Listen on Apple Podcast here: https://podcasts.apple.com/us/podcast/interview-with-jason-postill-and-tyler-lekas-from/id1520681893?i=1000617314973

SHOW NOTES

Welcome back to The Passive Mobile Home Park Investing Podcast, hosted by Andrew Keel. On this episode, Andrew talks with Southeast mobile home park syndicators and partners at MHCI Group, Jason Postill and Tyler Lekas. Jason and Tyler share their insights on the benefits of acquiring a portfolio of mobile home parks solely in the state of Arkansas. They also do a deep dive into the challenges they have been faced with concerning utility infrastructure and infill inside of their portfolio of mobile home parks. Jason and Tyler share their valuable lessons learned as well as the knowledge they have gained throughout their mobile home park investing journey.

Jason Postill and Tyler Lekas met in 2019 and formed MHCI Group in 2020, since then they have scaled to over 700 mobile home park lots in the state of Arkansas.

***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 ten 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 .

Book a 1 on 1 consultation with Andrew Keel to discuss:

• A deal review
• Due diligence questions
• How to raise capital from investors
• Mistakes to avoid, and more!

Click Here: https://intro.co/AndrewKeel

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

01:15 – Jason’s journey into manufactured housing communities

05:04 – The inception of MHCI Group

06:57 – Strengths in the partnership between Jason and Tyler

08:28 – Tyler’s background and journey into the mobile home park investing world

10:00 – Why is Arkansas the focal point?

14:15 – Apartment rents and lot rent in Arkansas

16:21 – The toughest hurdle to overcome in mobile home park investing

17:30 – Jason and Tyler’s MHP portfolio and current team

24:18 – Mistakes that Jason and Tyler have made in mobile home park investing

27:45 – Sewer lines are chaotic!

28:30 – The most important thing passive investors need to look out for

35:42 – Jason and Tyler’s perfect mobile home park looks like this!

37:50 – Getting a hold of Jason Postill and Tyler Lekas

38:06 – Conclusion

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

Links & Mentions from This Episode:

MHCI Group: https://www.mhcigroup.com/

Jason’s email: jason@mhcigroup.com

Tyler’s email: tyler@mhcigroup.com

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 a couple of amazing guests in Mr. Jason Postill and Tyler Lekas from MHCI 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 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.

Jason Postill and Tyler Lekas met in 2019 and formed the MHCI group in 2020. Since then, they have scaled to over 700 mobile home park lots all in the state of Arkansas. Jason and Tyler, we are excited to welcome you both to the show.

Jason: Hey, Andrew, thanks for having us. Really appreciate it.

Tyler: Thanks, Andrew.

Andrew: Let’s start with you, Jason. Would you mind sharing your story with our listeners and how you got into manufactured housing?

Jason: Yeah, great. I’ll try to keep it brief and not get too long winded here. Starting out, real estate was never really my background ever. Growing up, I wasn’t really involved in it. The family didn’t have it. My father had a rental in Pinehills, if you’re familiar. Shout out, Pinehills. It didn’t go well, so I didn’t really hear a whole lot of real estate talk.

I do remember the baseball tournament when I was about 12 and just seeing the skyline on Palm Beach. Walking the beach and just seeing it, I was little, I didn’t even know the term real estate, but I knew I was just obsessed with buildings. I didn’t even know what to think other than one day I want to own a building. I just had an obsession with the buildings.

Long story short, going into college, I played baseball. That was really my background. I played professional baseball. I started hearing a little more about it and thought, one day, I’ll just get a real estate license and get into it. That is what I did with my last season plan. The sales side, the residential, that just wasn’t it right.

I ended up hearing a guy at one of my camps, one of the pro camps. It was a big leaguers say, I didn’t make my millions playing baseball, I made it owning thousand units in South Detroit. I was just like, bingo, okay, well, that’s what I want to do. I want to create passive income to figure out how to buy these buildings.

I just start asking myself questions. How do I do this? Who owns that building? You think it’s these large groups. You start digging. You figure it out, hey, it’s you guys that pull together. They learn and figure out how to do it.

I got still on the brokerage side with apartments, started selling apartment buildings, and then got on the investment side interested. Finding all these deals, I said, well, I want to start participating in this and figuring that out.

Really, when I made the pivot into MH, it was more of a safety deal. I had some investors, and I said, well, it’s one thing to lose my money. We can go make more money, but to lose someone else’s money is just the scariest thing in the world. I started looking a little more into what’s safe. What’s the safest, statistically, asset in commercial real estate? I stumbled across mobile home parks.

Really, in 2018, I started doing a lot of phone calls. We’ll get to that story in a little bit, how I met Tyler. That’s really what took the turn. I ended up going independent instead of working for a commercial brokerage. I got in the door in 2020 with my first investment and grew since then.

Andrew: Okay, let’s back up a second here. Professional baseball. Where did you play professional baseball at?

Jason: Out of college, I wanted to just play baseball. That was just my holy grail. When I was 10, I wrote a letter to my mom, hey, I want to be a professional baseball player. That was true, what you focused on. But I went to college to play baseball, and then I signed with the Arizona Diamondbacks organization out of my fourth year.

I didn’t go back, that was the end of the plan, and then played throughout the minor leagues for a number of years. I had some injuries and could have probably kept it going, the minor leagues are these independent leagues. I ended up having a daughter and thought, hey, it’s time to hang it up. I don’t like saying retire, that just seems odd to say at this point in my life. Just hung it up and moved on into the real world, but it was a blessing.

Andrew: That’s super awesome. You went into the brokerage side selling apartments. How long were you with the firm before you left and started your own brokerage firm selling apartments? That’s what you did next?

Jason: I got in on the brokerage side with about 26 teams. I got into a commercial brokerage about two years before. Then I had the broker’s license and was able to do my own thing going independent in that. It was about four years working with a brokerage, and then I went on my own.

Andrew: Got you. Okay, then 2016, 2020, started your own brokerage, and got into mobile home parks around the same time.

Jason: Exactly. Yes, right.

Andrew: Man, you got a lot going on, dude.

Jason: It was a wild storm of events.

Andrew: That’s awesome. Then Tyler comes along. How did you guys meet up and put together the partnership?

Jason: I’ll tell that story before Tyler tells his intro. Really, I think it was one of my first couple of weeks going independent. I started calling mobile home park owners in Florida. He owned a park in Florida. I didn’t own anything at this day. I was just trying to steal on the brokerage or just find deals to vet.

My second week, my company JP Capital Solution, nobody knew the name. He didn’t tell me to eff off exactly. He might say, who the eff is JP Capital Solutions? Boom, hung up my face. I called him right back and just got out what I wanted to say because I can’t sleep at night if I don’t at least say what I want. I’m not going to harass people, but I at least want to get it out.

Whatever I said at that point, oh, I think we got hung up, we ended up continuing that conversation. We met, coffee, started talking a little more about real estate, and saw how our ultimate goals aligned, which is hard in this business.

Andrew: What’s your strength? Is your strength the acquisitions, the cold calling, the talking to owners?

Jason: That’s been my strength. Yes.

Andrew: Tyler, what’s your strength? What do you bring to the partnership?

Tyler: Basically just boots on the ground, I’ve always been a touchy feely kind of a guy. I manage a lot of the contractors, a lot of on site operations. If we were Blackstone or something like that, it probably wouldn’t matter as much because we’re buying four caps and all tenant-owned homes and whatever, but we’re buying pretty heavy turns.

You lived on site. I remember your raccoon story.  These heavy turns, you got to be managing the contractors, or you gotta be paying somebody 150 probably a year to really manage those guys for you. We said, look, we don’t have that type of capital starting out.

I moved from Florida to Arkansas to manage the portfolio to make sure there was somebody here because I’m part Neanderthal, so I can’t do computers. I was like, hey, I’m pretty good at making sure people can do what they say. It doesn’t take a rocket scientist, but that takes a certain type of personality to deal with contractors on a daily basis.

Andrew: For sure, and do you have a background in that?

Tyler: No, I don’t. I probably just grew up […] or something. I don’t know. I used to find Golden Gloves and whatever. I do some jujitsu now and […].

A little bit about me backstepping just a little bit, I was in the financial world that traded fixed income on Wall Street for all my career, basically, until about 2016. End of 2016, I got out of that business. You’re working 120 hours a week. I was trading different foreign markets.

It just wasn’t really a good life. You put on a bunch of weight and as much stress. My dad sent me an article about basically mobile home parks. I was like, this is an interesting asset class, so I ended up diving into it. I quit my job a couple of months later. I ended up buying my first park and did a whole bunch of stuff in between there.

I ended up buying my first park in 2018 in Titusville, Florida. I moved to Florida, basically from Oregon to Florida, and self-managed that park, and then ended up meeting Jason, like you said, on that phone call.

One little thing that he did leave out was I did like having a call back. It was during Christmas or something like that. It was Christmas Eve or the day before Christmas Eve. I had a couple of beers with my buddies. I was having a good time, and he called me up.

I was basically pissed off. I hung up, and he called me back and was like, I like this guy. I got nothing else to say because I used to do that when I first started in the financial world. I was a sales guy. I’m like, oh, man, we got disconnected. I liked that tenacity. Anyway, that’s how the conversation got started between us. It was good.

Andrew: That is so awesome. Wow. To this day, you guys are up to 700 lots all in the state of Arkansas. Was that strategic? Was that just where opportunities came? Why focus on the state of Arkansas?

Jason: I got to give that credit to Tyler. Him and I too, it wasn’t just, oh hey, we met, cold call, coffee, we’re jumping into deals and growing this. We probably got our teeth kicked into 18, 24 months, which isn’t a long time granted. But just for your listeners out there, finding partners again is not the easiest thing at all.

We were down here in Florida looking at deals. Just deal after deal, we’re doing due diligence after. We just couldn’t get across the finish line. I can see a lot of people just hanging it up just like, no, this is ain’t, and then guys come in just crush you with these cash offers. This was 0.20. When things were going crazy too, some people were sitting on the sidelines.

Long story short, the Florida didn’t work out the market. Tyler had a while […], I’ll let him go into that, into Arkansas. If you want to elaborate on how we tapped into Arkansas, but it wasn’t strategic like, oh, we’re going to grow up to a thousand once we got in it. It caught fire, but everyone jumped in.

Tyler: Yeah, Really, Frank Rolfe, you dial him up on the phone, and he reviews a deal for you, or helps you review a deal.

Andrew: Good system for that, by the way. He always answers, man. I swear. He is Mr. Reliable.

Tyler: Yeah, that guy’s a phenom. I don’t understand how he does everything he does. He now has 60,000 lots, and he answers all these nobody’s phone calls. I’m not saying you’re a nobody, but I feel like I’m a nobody. I can’t believe he picks up the phone.

We were really struggling in Florida at the time. I basically call him up, and I said we had a deal. I really wanted to just pick his brain on the southeast in general. He’s like, oh, I hate the southeast. Okay, great. Okay, give me something else. He goes, look, if I was going to buy anywhere in the southeast, and I was starting out, he goes, I really think Little Rock is an undercover market.

He goes, I don’t think it’s going to be for the faint of heart, but if you’re trying to make some money and trying to scale out, I don’t think there’s any really institutional operators in Little Rock. He’s like, that’s just my humble opinion. I started looking into it. I had a buddy who just started at Marcus and Millichap right when we were looking, and he was looking to buy parks. I said, hey, why don’t you database Little Rock for us? He ended up databasing Little Rock for us.

I think he sold his second or third deal to us because he got a hold of this guy named Joe Carrillo  on these two parks. Actually, it’s the two parks right behind me. That’s my wall art in my apartment here. I ended up buying those parks.

What we found out is, as we got deeper into the market, I lived here a little bit, and what we figured out about the market in general is that the land values here are super low. The rents really outsize the value of the land. I don’t know why the market ended up meshing like that.

What you have there is that you can go buy something for 10,000 an acre, and you can go rent it out for $300-$400 a month. If you’re going to buy something in Los Angeles, you may have really high rent there, but the land value is going to crush your cap rate.

We’ve just found this arbitrage basically within the state of Arkansas that I couldn’t find anywhere else. Alabama and Georgia at the time too, even till today are getting bit up. Our average price per pad I think is around 20,000 for the 700 units. When you think about that, our average lot rent is 325, 350. Anyway, I’m not trying to dive down the rabbit hole of all the metrics, but really good overall cap rates.

Andrew: I just remembered, my in-laws live in Fort Smith, Arkansas. I don’t even know the highway, but we were driving down the road. I saw a billboard above an apartment complex. It was a C grade apartment complex, and it said $350 a month, month to month rentals. I just remember thinking, what? For an apartment? Not even just a lot rent, an apartment was $350 a month. When you’re buying these parks, are lot rents $100 a month, $150? Are they really low?

Tyler: We did look at some deals in Fort Smith. The apartment rent is much higher. To your question, Andrew, we bought up apartments. Actually, it was a really good deal store. I mean, that $90 a month if you can believe in anybody in America was living there, lot rent. Then we went to $250, which was well below. We’re having $325, and we still think that’s pretty below, and there are some higher lot rent in the area.

They were, oh, this lot rent has been in 15 years. We’re like, no kidding. It was a 33-site deal, and $375, and then the bank valued it at $820. Within five months, that’s how we kept moving along.

To your question, there has, but right now, no. We’re seeing maybe $175, $200 at the low end. That’s again mom and pop that have owned this for 10, 15 years and no Sally and Johnny and go collect the rents still.

Andrew: I just want to know if there was meat on the bone. It’s so low, and maybe it’s just Fort Smith, but I just remember thinking like, man, I don’t know how to get those to pencil out. If apartment rents are that, where are lot rents going to be at.

Let me go through my questions here. I’m getting off track. Tyler, let’s throw this one to you. What do you think is the toughest hurdle you guys have had to overcome in mobile home park investing?

Tyler: I think there’s been two different main challenges. When we first started off, I think it was going out there and finding money to actually get deals because we really didn’t have a track record to go out and gather the money that we needed to continue to scale. I think that was also in part two of that challenge.

Again, when we were first starting off, it was also finding a manager that was willing to take a pretty low salary to deal with a lot of problems because we’re in a high crime area of Little Rock. Those finding personnel and then finding money early on was a big challenge.

As we’ve gotten bigger, our deal flow has gotten really good. The money has gotten easier. But now, it’s building out policies and procedures to continue to scale that growth. Those may be more business challenges, versus mobile home park challenges. But I guess on the mobile home park side, the tenants.

Andrew: No, I got you, totally. So you guys manage in-house?

Tyler: Yup.

Andrew: Okay. Maybe you can just shed a little bit of light on that, like how your operation looks? Do you have a team? Is it just you guys? Maybe when we’re done with that, we can talk about what your parks look like. You mentioned you have one that’s 33 lots. Do you guys buy with public utilities, private utilities, or what that looks like?

Tyler: I’ll take the team side, and then Jason can maybe speak a little bit more about the utility. Jason, does that sound good for you?

Jason: Sure. Yeah, we can dive into deals.

Tyler: Okay. Basically, it’ll be pretty short and sweet because basically, right now, how the structure is we’ve got onsite managers. We’ve got a call center that feeds up into—really, we’ve got two VAs in the Philippines that help us with a whole bunch of different stuff. They’ve been with us for a couple years now. They really know the business inside and out, so it flows up to them.

If they really can’t answer anything, it goes to Jason and myself. But Jason and myself, really, we use our own human capital to deal with a lot of the medium to big sized problems. The small problems, most of the time, give that a doubt, but we’re trying to acquire more assets and really doing most of the operational side ourselves. That’s one thing, getting a district manager.

I know we were talking to you guys at MHI about that, how your guys’ district managers work or vice presidents of district managers. We definitely need to build in that operational system, but it’s definitely a cash flow and seasoning assets. There’s definitely a yin and a yang, and I’m sure you guys dealt with the same thing, hiring and getting that cash flow up to snuff while you guys paid somebody.

District managers get paid 50, 60, 70 a year. How do you build that in your cash flow and continue to have outsized returns for your investors? It’s definitely a balancing act. But right now, that’s how our structure is. It’s basically onsite managers. Call center goes to our two VAs and then up to us.

Andrew: Cool. Jason, let’s throw it to you, brother.

Jason: Lean and mean. In looking for utility, what deals are we retargeting?

Andrew: You don’t have to go through every one of your ports, but what does most of your portfolio look like?

Jason: We only have one property that is private utility. Obviously, the direct bill, I think that was one of your questions, was the perfect deal, so this answers that. Obviously, the direct bill, the 100% tenant-owned homes, one clean parcel because we have a couple of deals, 18 and then a 22 over here. Our largest assets is 122 sites, so that’s a nice, clean, direct bill, 100% tenant-owned, beautiful property.

That’s almost like the perfect deal, but only one property right now. We don’t just cross it off the list. We’re not hard and fast like oh, it has septic or boons. Nobody really wants to look into those, maybe. I don’t want to say nobody.

We try to steer away or we’re just really diving in on the due diligence side on those because we’ve ran into the Orangeburg, which years ago, we didn’t even know what that was. Obviously, I’ve learned a lot, Tyler way more than I. He’s the warrior on the ground. He’s in there managing the contractors and doing all that. There’s a lot that comes up.

In Little Rock, out of those 700, there’s about 424 that are right in about a 3-5 mile radius. It’s not easy to measure, but it’s obviously easier to manage than just having them spaced out 18, 20, 40 units throughout the state. Those started being easier to find once we bought one, then we call the owner down the road. Hey, we own here. That’s really how that transpired.

Andrew: Are these value-added projects that have vacant lots? Or are these stabilized assets that you’re just buying?

Jason: No, these are heavy lifts. These are heavy turns. Even the one that had private utilities, the septic, that was a full park 33, but it was 100% park-owned homes. We converted that, 50% of the park left. It was a nightmare. I admit it, but I think it’s important for your listeners because it’s not all great.

It’s our top performer right now, though. We converted it. Some people just don’t want to own a home. Some people think, oh, happy birthday, Merry Christmas, here’s my home, and they’re thrilled. They love the ownership, but it didn’t work out in that scenario.

We’ve tried some different angles, but the infill was a huge challenge, a lot of these are. We’re still looking at those deals. To bring in homes, get the contractors in place. Tyler, if you want to jump in on this, but that’s a huge challenge. Most of our deals have been that, that’s why we got them at a steep discount 10,000 a pad, 12,000. Like Tyler mentioned, average 20,000 a pad.

Andrew: How many homes have you guys infilled over the last year or so?

Jason: Just that one property, we brought in seven in one month last year.

Tyler: It’s probably been between used and new homes throughout the portfolio. It’s probably been between 25 and 30. We’ll probably bring in another 7-10 here in the next 6 months. Again, I’m sure you’ve gone over this on some podcast, Andrew.

Infill in homes, when a broker comes out and says, hey, you could generate 10 cap from this deal. All you gotta do is fill in 20 vacant lots. Those guys are out of their freaking minds. If they knew all the operational stuff that went in on the ground here to actually buy the home, get the actual highway crew to drop it in the correct space, and then hiring your setup crew to go set the home, hooking it all up to utilities, doing the skirting steps, and all the stuff that falls off the walls when the home actually comes in, all the lights that fall off, all the walls that fall off, it is an absolute to do.

You really need, again, somebody that cares about the property, taking that home and putting on a pad because if you angle it too far, one way or another, you lose a whole another path. Guess what, you got to repeat that whole backup.

Andrew: That’s not cheap.

Tyler: Yeah, it’s not cheap at all.

Andrew: Ask me how I know.

Tyler: I’m sure there’s been some mistakes.

Andrew: Mistakes, that’s my next question, Tyler, and I’ll direct this one to you. What mistakes have you guys made that our listeners can learn from?

Tyler: God, we made probably every mistake in the book, everywhere from wrong water balances to incorrect lot rents on people’s online systems. But I really think one of our biggest mistakes, thank God we bought the asset right, Jason touched on it earlier, we bought a property called Arch Estates, as we call it now. It was 33 park-owned homes, and we slammed these guys.

We basically said, you either get your home and you get out. That was not the correct move because they all got out. They got 50% of the park went vacant. Luckily, we bought it for 675,000, which saved us. We can make the debt service payment and all that. But we basically had to go in there and renovate homes.

I remember walking into one home, and it looked like the walls, the ceiling, and the floors were moving because there were so many cockroaches in there. They dropped down my shirt when I walked in, so we had to renovate these houses because we had to get the cash flow back up.

The renovations were gnarly, HVACs were shot. There was one guy who ended up going to jail because he got so pissed off. He took a shotgun and started shooting holes in the walls. It was all this stuff.

One of our biggest mistakes was sending that letter out to your park-owned home residents. For your listeners out there, I would recommend that you buy a heavy park-owned home, and I’m sure you’ve done this Andrew as well, but if you buy all park-owned homes, you have to do home inspections, and it’s got to be super light. Hey, just want to let you know, we’re offering this to you.

Let’s say it’s a 100 space park. Do 5-10 at a time. Hey, we’re offering this. Oh, they don’t want to take it, no problem. We just recommend you know that we’ll be converting this sometime in the future. I think that was a pretty big mistake.

Again, we’re buying something for 25,000 a pad. We probably would have gone under on that property. Luckily, we bought it correctly. That’s a pro. For your listeners out there that are trying to buy their first part, look at price, man, because price is going to keep you out of trouble. I think you know that, Andrew, to definitely avoid bigger mistakes.

Andrew: Jason, you mentioned Orangeburg, that you ran into Orangeburg. Maybe you can elaborate a little bit on that.

Jason: That’s one time at one property actually up in Mountain Home. We do now always scope the lines, make sure we know what we’re getting into. We got this one at a discount. It wasn’t a monster problem, but it was just something where we run into, they start digging, but okay, well, now it’s great. Now we got issues going, problems, and replacement. It just snowballed into a larger problem than we were originally anticipating.

Andrew: Was the whole park Orangeburg?

Jason: No, half of the park was, but we don’t have this used throughout the whole park, but we found out. There was one park that again, they started digging, and then they just went right through Orangeburg. We found out, okay, well, quite sad. But it wasn’t the whole community, luckily.

Andrew: Yeah, luckily, because that stuff is brutal. It’s like a paper mache. Whoever invented that, why would you do that? It just doesn’t make sense. Crazy.

Tyler: I’m interrupting now. I was going to say sewer lines of some of these properties were pretty crazy. We had to replace 330 feet of sewer line in this one area because it was all screwed up. He said he was upset with us, but we ended up finding cement packs, schedule 10 copper.

Andrew: Copper sewer lines?

Tyler: No, sorry, not copper. Stainless steel, and then Orangeburg. We found five different types of sewer lines all patched together in this 330 feet. It was crazy. I remember taking pictures for Jason when I was out there like overseeing the plumbers when they were doing their thing. I was just like, what is going on out here? Who put this stuff together?

Andrew: These mom and pops, man, 50, 60 years of just patching it up is what led to that. It’s crazy. Let me ask you both this. We’ll start with Jason. This is one of the questions that gets the best feedback from the listeners.

What are the most important things passive investors, we’re talking about limited partners here, what do they need to look out for when investing into mobile home parks? Jason, you start off, and then we’ll go to you, Tyler.

Jason: That’s a really good question because there are so many guys doing it, apartments, and it’s just really knowing the operators and really the track record. If somebody’s new, that’s okay. But what have they done?

I had a guy tell me. It was an apartment guy. He said, a lot of these operators are operating off pro forma instead of a property management plan, which I thought was really interesting. I’m like, wow, that actually is a good point because you can paint these IRRs, get all these LPs excited, and cash on cash. But then it’s like, how are you managing this thing? Like, oh, well, we’re juicing rents, and we’re paying. No, it’s like, how are you managing this?

If all hell breaks loose, who’s going? We don’t know how to lease up. Every little piece of the business, how are you managing it? Knowing that if all eight men on site or whoever quits tomorrow, no notice, we have that just the other day, Tyler and I were at one property, managers quit on spot, no notice, it’s gone. Then what happens?

Do the operators know how to get in there, operate and do A to Z, and not just find the deal? Because I got popped in my mouth pretty good because I love the deals. That’s just what keeps me going because of property management. I hate to even say it because it’s the lifeblood of the business, but I would never start a property management company just to have a third party.

People all the time asking, oh, you got a brokerage, you can do it. I’m like, no, we do in-house with our group. That’s it. We don’t offer third parties. We want to know the business of that side. It’s, again, the lifeblood.

Going back to your question, the LPs, what do they need to look for when investing is just the operation side. More than just the shiny ball metric of the cash on cash and the IRR being the 30%, it’s how are they operating these guys? Who are these guys? How are they truly operating the business?

Andrew: That’s good. Yeah, operations are super tough. I was talking with someone earlier today. We were talking about the good, the bad, and the ugly. The ugly in mobile home parks is this is affordable housing, and you’re going to have a tough time managing this. Like you’re saying, Tyler, you got to have good systems in place. It just comes with time, for sure. Tyler, what would you say? What’s the most important for passive investors looking to invest in mobile home parks?

Tyler: I guess it depends on the type of structure, but we’ll just say it’s just a fund. You got to make sure that the internal metrics, whatever the GPs are measuring their metrics off of, what are those internal metrics? And how are they going to get from A to Z on those? As well, what are the fees involved because sometimes I’ve seen those packages, where the fees are baked into the total returns for the fund.

They’ll have a little disclaimer at the bottom of the page. This is before all fees that are taken out, and they’ll have seven different fees on that, a debt placement fee, asset management fee, and all this stuff.

I guess this is more on the operation side, but I would look at how the assets actually are and what the plan is. What I mean by that is if you’re buying 100 space park, and there’s only one occupied lot, versus buying 100 space park, and you got 99 occupied lots, those turnarounds and the ability for the GPs to get to those metrics are going to be two way different hurdles with both those assets. One’s going to be pretty easy, one’s going to be really really hard. Again, assuming price is relatively equivalent, all the variables you’re taking all into account.

Andrew: You give me a little bit of anxiety when you said 100 lot park and one occupied.

Tyler: I hear you. Oh, my God. I get the infill. I can’t stress that enough to do operators.

Andrew: It’s tough. I think just for the passive investors listening, I think you’ve heard that on other episodes where it’s like, hey, what’s the toughest value add component? Hands down, it’s infill because like you said, there are so many variables that you need to line up. You can’t buy a home that’s a 14 by 70 standard size and put it on a lot that can only fit a 56 foot long home. You can lose and jeopardize a lot of investor money if you’re not careful with that process.

Tyler: A hundred percent. I know this isn’t about you, but I would love to pick your brain about the toter that you guys bought and how that’s going to work it out.

Andrew: For the listeners, we bought a mobile home toter truck. We started a business, A1 Mobile Home Transport and Installation. We did that three years ago. It was one of the best things we ever did because we had a lot of big infill projects. It just gave us priority. We could control our timelines and a pro forma so much better because it was our own internal crew.

That’s just one of the big pain points I’m sure you guys are experiencing, as these third party transport companies are fly by nights. They’re not the most professional guys that are sticking to their timelines. It’s like, oh, I had you on the schedule for Thursday, but it’s Thursday now, something else came up, and I’m going to have to move you to next Thursday. It’s like, I can’t run a business where I’m basing my pro forma returns off of the time horizon that I can’t control because these guys keep getting whimsical with their timelines.

We started the company. It was heavily about the person. We had a really good person that had already drove trucks and things like that, so that was a huge part of it. It’s making sure that he was going to be running things. Jerry Rice is his name, and he’s very by the book type of guy.

It’s still there. But it’s tough because he doesn’t want to travel and go, hey, he lives in St. Louis, but he doesn’t want to go to Michigan for six months to do a project, and then go to Minnesota for six months. We just got to pick and choose our projects at this point. You have to have enough scale too to be able to make it work.

I think Tyler dropped off, his internet fell, or something. We’ll just keep going. What does the perfect mobile home park look like in your eyes, Jason, and why?

Jason: I might have to do it earlier. The direct bill, that’s one thing. Just call it the holy grail. That’s been the best. The parts that we have, just direct bill, we’re not chasing water bills. We always separate meter. There’s quite a few different providers, but we always do separate meter, which is great.

We build that back and recapture that, but there are still some operational errors there. Oh, meter misreads, oh, meter isn’t working, or whatever it is. We’re chasing the water bill. That’s the best with the tenant-owned homes. Obviously, we offload that expense. Just a nice, clean 50-100 plus park. They’re direct bill and 100% tenant-owned. That would be great with the quality

Andrew: In an MSA with 100,000 population. Lot rents upon acquisition are 250 and market is 500.

Jason: Yeah, exactly. With some upside there, exactly. Yeah, perfect park.

Andrew: Would you add anything else, Tyler?

Tyler: 100-plus base park and downtown Orlando in a safe area that’s got some older residents to it and 2000 model homes or newer. All direct billed, a city government, a state government, and its pro mobile home park. They’re helping us out every way they can.

Andrew: That’s good. I’ve never met one of those. Let me know when you find one.

Tyler: Yeah, exactly.

Andrew: And no Orangeburg sewer lines. That’s for sure. Awesome. This has been a great convo, guys. Thanks so much for doing this. If any of our listeners would like to get a hold of you, guys, what would be the best way for them to do so?

Jason: Our emails, we’re always on email, jason@mhcigroup.com. Tyler’s the same, tyler@mhcigroup.com. That’s the best way to contact us. Appreciate it, Andrew.

Andrew: Cool. Awesome. Thank you guys so much for coming on. I really appreciate it.

Jason: Yeah, appreciate your time. Thanks again for having us.

Tyler: Thanks, Andrew.

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