Interview with Abraham Anderson of Capital Communities

SHOW NOTES

Welcome back to the Passive Mobile Home Park Investing Podcast, hosted by Andrew Keel. On this episode of the Passive Mobile Home Park Investing Podcast, Andrew talks with Abraham Anderson of Capital Communities. Abraham exploded onto the mobile home park investing scene after attending the Frank and Dave MHU mobile home park boot camp in 2019. Abraham was a top salesman for a national insurance company in a prior career and with those skills he has excelled through cold calling park owners. Within 4 years, Abraham has become a top 50 mobile home park owner with over 2,500 lots in 40 communities. Abraham Anderson owns mobile home parks across 6 states and he is also the host of the Capital Cashflow Podcast.

Abraham shares with us his Mobile Home Park Investing strategy, how he managed to close his favorite mobile home park deal, why he only buys in red states, as well as his view on the future of the mobile home park asset class. Abraham and Andrew discuss which metrics to use in evaluating a mobile home park’s performance, the importance of affordable housing and the increased demand for mobile home park communities. 

He might be fairly new to the MHP industry, but Abraham Anderson has a wealth of knowledge to share with us.

Andrew Keel is the owner of Keel Team, LLC, a Top 100 Owner of Manufactured Housing Communities with over 2,500 lots under management. His team currently manages over 40 manufactured housing communities across more than 10 states. His expertise is in turning around under-managed manufactured housing communities by utilizing proven systems to maximize the occupancy while reducing operating costs. He specializes in bringing in homes to fill vacant lots, implementing utility bill back programs, and improving overall management and operating efficiencies, all of which significantly boost the asset value and net operating income of the communities. Check out KeelTeam.com to learn more. 

Andrew has been featured on some of the Top Podcasts in the manufactured housing space, click here to listen to his most recent interviews:  https://www.keelteam.com/podcast-links. In order to successfully implement his management strategy, Andrew’s team usually moves on location during the first several months of ownership. Find out more about Andrew’s story at AndrewKeel.com.

Are you getting value out of this show? If so, please head over to iTunes and leave the show a quick five-star review. I have a goal of hitting over 500 total 5-star reviews, and it would mean the absolute world to me if you could help contribute to that. Thanks ahead of time for making my day with your five-star review of the show.Would you like to see mobile home park projects in progress? If so, follow us on Instagram: @passivemhpinvesting for photos and awesome videos from our recent mobile home park acquisitions.

Talking Points:

00:21 – Welcome to the Passive Mobile Home Park Investing Podcast

01:50 – Abraham Anderson’s story and mobile home park investing journey

06:00 – Abraham’s first mobile home park deal

08:41 – Abraham’s favorite trailer park investing deal: 358 spots

10:29 – His team and how they handle management

11:23 – His Mobile Home Park Investing strategy through the years

14:43 – Funding and sourcing mobile home park deals

15:30 – Playing the long game

17:48 – Changing people

20:09 – Investing in people and property

21:07 – Mobile Home Park Investing Metrics, WalMart, and affordable housing

23:22 – Location, location, location

24:14 – Mobile Home Park investing – Demand is on the rise

26:50 – Rental rate increases

32:00 – Buying mobile home parks in red states

35:37 – Reaching out to Abraham Anderson

36:15 – Getting over the fear

37:25 – Conclusion

SUBSCRIBE TO PASSIVE MOBILE HOME PARK INVESTING PODCAST YOUTUBE CHANNEL https://www.youtube.com/channel/UCy9uI3KGQmFgABsr9lUtRTQ

Links & Mentions from This Episode:

Keel Team’s official website: https://www.keelteam.com/  

Andrew Keel’s official website: https://www.andrewkeel.com/  

Andrew Keel LinkedIn: https://www.linkedin.com/in/andrewkeel  

Andrew Keel Facebook page: https://www.facebook.com/PassiveMHPinvestingPodcast 

Andrew Keel Instagram page: https://www.instagram.com/passivemhpinvesting/ 

Twitter: @MHPinvestors

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TRANSCRIPT

Andrew: Welcome to the Passive Mobile Home Park Investing podcast. This is your host, Andrew Keel. Today, we have an amazing guest in Mr. Abraham Anderson.

Before we dive in, I want to ask a quick favor. Would you mind please taking an extra 30 seconds to head over to iTunes and rate this podcast with five stars? This helps us get more listeners and it means the absolute world to me. Thanks for making my day with that five-star review of the show. All right, let’s dive in.

Abraham Anderson exploded onto the mobile home park investing scene after attending a mobile home park boot camp back in 2019. Within four years, Abraham has become a top 50 mobile home park owner with over 2200 lots and over 40 communities across six states. Abraham, welcome to the show, brother.

Abraham: Thanks, Andrew. Glad to be on here. Really appreciate it.

Andrew: Yeah, it was great seeing you at SECO and bumping into each other. I know I twisted your arm a little bit to get you to do this recording. I’m excited to learn a little bit more about you. I’ve been hearing your name from sellers that we’ve been cold calling for quite some time. It’s nice to get to learn more about you.

Abraham: It’s a small space, for sure, so friendly competition and running into each other. It’s great to see you at SECO, and I’m glad to be here.

Andrew: Awesome, man. Would you mind starting out by telling us a little about your story and what in the world inspired you to go to the mobile home park boot camp and start investing in mobile home parks?

Abraham: Sure. Before I was in the parks, I was into apartments. Even when I was really young, I knew I wanted to be into real estate. I had a couple of inspirations, my brother. He’s much older than me. He owned several houses. I remember one comment he made me that I thought was really cool. He said, if you can just save up the money for a down payment, then the renters pay the mortgage. I thought, man, that’s really cool.

I had a friend whose dad was a contractor, and he owns some apartments. When I was 18, I started selling insurance, which is my dad’s business. From doing that, I’d saved up enough money to basically put a down payment or to buy a piece of land, and then a bank loaned me money to build for townhomes. That was my first foray into real estate.

I did that, I built those four, and I ended up selling those and buying apartments. I was in apartments. It’s a good business model. I made money out of it. But what always killed me with apartments was, I’d get it completely full. I had 20 apartments and got it completely full, and then somebody would leave, and then have $3000, $4000, $5000, $6000 return. Then I get full again, someone else would leave. Or the HVAC would go out, and that’s another $6000, or the hot water heater would go out.

It was just a constant game of Whack a Mole and chasing my own tail with trying to get a handle on these expenses. I listened to a lot of podcasts just like this one here, just all different kinds of real estate. Every so often, I would hear about mobile home parks. My first reaction was always, I don’t want to buy a trailer park. But as I learn more about them, I realize that the business model is just a parking lot.

You own the land, and the tenants own their homes, and they take care of their homes. The two big expenses with apartments were repair and maintenance and the turnover. With parks, they own their own homes. That’s the ideal model. They just pay a lot rent, so you don’t have to maintain their home, you don’t have to do repair and maintenance.

The average person that owns their home in a park stays over 10 years versus with apartments, it’s a year or two years, maybe. The two biggest headaches I had with apartments virtually didn’t exist with parks. I was like, okay, this is what I need to be doing. I’m going to buy mobile home parks, and this is going to be my focus.

Andrew: I love that. That is so cool. I believe you were the number one life insurance salesman for a major insurance company. I would love to know how your time in the insurance business shaped how you invest in mobile home parks, if at all. You just mentioned you started at 18 years old. Would you mind sharing a little bit about that?

Abraham: Yeah, absolutely. I enjoyed insurance. It was a lot of fun to me, because I really enjoyed conversations. With insurance, I primarily did Medicare insurance and life insurance. Often, people already had a specific type of policy, and my goal was to get them the exact same policy for just less money a month. That was always fun to me. I love saving people money and again, the conversations were fun.

It wasn’t even like a job. It was easy, but I really hated all the paperwork. That was not very fun with insurance. The carry over into parks was really a lot of the demographics I was talking to with insurance were people, 50s, 60s, 70s. This is a majority of the people on mobile home parks, the mom and pops that either built the park, or they may have built it with their parents and they inherited it now. It was very natural to go from talking about insurance to going into talking about real estate with them.

Funny enough, when I was still doing insurance and real estate at the same time, I ended up having probably a dozen park owners, I helped them with their insurance. That was my way of staying in touch with them and calling them every six months. Hey, do you have any questions on your insurance? Okay, well, do you want to sell your park yet? That was funny.

Andrew: That is amazing. Wow. Tell us about your first deal. You went to the boot camp in 2019. It’s only been four years. What did that first deal look like? Did you follow Frank’s model? How did you come across that first one?

Abraham: The first deal and almost every deal I’ve done has been off market, mostly direct to the seller. Some of it has been through assignments. The first two parks I bought were from the same seller. One was a 30- space park, the other one was a 13-space park with a house.

This was a guy. He owned a bunch of various types of real estate and just wanted to be done with it. That wasn’t his main business. Somebody gave me his contact information, so I got in touch with him and worked it out.

The 30-space park was about half park-owned home rentals, and the other half was tenant-owned. Otherwise, it was the perfect first park. It was city utilities, city water, city sewer, direct bill. Really on that one, all I had to do was convert those homes to tenant-owned. We went to all the tenants and just told them, hey, do you want to be a homeowner? Most of them were ecstatic.

Really, a lesson I learned from that first park, that 30 unit, this always stuck with me. This was a Hispanic guy. When we told them that we’ll sell him a home, he was so excited. Honestly, he told me later, he didn’t even think it was real, because he wanted to buy it for years from the previous owner, and he never would sell it.

We met and we signed the papers, and the ink hadn’t even dried. He got on the ground, he started pulling up all the weeds in his yard and making his garden nice. That just showed me how cool it was that when you have a community, everyone owns their home, it’s a community. They take care of their own home, their yard, and everything else. It’s just an awesome feeling to have that sense of community and to build that in these parks.

Andrew: That’s so fantastic. You’ve scaled to over 40 communities now from that first one that was 43 units or so. Tell us about some of the bigger deals you’ve done, some of the more recent ones. That’d be awesome.

Abraham: Sure. I’ve done from six lots all the way up to 358 as far as in one park. Other deals, it’s been a lot, especially right now.

Andrew: Tell us about that big one, 358 lots.

Abraham: That was a city. That was its own city. That was actually one of my favorite deals as well. I own two parks in this one area. In this area, most of the parks were pretty full. There’s this one park that had quite a bit of vacancy. It’s 358 spots, but they probably had 200 vacancies, which didn’t make any sense to me because every other park was full. and it was a nice area, and the park was fine.

It was very difficult to track this guy down. I could not get him on the phone. Finally, I ended up visiting him and got in touch with him. I just ran into the guy and was able to work it out. It took several months, but I bought that park. It was great.

Actually, it’s one of the only parks ever sold. I ended up selling that and my other parks in this area. Again, it’s everything else I’ve kept. It was very fun. I liked the parks. I almost regretted selling it, because it was just such a big property. I’ve never even seen a park that big come up for sale.

Andrew: Why just sell? Why did you end up selling?

Abraham: It was very far away. I’m in the southeast, it was in the west. That park was great, because it was all tenant-owned. Like I said, it was 158 occupied of the 358. The other two I had there were all rental homes.

Also, I had a 59-space park and an 89-space park in the same city, all rental homes. It was very difficult to manage that many park-owned homes far away and successfully convert them over. We got a pretty good offer on it. We ended up saying, you know what, no one ever went broke taking a profit. We ended up selling that and then buying other properties in the southeast.

Andrew: I love the Sam Zell quote there, that’s awesome. What does your team look like? You’ve been doing this for years now. How do you manage your communities and all of that?

Abraham: Sure. In most communities, we have an on-site community manager. Sometimes if we have two or three nearby, they’ll all manage multiple communities. I have a district manager. His job is to essentially make sure the managers are doing their job. He fills the calls with them, he gets on weekly meetings to see how performance is going and everything else.

On top of that, we have an office manager who’s an expert with our property management software. She helps with that. We have one other guy that does capital expenditure projects such as paving, landscaping, and things like that. We’ve got about 12 onsite managers, one district manager, and then two other staff.

Andrew: Got you. Okay, awesome. You’re handling everything, property maintenance, capex management all in-house. That’s awesome. Can you share with us how your mobile home park investing strategy has changed, if at all, since your first investment and why?

Abraham: Sure. Initially, when I was looking at parks to buy, I wanted just the turnkey easy park. I want it completely full, all tenant-owned, public utilities, direct bill. That’s all I would look at. As I started progressing, those got harder to find.

I’ve been taking on more turnaround projects. It could be heavy park-owned homes, or it may be private utilities like septic, which I’m fine with. You just have to get more creative and look at, all right, well, this property here, what can I buy it for?

At the end of the movie, once I’ve done all the improvements and I’ve converted over, what’s it going to be worth? And then is it worth it? Is the juice worth the squeeze for your time and effort? A lot more of that and just trying to get creative.

Right now in this environment, it’s been difficult with interest rates going up. A lot of creative financing deals where the seller finances it. We give him a down payment, which has benefits for the sellers as well. Just being open to different properties and trying to get creative to bridge the gap between what I’d like to pay versus what the sellers may want to get for it.

Andrew: Totally. Tell us about the strategy in terms of size. Are you not looking at anything under 100 lots? Are you looking at stuff with private utilities? And then what type of markets are you targeting? Where is your portfolio? Is it mainly in the southeast? Maybe you can share some of that.

Abraham: If I’m in a brand new area, like I know nothing in the state or within a couple of hours, I try to be around 50 lots or greater. For a couple of reasons, if you get to really small parks, and they’re also far away, they can be difficult to manage because it’s hard to pay a manager something that’s reasonable if you only have a 20-space park, so I try to do 50 now.

The other reason is, my end goal with all of these is to get them into a Fannie Mae or Freddie Mac loan, and they have a minimum size of about 50 lots. I will say though, if you’re just starting out and you’re trying to buy a park, small parks can make a lot of money, because a lot of the bigger players and a lot of other people are not targeting them. Twenty to 30-space or even smaller parks, most people will just overlook.

If I would look at some P&Ls on parks, I have some smaller parks that are direct billed, city water and sewer, full tenant-owned, those can make a ton of money. Again, you get into them for such a low cost basis, you have very little expenses. Especially if it’s nearby, sometimes they don’t even have a manager. I wouldn’t say, don’t close your mind to buying smaller properties, especially if you’re just getting started out. For me personally, though, unless it’s nearby, something I have, I try to get bigger properties now.

Andrew: That’s fantastic. How do you fund the equity for your deals?

Abraham: Everything I own is either myself. A little over half, it was just me. Then the other half, I’ll have one business partner. Either business partners will source deals together and we’ll buy it together, or people I’ve met will bring me a deal and we’ll buy it together.

I’ve looked at raising money and things like that. I’ve had people ask me. But thankfully, it’s just been one at a time, usually. I’ve been able to take it down with either myself or one business partner. That’s how I’ve done it so far.

Andrew: Very cool. What do you think is the best strategy right now? It’s October 2023, interest rates are high. You mentioned seller carry and including some of that so we can still get deals done. What strategy, though, do you think is best for the next 12-24 months inside a mobile home park investing?

Abraham: I would say, just play the long game. Some of these parks I bought, it’s been two or three years literally since I first started looking at parks in 2018 marketing till now before they ended up selling. Literally, every few months calling them up, and it’s just taken that long.

I think this helps with anything in life, especially in park investing. I really do enjoy the conversations. When you’re talking to mom and pops, I actually listen to them. Don’t just be like, oh, I don’t want to hear about your grandkids or fishing. No, that’s important, too. That’s how you get that bonding.

Whenever they do want to sell, they’re going to call you, or they’re going to sell to you because you actually did care. They can tell. I would say, just play the long game.

The other piece of advice I would say is, how many owners have you called this week? How many people have you talked to? How many mailers have you sent out? Just keep your funnel full of deals. It is a tough market right now, but people are still buying deals. I’m closing on one in two days. That’s a long one in the works. Just stay active, be optimistic, be enthusiastic, and just play the long game.

Andrew: Yeah, that’s great. I like how you have the top of the funnel. If you’re always cultivating that, you’ll always have deals no matter what the market’s doing. I think one thing that I’ve realized from talking to sellers over the last month or so is sellers know what’s going on, they know rates are higher, and they’re willing to be realistic and try to do a seller carry, or they’ll hold a note on the mobile homes themselves to try to help you get a deal done. I think just being realistic, telling them what’s going on, and what you’re seeing when you’re trying to get financing, is super valuable.

Abraham: One thing I want to add to that as well is, if you can buy a park right now with these interest rates, and that makes sense, that cash flows, and it meets all the other metrics, that’s a fantastic buy because interest rates, eventually, are going to go back down, and then you’ve come into a bunch of equity at that point. If you’re at 7 1⁄2% or 8% right now, and they drop later down back to 5%, 5 1⁄2%, that’s a ton of value that’s been created. So this is a great time to buy.

Andrew: Yeah, I agree with you on that. Abraham, what mistakes have you made in mobile home park investing that our listeners can learn from?

Abraham: I would say, there’s a couple that come to mind. As far as management goes, I can get this from Frank, I’m sure you’ve heard it. The easiest way to change people is to change people. Everyone seems great, whether it’s a tenant or a manager. When you’re interviewing them, they all sound so wonderful, they’d be perfect. After you either let them in or you hire them, then you find out how good they actually are or not.

Whenever you do make a hire, whether it’s a manager or another onde higher, you’re going to know right away if it’s not going to work out, and don’t delay that. We have the tendency to want to drag it out and hope things get better, but you’re better off just cutting it off. Okay, this is not working out, appreciate it, and move on to the next person, because a bad manager can give you a lot of heartache. You’re better off having no manager than a bad manager.

The other thing I would say as far as mistakes is, and I made this mistake once and I’ll never make it again, if you’re talking to mom and pop and they’re willing to sell, and they tell you, okay, we will sell it for this price, if you can pay that price and it still makes sense for you, don’t try to negotiate them down just for the sake of negotiating. Just say okay, I’ll do it. It was a great park.

In the city I live in, actually, ever since I looked at parks in 2018, I first started learning about them. He finally called me one day and he was like, hey, I’m ready to sell, and I want this prize. I called him back and said, hey, would you do this much like 10% less? He said, I’ll let you know. I didn’t hear anything from him.

A week passes, nothing. I’m starting to get nervous. Another week passed, and I finally got him on the phone. He said, yeah, I signed a contract for the full price with someone else. I said, oh, no. I’m kicking myself. I could have paid that, I really could have. It would have been a little bit more than I wanted to pay, but it would have worked. It was a great park. If you can pay the price they throw out, just say, okay, I’ll do it. Because if you don’t, somebody else will tell them, yes, and then you’ll lose the deal.

Andrew: Yeah, that’s a great, great golden nugget right there. What are the most important things that passive investors need to look out for when investing into mobile home parks? We’re talking about LPs that are investing with you, me, or another operator. What should they look at in a deal?

Abraham: Sure. When you’re investing with somebody else, you’re betting on two things. It’s just like a horse race, you’re betting on the racehorse and you’re betting on the jockey. You’re betting on the property itself, and then possibly more importantly, you’re betting on the syndicator, the person putting the deal together.

I would say, look at their track record, look at the previous deals they’ve done and how those have turned out. Also, look at the property itself. What are they buying it for? How much is the projected upside? Where is the property located?

People think for some reason that the ad is location, location, location, it doesn’t apply to their asset class. But no, it definitely does. I found just in my own portfolio, everything else, if you have a really good location, it fixes almost any other problem you’ll have just because of that so much demand you get for that product. If you’re looking to invest, again, just really look at who you’re investing with, the specific deal, and then the track record I’d say is very important.

Andrew: Definitely. Are there any metrics when you look at an area that tell you if it’s a good market or not?

Abraham: One thing I look at that’s just a really quick one, I’m sure you use bestplaces.net. Is this place in a metro as defined by the US government? And then look, is it declining, or is it growing? I’ll look at, is there a Walmart that’s within 5-10 miles of it? That’s for a couple of reasons, the Walmart.

Walmart spends millions and millions of dollars researching areas, population trends, and they’re only going to put out super Walmart somewhere that they see a future in that location. They do not put it in the middle of nowhere unlike Dollar General, which seems like they’re around every rural forest. But Walmart, they’re only going to put something that’s going to be there long term.

The other reason is all of our tenants, at least with myself, we have them pay at Walmart, pay their rent there. What’s around there? Again, when you drive there, if you’re close enough where you can personally visit the area, does this look like a safe area, the neighborhood, the community, the property itself? If the whole area is nice, but the property itself is rough, that’s not as bad because you can always fix that, but you can’t fix everything else around you. Again, look at metrics population growth.

A big one for me, I would say the most important metric I found, whether it’s population, income, the number one thing if you looked at nothing else is the average single family home price. I have some parks in markets with average single family home prices over half a million, and those by far have the highest demand, because people want affordable housing.

They’re not going to be able to buy a half a million dollar house, but they maybe can buy a $30,000 mobile home, because they want to live in this area. There’s a reason why the house price is so high. A big one I’ve really recently been focusing on is, what’s the single family home price among other things? But those are some quick metrics I look at when I’m evaluating a deal.

Andrew: Awesome. Yeah, thank you for that. Abraham, if you were going to describe the perfect mobile home park, what would that look like? And why?

Abraham: Sure. Number one, again, a great location would be fantastic. I’m talking about Nashville, Atlanta, Charlotte, just a primary market. It would be over 100 lots, everyone owns their home, everyone cuts their own lawn, its city water, city sewer, everyone gets a bill for their utilities, city owns the roads, city owns the sidewalks.

I actually have some parks that are close to this but not in the greatest area. You want to be in the business of renting land. If you can get a park, where everyone pays the utilities, city rep maintains the roads, what is there left to do? You’re just basically doing collections and rule enforcement at that point. That’s the perfect park. I literally dream about it. I dream about parks more often than I’d like to admit, so I’ve dreamed about this park before.

Andrew: Man, you and me both. What does the future of mobile home park investing look like? It’s October 2023. Obviously, rates are really high. How do you see mobile home parks fitting in with the direction the economy is going moving forward?

Abraham: I think the demand for affordable housing is only going to go up. We see right now a lot of consolidation with parks. We see apartment people getting into parks, because multifamily is pretty high right now, and there’s not many deals. There’s better returns in parks. Again, there are so many other benefits, I think, coming from multifamily into parks that make parks superior to multifamily.

As we continue to see consolidation in these big groups like Carlyle Group, Blackstone, and all these other ones, buying parks, that’s just going to make the asset class more valuable and also gives more legitimacy to it. As much as we’d hate it, we know it’s not true.

There’s still a stigma with mobile home parks, but that is going away. If you can get into parks right now, you can buy a deal, it checks all the boxes, and you’re not overpaying, then it’s only going to get better. Again, the cap rate is going to continue to compress just over time, the property value is going to go up, and the demand is going to continue to increase.

One other thing I really love about parks is, to me, they’re a fixable thing. You get a park, you may have some vacant lots, you may have some rental homes, but you can fix it and get it to where it’s all full, all tenant-owned.

I have some parks I haven’t even been to in six months. I still have people go and visit them, but I don’t even hear about it because there’s so turnkey at that point. With apartments, I was constantly chasing occupancy and repairs. I have nothing but good things to say about parks, and it’s only going to get better.

Andrew: That’s fantastic. Yeah, I just did a recording earlier today with Franco Perez, and he’s a big manufacturer and a housing guy in San Jose, California. He was telling me about how millennials are choosing lifestyle over grinding it out in the same job for a long time. So they’re big on remote work, affordable housing, and buying manufactured homes in elite locations like Huntington Beach, California, San Jose, and in other areas.

I think you’re right. I think that stigma is changing. I think there are some good operators out there that are really adding a lot of value like yourself. You’re adding a lot of capex to these properties and not just increasing rents right away. But I’m curious, what are your thoughts on rental increases? What’s the most you would raise rents in the first year of a new acquisition?

Abraham: Sure. One of the parks I bought with the lowest rents, this isn’t a market lot rents for 300-350. I bought a park from mom and pop, and the rents were $60 a month. They owned it for 40 years, and they’ve never raised rents since they first built it.

We got in there. We sent everyone letters saying, hey, the rent is $150 now, this is still a good deal. Here’s the other parks, and they’re all at 300. But if you want to leave, let us know. You’re free to move. No one even complained. They’re like, yeah, I knew it was coming. We’re laughing about how good of a deal they got in the last three decades.

In general, it’s unusual that you see them that low. We try to stay no more than around $50 a month at an increase. We go up once a year at most, and we try to get no more than $50. It really depends on where the rents are at when we buy it and where they’re at in the market. Again, there are some markets I’m at that the market is $650, and the park that we took over is at $200. It’s going to be five, six years before we get to that. By that point, lot rent is probably going to be $800-900.

One thing that’s important about rent increases is, they are necessary to keep the housing affordable. That seems counterintuitive, but if rents don’t go up, one of two things happens. Either the park gets sold for land value, and everyone gets kicked out and redeveloped. I’ve seen that time and time again. Because the rents are just so low, it does not make sense as a park. The highest and best use is an added value.

Even if it stays as a park, it just looks terrible, because the owner has no revenue to put money back into the park, whether it’s roads, landscaping trees, all this is very expensive, or the infrastructure. The rents have to go up.

I don’t think I want to talk about this. But obviously, we wouldn’t be doing this if we weren’t making money as well, so we need to make money also. Otherwise, why do anything? As far as the business sense, that’s the whole purpose of why we’re doing this. It is rewarding in a lot of different ways. But if we can’t put bread on the table, then we will be doing something else. Rents have to go up.

Really, my experience has been, most residents are totally fine with it. With anything, you’ll get the 5% to maybe 10% that are mad just about anything. Someone told me once that a lot of tenants in general, any asset class, sometimes their perpetual whiners, could win the lottery, and they’d be complaining about having to pay taxes. I always tell the joke, we could go into a park and lower the rent, and they’d find a way to complain. It’s about time, they should have done it even more. Don’t let it bother you.

What you should be concerned with and again, what most of the tenants will look for is, is this still a good value? What are the other parks in this market? Because they have friends and these other parks. They know them. There’s not very many parks, typically, in any area.

Often, what we’ll put in our rent increase letters is, hey, these are the improvements we’ve done, and these are the ones we have planned. The rent is going to this amount. Here’s the other parks in the area, this is what their rents are at, call them in check. We still think this is a good value, we’re still less expensive than everybody else. But if you disagree, you’re free to move.

They just want to feel that they’re getting a good deal, and they’re not getting taken advantage of. If you can show them that, most of them have no problem at all paying high rents. Again, I’ve had residents through managers or directly when I was managing the parks tell me that, I’m so happy you guys took over. This place looks so good. I actually feel like I can play outside with my kids. I’m not worried about some of the shady people that used to live in the park that we’ve evicted or gotten rid of.

They’re so happy, because the park is just like a whole new life has been breathed into it. There’s been three different parks that I’ve purchased, that the other person trying to buy them was going to go in there, tear them down, and redevelop it. The residents are more than happy to pay $50 more a month if it means being able to keep their house and keep living there.

Andrew: Totally. It sounds like you’re doing it the right way, not just raising at some astronomical amount and not providing any capital expenditures. A lot of these mom and pops, you see it time and time again. They’re living off of these as retirement vehicles, and they’re not reinvesting into them. They trim the trees to do the landscaping appropriately, skirting with holes in it on some of the older homes. I think all that, when you come in and you fix up a community, a lot of the residents really resonate and really appreciate that. So I totally agree with you.

Abraham: I want to compliment you from it. I’ve been through some of your communities, both before and after you purchase them. I want to say, you do the same thing. I’ve witnessed this myself as far as fixing, skirting, roads, and landscaping. I applaud you, I know you’re doing it the right way as well because I’ve seen it.

Andrew: I appreciate that, man. Thank you. What do you think is the biggest threat, Abraham, to mobile home park investing?

Abraham: In the communities themselves, or just investing in them in general?

Andrew: I would say, in comparison to other investment avenues. You could put money into money market accounts right now and make over 5%, but maybe tiny houses, maybe 3D printing. A lot of people have said, regulation is a big threat to mobile home park investing, rent control. I’m curious of your thoughts.

Abraham: Sure. I would say, absolutely, the biggest threat is rent control. This may be politically incorrect, but I only will buy in red states. I won’t buy in coastal states. I’m not going to buy in California, Oregon, or Washington. People do it and they make money, but it just terrifies me. I don’t want to be the guy in New York State that owns 20 parks, and then they pass rent control where it’s only 3% a year. That’s the biggest threat.

It’s odd, because they’ll pass legislation just aimed at parks, and it’s always in blue states. I love a lot of blue states. I like California. I was there a couple of weeks ago, but I don’t want to invest there. That’s definitely a big threat.

Really, the other threat I would say is, again, just investing in a good area. That’s just a general real estate thing. Like we talked about earlier, don’t buy a park in the middle of nowhere. It’s not going to go well. Don’t buy a single family home in the middle of nowhere. It’s not going to go well. Just do your diligence.

I really don’t see a threat otherwise with legislation. Some people think, oh, well, they’re going to legalize building new parks, because it’s such a great form of affordable housing. It’s the only unsubsidized form of affordable housing, but I don’t see that ever happening.

In every market we’re in, parks are effectively illegal to build. You have a monopoly, essentially. You’ve got an asset class. Parks are the only real estate class that shrinks every year, because existing parks get torn down for land value and built into something else.

Another reason people don’t always think about why that happens so often with parks is because a lot of cities dislike parks so much. They will give you any zoning you want if you’ll tear down the park to replace the park with something else, high density, high rise apartments, anything. The reason why is some of it’s stigma, some of it’s nimbyism and all that.

Cities don’t make very much tax revenue off of parks. That’s the main reason cities don’t like them. Let’s say the mobile home is worth $30,000, the lot’s worth $30,000, and the tax rate is 1%, so $600 a year is what they get. If they have one kid that goes to public school, the city pays $8000 a year if they get to school, at least. So they wouldn’t have three kids, and then also they may not have health insurance. They go to the emergency room, and they may get EBT.

I have some parks. I’ve done the math, where it costs the city over a million dollars a year on these parks. But the good news is, they can’t get rid of them. They’re grandfathered in, they’re there, they’re allowed to continue on. I don’t see them ever allowing new parks to be built. Really, the biggest threat would be rent control. Just buy in areas that are landlord friendly.

Andrew: That’s great feedback there. Thank you so much. Abraham, if any of our listeners would like to get a hold of you, what would be the best way for them to do so?

Abraham: Sure. Probably the website, capitalcashflow.com. I do have a podcast. I don’t upload very regularly. I’m too busy buying the parks, running them, and getting chased out of parks to do that. But you can contact me through that website. Please reach out. I’d love to talk to anybody and answer any questions if some people have any other feedback.

Andrew: Awesome. That’s capitalcashflow.com. We’ll put that in the show notes. Abraham, before we log off here, what’s one last bit of important advice that you would give an interested passive mobile home park investor before we sign off?

Abraham: I would say, a lot of people I’ve seen, they really have that fear of pulling the trigger. They may know everything about it. They may be familiar with everything that we’ve talked about today, but they still haven’t pulled the trigger because they’re just so petrified. Just do it.

Again, pick a good syndicator, a good operator, pick a good property, and just do it. You don’t have to bet the farm on it. Just invest in the minimum event and just see how it goes. I think you’ll be pleasantly surprised. All the knowledge you’ve learned from listening to these podcasts will turn out to be true. Again, it doesn’t have to be a big investment.

I would just say, if you’ve learned all this stuff, and you’ve done your research, just pull the trigger and try it, or just buy a park. If you’re looking at buying, buy a small park and see how it goes. If you never get started, you’re never going to get anywhere. There’s this one quote I heard early on in real estate that I thought was great, that 10 years is going to go by whether you own real estate or not. So start right now.

Andrew: I love that. That is awesome, man. Thank you so much for coming on the show.

Abraham: Yeah, absolutely. Thanks for having me on, Andrew.

Andrew: That’s it for today, folks. Thank you so much for tuning in.