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 interviews Nick Chapman, Principal and CEO of South-East Family Housing.

Nick Chapman, a former US Marine and State Trooper, ventured into mobile home park brokerage at Marcus and Millichap and then quickly became a commercial real estate investor himself. He started investing in 2021 by acquiring a 26-unit apartment complex, converting all units into “mid-term rentals” for traveling nurses and corporate clients. Nick actively manages the complex and discusses his hurdles as the sole “sweat equity” partner and General Partner, while pursuing mobile home parks for future acquisitions.

In today’s conversation, Andrew Keel and Nick Chapman cover various topics including why studio apartments are less desirable, contrarian thinking, the significance of Self-managing commercial Real Estate Assets, the importance of your Website and SEO, Nick’s preferred resources for Real Estate Self Education and passive Mobile Home Park Investing tips.

Nick is eager to share his knowledge on mobile home parks with interested limited partners (LP’s) and anyone interested in the mobile home park asset class. While he may lack the experience of some other guests, Nick compensates with the valuable lessons, mistakes and golden investment information he has learned over the past few years as a GP, all of which he shares with us today.

***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 3,000 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. Check out KeelTeam.com to learn more.

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:

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Talking Points:

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Links & Mentions from This Episode:

Nick Chapman’s LinkedIn: https://www.linkedin.com/in/businesswithnick/

Nick Chapman website: https://ibuyhouseswilmington.com/

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

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

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

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

Andrew Keel Instagram page: https://www.instagram.com/passivemhpinvesting/

Twitter: @MHPinvestors

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TRANSCRIPT

Andrew:  Welcome to the Passive Mobile Home Park Investing podcast. This is your host, Andrew Keel. Today we have a special guest, Mr. Nick Chapman, principal and CEO of South East Family Housing.

Before we dive in, I want to ask a real quick favor. Would you mind please taking an extra 30 seconds to head over to iTunes and rate this podcast with five stars? This helps us get more listeners, and it means the absolute world to me. Thank you so much for making my day with that review of the show. All right, let’s dive in.

Nick Chapman is a former US Marine and state trooper turned commercial real estate investor. Nick transitioned into commercial real estate back in 2021 by acquiring a 26-unit apartment complex, and he converted all 26 units to midterm rentals for traveling nurses and corporate clients. Nick actively manages the apartment complex and was a former mobile home park broker for Marcus and Millichap. Nick, welcome to the show.

Nick: Thanks for having me on, man. I’ve been following you for a while and always love the value that provide listeners. I’m just thankful to be here.

Andrew: Would you mind starting out by telling the listeners a little about your story and how you went from being a marine to an active commercial real estate investor?

Nick: The short of the long of it is I grew up in a really, really small town in Massachusetts. I grew up lower to middle class, but I was rich because my parents were still married, and they really showed me what love is. 

I remember from very early, since I had a memory and my dad works at a print factory, and he would always come home. His hands are covered in ink. He works in the press. He still works in the press. He still does that same job today. So just him coming home and just really showing me hard work, hard work, hard work. 

I remember, 2008 was really tough. My mom got laid off. She went and worked at the print factory. I have an older brother who’s two years older than me. He graduated high school and worked at the print factory.

I was like, man, if you guys have taught me anything, I do not want to go work at this print factory. There was so much pain related to graduating and going to work. There was no way I was doing it, but my grades were terrible. I was a terrible student, the class clown.

Give me a scenario, will crank it out. But give me a test, dude I’m the worst when it comes to academics. I knew I didn’t want to go to college because I had no clue what I wanted to do. I’d been monkeying around high school my whole life and I wanted to get out of Gardner. I want to get out of Massachusetts. Gardener, Massachusetts was a town that I grew up in.

I was like, look, I can get out of here by enlisting in the military. I’ll have four years to figure out what I want to do with my life. I’ll be able to travel and get out of the small town where everybody worked at this print factory. It was a major employer. I’m sure you’re buying deals that have a major employer where most people work there. That’s what I did.

I’ve always been a go-bigger-go-home guy. I was like, if I’m going to enlist, I might as well join the best. That’s why I wanted to enlist in the Marine Corps. I enlisted in the Marine Corps, got deployed, went all over. I actually got married when I was 20 years old. My wife was 19, so we got married really, really young. I just had my first daughter. That’s been a huge experience in itself.

Going back to the Marine Corps, I love the Marine Corps. You had a rank structure. People told you what to do, when to do it, where to do it. There was never a question of what needs to get done. I love that about it.

I saw my roommate on a deployment. He missed the birth of his child. I’m emotional just thinking about that, if I miss my daughter’s. Whenever you’re at a job, you look up at your boss and you’re like, I can’t wait to be that boss. I was like, I really don’t want to be like a general. I don’t want to miss all of these memories, so important.

I did my four years. I got out. I loved it so much. I remember getting out of the Marine Corps, and they make you take a test like, hey, what did you do in the Marine Corps? I was a tanker. All your skills that you related, you’re going to be employable in the workplace. Here are a bunch of companies that would love to hire you, which is a great program, by the way.

My test said, you should be a truck driver because I drove a tank. I’m like, dude, I am not going to be a truck driver. I don’t want to live on the road. I loved my country, the freedom. I really believe in America, so I was like, what better way to transition than I can go from serving my country to serving my community, being a police officer, every day is going to be different, I’m going to be home every night? Even if I get off at one o’clock, at least I’m home, and I’m not deployed in the middle of a desert somewhere. You still had a uniform, you still had a rank structure.

I love that. It was a perfect bridge into my dream job. If you asked me what my dream job was, I was like, this is it. I drove a charger. I was top of the world arresting people. Think about how much power a cop has. You take someone’s freedom away. Let’s not downplay, that’s a big responsibility, so I loved that.

Very similarly to the Marine Corps, I was a top producer. I was high octane, high protein, just hammering down. I had the most arrests, the most car stops in my troop. I remember my supervisor sat me down one day. It was the 4th of July weekend. He’s like, you are on desk duty. You’re sitting down, and you’re on desk duty this weekend.

For those of you that don’t know, 4th of July is crazy. People are playing bumper cars. It’s domestic violence. It’s craziness, it’s all to the walls. Usually, you get put on desk duty if there’s an active investigation going on. If you call someone a-hole, they’re going to take you off the road. If you were on the news for some reason, they’re like, all right, let’s shelter this guy. Until we clear it, then we can put them back on the road.

I hadn’t done anything. It turns out, I was bogging him down with paperwork, because for every arrest I had, it was an eight-page report plus the court paperwork. I was slamming this guy with paperwork. He’s like, I got to catch up. How can I do that? Well, I’ll put Nick on office duty.

I’m like, here I am. I’m like, why am I being punished for being a top producer? That opened my eyes up. That was step one. It was like, ah, this might not be for me. I knew my boss, the Colonel of the state police was like, hey, for every DUI arrest, for every arrest we get, we can use this, go to the state, and get us raises. We can show the motoring public, look at what our troopers are doing. We need more troopers. We need raises. We need money for better cars and better guns.

By giving them stats, we gave the governor the ability to go and ask for us troopers to get paid better and get better equipment. I’m like, I’m getting punished, even though I know my boss wants this. I’m like, what is going on?

Andrew: It seems like you have that meritocracy mindset. The harder I work, the more I should make, the more opportunities I should get, which would be great in sales.

Nick: Exactly. I met my neighbor, because when you’re a trooper, Andrew, everyone wants to be your friend. Your neighbor is like, hey, my kid got a ticket. Can you help me out? What should I do? My brother-in-law got arrested. Everybody wants a favor or like, hey, I’m going on vacation. Can you just drive by my house?

I remember my neighbor has this huge house, dude, an incredible house. I’m thinking to myself, who lives there? What do they do? We’re all naturally curious about the top wealthy people in the world. By the way, this is a town of 800 people, so to have this huge house in such a small town in New Hampshire…

Long story short, he invited me to go snowmobiling one time. Of course I took him up on it. We’re sitting there in snow pants and stuff. I’m like, I’m not asking as a cop, I’m asking as a friend. What do you do, and is it legal? I’m just curious. He’s like, real estate.

This guy didn’t have nice hair and teeth. I’m like, you’re not a real estate agent. You know a good broker on Million Dollar Listing New York. This guy just doesn’t seem like he fits that bill. He’s like, no, no, no, no. I own real estate. He’s like, I own 650 units. I’m like, 650 units? What do you mean 650 units? 

He’s like, well, I own mobile home parks, apartments, Section 8, RV Park campgrounds, commercial. He’s like, I built single family homes with an HOA exit. This guy wasn’t like Andrew Keel who’s just focusing on mobile home parks. He’s doing all different asset classes, which I think is really rare to find within real estate. Most people go all in, whereas he was very much like, I’m going to diversify myself. I love real estate. But his thing was always cashflow. He always focused on the cash flow.

Long story short, I was like, look, will you teach me real estate? He’s like, yeah, absolutely. He gave me a list of books to read. I think that everyone is naturally curious about real estate because they think it’s passive income in your sleep. You have to remember, I’m driving around in a cruiser for eight hours. I’m just listening to these books while I’m getting paid, or I’m on desk duty just listening to these books.

I was like, man, I understand this. For lack of a better term, this isn’t rocket science. I would go to him and I’d be like, hey, look, I don’t understand depreciation. I couldn’t wrap my hand around what depreciation was for the longest time.

I think he liked that I was immersing myself because so many people you know, Andrew, want to get into real estate. They ask you and then you get on a call with them, at least in the beginning of your career. You probably got on a call with them. You told them all about how to do it, and then they never do anything with it. You’re like, well, why am I teaching these people? I think he liked that I was taking action, and I paired that with the place that I was in whether it relates to my workplace, and then Covid-19 happened.

Also, I want to talk a little bit about being a trooper. I was going to domestic violences. I was pulling dead children out of car crashes. In my first week, I cut down a 7-year-old who hung himself, just really messed up things that people don’t really talk about. They don’t really understand what police officers go through. I couldn’t eat meat for one time, because I had seen so much blood at one of the scenes. It just messes with you.

When I paired all these things, Covid-19 really naturally sat everyone down and said, well, what am I doing with my life? Do I really want to do this for the next 20–25 years of my life? I think it was really apparent to me that the answer was no for me.

Naturally, I learned, though I learned how to talk to people on the side of the road, like criminals. It was a great bridge into sales. That’s why I joined the mobile home park brokerage because I know I could sell. I was convincing people that I didn’t know, complete strangers, to confess to me their worst crimes, like your deepest, darkest secret. Whether it was child pornography or sexual assault, I had to sit across from the table and get this guy to confess to me.

What I learned is that a lot of what we used in interview interrogation is sales. I could talk to anybody. If you can talk to someone like that, you can certainly talk to a disgruntled 70-year-old who owns a mobile home park and tells you to F off on a cold call. I guess to bridge into mobile home park investment, I know I’ve been talking this whole time and I apologize, but…

Andrew: No, I love it, man. You have a very interesting story. I’ve been following you a while as well on LinkedIn, so this is super intriguing. How did you go then? You said, hey, I’m going to do this thing. How did you end up at Marcus and Millichap and then ultimately becoming a GP yourself?

Nick: I talked to Kevin, who is my mentor, my neighbor here in this situation. I said, Kevin, if you could do anything, what’s your favorite, most profitable asset? You have to remember, he has RV Parks, he has market rate apartments, he has Section 8 apartments. He said, dude, my mobile home park prints money.

Andrew: Very good question, though. Very good question to ask him.

Nick: Yeah. I’m like, I don’t know where to go. The books that he gave me were Rich Dad, Poor Dad, a lot of the classics like the OG classic real estate books. It wasn’t like, hey, read this book about mobile home park investing.

Naturally, I knew I wanted to go into a niche. I said, look, if you could do it over, what would you go all in on? He was like, without a doubt, the immediate answer was mobile home parks. 

Naturally, I started immersing myself in mobile home parks. When I left the state police, I moved to where I lived now in Wilmington, North Carolina.

Andrew: How did you end up in Wilmington? What did you do to immerse yourself in mobile home parks? I’m a mobile home park junkie, if you will.

Nick: I would definitely maybe go a step further than a junkie for you. When I was in the Marine Corps, I got stationed in Jacksonville, North Carolina. It’s a huge base for the Marine Corps. My wife loved the weather here. The whole goal was after the state police, we were going to retire and move back to North Carolina.

We love Wilmington because if you’ve ever been in the military base, everyone there is in the military. You want to get away from the military. You’re like, dude, I’m sick of seeing these haircuts, and everyone’s a military spouse. I just want to get away for the weekend, like get me out of here.

Wilmington was an hour away from Jacksonville. We love this quaint little beach town. It was so nice, but it was a quiet, hidden gem. We were always like, look, when the time comes, we’re going to retire. We love the weather down here. It’s so great. That’s how we found Wilmington.

When Kevin told me, without a hesitation, Andrew, he didn’t even think about it. He was just like, mobile home parks. He was like, the most profitable. Not passive, because let’s all be honest here, passive income is bullshit. It’s work. All of it is work. He’s like, mobile home parks are the best model. As far as repairs and maintenance, as far as turnover, as far as lifetime value, longevity of the customer, the tenant, and repairs, mobile home parks were the best model.

Being a millennial, I’m on YouTube, I’m on podcast. Whenever I get into something, man, I go a mile deep. I’m immersing myself in every little detail. I found Glenn Esterson’s podcast. For those that don’t know, Glenn is a huge mobile home park broker.

Andrew: He’s been on. The MHP Expert. He’s been on the podcast. He has a book. Yeah, a super, super knowledgeable guy.

Nick: He’s a legend. Yeah, for sure. Shout out to Glenn. He’s a lot of the reason that got me here and took a chance on me when I first got in. I contacted Glenn naturally. It turns out he lives in Wilmington. I saw it in his email signature.

You know how you have like Glenn broker, and it says your mailing address. It was like, Wilmington. I’m like, dude, what are the odds of that? I was like, look, can I take you out to lunch? That’s how I met Glenn. He basically gave me an opportunity to join his team and basically start banging the phones. This was 2021. This was when the bull market of bull markets. Everything was going crazy.

Andrew: Wow. That is amazing. I have so many questions here. I wrote a bunch of notes. First off, let’s go back to the neighbor, Kevin. What a gift to have that as your neighbor and for him to be willing to mentor you into this. 

Do you remember any of the other books? You said Rich Dad, Poor Dad was one of those. Did he have any other books that just come to your mind that were like, hey, that was a good one?

Nick: Rich Dad, Poor Dad, the Art of The Deal by Trump. By the way, I’m not a Trump guy. Don’t DM me saying I love Trump. I’m not going there.

Andrew: Plain, classic, real estate investing books.

Nick: Just OG classic, classic things. I’ll tell you this. I remember, Andrew, I had finally made the jump. I think he was really proud of me. Obviously, many people don’t leave their W-2 job, especially if it’s a high state job with the best benefits and you get a pension. 

It’s like that pill that they give you, like the golden handcuffs of you just got 10 more years, you have the best insurance, your family gets to stay on the plan. I feel like a lot of people don’t ever leave such a great paying state job. He saw that I was willing to just take the jump. We had built such a great relationship that he made me a deal.

I remember we were sitting in his sauna, and it was the day before I was leaving. He was like, look, I have always wanted to invest out of state. I’ve never had the opportunity. All of his 650 units are all in New Hampshire.

He’s like, I’ve always wanted to build a portfolio out of state, I just don’t trust anybody. I trust you. You’ve been taking action, you’ve been asking the right questions. He’s like, look, if you find a deal that makes sense, I’ll bring the capital, you do all the work. We will figure out a way to split everything out on the backend. I was like, dude, what more do you want?

Andrew: Yeah, that’s the hardest part. A lot of guys stop there. They’re like, I don’t know where to find the money, but he’s right there saying, Hey, I’ll support you. 

Nick: I went and joined the brokerage because I felt like it was almost like daddy’s money. I didn’t want to be so hung. I was like, I want to be self-made. No one in my family had been in the military before, and I was proud of being the first one. No one had moved. No one had been a state trooper before in my family, so I was like, look, I just want to do this for me. That’s why I joined Marcus and Millichap at first.

I remember cold calling and owners telling me like, yeah, I would sell for a million-and-a-half, but I’m not listing it with you. I’m not doing a listing agreement. I remember just bringing it to Kevin and being like, dude, this is a great deal. Or I’d bring it to guys with similar funds like you, and I just wouldn’t get my calls returned because I was a brand new broker. 

I was like, man, I got to leave and buy these deals myself because these are great deals. That’s where I really learned the off market nature of real estate and how crazy it was. Just to give you some context, I remember my first time underwriting a deal. The seller wanted $2 million.

Andrew: It’s a mobile home park deal, right?

Nick: This is mobile home park, I’m on the brokerage side. I’m looking at the P&L, looking at the rent roll, and I’m like, how the hell does this deal make sense at $2 million? This seller is smoking you-know-what. There’s no way this deal’s worth $2 million.

Charles DeHart, who used to be a principal with Kevin Bupp’s fund, was the one responsible for really teaching me this. We remember looking, there’s a column for his actuals, and then there was a column for what we could do with it. 

It’s the seller who’s 70 hasn’t raised this rent in 20 years. It was like, we could just bring rents to market. Now this deal starts to make sense at $2 million, or maybe he’s way overpaying for insurance, or there’s a property management company that just totally, you can run it leaner knowing what you know, because you have other assets and other management, and utility providers are already in this specific town.

That’s when I learned how to price in the upside, the potential of the deal. I remember that being a huge aha. Even in the books, they don’t really teach you that. All these OG books are just basically a clickbait of passive income and buy assets, not liabilities.

Andrew: There’s a risk there. I think that’s probably why they don’t put that out there. There’s risk. In mobile home parks, it’s more transparent, I think. It’s like, hey, there’s an 80-lot park, there are 10 vacant lots. Bring homes in, set them up, sell them, and you can generate rental income.

In storage for example, it’s more like you can start revenue managing. It’s a mom-and-pop facility. You can add revenue management. Sometimes it works, sometimes it doesn’t work. But I think in mobile home parks, it’s a lot more clear. That’s one thing I like about the asset class.

Nick: I’ll say this. Even being a broker and now being a principal, we would price the upside in. We’d say, hey Andrew, you can come in. There are 10 vacant pads, you can bring in homes and bring rents to market, but you have to understand. What I did not understand as a broker was that that costs money. You have to find 10 homes and pay cash for them. You can’t finance these homes.

Ten homes, let’s say you can get them for $10,000 and then it’s another $10,000 a pop to bring them in. That’s all cash. You’re not financing that. You have to understand that this upside comes with a cash suck, some sort of capital injection. A lot of times, banks aren’t going to finance that, so you have to have an operator who understands, when am I going to get this money back?

That’s the whole name of investing. Any book, any investor will tell you, okay, Andrew, I want to invest with you. I have a high-paying W-2. I want to test the waters. I don’t know what your minimum is, but let’s just say it’s $100,000. Their first question is likely like, when will I see this back? What can I expect?

By the way, everything looks good on paper. We can bring in 10 homes, but what happened in Covid-19 is you can’t find these homes, finding used homes, and people to move homes. You also have this huge turnover because mom and pops rent was $200. Andrew buys this deal and he thinks he can go to $400. That looks great on paper. But when you try to raise the rent, $200 on somebody in this specific sector, you’re going to have some turnover.

Now you have to bring in your contractors, turn that home, which costs money, cash to renovate it, plus you have vacancy. If you’re using an agent or even onsite staff, there might be a commission associated with getting somebody in. 

Now your cash flow is really hurting because you raised the rent, because it looks so good on paper. Year one, two, and three really aren’t paying that investor much. It’s really more of like, hey, we’re going to get this thing stabilized, it’s going to be some work. There’s going to be some capital with this work. I think LPs and limited partners need to understand, what’s the business plan? And understand that everything looks good on paper. 

You and I can do what I call spreadsheet manipulation and make any deal look good. Change the exit cap down to a four-cap, the refinance is going to be 3%. We’re seeing that unfold. Guys that pro-forma’d year four. Year two, they went in with this floating debt not expecting rates to go from 3% to 7.5%. That really hurts. There’s a lot of people that are…

Andrew: Underwater. Yeah, negative cash flow.

Nick: No equity or their equity evaporated. There are some people that are just giving the keys back to the bank at this point.

Andrew: Yeah, have to. Let me ask you this. What else do you think is important, Nick, as an LP? What should they look out for? If you were going to invest passively into a mobile home park syndication, what would you look out for? What would you want to know? What are the top three most important things?

Nick: The number one thing, and I think everyone is familiar with the 80/20 rule, 80% of the traffic is on 20% of the roads and understand that huge problem, I think that bottleneck, bar none, is does the general partnership self-manage their assets? 

I don’t think I would ever invest my money with somebody who’s utilizing a third party, because the third party doesn’t have any skin in the game. At 5:00, when you need to fill this vacancy for your apartments in order to meet your monthly mortgage, Andrew, you and I are answering that phone. We’re going to 100% close this deal no matter what. But the leasing agent who’s paid $15 an hour at five o’clock…

Andrew: They’re clocking out, yeah. I think that’s the big difference. I think that’s a really good point. I don’t think anybody else on this show has mentioned that. Right now, I am posting mobile homes for sale on my personal Facebook on Marketplace to sell units, because other people’s accounts have gotten banned or whatever.

There’s bar none. People are like, Andrew, I thought you had a lot of units. You have 3000 units. Why are you listing a mobile home for sale? And they see it on my Facebook. I’m like, dude, I’m going to do whatever it takes. I think you’re exactly right. Those types of GPs that are going to take it, handle it, and put it into work, are just going to have lower margins.

Nick: It’s not even doing what it takes, either. It’s doing what is required, because I think there’s a significant difference between doing my best and doing what’s no shit required. Managing real estate is so hard, and it’s glorified by these people with nice hair and nice teeth telling us that we can get passive income in our sleep. It’s really just chaos. Really, there’s nothing passive about operating real estate. If somebody’s telling you that it is, you should run really, really hard and fast.

Andrew: You earn triple net leases. The type of affordable housing property management is intense. What you’re doing in mid-term rentals, like we were just talking about before we started recording, which I definitely want to touch on, there’s a lot of turnover. I would love to hear about what you did to make sure that hey, you had good lead supply to overcome that.

Nick: Yeah. Obviously, going from the brokerage, I learned how to cold call. I learned how to underwrite deals and understand that the upside, hey, because the seller is running it like that, it doesn’t mean that I have to run it that. Warren Buffett talks a lot about intrinsic value. What’s the highest and best use for that property?

By the way, I love RV parks and mobile home parks because I think ultimately, they’re not the highest and best use for a lot of these lands. The cashflow, great, the model’s outstanding. But in 20 years, you might be approached by a developer that says, hey, we want to build a shopping mall here. The community has grown so much. You have that multiple layer of upside, so I love that about that asset class, by the way.

I found this 26-unit apartment complex in Wilmington, North Carolina. It was direct off market to seller. It’s a very unique property. It’s all made up of studio apartments. Most apartment complexes, as you know, have a three-bedroom, two-bedroom, one-bedroom, and studio. That’s great because if somebody can’t afford a three-bedroom, you can down sell them and say, hey, I know you can’t afford a three, but let’s put you in a two. You can afford it.

The same with the upsell. I know you were coming in to look for a one-bedroom, but really you’re approved for a three-bedroom. Don’t you want this office? So you can upsell and down sell people Being a unique property of all studio apartments, I brought this deal to Kevin and was like, look at this deal, finally a 26-unit. This is a good-enough size portfolio.

For those of you getting started or LPs, you always want to make sure that the deal is big enough to support management. That’s why I think that your team is not interested in a 20-unit property, unless if you own other stuff directly next door, because you have to be able to afford onsite management. You want the asset to be big enough so that way, you’re not the one unclogging toilets, which I did for a while, by the way. You always want to go in like, I don’t want a job. No one gets into real estate to be a job type of deal. You want it to be big enough to where you can support onsite management.

Anyway, I brought this deal to Kevin and was like, look at this. I found a 26-unit, this is amazing. He was like, yeah, no, terrible deal. I’m like, terrible deal? What do you mean, dude? This is the best location in Wilmington. You don’t know Wilmington. You’re all the way up in New Hampshire.

He is like, yeah, I could take one sniff of this deal and see that it’s all studio apartments, and studios are terrible. I’m like, studios are terrible? I hadn’t learned that in any of the books that I read or any podcast. I’m like, what do you mean studios are terrible? 

He’s like, well, if I analyze my 650-unit portfolio, studios have the highest amount of turnover, because naturally us Americans, we get more stuff. We get a pet, we get married, or we get a boyfriend or girlfriend and we need to go to a two bedroom. Then we go to a two bedroom, and then we need a three bedroom. Now we all want to live in these huge houses.

Naturally, studios have the highest turnover rate. The whole name of the game of real estate for most people who know—that’s why parks are so great—is to keep the tenant as long as possible. Us landlords are the one responsible for repainting, turning over these units, and then we have to release them. There’s vacancy, there’s advertising cost, maybe we’re paying commissions to people to release. You want the customer to stay for a long time, so studios are not good for longevity. 

He also said—and I never understood this—that studios are the cheapest. When you have the cheapest, you tend to attract an avatar that’s really rough. He was like, no way, dude. Not a chance.

It was a really nice property. It’s a class A brand new construction, brand new and renovated with windows. When I say full gut, full gut job, the brick was painted off white. It’s a really nice deal and I know the location again.

Looking at the location, it was across the street from this huge hospital, 850-bed hospital here in Wilmington. I know living here that the hospital provides care to the surrounding 25 counties. If you break your arm and you live two hours away, you’re driving all the way to Wilmington. 

I knew that Wilmington also had this huge boom of people migrating due to Covid-19. The hospitals don’t tend to grow to the same level as the population. A lot of times the hospital is a shit show because the wait times in the ER are crazy.

I knew that travel nurses had to be somewhere. I was like, well, where do these traveling nurses stay? My studios are right across the street directly next to Starbucks. I could throw a softball to Starbucks from my apartment complex. You and I know that Starbucks does these super extensive studies to see, is there enough cars going by? Can the population afford Starbucks?

I knew a lot of people invest near Walmart because Walmart does these same studies, so I knew I had to figure out a way to buy this deal. Going on LinkedIn, LinkedIn has always been my hero. I post on LinkedIn. I’m like, hey, who knows anything about traveling nurses, because I want to buy this deal where traveling nurses rent to us? Where do you guys post all your listings?

I got on this call with this guy named Larry. He just sold the deal, and now he became a limited partner. He’s like, oh, I did this, I got the book, I got the playbook, I’ll give it to you for free. I was like, dude, that’s awesome. He’s like, go on furnishedfinder.com. That’s where everybody hangs out. That’s where you get all your leads from traveling nurses. He’s like, traveling nurses are amazing.

He’s like, I would buy this nice bedding. They would rip it off, put their own bedding in there because they’re health freaks. They’re a great avatar to rent to. They don’t smoke, they’re health-conscious people. You go to nursing school, you know a lot about science. I’m like, this is awesome.

He’s like, dude, let me save you some money. He’s like, run a test ad before you even buy it. I went over, I took pictures of the apartment complex, posted those pictures unbeknown to the seller on Furnished Finder. I wasn’t under contract to buy or anything. I listed it for rent for $2200 a month for this 450 square foot studio. We got swamped. We were getting 25 inquiries a week on Furnished Finder. People trying to book our property that I didn’t even own.

The seller was currently renting these studio apartments for $800 a month. Now I brought it back to Kevin. By the way, every time we get a Furnished Finder Inquiry, I’m forwarding it to Kevin. I’m like, look at this, look at this. He’s like, all right, stop. I don’t need to see 60 leads every two weeks. I get it, the demand is there. This is awesome. He’s like, let’s do this deal.

That’s what we did. We bought the 26 units. Basically, we inherited 12 month leases. We just told everybody, hey, look, we’re not extending anybody. If you want to break your lease and get out early, we’ll let you do that because honestly, this is affordable housing. We understand that we’re taking away affordable housing, and we extended a lot of people to try to help them, find them other housing, and different things.

We then furnished the units and started renting them out one by one. All we really did was repaint the interior and pay for furniture. Basically, we’re renting them out $2000 a month to traveling nurses. What’s really cool, too, is we utilized cost segregation. We paid $3.6 million for this asset. We got $900,000 in depreciation, but we were also able to get some depreciation from all the furniture that we bought.

Andrew: That’s all personal seven-year property?

Nick: Exactly right. We were able to cap a ton of depreciation. For a guy like Kevin, he’s like, look, I can put my money that’s getting $0 in my checking account. I can put it into real estate, get some return. But also, you’re getting a ton of cash flow from this particular property. It made all the sense in the world for him and for me. I’m now self-managing an asset, so I had to learn marketing, and I can get into that too.

Last winter, Furnished Finder completely shut off. It was like you’re taking a shower and all of a sudden, the water just shuts off, but you still have shampoo and soap in your hair. The vacancies just started stacking up, like it was 1, 2, 3, and then I had 10 vacancies. I’m calling Kevin. I’m like, hey, man, I just want to get ahead of this.

For those LPs out there, if your GP is getting ahead of problems and clearly communicating that, that is gold. You need to put more money with them, because most people don’t tell you it’s a problem until it’s a real problem. Chances are, if they’re a good operator, they could smell it coming. When you get that smell, you should always try to get ahead. Just jump on the grenade. Get on there.

He was like, look, what can we do? What other sources can we use? Basically, Furnish Finder got completely dried up. No more leads, everyone figured out about it. That’s social media. You think about what happened, everybody gets on Facebook. If you own a business, you advertise on Facebook. The ads used to be 99¢ and then now it’s $200, because they realize that the traffic, and it just gets saturated, more expensive, and more competitive. That’s essentially what happened.

I learned SEO (search engine optimization). I had a website that my buddy who I played pickleball with made. It was a great design, but it wasn’t optimized. We weren’t getting any leads from it. It was just a brochure, a magnet of our apartment complex. I learned SEO, and I don’t want to get technical for the listeners, but it’s a really, really powerful strategy to get leads to come to you.

So I learned SEO, and my website went from zero leads to 80 leads a month now. It went from vacancies, a bunch of vacancies to people basically pounding on my door trying to get in just from SEO. Every LP should know what their customer acquisition cost is. They probably have a W-2, or they at least know a little bit. They probably read Kiyosaki’s book. Where are you getting your tenants, Andrew?

This market that we’re considering investing in, can the tenants support it? Where are they coming from? Where do they work? Can this market sustain? Your pro forma, 500 rents that you’re thinking that we can get in, what data do you have that will support that? Did you run a test ad and found a ton of demand for this or we’re not sure? Just learning that I think is huge and knowing that customer acquisition costs.

You look at Shark Tank. Everyone watches Shark Tank. They always ask like, what’s your customer acquisition cost? Anyone who can go direct-to-consumer is going to get a higher valuation. 

If you’re selling on Amazon or if your GP is using apartments.com, Zillow. I just got quoted $800 a quarter to put on apartments.com. I’m like, I would be out of business if I had to use apartments.com to lease my 26 units. Going direct-to-consumer and getting this SEO is huge, because the other thing, too, is Airbnb. Airbnb gets a 15% fee off the top putting that deal together.

Andrew: Mobile home parks are a little different because we don’t have all these. The demand for affordable housing is just off the charts. You put something on Facebook marketplace, and it’s just gone within 24 hours to three different qualified candidates. I love how you thought out of the box. What are your top three pieces of advice for SEO just based on what you learned?

Nick: Knowing your core keywords is everything. It’s like if you were to go into a tennis tournament. They’re like, well Andrew, you want to enter this tennis tournament? They’re like, what level are you? Are you beginner, intermediate, or advanced? You’re like, well, I’m intermediate. They’re like, okay, Andrew, what’s your age bracket? You’re like, well, I’m 34. They put you in an age bracket.

That’s what all these algorithms do. They’re basically, Andrew, if you type in the browser, furnished apartments Wilmington NC, that’s who I want. That’s my dream customer. That’s who I want. It’s all about creating content out of those core keywords.

My buddy who I played pickleball with, who made the banner of my website, quietly nestled in trees. Is anyone searching for that? No. How would Google know that I provide furnished apartments for rent in Wilmington if I don’t tell them what to do?

I changed my headline and my website to be, we provide furnished apartments for rent in Wilmington, North Carolina. Then you have the body, and you start describing what you do. Every website has a paragraph here and a paragraph here. Basically, you want to put those core keywords, furnished apartments Wilmington and NC in a way that’s not spammy, that flows nice. You want to do it three or four times in each paragraph.

Basically, then Google knows, okay, Nick provides furnished apartments in Wilmington, NC. We’re going to start testing them. Andrew, you click on my website and immediately you click out of it. Google’s like, that’s weird. It must not be what you were looking for.

Google’s always going to do what’s best for them and then what’s best for you. If that’s not what you’re looking for, they’re like, okay, Andrew, well let’s send you here. Then you spend two minutes on the website looking. Google is like, that’s it. That is the right customer. Google’s first, like, that’s interesting. We sent Andrew here, and he spent two minutes on it.

Andrew: He was happy there. Yeah, we’ll send more of those. Totally.

Nick: Now it’s just like, go get more of these people. Those people are the 34-year-olds that are intermediate, that are joining this. You’re in a bracket, but it’s a search. Google goes out and gets more of those 34-year-olds that are intermediates, that play pickleball.

Then there’s Google Analytics. I noticed that after a minute-and-a-half, people were exiting out of my website. I’m like, that’s really weird. I got a timer, and I started reading my website. Then a minute-and-a-half, I realized I was getting really bored.

We live in the TikTok world where everything is moving. You watch a TikTok video, and if it doesn’t change a million times, people don’t even watch it. I’m like, oh, I got to do something. The biggest question that I had was, what’s the price?

Naturally, we didn’t post our prices because we wanted to get inquiries. What I did was at the minute-and-a-half mark on my website, I said, hey, if you want to check out the prices, click here. Then they click here, and they go to another page that I own. Google’s like, holy cow, we sent 10 people to this website, 8 people watched it for a minute-and-a-half, and then all 8 people went here and then spent another 2 minutes, and then inquired.

It must be good. We’re going to keep recommending this content versus if everybody went to my page and immediately backed out. They’re going to be like, well, we better find somebody else. That’s really what SEO was, but it was a huge competitive advantage for me because I can drive traffic to my website for free.

Hosting a website is $200 a year. I’m not paying $800 a month or whatever the hell apartments.com is. I think that most property management real estate companies are just like, oh, well we got the gold package at apartments.com, and we put it on Zillow. I think that there’s a huge competitive advantage for people to self-manage their assets, but also utilize SEO to drive those tenants. You’re in a different market. Your dream customer, Andrew, is on Facebook.

Andrew: Yeah. I have a couple of questions real quick because we’re running out of time. Nick, you’re just a wealth of information and golden nuggets. Thank you for all of that. 

What would be your perfect mobile home park, Nick, knowing what you know from your time with Glenn and the Marcus and Millichap guys? What would the perfect mobile home park look in your eyes?

Nick: My perfect mobile home park would be those trophy assets that the REITs are buying. It’s basically Sam Zell’s portfolio that he put together. I would buy that. Class A, people never want to leave. People can afford $700 a month. The tenant owns the home. I know we live in a different age where a lot of these institutions have gobbled them up.

To answer your question, if I was an LP and I was thinking of considering going into investing with Andrew or any other operator for that matter, I would look for public utilities, city water, city sewer. I don’t want to deal with septic. These people are going to be flushing tampons and destroying it. You could put a camera on their fricking drainage pipe and they’re still going to do it. You can’t get blood out of a rock, so you can’t charge back somebody $6000 for septic.

I would say city water, city sewer is a huge one. I would also say location and demand, being somewhere where the tenant can afford the rent. If you’re projecting, and I think that that’s an overlooked metric, I think people are like, oh, we’re just buying in Wilmington, North Carolina because we’re buying in Wilmington, North Carolina. The asset’s right next to the hospital, so this is an awesome asset because the hospital’s never going to move. This is a perfect asset.

They go out and buy the asset with these huge pro forma rents, and they realize the hospital doesn’t pay enough to attract the people that even work at the hospital. You have to have demand. I would say at least a hundred units, knowing that, public water, public sewer, and a good growth MSA.

I don’t mind the cold states. I think there are opportunities there. Sure. I’d rather not pay for plowing. But at the same time, if you come to North Carolina, you’re going to pay for tornado and hurricane insurance. I think there are opportunities out there, but those are the main things that I would look for, size, location, and public utilities.

Andrew: That’s awesome. Yeah, those are good points right there. Dude, I think we’ve covered so much. I’m super grateful. I want to make sure I circle back and congratulate you on the birth of your daughter.

Nick: Thank you.

Andrew: That is really awesome. I want to thank you for your service. That’s something I’m a big fan of, and I want to make sure I give you the proper respect for the service you gave to our country. Thank you for that, Nick.

Nick: I appreciate it, man. I’ve been following you for a while. I really like that you self-manage your assets and you do a great job on the pod. I’m just grateful to be here, and shout out to all the […] dads on there. 

The easiest way to get a hold of me is on LinkedIn. I post there all the time, so I respond to all my DMs, and I’d love to connect with any listener.

Again, I don’t run a fund. I don’t have any deals to invest in. This 26-unit that I do own, I actually took it down, tenant in common with my partner, Kevin that I mentioned. I have nothing to sell you. Here, if you want a good follow, I try to post on there.

Like I said, I will respond to my DMs. I love connecting with people. I like to walk a lot, so just walking and connecting with different people and learning about different assets. As you can tell, I immerse myself in anything that I do. I would love to connect with anyone out there and really appreciate you having me on here.

Andrew: Totally, Nick. What’s one last bit of advice that you would give an interested passive investor that’s looking at investing in mobile home parks?

Nick: That’s tough, man. I would put an exclamation point on making sure your GP is self-managing the deal. I’ve also been known, Andrew, to be a contrarian thinker here. I would say, be the bank. Underwrite the deal like the bank. The bank knows you have to submit your taxes.

If I’m investing with Andrew Keel, I want to know that you’re not living in a Lambo. I basically want to see your taxes, Andrew. I want to know that you’re fundamentally a good guy and that I can relate to you. I trust you. I would say be the bank. Know what LTV is, how high leverage they’re getting, and really just understand the deal that you’re investing with, and understand what the business plan is.

Like we talked about, everything looks good on paper. But when the rubber meets the road, you and I both know there are always going to be hurdles. I want to invest with a guy who I know is scrappy, and he’s going to use his Facebook page if the business page gets shut down to list his homes. When the phone rings at 6:00, I want to know that my GP is going to answer the phone.

Chances are, LPs, if you’re getting pitched something or thinking about, you can go look at their assets that they own. Call that apartment complex at 3:00 and see if they answer. Look at the five-star reviews on that apartment. Look at the deals that they already own. 

There are a lot of people in the space that are just in the capital raising business, they’re not really truly operators. Those are some things. I know you said one thing, and I gave you 10. I can’t give you one thing. It’s impossible.

Andrew: I really appreciate it, Nick. Dude, thank you so much for all these golden nuggets. Thank you for coming on.

Nick: Thanks, man. I appreciate you having me.

Andrew: Totally. That’s it for today folks. Thank you all so much for tuning in. If you got value out of this show, please leave us a review on iTunes or wherever you listen to your podcasts. Thank you all so much for listening.