Interview with Jason Janda from Rochester Property Group

SHOW NOTES

Welcome back to the Passive Mobile Home Park Investing Podcast, hosted by Andrew Keel. On this episode, Andrew talks with midwest mobile home park owner and operator, Jason Janda. Jason’s background in apartment acquisitions and syndications has enabled him to have a unique perspective on the manufactured housing industry. Jason shares some of the mistakes he made as well as the important lessons he has learned throughout his mobile home park investing journey. Jason provides invaluable advice for passive investors (limited partners) and he also shares his thoughts on the future of the manufactured housing industry. Jason discusses his mobile home park investment strategy, which leads to a deep dive on the mobile home park opportunities he is reviewing and potential obstacles that come with investing in the southern United states.

Jason Janda, the CEO of Rochester Property Group, is a real estate tax attorney and mobile home park investor/ operator. After working in various legal and business capacities, both in private equity and within law firms, Jason decided to create his own firm to acquire and operate mobile home parks throughout the midwest. Jason currently operates 15 communities in 6 states.

***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 2,500 lots under management. His team currently manages over 30 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

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 200 total 5-star reviews by the end of 2023, 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

01:24 – Jason’s journey into manufactured housing communities

02:45 – Jason’s acquisition experience at an apartment/multifamily syndication group

05:38 – Variable rate loans on acquisitions

08:28 – The toughest hurdle to overcome in mobile home park investing

09:23 – What are the types of mobile home communities that Jason targets?

12:40 – Managing in-house and leveraging technology

13:41 – How does Jason find his mobile home park deals?

14:25 – Where do you think the best mobile home park strategies are?

17:37 – Slowly walking up lot rent to market rent

20:09 – Mistakes that Jason has made in mobile home park investing

21:10 – How did Jason get educated on mobile home park investing

22:56 – More mistakes that Jason has made

24:46 – Current deals in Jason’s mobile home park portfolio

25:57 – One-off syndications (mobile home parks)

29:27 – The most important things passive investors need to look out for

30:42 – Jason’s perfect mobile home park looks like this!

32:04 – What does the future in mobile home park investing look like?

33:58 – The biggest threat to mobile home park investing

34:30 – Getting ahold of Jason Janda

35:05 – Jason’s final piece of advice for passive mobile home park investors

35:52 – Conclusion

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Links & Mentions from This Episode:

Jason Janda’s LinkedIn: https://www.linkedin.com/in/jasonjanda

MH Communities: https://www.mhcommunities.com/

Rochester Property Group: http://www.rochesterpg.com/

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

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

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

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

Andrew Keel’s 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. Jason Janda from Rochester Property Group. 

Before we dive in, I want to ask you a real quick favor. Would you mind please taking an extra 30 seconds and heading over to iTunes to rate this podcast with 5 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. 

Jason Janda, the CEO of Rochester Property Group, is a real estate tax attorney and mobile home park operator. After working in various legal and business capacities both in private equity and within law firms, Jason decided to create his own firm to acquire and operate mobile home parks throughout the Midwest. Jason currently operates 15 communities across 6 states.

Jason, we’re excited to welcome you to the show. 

Jason: Thanks for having me. Big fan. 

Andrew: Awesome, man. Let’s start out by just learning about your story and how in the world you got into manufactured housing.

Jason: I think you touched on a lot of it. My background was as a real estate and tax attorney, similar to some of your listening base. I started out in the apartment world and real estate private equity. We would do syndications on the apartment side. I transitioned from in-house counsel to director of acquisition, so I got a good understanding of the underwriting and what type of apartments to buy.

Fast forward, the Great Recession happens. The company I was working for stopped buying during that time, so I bounced to a different real estate private equity firm and then eventually to a law firm.

At the law firm, I was the low man on the totem pole. I was the guy doing borrowers’ opinions for all the Fannie & Freddie mobile home parks. Just dumb luck, I got to see the underwriting, and just on a pure real estate finance basis, the returns that these mobile home parks were generating far exceeded the cap rates that we used to buy apartment buildings out. 

But the debt from Fannie & Freddie was almost the same, so that means your spread was huge. Granted, things have changed over the last 12–15 years, but that was really the nexus of getting interested in the space.

Andrew: Wow, that is fantastic. Take us back. Before the Great Recession, you were in acquisitions and an apartment syndication group, right?

Jason: During the Great Recession. At the time we had bought a couple of DPOs (discounted payoffs) on notes to buy it directly because a lot of the banks at the time didn’t want to hold the actual asset because they didn’t want the liability.

It was a much different environment. If your property was underwater, they would appoint a conservator and hire a third-party management company, but they still wanted the borrower to own the property just in case that slip and fall happened.

It was just such a different world. But at that time, lending was very tight, so we weren’t doing a lot of additional acquisitions. When your compensation is tied to doing acquisitions, that’s not the best situation for an individual.

Andrew: Did you take anything away from that time that you implement in your business today? One of my great mentors always talks about how liquidity just dried up. When we first started buying parks, he was always like, hey, you need to do certain things with the debt you’re taking to protect yourself. 

I’m just curious, Jason, if you have similar things in your business, rules of thumb, if you will, that you implemented from your time doing acquisitions in the middle of the Great Recession.

Jason: I would say yes. More big picture, one, just understanding that this is all going to be cyclical. Over the next 20 years, we’re going to have another upcycle. We’ll probably have another downcycle. Right now, we’re kind of getting pinched with interest rates being high but a lack of inventory, so prices are still relatively high. It’s just harder to make stuff pencil.

But during 2020–2021, fortunately, we weren’t buying the 4.5% cap stuff because even if we could walk in that low rate for five years, unless you’re getting Fannie or Freddie paper and locking it in for 10%-plus, it’s scary because historical rates are closer to 6%. We’ll get where we’re at now. The five-year—which a lot of our debt is based on—is up.

In addition to that, the regional banks have felt the squeeze. They’ve expanded their own spread over the five-year, so you’re getting the double whammy. Just trying to remember, hey, look, the under 6% debts were praised, basically happy with it. Try to focus on good long-term investments at reasonable prices. If there’s an upside, try to execute that upside but definitely before any sort of debt is coming through.

Andrew: Tell me about variable-rate loans. Do you do anything like that? Or any bridge debt on your acquisitions. I know that a lot of my apartment friends have been in trouble recently with some of that stuff, but some of them haven’t.

Jason: Definitely. Same with mine. I have a lot of friends that did a debt fund execution. That’s what got certain things close but when it’s variable, your baseline is 1% or less, and your spread is 1.5 or 2 points above that. It’s fine. Now, when it’s 9%, good walk.

Fortunately, we typically do try to do at least five-year debts, which to start out is I’d say a little more aggressive on what our LTV is than what some shops would. But that’s because most of the stuff we’re buying has some sort of value-add component, either it’s a physical value-add or rents have been below market for an extended period of time. If we’re buying it at 70%–75% LTV, within 2–3 years, if we execute our plan, it’s closer to 50%–55% LTV.

Andrew: I love it. It seems like you have a very similar business model to our own, which is buying in the Midwest, buying value-add from mom-and-pops, fixing them up, and increasing the income. That’s why we’re still able to get deals done right now. 

I’ve talked to some groups that haven’t bought anything all year. I’m like, hey, well, we’ve done five deals this year which we feel pretty confident in. It’s all value-add stuff. The going-in cap rate doesn’t look great and it’s a little bit harder to get financing on the going-in income that the mom-and-pops have stated, but year two, year three, when you look at what we’re doing with it, that’s where we’re able to sell them on the business plan. Is it similar for you in the marketplace?

Jason: Definitely. We’re seeing the same thing. We’re seeing banks tight their lending standards. Before, proforma was acceptable. Now, it’s, hey, show us what’s the actual. But we’re also seeing a rise and some seller carry, which helps—not long-term seller carry, but you might get three years or so. If that gets us through this rough patch and if the Fed lowers rates a little bit over the next 2–3 years, that might be the bridge you need.

But similar to yourself, if you buy it, we’re finding that the supply of new homes and used homes is increasing at a more reasonable cost on a more reasonable timeline, so we can fill up some properties and communities faster. The execution is there. The problem is just the inventory is not there. We’re counting on a lot more doors, a lot more cold calling, and all that sort of stuff.

Andrew: Jason, what do you think is the toughest hurdle to overcome in mobile home park investing?

Jason: I’m sure there’s a lot. I’d say from the passive side, it’s just getting comfortable with the actual operations and understanding the difference between a park-owned home versus a tenant-owned home versus, okay, hey, this is the underlying property we’re investing in and understanding the potential pitfalls.

Coming to mind is a wastewater treatment plant. You buy a small park with a wastewater treatment plant. That can be very expensive to redo. If the community is not 7500 spaces, you probably want to avoid that.

There are definitely exceptions to that, but just becoming knowledgeable about what you’re putting your money into, I would say, is a learning curve.

Andrew: To piggyback on that, what are the types of communities that you’re targeting currently with your portfolio? Is it majority tenant-owned homes, or do you like park-owned homes? Will you buy with private utilities? Maybe just give us some color if you don’t mind.

Jason: Definitely. We’re value guys. We’re a value shop, so unfortunately, it’s all of the above and it depends. If we have to take a lot of park-owned homes, there has to be value for us. You might fix those up, sell those off, and do somewhat of a trade. This is a little counterintuitive. If someone’s paying $650 for home and lot rent, you might sell them the home cheaper but bump the lot rent a little bit to lower their overall payment. They’re happy with that, but you’ve just capitalized that increase in lot rent.

But to answer your question, well water, we’re fine with. We strongly prefer public utilities. The best would be direct build all utilities. You can’t always find that. Tenant-owned homes are easier because in park-owned homes, someone’s going to move out and you’re going to have downtime.

It depends how quickly you’ve got a rehab crew around there that can bring it back, and then rent it out again. In the lesser and certain markets, you just have to think, is this something I really want to deal with versus selling the home off and having it 100% tenant-owned homes? At that point, you have a much more stable property and fewer move-outs and move-ins.

Andrew: Totally agree. Tell me about your operations. Do you guys use a third-party manager, or do you manage in-house? How’s that set up?

Jason: We have an affiliate, which is a property management company called MH Communities. We managed in-house when I started. Like a lot of people, I did the management all by myself. The problem with that is—as I’m sure you could appreciate—that’s just not the best use of time. There’s a better use of time in focusing on acquisitions, investor relations, financing, and the day-to-day property management of tenant complaints, especially park-owned home issues. That’s just not the best use of time.

What I have realized is if you’re not buying the largest properties, then doing it in the house makes a lot of sense. If you’re buying properties that are big enough, you can farm it out to a third-party property management company. But if you’re buying a 50-space park, they might have a de minimis monthly fee, and that might be a large percentage of your overall rent.

Andrew: Totally agree. We’ve bought three properties this year. We’re third party managed by a big nationwide management company. They’re running on 55%–60% expense ratios. Our entire portfolio is under a 35% expense ratio. They’re just less efficient compared to in-house, where you’re vested. You want that property to succeed.

That’s interesting. You’re hands-on, you have your own operations affiliate company, and you’re managing the projects and things in-house as well with that.

Jason: Definitely. The other thing that you can do if you’re managing it in-house is try to leverage technology and whatever platforms you can use as early as possible just to streamline. If we could take man or woman hours out of the equation by automating and paying a fee for that, it usually makes sense.

Andrew: I totally agree. What’s the average lot number size of your communities?

Jason: We target the 50–90 range. That’s big enough that it makes sense. We could get decent financing, but as you know, once you get over 100–150, there are so many competitors that what’s the cap rate you’re able to buy that out? If you got an amazing acquisition […], and you pick it off, great, but can you consistently find the big ones that haven’t been touched by everywhere?

Andrew: The bigger group. You’re in acquisitions for the apartment deals, so I’m taking it that you do acquisitions now. How do you guys find your deals?

Jason: It’s an all-of-the-above approach. Everything from cold calling, direct emailing, direct mailing, and paying finder’s fees when possible because typically, the fully brokered package, we’re not winning those. There are people with cheaper capital elsewhere. Even if it’s not cheaper capital, they have a shorter horizon, so they can probably hit their IRR return. Whereas we view ourselves more as stewards of capital. We’re in it for the long term. Our goal is to provide consistent long-term returns quarter after quarter.

Andrew: I’m assuming the best opportunity or strategy that you’re seeing right now is in value-add deals and Midwest. Do you have any other color that you can add on like where you think the best mobile home park investing strategy is right now?

Jason: I see a lot of opportunities developing in the South. Six or seven years ago, not a lot of people were buying in Alabama, Louisiana, but the returns there are similar to what I saw in the Midwest when we started in the Midwest.

Andrew: I feel very strongly against that. I’ll tell you why. We’ve explored some markets. If you’re in a big market in Alabama, Mississippi, the Capitol, or something like that, it’s hard to go wrong. But in any sort of secondary, tertiary markets around there, I’ve seen just a low quality of tenant, ultimately, very low income if you look at the best places like the low median income.

Also, one thing that I picked up on that just is an anomaly or something, I’m on a repo list where all the mobile homes in the country, I get a list of all of them. Every single month when I get that email of the list of mobile homes that are being repoed, Mississippi and Alabama are the number one and number two states where all those homes are getting repoed. 

I would hate to get into that type of market where it’s like, jeez, you’re trying to increase rents to be able to maintain the property. What if you’re just not able to because it’s just such a low-income area? I’m sure there are nice pockets, but that’s been my experience.

Jason: That makes a ton of sense too because if you’re dealing with a tenant base that only has so much income, and if they’re buying home X which is financed by a company Y, you know what those interest rates are. They’re relatively high. The slightest change in that person’s lifestyle, their car might break down, they might lose a job, what have you, they’re losing their home.

Let me just clarify why I’m saying this. What I’ve seen in the South has been operators who haven’t touched rents in a very long time were still based on really low monthly income.

 Rent can go up by a large percentage base. Granted, again, it’s sector-specific and market-specific. If you’re in tertiary Alabama, I don’t think it’s going to work. But if you’re in a better location in Louisiana, Guy X has been operating forever, and the rent is $175 still because that’s how it’s always been, the market dictates that it could go up not quite double but close to it. We’re not the type of shop that comes in and just underwrites it like that, comes in and doubles it on day one, but we’ll make those improvements and slowly walk the rent up to market.

Andrew: What does that look like? How much are you comfortable with in a given year if market is double?

Jason: It really depends on the underlying customer base and it depends on what the overall dollar amount is. If you’re buying $200 rent, that percentage jump might be higher than if you’re buying $400 rent in a market where market rent is %650. It’s hard to pin that down. It might be 10% or 15%, but usually, that’s after coming in.

Andrew: For 10% or 15%, if you got a market that’s $400 lot rent and current rents are $200, you’re only going to go 10$ or 15% year one?

Jason: I was talking more of a $400 lot rent going up 10% or 15%. That’s $40–$60 because that’s where it starts to have a meaningful impact on the underlying customer base like your tenant base.

Andrew: Got you. But if it’s $200 going to $400 market, what’s your year one number?

Jason: You’re doing that faster. I can’t think of the last one we did, but again, we do it slowly. The reason we do it slowly is that’s going to be a 20-year hold for us. Our partner base knows that, we’re underwriting that, and we’re slowly getting there. Then, the other thing that’s happening is you are going to have some turnover. Those new tenants are coming in at market.

Andrew: With the infill homes and everything, yeah, they’re coming in.

Jason: But what we’re also trying to do is because it’s a balancing act, you also don’t want to increase it enough that someone says, oh, you know what, I’m taking my home out of here because the value that you lost on that versus the value you’ve increased and the capitalized lot rent, you want to make sure they work together.

Andrew: I think with a good amount of capex that’s been dumped into a property—new roads, taking care of the deferred maintenance from the mom-and-pops, trimming the trees, fixing the cracks in the sidewalks, new mailboxes, and things like that—I totally think that a $50–$75 increase in year one is […]. But you just got to do the work, and that’s where a lot of other operators have not done the work. They just come in and jack up rent by $200 in year one, and they give everybody a black eye.

Jason: They give us all those phone calls. All those tenants start calling, hey, can I move into yours?

Andrew: Jason, what mistakes in mobile home park investing have you made that our listener base and I can learn from?

Jason: Early on, before I even did my first transaction was paying some of the out-of-pocket due diligence before finishing the standard due diligence that we requested. I still remember the first one. We signed up for phase one, we got a survey, and all this money was going out the front door, and then lo and behold, we didn’t get the bank statements, we finally get the bank statements, and this particular operator wasn’t collecting the rent he was. He only gave us the last three months because he was doing deposits of his own money into the bank. By this point, I’m out $5000 or $6000. I’ve got all these materials in a park I’m never going to be able to close.

Andrew: That’s tough, man. How did you get educated on mobile home park investing?

Jason: I don’t think a lot of us started thinking, hey, let’s stay at the MH space. That’s a great space for us. It was a transition from apartments. I had a decent knowledge and decent training in underwriting and that kind of side of it. From there, it’s just the jump of, okay, what’s the main difference? If you’ve got a mobile home park that’s all park-owned homes, very similar to an apartment building. If you have one that’s all tenant-owned homes, it’s much easier to operate than an apartment building.

Andrew: Did you go to the MHU boot camp, the Frank & Dave boot camp, or anything like that?

Jason: Yeah. About a decade ago.

Andrew: I think most operators that I’ve had on the show have gone to that and cut their teeth and learned from that. I was telling someone the other day that when that thing came out, they gave you the 30-day due diligence handbook and there are 50 checklist items. I was going through our due diligence on a new deal, and it’s 350 checkpoints now. We’ve learned stuff from every deal because we made mistakes from X, Y, and Z, you name it. We’ve learned from it, but it’s a good boilerplate kind of seminar, a weekend boot camp to go cut your teeth.

Jason: Definitely. I’ve actually reached out to see if they still do it. I think they’re just starting it back up at Frank’s house. You also go through it. Back in 2013, it said, okay, you have to buy it if it’s a […]. You can’t buy anything less than that. That’s how I started. I said, okay, I’ll buy all the 9% cap stuff because even back then, I could go get 5.5%–6% debt. Your cash on cash was huge.

Andrew: Any other mistakes that come to mind that you think we can share with the listeners?

Jason: One that I can think of is letting the tax tail wag the dog. Obviously, accelerated depreciation is a big thing in our industry, so having that accelerated depreciation, and coming up with that as the excuse for buying a certain property that might be just on the edge, that was one of the ones where if you look back, we probably shouldn’t have bought it. We may do it, but one more difficult project or problem took up maybe 35% of our time. You had a 50-space park, and that was a third of everyone’s day. This is not worth it.

Andrew: That’s the same thing when an investor asks me, oh, why aren’t you doing development of mobile home communities? I said, well, there’s a lower-hanging fruit right now in the marketplace that is easier to scale with compared to learning something from scratch that I’ve never done before. I’m sure there’s an opportunity in certain markets to build ground up, but the time and effort that would go into that versus what we already know is just a better use of time.

Jason: I’m sure you’ve got a bunch of other people on the podcast—I’ve heard some as well—that dive into RVs. I still see enough opportunity in the MH space, at least in the niche that we operate in, that I’d rather continue to do what we know very well rather than start learning something else.

Andrew: Have you guys done any deals this year, Jason, in 2023?

Jason: We do a couple every year. We have a very tight sieve. We start with a big funnel, and then not a whole lot gets through it. We’ve got another one closing on the 31st of this year.

Andrew: Tell us about the deals.

Jason: It’s like a hub and spoke model. If it’s a bigger property, we will take a stab at it almost in any of the 12 states which we target. But if it’s a smaller property, we’ll still take a stab at it if it’s close to another one, especially if we’ve got a good manager there.

What we’ve come to notice is that if we’ve got about 300 sites within about a couple of hour’s radius, then we can operate those very well. We can support a maintenance crew that can rehab homes, we can float people, and we can borrow different trades. If I’ve got a great electrician here, I can send them over here. That’s definitely the model of growing out in a certain state, but if it’s a new state and it’s a 5-space park, it’s probably not going to scale.

Andrew: Do you guys do one-off syndications, or do you have a fund that you raise money through?

Jason: We typically do one-off syndications. Again, my background came from the apartment space, so I tried to steer it in the way most optimal to raise money. That turned into low fees, a higher back-end promotion, alignment of interest, and then being very transparent on quarterly reports. Here’s what gross income was, the operating expenses, our NOI, debt service, and cash flow. Based on those, this is how much we can distribute. 

That was one of my frustrations as an LP. I’m an LP in about a dozen apartment syndications and a lot of times, it’s a black box where you’re getting a certain distribution, you don’t know how it’s based, and you don’t know why.

Andrew: You’re lucky if you’re getting apartment distributions right now. I’ve heard horror stories.

Jason: Definitely. Especially state-specific. We do operate in Illinois right now. We will not be operating in Illinois in the future, but there are certain states that make it very hard to operate. That’s another big mistake.

Andrew: New York is a big one. We made a mistake and bought one there. The judge, we go and meet him every 90 days to try to evict the same tenant that hasn’t paid since we bought the park. He just keeps extending. Because they have kids and it’s a family, he doesn’t want to kick them out on the street, so he just keeps extending. It’s been over a year now that we’re not able to evict this one tenant that literally wasn’t paying the previous owner.

Jason: We had it spread out of Illinois Park, so you’ll appreciate this. Sixty-one sites, and we had over $100,000 in delinquency. It spread like wildfire because a couple of people realized, hey, you don’t have to pay rent. They can’t kick you out.

The longest person we had was 26 months. That was 26 months without paying rent. We couldn’t evict them because there’s an eviction moratorium. Even when that was done, there was such a backlog at the courts, and then even when you finally got your court date, the judge was basically telling you, hey, go negotiate something. I don’t want to do this eviction.

Andrew: It’s so wild. I will say until the rental relief programs in Illinois ran out—because we own properties in Illinois and the one in New York—they were writing big checks. They were like, hey, we’ll cover the hole last year and would send us $10,000–$11,000 checks to cover the past due balances for several tenants. We went down that road, but when the money ran out, it was like, hey, there’s nothing left because they can only go back to that program so many times. I think it’s once or twice, and they’re just dead.

Jason: That was a mistake we made in Missouri. We bought a property during the pandemic. We liked it, the price was right, and everything else, but a lot of people were paying through government assistance, the rental checks, you couldn’t really gauge. We were fine. We were getting a lot of money, but then when it stopped, a lot of the rent stopped. You had so many evictions, you’re rehabbing homes, and then literally you’re taking out a new loan just to fix the property.

Andrew: That’s crazy. Jason, what do you think are the most important things that passive investors—we’re talking to LPS—need to look out for when investing in mobile home parks?

Jason: Obviously, doing your due diligence on the sponsor. Understand what the return parameters are and what the fees are. I’m all for the sponsor getting paid well, but there has to be an alignment of interests.

The sponsor shouldn’t be made whole just on an acquisition fee, finance fee, construction management fee, I woke up on Thursday fee, and what have you. Just making sure that you understand the fees, there’s a back end for the sponsor, and then also just hopefully getting some reporting so you understand that a property is not doing great, just being in the loop. Hey, not doing a distribution this quarter because of X, Y, and Z.

Andrew: And being consistent with it instead of just an update this month, nothing next month, and then you’re back on it. Being consistent and setting expectations are huge.

Jason: Consistency is the right word almost throughout the board. Whether it’s operations so that everyone has a clear expectation of what’s going on.

Andrew: Totally. Jason, what does the perfect mobile home park look like in your eyes, and why?

Jason: I haven’t seen it yet, but like what we touched on briefly earlier, I’d say tenant-owned homes, streets are done, you don’t have trees hanging over homes, ideally direct-billed, and collections are good.

Andrew: How many lots?

Jason: As many as you can manage.

Andrew: As many as you can get in, and you’re buying it at a 10% cap.

Jason: There are so many legacy owners still out there. There are great ones. Even the ones that have the deferred maintenance we’ve touched on earlier, it’s understandable because if you’re operating this for 30 years, 20 years, or however many years from the folks that we bought in the past, stroking that big check to fix. We spent $60,000 at one property recently just to do culverts, so we had better drainage. That was never going to get done by the prior owner.

Andrew: There are mom-and-pop and baby boomers that are using it as a retirement vehicle. It just doesn’t make sense. That’s why I think it’s good that there’s new blood coming into the space that’s reinvesting in aligning interests. A lot of people don’t get this, but the nicer the property looks, the better debt you’re gonna be able to get on it, so it’s a win for investors and tenants to make it look nice.

Jason, what do you think the future of mobile home park investing looks like with the direction the economy is going? Obviously, higher interest rates are here. There are possible recession talks still. What do you think that looks like?

Jason: We have those conversations often. I still see it as being a great avenue for long-term wealth accumulation. You’ve got tax benefits on the depreciation side. You’ve got solid cash flow usually. Even from the more core assets, you get good cash flow. Debt, my hope is you buy a property a little bit below where it was a year or two ago, and then you’re happy with that purchase price because, in 3–5 years, you’ll be able to refi it and get somewhat more reasonable debt.

But you hit the nail on the head. I’ve had that conversation where certain people have told me hey, I don’t know if I’m going to do this next one because I can get 5% of my money market. I can get 5% here. I’m taking a risk with you. You’ve delivered solid returns.

Andrew: How do you overcome that? I’ve received that same objection. How do you overcome that at this point because now it’s 5.25%?

Jason: My response was, okay, but look at the last 20 years. Let’s say you just left it in your money market that was 20 years. What would you return on that be? We’ll get those same 20 years in any of the mobile home parks we own, you would have had your money multiple times over. In addition to that, you’d have the depreciation because a lot of the people that you’re dealing with and everyone’s dealing with that are investing, they pay a decent amount of taxes so they could use some of that depreciation to help shelter some of that active income.

Andrew: Good points. What’s the biggest threat to mobile home park investing?

Jason: We’re losing a lot of supply, and we’re seeing a lot of consolidation, especially whether it’s mom-and-pop sells to an operator that buys 20–40 communities. That 20–40 is then sold to the next bigger fish. Those fish are then sold to the next bigger fish, et cetera. We’re seeing that, but again, I still think we’re far less consolidated than almost every other real estate asset type. I think there’s plenty of opportunity.

Andrew: Totally. Jason, thank you so much, dude. Tons of golden nuggets on here. If listeners would like to get a hold of you, what is the best way for them to do so?

Jason: Get me on LinkedIn. My phone number is on mhcommunities.com or Rochester Property Group. We’re always around. If there are questions we can answer, happy to.

Again, thank you for your time. Big fan of the podcast.

Andrew: Real quick before I let you go. What’s one last bit of important advice that you would give an interested passive mobile home park investor just before we sign off here?

Jason: A lot of people buzz through a PPM because it’s got a lot of risks. It’s got to go on to other stuff. But just make sure you understand, okay, hey, what’s the return I’m going to get? How was the sponsor going to be compensated? To me, the biggest one that used to frustrate me is just having that conversation with the sponsor. Hey, what sort of financial reporting am I going to see? I just want an idea of what’s going on.

We provide basic financial reporting every quarter, one with three or four updates of larger items that have happened over the quarter just so instead of as an investor, you feel like, oh, I’m a partner in this property or in this fund.

Andrew: Cool. I love it, man. Jason, thank you so much again for coming to the show.

Jason: Thank you so much. Appreciate it.

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

Jason: Take care. Thank you so much for having me on. I really appreciate it.