Epic Real Estate Investing - Real Estate Investing for Cash Flow with Kevin Bupp | 252

Episode Date: March 20, 2017

Epic Real Estate Investing is joined by Kevin Bupp, a real estate investor specializing in mobile home park investments. The host of the Real Estate Investing for Cash Flow podcast explores a unique class of property investments that provides opportunity for cash flow and more. Learn how mobile home properties meet the market demands for affordable housing and how that can translate to cash flow for you. Continue to grow and diversify your portfolio with Epic Real Estate Investing. ______   The free course is new and improved!  To access to the two fastest and easiest strategies to a paycheck in real estate, go to FreeRealEstateInvestingCourse.com or text “FreeCourse” to 55678. What interests you most? • E.ducation • P.roperties • I.ncome • C.oaching Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Broadcasting from Terrio Studios in Glendale, California, it's time for Epic Real Estate Investing with Matt Terrio. And welcome to Epic Real Estate Investing. This is the place where I show people how to escape the rat race using real estate. If you're just getting started and or you're looking for new and creative ways of making money in real estate, I've put together a free course just for you, including a checklist on how to find motivated sales. sellers. Those are property owners that are willing and able to sell you their property at a discount. Yes, they exist. They are out there. And to access that free course, go to free real estate investing course.com. Free real estate investing course.com. I already got a great show for you today. But first, I want you to mark your calendars from May 24th, 25th, 26th. And then if you're

so inclined to join us also for our mastermind event, the 27th. So 24th, 25th, 26th is the next epic intensive. It is officially on the calendar, the theme. Weapons of mass production. I'm going to share with you all the potent tools and methods every real estate investor can use to find motivated sellers, buyers, buyers, and lenders in as little as 60 seconds. I'm going to show you a couple techniques that you can get instant response from, even if you think you've heard it all before. So with weapons of mass production at your disposal, you'll find more deals, cash more checks, and finally start calling the shots in your life. So that's what this event is all about. Each one of our epic intensives has a different theme.

So I'm going to show you how to find more motivated sellers, buyers and lenders, and without throwing away good money after bad, even if you've never made a dime in real estate. All righty. So May 24th, 25th, 26th, you can go to epicintensive.com. Doing something very different this time, by the way. Prior to opening up for our early bird pricing like we typically do, I'm actually going to let the first 25 people in for free. That's right.

The first 25 people to register are in for free. And today's session, I'm recording this a little. little bit in advance. I do anticipate having the registration page live by the time that you are hearing this. I'm going to do my best. But should you get there and everything is not set up yet, I'd just like to ask in advance for your patience, but I'll get it set up ASAP. All right. So you can go check it out right now at epicintensive.com. And by the way, have you, you checked out our private Facebook group lately. It's pretty amazing what's going on there. I mean, the amount of deals getting done and for the amounts of money that's getting generated, it's all been very, very impressive lately.

It's turning out to be an outstanding year for real estate for the Epic community. So, you know, between the follow-through crew and the Epic 89 participants, absolutely crushing it. For example, Jeremiah Johnson on Friday posted a $20,000 wholesale dealer that he's got under contract on Tuesday. He got on a contract and he sold it on Tuesday. Kenny took the day off of work. That's a win for him in itself. But he did so to go pick up his momentum from a $60,000 profit fix and flip. Finally sold and funded.

He posted that check in there. Sean Vanneboss, the seller came back to the bargaining table game on for him. River closed one more deal. That's three weeks in a row for her. She's going to actually be on the show with us next week to share with us how she did that. And now she wants to find deals over $10,000 to break their record. But she's got a deal closed three weeks in a row. Corey posted a very impressive check of $191,000 from two single family houses.

And he posted a rewind five years ago. I did not know Matt or Mercedes or any of you. And I definitely didn't know shit about. real estate. Still don't. I was 21 living in an upstairs bedroom in my parents' house, $70,000 in student debt and nothing to my name. What I did have was a realization. You can make excuses or you can live the life you want, but you can't have both. Awesome, Corey. Congrats. Thanks for sharing that with us. You're an inspiration to all of us. And Gary posted his third wholesale deal check, posted a picture of an $18,000 check. So you guys are doing great. And then I just

this morning on my walk, I was checking with my coaching clients. I just sent a text to one of them. Michael to check in and here's how he replied. I hadn't talked to him in a couple weeks. That Matt, thanks for checking in. I closed three deals last week. Closing on another one tomorrow and I've got another one under contract today. So business is getting done inside the Epic Investor community. At the Epic Intensive,

I'm going to be sharing the weapons of mass production that's making all of this happen and a bunch of new ones that are working for us here in our office too. So go to Epicintensive.com. The first 25 are free. I know that was a lot. That was more than I've ever shared with you before, but that's how much success had been posted in the Facebook group just last week. All righty.

So on the phone today, I'm joined by fellow podcaster, successful real estate investor from the Real Estate Investing for Cashflow podcast. The asset classes he uses to create cash flow, a little bit different than what we discuss here regularly on the show. But I always want to share different options with you. There's so many different ways to do this business, so many different ways to succeed in this business. So I invited him on the share, or excuse me, on the show to share personally.

So please help me welcome to Epic Real Estate Investing, Mr. Kevin Bup. Kevin, welcome to the show. Matt, thanks for having you, bud. I'm excited to be joining you guys today. Sweet. And, you know, I've been on your show, I think twice now, right? You have, yeah. And I was like, hey, would you like to come on my show again?

And then you said, I've never been on your show. And I was like, uh-oh, we have to fix that. I wasn't good enough. I was trying to make deals happen. I guess now I'm at the point now in my life. I can sit in the big boy club. I guess so. I mean, I honestly thought we did, we'd done that exchange and we were close to each other, but I guess not.

So, welcome back. Let's make this one super special. We're here now, right? We are. We are now. So what market are you in, Kevin? I live in, well, I live in Clearwater, Florida, but I don't necessarily invest where I live. It's not because I don't want to.

I just don't have the choice based on the assets that we invest in. So I live in Colorado, Florida, but I invest in basically the eastern half of the U.S. is the best way to put it. Got it. Okay. So on that note, what are the asset classes that you are most commonly involved in? Mobile home parks. I mean, that is like 99.9% of what we focus on the day. I've owned hundreds of multifamily doors. I've owned hundreds of single family house rentals. So I've been doing this as I was 19. And that was way back in, I don't know, 1999, I guess. I'm trying to do the math here. I'm 30. I just started 38 yesterday as of this recording. Happy birthday. Thank you. Thank you. I've been doing this in my entire adult life. So I've owned a little bit of everything. own office buildings, small retail. But about five years ago, I got into it to mobile home parks.

And so that's all I've really been doing since that point in time. I've owned a few other small little odds in here and there. I still own some single family homes, but all of our active portfolio, things that are really we're working on today and things that we're actively putting in the pipeline are mobile home parks. Got it. So that's really kind of the buzzword here in Los Angeles on the other side of the country. and all of the local meetup groups and the RIA events,

like it just seems like that whole mobile home park subject is recurring over and over and over again. And I honestly, I don't know really anything about it other than, you know, someone in my family. Other than you don't want to live in one. Other than I don't want to live in one, right? Exactly. So tell me, with all the experience that you had and as long as you've been doing this, why have you settled in on that asset class? Well, it's funny because I didn't know anything about mobile home parks.

I guess it's actually been about six years now. I didn't know anything about them either. And I just, I had gone through a really challenging time, Matt, in 2008 when the crash happened. And I lost a lot of real estate. And I took a couple years, just kind of started a couple other businesses, stuck my head in the sand, whatever you want to call it. I mean, I did do real estate for two years. But when I got back into it, 2010, decided I really, okay, I'm going to put my focus back in the real estate. I need to rebuild my fortune because I pretty much had lost everything. I looked back in my prior business model at what worked and what didn't work. And what I realized is that multifamily worked really well for me.

It worked better for me, my own personality type and my investment style. It worked better for me than the single family home portfolios I had built. And so I knew I wanted to rebuild a fortune with multifamily. And I knew I could get there faster. I knew it was a lot more scalable. And so I just at that point, you know, the market had changed a lot from when I had gotten out of real estate, you know, from when 2008 happened, 2010, you know, the lending environment was completely different.

It wasn't a lot of credit out there and lots of distressed deals in the market. And so things were different. And so I just ran out and I started talking to everyone I could that was still active in the multifamily space to find out what they were doing, what markets they liked, why they liked them. It's just so I could get back up to speak because I literally had walked away for two years just because I didn't really know what to do with myself at that point in time. I was going through some challenging times of credit and such. But anyway, one of the introduction that was made to me was a gentleman named Randy. And Randy had been in the finance side of the business of mobile home parks and RV parks here in Florida for the past 30 years. and he had retired, I think about six years prior to me meeting him.

And he started buying parks. In retirement, he started buying parks. He knew them. That's all he had to refinanced in his banking career. And so he knew them inside and out. And so as soon as he retired, he's like, well, I guess I need something to do with my time. I'm going to start buying mobile home parks. And so I had a two-hour lunch with him.

I didn't even know what to expect. I went into it saying, you know what? I'm just going to ask some questions, find out about this asset class, why he likes it. And I walked away after like two or two and a half hours and said, I'm going to give the next year year of my life to focus on this and figure out as much as I can and see if I can make some deals happen. And so I was that excited when I left that meeting with him that that was the point in time where I made decision that mobile home parks was going to be at not apartment buildings, mobile home parks. So that's how I found out about.

And that's how I decided to dive into it. And we did our first deal. And so here we are today after many, many deals later, we're still buying mobile home parks. Sweet. So, you know, here we are many years later. You've stuck with it. So obviously, it's treating you well. That's great.

What do you like best about it? You know, so there's multiple things. You know, I'll give you some of the key components that we really, really like. Number one, it's very unique in that it's the only asset class that has a diminishing supply. And so what that means is they're not building them anymore. Local municipalities and, you know, cities and towns, they don't like them. And so they don't permit them to be built. And they're actually getting torn down faster than they're being built.

And so it's the only real estate class of anything. You could think of retail, shopping centers, assisted living, etc. self-storage, everything, they're still building them. Mobile home parks are going away faster than they're being built because people don't want them. And so there's a unique barrier to entry that we have in this space, meaning like if I go by a mobile home park in a very desirable market that has a high demand for affordable housing, which is kind of our niche, I don't have to worry about a competitor building one down the road. So that's pretty cool.

If there's any vacant land available, you have to worry about that. And so that's one of the benefits of it. Another one is that, you know, they're a lot easier to manage typically. then an apartment might be, meaning that, you know, most of the parks we own, we just, we own the parks themselves in the dirt and the infrastructure and we just rent the lots. That's not 100% the case, but that is most of the business is that you just rent the dirt. And so the tenants, they own their own homes. If there's a plumbing issue, there's an air conditioning issue, a roofing leak, anything,

they don't call me, they handle themselves because they're the homeowner. They're just renting the dirt from me. So think of as a as a parking lot, as the best way to put it, where I'm in charge, I'm in charge of the common areas. I'm in charge of keeping the roads up, and I'm in charge of typically the water and the sewer lines, making sure that they work and they're not clogged and that they're supplying the utilities to these homes. After that, it's up to them. So that's a really nice benefit of it.

And on top of that, if you really tried to compare apples to apples, which is really difficult to do when you take an apartment building versus a mobile home park. But if we could compare apples to apples, and we had a mobile home park of about the same size, about the same grade, meaning like a three-star park versus like a C-plus or B-class, you know, apartment building, same market, you should typically be able to expect about a two to three point yield premium as far as returns are concerned. And so you're buying, you know, if you're buying a apartment building at a seven cap, you could probably find that same mobile home park if you're buying it right in nine or ten cap. So the returns are much more attractive. It should be much,

should be much more attractive. It's not always the case. Obviously, you got to buy things right. But typically the returns I'm getting today on my mobile home park portfolio blow away. anything I've ever made in single-family homes or multi-family. Super. So the supply and demand is working in your favor, and it continues to work in your favor, right? The supply is diminishing. Very much less property maintenance, specifically on the structures themselves. So you're not changing roofs and water heaters and stuff like that, right?

Yeah. And then a higher return, two to three percent more than you would normally get in the apples-to-apples comparison with the multifamily. So that makes sense to me. And it's affordable. You know, there's really, there's nowhere else you can possibly live. So we don't, we don't own like, you know, drug-ridden, like, run-down-type mobile home parks. I mean, we own family-style communities.

Typically, there are people there that have children. You know, it's a safe quiet community. It's typically in a really good market that's, you know, what we deem is not affordable, meaning like there's a high demand for affordable housing. And so there's really, if you really start thinking about the scale of living options. And so I'm going to assume from a renter standpoint, you've got, you can rent a single family home or if you're in the apartment space you're going to rent an if you're at the top tier you're in a class if you can't afford to a class apartment building you're

going to move to a b class can't afford to b class you're going to move to a c class you can't afford to see class now you've got some decisions to make because the d class is kind of a war zone where you got a pack heat to be comfortable and you know it just got a lot of bad things going on it's kind of war zone type stuff or your option could be to move into a community type situation in a mobile home park that's actually probably even cheaper than the d class but way safer and probably more equivalent to like a C plus class apartment building. And so there's really, and if you can't afford to live in a mobile home park, so our average lot rent in our parks, in different parts of the country are different, you know, a lot rents and different rates,

but our average lot rent's about $300 a month. If you can't afford, and that's, that's if they own their home. If you can't afford $300 a month, Matt, then you have no other options. There's nowhere else you could possibly go and live for $300 a month. You couldn't even probably live in a shelter. You'd probably still have to pay them something to live there, you know? Right. So, so it's, So it's nice knowing that we've got a product that's in very high demand because affordable housing just isn't being built. You know, it's not, it's not meeting the demand. The supply is not meaning the demand as far as new affordable housing developments coming out of the ground and such. And so we have a really nice niche, and our niche fills that void.

Got it. So regardless of what asset class it is and what you're investing in, the beginning process of finding deals is all pretty much the same. You've got to go out and generate a lead. You've got to talk to that lead and convert it, get it under contract. What is the where do people go and look for mobile home parks if they're prospecting? Is it direct mail? Is it band-a-sign? Is it classified ads?

Like, what's the approach there? So all the above work, you know, I can tell you that there's, you know, loopnet is like the commercial MLS. And so you can find, you know, there's a whole category of mobile home parks for sale on LoopNet. Loopnet's, I tend to call it the broker trash can because most of the time when deals finally make it there, they're, you know, they've been shopped around a bunch or they're overpriced and there's something wrong with them.

That being said, we actually have two parks in contract right now that we found a loop net. There will probably be, if we close them both of them, they would be the first parks that we bought in like three years off a loop net because there's just not a lot of opportunity that comes up there. A lot of things are just, again, overpriced or there's some kind of other inherent challenge with it. But loop net's the big one. And then there's a website called mobile home park store.com. And that literally is a website dedicated to mobile home park sales.

And so, but again, very similar to loop net. Most things that make it up there, yeah, they're kind of overproneyspriced. So there's some other kind of challenge that just probably doesn't make them a great deal. And here's the fact. I mean, this applies really to all commercial real estate, Matt, is that unlike residential, whereas probably 90, I'm just going to make up some numbers here because I don't know the exact numbers, but probably 97% of the transactions that happened in residential real estate happen through the MLS. Right.

Right. The number's pretty high. Maybe it's not 97, but it's pretty darn high. I think it's 95. 97 is what I've always heard. In the commercial side, it's the complete opposite. like 95% of the deals happen off market, meaning like they never make it to a website like a loop net or a mobile home park store. They're done because a broker has a relationship with a property owner and that broker connects them with another potential buyer.

But no one never even knew that sale happened until it hits public records. It just happens. And so a lot of times we buy deals, we buy deals by going direct to owners or we'll use brokers. But more so our business model works best by going direct to owner. So we do a ton of direct mail. We do a ton of cold calling. And that's how we bought pretty much, I guess about 90% of the deals that we own today is by those two methods. And you can use brokers and you can do other methods as well.

But direct-to-owner works for us. And it just fits our style. Got it. So is it a normal postcard? Is it a more formal letter? Is it a handwritten letter? What kind of? We do everything.

It really depends on we spend a lot of time. And I think this is the important part of it. We spend a lot of time in our database. And we really put a lot of energy into segmenting our list, knowing who we're mailing to. And so we've done this long enough to where we can look at our database of mobile home parks. And we can say, well, this guy's a mom and pop. We know how long they've owned it. We know how long they've owned it.

We know they don't own any other parks. And so we always categorize them as a mama pop. They've owned it for like 20 plus years. That's their only property. And then we see other names that have a pattern. They own four or five parks. So they're a little more of a sophisticated owner. And then we see other names that own, you know, 40 mobile home parks.

So these are professional or institutional type guys. And so we try to send a different message to different owner types. And so like a mom and pop, they might get a handwritten level. first or they get they no matter what they get a very personalized letter it might not be a handwritten letter but it's gonna be a very personalized letter it's gonna come from perspective of me and my family we're in the park business we're looking to buy a park we've seen your park and I even sometimes put like a family picture like on the signature line and then more professional

owners probably gonna have like a business letterhead and then sophisticated learns actually we donate or like more institutional owners we don't do direct mail to a lot of times it never even makes it to the right person so we'll cold call them or we'll get a broker involved in those types of scenarios so it just really depends We do different types of messages for different types of people. And then we have different types of follow-up as well. You know, like, if a postcard doesn't work, we'll do a letter.

If a letter doesn't work, we'll do a postcard. And we'll go from more handwritten to a more printed letter. And we'll just change everything up. But I think the more important thing with direct mail is that you touch them all the time, is that you continually touch them. And so that's really our main key ingredient is that we send out multiple mailers per year to every single park owner that we're trying to, to buy or every single park that we're trying to buy.

Got it. So once you've got it under contract, pretty much it looks like any other deal, you conduct your due diligence and then you just manage the asset, right? That's it. You know, there are some tricky components of mobile home parks that don't probably exist in a lot of the other asset types out there. The utility setups in mobile home parks can be very unique in that, and it can be really the part that people lose their butt on.

I mean, it's one of those things that you've got. You've got to really understand the utility infrastructure of a mobile home park to know what you're getting yourself into. And what I mean by that is a lot of these mobile home parks, a large majority of them were built on less desirable plots of land back when they were built. So if they were built in the 60s or 70s, maybe at that point, you know, the land was outside of the town. But now it might be annexed into the city.

So it might be like more of a suburban environment now. But back when it was built, it wasn't. And so, you know, back when they built it, it probably didn't have city utilities running to it. It didn't have public water. didn't have public sewer. And so a lot of parks we still see today, they have, like, private sewage systems. Like, literally, they have, like, a miniature sewage plant in that park that service is just that park.

Like, think of, like, how your city services your sewage. Well, think of, like, a really miniaturized version of that inside that park. So there's common, you know, that's quite common. And then you got, like, a well component where maybe there's not public water and there's well water. And so you got that, that becomes a very complicated process if you don't know what you're doing, meaning like you're now basically treating sewage and you're treating drinking water. And if you don't know how to do that right or if you end up poisoning somebody or you have sewage issue, you can get yourself into some big trouble with the EPA and the DEP and, you know,

and lots of lots of money and expenses to repair it. So. Sure, yeah, you don't want to get those two lines crossed. No. It's funny because we've actually, we've had to our challenges. We kind of know what we're getting ourselves into. Like with due diligence, you just have to know what you're getting stuff into. You got to get the third parties involved.

We own multiple parks that have private utilities, but when we're buying them, we get the third parties involved that are professionals in that space. We get them to inspect the utility systems, kind of know what the life expectancy is, any potential problems that we might have coming up. And we set aside to put the right reserves in case we ever have to replace something. And we have to really know going in what you're about to get yourself into. And we've got a big project now. We've got a large common area septic system that's failing. And we're connecting in the city sewer. costing us about a quarter million dollars. So, you know, that came up about six months after we

bought the park. But we knew, we went into it thinking that worst case scenario, this happens in the first year and it's happening. So we kind of plan for it. That would kill, that particular issue in that park would have killed somebody. Like they would have, the deal would have bankrupted itself. If that would have happened, they didn't plan for that. Yeah. Yeah. Learning some of those lessons myself. Just very recently, as we talked about just before we started recording. But yeah, it's, you know, achieving success is part of learning those lessons and applying those lessons to the future.

And speaking of lessons, you'd mentioned something about 2008, where, you know, you lost everything and you had to start over again. What would you say, what are you doing differently now than you're doing then? That's, you know, I guess what lessons have you carried forward that are serving you today? You know, that's a challenging question, Matt, because I was very low leverage back. I considered myself a very conservative investor back prior to that crash happening. But the thing that got me that really hurt us. I was in Southwest Florida.

And so, you know, we were at about a 58% LTV on like our entire portfolio of single family homes. Not talking to apartment buildings, but the single family homes. And so in the eyes of most people, that's very safe. Seems decent, yeah. I mean, we lost it. Literally, we were worth nothing in a matter of eight months, eight or nine months. Like every single, like there are certain markets that went down 60% where we were. And so our equity was gone. But not only that, there was a lot of speculative builders that were building down in Southwest Florida.

There's lots of vacant lands, lots of open land in Southwest Florida. Now it was back when people were literally flipping a new house before it was even finished. They were flipping like five times, you know? And so we actually had an issue with a lot of new spec builders that had brand new 3-2-2s, like for further than the I could see that were started renting their. homes out. So we're renting brand new homes out to cover their construction loan costs. And so we had like this mass exodus of renters out of our units. So we got hurt really bad. So I don't know what I would have done differently as far as that's concerned other than I probably would have put I should have put more effort into multifamily properties and just focused on that part of my

portfolio because it seemed like the single families. And I know you're a single family guy. So I'm not saying like single family is bad. I'm just saying in that market in Florida, it wasn't enough of a cash flow play. Like we did have cash flow, but it definitely was more of appreciation. And an appreciation type of market. And so I guess if I ought to go back again, I definitely would have put way more emphasis, which we do today. It's all about cash flow. I could care less about what it looked like on paper.

In fact, I never even do. I don't even spend the time or energy to get myself all excited about what it might look like on paper of what I'm worth because of the equity I have because it's irrelevant. It's monopoly money. It's fake. You can't spend it, but you can spend the cash flow. And so with that being said, to answer your question, I would have focused much more heavily on cash flow than I would have.

one appreciation. And back then, I kind of looked at both equally, but really the appreciation is what got me excited because I was like, look at these big numbers. I'm worth this many millions of dollars. This is great. Right. But it went away in a drop of a dime. It just went away. Poof, gone. Right. Yeah, you know, if you look back historically, we all kind of know that these real estate cycles go in seven, eight, nine years cycles. And, you know, we're right, pretty much approaching that right now, how is that impacting how you're doing business or are you concerned with it? Or what do you see for the future? What are you noticing in the market and what's imminent over the horizon? You know, the good thing is that with mobile home parks at least, I found this out

after we started investing in them. But they actually had the lowest default rate of any commercial asset class during, you know, between like 2000 to seven, 2010. Well, yeah, that's pretty $300 a month. Yeah, I mean, that's it. There's no much you can go. So like when you start, again, teetering down that scale, like, I can't afford it. I got a downside. I can't afford, I got a downsize, you end up in a mobile home park. And it's not like that's like the end of the road for you because a lot of the parks are nicer than a lot of the apartment buildings that are out there. But it's very affordable living. And so, you know, we're just very conservative. I mean, every deal we buy, we kind of, we look at something as though, okay, well, what's the worst case scenario?

Like if we're buying it today, a lot of stuff we buy is distress. And so we know that whatever we're buying today, number one, it's got to make sense on today's numbers. And that's in the distress estate that it's in. So we're typically buying things at very significant discounts. Like we're not paying for the upside, which I see a lot of people doing in today's type of climate. We're not paying for that upside. And so we know that more than likely, the property will never be in the condition that it's currently when we buy it. And so if we, if we increase the occupancy, get the, you know, collections better, that we know that still, you know, worst case scenario would happen. If it actually ever did, if we lost occupancy and it went back down to what it was like when we bought

it. Like let's say it was struggling to the point of, you know, when we purchased that park, that it would still support itself. Like it actually would still support its debt service. And so we always kind of go in with like the worst case scenario of like if worst case did happen and people wanted to be homeless rather than live in a mobile home because they couldn't even afford $300 a month. If that did happen, if the world really came to an end like that, could we still pay our debt service and could we still, you know, perform in these parks and make it through the downturn

and the answer is yes. So that's kind of, we go in with that mindset. I don't think it's ever going to be that severe, but we, I like to think it with that way just because I got hurt so bad in 2008. Right. Yeah. If it ever did come to that, I would have to think that we'd have bigger fish to fry than our debt service. Exactly.

Right? And a lot of the parks we're buying, I mean, they just, our cash on cash returns are ridiculous. These things, they just, they cash. Like, we're not, I'm not the kind of guy that goes out. Like, I see a lot of these multifamily prospectus has come across my desk. And, you know, they're promoting and they're all excited about, you know, eight or nine percent cash on cash returns. And I just kind of laugh, you know, and they've got like, you know, 20 percent IRAs, but that's assuming a, you know, a 7% rental increase for the next five years and then exit out of it at a five cap.

It's like, well, that's just not realistic to me. You know, like that just like you're literally, that's a lottery ticket right there. And there's a good chance when you scratch it off. It's not going to be a winner, you know? The stuff we buy is a winner from day one. It just gets better as we, as we improve the upside. Yeah, you make your money when you buy, right? That's it.

Absolutely. It's not. That's percent. That old adage is not there by accident. 100%. Right. percent. So sounds great, Kevin.

I'm sitting here thinking like scratching my head. Maybe I should start looking at mobile home parks. But there's challenges with every strategy. What's the biggest challenge that you face with this one? You know, there's multiple. I mean, you know, financing is challenging sometimes with mobile home parks. A lot of them, they're still, it's a very fragmented industry. And so there's still a large majority of parks out there that are owned by like the

original mom and pop, like developers, you know, or maybe like a second generation, but still like not a very professional owner that keeps great books. In fact, more often than not, I'd say parks that we buy, the reason why we get on our financing is because there's no other option. Like, the books are so bad, you know, they keep like handwritten ledgers and it's pretty, you know, they don't have a use computer or anything like that. And the bank would look at it and be like, I don't even know what's going on here. There's no way we're lending money on it. So lending can be challenging sometimes for that reason. It also can be challenged because the banks just don't understand the asset class.

In their mind, in their mind, they think that it's not secure because someone can just move their mobile home out of the. that lot. Now you just got a piece of dirt left over. But really, very rarely do homes ever move out of a park? They're very expensive to move on average are like three to four thousand dollars for a single wide. And that's just to move it. That's not to reset it back up and reconnected on a new lot. Like really, you're looking probably about six or seven thousand dollars to move a single wide. And so they don't move because people that live in a mobile home park, they never have six or $7,000 in their pocket at one point in time to go move it somewhere. So financing is a big challenge. Another challenge is the management component of it.

You know, when you compare it to like apartment buildings or even single family for that matter, you can pretty much, if you're in a major market, you can pretty much bet that you can find a third party property management company that should be able to do a good job managing your asset. I say should. You know, you should be able to find somebody to manage your asset, meaning like you could not be 100% passive, but you could be as hands off as possible. And mobile home parks, it's not the case. So it's not a large enough asset class to where there's like multiple professional property management companies that specialize in this niche. There might be a few companies out there that do it, but they're not great at it. And so if you want to be in this niche, even the biggest operators out there, you have to be

vertical with your management. Meaning like you have to, every single one of our parks has an on-site manager. And so sometimes it's a husband and wife team. Sometimes it's just an individual. But they live in the park. They're there. They handle the rent collections. The late notices, they show up on court on behalf if they can.

So they handle the day of the operations. but you've got to be vertical. So like we actually handle our communication from our central office, but we have to oversee them. So like we're overseeing the property management of every single one of these parks, which can be intense.

I mean, it can be pretty intensive and it can be, there can be a lot of moving parts to it. So that can be a challenge for a lot of people. If you can't figure that out and you can't figure out how to efficiently go vertical with the management infrastructure, then it might not be for you.

Right. Because that's where most parks fail. If they're not managed correctly, they fail. that's where cash flow period fails. Yeah, absolutely. Management. I mean, you've got to do as much due diligence and work on your management as you do the property in many cases. I think that's why a lot of like a lot of apartment guys are attracted to apartments because you really can.

I mean, there's some really good management companies out there, especially when you start buying bigger apartment buildings. You know, management companies that are specialized. They specialize in even turnarounds. Like there's different types of management companies. And you can find, you know, large professional operators that also have a management. arm and they can help you manage your property and you cannot be fully hands off but like you know that someone's in there doing a better job than you could ever do managing it and that's not the case of mobile home parks like you got to figure it out yourself you got to put the systems and processes in place to manage that

asset you can't just hand it off every time i've ever seen it hand it off to someone else fact we've got a parking contract now up in buffalo new york and it's being managed by a third party management company and it's it's it's pitiful i mean it's it's the worst thing they literally only get like i looked yesterday They're getting like 40% of collections by the sixth of the month. So by the grace period's done, they've only collected 40% of the collections in the park. And that's pitiful. I mean, come. Totally.

They've been managing it for two years. And it's sad. It's really sad. Right. Well, let's turn this around. What about the future of your business has you the most excited? You know, as I mentioned, it's a fragmented industry. And so there's a lot of mom and pops out there that are aging out of these assets.

It's a very unique time in a mobile home park space because the average age, I'm not joking, we bought seven parks last year. And the average age of our seller, if you actually looked across the board, was like 70 years old. And so there's a, and a lot of them own, they own them free and clear most of them did. And so there's an opportunity there to buy from aging owners, not only aging owners that can sometimes offer owner financing, but it's exciting because a lot of times they haven't run it like a true business. You know, like they haven't raised rents in a long time. We've bought parks where they haven't raised rents in 16 years. And so there's like so much, you know, just upside and money left on the table. That's what excites me about this business as a whole because I still think there's a lot of the, no matter what the economy is doing.

It doesn't matter. I know there's opportunities out there right now in this space that I can buy to where I can go in right away and raise rents 40% and not miss a beat, you know, not skip a beat because the owner hadn't raised rents in 10 years. And so that's got me real excited about this industry. And I think that that will offer opportunity for the next 10 to 15 years, those that are aging out of. of this asset class and selling to people like ourselves. So that's got me excited. And then we just actually just finalized putting together a $10 million fund to actually kind of accelerate our buying in the park space. So up into this point, we've been doing a lot of deal-specific capital raises or just using our own money on deals. And now we're just, we got such a big pipeline and we're about

to ramp up marketing. And I'm excited, man. I know that a lot of people think we're like in a peak of a market, which I think we are in a lot of other asset types, but we're still finding great deals. more challenging to find, but they're there. So I'm pumped for just more deals down the road. That's great. That's great. And congratulations on the fundraise. Yeah, thank you. You bet. If any listener wanted to reach out to you, Kevin, what would be the best way for them to do that? They can find me two ways. My website, which is Kevin bup.com. That's like my main website. I also have my main real estate podcast up there. But then also we have a mobile home park specific podcast as well, Matt. So I do two weekly podcasts. I do a commercial real estate show called Real Estate Investing for Cashflow.

And then back in June of 2016, we launched a weekly show called the Mobile Home Park Investing Podcast. So they can actually contact me through that website as well, which is called Mobile Homepark Academy.com. So they can find me either way. Both of those contact us pages end up in my inbox sometime or another. They come to me. All right. Which the way they can reach me. Great.

We'll make sure that all of those links and domains are in the show notes, just in case you're on the treadmill, or you're out jogging around, or you're driving around. Thank you, Kevin, so much. It's been an absolute pleasure. We'll certainly do it again. And all the best to you and yours. Great. Thanks, Matt, for having a show. It's been a pleasure.

You bet. Take care. All righty, so that's it for today. I'll see you next week on another episode of Epic Real Estate Investing. God bless to your success. I'm Matt Terrio, living the dream. You've been listening to Epic Real Estate Investing, the world's foremost authority on separating the facts from the BS in real estate investing education.

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