Interview with Matthew Ricciardella, Founder of Crystal View Capital

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 an amazing guest in Mr. Matthew Ricciardella, founder of Crystal View Capital.

Matthew Ricciardella is a glowing success story in the mobile home park asset class. He is a self made entrepreneur, mobile home park investor and philanthropist.  Matthew is the founder and principal manager of Crystal View Capital, with over 20 years experience in the real estate industry. Matthew Ricciardella has personally been a principal in over $1B in real estate transactions. He presently has over $500M in assets under management across the various fund’s that he sponsors.

Today, Matthew shares his wisdom with us as he talks about his mobile home park deals and how he has been able to acquire his huge portfolio of commercial real estate. Matthew discusses buying mobile home parks in blue states and what metrics he looks for in the markets he buys in. Matthew also highlights what good mobile home park operators can do to stay out of trouble. 

***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

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 500 total 5-star reviews, 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

00:40 – Matthew Ricciardella’s journey into mobile home park investing

04:05 – Getting educated on mobile home parks as an asset class

06:00 – Matthew Ricciardella’s first mobile home park and how his strategy has changed over the years

08:23 – The footprint for Crystal View Capital

10:23 – The perks of self-managing mobile home parks

13:38 – The mobile home park industry is very hands-on with operations and property management

15:26 – The infill process in Mobile Home Parks

18:00 – Tenant-owned mobile homes

19:44 – Jeremiah Boucher and Patriot Holdings.

21:05 – What not to do: Placing the park-owned mobile home income into your top-line revenue and applying a cap rate to that net-operating income

24:32 – Expense ratios

26:00 – Buying Mobile Home parks in Blue States

27:27 – Understanding the local mobile home park market 

28:50 – Self-storage versus mobile home parks

30:30 – Going to scale with fragmented mobile home park business models

36:50 – Matthew Ricciardella’s perfect mobile home park looks like this

38:09 – Threats to the Mobile Home Park industry

38:55 – Characteristics of good and bad mobile home park operators

40:00 – Reaching out to Matthew Ricciardella

40:48 – The importance of educating yourself in mobile home parks as an asset class

41:20 – Conclusion

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Links & Mentions from This Episode:

Crystal View: https://www.crystalviewcapital.com/ 

Osptrey Managment: https://www.osprey-management.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. Matthew Ricciardella.

Before we dive in, I want to ask you a real quick favor. Would you mind taking an extra 30 seconds to please 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. Thanks for making my day with that five-star review of the show. All right, let’s dive in.

Matthew is the founder and CEO of Crystal View Capital. With over 19 years of experience in the real estate industry, he has personally been a principal in over $1 billion worth of real estate transactions, and presently has around $500 million in assets under management across the various funds that he sponsors. Matthew, welcome to the show.

Matthew: Thanks, Andrew. I appreciate you having me today. Excited to be here.

Andrew: Would you mind starting out by telling us a little about your story and how in the world you got into manufactured housing?

Matthew: I started back in the industry. It’s been a while. I think I bought my first park in 2006, as a matter of fact, in Orange County, California. My background is I started as a residential realtor in Southern California. Initially, I’m from New York. It’s where I’m born and raised, but moved out to SoCal back in 2002. I got started as a realtor.

The way I built my business was I got on the phone, and I built relationships. I did a lot of cold calling, a lot of door knocking, things of that sort. I wasn’t scared to go to work, roll up my sleeves, and build up a nice business. From there, I gravitated towards flipping homes. I found deals off market on the phone, built a team of cold callers that were working with me to find owners of these properties that were willing to sell to us.

That worked well until the Great Recession of 2008, 2009, 2010. I was looking for assets that produced a passive income that was sustainable, was predictable, and reoccurring. I invested across all commercial asset classes ranging from multifamily, industrial, retail, and office.

What I found was manufactured housing communities by and large delivered that predictable revenue stream that I was looking for more so than all the other asset classes. I could really buy them advantageously, because at that stage, MH really was not in vogue like it is today.

Today, you’ve got a lot of PE shops, institutional capital, which are chasing these deals, but back then, it was the redheaded stepchild, Andrew. Financing was difficult. Mostly, seller financing is the way that we buy deals. I applied that same sales strategy of focusing and finding these deals off-market, building relationships with the mom and pops. That was my story.

I built up a really nice business of personal assets. In 2014, I realized this is really a scalable business. Along with our other core asset class of self storage, we built a fun structure, started raising capital, and it’s going extremely well for us.

Andrew: That is fantastic. You said you bought your first park in 2006?

Matthew: That’s right in Anaheim, California.

Andrew: Tell me, what did that look like? How did you get educated on mobile home parks just as an asset class?

Matthew: Right now, there are a lot of boot camps available, a lot of universities, which I would encourage folks to go to to learn the business. Back then, a lot of that didn’t exist. It was just bootstrapping your way up. You learn from your mistakes.

There were some books available. I think I read one by Frank Rolfe back then that was helpful for me. I remember I called these folks back in 2006 on this particular park. It was a cold call. They were retiring, rents were way below market. The property had a ton of deferred maintenance, bought it right, solved the deferred maintenance issues. We repaved it, put in a new fence. There was actually a laundry facility in there, replaced all the equipment.

I encouraged residents to put skirting on their homes. It brought rents up to a market level. I think we sold it for double what we paid for about a year-and-a-half later. It was a good entry into the industry. From there, it just went off. I put my head down and replicated that process over and over again.

Problem was, I never seem to have enough capital. There were so many deals out there. Now, it’s the opposite. Now, there’s plenty of capital, not many opportunities. I think they’re starting to come again, by the way. Back then, opportunities were everywhere, but I was starved for capital. That’s why I got into the fund business.

Andrew: That is fantastic. And your model seems very similar to ours, a lot of cold calling, direct to owner, mom and pop acquisitions. Maybe tell us a little bit how your strategy has changed since 2006. How big was that first park that you bought? Maybe the utility infrastructure. Has your criteria changed at all since then?

Matthew: Size has become more so our friend. Rewind back to the first park we bought, I think it was nine sites to put things into perspective. It was in Anaheim, which parks are tough to come by in that market. We recently bought a park a couple of quarters ago that was about 432 sites that was in Iowa in our third fund.

Right now, we’ve got close to $50 million in new acquisitions. We’re close to having under contract, the majority are parks, and most of them are larger. 250-plus site communities is where we like to be. That’s not to say we won’t go smaller. To answer your question in terms of setup, we’ll do private utilities. We’d prefer not to have them. We’ll do park-owned homes, we’d prefer not to have them.

Really, our strategy and our focus is identifying underperforming assets and adding value to them, put simply. That could range from rents below market. It could range to occupancy issues. Right now, I’ll tell you, we’ve been able to fill more sites within the last 12 months than I’ve ever seen in my career over the last 19 years with interest rates where they are, with folks having the inability to buy stick-built homes.

The ever increasing demand for affordable housing and lack of supply thereof has made mobile home communities an ideal destination for a lot of folks that need affordable housing. That segment, as you know, is growing. I think we’re really in an opportune spot here to grow our occupancies and to have some significant pricing power as a result of that as well.

Andrew: Do you guys do a lot of infill? Tell me about that value add? Is it submetering infill projects? You said you bought a big community in Iowa. What’s the footprint for Crystal View Capital?

Matthew: Let’s use that park as an example. They had a pretty large water and sewer bill. I think it was to the tune of about $14,000 a month. What we did is we submetered that water and sewer, and passed that expense through to our residents.

We identified that lot rents were roughly 35% below market. We brought them up just shy of market level. We don’t want to push beyond the market. We’d like to be a little bit below. I think it builds goodwill within the community.

We spent about $1.2 million completely repaving all the roads in the communities, and residents were ecstatic. We’ve brought back a clubhouse that was non-existent for many years, and now residents can have functions in those clubhouses, cookouts, things of that sort.

Within a short period of time, we’ve increased net operating income through raising rents and cutting our metering water and sewer. We’ve increased NOI to the tune of close to $200,000, which at a 5–6 cap is close to $4 million of value. That’s just one example of many of the opportunities and the value add components that Crystal View sees and executes on.

Andrew: That’s wonderful. It just shows you right there. It’s the nuts and bolts. It’s not complex. It’s not rocket science. But it’s not easy either. I’m sure climbing underneath of 432 sites to put those submeters on and making sure that that was done in Iowa, which I’m sure needs heat tape and insulated well. It’s not rocket science, but you have to roll up your sleeves and get to work.

It’s worth it. You added $200,000 in NOI. Like you said, at a 6 cap, that’s $3.5 million in added value right there. That’s awesome.

Matthew: Yeah, and we’re not done, by the way. We’re starting to bring in new homes and used homes . The demand for homes in this market is very high. We anticipate we’ll probably fill 10 sites a year. Lot rent right now is about $450. You could do the math there of the additional value add that we’ll have over the holding period of this investment. We’re really happy with this one.

Andrew: That’s fantastic. Do you guys buy in the Midwest? Will you buy anywhere? Are you still looking in California?

Matthew: We look across all 50 states, Andrew. We’re very opportunistic, but we’re looking for those special situations, where they’re underperforming, non-performing. Typically, we’re buying from mom and pops, because we’re building relationships with them.

I will mention this. We see opportunities from groups that aren’t mom and pops, that are more sophisticated owners. You made a comment earlier that getting below homes and rolling up your sleeves. A lot of the newer entrants thought this was just, hey, it’s very easy business. How difficult can it be to operate a mobile home park? I can tell you it’s very management-intensive.

We manage all of our own assets, by the way. A lot of groups are more or less capital allocators. They’ll go out and raise capital similar to us. But what they do is they just put that capital to work, and they find third-party property management firms to basically execute on the strategy, whatever that strategy might be.

The way we think about it is, who’s going to care more about that process? A third party fee generator who’s collecting rent or the actual owner? We actually oversee and undertake that entire value add process, and we self-manage through an affiliate entity, all of our assets across MHN storage. I think that’s driven a lot of value for our investors.

Andrew: Tell us about that management company you’ve built. How many sites you’ve managed, and how long you’ve been self-managing.

Matthew: We’ve self-managed right from the very start. I had a bad experience with a third party company. There was some theft involved. We just felt we could do it better. We’ve created and developed the systems. We’ve refined them. We have a team of about 170, 50 of which are headquartered here in Las Vegas.

I think it’s twofold: (1) It’s a property management function, but (2) it’s having the vision to see the value add strategy and the ability to execute on it. We’ve got both. It’s served us quite well. To answer your question, we have about 4300 sites presently in the portfolio across 30 different communities. It’s located in the north of 15 states throughout the country.

Andrew: That is fantastic, man. That is really awesome. Wow, what a portfolio.

Matthew: Thank you.

Andrew: What do you think is the toughest hurdle in mobile home park investing? What’s the thing that most operators can’t overcome?

Matthew: I think going back to the answer I was just giving, some of these newer entrants think that this is a very easy business. And it can be, by the way. Some parks are effortless, and other parks are heavy value add. It’s just, do you have the ability to roll up your sleeves, go to work, and watch these assets? Because you have to be all over them. The moment you take your thumb off the pulse, they could get away from you.

I think that’s what happens with some of these larger groups. They come into the space, and they think it’s easy to manage. Yeah, there’s value add. It’s possible, but you have to work it hard. You have to go and find homes, bring those homes in, set them up, create a home sales program, find a way to finance these homes, work with the residents, hear their concerns, understand what they are, and then to answer those questions for them. If people want pools, playgrounds, or clubhouses, offer it to them. It may help you drive revenue.

It’s being very hands-on having a grassroots effort, having a great team that’s communicating with the on-site folks and being there to serve your customer. We’ve been able to do that, and that’s driven a lot of value for us. I think that’s probably the large disconnect for folks coming into this industry, just thinking that it’s a layup, and it’s very easy. Sometimes it is, but more times than not, it isn’t, and you really need to work on it. The rewards are there if you do, in spades.

Andrew: I definitely agree. Tell us about that infill process. It seems like that’s something that you guys are adding a lot of value with. You said a mix of new and used homes. I would love to just hear how you’re doing that. How are you sourcing your used homes? I would love that.

Matthew: I think really, what it comes down to is understanding the marketplace. Each market is different. You could be in a higher demographic where you’re going to be able to sell new homes all day long, which is ideal. We have some markets where that is the case for us. We have got several communities in Wisconsin, down in Texas where we’re doing just that, and it’s working extremely well for us.

Other communities, new homes, the demographic isn’t there. The income is not there to sell new homes, so you have to bring in rent-to-owns or bring in used homes, and have a program to finance those communities.

Right now, we actually have another affiliate entity, which is a lending company that we’re getting registered in the states that we own and where we’re going to provide financing for residents within these communities, because that’s a huge void, Andrew. A lot of banks don’t want to finance these lower-tiered credits, these higher risk residents, but this is really their most valuable investment.

The default rate is quite low. Although they have bad credit history and FICO scores, we’d be happy to finance them. It helps us fill our communities up quicker. It helps us move more towards homeownership versus rentals, which enhances pride of ownership, in my opinion.

The way we find our pre-owned homes is we actually have bonus programs for our asset managers and our on-site. They’re scouring Craigslist. They’re looking in local newspapers finding these homes. We’re making cash offers, moving them into our community. In some markets, we own the moving trucks, which makes that process easier. We have crews that set the homes up, block level skirt, get the utilities all set up.

We have the home sales side. We have a back office here that assists and oversees that feature. We’ve got it soup to nuts from start to finish. The system’s really dialed in, and that’s allowed us to deliver the value and the returns that we have for our investors.

Andrew: That’s great. It sounds like you guys do. You really have hit it on all the different platforms. You mentioned earlier, you’re a fan of the tenant-owned homes, but you also have some park-owned homes. Maybe tell us about that. Do you do rentals? What do you prefer? How do you guys look at that?

Matthew: The preference for myself and across the industry, I would say by and large, is tenant-owned homes. I think it further enhances pride of ownership. It also makes it easier to finance. The main lending source for this industry for acquisitions and refi is Fannie and Freddie. They don’t like park-owned homes. They’ll make exceptions. But by and large, they’re looking for tenant-owned communities.

To this extent, we buy a park with park-owned homes. We try to transition them over to sales and tenant-owned homes. It just makes life easier. You also don’t have to maintain those homes, which is one of the largest reasons why investors gravitate to mobile home communities versus multifamily is that you don’t have turnover as much.

You have stickier tenants. It’s cost prohibitive to move those homes out of the community, but repair and maintenance. Toilets break, sinks clogged up. When they own their home, that’s their responsibility. When it’s a rental, it’s like an apartment unit. You’ve got to maintain and fix that stuff. Those are the reasons why we like tenant-owned homes versus park-owned homes.

Andrew: Same with us, we’d like to convert them to tenant-owned homes as well. I know you’re based in Las Vegas. I know we were talking before we hit record here about Jeremiah Boucher and Patriot Holdings. How do you guys know each other? Did you guys get into the business at the same time? It seems like you guys have a very similar story with cold calling and just to get crafty with it, and also being members of Scott Scheel’s Commercial Mastermind.

Matthew: Jeremiah is a dear friend. I’ve known him, believe it or not, close to 20 years. We started in the business together, very similar backgrounds. He was a realtor, too, so we just shared stories and strategies together. We made a lot of calls and refined our skills as salespeople in our early 20s.

We moved from being salespeople to investors. That’s how we met Scott Scheel. We learned how to size up an opportunity, what an opportunity hinges on, what are the important components, and then started making small investments for our own account. We actually JV’d on a lot of deals together.

I was fortunate enough to help him when he launched his fund concept, and he’s done extremely well also. It’s just been a lot of fun to have that camaraderie, that friendship, and to do it with somebody that you call a friend.

Andrew: It’s so cool. There are 50,000 mobile home parks across the US, but it’s more of a tight-knit community. Everybody knows each other when you do a conference or something.

Matthew: They do. It’s a small world.

Andrew: It’s a small world, yeah. That’s really awesome. What mistakes in mobile home park investing have you made that our listeners can learn from?

Matthew: Most of the mistakes, luckily, have been at the beginning of my career, and they’ve been small in scale. I think one of the biggest mistakes and flaws you could make as a novice coming into the industry is placing the park-owned home income into your top line revenue and then basically capping out. You’re applying a cap rate to that net operating income that’s associated with a park-owned home because it’s really not. You need to back that out. You need to treat those homes as a wholesale purchase outside of the lot rent.

As an example, let’s say you have a park-owned home, and it’s rented for $500. The lot rent is $250 for easy math, and the park-owned home component is $250. Only underwrite the $250 of lot rent and not the park-owned home income, because when you go to a bank or you go to sell it, any other buyer is going to do just that. And now you’re going to take a big haircut on valuation. That’s one of the largest mistakes, I think, a first time investor can make.

Also, understand the utility setups. A mistake I’ve made is not understanding the condition of a private system, and subsequent to that, having to invest considerable capex to bring that system up to par. I’m not saying don’t buy because you have private utilities. Just understand what you’re getting into, and reserve the capital if it’s needed. Or ask the seller to make those improvements before you do the purchase. I think those are probably the biggest flaws you could make. Understand the marketplace, selecting managers. Management is huge.

I’ll tell you this. We’ve had a lot of requests from actual sellers with who we’re buying from to say, hey, we’ve heard about you guys. You should do a great job. Can you do third-party management of our community? The time in our life has come where we want to spend more time with the grandkids, but at the same time, it’s not the right time to actually liquidate. We’d love to find a great third-party manager. Not many exist in this industry, so we’re just starting to offer that service.

If you’re going to do it yourself, just understand what you’re getting into. If you’re selecting a third party company, really do your homework and your research there to pick the right company. For those folks that are interested, our third party is Osprey Management. That’s the name of our management company.

Andrew: Very cool. I didn’t know you guys offered that. That’s really cool, because it is a lot to set up these systems and to get the scale you need to be able to hire the people and put them in the right spots. It’s taken a lot of time for us to do that.

I will say, we bought a portfolio of three parks from some owners that were letting it be third-party managed, and their expense ratios were 57% for 3. It was insane. We took those over, and now they’re down to 35%. It can be really expensive to do that kind of stuff. What are your typical expense ratios look like across your portfolio?

Matthew: It depends. First off, just a quick comment there, kudos to you and your team for taking that expense ratio down. We’ve seen similar expense ratios on third-party managed communities. In fact, when we find third-party managers, we try to see what else they’re managing to see what else we could buy, because it’s a pretty easy value add.

To answer your question where our expenses fall in line, it’s really going to depend on the market. It’s going to depend on the state. Some states have a lot higher property tax than others. That’s going to drive a lot of it. Also, it’s going to be, are you in the more northern exposures where you’re going to need to plow more?

Some places down in Texas, landscaping can get out of line pretty quickly. A lot of that’s going to depend. But I’d say by and large, we’re on the low side, 36%–37%, where you have really high property taxes like we do in New York and Connecticut. You could be upwards to 43%, 44%, 45%.

Andrew: Thank you for sharing that. You guys will buy in blue states. I know a lot of operators shy away from the Illinois’, the California’s, the New York’s. How do you guys look at that?

Matthew: I guess we’re a glutton for punishment. We own in New York. We actually have a pretty decent-sized footprint there. It is rent control. That’s another thing we’ve prided ourselves on. We’ve learned the rent control laws. We’ve got a great council. We abide by all of those rules and regulations, but you could still create value. We’re adding homes there, and we’re filling vacant sites, so it still works for us.

Connecticut doesn’t have rent control, but that’s a bluer state. High property tax, but we bought a portfolio there that we’re doing really well with.

Being opportunistic, I wouldn’t shy away from certain states. Just know what you’re getting into. If you can’t get comfortable, then don’t buy there. At the same time, don’t let the regulatory tail wag the dog, so to speak. I don’t know if you want to just go into the red states, and you buy a park that the economics don’t work. That’s not going to work out too well, either.

Andrew: That’s a great point.

Matthew: Just understand what you’re getting into, underwrite the deals. We use financial models. We have an investment committee. We stress the deal across rent control and issues that could happen, capex. We’re pretty conservative with our underwriting. Once those deals make sense, we’ll pull the trigger understanding those risks.

Andrew: That’s smart. That makes a ton of sense. What does a good market look like to you guys? Do you have certain metrics you look at, median home price, income levels? Anything with that?

Matthew: We do look at the fundamentals. We want to understand their job growth. Is the local economy growing? Is it shrinking? Some markets are shrinking quite frankly, and you’re going to lose occupancy, so you want to understand what you’re getting into.

The one nice thing of MH compared to storage is you virtually have no new supply coming to market. One of the issues with storage is understanding that new supply is coming out, because it’s going to impact your ability to grow revenues. With parks, that’s really never going to be an issue. It never has been an issue for us..

What could be an issue is populations that are shrinking if you’re dependent on one major employer. We’ve seen a park in Kansas like this, where it was a meat packer. He was the main employer. It employed virtually 70%–80% of that park.

It was doing well, but what would happen if that employer left that market? You’d have major issues. If you get comfortable with that level of risk, fine. We couldn’t, but those are the things that we’re underwriting to, that we’re doing our due diligence on before we purchase a park.

Andrew: That’s great. If you had to pick one asset class, either self storage or mobile home parks to invest in, which would you choose, and why?

Matthew: I actually get that question a lot. Unfortunately, there’s not an easy answer. That’s why we do both honestly, Andrew. It’s what I call the best of both worlds. What I mean by that is storage has extremely low operating expenses. You get cash on cash returns pretty much day one.

Parks on the other hand, if you’re doing your job, you’re bringing in homes, and filling vacant sites, that cashflow may not be as strong. But when you go to sell the community or down the road, when you refi and you fill and you stabilize, your cash flow is extremely strong. You get more of a residual pop on the parks, in my opinion, and more of a cash on cash upfront on the storage. That’s why we’ve built our funds with both asset classes, so you’re getting the best of both worlds.

I can’t really choose one over the other. I will say this going into the market we’re going into today, I tend to lean more towards parks. Just that I think that the demand for affordable housing is the strongest I’ve ever seen in my career. That would be my two cents.

Andrew: That’s great feedback. I appreciate you sharing that. To piggyback on that, what do you think the future of mobile home park investing looks like? How do you see them fitting in with the direction of the economy’s going, where interest rates are super high right now, and they went up really fast. Everybody’s talking about a possible recession. What are your thoughts?

Matthew: Speaking of the asset class, it’s become a lot more mainstream. I made the comment of it being a redheaded stepchild when I got started in my career back in 2006. Today, the Blackstones of the world, all these large private equity shops, institutional capital, is all investing and wants exposure to manufactured housing. Storage as well.

The issue for them is it’s challenging for them to go to scale. They’re accustomed to writing $500 million/billion checks. This is a very fragmented business where the only way you’re going to do this is to buy massive portfolios. The future that I see is more and more interest from institutional capital coming into the space which is going to drive valuations.

With Fannie and Freddie being a captive lender, while interest rates have risen dramatically, their spreads over the 10-year is only 170–180. Compare that to CMBS, we’re getting deals done in the low sixes. I’m not saying it’s great compared to where it was 24 months ago, where it was sub-3. But all things considered, it’s not bad.

Andrew: That’s great feedback. That’s wonderful. I was at SECO, a conference for community owners, this past week. One of the presenters said that something like only 3% of the mobile home communities in the country are owned by the top 10 operators, so it’s still highly fragmented.

There are still so many mom and pop owners that own one or two communities. Like you said, those big Blackstones of the world that want to buy a huge portfolio, it’s really tough to find those big portfolios, so you can’t write a big enough check, right?

Matthew: That’s right. Usually, those players that have those large portfolios really know what they have, so they’re going to have to pay up for them. A lot of these REITs are not selling. What we do is we’re aggregators. We’re out there finding these medium-sized communities. At some stage in the game, one of these larger operators really wants to go to scale, and they’re willing to pay a premium for it, we’ll probably divest. But we’ll continue to buy more.

I think opportunities are coming just because it’s harder to obtain debt financing right now. I think cap rates have actually expanded, I want to say, over the last 6–12 months. I think that that’s probably going to be a trend that continues for the near term, I would say at least the next 12 months. We’re a buyer very much so in this environment.

Andrew: That’s great. I think I’ve seen a lot of stuff from brokers where in the past they would never return your call. But now, they’re actually calling me and making sure you see a deal. It’s interesting how the tides have turned.

Matthew: Yup. I’m seeing the same thing and agreed.

Andrew: Matthew, for passive investors—we’re talking to LPs—what do you think are the most important things that they need to look out for when investing into the mobile home park asset class, either via a fund like yours or one-off syndications similar to what we do? What should they be looking for? And what questions should they ask?

Matthew: If you’re going to be passive, meaning you’re not going to be an active owner, operator, I think that’s a way to go for folks that really don’t want to create a career here, because I think that’s what you have to do to be an effective operator. Do this full time. I don’t think this is a passive gig, unless you’re really investing in an operator like our LPs are as an example.

For those of you that want to be passive, what I would say is really, vet your sponsors. Do your homework, do your research. A lot of groups out there, and I’ve made this comment, are merely capital allocators. They’re out there, and they’re raising capital. They’re finding a third-party manager to manage the investment. They really don’t have their thumb on the pulse like we do.

They’re finding deals, frankly, by participating in auctions and through brokers. Nothing wrong with that, but how much value is there if you’re the high bidder for your investors? How much value are you providing for your investors?

I think for us, I feel good about it because we’re finding these deals off market and then we’re self-managing them. I think that’s a lot of value creation for our investors. The other very important point is, make sure whatever sponsor you select, they believe in what they’re doing, and they’re willing to back it up with their own money.

For us in particular, we make very large, actually eight digit investments into our funds as an LP. I like to say we do that for two reasons. (1) Selfish reasons. I don’t know where to get a better return than Crystal View. (2) We want a strong alignment of interest, and we like to eat our own cooking. We think that creates a strong bond.

Our investors appreciate that we’re in this together. This isn’t a fee generation game. We think about it like an owner. I would make sure whoever you decide to invest in is thinking about it like an owner and not a sponsor.

Andrew: That’s great feedback. Do you have any ideas of how they could tell if their GP is a capital allocator versus one of the boots-on-the ground-operators, or questions they should ask? I’ve seen a lot more of that, what you’re talking about, where it’s like, hey, I’m raising money, but I’m raising money for them. They’re the ones that are actually going to be doing the work.

Matthew: I guess two logical questions are, are you actively managing these investments, and how do you find your deals? You’re right. Because of how strong both asset classes have been as of late, more and more new entrants have come in, and that’s fine. Nothing wrong with healthy competition. Not to say that you won’t get good returns through folks that are purely capital allocators, but just understand what you’re getting into.

Andrew: That’s great advice. What does the perfect mobile home park look like in your eyes, and why?

Matthew: I would say an infill location in a larger metropolitan area, all park-owned homes, lot rents are ever growing, public utilities billed directly to the residents, and no deferred maintenance. Those don’t come across my desk very often. If they do, you’re paying extremely low cap rates. That would be the ideal park.

Sometimes you could buy parks that don’t check those boxes and turn it into that. You can’t reproduce real estate. If you buy something way out in the sticks, you can’t replicate an infill location.

But by hard work and effort, you could take a community that has park-owned homes converted over to a tenant-owned community. You could get your roads paved. You could do things to create an ideal community if you have the vision and you have the creativity there without paying up for it.

Andrew: That’s good. What’s the biggest threat to mobile home park investing in your eyes?

Matthew: There are not many, and that’s what makes it so compelling, honestly. I would say, if they found a lower form of affordable housing—I don’t know what that is—that would obviously be a threat. If municipalities basically opened up the floodgates for new development, that would be a threat, but at the same time, it wouldn’t be because it’s cost prohibitive.

Even if it was free game to build mobile home parks anywhere, think about the costs and the timing involved to get a community up and running. Where would their rents have to be to pencil based on those costs? There are not many threats. You would be your own threat if you didn’t buy right and if you didn’t manage right. You could be your best friend or your own worst enemy.

Andrew: That’s great feedback. There was another operator I saw that overpaid for something, was raising rents really fast, and ended up on the front page of the newspaper. That’s not how you add value. You add value from what you’re doing right. You’re paving the roads, you’re fixing deferred maintenance, you’re infilling homes. You can’t just put it on the backs of the existing tenants. That’s important.

Matthew: I’ll make a comment there. You bring up a good point. Unfortunately, there are some bad operators that give us all a black eye. But there are a lot of great operators out there that add a ton of value for their investors and their residents. We shouldn’t all be boxed into that category.

It’s unfortunate that that happens. But the media, as you know, doesn’t always highlight the positives of us as owners. They usually find that one bad actor, they put that on the front page, and they say we’re all the same. That’s obviously not true.

Andrew: 100% agree. Matthew, thank you so much for coming on the show. There are several golden nuggets here that our listeners will walk away with. If anyone would like to get a hold of you or Crystal View Capital, what’s the best way for them to do that?

Matthew: You can visit our website at www.crystalviewcapital.com. If you’re interested in making a passive investment, you could reach out to us at invest@crystalviewcapital.com. If you’re interested in third-party management, please visit our website at www.osprey-management.com. I’d be happy to speak to anyone on a one-off basis if they reach out.

Andrew: Awesome. Matthew, what’s one last bit of important advice you would give an interested passive investor before we sign off?

Matthew: I think we hit on it. Keep listening to these podcasts that you’re putting on. Try to educate yourself. Education is key. That’s probably your most valuable asset even beyond buying right and doing all the things we talked about on this podcast. Educate yourself and invest in yourself. It will pay you back tenfold plus.

Andrew: Awesome. Thank you so much, Matthew, for coming on the show.

Matthew: Absolutely. Andrew. Thank you for your time. It’s been a pleasure.

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