insurance company gives us the rent back. The big reason is if you collect cash at a mobile home park office, one day someone in that park or someone outside the park will realize, let's think about this.

Now, there's 100 lots at 300. That means there's 30,000 in cash sitting in that office somewhere between the first and the fifth, and they're going to rob it. Yeah. So that's the key item. You don't want the cash because you're going to get robbed. And now you're talking, you know, who knows what danger mayhem make up from that. So that's why we don't do cash as it keeps you from have any kind of criminal problem. All right.

All right. Great answers. And that was the end of the fire round. Now let's get to the last section of the show. Famous Four. All right. This is the Famous Four. These are the same four questions.

We ask every guest every week. But before we get to them, let's hear what's going on this week over on the Bigger Pockets business podcast. Hey, guys. This week on the Bigger Pockets business podcast, we interview Shark Tank Shark, Barbara Corcoran. She tells us what makes a great pitch, what, traits professional investors look for when sizing up entrepreneurs and when and if you should start thinking about raising money for your business. Check it out on this week's episode of the Bigger Pockets Business Podcast. And please don't forget to subscribe. Now, back to your famous four.

All right, Frank, these are the four questions we ask everyone every week. So let's throw them at you. Number one, do you have a favorite real estate specific related book? I do. Hold on. I'll give you two of them because one's very hard for anyone listening to get a hold of. Okay. My favorite real estate book is called The Man Who Bought the Waldorf. It's the story of Conrad Hilton. I love the book because it's a shocker. You think the book is all about him building up his beloved hotel brand, which he does,

but then he loses it all in the Depression. Then he has to start from scratch and rebuilding it before he dies. So I like the fact that it's a rags or riches to rags or riches story. It makes it more exciting. That's cool. The other one I like, which is a new book, which you can get. The first book's not in print. You can only get out of old antique books.

booksellers. The second one is, am I being too subtle, which is the book by Sam Zell that came out, I think about a year ago. And it's a great book because it's all about risk and reward analysis. So those would be my two best real estate books. All right. Next question. What's your favorite business book? Okay. Favorite business book? Am I allowed to do two again? Sure. Just okay.

No rules here. Okay. First one is called Dave's Way, the story of Dave Thomas. It was a little book you could get at Wendy's for $1 back in about the 80s. Really? Fascinating book. I had no idea that Dave Thomas invented not only Wendy's, but Kentucky Fried Chicken. Really? Yes, and it's very much of a, just an insano rags to riches story.

He's starting off with Dave Thomas living in the back kitchen area of an old abandoned chicken restaurant, trying to bring it back to life and inventing Kentucky Fried Chicken all the way from the beginnings of how it worked, all to the red striped bucket. He invented all of it, selling it, going into retirement, getting incredibly bored to study he wants to invent a better burger. It's got some great chapters on managing managers. He calls it Roddy in the Wave. It's a very interesting book. The other one is because I like reading both business and war books interchangeably. I like the biography on Patton, which is just called Patton, a giant book, about 1,000 pages in length. It's all about Patent's philosophy of always being on the attack.

And it really relates well to real estate or by own beliefs in real estate because, you know, being on the attack typically does, does better your position. That's awesome. All right. I really like that. Okay. What are some of your hobbies? You know, I don't have a lot of hobbies. My big hobby is, in fact, teaching.

I think I was a frustrated, I don't know, college professor or something in another life. So I've been teaching all the way back when I was at Stanford. In fact, I was the youngest member, supposedly the Stanford faculty in history, because I was the public speaking instructor while a junior at Stanford. And I got that gig because I was the TA for the public speaking, the giant Stanford intro to public speaking class, which was taught by two attorneys. One attorney did not come back, and Stanford contacted me over the summer, if I want to take the guy's position.

So I actually had a full faculty card. I could use the faculty club and everything else, but I was only a junior. Oh, funny. And so I've always been teaching ever since then. I taught public speaking and continuing ed at SMU for 20-something years. And then, of course, today I teach on mobile home parks, but I've always been teaching.

I like teaching. Cool. That's great. All righty. Well, last question for me then. Frank, what do you think sets apart successful real estate investors from those who give up, fail, or never get started? I think the big thing that separates people is coming to grips with fear.

It's kind of like the Will Ferrell movie Talladega Knights where he can't drive the car because he's so obsessed with being on fire that they have to, what, stick a mountain line in the back seat to finally get over his fear or something. I think a lot of times when you approach real estate or anything in life, or at least what I have to do is I break everything down into three modes. My best case scenario, my realistic case scenario, and my worst case scenario. And you can't go with the full on worst of the worst case. The full on worst of the worst case would be I get in my car to drive out to the property and I've hit by a truck and killed. So you have to get a little reduction of the fear factor.

But you look at any deal and you say, what's the worst that can happen to me? If I go back to Glenhaven, what was the worst that could happen to me? Well, I would have lost my $10,000 dollar down payment. And if I put any more money in, I would have lost that too. That was my worst case and that got me over the hump because I'm a very pessimistic person by nature. So I'm really never obsessing on my best case. I'm not someone who gets involved in something and says, wow, I can make all this money with it. That's, I mean, that's important or you wouldn't do it. But I'm always obsessed with my worst case scenario. But at the same time, I think it's also important that people acknowledge there's a worst case scenario in doing nothing. It's actually probably the

worst risk you have in life is the doing nothing playbook. And in fact, I read a book on this by the Army. Can't remember the name of it. It's the Army's management book they give to their officers. And there was something in the book, I thought fascinating, which was called the 80% solution. What the 80% solution met was if you were pinned down under fire and if you don't move, you're going to die. So you have 80% chance of living if you move. Because at some point, the enemy is going to pinpoint exactly where you are and blow it up. And I think that's true for a lot of people. So I think a lot of people, they get so obsessed with fear that they miss the bigger fear,

which is the fear of doing nothing. So as long as you can get involved in things, you can manage the downside risk, you should definitely get involved in them. Even if the worst case scenario happens, at least you tried. And maybe you learn from it and you can try again. But I think fear is the number one thing that stops people from being. successful. And I think if people can just overcome that, you know, not not, not just saying, ah, what the heck, let's go on attack and, you know, like some crazy cavalry charge of World War II

that went nowhere. But if you just look systematically to every deal and analyze your worst case scenario and realize how you can mitigate it, then you should move forward. So I think the number one problem is fear. I love that you said if if you're afraid and you do nothing, you're almost guaranteeing that you'll die. You know, because that's the truth. That's a lot of people's initial instinct is, oh, man, I don't know what to do. I'm going to freeze and I'm not going to move. I posted something on my Instagram actually about indecisiveness and how like the roads are full of squirrels that couldn't make a decision. Basically, they got run over by cars. You know, like if they had gone one way or the other, they would have been okay. But because they didn't move at

all, they got run over. And then when you couple that with, you know, that car that's coming for you or the enemy that's shooting at you could actually be the opportunity that you didn't take the chance that you had to make your life better. And if you don't make any any action or decision, at all, then you're sure to lose as opposed to choosing and making the wrong one. I mean, I'm probably going to be thinking about that all day. Really good point. Do you have anything you want to add on that, Brandon? No, I mean, I think that's great.

I think, yeah, I think too many people are played by indecision and that sometimes even a bad decision is not as bad as no decision. I've been thinking that a lot lately. I'm actually reading that book, Traction right now, which is all about, like, forming your business. And Traction talks a lot about that of just, you've got to just make decisions in life. you got to just do stuff. Otherwise, you're just frozen.

Frank, this has been amazing. Really, really good stuff. Really, really powerful show. So thank you so much for joining us today. David, I'll let you ask the final question. Then we'll get out of here. Yeah, Frank, for people that want to hear more about this, where can they find out more about you?

Okay, you can always find out all my latest writings and thoughts. If you go to mh.com, just www.m., which stands for mobilehome university.com. That's where everything I ride or talk about or lecture on, it's all stored in that one repository. So that would always be the best place to go. All right. Perfect.

All right. Well, thank you very much, Frank. This has been fantastic. We'll see you around. Okay. Thanks for having me. All right. That was our episode with Frank Rolf.

Man, I've been looking forward to that show for years since I first heard about Frank as like being like this powerhouse in the industry. And I totally understand why he's like the guy. Like he's like the godfather of mobile home park investing. Totally love it. I think I just learned more about mobile home. parks in that one hour than I have in my entire life up to this point.

I agree. I was actually slightly worried. Honestly, I was slightly worried about doing a show with Frank because I knew he's really good at explaining the benefits and why they're so awesome. And I was like, I don't want everybody in their mother choosing mobile home parks, creating all this competition.

But at the same time, like I want our audience like doing what's best for them. So like we said earlier, the best investment is the one that you pick. So if you want to do mobile home parks, go do it. Go learn. Go grow.

Go network. Or if you want to do wholesaling, $30,000 houses. go do that. If you want to do multifamily, small multifamily, house hacking, burn investing, pick one and do it. I mean, Frank did it. David Green here did it. You can do it as well. So anyway, fantastic episode. Well, hey, before we get out of here, we want to add a new little segment in the end of the show to kind of talk about some of our members here that are part of bigger pockets. And today I wanted to give a shout out to Donald S. He's a pro member in St. Louis,

Missouri. He just completed his first flip, made $13,000 in profit. But he learned a ton, and he wrote all about it over on the real estate success store. forum, which of course you can get to at biggerpockets.com slash forums. And hey, in future shows, we're going to start highlighting, like I said, more of these stories. So especially, we like to, you know, I guess reward our Bigger Pockets Pro members. So if you're a Bigger Pockets Pro member, in coming weeks, we'll be giving you guys some instructions on how you can, I guess, I don't know if the words apply or submit

your success stories. And we can talk about deals that you've done or things that you're working towards, just kind of a way to inspire all of us to push ourselves. So anyway, congrats Donald S on that. very, very cool. We'll link to his story in the show notes at biggerpockets.com. So I show 339. And of course, you can find all the link from today's show there.

You can find connections to Frank, all his website and all that good stuff. The books that we talked about today, quotes, the video from YouTube, all that's good stuff. Right there, biggerpockets.com. That show 339. And with that, that's all I got. So you want to take us out, David? Yep. Way to go, Don Don, Dawn.

Nice to see you guys doing well as pro members. This is David Green for Brandon, my Burr Brother Turner, signing off. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online. Thank you all for listening to the Bigger Pockets Real Estate Podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform.

Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K, copywriting is by Calicoe content, and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk.

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