Epic Real Estate Investing - Mobile Home Park Investing with Andrew Keel | 783

Episode Date: September 22, 2019

This Sunday, Matt interviews Andrew Keel, a CEO of Keel Team, a company that currently manages 16 manufactured housing communities across seven states. Tune in and find out what are the things you have to watch out when moving into mobile home parks, what skills are required for this kind of business, what Andrew thinks about 2020 recession, and many more! Learn more about your ad choices. Visit megaphone.fm/adchoices

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Here's Matt. All right. Welcome to the Epic Real Estate Investing show. I got a great show for you today, a very special guest. He is the owner of Heel Team LLC and his team currently managed a 16 manufactured housing communities across seven different states. His expertise is in turning around undermanaged manufactured housing communities by utilizing proven systems to maximize the occupancy while reducing operating costs. So please help me welcome to the show, Mr. Andrew Keel. Andrew, welcome to Epic Real Estate Investing.

Yeah, thank you for having me. You bet. Glad you're here. So I'm interested. Like, what's a, tell me, what's a manufactured housing community? It's a fancy way to say mobile home park. Ah, okay. Like, this is the new one for me.

So, yeah, tell me, tell me about, I don't know, tell me about what you were doing just before you got into this specific niche. Yeah, sure. So I have an interesting path into mobile home park investing. I started out as a Lonnie dealer. There's a guy named Lonnie Scruggs who wrote a book called Deals on Wheels. And I guess one step before this, I was actually wholesaling and rehabbing houses in Central Florida. And through my marketing, I came across two mobile homes in Ocala, Florida that were like really cheap, like a thousand bucks a piece. And I didn't know what to do with them.

So I got on Google, found a YouTube channel for Lomel, Lonnie Scruggs and subscribe to his channel, listen to everything he put out. He had a training seminar. I read his book and ended up buying 19 mobile homes and selling them on contract and, you know, just creating mailbox money, as Lonnie puts it. Eventually met a park owner in Ocala, took him out to lunch, and he really kind of changed the way I looked at things and said, hey, the real value is built in owning the real estate and not the personal property that is the mobile home.

Right. So that was an aha moment for me. I immediately started to get hooked in mobile home parks. I went to a couple seminars. I went to the MHU boot camp and I started cold calling park owners. And right after the boot camp, I actually got my first lead on a good off market deal in Edwardsville, Illinois. And I reached out to a couple of investors that I met at the MHU boot camp, the Frank and Dave boot camp. And one of them, put up the money for my first deal. And since then, we've done several deals together. And now we've brought on other investors and have done some syndications. So, yeah, just kind of brought us to where we are today. Got it. You know, I'm born and raised in Southern California, primarily Los Angeles. And I just moved to Las Vegas.

So I haven't seen many mobile home parks in my life. I know what they look like. I've certainly passed by some. And my mom actually lived in one. But how abundant are they? I mean, how many are there in the country? There's about 44,000 mobile home parks. Okay.

Now, that includes, you know, five-lot mobile home parks, and they go all the way up to, you know, 500-lot mobile home parks. So there's a lot of differences. There's a lot of, you know, different classes. You know, there's the grade A properties with amenities and, you know, 55 and older, and there's a swimming pool and a clubhouse. And then there's all.

also, you know, the bottom end of that spectrum. And I think that's what kind of, kind of when we think of mobile home parks, we instantly have that stigma of, oh, trailer trash, eight mile, you know, trailer park boys. You instantly think of that low end. But a lot of people don't realize that, you know, some of these mobile home parks, manufactured housing communities, are very nice. And they look like nice subdivisions that, you know, that you and I would live in. So it's, there's a, there's a big. spectrum there for sure. Got it. So when you're looking for these types of off-market deals, you mentioned cold calling. Is that the primary way that you locate your opportunities? Yeah. I mean, we've, now that we have 16 communities, you know, we've diversified across a lot of different lead-gen sources from mailing letters to cold calling to brokers to mobile home park store.com. Those are just a few ways that we, you know, we deal source. Got it. So you've got 16 of these parks. How long is it taken for you to get to that point? It's taken about three years to get to this point. That's respectable. Thank you. I appreciate that. That's good. I can imagine because I, you know, I've got a bunch of single family houses.

And when I made this transition into multifamily, I thought, hey, it's just like 20 more houses underneath one roof. How difficult could it be? And there are a lot of little nuances and stuff that I wasn't ready. for and didn't plan for and shoot, I just couldn't have imagined and expected it. What are the type of nuances you going from houses to mobile home parks? What's the big differentiator and what does it take to succeed in that arena? Sure, great question. So I started out and I had about a handful of single family rentals. And then I had a nine unit apartment complex that I got seller financed that was in Daytona Beach, which is about 45 minutes away from my house.

before I got into mobile home parks. And I'll never forget, I was self-managing that nine-unit apartment complex. And my phone would never stop ringing. It was like there was also, and it was an older building, but there was always an AC unit that was breaking down, a leaky faucet, you know, a refrigerator door that wouldn't shut all the way. There was always something going on. So when I got into the mobile home park space,

one of the big things that intrigued me is that, you know, we don't own the homes. We just own the dirt underneath of the homes. So it's, we're basically like a big parking lot and people are paying us to, you know, to have their home there. And these homes, you know, they say they're mobile homes, but they're not exactly mobile. You know, they're, they're pretty expensive to unhook all the utilities, transport, and then reinstall. So it can cost around four to five grand to transport these things. And 95% of mobile homes never move from the spot they're initially installed in. So there's some good information about, you know, why mobile home parks right there.

Got it. So for someone that would be entertaining this, because I've heard, you know, mobile home parks and storage facilities and kind of, you know, alternative real estate asset classes, I guess you'd call them. And they all sound so great, right? What are the things that you need to watch out for when moving into mobile home parks? Yeah. So due diligence is.

is very, very important. And specifically on the utility infrastructure, because a lot of these parks were built back in the 60s and 70s, and they're older, you know, old water lines, old sewer lines. So we do a lot of due diligence on those infrastructure, utility lines, along with the electrical and gas lines, making sure that they're in good condition. Because those are the big ticket items that have had to be replaced would be, you know,

very, very expensive. So if someone's just getting into this business, I would recommend they do a lot of research on the utility infrastructure. Got it. So what would the typical due diligence process, not process, but length of time that you'd ask for in a contract to satisfy all your curiosity about the property? How much time do you need for, say, I don't know, just your average run-of-the-mill part? Yeah, we want at least 30 days of due diligence. but, you know, sometimes on a bigger property, we'd want as much as 60 days, but 30 days is pretty standard. Okay. And going into this, what type of resources would you need to really, you know, pull the trigger on the opportunities that you find?

And what type of, I don't know, their character traits or personality traits or strengths, skill strengths, or assets like that? What do you need to make this work and work well for yourself? Definitely. So, I mean, first off, when you're putting a deal together, you know, there's, there's the deal itself, there's the money, and then there's the knowledge of how to execute the business plan and pro forma and make a profit. So those are really the three things that you'd need. You know, like I've done partnerships where someone brings the deal. We bring them into the deal. You know, I have the expertise and I also have access to a lot of investors that want to invest in this space. Because, you know, investing in mobile home parks is arguably the highest rate of return out of any form of rental real estate. So it's a, it's a, you know, abundance mentality. There's three aspects to every deal. But, you know, you just have to go in open-minded. And, you know, I think it's not rocket science, but there's a certain number of, you know, persistence that you have to be ready to implement.

So did you say it's the highest returning? Highest rate of return, correct. Okay. And what capacity? Like overall, like the yield or the cash flow? Yeah, I would say both. I mean, on a monthly basis, you know, or debt service ratios are some of the highest in all of real estate.

So that's, you know, I think there's also that stigma as well that kind of keeps some investors out of the space. I'll never forget, one of my first investors that I approached with that deal in Edwardsville was a family friend very well off. I've known him since I was a little boy. And I went up to him and I said, hey, you know, I presented him the business plan and he said, Andrew, there's no way I'm investing in a trailer park with you. And that was that. He didn't even look at the numbers. He didn't look at anything. And, you know, looking back, now that we've fully gone full circle on that business model, you know, the rate of return that he would have received would have been, you know, well over

125% annually. Right. Yeah, that's something you probably want to consider. Totally. And that's kind of, I guess, where my line of questioning is going, because I might even fall somewhat into that category, just because I don't know a whole lot about it. So I'm asking the questions like, what does it take to succeed? What is it?

What do you need to watch out for? Trying to flush all of that out to give it the, you know, to have an open mind around it. What am I not asking that I should be? Well, I guess what are the biggest faults? what are the big things that you want to look out for that are the biggest mistakes or what could go wrong, right? I mean, any investment you want to look at the worst case scenario and kind of, you know, see how you can offset those risks. A question that I get a lot is about tornadoes.

And, you know, hey, you know, the tornado comes, comes through and rips up the whole mobile home park. You know, what do you do then? Because, you know, the tenants own the homes. Are they going to go shell out the money to buy brand new homes and bring them in there? Probably not. But what we've seen historically when mobile home parks are tore up by tornadoes is that FEMA does come in. And if you don't have insurance, they have provided financial assistance. There was a park in Oklahoma that had a major, I mean, unbelievable tornado come through and mess up the whole town.

And FEMA came in. and what does FEMA do? They want to provide temporary housing as fast as possible. So they bring in manufactured housing to the mobile home parks because that's the fastest way that they can hook in and get a home online. And then for people in the community that have been basically pushed out of their home or their home has been destroyed, they're putting them in the mobile home parks.

And then, you know, there's a lot of resources that you can take advantage of. But obviously, no one wants to go through. a tornado type situation, a catastrophe like that. But, you know, we also carry loss of rent insurance that offsets that risk. So there's things that get you out of that situation, but that would be obviously a catastrophe. Right. So, I mean, there are risk management steps for that as well, though. Exactly.

Super. Super. Cool. So what does your day-to-day business look like? What are you doing? What does what business look like for you right now? Sure. So we, you know, I'm working on acquisitions. We have a few in the pipeline. We usually do, I'd say, four to five deals per year, and, you know, that's

pretty standard for us. I have my own management company now that manages our existing assets. And we also have purchased our own manufactured home moving business. So we have a transport business that helps us infill properties. And a lot of our properties that we purchase our value ad, meaning that there's vacant lots. So we'll come in, bring in homes, and then sell the homes on site to increase the occupancy and ultimately the asset value. So that's that's a little bit about what we're working on right now. We're always, you know, raising capital for a new deal and, you know, putting deals together. Got it. So if you were to start over, knowing what you know now, let's be the three first actions you would take. The three first actions I would take. Well,

I would have got started cold calling mobile home parks and deal sourcing. And deal sourcing. right away, that would be number one. Number two, I would have gone to the boot camp, the Frank and Dave MHU boot camp. I would have gone to that earlier. Very tremendous educational boot camp that I recommend someone go to if they're interested in the business.

And then number three, I would have bought bigger properties earlier. That's kind of something that we're just now getting into is looking at higher number of lots. A lot of our parks now have around 50 to 60 lots and, you know, we're looking to get into properties now that have 100 plus lots because from a due diligence standpoint and an acquisition standpoint, you know, the same amount of work goes into the due diligence of a 31 lot mobile home park that goes into a 200 lot mobile home

park. You know, it's the same inspections that need to be done, the same infrastructure, et cetera. So yeah, that's what I would have done. Got it. Good, good advice. Now, that'd be very similar to what I'd probably say with houses. You know, you get educated, you go find the deal, and, you know, work like hell. Right? So there's a lot of talk right now about the recession, right? The 2020 recession, a shifting market where we've been on a 10-year, really solid run. What about the what are you seeing in the market that has you concerned and what are you seeing in the market that has you excited?

Yeah, I think the Fed just dropped interest rates again yesterday. Is that what happened? I know that we're doing that. I did not check it to see what happened, though. Yeah, they dropped it a quarter of a point yesterday, and then the previous drop was half a point. So I think that there definitely has, it's been a long run. I mean, for real estate investors, you know, there's been a lot of money made. And, you know, we all know that the market's cyclical.

We expect it. And when the market changes, you know, our business models change. And one of the reasons why I got into manufactured housing is because it is somewhat recession proof. If you think about it, it's the most affordable form of non-subsidized housing in the United States. So, you know, if you look back at the numbers back in 2008, 2009, 2010, you know, mobile home parks had zero quarters of negative growth. So I feel comfortable, you know, where we are at. Do I think a recession is coming, you know, like the one that hit back in 2008? I don't think it'll be that severe.

but I do think there will be a slight downturn. Right. Yeah, the, thinking the same thing. I think there would be an adjustment. There has to be, right? Yeah. That doesn't look like there's any indicators pointing towards that being anywhere close to what

happened before. But then again, we had no idea that was going to happen either, right? If it is something that happens that impacts us is going to be something that we don't know that we don't know about, right? Now, it's really clear. We look at hindsight and everything is so clear as to, what actually happened.

Still took a year or so to break it all down and for the average person to figure it out. But yeah, no, I'm always optimistic about real estate and people always need shelter over their head. I didn't know that about mobile home parks as far as the never having a down year, right, a negative year. Is that what you said? Mm-hmm. Right? That's awesome. Cool.

So who are you looking for in your business? What person would you like to meet that would have the biggest impact on your business? The man's name is Sam Zell. I believe he owns the most manufactured housing units in the country through its equity lifestyles is his reet that is focuses on amenity rich, you know, 55 and older communities. He used to partially own, I mean, he's like he's a real estate mogul. I mean, he owned in three asset classes he like owned the most units. One was manufactured housing. One was multifamily apartments and the other was office.

office space. So just the way he's diversified and the way he started out, I read his book, Am I Being Too Subtle? And just some of the stories he has and he seems like a very knowledgeable guy. So I'd love to meet him and I think he could help me take my business to the next level, but also, you know, just kind of help train a younger version of his self, maybe. Sure. So we've got, I mean, we've got, we're up to like almost 10. million downloads in this podcast. A lot of people listen to the show. If somebody was listening that knew Sam, what would be the value that you'd bring to him? If somebody knew Sam, man, I would, I'd be willing to work for him for free. I mean, that's the kind of, you know,

value that I see in that relationship. And if someone young out there that says, hey, I'm interested and, you know, getting into this space, be willing to work for free. I mean, there's, there's some value behind that. Yeah. My two favorite employees ever, both came to me saying that, those very words. Yeah.

One is no longer with me. Went on to different interests. But the other one has been with me the longest. And I think that's a really, really good approach. I think that's really good advice, particularly if it's about something that you really want, right?

Super. Andrew, it's been an absolute pleasure. Let's do it again. Let's check back in in the future. If someone wanted to get in touch with you, what would be the best way for them to do that? Yeah, they can check out my website. It's keelteam.com. That's k-e-e-e-l-team.com.

If you're interested in maybe partnering on deals or investing passively in mobile home parks, you can schedule a consult with me. We can get on the phone, get to know each other, and hopefully work on a deal together soon. See if there's a fit. Sounds good. Well, great, Andrew, it was a pleasure to meet you. and yeah, we'll talk soon, all right? Awesome.

Thanks for having me. You bet. Take care. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. You didn't know who's worth, we got the cash flow. This podcast is a part of the C-suite Radio Network.

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