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 the highly experienced, value-add mobile home park operator and Co-Chief Executive Officer from The Firm, Kirby Horton.
Kirby spent five years in the US Navy, acquired a degree in economics, and worked for 28 years in the employee benefits industry before starting his manufactured housing investing career. Kriby started his career in the midst of a recession and now has over 16 years of experience in the mobile home park asset class. Kirby Horton has done it all from buying, selling and operating mobile home parks primarily in the southeastern United States.
Kirby shares with us how he overcame getting started during a recession and he also talks about his unique and highly effective mobile home park investing strategy: massive infill! Kirby also emphasizes the importance of getting to know the people you’re going to be working with. He is a huge fan of building a cohesive team and keeping good people for the long term within his mobile home park investing company. Kriby Horton explains the importance of educating yourself in the mobile home park industry before diving in, in order to avoid costly mistakes. Kirby and Andrew also do a deep dive into Kirby’s infill processes and how he has dealt with regulatory issues that many mobile home park investors face.
***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 40 manufactured housing communities across more than 10 states. His expertise is in turning around under-managed manufactured housing communities by utilizing proven systems to maximize the occupancy while reducing operating costs. He specializes in bringing in homes to fill vacant lots, implementing utility bill back programs, and improving overall management and operating efficiencies, all of which significantly boost the asset value and net operating income of the communities
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
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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
01:25 – Kirby’s start in manufactured housing
08:33 – How to build an amazing team
10:22 – Acquisition and expansion
13:05 – Municipalities using third party enforcement for inspections and code enforcement
15:31 – Infill is a team effort
18:26 – Kirby’s current mobile home park strategy: renting new mobile homes and infilling vacant lots
21:27 – Direct bill utilities
24:17 – Learning from everyone and everything, always ask questions
25:41 – Research the track record, integrity and quality of the GP (general partner)
27:52 – An achievable infill number in the first year for The Firm
32:11 – Building underground
36:46 – Highest and best use, and regulatory problems
40:30 – When ignorance can be bliss
42:00 – Reaching out to Kirby Horton
43:10 – The importance of due diligence
43:58 – Conclusion
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Links & Mentions from This Episode:
The Firm Inc: https://thefirmmhp.com/
Kirby’s email: kirby.horton@thefirm.com
Instagram: https://www.instagram.com/thefirmmhp/
Facebook: https://www.facebook.com/TheFirmIncTN
LinkedIn: https://www.linkedin.com/company/the-firm-inc
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
TRANSCRIPT
Andrew: Welcome to the Passive Mobile Home Park Investing Podcast. This is your host, Andrew Keel, and today we have an amazing guest in Mr. Kirby Horton.
Before we dive in, I want to ask you a real quick favor. Would you mind please taking an extra 30 seconds to head over to iTunes and rate this podcast with 5 stars? This helps us get more listeners and it means the absolute world to me. So thanks for making my day with that five-star review of the show.
All right, let’s dive in. Kirby Horton is the co-chief executive officer at The Firm with 30-plus years experience in the insurance business and 16 years experience in manufactured housing, buying, selling, and operating mobile home parks primarily in the southeastern United States. The Firm is based in Franklin, Tennessee.
Kirby, we are excited to welcome you to the show.
Kirby: Thanks, Andrew. Very excited to be here. Enjoyed following your podcast and enjoyed meeting and visiting with you last week at SECO.
Andrew: Yeah, SECO was an awesome conference. It was great to put faces with a lot of names that I’ve heard of, and it was awesome to meet you in person and have breakfast.
Kirby, would you mind telling us your story and how in the world you got into manufactured housing?
Kirby: Andrew, like most of us, it was a very serendipitous route. I didn’t go to school to get into the mobile home park business. Like you said, I spent a long career in the insurance industry, employee benefits in particular, pension plans, group health insurance, and then probably 15 or 16 years ago, recognized that I needed to transition into something else that I had a more control over, something to build equity, and something that quite frankly was more fun.
I started looking, I’m a voracious reader, a sponge for knowledge, doing a lot of research, and came across a book that referred to this guy in the Carolinas by the name of Lonnie Scruggs. I read that chapter about Lonnie Scruggs two or three times. Put it down, come back a few months later and read it a few more times.
I just really was infatuated with his business model. I think the guy was a genius in that regard. Taking his model in our small town of Franklin, Tennessee, which is just South of Nashville; there was a large mobile home park there. I had no idea of what I was doing other than no fear. I had nothing to lose.
I went in and cold called on the park manager and just basically said I would like to buy your vacant homes. I didn’t even know if they were called park-owned homes or tenant-owned homes. I didn’t even know if he had any. I just said I want to buy your vacant homes.
He said, okay, well let me take you over here and show you one. And it was number 13. I remember that to this day and my wife and I joke about number 13. There’s a two-bedroom, one bath POS, and it was horrible. I paid him $800 for it, but found out much later that I way overpaid.
Andrew: When was that, Kirby?
Kirby: Gosh, Andrew, that would have been 16 years ago or maybe 17 years ago. We bought it and started working on it slowly doing the rehab. First of all, cleaning everything out, assessing what needed to be done, got it up to where it was move-in ready, advertised it on Craigslist, and had no problems whatsoever in unloading it.
Had somebody immediately. I didn’t do any background checks at the time. I didn’t think about it. Basically she came to me with the money and the need, and we had the product and the need to fill it, so we got her filled up. Then I went back to the park manager and asked him if I could have a second one, and did the same thing there. Rinse and repeat the third one, the fourth one.
Eventually it became developing a model that I stuck with. I followed Lonnie to begin with and imputed an interest rate and did this and did that, but eventually it came to my attention most of our customers were Latino and keeping it simple is incredibly important.
What we basically did was we ended up purchasing these homes, if not outright getting them for free. We would put a few thousand dollars in it and basically we would sell them for $2000 or $3000 down, $250 a month for four years. We did that on every home. At a certain point we were up to about 80 homes in total that we had under contract.
Finally, one day I went to my wife and I just said we need to own the dirt. We need to be in the park business because they always get their lot rent first. They’re first in line. Then the other thing that concerned me was I didn’t want to be tied to that mobile home park the first week of every month collecting rent, walking around with tens of thousands of dollars of lot rent money in my pocket. It’s not that safe. We incorporated and we let those. We transitioned into a rent manager. We used pay lease for rent collection.
I got away from the problem of having to be in the park every month collecting rent, so that helped a lot. Then I started looking for opportunities to purchase parks. I found one down in Warner Robins, Georgia, which is just south of Macon, Georgia, purchased it, and learned a lot. I paid my tuition, lost about $70,000 on the deal before we sold it, but learned so much more than that, never looked back and just kept going.
Today, I think we’ve been involved in probably a hundred or so manufactured home communities, and just love the business.
Andrew: Wow, what a story, Kirby. Congratulations on your success. That’s awesome.
Kirby: Thank you, Andrew. I think you and I had the same start, didn’t we?
Andrew: We did. Started as a Lonnie dealer. I can only imagine 80 homes and the operation that you had going on. That is something fantastic. I got up at about 20 and detoured to parks. I ran into a park owner and he took me under his wing. Were all of those 80 in that same park?
Kirby: About 30 of them were, Andrew. The thing is that the owner of that park was an institutional owner. They came to me after about 30 of them and they said, we do have a few other parks down in the Atlanta market. We have a major vacancy problem with a lot of vacant homes. Would you be willing to expand your operation and go down there? We can actually give you the homes and plus several months of free lot rent while you’re rehabbing them and then flipping those homes. We did the same thing down there.
The little difference down there was we shortened the 48-month payment period and got more cash up front for the sale of the home.
Andrew: That’s fantastic.
Kirby: And you know what, Andrew? Ironically, the park manager from way back is actually one of our star performers today. I ended up hiring him, Allen is his name, and he’s on our team today and has been for probably 10 or 12 years.
Andrew: That is so cool. That’s one thing I remembered from when we had breakfast is you said that a lot of your employees have been with you for 10-plus years. Would you mind touching on that and just giving some insight into your culture and how you’ve been able to have such a high retention rate?
Andrew: Absolutely. It is a team effort. I know that that gets bandied around a lot, but this is truly the case. It’s not a one-person show. This team, we think very highly of them. They are best in class. No doubt about it. I would gladly put my team up against anybody else’s team in competition and feel very confident about it. They’re just really good people.
We have advertised for park managers when we take over a community. But other than that we’ve never advertised for corporate employees. We’ve always gone out. We hired them from Bank of America, Wells Fargo. We’ve hired them from other parks. We’ve hired them from experiences that we’ve had in other industries.
These people were not looking for a job. We came, found, and sought them, and we’ve empowered them to basically be the best that they can be and to join us in our mission to build better communities. They’ve stepped up to the challenge and kudos to them. They’re a great team.
Andrew: That’s awesome. How many team members are you up to now?
Kirby: Right now, our core corporate group which is not assigned to any one particular park, I think is about 12. On payroll, which includes the maintenance people, the community managers, leasing agents, all of that, I think we’re bumping up against 50 total employees.
Andrew: I know we were talking a little bit about property management and infill project management. That’s your core. You’re the elbow grease. You’re putting in the work. You’re handling heavy infill projects. Maybe you can touch on that and maybe talk about what you think is the toughest hurdle for most people to overcome in mobile home park ownership and investing.
Kirby: I think in terms of the acquisition and acquiring the mobile home park, maybe expanding the park, it’s the NIMBY effect (Not In My Backyard). Nobody wants a mobile home park that they drive past every day on their way to work.
Your community leaders give lip service to affordable housing, but manufactured housing is not on the short list of solutions to the problem from the community leaders. Your planning people, I swear, Andrew, there’s got to be a course in college for community planning that is anti-manufactured housing. It just seems like across the board.
Andrew: They don’t like us.
Kirby: They cannot stand us. It took me a while to understand. I finally got through with a planner in the church that we go to. The county planner explained it to me. He goes, it’s purely numbers, it’s dollars and cents. The tax revenue that we get from that 23 acres of manufactured housing does not offset the resources that we have to spend on subsidized lunch and breakfast at the school, the extra expense of law enforcement being deployed to the community.
I do understand to a degree the dollars and cents piece of it. Manufactured housing generally ends up costing the community more than they receive.
Andrew: In tax revenues.
Kirby: Right. I do understand that. However, as we all know—I’m preaching to the choir—there’s an incredible need for affordable housing. I’m a true believer that manufactured housing is the best solution for affordable housing.
Andrew: Amen, brother.
Kirby: If you want to buy a vehicle today, you don’t go out behind somebody’s barn and buy one that they manufactured behind the barn one piece at a time. You buy an automobile that was manufactured in a factory efficiently and affordably.
Andrew: I’m a huge fan of affordable housing as well. I think what we’re providing and what you’re doing infilling, because there are all these vacant lots that are missed opportunities for service workers that we desperately need. Maybe you can touch on that a little bit, your infill strategy, your project management, and what all goes into that.
Kirby: One of the things, Andrew, that we have really picked up on here recently is the municipalities are starting to steer, at least here in the Southeast, into third-party solutions for inspections and for code enforcement, where before you would have county employees or city employees be in your inspector and be in your code enforcement.
What we’re starting to see in some of these countries is that they’re outsourcing the inspections and code enforcement to third parties. We’ll go into a community—this becomes very problematic—develop an incredible relationship with the local people, thinking that we’re doing everything exactly the way they want because of early communication with them, and because that’s the way we’ve always done it.
It comes down to the final inspection, then this third party comes in that’s not even from the area, and they have different criteria for passing the homes and giving us a CO. We’re starting to see a trend in that area.
We, of course, like everybody else, suffered from the supply chain issues. That hurt tremendously. We ended up trying to warehouse and buy in bulk. two-ton air conditioners, three-ton air conditioners, skirting by the truckload. We tried to stockpile what we could, when we could get it, where we could find it, and then just basically be our own warehousing logistics company.
Andrew: I think it’s important to add color on the scale of your operation. How many infill homes did you bring in last year with The Firm?
Kirby: In 2022, a little bit over 500.
Andrew: Over 500 homes.
Kirby: Over 500 new homes.
Andrew: Brand new homes from the factory. You’re doing the concrete work. You’re doing the setup. You’re overseeing all of that.
Kirby: And we’re also doing the infill, the marketing, and filling the homes with families.
Andrew: Filling it with families, that’s right. That’s an incredible operation for 12 corporate employees to undertake. Shed some light on that. What can we learn about that process? How are you managing that? Because that is incredible. I don’t know any other groups that did over 500.
Kirby: Again, don’t use the word I. It’s a team effort. For instance, last September in North Carolina we had one area that consisted of four different communities that received roughly 130 homes in one month.
Andrew: Wow, one month.
Kirby: It’s a lot of fun. We have a protocol. We have documentation that has to be performed by our employees that are on the ground. Whenever a home comes in, it’s important to coordinate with the factory and with the drivers. Everybody is important in the process.
The drivers are important. You receive the home. They’ve been driving all day. They just want to unhook and get on the road and try to get back home. But we hold them and hold their feet to the ground. We want to take pictures. We want to make sure that the then on the home matches the documentation inside the home.
Then we’ve got to make sure that the insurance company the same day within a couple of hours has received the information to insure the home because we cannot go to bed that night and leave that home just sitting there uninsured.
Some of our employees are going to be working upwards to seven, eight, or nine o’clock in the evening when these homes are coming in, taking pictures, doing the documentation, filling out the paperwork, making sure that it gets to the insurance company and where it needs to be.
After that’s done, then we start looking at putting it on the lot where the lot has been prepped. We’ve prepped it. If we had to put footers in, peers, or foundations, we’ve done that.
Once we’ve got the lot ready, the home goes on, then it’s just over and over the same thing, rinse and repeat. Block, set, tie down, plumbing, electrical, AC, skirting, decks, clean the inside, sweep, mop, let the community manager inspect it, and then turn the keys over to them after we have the CO.
Again, though, it’s a team effort. A lot of this is happening. It’s always happening without me being there. We had such a dedicated, loyal team to do it.
Andrew: It’s obvious. Your strategy is very valu-add. You’re infilling to fill vacant lots. Do you feel like that’s the best strategy right now within mobile home park investing? And given higher interest rates, how are you guys countering that with the interest rates you’re paying on the homes you’re bringing in. Are you renting a lot of these? Are you selling a lot of these brand new homes? How does that all play into where the economy is at?
Kirby: Renting is our key. We have successfully failed at selling homes. We have not done a good job of selling homes inside the communities. We do an incredible job of renting and infilling. I think on average, we’re running less than 30 days from the time the wheels hit the property to the time it’s occupied by somebody.
Andrew: Less than 30 days?
Kirby: Less than 30 days.
Andrew: Wow. My goodness. You said 147 in that one little cohort.
Kirby: I think it was 131.
Andrew: In a single month.
Kirby: That’s the average Andrew. Sometimes we get stymied, and there are issues and problems that can affect it. Whether it’s trying to paint the CO or the weather or supply chain issues, there are always those kinds of issues, but we typically will average about 30 days to get a home occupied.
Our marketing team, I think we have about five people dedicated to marketing, and that team right there starts marketing before the homes even arrive. We do video, we do walkthroughs from previous homes. That’s one of the advantages of using the same manufacturer and the same model of home, is that you can do a lot of pre-marketing before the homes even arrive in the community.
Andrew: Wow. That is such an awesome operation. I love it. I know you said your strategy is hey, we buy these huge infill projects. We fill them up, get them rented, and then you exit. You’re selling right when they’re filled up and moving on to the next project.
Kirby: That’s right. Andrew, there are a few that we’ve kept longer term, especially as cap rates have risen significantly. We know that in these communities, there’s an intrinsic value there that they’re worth more than the market is giving credit for based on interest rates. They’re good assets and they’re cash flowing. So we’ll just hold on to them until the cap rates compress again and come back down, and then probably exit at that time.
Andrew: Fantastic. What an awesome model. I know, Kirby, you mentioned some mistakes that you’ve made. On your first park, you said you lost $70,000. What happened there? Then maybe you can share just some other common mistakes that maybe you’ve made and you’ve learned from that we can all learn from.
Kirby: The first park definitely was just ignorance. Because we had done so many Lonnie deals, thinking that we knew how to do the deals, and then realizing that being a Lonnie dealer and being a park owner is significantly different.
We didn’t research the market well enough. We saw an opportunity as a Lonnie dealer to go in and rehab homes and unload them, but we didn’t look at the regulatory issues in that community. We didn’t look at the infrastructure close enough at all, really.
If there’s a mistake to be made, we made it. We’re very fortunate that we exited with just a $70,000 loss. But we learned a lot, we paid our tuition, and we never looked back. We never gave up.
Andrew: That’s what’s most important. Any other items that you’ve learned from like utility infrastructure? Are there any tips for other people looking to buy parks that you’d give on that?
Kirby: I think obviously the jewel that everybody’s looking for is the direct bill utilities. I thought early on that I would steer away from well water. Now we’ve probably got a half a dozen parks that are on well water. I swore early on that we’d steer away from lagoons and wastewater treatment plants. Now, we probably have a half a dozen properties on lagoons and/or wastewater treatment plants.
It’s just important (I think) to understand what your plan B and plan C is. If plan A fails, what is the cost of remedy for plan B and plan C? If the cost for plan B and C is stomach churning and bothersome, then I think you probably need to pass on the deal.
On the other hand, if it’s a relatively, and I use the word relatively, inexpensive fix to convert from the well to city water, you might be able to take advantage of the fact that nobody else wants well water. Same thing with wastewater treatment, same thing with a lagoon.
Septic tanks are daily things. Septic tanks shouldn’t cause any problems to anybody. A lagoon is not much more than a septic tank with the lid off. Again, I think just understanding what your plan B is and plan C. Make sure you understand all the risks that are out there.
Andrew: That’s great. How did you learn that stuff, Kirby? Obviously, hands on, I’m sure you’ve learned over the last 16 years, but did you read any books, go to any courses, or anything like that to learn this stuff?
Kirby: Like I said, I’m a sponge. I asked a lot of questions. I follow people that are successful. I love working with people who know so much more than I know, learning from them and asking, I probably sound like a four year old, why, why, why? Always asking why are you doing this? Why do you do that? And how does this work? That type of thing. Trial and error, and just learning that way.
It’s hard to figure out wastewater treatment plants and solutions to that. and well water using YouTube. There’s some base knowledge you can get from that, but for the most part, you’ve just got to throw your boots on, be out there, watch how it’s being done, and try to replicate that.
Andrew: Talk to people.
Kirby: Yeah, talk to people and try not to make the mistake over and over again.
Andrew: Amen. I will say it says a lot about you. I don’t think any other guest that I’ve interviewed has mentioned that they’ve listened to 15 podcasts before doing the interview to research the format of the show. I appreciate those downloads, Kirby.
Kirby: You’ve done a nice job on your podcast. Congrats to you on having the system down and having the template.
Andrew: Thank you very much for that. Kirby, if you were going to invest passively into a mobile home park through a syndication or something like that, what are the most important things you would look out for to protect your investment?
Kirby: Obviously, it’d be the track record, integrity, and quality of the GP. Again, it’s a no brainer, but it’s amazing how many people fail that test of how realistic it is. The projections that they’re showing, is it real?
Then what’s your other alternatives relative to self storage, relative to boat and RV storage, relative to RV parks, relative to multifamily or single family? Right now relative to T-bills and CDs? We’re parking some of our dry powder in CDs and treasuries with the interest rates the way they are. I think as GPs or as operating syndicators now, your competition now are the Treasuries. That’s a compelling agent investing in treasuries, quite frankly, right now.
Andrew: I 100% agree with you and it hasn’t been this way 20 years, maybe more than that.
Kirby: I’ve never had treasuries as my competitor and I’ve been around a few years, but it’s been a long time since there were alternatives to actively getting in the market.
Andrew: Totally agree with you. You mentioned the projections and are they real? Are they achievable? I was just thinking about most operators. If I was looking to invest with them and they told me, yeah, we’re going to buy this park. We’re going to bring in 80 homes this year, and they’ll all be occupied by the end of the year. I’d probably question that. I’d be like, really? Do you have the resources to do that? But you’re doing it every day.
What is an achievable infill number in a given year, year one after you buy a park for you guys or for the average investor mobile home park operator out there?
Kirby: Generally, I don’t know what’s achievable and what’s realistic, Andrew.
Andrew: By market. I’m sure obviously a hotter market is going to have higher absorption.
Kirby: We’d be hard pressed to look at any deal that had less than 25–40 opportunities to infill. We need to bring in 25–40 homes to make the deal viable just because of scale. I think if somebody comes to you and says it’s a 120 empty lot fill in project, I’d certainly want to see, not just on paper but visually past performance.
Somebody told me a long time ago, the program Excel has, has written more fiction than any author. I think you need to be careful looking at projections and looking at what the GP puts on paper. Go kick the tires, go kick the dirt, go look at the property. And that takes a lot of effort from an LP.
Andrew: That is really good advice. You can even hire someone on Craigslist for $100 to go do a drive-through video of a park that the operator owns and just see what that looks like. How do properties they currently own look? That’s such great advice, Kirby.
Kirby: Absolutely. There are a lot of liars out there, Andrew. It’s too bad and there’s a lot of blue sky being sold. I think not only looking on paper at past performance, but like you said, hire somebody from Craigslist, or if it’s close enough, take a day trip or a weekend trip yourself, hit the dirt. look at the property, and see. Talk to a few residents and see is it the real deal? Is it something that you would feel proud of putting your money into?
The other thing is pride of ownership. We talk a lot about pride of ownership as it pertains to TOH versus PLH. That’s always way up there on the list of why you want to have a TOH Community is because of that pride of ownership. Well, the same thing holds true with the park ownership. Is the pride of ownership there?
There are six rules that we run by. Three rules that we apply to the residents and three that we apply to our employees. One of the things that we always refer to our tenants as residents, not tenants. We show them the utmost respect.
The three rules, three basic guidelines that we have for the residents, is that you keep your yard clean, you be a good neighbor, and you pay your rent on time. If you can do those three things, you’re golden. We’ll take care of everything else. You do those three things.
Then as far as our team is concerned, everybody on our team knows that they are empowered to do what is necessary to get the job done, as long as it’s legal, ethical, and moral. As long as it meets those three criteria—legal, ethical and moral—then they are free to do whatever it takes to get the job done.
Now, if they make a mistake along the way, then we got their back, but we’re going to coach them and instruct them not to make that mistake again. We’ve already invested the money in them in that mistake, why would we terminate them and get rid of them for making that mistake after we’ve already paid for the mistake? Let’s learn from it and move forward and not make it again. But again, as long as it’s legal, ethical, and moral, they are free to do what is necessary to get the problem solved.
Andrew: That’s great, Kirby. Thank you for sharing that with us there. Kirby, what does the perfect mobile home park look like in your eyes and why?
Kirby: One that we just completed. Andrew, obviously the perfect mobile home park is going to be direct built, utilities all underground, not along the coast. I love the coast. I don’t like sometimes the hurricane and weather that hits the coast. Not along the coast, direct build utilities, preferably underground, a good, solid economy in the area.
You cannot fix the market. I can fix TOHs. I have taken some park-owned homes, renovated them, salvaged them, and other people would have thought they should have gone to the landfill. There are a lot of things that you can fix. There are a lot of problems that you can fix. But one problem you can’t fix is demand. If the market’s not there, it’s not there.
We do run multiple test ads before we go into a market. That’s extremely important. If the test ads fail us, we’ll do a second, maybe even a third test ad if we really like the market. But if it keeps failing the test ads, you have to cut your losses before you have any. Just don’t go there.
Andrew: That’s great advice. You mentioned the underground utilities. I’m curious why you prefer those.
Kirby: There are two reasons. One is weather and then aesthetics is the other. It’s nice to have all of your power lines underground. You go into a community, everything’s underground. It’s just a lot cleaner. It’s easier from a maintenance point of view. It’s easier from landscaping, the mowing of the yard. You don’t have to mow around the poles.
In extreme weather, you don’t have to worry about lines coming down. Ice, you don’t have to worry about the lines breaking. I know you’re from the Orlando area so not too much of a problem down there for you. But you do have communities in freezing areas. With those, that ice, those lines breaking that can cause problems. There are less problems if the utilities are all underground.
Andrew: That’s good advice right there. Thank you. The economy, it’s a big question mark, the interest rates are high right now. I say who knows. This is 2023. They’re high compared to the last 10 years.
Kirby: Andrew, let’s hope interest rates are high right now.
Andrew: Exactly. How do you see this all playing out? How has your investing strategy changed given the higher interest rates and possible recession?
Kirby: I have no idea where it’s going. Only a fool would try to predict where it’s going, I think. In terms of pivoting and being nimble, we are paying attention to what we do and making sure that what we do is the best in class and let that speak for itself.
We’re starting to work with a few more GPs than we worked with in the past. Typically, we would work with maybe just a couple because they had the bandwidth to bring in the volume that I’m talking about. Now with interest rates going the way they are, we’re seeing that bandwidth being narrowed a little bit. If we want to keep our pace up that we’re doing, then we’re going to need to expand the universe of GPs that we work with.
We find ourselves now working with other GPs that share the same values that we share and are on board with the mission and in the direction that we want to go. I think that’s how we’re pivoting and adjusting, is not to crawl away, not to hide, and not to retract, but to expand, to get out there, and get ourselves known.
Andrew: Awesome. Kirby, what is the biggest threat in your eyes to mobile home park investing?
Kirby: Highest and best use, and regulatory.
Andrew: Regulatory stuff.
Kirby: Regulatory, and highest and best use, those are the two. For the most part we’ve made it through the supply chain hiccups. That’s not to say that we won’t have other supply chain hiccups.
I think our industry did an incredible job, a standup job of showing resilience and stress testing during the last few years. I was very pleased to see our thesis play out, that good times are bad, we are a resilient industry. So that’s nice to see.
Andrew: I’m going to tell you a little bit about that. If you don’t mind. Sorry. During COVID, you guys are infilling homes like crazy. How would that look? Were you guys still able to fill homes and get stay on schedule with your absorption rates and everything?
Kirby: Absorption wasn’t the problem. The supply chain issue obviously was a hiccup that was difficult to ignore. We did have those issues that impacted our performance and our results. On the flip side of that, the demand was even higher than ever before. As most operators know, your collections skyrocketed during that period of time.
I don’t know of any operator who says their collections were worse during the COVID thing. Everybody’s collections got better. One thing I always stress, especially to our younger team members, is trying to look beyond the headlights, look beyond the high beams of the car. When you’re driving down the road at night, you can see what’s in front of you, what the lights show, but anticipate what’s beyond those lights, because that’s where the danger lurks. It’s what’s beyond the lights.
Early on during the helicopter money and everybody paying their rent, no problems, we cautioned our residents and we worked with them to build up a fund in advance, basically credits. Pay in advance. You’ve got the money coming in, it’s not going to last forever.
Now, obviously, it fell on deaf ears with some people. Other people took the advice and prepaid some months in advance, especially those that were able to obtain some state assistance dollars. Some states offered subsidized housing or rent checks.
For those people, we really encouraged them to continue to make their monthly payments. Even though we got the lump sum from the state, we still encouraged them even if they couldn’t make the entire $450 a month lot rent. Pay $100 a month to pay something in advance because ultimately the state money is going to run out. You don’t want to be all of a sudden, nine months from now, get a rent notice and you’re not prepared for it.
Andrew: You’re not ready. That’s great advice. One of the things I know you were in the business during the great recession, 2008–2009. How did it look back then and were there any items that you took away from that that impacted how you invest today?
Kirby: Not really. Andrew, ignorance sometimes can be bliss, I guess. I didn’t realize how bad it was because I hadn’t been in this industry or this niche before. I didn’t realize how painful it was.
I guess there are some advantages to starting in an industry during a recession or a bad period of time because you don’t know what you don’t know. People that maybe had it easier prior to 2007, were wringing their hands and comparing 2008, 2009, and 2010 to pre-recession. We just didn’t know what we were supposed to be scared of, I guess.
Andrew: Demand was there. You had empty homes and you were filling them.
Kirby: We’re not the smartest kids on the block, but if demand is there, demand can cure a lot of problems. Low interest rates can cure a lot of problems. You can make a whole lot of mistakes with low interest rates, and a lot of us did. It’s when those rates start coming up that you realize how nice it was back then.
Andrew: Totally. Kirby, you’ve given us a lot of golden nuggets. Thank you so much for coming on the show. If any of our listeners would like to get a hold of you and learn more about The Firm, what’s the best way for them to do so?
Kirby: Obviously the Internet. Our website I’m very proud of. It tells a lot about our company. It’s thefirmmhp.com. It’s rather lengthy and convoluted. Some usually have to spell it out a few times for people, but it’s thefirmmhp.com. That’s the best place or via email kirby.horton@thefirm.com. Those are the best ways.
For social media, our social media people hopefully have us plastered on Instagram, TikTok, all of these platforms that they understand that I don’t fortunately. Hopefully, if you do a Google search for The Firm we’re going to show up on page one, fairly high up.
Andrew: Awesome. Kirby. What’s one last bit of important advice you would give an interested passive mobile home park investor before we sign off?
Kirby: A passive investor, do due diligence. Again, kick the dirt and examine everything on paper. Look at the numbers, compare it to alternatives that are out there. If you have that opportunity to kick the dirt or hire somebody to go kick the dirt, absolutely. Look at past performance because past performance is indicative. It might not dictate your future performance, but past performance is indicative of the quality of work that the GP has done.
Andrew: Totally. Kirby, thank you so much for coming on the show.
Kirby: Andrew, it’s been a blast. I really enjoyed getting to know you and having breakfast last week. Thanks a lot.
Andrew: Thanks, Kirby. That’s it for today, folks. Thank you so much for tuning in.
Andrew Keel
https://keelteam.comAndrew is a passionate commercial real estate investor, husband, father and fitness fanatic. His specialty is in acquiring and operating manufactured housing communities. Visit AndrewKeel.com for more details on Andrew's story.