Listen on Apple Podcast here: https://podcasts.apple.com/us/podcast/interview-with-john-hall-of-newby-management/id1520681893?i=1000567260079

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 John Hall of Newby Management. John and Andrew discuss several items including: overcoming tough hurdles, advice for passive MHP investors and the unique perspectives John has on managing mobile home park communities from his long career in the space. In addition, John Newby and Andrew Keel also discuss the similarities and differences when it comes to the property management of RV parks and mobile home parks.

John grew up in the manufacturing housing community industry, as his mother and father managed RV communities throughout their careers. John started at Newby Management in 2012 as a regional manager and has worked his way up to now being the President of Newby Management since 2020. Newby management oversees forty-five higher-end amenity rich properties primarily in the Southeast and Florida.

***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 2,000 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

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Talking Points:

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

01:38 – John’s journey into the mobile home park management space

03:30 – Park-owned homes and tenant-owned homes

04:00 – John’s team and the management systems at Newby Management

05:20 – Tools and software in MHP management

07:17 – RV park management

10:06 – Project management for CapEx tasks and infill for manufactured housing communities

11:27 – Toughest hurdle in mobile home park management

12:52 – Common age of residents in the communities (in Newby’s portfolio)

14:45 – Things mobile home park owners overlook when calculating budgets and underwriting

15:43 – Mistakes to learn from (from Newby or other owners)

17:21 – Important things passive investors need to look out for when investing into mobile home parks

19:36 – Tips for selling mobile homes when they arrive on site

22:10 – Top KPI’s John uses at Newby

23:15 – John’s perfect mobile home park

24:15 – Hiring Newby

25:16 – The future of manufactured housing communities

26:59 – Getting a hold of John and Newby Management

27:17 – Conclusion

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

Links & Mentions from This Episode:

Newby Management: 941-721-0046

Newby Management: https://www.newbymanagement.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 an amazing guest in Mr. John Hall, the President of Newby Management.

Before we dive in, I want to ask you a real quick favor. Would you mind taking an extra 30 seconds and heading over to iTunes to rate this podcast with five stars? This helps us get more listeners and means the absolute world to me. So, thank you for making my day with that review of the show.

All right, let’s dive in. Newby Management has faithfully served RV and manufactured home communities for over 46 years. They are a full-service property management company. Newby Management handles all aspects of community operations from resident relations, collecting rents, maintenance, human resources, financial and accounting needs, as well as sales and marketing.

John grew up in the industry as his mother and father managed RV communities throughout their careers. John started at Newby in 2012 as a Regional Manager and has worked his way up to now being the president of Newby Management since 2020. Newby Management oversees 45 higher-end amenity-rich properties primarily in the Southeast and Florida. John, we are excited to welcome you to the show.

John: Thank you. It’s great to be here with you, Andrew.

Andrew: Maybe you can start out by telling us a little about your story and how you got into managing RV and manufactured housing communities.

John: Sure. Newby Management was founded in 1975 by an individual named Martin Newby. His family owned it and operated it since then. Martin syndicated a group of investors together to buy communities. The thought was that he would in turn, then operate them on their behalf as the management company. He was later joined in the business by his nephews, Tim and Todd. They each have served as CEO and President of Newby through the years. Todd Newby is our current CEO.

Andrew: Wow, that is fantastic, and it’s 45 communities. How many lots is that?

John: Just under 10,000 home sites total.

Andrew: Just under 10,000. Wow. That’s awesome. That is a huge portfolio. Maybe tell us a little bit about those properties, what star quality are they, what locations, maybe some of the cities they are located, things like that.

John: Sure. They range in different ownerships. Groups purchase different styles of communities to operate. We have at any given time, probably a two-and-a-half-star to a five-star community in our portfolio. The average community size is probably right around 200 in total, but there are some that are smaller at any given time that we’ve operated.

The smaller ones tend to be more of a rental model where there is less home ownership and more community-owned homes with rentals in them. The majority currently, though, are not that model. There are definitely homeowners in the majority of them, currently. That’s been a nice blessing because it’s a little less headache and less work.

Andrew: I can only imagine. It seems like you prefer the tenant-owned home model?

John: Absolutely.

Andrew: Okay, I do as well. On the park-owned home model for those parks that you manage, what type of expense ratio do those run at? Do you have an idea?

John: I don’t have the exact numbers in front of me, but it can be pretty high depending on what the previous owner has done with the community.

Andrew: Do you think around, like a ballpark, 50% or 60%? Something like that?

John: I was going to say about 40%.

Andrew: About 40%? Okay. Awesome. I’m very interested, John, and learning about your team and what that looks like in order to efficiently manage 45 different properties and 10,000 lots. Would you mind just diving in a little bit and telling us about the team, how many employees you have and things like that?

John: Absolutely. We operate with usually an onsite manager in each community. Then that can vary depending on the needs of the community between a part-time or a full-time employee as the community manager. There’s usually a maintenance person underneath that community manager. Sometimes there’s an admin as well. It just really depends on the size of the community and the needs and additional maintenance staff, sometimes they’re necessary as well.

All in all, we have 158 employees currently in those 45 communities that we manage, and that includes our corporate offices in that number as well. Corporate offices are sitting right about 35 employees currently. We have a regional manager that operates a portfolio of communities, so they’ll have anywhere between 10 and 12 communities in their portfolio at any given time that the regional manager […]. Then an accountant staff as well, that’s in a corporate office that works off the portfolio as well, similar in size to that of the regional managers.

We do all of the invoice processing and payment. Invoices are uploaded on-site by the community manager, but then all the payments are right out of our office here through an accounts payable person.

Andrew: Have you guys explored any software for that? I know some of the other operators I’ve spoken with have used like AvidXchange or something similar. Have you guys looked into that at all?

John: We use software called CINC and that’s provided through South State Bank, and it links directly with each community’s operating account. It allows us to have direct deposits via the manager on-site so whenever a payment is made, it goes directly into the operating account on site. There’s no need to run to the bank anymore and deposit those checks on a daily basis. It’s automatically done right there with that check capture machine.

Then the invoice is there, uploaded on-site as well. We get a scan of the invoice along with the coding of it, what GL code it impacts on the budget, and then all that’s verified in a two-step process by the regional manager and the accountant that’s assigned to the community before the checks are cut each week.

Andrew: Very nice. Since we’re on the software piece, maybe tell us a little bit about what other software you guys use. Do you use something like a rent manager or something else to manage the properties?

John: CINC handles all the resident accounts as well and all the payment history for each homeowner in the community and keeps track of it. Each one of them also has access to a portal where they can go in and make online payments if they opt to. And they can also sign up for ACH.

ACH is our preferred method of payment because then it’s just automatic each month for them and they don’t have to think about it or worry about being late with a payment. A lot of them do checks or money orders as well, which they’re getting or uploaded at the office.

In addition to CINC, at the RV parks we currently use Campground Master, but we’re looking for different software for that currently that can be more expansive and do more online reservations. Most of the RV communities that we manage have annual year-round tenants, but we’ve been approached by some developers recently and they’re looking to get into the space and are in the process of developing new communities. We’ve identified a need there to get some software that’s more feature-rich for online reservation purposes.

Andrew: Very cool. Wow, I don’t know a ton about the RV space. We have one park that has 40 lots that is very seasonal, but I’ve heard really good things. I know some other operators that are getting into the RV space. Maybe tell us a little bit about the complementary aspects of manufactured housing communities to RV parks and some of the differences as well, especially with the management?

John: The biggest benefit with the RV park ownership, in most instances the tenant is bringing their unit with them. You have zero upkeep and issues with homes and maintenance issues moving forward. It usually ends up being a park model set up in each one of the RV communities, which then would be a unit that doesn’t move after that point.

Traditionally, most of the communities are made up of transient guests that are here for a period of time, whether it be a six-month period or a month-long stay. The stays tend to be a lot shorter in the RV parks than they do in the manufactured homes.

Eventually, people come down seasonally in manufactured homes. Traditionally in the industry years ago, about 60% of the people left over the summer and now we’re finding that it’s reversed. It’s probably more like 60%–80% stay year-round and only about 20%–40% leave now.

I think it’s still quite a bit more seasonal in the RV spaces. You get a different tenancy over the summer than you do in the winter. You get the folks from up north and in the summer you end up with maybe folks from out west, a little bit different make up. That also tends to keep the community fresher and a little less heartburn from the residents. It’s more of a fun lifestyle. They are there to have a good time and enjoy themselves.

Andrew: Very cool. From a management standpoint, I would assume that there’s a higher turnover and you need more people involved. Is it similar to a manufactured housing community where you need just an onsite manager or do you need the same staff typically?

John: It depends on the community. We have one community that is in the Kissimmee area, the […] area, and they are very active with people coming in and out more frequently. In that instance, yeah, we definitely need more staff there to suit those needs when you have more of that transient life coming in and out more frequently. They have a pretty aggressive reservations team as well because they’re taking a lot more of those reservations.

Then we do have some of those older communities like I talked about earlier, where you have less of that transient business and they’re more year round. That tends to go back to more of the traditional setup of just a manager and a maintenance staff.

Andrew: Very cool. Going back to the manufactured housing community side of things, how do you guys handle project management for CapEx tasks and infill? Do you guys handle any of that sort of stuff for your owners?

John: In each one of our management agreements, there is a clause in there that allows us to have a supervision fee that gets passed on to the regional manager. It’s split between our management company and the regional manager that’s assigned to the community. They would get approval for those tax projects beforehand from the community owner. Then we would supervise those projects at the request of the community owner or they could choose to have an outside company come and do that supervision. That’s really their option.

We usually work together with the community owner and develop the budget each year. We plan for those CapEx projects each year based on the community’s budget. We come up with a schedule and a list of each project. We usually get a group of proposals together, a minimum of three is what we strive for. Sometimes that depends on the availability of contractors, especially lately. That can be kind of difficult, but we try to get at least three bids with the same scope of work together, have that evenly bid across three different sources, and then present all the options to the community owner, then let them decide which one they want to go with. Then we’ll supervise those projects at their request.

Andrew: Very cool. What do you think is the toughest hurdle for mobile home park management? What’s been the toughest part for you guys?

John: We operate under a philosophy that we serve three different customers. We serve the community owner, we serve the community resident, and then we serve our Newby team members. We’re striving each day to strike a balance between the needs of those three groups. We don’t want to over-serve or under-deliver to any of those groups. If we do, then we’re out of balance.We have to deliver a package of services that meets each one of their needs.

To the owner, we have to be wise stewards of the community that they’ve entrusted to our care. We have to provide excellent customer service, open dialogue, and two-way communication to the homeowner and a well-kept community so that they see value for their monthly fees. Then to the team members, we have to provide rewarding employment where they feel valued and they contribute to the success of the community that they serve.

Andrew: Okay, so what’s the toughest hurdle (would you say) in the management of the communities?

John: I think the toughest hurdle is probably the resident relations piece. A lot of people lose sight of that. They feel frustrated day to day, and they can stub their toe in that arena.

Andrew: I may be totally off on this, but from our talk before we started recording, a lot of your communities, would you say that the majority of your residents are older, like over 55?

John: Yeah, we have very few family communities in our portfolio. The majority are 55 plus. We have seen the average age of our residents come down quite a bit over the last few years. When I first started nine years ago, when we ran the numbers I believe our median age was somewhere around 78. I believe it has dropped to, the last time we checked, it was probably 68.

Andrew: Wow, that says something about all the baby boomers retiring and coming down to Florida, right?

John: Yes.

Andrew: I can definitely see that. My grandparents lived in a manufactured housing community down in the Keys and they were home all day. They were nitpicking little things here and there, oh, the rocks are bad. They’re getting mildew on them. We need to redo these rocks. It’s a different type of tenant versus an all-age community where people are in and out and going to work every morning.

John: Yeah, and that’s what we try to explain to our managers. They sometimes get frustrated about those interactions. But the older tenant, that’s really all that they have to do to occupy their time. That’s where we have to come in and provide groups for them to participate in or activities for them to get involved in so that they have better things to spend their time doing like having fun than obsessing about a rock or what have you.

Andrew: Yeah, that’s awesome. Get the cruise director out and start setting up entertainment.

John: Absolutely.

Andrew: That’s a completely different niche (I would say) in mobile home park ownership compared to where we’re at, which is more all-age affordable housing communities. Not that yours aren’t affordable, but it’s a different lifestyle type of choice. Very cool. What are some things that you’ve maybe seen some mobile home park owners did not account for in their budgets and underwriting?

John: I think the biggest mistake that I’ve seen over the years is where they don’t reinvest in the community and keep it current and fresh, or they don’t account for the previous owner maybe neglecting some of the infrastructure issues in the community, and didn’t do a good job during due diligence to see those issues beforehand. Then they wake up one day and they realize oh, I need to put in a wastewater treatment plan or I was under a consent order for this and got all these penalties piling up because they weren’t addressed in a timely manner. Just things like that where the community may not have been well maintenanced in the past and they didn’t discover those things in due diligence might creep up and surprise them after the fact.

Andrew: Yeah, that’s a big one. What mistakes would you say you’ve seen, either your management company makes or other owners make, that you think our listeners can learn from?

John: I think the biggest thing that I’ve seen here recently is people that come from another sector of housing to invest and they don’t fully understand this industry and try to treat it like traditional housing or apartments. They’ll purchase a community that is again, that sad little reinvestment, and may have many homes that are owned by the community. They don’t allocate enough time or resources for turning and remodeling those homes in order to rent or sell.

They don’t value the customer relations piece and they go in with the anticipation that they’re just going to move rents all the way up to the market where this may have been a community that was suppressed for a number of years.

It seems to me from what I’ve experienced, the longer somebody owns a community, the more relationships that they make as a community owner with the people in the community, and the less likely they’ve been to be aggressive with rents over the years.

The new owner comes in thinking oh, this is $200 a month under market, I can just push it up tomorrow, but they don’t do that reinvestment piece first to get the new buyer in there and attract the community and they try to be too aggressive with the rents. They burn relationships with the current tenancy and haven’t made the investment to attract the new tenancy.

Andrew: We’ve seen that all too often recently, with the people making the newspaper and stuff like that. So yeah, I agree. This is one question I ask in every interview. What do you think are the most important things that passive investors—we’re talking limited partners here investing in syndication or a fund, something like that—need to look out for and understand when investing into mobile home parks?

John: I think it goes back to what I hit on earlier. Be sure that you do your research in the due diligence period. Make sure that you know exactly what you’re buying before you buy it. Does it have a water plant? Does it have a wastewater plant? Are they well maintainance and maintained? Are they in any consent orders?

Learn from the community members or the HOA, what the issues are and their needs are from their perspective because the community owner is going to present the community one way, but when you actually talk to the membership of the community, you’re going to get a different feel and a different picture from them of what the deficiencies are in the community. They might have plans.

A lot of times they’ll come in and they’ll say we’re going to put in this amenity or that amenity, but they haven’t talked to community residents to know if those amenities or those improvements to the facilities are actually what the community needs and wants. They might go in and put an amenity that will never get used in the community because they didn’t ask.

Andrew: That’s a really good point. How would you go about doing that? Just take a poll, or go talk to the manager, go meet and talk to the residents, or use a survey?

John: We’ve used both methods. The biggest and most successful result is getting in front of the HOA with the permission of the current community owner, having a little town hall with them, meeting with them, letting them voice their concerns with you, and figuring out a plan then of different options.

What we’ve done in the past is after we’ve met with them, we’ve gotten an idea of what would be popular, and then we’ll send out a flier to the membership with the community and say rate these different amenities on a scale of one to five, five stars being what you want the most, then we take those most popular ones and then proceed getting bids for those items and trying to figure out how we can fit those items in the community.

Andrew: Very cool. I love that. That’s a great idea. I have a question I wanted to ask you about retail sales and marketing. I think infill has been one of the big-ticket items where a lot of operators are basing their business plans around that. The backlog of new homes, being able to get those from factories. Having homes, you order homes and it’s 8–12 months before you get them there. Once the homes are there and they’re on-site, what are some tips that maybe you could give some other operators that are listening for selling those homes at a retail price in communities?

John: The retail price piece has not been an issue lately. There’s been such a demand for them. Traditionally in the past, probably in the past five years, you would go to market with a home and you would anticipate losing anywhere from $5000–$10,000 on the home just to get the lot rent going again on that lot and occupy it.

Now, we’ve seen that we can actually sell those for the cost that we have in them plus commission and even in some cases for a profit as well, minimal profit, but it holds up in today’s market because there’s just such a demand.

What we do is try to put the lot and the home’s floor plan out beforehand. We advertise with a poster or banner on the home site and then we’ll put the floorplan out, the coming soon signs or something like that, we’ll put that up on our website as well and that tends to help.

Once the home is there in the community, as soon as you can, we’ll do an open house for the community members to go through the home and tour the home. The benefit of that is it gets them excited about a new home being in the community. It gets them talking about it. They usually have friends that are looking to come down and then they become your salespeople at that point.

In addition to that, it gives them ideas of how they can reinvigorate and maybe remodel their home. They’ll see improvements in the new models and say oh, I like that. Let me do that in our house. It just kind of helps bring the whole community up as a whole when you are able to reinvigorate […] in there.

In addition to those things, we do the traditional methods of advertisement, trying to get it on Zillow, MHVillage, and just some of the other resources in the area that we use.

Andrew: Awesome. Financing, if someone’s going to come in, do you provide them financing options to purchase the home?

John: We have a list of preferred lenders that we’ve spoken with that are usually willing to loan on mobile homes.

Andrew: Awesome, very cool. What are the top KPIs that you use in your management company that you relate to the owners of your communities?

John: We do an annual survey with our community memberships, the majority of our communities. We’ll relay the information to those surveys to them with the biggest needs, kind of like what I hit on before where we’re going into the new community and surveying membership, we’ll do a similar survey about the current conditions of the communities we operate and share those with the community owners.

Our community owners also get copies of monthly on the financial statements for the communities with your budget recap report at the end of the year to them and they’ll know how we performed. Usually, we meet with them. A couple of them will meet individually, review the results of the prior year, and then discuss the projects for the upcoming year and the expectations for that.

We usually meet annually as well to discuss the rent letter process and what we feel the market is bearing as far as increased percentages. Most of our increases are market-based, so we’ll have a discussion with them based on the data comp surveys that we subscribe to for each trade area that we serve as far as what those percentages need to be for the coming year.

Andrew: Very cool. What does the perfect mobile home park look like in your eyes and why?

John: I think the perfect community is one that’s consistently looking for ways to improve and stay relevant to today’s buyers. They’re evaluating their offering, they’re updating regularly, addressing work order maintenance issues timely, and keeping up with the curb appeal. They’re consistent with rules enforcement, charging fair rents for the amenities and the experience that community offers. Is the staff warm, friendly, and competent in their role? Are there regular well-attended events? Is the staff meeting regularly with the membership and hearing from them and addressing concerns?

We can’t always please everyone, but the most important thing that I’ve experienced is that our residents want to be heard. I always tell them I can’t say yes to everything, but I’m at least going to listen to you and I’ll do my best to give you an answer that I think you’ll be pleased with. There are some things that we just can’t do. We can’t please everyone, unfortunately. We can try.

Andrew: Yeah, that’s great. At Newby Management, I know you said the average number of lots in one of the communities is 200 lots. If someone has a 200-lot park, what does it typically cost to hire you guys to manage their community? It sounds expensive.

John: We charge a fee and it’s based on the size of the community as well and the operating budget of the community. Our fee is of gross income and we usually charge anywhere from 4%–6% on average. Our minimum fee currently is sitting at about $2000, I believe.

Andrew: Okay, very affordable.

John: It doesn’t include the on-site staff or the onsite manager. Any decisions for that directly impact the community’s budget, but our fee for all the backend stuff that we do, which is all the accounting monthly, the financial packet preparation, regional manager, all of that is included in the […].

Andrew: Wow. Yeah, that’s very affordable. That’s awesome. What do you think the future of manufactured housing communities looks like? Right now, April 2022, inflation is roaring, interest rates are rising, there’s a possible recession coming. How do you think these communities will deal with that?

John: I think in some ways, we’re safe from some of those things because it still is affordable housing at the end of the day. Even with record-setting resales and record-setting new home prices that we’re seeing, when you compare that to the rest of the market, it is still affordable. It offers an experience that’s unlike any other.

As you said before, it’s basically like being on a cruise ship, but you’re living there. What can you go do today? Is there a group down there that’s a car group that you’re going to go be with or water aerobics, or what have you? There seems like there’s always something going on any given day that you can participate in if you choose to. If you don’t want to, you don’t have to. That’s one of the other benefits.

It offers a community lifestyle that you don’t get from other home ownership types. Usually, you’re very plugged in to your friends, your neighbors, and there’s a support staff there for you with your neighbors and the community operators as well that are looking out for you. At Newby, we’re a faith-based company, and we operate with a Corporate Chaplain as well. He goes out and checks on residents and is there for their needs, as well as the needs of our employees and team members.

Andrew: Pretty cool. If our listeners would like to do so, what’s the best way for them to get a hold of you?

John: They can visit our website at www.newbymanagement.com or they can call our offices at 941-721-0046.

Andrew: Awesome. Well, thank you so much for coming on the show today, John. We really enjoyed all the information you shared with us.

John: Thank you, Andrew. It’s very nice to meet you.

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