Interview with Ekaterina Stepanova of M2K Partners

Listen on Apple Podcast here: https://podcasts.apple.com/us/podcast/interview-with-frank-rolfe-of-mobile-home-university/id1520681893?i=1000510303093

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 Ekaterina Stepanova. Ekaterina has over twelve years of experience in operations, project management, advertising, and production. On top of that, she has several years of experience in residential real estate investing, having also worked for Ogilvy, BBDO, Citigroup, and Columbia Artists. She currently is the organizer and leader of the MHP Tribe, a mobile home park investing community and Facebook group. Today Ekaterina is here to talk about the future of the MHP industry and how she got into mobile home park investing. She will also share stories and lessons she’s learned on her mobile home park ownership journey.

***Andrew Keel and Keel Team Real Estate Investments (Keel Team, LLC) do not endorse any interviewee. This interview is for informational purposes only and should not be depended upon for investment purposes. ***

Andrew Keel is the owner of Keel Team, LLC, a Top 100 Owner of Manufactured Housing Communities with over 1,500 lots under management. His team currently manages over 20 manufactured housing communities across ten states – AR, GA, IA, IL, IN, MN, NE, OH, PA and TN. 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.

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.

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

01:20​ – Ekaterina’s background

03:48​ – Turnkey rentals in Memphis

06:12​ – M2K Partners and managing parks

12:20​ – Ekaterina’s criteria for deals

14:30​ – Managing parks that are far from each other

16:48​ – Direct-to-owner Deals

18:40​ – Number of deals taken full-cycle and their process for fixing them up

19:50​ – Important things passive investors need to look out for

22:10​ – Vetting operators

24:00​ – Andrew’s expansion on a huge tip for LPs

24:34​ – Affordable housing and the real estate environment

29:00​ – Ekaterina’s perfect mobile home park

31:00​ – How Ekaterina’s team’s process for management for new sites

34:22​ – The value proposition at M2K Partners and what makes them different

37:00​ – The MHP Tribe

39:30​ – How to get in touch with Ekaterina

40:04​ – Conclusion

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

Links & Mentions from This Episode:

MHP Team Website: https://www.mhpteam.com/

LinkedIn: https://www.linkedin.com/in/katerinastepanova/

MHP Tribe Facebook Group: https://www.facebook.com/MHP-Tribe-335633473734326/

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/PassiveMHPin…

Andrew Keel Instagram Page: https://www.instagram.com/passivemhpi…

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 Miss Ekaterina Stepanova. Before we dive in, I want to ask a really quick favor of all of you. Would you mind to please stop right now, head over to iTunes, and leave us a five-star review? This helps us get more listeners and it also encourages me to know that you’re listening in. Thank you all so much for doing that. All right, let’s dive in. Ekaterina has over 12 years of international experience in advertising, production, project management, and operations.

As a part of Ogilvy, BBDO, Columbia Artists, and Citigroup, she has 14 years of successful residential real estate investing experience, along with four years of mobile home park investing experience. They have parks in Florida, Michigan and Arizona. Ekaterina is also the organizer and leader of the mobile home park investing community, MHP Tribe. Ekaterina, welcome to the show.

Ekaterina: Andrew, nice to be here this beautiful Friday afternoon. Thank you for having me.

Andrew: Awesome. Would you mind starting out by telling us a little bit about your story and how you got into manufactured housing?

Ekaterina: Absolutely. Like many investors, I started probably in single-family investing and I first rented my apartment back in Moscow. When I immigrated to the United States, I started my real estate career by purchasing a turnkey out in Memphis. By virtue of its being rather hard to manage from afar, I had two subsequent evictions in the course of just six months. I quickly realized that one tenant evicted means 100% vacancy.

I started looking into commercial real estate investing and multi-family investing, apartment investing mainly, being such a competitive niche. I started looking elsewhere, and I found mobile home park investing. That was really interesting and exciting, so I thought I will give it a shot.

Andrew: That’s amazing. When you were in Moscow, was it affordable housing that you’re investing in or was it something completely different?

Ekaterina: That was actually much simpler than that. My apartment that I purchased when I was in my early 20s was my residence. That’s where I lived. When we immigrated—my former husband and myself—to New York, it was empty, so we rented it out. My mom was my first property manager. She did a really good job. I got a taste of this passive income, especially when someone else is managing it for you, so I cannot go wrong with that.

Andrew: Yeah. You were right from that to turnkey rentals in Memphis. Tell us about that process, the hurdles, and how you found them.

Ekaterina: I started reading on BiggerPockets about different ways to invest capital. I thought, I’m in New York. It’s not very affordable here, so I probably need to go out of state. What can I do out-of-state that is safer, more stable, that I don’t have to rehab because I don’t have the background or really no knowledge of how to rehab anything. I thought turnkey might be a path for me to go. I was looking for an operator. Similar to when investors or LPs are looking how to invest—they would look for the right sponsor—I was looking for the right operator who would really take care of the property for me, who would take care of the residents for me.

By doing that research, I found a company that I thought would do a great job. I purchased from them and I was planning on purchasing many more homes from them. I think it was just a turn of events and just destiny how this really is a good and (I would say) a pretty solid operating company. I had two evictions in my single-family home in the course of just six months. It’s really incredible, but they did. I think that was really a turning point and definitely it was good luck that I started looking into commercial real estate. I think that actually worked out after all.

Andrew: I love your perspective. Most people would say, I had two evictions in the first six months in a rental. Maybe this isn’t for me. This is terrible. I’m down. I’m sad. I’m not getting the returns that I was expecting. You turned it positive and said, this is good luck. I’m thankful that I had the struggle, because it brought me to mobile home parks. I applaud you for that.

Can you maybe tell us about M2K Partners and how many parks you have now, how you manage them and things like that?

Ekaterina: Absolutely. When I started looking into mobile home park investing, I was looking for an educational program that I could partake in. At that time, Sunrise Capital—Kevin Bupp and Charles Dehart (his former partner)—had an academy which was a course I took. I walked through that and through them really, through networking. Within the group, I met my current partners, Matt Boettinger who is out from Atlanta, and Nick Villanueva who is out from LA. We’re pretty much all over the place. I’m in New York, so all over the place. It’s all parks.

We started collaborating, just doing things together. The most important thing is we really have—as everyone will probably say in a partnership—complementary skills. Andrew, as you were introducing me, you very kindly mentioned that I had experience and expertise in advertising and marketing. I was responsible for doing that part of our business—marketing, sourcing deals and bringing them to our team.

At that time, Matt already had several parks, so he knew operations. He knew how to take care of the turn-on projects. Our partner, Nick, is just a very savvy businessperson. He has his own brokerage, owned all kinds of commercial real estate, so he’s just a very savvy investor. He also brought in his balance sheet, so to speak, to strengthen our position.

We started purchasing parks and our first one was in Florida. This is funny. While we’re looking for our first park to purchase—very exciting—for me it was the first ever, for Nick it was the second park, and for Matt (I think) it was his fifth park. For me, it was very exciting and I couldn’t wait to close. It took us over a year to find and actually close on our first park.

In the meantime, we had very specific criteria to our parks. It would have to be a value add. It had to be in a strong economical market. It has to have a good cap rate for us. We just have to buy it at the right price. All those different things had to come together. We need to be able to leverage it, put data on it.

In the meantime, we were able to wholesale two parks while we were at it. I went out to do due diligence. We had several other parks on the contract and for one reason or another, we were just not happy with the result of the due diligence. We just chose not to proceed on maybe two or three parks that we had in contract before that. This was sourced directly from owners as well. It is also very important to say when something doesn’t look exactly right, it doesn’t check out, or it is not exactly the deal for you, it doesn’t look exactly right, just say it. Say you don’t want it, pull back. It’s better than you buy it, you own it.

For one reason or another, something we discovered during due diligence as we’re getting better and better at what we do, we started faster, also discovering things that were potential deal killers. I think that’s what really took us so long to get to our first close. A couple of parks that I mentioned we wholesaled were in North Carolina, one we referred out, another one we legitimately wholesaled. Other people were very happy with them. They were just not the right ones for us. They were too run down, too far, deep in the boonies, and whatnot. We just didn’t feel like we would like to own it, so all different reasons.

We purchased our first park and we’re very happy with our purchase. I think this became our staple, so to speak. We purchase really not volume, but very, very selectively (I would say). Our last park in Michigan, I was lucky enough that I had an opportunity to present it as a case study at […] conference. It was a truly beautiful case study and a great buy for us. We were able to double the value of the park, more than double just in the first year.

We’ve done so many projects in that park and this is something that we’re looking to do when we look at the potential property to buy. With that, we own a park in Michigan. We own in Arizona. We own in Florida, and are currently closing on the one in Ohio. Again, it sounds like we’re all over the place, but that’s where the deals really dictate where we’re going to be. It just needs to be a really good deal that makes sense for us and we have the right resources in place to really implement that.

Andrew: Maybe you can share a little bit about your deal criteria. What do you look for besides obviously a good cap rate? Do you have a certain criteria that you target?

Ekaterina: Yes. The one in Florida is a little smaller, but the lot trends are rather high in Florida. That is why we purchased that one. It’s 42 spaces. Now, in a new market, I would say size-wise, the deal would need to be probably over 80 spaces for us to really strongly consider it, unless it’s such a steal. We would look at the economic strength of the market. That is something that you can rarely change so it has to be in place in size. I would say probably 100% we’re not going to consider the lagoon situation.

I know people who will because they know how to operate that but not us. We do not have the experience in lagoons. We do not mind at all wastewater treatment plants or wells. We can get comfortable with those but we would not consider a lagoon. We would want to see a return of our capital within the first probably 2-3 years. That will be our consideration because we would want to turn parks around and be able to have enough upside in it that we could double our investment in a couple of years. That would be the goal.

Andrew: That’s fantastic. I got to bring this up. You have one partner in New York—yourself—you have one in Atlanta, one in LA, all across the US, and then you have properties in Arizona, Michigan, Florida and Ohio. How do you manage those being so far apart? Does that ever provide any issues? Maybe you could share a little bit about the management.

Ekaterina: We’re not a big operation as you can see. We do not have a regional manager or anything like that. Every deal we look at just really consider how we’re going to operate this. Is there a person or maybe someone that we know is in place and we could leverage that relationship?

For example, in Florida we did have a relationship, and that was a very specific deal that included selling all parks and homes to tenants. We had an amazing expert in place in Florida who already worked in Florida and worked for my partner, Matt, in Alabama and his Florida parks, so we were able to execute this deal specifically because we had him in place.

For Michigan, again, we just have the right people in place. The Michigan deal was completely different. We needed to do water sub-metering, electrical sub-metering and also turning homes, rehabbing them and renting them out. We had the right person who had a crew who would rehab homes and lease them out really quickly. Because of that, we were able to execute our plan.

It’s really about people, whether or not we have the right people in the right location, with enough time resource to execute our vision. Unfortunately, it’s not like blankets, but it is a little bit of a unique approach to each deal. You have to really assess and see if that can be truly implemented.

Andrew: Definitely. You mentioned a little bit about how you find deals direct-to-owner. Maybe you could share a little bit more about that process.

Ekaterina: Absolutely. As you may know as well, it used to be much easier. You would find deals just by mailing to, writing to owners, calling them, maybe texting them. Now, it’s getting more and more difficult because the market is oversaturated. Also, our team got busier (of course) with the parks. We need to operate the parks, make sure that they turn around in time. This is one of the reasons that I started my mobile home park investing community—MHP Tribe—to see if we could find people who are out there marketing and could potentially work with us, maybe do marketing for us. We could teach them, bring them into a deal, and operate this together.

Right now, we still do our direct marketing. We just have someone who is helping us out with that, our partner on the last deal that we did. She’s really active right now with marketing. We also have new contacts that would maybe refer us to deals, and just through networking. That’s really how it is right now.

Andrew: That’s great. That’s unique. I don’t think there are a lot of operators out there that are truly leveraging the networking side of generating deals, so that’s very smart. How many deals have you guys taken full cycle, where you fix them up and sell them, or fix them up and refinance them? Maybe you can go through that.

Ekaterina: Absolutely. As you mentioned, I’m an infant in the industry. It’s coming to my fourth year. Obviously not including our two deals that we wholesaled early on, we’re selling our first park, the Florida park. The reason we’re selling it is we’re really buy-and-hold investors, but this one is just (again) a smaller project. We didn’t really think that we would like to hold it for long-term, so it was always a two-year plan for it. Now, we’re preparing to sell it. It’s actually listed. It’s in Pensacola, MSA. We are also preparing to refinance our Michigan park just in the second quarter. That’s coming up.

Andrew: Kudos. I know that’ll be a nice payday for you guys and a lot of hard work went into that. That’s fantastic.

Ekaterina: Thank you.

Andrew: Maybe you can share what you feel are the most important things that passive investors need to look out for when investing into mobile home parks.

Ekaterina: I think it’s equally important as LPs would be investing in a mobile home park, so multi-family. They have to find operators who they can truly trust and who they know that will do the right thing. Maybe they also have similar visions because once we had this experience, we were looking at the turnkey property—it was a park—and guess what? Our investors, our partners, none of them had this appetite for turnkey because they said, no guys, but that’s what you do. Why would you do that? Go do your values-adds, leave that for someone else.

You have to truly have the same vision LP or principal sponsor. You really have to have similar vision, know where you’re going, and what this entails. Do due diligence on the operator, get familiar with them. I think it’s very hard to know everything about parks, so many moving parts. Aside from general criteria such as economy, maybe employment and other things, mobile home parks also sometimes have private utilities. It’s really hard to know everything about everything. I would just focus on vetting your principals.

Andrew: And that’s been a recurring thing that a lot of people that I’ve interviewed have said, really spending time to vet that operator. Maybe you can share a little bit about how you’ve vetted the operators for the turnkey rentals in Memphis and what levels you took to get comfortable with finding a good operator.

Ekaterina: First, I think you need to just see if there’s a specific market that you are interested in, then to see who operates there, who owns properties in that market and talk to them. See what their goals are, what their philosophy is. Also, if you are located in that market there is nothing better than to just drive through and see how the properties are kept, do sort of a surprise inspection, drive through. If you can talk to residents, see how they are enjoying living in those properties. I would also speak to previous investors absolutely and see how they’ve been enjoying having those relationships

I did that and I think you just need to see how much time your principals or your sponsors are spending on investor relationships because getting money, just doing the fundraising part is rather easy, but then the real relationship begins. This is how you’re being treated, so I think there is nothing more valuable than talking to current or former investors of those LPs.

Andrew: I love that. I think that’s a huge tip that a lot of LPs should implore. The other thing that you said was talk with tenants. I think that’s very smart. I mean what better way are you going to determine if the person’s a good property manager because if your customers aren’t happy, you’re going to have higher turnovers, which lead to an unsuccessful business model. So two great tips: (1) talk with the previous investors, (2) talk with tenants if you’re able. I love that. What can you tell us about the current state of the manufactured housing industry and where you see it going into the foreseeable future?

Ekaterina: I think, again, affordable housing is needed as much as ever, probably more important than ever in their current state of the economy. I would say that I’m not really worried about not having paying tenants because unfortunately just however life happens is, those residents who are not able to pay will be replaced potentially with the residents who are coming from single-family homes or coming from apartment buildings, they come into communities. There will be always someone to rent in our communities and across the United States. I don’t see anything concerning. I would just say that all of us in the industry will probably need to step up because demands and the level of expectations are getting rather high. I think we truly need to do our best to be up to par.

Andrew: Maybe you can elaborate on that a little bit. I think I follow you because I know that there are a lot of mom-and-pop owners that have a lot of deferred maintenance in these communities. They’re the baby boomers that are using these as retirement vehicles and they’re not reinvesting into the assets. One thing that excites me is that there is so much opportunity to come in and clean up these assets. There are new operators doing that like yourself and our operation, but maybe you can share a little bit more about that topic.

Ekaterina: I think, again, as manufactured housing is becoming such a hot topic and large institutional investors are after it, everybody really is looking to invest one way or another in mobile home parks at this time. More and more attention is being brought to this real estate niche. I think as we get attention, also some dogmas and clichés are coming up as well—trailer parks, trailer trash and all these very unpleasant ones. I think this is our chance right now to change this by being very professional about what we do and over delivering for our residents because there’s plenty to go around for us, truly.

Those who invest in parks know how well of a wealth-creating vehicle parks can be. There is no excuse for us not to bring parks to their best potential. Pure deferred maintenance, bring it up, pressure wash homes, repair roads, do whatever is really necessary, and make this a true community looking like a community. Looking like a family-friendly park and place to live. I think this is an opportunity for us really.

Cities will not feel as bad anymore about the trailer park once they become communities, and they become a true pride of ownership. I think with the spotlight on us, there is a lot of responsibility for us as the operators, as maybe new investors in the space to do a great job.

Andrew: I agree 100%. That stigma that our listeners know is around this asset class and as new communities are being purchased and improved, hopefully we can do away with that at some point. That’s great insights.

Ekaterina, what does the perfect mobile home park look like in your eyes?

Ekaterina: Perfect as an end-product, so to speak?

Andrew: The question is open-ended. You can answer how you want it. Some people have said that they look at a park that provides a good return to investors, whatever that may look like. Some have said that it’s 100 lots, all tenant-own homes and direct bill utilities. What would you say is most important or what the perfect mobile home park looks like?

Ekaterina: I think I would answer this way. A perfect mobile home park deal is the one that we are able to get in and have a lot of upside. Let’s put it this way. There are lots of projects for us to do. For example, sub-metering, maybe lots of vacant homes. This is a sweet spot, a lot of vacant homes, yes please. You can come in, rehab those homes, put them back online. That is something that we are able to, again, do a lot of the heavy lifting but at the same time we can increase the value rather quickly because we do all projects rather quickly.

We could increase the value maybe in the course of a couple of years. If it’s a year, it’s even better. That should be a rather large park, I would say, the larger, the better because then again, you don’t have to be looking for 10 parks. You can just do this under one geographic footprint, just in one location. Lots of park-owned homes, vacant park-owned homes, preferably not terribly distressed, maybe utilities that we can build back, preferably not electricity but maybe water, and of course if we have rents under market that is great. This way I know that we will be able to truly take care of our investors really well and I know that we will take care of our customers really well.

Hopefully in a couple of years, we’ll turn it into something really boring, meaning totally sub-metered, totally tenant-owned, resident-owned, and just a very uneventful. That would be ideal, if that makes sense.

Andrew: That makes a ton of sense, I can relate. Stabilized assets are a lot easier to manage versus the ones with tons of projects going on.

Ekaterina: That’s why I would prefer to just attack it. Do it really quick.

Andrew: Tell me about that. We touched on it earlier, but let’s say you have a project in Michigan, which is right in the middle of LA, New York, and Atlanta. Does someone move on sites or do you find someone on site to manage a project? How does your team handle those projects? Because that’s your niche, you go after the big value-add stuff.

Ekaterina: For that, it’s teamwork. It’s truly teamwork. Neither one of our partners would be able to pull it off just by ourselves. It’s truly a team effort so we just map out and again, we all have pretty good understanding of project management so we just divide and conquer. We divide the projects and put one person in charge. It’s a lead on the project, let’s say electrical sub-metering. We have a new partner in that deal who is taking the lead in electrical sub-metering. Dimitri was leading that, and I was supporting him and helping out just doing coordination with the help of the park manager and so on.

We divided those projects. My partner Nick was leading turning units. Rehab units, rehabbing lease, he was leading that. He had a person who was in charge of the crews who were doing the actual work on site. They turned 33 units in the course of a year.

Andrew: That’s amazing.

Ekaterina: We had a water sub-meter. Again, my partner who was in charge, was leading water sub-metering. I was helping with coordination because I’m mostly doing asset management, so day to day. That includes park manager and staff, just divide and conquer.

Andrew: The teamwork makes the dream work.

Ekaterina: Absolutely.

Andrew: That’s fantastic. Well, I applaud you guys for working together because it definitely needs a team to attack value-add projects like that. What would you say is the value proposition at M2K Partners and what makes your operation different?

Ekaterina: I think our value proposition is that we go slow and we vet a lot of projects before we purchase one. I think we tend to go rather maybe slower, but we look for great deals. Many may say that, but that’s just from our track record. That’s exactly how it looked. We’ve had a lot of projects and we would pick one that we could truly, as I was mentioning a minute ago, just really attack and just really do all of them really quick, turn the park around, and then maybe re-file or sell.

We truly enjoy partnerships and from project to project, we had repeat partners staying with us. That is why I think we never really had to go out and look for funds. The last project, we had two new partners who joined us, but they also were new to the industry. They were very eager to learn. For us, it was perfect. We said okay. We would accept you. We could just raise money from our previous partners and will have them but since you guys want to learn, we do have plenty of projects in this property, so all right. Let’s do this.

I think we just really enjoy working in partnerships with others, we would always welcome new partners to come. Maybe if they bring a deal, that would be great. Even not, maybe they’re local to the market. I think partners are amazing. I always enjoyed working with partners. New partners are awesome.

Andrew: Do you guys do joint ventures for your acquisitions or do you raise money through a 506 syndication?

Ekaterina: No, that was a joint venture. Most of these were joint ventures. We were able to just pull things together by virtue of people knowing, so they would feel more comfortable investing more.

Andrew: That’s wonderful. Can you share some info about the MHP Tribe, the meet up that you do, and how people can find it?

Ekaterina: Absolutely, a passion project of mine, MHP Tribe. I always remember how I was truly helped when I was getting started. Charles Dehart was awesome. He helped me. My team spends so much time helping us underwrite our first deals. MHP Tribe which is a group on Facebook right now, is the community where we have people who have experience in who have many parks and who have no parks. We come together every Monday and we have our community calls on different topics. It’s February already of 2021, so this quarter is completely dedicated to turnaround projects.

We started in January with a management turnaround. Now, we are on sub-metering. Last Monday, we were on just water sub-metering, so on and so forth. We’re just continuing all types of turnaround projects which will include electrical sub-metering, infill projects, lease sub-options and all this continuing into Q1, maybe we’ll touch on Q2.

Everyone comes and whoever has the best knowledge, they would share, make a presentation. We discuss it. Once a month, we have a meet-up when we have a guest on, again, a specific topic. This February, we have Jimmy Johnson coming to us to talk about how he was able to make such a successful MHP wholesaling business. We’re very curious how he finds his deals.

Andrew: That is fantastic. I do follow the group on Facebook. I’m just so in awe of the consistent amount of content that you put out through that. If any of our listeners are interested in the active mobile home park ownership operation side of things, that is a great group to become a member of.

Ekaterina, thank you so much for coming on the show. I really appreciate it. How can our listeners get a hold of you if they’d like to do so?

Ekaterina: Well Andrew, thank you. It was my pleasure, it’s definitely a highlight of my day. It was great. Thank you for the great questions. I really enjoyed sharing about our team. You can find us at mphteam.com. This is the website for M2K Partners, mhpteam.com. MHP Tribe is a group on Facebook. I’m also on LinkedIn, so feel free to reach out.

Andrew: Fantastic. Thank you so much again for joining us. That is it for today, folks. Thank you so much for tuning in.