Interview with Paul Stout of KP Asset Management

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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 Mobile Home Park Investor and Operator Paul Stout. Paul is the founder of KP Asset Management and they specialize in mobile home parks and self-storage facilities in Indiana, Illinois, and Ohio. When Paul decided to get into real estate investing, he started out like all of us: diving in deep and doing the necessary research into different asset classes that allow scale. When Paul found mobile home parks, he knew he had found his niche. He dove in head-first, by investing in a mobile home park and managing it himself to learn the business.

Today, Paul offers up some great advice on what sort of things he looks for when he is researching a potential mobile home park acquisition. Paul tells us about how he got into the mobile home park business and what hooked him about this asset class. Paul also gives his advice for new passive investors who are looking to invest in the mobile home park asset class.

Andrew Keel is the owner of Keel Team, LLC, a Top 100 Owner of Manufactured Housing Communities with over 1,500 lots under management. His team currently manages over 20 manufactured housing communities across ten states – AR, GA, IA, IL, IN, MN, NE, OH, PA and TN. 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: 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

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

01:04 – Paul’s story and journey into the business of manufactured housing

04:30 – Advice for passive investors: things to look out for

08:30 – Paul’s research into the market

21:40 – The toughest hurdles for Paul

25:28 – The state and future of manufactured housing

31:10 – Strengths and weaknesses for KP Management in terms of management

35:00 – Paul’s perfect mobile home park

37:05 – Experience with manufactured home loans

43:00 – Proforma mistakes

46:50 – Infill

48:57 – Getting a hold of Paul

49:20 – Conclusion


Links & Mentions from This Episode:

KP Asset Management Website:

Paul’s Email:

KP Asset Management Phone: 219-595-2655

Keel Team’s Official Website:

Andrew Keel’s Official Website:

Andrew Keel LinkedIn:

Andrew Keel Facebook Page:

Andrew Keel Instagram Page:

Twitter: @MHPinvestors


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. Paul Stout. Paul is the founder of KP Asset Management. KP Asset Management specializes in mobile home parks and self-storage facilities across Indiana, Illinois, and Ohio. Paul’s current portfolio manages around 500 units, and he syndicates and manages most of his portfolio in house. Paul, welcome to the show.

Paul: Thank you, Andrew. I appreciate you asking me to be on.

Andrew: Definitely. Can you start out by telling us your story and how you got into manufactured housing?

Paul: Sure. Long time investor, mostly in the stock market. I started investing pretty young. In fact, when I was a teenager, not even old enough to open my own account, my dad took me to his office building downtown and introduced me to a broker that worked there. They helped me set up an account to start trading. I was probably 16 or 17 years old because I know I couldn’t open it myself. I did a lot in the stock market and always wanted to get into real estate, just never really put forth the effort to do it.

Probably about seven or eight years ago, I started getting really serious about wanting to get into real estate. I started to earmark some of the money I had in the market that was enough that I can start purchasing some multifamily. I pretty much started like everyone else, just educating myself looking at single-family and then realized it probably wasn’t for me looking at multifamily.

I stumbled across mobile home parks, and I actually dismissed it at first but it kept sticking at the back of my mind, some of the things I learned about it, which was the ease of operation. Although it’s not easy to operate, it’s typically easier than the multifamily. I started looking into it, I started educating myself on it. There wasn’t much to be found as far as education back then, there was a little bit, but I bought my first property on my own and decided I was going to self-manage it.

When I say self-manage it, I mean without even an onsite manager. Take all the calls and basically learn the ins and outs of the business as much as possible over the past couple of years so that by the time I decided to start speaking with investors about coming on board and purchasing more properties, at least I had a good background in managing the property.

I had a good feel for what was going on, and when I started to hire people to take over the day to day management of the parks, I at least know what they would be getting into instead of them being able to pull things over me. Since I’ve been there before, I pretty much knew what was going on and what needed to happen.

After that, I purchased a second property with an investor, and that went along for about eight or nine months. Found some other properties, purchased (I believe) four more properties in the course of a year. Basically, we’re up to eight properties now. I’ve been doing it for almost five years and about 500 units. Overall, it’s going really well. We’ve got everything from the properties we purchased that just needed a little bit of revision of management all the way to pretty good site turnarounds.

Andrew: That’s fantastic, man. All of that in five years. That’s pretty awesome, man. For our investors that are the passive investors, the LPs, what would you say are the most important things that they need to look out for when investing in the mobile home park asset class?

Paul: For me, number one is the market because it doesn’t really matter what else you have. In my opinion, I think that the market really drives the asset to be successful or unsuccessful. You can certainly purchase a poor asset in a great market, but I would prefer that to a seemingly good asset in a poor market.

The reason is that if you purchase an asset that isn’t performing quite to what it should be. If you have a good market, you can always get it there. Whereas if you have a property that is in a not so good market, it may be going well today, but things can change in poor markets. I define a poor market as somewhere that has limited employment, or they rely too heavily on a single employer which, can change very quickly and can have a dramatic effect on your property

As far as purchasing properties that are maybe not looking so great at the time, if you have a good market, if you build it they will come. If you have a product that will sell in a good market, you’re going to be able to sell it. It just becomes so much easier to do that.

I would say if all of our properties, they’re all in excellent markets. One of them is in an okay market and that one has been the most amount of work. Moving forward, I think I’m going to stick with really good markets. I like to see at least $250,000. I know a lot of people are chasing markets that are in $100,000, but even those could be good if you know the micro area.

If you have a market that’s on the smaller side, you really need to take a look at it. Is that the only market in the area within driving distance to jobs—maybe 30-50 minutes, or is there another $100,000 or $200,000? Because that can make a difference too. People will travel for good jobs, but I typically like to look at larger areas.

Most of our portfolios now are in areas where there are millions of people and those are just simpler. They’re so much better as far as finding folks and being able to infill and occupy the homes that we have.

The other thing that you have to look at, of course, within that market is the demographics of that market even at a microscale because when you get into the large metropolitan areas such as Chicago or Indianapolis, I would imagine it to be true of most of the large metropolitan areas. You can have certain small sections that aren’t great as far as crime, jobs, or you may have extremely low housing prices. Those can be challenging for operating a property effectively as well.

Then of course there’s value. As you know today, it’s very difficult to find value in the space. I don’t mean value by the asking price necessarily, it could be, but it could also be seemingly overpriced by today’s number. A property that you know is undervalued simply by the fact that the rents are too low or something of that nature. If you have a great area and you’ve got good value on your buy, then you should do pretty well.

Andrew: Would you mind sharing a little bit about what research you do in regards to the market? For LPs, what I say is you should spend at least 5-10 minutes learning about the top employers. Maybe you could share a little bit about what you do when researching the market outside of just looking at population numbers.

Paul: Definitely. Some of the big ones are of course population numbers, then you’re also looking for what type of jobs these folks have? Is employment diverse? Even if it’s diversified, are these employers cyclical or not. Are they employers who are heavily into one segment or not because all those things could be a little bit of a red flag?

If you have diversity in both size and segment, whether it’s manufacturing, education, or medical, it’s best to have very diverse employment and to really understand who are the top maybe 10 or 20 employers like you said. Taking some time to look at that and doing a little bit of background checking to see if somebody’s employers are employing mostly physicists and engineers, that’s probably not the focus that they’re going to be living in your property if you’re in manufactured housing, unless it’s a higher-end one.

You have to be careful too not to look at the employer and say, look there are 10 great employers. They’re not going anywhere, but most of the people living on your property aren’t actually working for them. You’re looking for employers like Amazon and Walmart, places that employ people in the everyday Joe without a college education, service industries—whether it be fast food, things like that. You’re looking for that.

You’re also looking for the school systems because it really doesn’t matter how much money folks make or how much they can afford in housing. If you’re going to be owning a property that is a family-oriented property and it’s not a lifestyle choice or some 55 and older community, everyone wants their children to have good schools. We like to take a look at the school system to see how the school systems really perform compared with surrounding areas because if they don’t perform as well, you’ll probably lose a lot of prospects to the surrounding areas.

We then look at things like your average travel times for work. It’s nice to have places that are close. It’s nice to have places that are looking at these areas to come into and to move their business not the other way around. If there’s a lot of businesses—we struggle with this in Illinois sometimes where whatever is going on in that state with taxes or whatever else it might be, you might have some great employers but are these employers looking to leave that could be dangerous.

We then look at the pricing of comparable housing. When I say comparable housing, typically, we’re looking at two- to three-bedroom apartments and two- to three-bedroom homes on the lower end of the scale. If you can get a three-bedroom apartment for $600 a month and you can purchase a two- or three-bedroom home for $65,000, it might be a little bit hard to move a manufactured home.

Those are some of the things we definitely look at, and those are some of the things that will tell us whether the area is as good as we think it might be initially. We always visit the area too. We just drive around and see what people are doing. Is this a place that’s bustling? Are people there and they’re going to stores, they’re visiting shops. There are lots of people, then we go around the area where the property might be located, and we try to see if there are some really run-down high crime areas.

We like to try and stay away from that as much as possible, but in some of the larger metros, one or two blocks, quarter-mile, half-mile can make a huge difference and it’s just the way it is. It doesn’t necessarily mean that a property won’t perform well if it’s close to a blighted area, but if it’s an area that we know really well, we’ll be much more comfortable with it.

That’s another thing. We try to invest in areas that we actually know that are somewhat near home, that we’ve visited, that we understand, and that we spent some time in.

Andrew: That’s excellent. Where are you based, Paul?

Paul: I’m in the Chicago Metro, so I’m in Northwest India. We do a lot of Indy, Chicago area and also the Indianapolis area and the Spring Field, Illinois area because I’ve spent a lot of time in those three areas. I was born and raised in the Chicago area. I spent a lot of time in Indianapolis. I spent a lot of time in the Spring Field. We’re comfortable with those areas so we focus on those.

The area we’re in Ohio is really great because it’s got everything we look for. In fact, there are quite a few good metros that are really close. It’s the Akron and Canton area, which are also very close to Cleveland Metro. Basically, lots of jobs, good-paying jobs, steady jobs are what drives these metros to be really good for us because we’re never short of finding folks that are able to afford the product that we’re selling and who are looking because all these areas also have shortages.

There’s definitely a shortage of affordable housing in all of these areas. That too is key because if you’re seeing houses that are on average $200,000, that typically indicates that you’ve got a pretty good need for affordable housing. Especially if you’re looking at the vacancy rates in the area and they’re 10% or lower, that usually indicates a need for housing that’s affordable.

Andrew: Definitely. I want to mention a couple of websites and passive investors because a lot of them I’ve spoken with won’t actually go drive to every park that they’re going to passively invest in. But they can take 10 minutes or so and check out That’s a good website to learn about a certain area, a certain metro. In regard to schools, is a great website to use for that, and is another site that has a lot of good data on it about a certain area. It’s really interesting.

One thing that I saw recently on LinkedIn is a map of the space and the population inflow and outflow. I saw the state of Indiana, the population is increasing and then opposite to that Illinois is decreasing drastically. Do you have any comments on that? What do you say? Have you noticed it in your business?

Paul: It’s definitely something that I’ve noticed, and in fact, I stated that we do invest in Illinois, we’re very selective. Illinois is for, better or worse, I guess they’re on a path where they’re on a point of where they’ve just got out of control with spending and therefore their taxes have continually gone up and up. I spent most of my life in Illinois. I was one of those people that moved out of Illinois to Indiana.

When they raised taxes and people began to get to a point where they can’t afford it, they looked for somewhere that is more reasonable. If they can just jump over the border to Indiana or Iowa, that’s what they’re going to do, and that’s what they have been doing.

It seems to me that has increased dramatically in the last three years and here with COVID, it has seemed to even increase more so. In the area that I live, Northwest Indiana here, the amount of building, the amount of new construction is just unbelievable.

Every time you open a paper, you turn around, there’s another developer adding thousands of homes and they’re selling so quickly. I’m actually a real estate broker as well, and I deal mostly with investment properties. But I do, for certain people, help them with their single-family homes. It’s extremely difficult to buy anything around here right now.

Something goes on the market, if someone calls you and says, hey, I’d like to look at this weekend and says it’s Thursday, you basically just tell them don’t bother. It will be gone by the weekend, and it normally is. People certainly are moving out of Illinois.

That said, I don’t believe that there is a long term danger of investing in the Chicago land area of Illinois and some of the larger metros as well because Cook County is really one of the more difficult areas. There’s plenty to invest in outside of those areas inside of Cook County, and many of the big players like […], they still do invest in those areas and they’re doing just fine. I think they’ll continue to do just fine.

The areas that are probably going to get hurt more are some of the outlier areas where basically, as people leave the suburbs, obviously the prices of the homes are going to go down because you’re going to have to maintain supply, if not increase supply, and you’re going to have less people wanting to buy those.

A lot of people who may have had to live in a way off park in Kankakee, Illinois, or something like that, but they work near the city. As the prices come down closer to the city, they’ll probably move. In my opinion, that could be a danger. I think overall, I don’t know that it’s going to affect the mobile home parks and manufactured housing near as much as it is single-family housing.

If I were investing in single-family housing in Cook County right now, I might be a little concerned. But as far as the manufactured housing, we’re talking about people that are on the affordable housing spectrum here as far as they’re purchasing, and they’re looking for a good product or a good price.

As long as these properties do not price themselves out of the market, I think they can still continue to thrive over there. I do know folks that invest that have parks in Illinois and they’re still doing fine. They’re a little concerned, and I’ve heard brokers talking about if you own anything in Illinois, you probably want to sell it right now.

I understand that there’s not a lot of people super interested in Illinois, but at the same time like what Warren Buffett said, when the people are fearful, you should be greedy and when they are greedy, you should be fearful. If people are fearful and not wanting to purchase parks in Illinois, that actually may bring about some really good value over there.

I’m not currently looking to buy a bunch of parks in Illinois just to be clear on that because I really like Indiana. I’m really concentrating on Indiana, in the Chicago Metro because that’s where all the people are going. All the people that are leaving Illinois, they’re coming over here. I always liked Indianapolis. I’ve done really well there.

I guess for what it’s worth, that’s my opinion for Illinois. But as far as Indiana goes, Indiana is a great state. If you get outside of Cook County, Illinois is more landlord-friendly than most people believe. Cook County is extremely tenant-friendly.

Andrew: I have to agree with you on that, Paul. I have a couple of parks myself in Illinois and every single one of them, when I have to evict somebody, it’s double the work in any other state.

Paul: No kidding.

Andrew: It really is and it takes longer, especially right now with the eviction moratorium going on. I just feel bad for all those restaurants and other businesses that are being shut down basically by the state. It’s unbelievable. Indiana, on the other hand, I’ve had a lot of success there for sure.

Paul: Indiana is simple.

Andrew: They’re pro-business. They want people to come and do business there. That’s why they’re growing.

Paul: That’s right.

Andrew: Tell me this, Paul. What has been the toughest hurdle for you in the business thus far? I think you said you have eight properties, is that right?

Paul: I would say the toughest hurdle I’ve come across so far is early on, partnering up with people, is basically not spelling everything out to the detail we should have spelled things out. For instance, we have a property in Central Indiana and the agreement was that the funding was going to come from a certain place, and that place with the investors basically dried up. There was no backup plan for that so now we’re looking at other ways to get that property funded because the property is a turnaround. I wouldn’t call it a super heavy turnaround, but it’s a medium turnaround.

You and I discussed that property. In fact, that property has been the biggest challenge in that we’re trying to find other avenues of funding, and they exist. However, they are not just as ideal as we are hoping in the first place.

Basically, if I were to say the one thing that has been the biggest challenge that I have learned the most from as well is when I set up, syndicate a property, and I go to the investors and we discuss how this is going to be funded, you should always have a backup plan.

Everybody basically puts in a pledge or they even fund it at a certain point. But if that can’t happen for whatever reason, what is the backup plan and plan for that because if we had planned for what the backup is the path we’re actually taking, it’s going to work out fine. I think the biggest part of it was a lot of resentment over the fact that, man, this was supposed to go one way and then it’s not going that way. Yeah, this will work but it’s not ideal.

It’s going to work but it certainly would have been better if we sat down and said, okay if that doesn’t work, what’s our plan? What’s our plan B and even plan C and how’s that going to look.

The other challenge that I would say is extremely high right now, and you probably agree with me on this, is finding contractors during COVID. It is unbelievable. You would think it’s because nobody’s working and they’re all at home. That’s not what I found. What I have found is everyone is busy. Everyone has so much work. They’re so booked out, it’s been extremely hard, and because of the fact that we have so much value add going on right now, that is really pushing our schedules back significantly. That part of it has also been a challenge.

Andrew: Both good points. On the first point, is it just one investor that you did a joint venture with on that acquisition?

Paul: Yes.

Andrew: Got you. That could be very tough when you run out of funds. I’ve talked quite a bit about this. If you buy a park that’s in a good market, there’s not a lot that you could do to completely go bring your income down to zero. If you’re undercapitalized, it really straps you with what you can do, and it’s a tough place to be in.

I know some operators that try to use the cash flow to implement and do CapEx, it’s just a little tight. It hurts your time frames because you never know what’s going to happen and when they’re going to have a unit turnover. That’s interesting.

Tell us Paul, what do you think about the current state of the manufactured housing industry? Where do you see it going to the foreseeable with COVID and all?

Paul: I think the state of manufactured housing is similar to other types of housing. There are some hiccups with collections and things like that. I would have to say—from my personal experience, folks I’ve spoken to, and things I’ve read—it’s not quite as bad as the multifamily. It’s a bit challenging right now, and it seems to me that this second round of COVID has actually affected us more so than the first round.

We had some tenants come to us and typically we don’t really get into the payment plans or anything like that, but this was such a new situation that we started working with a few tenants. It worked out okay. We allowed them to pay and they have to have something in writing that basically says we’ll pay extra every couple of weeks or whatever it was. That worked out okay.

We didn’t have it quite as much as we were expecting because we didn’t know what to think when all of these started. But in the second round, it seems like more people have lost their income. The other thing it seems like finding replacement income—whether it be from the government or from another job—has become more of a challenge.

Our delinquency from the first wave of COVID was actually fairly low, and our delinquency on the second round has actually increased from that point. We’re still doing okay. It could always be better. We like it to be better, and we’re actually making some changes to make it better. But giving us the ability to where we would typically say, the state you’re in if you don’t pay we’re just going to file an eviction.

That whole process we had to rethink dramatically because, in this environment, it seems that these folk—first of all, from the human aspect—have nowhere else to go. If they’ve lost their job and they’re at the final place anyway, they can’t find anywhere cheaper. But I do believe that moving forward, the industry itself, I’m very bullish on it because of a lot of different factors.

Obviously, one of the big ones is consolidation. That’s happening dramatically. I’m sure you see it with searching for properties, it’s nowhere near as easy to find them. When you do, the prices have gone up dramatically, but I still do think there’s enough value left whether it be in a value add in property level from rent raises because I think the rents are way too low in many properties. As consolidation continues and some of these bigger players come in and correct those numbers, it allows the smaller guys to correct those numbers as well without pricing ourselves out of the market.

I don’t want to be the first one to go from $250 to $375 or $400, but I certainly will ride the coattails of three or four other properties that are raising their rents. I definitely see a lot of value in the future. I think that we have to rethink what we’re willing to purchase upfront.

For instance, a lot of people aren’t willing to purchase value. In my opinion, I’m willing to purchase value but it just depends on what it is. It’s based on risk and work. If I have to put up all the risk and all the work, I’m not really willing to pay for that value upfront, but if there’s little risk and little work such as rent raises, I’m willing to pay some of that value.

I think a lot of investors who look at purchase caps are going to have a difficult time moving forward. But those who can look past it and who can truthfully build a pro forma that is reliable, achievable, and not from a broker who’s trying to sell you the property. They’ll probably do pretty well because I believe that the asset class—as the big players run out of 200-space to purchase, they’re going to come knocking on the doors of the 100-space properties. If you can get good with the value add, they’re really not in that game yet.

I think there are a couple of big players who are dipping into that game. But for the most part, they’re looking for turnkey properties, and there are so many out there that could be there but just aren’t.

I think that’s where the mobile home park investors who are going to do really well going into the future are the ones that can truly evaluate something, look at the value of it, and be able to reliably estimate or forecast what the property will do in 3 months, 6 months, 12 months, 24 months. Be willing to pay a little bit for that value upfront.

Also, the ones who are able to take a property that is not running at full capacity or at the optimal management and be able to turn those properties around. That’s really where people are going to do well.

But overall, the industry seems to me it’s going to keep going up because it has gone up dramatically in the last five years since I started. When you look at the fundamentals of it, there’s just still so much room. It certainly hasn’t gone to the top yet.

Andrew: I agree with you on that point. Tell me what are some of the strengths and weaknesses of KP Asset Management on the actual property management side of things.

Paul: This is always like the double-edged sword where some of the property management companies, as they grow, they become slow. We’re still small enough where we can execute speedily, where we can make decisions quickly, where we can take a project, and if something changes, we can basically pivot very easily.

Larger companies have a very difficult time with that, so one of our strengths is in our small size because of the fact that we can certainly look at things, make quick decisions. We don’t have to go through layers and layers of management.

We also try to run as lean as possible. If we have an individual working for us, we make sure that that person is working as efficiently as possible. We try to give him the technology. We’re always looking at new technology to try to increase efficiency. We train our employees as much as possible, and continually try and make certain that they’re always up on anything new.

We’re never afraid to try new things, including things that come from unlikely places. We’re always willing to listen to better ideas. If we have a system or procedure in place and we get feedback, we’re always willing to look at it. It may not work, but we can always go back. Sam was kind of the same way where we were, basically. He was willing to try just about anything that was recommended to him by anyone. We try to take that perspective on things and listen to everyone that works for us.

We also try to listen to our tenants. What are they telling us? We don’t go out and decide that this property could use a playground and it’s nothing but a bunch of 55 and older folks. We talk to the people and we try to find out what would bring value to them.

One of the big pushes that we’ve got right now is we’ve got one of our managers looking at every property and basically trying to figure out what will bring value to the community. When I mean value to the community, it means something that—of course, COVID notwithstanding—will bring the community together because we have communities where folks are isolated. They don’t really talk to one another. They may have a friend, one or two in the park. Then we have other parks where everyone seems to hang out and everyone knows one another. They visit each other.

The properties run so much easier when there’s that community aspect. We’re really looking at opportunities for vacant spaces, or just vacant areas in the property to try to have community-building type objects or whatever it might be. Whether it’s just a little covered area with some picnic tables or something that brings the community together so they’re all looking out for one another. They all know one another and they’re watching out for one another.

We’re also trying to increase our communications with our tenants because typically, we had that funnel from the on-site personnel to the upper management or the middle management. Now, we’re trying to open it up so that there’s more communication between the mid-management and the tenants so that we can hear them and they can feel heard, and so that we can act more quickly, make them happier, and make them stickier. In reality, it’s what it does.

Andrew: Yeah, tenant longevity. That’s the most important.

Paul: It’s a big one.

Andrew: Tell us, Paul, what does the perfect mobile home park look like in your eyes?

Paul: I would say the perfect mobile home park is in a metro of at least 1,000,000, 1,000,000+. I would say at purchase, it has depressed rents that are somewhere in the neighborhood of $75 or $100 low. Maybe it doesn’t have the utilities—the water and sewer billed back. It’s got good occupancy and lots of tenants that have been there a long time. Most of them own their own homes and haven’t paid for them outright. The surrounding area has very high home prices. I’d say that park has at least one 125-150 spaces. At purchase, that would be the perfect property.

On the other side, from operations—something we’ve owned a while—the perfect park is one that’s obviously completely full. Most, if not all the tenants, own their own homes, whether it be through some debt on the home, or they’ve got them paid off.

Again, going back to that community aspect, if I’ve not been to that park or folks don’t know me there and I pull up, I step out, and I walk up to a home or something like that, or go look at something, immediately, someone’s on me. Who are you? What are you doing here?

I’ve had that happen and I’ve explained to the people who I am. Immediately, they want to apologize and I tell them, please don’t apologize. This is what we want. You’re watching out for your neighbors. I pull in here, you want to know who I am, what I’m doing here because you’ve never seen me here before. That’s fantastic. That’s great.

I think that a property that has good tenants that are obeying the rules. They’re in their forever home, so they’re not going anywhere. They don’t plan on moving anytime soon. They own their home. Those are ideal, and either it’s a larger park or it’s very close to another larger park.

Andrew: That sounds like a heck of a park to me. I wanted to ask you about the manufactured home loans. I know you’ve done some of those with PEP Lending. I know you had another company that you’ve used or a credit union. Could you share a little bit about your experience with them and what that looks like?

Paul: Sure. If people are looking at putting third party debt on properties, they really want to look into all the options out there. Pretty much everyone knows about 21st Mortgage and they have a good product. But I will say—regarding 21st Mortgage—is that they have a good product depending on what area you’re in.

The tenant-based, it may not work for 21st. There are other options out there. We’ve had a lot of great success with Oxford, and some other lenders like Principal Equity Partners. They’re all slightly different.

The number of chattel lenders in the business has grown substantially. There are so many more today than there were when I first started. But they’re not all apples to apple comparisons. You really have to contact as many as possible and find out what the differences are.

As far as I know, I believe Triad is actually working on coming out with a nonrecourse product, so I’m really excited about that. I’m going to keep in touch with them to see what that’s about. But for the most part, they’re all recourse at this point, and they’re recourse in different ways.

For instance, you are underwriting the payments with 21st Mortgage, whereas you’re underwriting the balance with Principal Equity Partners. That’s a big difference. I’m not saying one is better than the other, but it really has to be thought through. If you have to pay off the home, depending on how much it is, you have to be prepared to do that.

Going back to what I was mentioning regarding 21st, it’s not that they don’t have a good product, but it can be a little bit tougher for some tenants to be able to get approved through 21st. Looking at other companies that look at tenants differently, that doesn’t put credit is high on the list of qualifying attributes, that’s important as well.

For instance, Principal Equity Partners look at job history and payment history. For the most part, they really don’t care about your credit history, and for most people that have family parks, these folks are not coming in with great credit. In fact, we’ve had to rethink some of our procedures as far as credit goes because if you’re trying to find a tenant and someone comes in and their credit is 480 and you’ve got it cut off at 500, you may be missing out on a great tenant. You really have to look closely at why they have such poor credit.

Working with lenders that are willing to do that like Oxford and Principal Equity Partners is really important if you’re in an area where there’s a lot of that. 21st is great because they typically will pay for more than some of the others. They pay for the setup, for instance, whereas Legacy won’t pay for the setup. They’ll pay for the invoice and the HVAC. There are just so many different products out there. The most important thing is to learn as much as possible about at least half a dozen of them that are available in your area and then make more than one available to your tenants.

Ideally, we have three available on each property because if we like 21st the most, if the prospect is approved, great. If they don’t, we want to have a fallback plan. In reality, if we’re trying to push something, you have to be very careful with some of the laws that are out there where you don’t want it to seem like you’re steering them to a particular lender anyway. It’s a good idea—from a liability aspect—to have more than one lender available.

Many people will underwrite these things themselves through either investment pools, which is fine, or on their books with their property. We do that when we have to. But typically, I try to look at that as a stepping stone. For instance, if someone comes out and is looking to purchase a home, they apply, and their credit doesn’t quite meet the standards of the lender. Maybe they don’t have quite as big of a down payment as the lender would like, we might give them a short-term option to where they will lease the home from us for a limited time. Then they will have to purchase the property at the end of that term.

In the interim, what we’ll do is we’ll help them build. The property management software that we use will actually report to the big three in order to assist tenants in building their credit. If we can get them in one, two, or three years at the most to a point where that lender can give them that loan, that’s ideal. But just understanding too that even if you have all these products, you may have to carry folks for a little while depending on the scenario.

Andrew: I like that option where you say, hey here are three lenders you can go to. Apply with all of them. It might help them out quite a bit. With regard to pro formas, what have been some of your pro forma mistakes, and then also what have been some pro forma items that you’ve been right on?

Paul: I’d say the biggest mistake with pro forma—and it’s probably going to be the same with a lot of people—is schedule. It’s very difficult. My background is in construction management. I come from that industry. I did that for over 20 years and I can tell you, it’s very seldom that you get on a job that comes in under budget and ahead of schedule. It happens occasionally, but most jobs go beyond schedule. When we’re doing a value add, the schedule has been some of the biggest oversights when trying to figure out how long it is going to take to do this or that.

Another thing is when you’re building your pro forma. For instance, sometimes if the schedule is going to be farther out, you have to take certain things into account. We’ve had certain vendors, for instance, where we had all these quotes upfront, we built this pro forma, and then something happened where their material costs increased dramatically like with COVID. You’ve got good numbers, but let’s say your bids are only good for 30 or 60 days, and you’re coming back 90, 120 days later. All of a sudden their asphalt has gone up 30% or wood has gone up 60%. Those are some misses.

Can you fix those ones? Pretty much you can’t, because you need a crystal ball to be able to fix that. But being a little more conservative on schedule is something that they’ve learned to do. Also on the cost to where if I’m getting bids, we certainly don’t pick the lowest bids and throw those in the pro forma. That’s a big mistake because if you go through the process of vetting a contractor here that’s the lowest and there are great contractors, fine.

But many times, what you’ll find is that the lowest-priced contractor really doesn’t have everything in the bid, and you probably didn’t build that out or spend the time to vet all that out when you were building the pro forma.

Some of the pro forma items that we’ve hit or exceeded, for the most part, I try to be a little conservative on rent raises. It seems in the last couple of years, I’ve undershot that quite a bit, which is obviously a good thing because of the fact that it was hard three or four years ago to see how quickly the consolidation has driven rents upward. That’s a good thing.

Today, I wouldn’t count on it necessarily. I’d still be conservative on those fronts. But if you’re putting together something that is a lot of value at a lot of construction work, make sure you’re conservative on those time estimates, and make sure you’re not just taking the lowest bidder. Not necessarily that you have to vet the contractors out, but maybe take the second-highest or even the highest depending on what it is.

I’ve always added at least 15% to every budget just for discovery because discovery will kill you. You go in to replace a section of pipe and you have to keep chasing it. You always have to have some extra fluff in there. Another thing is that, basically, if you’re moving a lot of homes in, you want to be very careful.

Andrew: I was going to ask you. Tell us about infill. Do you manage that yourself? Do you have a team that manages that? How many homes do you bring in?

Paul: Yeah, I manage that myself. This year, here in the next few months, we’ll probably have two dozen homes coming in. I would say that this year, we’ll probably have 50 homes moved in, maybe 60 tops. But when it comes to moving homes in, one of the things that, early on, I looked at was if we bring in six homes, will we be able to sell these off, and then utilize that money to start bringing in six more homes?

It’s a little dangerous because of the fact that, as I was telling you before, if you get a bunch of prospects, they come in, and they’re all good with the 21st century, Oxford, or something like that, you get all your cashback. That works beautifully. No problem. The problem comes in when these tenants cannot get that financing and you have to have a lease option.

Well, now where’s all that cash? Well, it’s tied up until you get that third party debt converted. You have to be really careful about that. I would always rather go to my investors and say that we want to fund most, if not all these homes right upfront.

Now if we don’t need that money because of the fact that we’re able to churn, that’s great. But don’t count on that churn until you really understand that market. Maybe until you’ve sold a dozen homes in that market and you can see and you’re sure that you can get that third party debt to allow that churn. Because if you can’t get that third party debt, your only other option is to carry them until such time when you can get the third party debt. Don’t count on that churn too much.

Andrew: It just can lengthen your time of the turn around if you have to sit around and wait. Awesome man. Well, Paul, thank you so much for coming on the show. How can the listeners get ahold of you if they would like to do so?

Paul: Well, they can visit our website. That’s It’s plural. My email is paul@kpassets. They can get a hold of me that way. The company number is (219) 595-2655.

Andrew: Awesome. Well, thank you so much for coming on the show, Paul. It was a pleasure having you.

Paul: Thank you. I appreciate you having me.

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

Andrew is a passionate commercial real estate investor, husband, father and fitness fanatic. His specialty is in acquiring and operating manufactured housing communities. Visit for more details on Andrew's story.

Keel Team provides unique opportunities for passive investors to enter the mobile home park asset class without having to deal with the headaches of tenants, toilets or trash.


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