Alex and Steve came to Mobile Home Park Boot Camp in 2017 following a decision forged on a vacation in Japan. They pursued their joint dream of building a portfolio of mobile home parks and how own seven properties with two more under contract. How did they grow so successfully so fast? That’s the focus of this call. You’re going to hear all about how they found and financed each property, as well as raised the net income. But it doesn’t stop there. Lessons learned will abound, as well as tips and predictions on the future.
Frank Rolfe serves as the host of this conversation, and that means the focus and fast pace that you’ve come to expect. He will also make sure that the main points are covered and the lessons learned are abundant.
From Vacation To Vocation: The Story of Alex And Steve - Transcript
Frank Rolfe: I have with us Alex and Steve, two park owners who, not that long ago, had no parks and then started learning about the industry back in 2017 and have done phenomenally well. They now have seven mobile home parks under ownership, and two more under contract. And they have a very, very fascinating story. So Alex is here. Are you guys here with us?
00:30
Alex & Steve:Yes, we are.
00:31
Frank Rolfe: Alright, well, let's start off with how you came to even think about mobile home park investing. It's a strange concept. So what was the initial catalyst? What was the grain of sand that created the pearl in the oyster here? What was the thing that made you first contemplate the industry?
00:51
Steve: It's a fun story. I'm going to start off first. This is Steve. Alex and I have been friends for probably over 20 years, and he was running a pretty big business. And I was operating a pretty large business myself. And we went on a trip together, just a vacation with our wives, and somehow, some way Alex brought it up to my attention that he's got a friend who's in the industry. And he said, "Is this something that you would want to take a look at?" And I kind of knew that I was going to be leaving the assisted living world, which is where I spend about 13 years of my life running a very large facility. And he said, "Is this something you're interested in? And if it is, let's take a class with Frank and Dave, and see if we can turn it into something." And I said, Absolutely. Sounds interesting. And when we got back from our trip in Japan, we flew to Vegas, took your course, and just started plugging along. That's the beginning of my story.
01:54
Alex: Yeah, and as soon as we left the course, we started learning the process and reading the manuals, and we literally went into maybe 10 or 15 contracts within the first eight, nine months, kissed a lot of frogs, before we bought our first deal. So it wasn't a simple process. But it took a lot of determination. But we were able to buy our first deal, after you know, letting go a whole bunch of deals that were awful. So it took it took a while. But after the first park, it was a lot easier.
02:31
Frank Rolfe: Okay, let's go over these deals. You just did a very, very high level at 5,000 foot elevation on the seven that you currently own. Can you go over, A how you found them? And then B how you finance them? Because those are two critical items that most people are always fascinated with. So how did you find each one of them and how did you finance each one? Like was it bank debt, seller carry, that kind of stuff.
02:59
Steve: So all of our parks are in Iowa scattered across the large cities in Iowa. And the very first one was literally cold calling. It was an absolute accident. And once I finally got to grandpa direct, I actually took a flight to Waterloo, Iowa. I had the pleasure of meeting grandpa, we signed on a napkin in a bar. That was after the first interaction. We spent about five hours together driving his property. He showed me the city, he showed me all the other assets he owned in that town, we clicked. And when I came back home, Alex was somewhat in disbelief because the financing was very complicated. No bank was going to give us a loan on that property. And so when I called grandpa back from LA, which is where we live, he seller financed force.
04:05
Frank Rolfe: So the deal it was a whole lot of bonding, transpired right, so I've had those same kinds of meetings where it's in the car. And then once you've hit that level of bonding then all kinds of magical things happen. So okay, go ahead.
04:21
Alex: Yeah, the park was in pretty rough shape, and the grandpa was taking cash. And, you know, like there was zero chance we were able to get bank financing for it. And because of Steve's bond and building that relationship, the grandpa was confident enough to give us seller financing for that first park.
04:45
Frank Rolfe: Okay, got it. So tell us about the second park.
04:48
Steve: The second park was an absolute chance, because we were already in that town. I started traveling to Iowa a little bit more frequently, understanding that obviously, now we had a purpose in that town. We had a park to look after. And so what ended up happening is I started to meet some folks on the ground, got a hold of a gentleman who has a partner also. They've owned multiple parks, we started talking, kind of got to know them a little bit more. And within the year, we ended up buying one of their parks, and that park we financed with the bank.
05:31
Frank Rolfe: Okay, and then tell me about the third park.
05:36
Steve: The third park is fascinating. Same idea. So one of our electricians or plumbers, I don't remember one of the relationships that we built over that first year, year and a half, I started kind of talking to him and saying, "Look, you meet a lot of park owners, you handle a lot of business within the community. If anything comes across your table, do me a favor, make the introduction, and I'll do the rest." And he said, "Absolutely. I like working with you guys. And you guys are straight up, guys. I'll make the intro. And when I do, the rest is up to you." So I ended up meeting a husband and wife team who happened to own a park. And it actually worked out beautiful for us because you guys did diligence on that park. And because we were students of your university, you guys were extremely helpful in helping us with the due diligence. These folks ended up taking me out to lunch in a town of about 100 people in the middle of nowhere. I can tell you honestly, I was genuinely concerned for my life. And I called my wife on the way there and said, "If you don't hear from me, here's the last place I'm at. You can find me there." We end up going to a terrible restaurant where I couldn't eat any of the food. I just had a coke. And we signed the contract in that restaurant on the table. And that was also bank financing.
07:08
Frank Rolfe: Got it. You do a lot of contract contracts done on napkins it sounds like. So let's go to the next park.
07:14
Steve: And so that's the next one. Alex, where's the next one, Cedar Rapids?
07:22
Alex: Yes, it is Cedar Rapids.
07:24
Steve: So in Cedar, so we ended up basically, you know, going to Iowa. Now I'm going to Iowa fairly frequently probably like three, four times a year, keep talking to more and more people. I get in touch with a gentleman who owned three parks, two of them in Cedar Rapids, and one was on the outskirts. And I give him a call, I can't get in touch with them. He's out on vacation. He gets back from vacation, I call him again. He says, "Yeah, I've got a park for sale." I said, "You know what, I'll be on a flight the next morning. " I was on a flight the next morning, I land in Cedar Rapids. We meet, we do a walk through. This is a sophisticated seller and he was not looking for seller financing. But after we spent some time together and again, I mean, I've been to his house, I saw the properties. We're spending real time together at this point. And I convinced him to give us pretty favorable terms for us on seller financing. And because he was an educated seller, he understood that he was going to be making a nice interest payment off of all of this. So he said, okay, he sold us one park. And I asked him about his second park. And he said, "I will sell you guys the second park, but let's work together for a little bit. See how it all plays out." And eight months later, we ended up purchasing his second park, which is about five miles away.
08:50
Alex: And with that original, with the first park that we bought, we actually put in a contract that he must sell us the second park within a year. Otherwise, if he doesn't sell it, he will have to give us $100,000 cash, basically.
09:06
Frank Rolfe: Wow. That's impressive. Okay. All right. Tell us about the next one.
09:16
Alex: I think the next one is basically the folks that we bought our third park from, they called us and said we had such a pleasure dealing with you directly without going to a broker, would you like to buy our second park. And we literally closed on that park within 30 days because at that point where we started to have a great relationship with a local bank in Iowa, that they're literally giving us a blank check. They said, "Anytime you guys have a park, anything you want to buy, if it makes sense to you, it makes sense to us. We'll give you financing." So on deals in Iowa now, we can close within 60 days easily. And those guys called us back. Actually, one of the parts we were in contract with, they called us again and said, "Okay, now we're willing to sell you our third park." So we're about to close on that one within the next 30 days or so.
10:15
Frank Rolfe: Got it, and I think that's six parks right? So are we on the seventh I think? Tell us about the seventh park.
10:27
Alex: The seventh park is actually the only park that we bought through a broker. And that was our first experience dealing with a broker. And closing with a broker, it was a lot more complicated than dealing with the grandpa directly, a lot more hoops to jump through and all that stuff. And we were… there were 27, or how many Steve bids on that part?
10:55
Steve: 27, yeah.
10:57
Alex: Yeah, 27 bids on that park, and we weren't even the highest offer, but due to our relationship with the bank, and because we had already so many parks in Iowa, and we gave the previous owners phone numbers to the seller, and our bankers phone number to the seller, he called them and they said how good an experience they had selling parks to us, he chose us to sell us apart, even though we're $150,000 below the highest offer.
11:31
Frank Rolfe: Definitely, we've done that same thing. We frequently give people former sellers phone numbers of testimonials. That's a huge, huge asset to have. So tell people why you like Iowa so much. We're also huge fans of Iowa. What is it about Iowa that turns you on?
11:48
Steve: I mean, first this is Steve, first and foremost, my conversations with you over the years have been pretty extensive. I've seen all of your parks in Iowa. Our buddy has had multiple parks at Iowa. And once we got into Iowa, so you know, the big guys already did their diligence, obviously you guys have and if you're comfortable with it, we are as well. But the biggest thing after that is because we have so much in Iowa, and we have a presence there, it really is just a good place to do business. It's very favorable tenant laws, actually owner laws, right? So, evictions are somewhat simple when COVID is not around. Nonpayment of rent as a guaranteed eviction. And just overall very good people, hard working people. And the relationships that we've built have allowed us to expand dramatically and to have guys do service for us like the plumbers, like the electricians, like the air conditioning guys. Just hard working guys that make our jobs a little bit easier when we need stuff done in that state.
12:56
Frank Rolfe: And let's go back in time when you bought the first part, what kind of stereotype did you have about mobile home parks and mobile home park residents on the front end? For example, when I bought Glen Haven, I had extremely negative stereotypes on the industry, just from what I'd seen on TV. So I just assumed that everyone in a mobile home park was damaged goods, nutty, dangerous, all the things you see on TV all the time.
13:28
Alex: Yeah, I got to tell you so because my friend already owned multiple parks. He told me this business is great. And I'm like, and I sold, I was in logistics, and I sold my logistics company, and I had cash to invest. And I asked him, can I just give you money and invest? Let me invest in you buying parks. He was like, "No, it doesn't work that way. Take a course and you'll understand why." And then I understood that, you know, finding a deal is literally 75% of the hard work. So that was my first lesson. And number two, when we flew to look at our first park, before we bought it Steve drove me through the park. I looked at him, I said, "I can't do this, bud." It's just it was ugly. It was disgusting. The people looked terrible. And I'm like I can't do this. And he felt the same way that we called our friend and he was like, "Tell me the city, tell me how many lots, tell me is it city water city sewer?" We said yes, yes, yes. He was like, "Don't even think about it, buy it." I'm like, really, he was like buy it. So because our initial feeling that you know, the people were kind of disgusting and disturbing and the place looked ugly. It didn't really matter as long as you buy it for the right price in the right city and with the right infrastructure. You can always turn it around and get better tenants, and fix it up and make it look a lot better. So that was our lesson from our first initial good look at the park, you know.
15:14
Frank Rolfe: And have you found over time that your perception has changed on the residents?
15:19
Steve: 100%.
15:22
Alex: 100%. It's, even if we buy a park that's kind of rough, you could always turn it around. And if you clean it up, good people will come. Good, hard working people, we run background checks. So we're getting a lot better clientele, it depends how you run the park. And you can always get good people to live in the park.
15:44
Frank Rolfe: Totally, totally agree. Well, tell me tell me some of your lessons learned. I mean, you've been hugely successful since 2017, bought a lot of parks. What are some of the key takeaways now that you're a larger scale park owner? What are some of the underlying truths about the business that you've learned you may have not known on the front end? Or that you think most people should know about it?
16:09
Alex: I think… Go ahead, Steve. You start.
16:10
Steve: Well, what I was going to say is that first and foremost, that the information that you guys taught us in Vegas, when we took that, you can't… it's hard to explain to a newbie that's never done this before, how valuable all of that information is. The fact that you guys drove us through a couple of parks in Vegas still is in my mind, because I have a vivid picture of those parks, and they were very, very difficult parks. Like a guy was trying to stick a couch inside of a car, you know, it's those types of moments they stuck with me. And so once we started to look at parks as a whole, we started to really understand the differences between the lower grade and the higher grade parks. So that's number one. Number two is look, somebody who has never been in this industry before, they really can't comprehend what it's like. Everybody's thinking a trailer park is just the disaster, people are getting shot, there's drugs, there's all this bad stuff happening. But as you move forward through the process, you start to really understand this is incredible housing opportunities for people that just don't have a lot of money. It doesn't mean that they have to be bad, it doesn't have to be, you know, there doesn't have to be drugs, it doesn't have to be rapists and pedophiles. Really, we're learning that the parks really can become an incredible asset for not only the people that live in that park, because we can create that environment for us. And we're starting to really understand what you can do with it as you get bigger and you get better at it. Your class was, you know, the end all be all. I don't think you can do this without learning from the big guys, which is you. And the fact that I'm able to pick up the phone, call and ask whatever questions we have about a deal that's upcoming, I mean, that's priceless. So that's just how I feel about it.
18:07
Alex: And what I've learned you're as good of an operator because we don't live in a city, you know, like we live 2,000 miles away, you're as good an operator as the help and the management you hire. We were blessed with being able to hire the right people and the first lesson that we learn in your course was find the nicest unit in the park, knock on the door and see if they can be a manager. And that's precisely how we found every manager that we ever had working for us. Having the right management in the park makes things so much easier, so much smoother. Basically people that care about the environment they live in and want to make the park better and they work for you, that's just a win/win. We were able to find the right management which made our job easier and made the parks look better. And if you have the right management your job is so much easier because you know we're not there. It's a lot harder to do if you're not there.
19:19
Frank Rolfe: That makes total sense. And tell people on the, you know people are always curious on the how you underwrote your deals. What have you learned about underwriting deals to remain competitive, which clearly you've done a great job of to buy so many parks? How do you remain competitive with pricing yet still maintain really good upside? What do you model? Do you model after the first rent increase or what have you seen as far as economic forecasting?
19:54
Steve: Well, I mean, we always we always look at what the housing market looks around the park that we're buying. So if we're seeing, you know, our first park we bought his lot rent was $200, and the nearest lot rent everywhere, was $300 to $325. And we paid him based on the $200 lot rent, while knowing that we're going to increase it to $300, within the first two or three years easily without even thinking about it, maybe even sooner. So we base our price, not only on what the person is trying to sell it for, but also on the market that's around the park. So that's, that's been really helpful to us. Not looking at, you know, somebody that's asking $200 lot rent but asking $30,000 for a lot, it's still not out of the question for us to buy it, because we know that our first lot rent increase could be at $275, from day one. So that's how we base our pricing on not only the what the current lot rent is, but like you said, the future lot rents based on the market in the area.
21:07
Frank Rolfe: And you talk about hiring being so critical, which it is, as far as success, having a really good manager. What are some of your lessons learned on hiring the right people to manage the properties appropriately?
21:20
Steve: We've been pretty fortunate to be honest with you, because a lot of our parks are concentrated within five miles of each other. So that's been a huge thing for us. We bought the first park, and then the second and third park only happened to be four miles away. So when we picked the manager for our very first park, learning with her together and her husband, and having them basically take care of our first one, they had a car, we approached them and said, "Look, we're adding another asset to the portfolio. Come with us take a look at it, do you feel comfortable? Is this something you think you can tackle?" And they were very excited, very eager, they really liked working with us. And they understood that as we add more assets, if they can run them, they make more money. Well, it turned out that they were able to run four of the parks in the area for us. So we really didn't have four separate managers, we had one manager that was handling four properties. When we picked up our next portfolio, basically, our next little package which was two parks in Cedar Rapids, one manager ended up running those two properties as well. She actually was an assistant manager of a KC store in the city, she quit her job to take on these two parks, and they are probably one of our better run parks, those two particular ones. And when we move to the next city, again, we found the best possible home. You've also got to remember we have very good relationships with the sellers, right, that's, that's like a huge thing that we do is we build a real rapport with the sellers. And by the time we're done doing our 60 days of diligence, you know, between the 30 days of checking the property and the financing, because we have properties in Iowa, I'll come out an extra time and meet with those owners face to face an extra time and they're so comfortable at that point. And Alex and I actually met one of the owners together, where at night, we went to meet our future manager together, which was a very unique scenario because she, you know, we have to downplay who we are what we are, she's in the dark, the owners asking us "Don't say anything extra because you don't own the park yet." But we can't go back home without knowing that we're going to have someone to run it. And so we've been blessed and fortunate in that the owners that are selling this stuff to us, they're kind of giving us inside information as to who they think would be the best candidate, because they know what we're looking for. And we're pretty good at describing to them what we expect. And so it really has worked out.
24:07
Frank Rolfe: And let me ask you this as you grow, how do you see that management structure evolving? Are there any things you anticipate changing or greater efficiencies you can achieve as you get larger?
24:21
Alex: So we decided to make the management that runs Cedar Rapids, because we see how those parks are functioning better than any other park, we decided to make her the general manager of all parks. So once a week, she takes a drive to different parks. One day a week she drives one direction, one day a week she drives the other direction for other parks. So she's now managing the managers of other parts. So we have another buffer between us and the manager. So most of the time, we just talked to her about all other parks. She's like the general manager of other managers and that has been really helpful, having another layer between us and managers. The more layers you have, and somebody who's successful is training other managers and making sure they do things the way we like it, it's really been helpful. And I think the more you grow, the more you would need managers to manage other managers. I think that's the lesson we learned from that park.
25:33
Frank Rolfe: How much time per week would you guys say you spend on average, per park? You know, a couple hours, four hours, what do you what do you think is appropriate? If someone is looking at buying a mobile home park, how much time should they allocate do you think just for the management of the property? What would you say weekly?
25:57
Alex: I think it really depends on what kind of parks you're buying. If you're buying a park with a lot of park owned homes that are in rough shape that you will have to turn is going to take a lot of time, a lot of daily time and daily management. If you're buying, you know, a park that's mostly tenant owned homes, it really doesn't take that long. So it really depends on a lot of factors. But I would say we spend a lot of time, me and Steve, on the phone with the managers, and vendors and stuff like that. But most of the time is spent on finding new properties. Because that's the hardest part of this business is finding new properties to purchase. But as far as my daily management of parks, it all depends if there's a lot of park owned homes and infrastructure issues. But if not, I want to say you can spend easily, 20 hours a week if the parks are structured correctly, and you have right management. 500 lots you could probably manage within 30-40 hours a week. That's my estimate.
27:16
Frank Rolfe: Would you say that's your own personal time or do you mean cumulative with the folks in the field?
27:22
Alex: No, our own personal time spent on the phone between me and Steve and management, and making sure things are correct. And, you know, dealing with the vendors, I would say at least 20 hours a week.
27:38
Frank Rolfe: Okay, and that's spread out over-
27:40
Steve: We're pretty engaged, Frank. And also remember we have a pretty extensive portfolio across one state. And we are pretty engaged, right? So we have, you know, we're laying down roads, we're constantly working on plumbing, trees, and all this other stuff. So we like to be involved in all of that. And we do talk to all the vendors and constantly talking to managers, but in reality probably two to three hours a day in the morning we put on the phone where we talk to you know, we've got evictions happening, we've got a lawsuit here, a lawsuit there, somebody's dog bit somebody else, all these little things. We kind of are involved in talking to our manager just to know what's happening. Probably two to three hours a day easily. And yeah, which you know, per week on a portfolio like ours, yeah that's probably 20 hours.
28:33
Frank Rolfe: Gotcha. So if you work it out per Park, it's probably about an average of about three to four hours a week per Park.
28:39
Steve: For sure.
28:40
Alex: That sounds about right. Yes.
28:43
Frank Rolfe: Okay. And let's talk to me about utilities. Do you have any private utilities in those seven parks so far? You're 100% and city water, city sewer?
28:54
Alex: 100% city water city sewer in two of our parks. We have lift stations basically-
29:01
Frank Rolfe: Yeah. But that to me that's still, that's of all the private water sewer number one it's not private and number two-
29:13
Steve: We followed your guys' lead Frank.
29:14
Frank Rolfe: … it doesn't concern you.
29:16
Alex: And you know what, even the lift stations, they break and they're a lot of money to fix.
29:25
Frank Rolfe: Yeah, no, absolutely. Compared to the other items, they're the best of the crew?
29:31
Steve: Yeah. So we really followed your lead.
29:33
Frank Rolfe: Good. So what was your worst day ever? Whether it was on park one, park five, park seven, what was the day when you said man-
29:38
Steve: Yeah, we've got a story. So Cedar Rapids. I roll in. This was probably half a year ago or so. I roll into town, I'm meeting with the managers, I'm seeing the parks, blah, blah, blah. I walk into one of the parks and it really smells like feces. Like it really, really smells like feces. And about two miles away from our property, there is a city plant where they process sewage. So I'm thinking, wow, the winds must be strong. Something's going on, I can really smell it. Well, right as I say that and think that to myself, the health department rolls into the park. Okay. And he rolls in. Luckily, I happened to be there and he goes to me, "You've got a problem here." And I'm like, "What are you talking about?" I had no idea. I just got there, he just got there, and I'm like, "What are you talking about?" And he goes, "Well, you've got a real problem here." I said, "Okay, well, before this escalates into something crazy, why don't you walk me through it? I'm the owner. I'd be happy to take care of whatever issues we have." He goes, "Well, this is going to cost you an exorbitant amount of money. The DNR is going to get involved. This is an absolute disaster." I go "Look, sir, let's take a step back. We just met, what are you talking about?" He goes, "You have sewage that spilled from a lift station into a local river." Not the river, but it's the creek, right? The Creek, a mile away from the creek runs into the Cedar River.
So what I found out is we have an AT&T tower on our property. And AT&T Tower was doing construction on our property, basically. They called one call in Iowa and they ruptured an electrical line that controls the motor for the lift station. Except the problem is they never told us that they hit the line, they just basically called it's called Alliant Energy, they call them, cut the line cut the power. What they didn't realize is they cut the power to lift station. So all of the sewage was spilling over. But it was spilling underground, so nobody could see it. There's an elbow joint that comes out of the septic tank that's there where the lift station is and so it broke the elbow in the pipe. And that started seeping into the creek.
The damages potentially had I not been there would have been in the many hundreds of thousands. And the DNR, which is the Department of Natural Resources, they control all of the water flow in Iowa, specifically as it flows into the Cedar River. So that little incident costs us about $30,000. And we are fortunate that I was there to catch it in time and to have the relationships that I have. I had guys come out. It took eight eight-wheel trucks of water and chemical to clean the creek to the desired basically specifications for the health department. That is probably our craziest story up to date.
33:11
Frank Rolfe: And AT&T for any of that. I mean, if AT&T is the one that-
33:15
Steve: We've been fighting with them for a while, and the owner of the park that sold it to us, he got taken for a ride and AT&T wrote an incredible contract that was completely in their favor. And all he did was sign it.
33:36
Alex: We sued AT&T. We hired a really good law firm and we got some money out of them, but not even close to covering the entire expense. And the crazy part is it was raining the next day. If Steve wasn't there and the rain would have taken all the feces down to the river and would have fallen into the river, we would have been fined I think like $10,000 a day or something crazy. Yeah, it would have been like half a million dollars to clean this thing out. Because the feces would have made it to the river.
34:12
Frank Rolfe: Well, you know, we've just sold everyone listening never to own a lift station. So it's definitely worth it when you get involved in need in the sewage disposal business-
34:23
Steve: You just have to know. You just have to know but this, so we've been we've been very fortunate with all of these events that have taken place because look, we also ran into Derecho. I don't know if you heard of the Derecho, I'm sure you have. But I don't know if your listeners have. The Derecho was an inland tornado. It was an inland, no not a tornado, it's the one that comes off the off the ocean. So it's a hurricane inland, an inland hurricanes that took out 85% of all trees in the city of Cedar Rapids. It tore out all of the electrical poles in one of our parks, all of them. We had to replace every single electrical pole in the park. So we also encountered that, and that's a once in a 500 year event, as we've been told. So that was fascinating. So we've encountered a lot of interesting things. Luckily, Alex and I are quick on our feet. We're fortunate to know, you know, real estate in general. And we're quick to move. I mean, I was I came in to the city two weeks later, and had an electrical team on standby ready to go. So we got the power back up, but the city is still cleaning up trees today. And we're, you know, nine months out.
35:48
Frank Rolfe: Right. Tell me your what was your best day ever? What was the day you were like, wow, this is the best thing I ever did.
35:56
Alex: I think the best day ever is every single month when we collect the rent checks, and the best day ever is every single time we buy a new park, I think ever every single that's the best day ever.
36:08
Steve: That's the best day ever when we sign on the dotted line when we know we're actually closing escrow. That's probably the best day ever.
36:14
Frank Rolfe: What as far, I mean again, Iowa is a red state, but it's getting a little purplish, right? There's that one crazy state legislator that in every session proposes rent control and all kinds of stuff. So there's a little bit of money floating around Iowa. Have you had any cities pushback on allowing you to, for example, fill vacant lots, or have you been fortunate enough to avoid any issues like that?
36:43
Steve: I think we've been pretty fortunate. We haven't run into anything.
36:46
Alex: We haven't had any issues. I mean, the great part about Iowa there's a there's a really good lobby for our type of business and, they really been doing a great job in stopping these crazy new laws that are trying to pass.
37:06
Frank Rolfe: Yeah, Joe Kelly is, yeah he's awesome. You know, it was strange this past year when you had that in, you know, I forget the guys name, his only claim to fame is he won the Iowa Lottery. Right. So since he won the lottery, he thinks he's a genius even though he has absolutely no business experience at all. I think he was a postal delivery carrier. But so this past session, he was able to get The New Yorker magazine to write an article negative on the industry, because trying to help him in his quest to create Iowa rent control and who knows what all. So the guy is, he's well funded, and he's extremely misguided. So I didn't know if you'd had any issue there. You know, there are some parts of Iowa, sometimes the cities will push back on, because they're starting to show, they're getting a little blue on the fringes there. But I just didn't know if you all had any real life stories of any issues like that. I'm glad you don't.
38:18
Steve: Jody McDougall works for Davis Brown, right. Davis Brown just got purchased by Dentons. Okay. My wife, who happens to be a commercial real estate attorney for a nationwide law firm happens to know Dentons very much because they are on the opposing side frequently during their cases, for real estate transactions. Dentons is a worldwide law firm and Jody is one of the top partners now in Des Moines. So anybody with real deep pockets when they run into these guys, these guys have all of the pockets. So I can't envision some Joe Schmoe even with deep pockets having enough power and the know how to navigate past these guys. So that's kind of what we're betting on.
39:08
Frank Rolfe: Yeah, and so far he's been 100% unsuccessful. It's just the fact that he lurks around bothers people because with him out if he didn't exist, it would be 100% never any mobile home park items that they've been proposed. But this one guy every session, you know, he drums up a ton. Let me ask you this. I mean, Iowa is obviously a great place to own mobile home parks. We fully agree with that. Will you venture do you think much out of Iowa? What are your future plans? Are you going to keep it standing in Iowa only or what's the plan?
39:50
Steve: I tell Alex all the time that I'm starting to get concerned just because our entire concentration is in one state. And so it's like it's almost like a double edged sword right? We're plugged in all the way into Iowa, we have a full blown infrastructure, people that know us, people that help us, and the managers and everything else, we feel extremely comfortable every time we fly into that state. I don't know the right play here, and I've had this conversation with you on the phone in private, obviously. I don't know. Obviously, I would like to get out of Iowa at some point. But then the question becomes that if we do get out of Iowa, I would probably chase the higher end parks. I wouldn't want to start all over again in a state that we don't know, learning the process the way that we've learned it in Iowa.
40:44
Alex: It would definitely have to be a bigger park. Because we're not going to buy a 50 lot park somewhere in Texas. It just wouldn't make sense financially for us. Because right now we already, because we're concentrated in one area of some of the fixed costs are staying the same because management and stuff like that. It'll be really tough. It would have to be a way larger park. But again, going for a way larger park, you would have to go through a broker. And now you're looking at a five cap, a four cap. And I don't know if that just makes sense, because the parks we're acquiring right now are without brokers just because so many people know us in the state, and they come to us to buy their parks.
41:30
Frank Rolfe: Let me ask you this, you know Iowa has been in the news somewhat with this narrative that raising rents are evil, because you had some large rent increases from other larger companies in Iowa that have bought parks at ridiculously low rent levels and then tried to raise them to market. There's always push back on that. You know, John Oliver even did the segment on how raising rents are evil. He called me the America's biggest a-hole because I tell people-
42:00
Steve: I remember that.
42:01
Frank Rolfe: What would you tell people if anyone said, "Oh, well, you know, these guys are just evil. They're buying these parks in Iowa, they're raising rents and displacing the needy," and all that. What are your thoughts on this whole narrative of the evil landlord and raising rents?
42:20
Steve: We have a similar outlook on it. Alex, if you want to go for it.
42:23
Alex: Yeah, I mean, a lot of times if somebody's charging $200 lot rent, they're not up keeping the park whatsoever. The roads are messed up, the infrastructure is messed up, they're not fixing anything, they don't care about anything because the lot rent is $200. And we do raise lot rents, but we make the parks look and feel a lot better, safer for the tenants. And we provide a better living environment for market rate. We're not going to raise the lot rent, for instance, from $200 to $350 from day one. We'll go slowly, we can take two or three years and go $50 at a time. But within those three years, the park is going to look so much better. So we don't really have any push backs from our tenants when we raise lot rents, because they know they're living in a better place. You know, people are complaining that we're raising lot rents, somebody who's charging $200 lot rent, you can't even rent a shed or a storage unit for $200 now. So it makes no sense. It's just those people were not functioning correctly. So me and Steve, we have no issues raising rents whatsoever, and I don't feel bad about it because we're providing a better environment for tenants to live in.
43:48
Frank Rolfe: Yeah, I totally agree. I mean, the narrative I always tell people is, you know, and I don't know if this is true with your properties, we just basically bring these old properties back to life. I mean, it's not a new concept. People have been doing it in apartments and office, and everywhere they go they're celebrated.
44:07
Steve: Yes, Frank, we saw you do it in Denver, Iowa. Frank, we saw you do it with our own eyes in Denver, Iowa. We drive by that park probably 50 times a day.
44:18
Frank Rolfe: Yeah. Well, I mean, people I know John Oliver has no knowledge of the realities of life I guess. But you know, if you're going to bring old stuff back to life, if you're going to put money back in, if you're going to make it a nice place to live, you're going to have to charge higher rents. I don't know any business in American history that has brought things back to life and not increased the rents. Every restaurant you go to where they do the million dollar renovation, roll out the new menu with the five star chef, those prices are going up. And it's not because they're evil, it's just because you have to.
44:58
Steve: Frank, the problem comes in If you are a conglomerate that just purchased a three, four cap, okay, and you've got investors that you need to report back to and kick money back to, it's very different than Alex and me coming in picking up an 8, 9, 10. Right? We know what's going to happen. We know at what pace we're going to increase it, we know exactly how long it's going to take us to get there. And we know that our tenants are never going to complain, because we're never going to come in at 100% double their rent, that's just not going to happen. That's not how we run shop. Now, if we were picking up three, four caps, and that was the only way for us to make money on that deal, I can see what somebody would do that, but it's just a dangerous game to play. And there's a company that tried that in Iowa, and they got annihilated on the news. They just got destroyed because they tried to double the rent.
45:59
Frank Rolfe: Yeah, no, I believe me, I'm aware. I hear that narrative all of the time. Let me ask you this, I've always been a big proponent of the idea that mobile home park owners are more like a fellowship, it's almost like being a member of some kind of social club or rotary club or something more than just a regular business, because there's so few people in it, that when you find people who are in it it's always refreshing and fun to talk to them. Because they're rare, right? So if people are listening to this, and they say, "Hey, I have a question for Alex and, Steve." If someone wanted to reach out with a question, would it be okay for us to forward their email to you? And would you partake of the fellowship here?
46:53
Steve: Absolutely. We actually got a couple of our friends in the business and helped them buy their first parks.
47:03
Frank Rolfe: That is excellent. And let's talk about the fellowship for a moment here. Have you ever, because you've talked to a lot of mom and pop people who own the parks, even those people who had no interest in selling, have you ever had anyone hang up on you, yell at you, or were they pretty much nice people?
47:24
Steve: Never have I had anybody yell at me or hang up on me. Everybody's been extremely pleasant to deal with. Everybody has been really accommodating. I have zero negative connotations towards any of it.
47:36
Frank Rolfe: And obviously, you've had businesses in other sectors of American business. Have you ever seen a group of people as nice as park owners?
47:47
Alex: No, I have not.
47:48
Frank Rolfe: And why do you think that is? Why are park owners so unusually nice? Because I used to be in the billboard business and people weren't nice at all. My competition and the land owners are not nice.
48:01
Steve: I can give you my personal opinion, which is very different from most, because I ran an assisted living facility. And a lot of my skill set probably comes from that inevitably. I've never thought about it, but I think it does. It's dealing with people, you're constantly dealing with people and you're constantly creating solutions in which they live. So that's where the assisted living business is the closest that I have ever been to the park business where you're constantly engaged with your tenants. Your tenants are not only living there, they're utilizing your space, your infrastructure, sometimes even your homes if you've got the park owned homes. And I think that's where you have to be a people person to be able to talk to people and function within that environment. That's how I see it. I mean, Alex may see it differently. But go ahead, Alex, if you have a different…
48:56
Alex: No, I mean, I see it in a way where some of the deals that we were buying, the grandpas were basically saying these tenants have been my tenants for 20 years, they're my friends, please tell me you're not going to go in and raise lot rents by $150. And started naming names of people, you know, that are on low income and stuff like that. And we had to promise them that we're going to make the keep the park nice. That's how nice these owners are. That's how much they cared about their tenants and their well being that they were even afraid to sell the park when they're already 85 years old. They don't need the park. They'd rather retire without money, but they were afraid to sell it for a lot of money, just because they were afraid that we were going to do something to their tenants. That's how nice these people.
49:44
Frank Rolfe: I gotcha. Let's talk a bit about the future of the industry itself. You know, we're sitting here it's 2021. Where do you see this industry 20 or 30 years into the future? How will it change? Obviously there'll be fewer park for sale for sure that you can buy cheap and bring back to life. But what about the actual product itself? Like you think mobile homes are as good as they'll ever get? I mean, the interiors are pretty good. The exteriors aren't that pretty. That do you think the big break through is? Pretend you're Steve Jobs, and it's the early days of Jobs and he's predicting now well, one day we'll have the whole computer and a phone. How do you think the industry will change in the decades ahead?
50:30
Steve: Well, I always make an example of a trailer park is basically like Bitcoin. You can make any more. They won't allow any more parks. You can't make any more Bitcoin, you're not allowed to make… you can't open up any more parks. So it's a finite number of parks that are there, that will continue going up in price. Now, as far as the homes, the homes themselves, I mean, I'm looking at these new homes, they're looking better and better, and people are willing to live in smaller homes. So the three bedrooms that 1300 square feet, big homes, they're not the fad right now. And I think they're going to make homes a lot better looking, and smaller homes that our people are going to be willing to live in. And let's say if the parks are going to turn into three, four or five star parks, I think educated people that are making, you know, $60- $70,000 a year will be willing to live in these communities, because I think Millennials are super into communities. They want to live in a community. So I believe the future of our industry has a very bright outlook with a lot of improvements. That's what I think.
51:53
Frank Rolfe: Yeah. Can you think of any mega trend that parks are not on the correct side of this at this moment?
51:59
Steve: No, no. Well, weather.
52:03
Frank Rolfe: Okay, I would agree with that. I think weather is a good point. Yep.
52:08
Steve: That's the only one that I see that's a real interesting, damaging deterrent, really, because it's been extremely unpredictable. I mean, when we hit Derecho that was a wake up, that was crazy because that's not something you expect. When Houston got rocked by the storms, that's not something you can predict. The winters are brutal. So I think weather is the big thing. On a positive note, if you can't afford to live in a mobile home park, your next option is a box on the street, which is a scary thought. So at some point down the line, if we've got people that can't afford a decent lifestyle, but they don't want to be homeless and they're hard working, this is really an affordable solution for anyone. And look, there are some really bad parks that nobody should be living in. But it's better than being homeless. And there are some really nice parks that feel like incredible communities where I don't need to pay $500,000 for a home where I can get probably an amazing trailer for $50K.
53:145
Frank Rolfe: Let me ask you guys this, do you think the industry can someday actually regain respect? That's always been the problem historically, since the 70s, is that people who own mobile home parks are considered shameful, and the residents are considered trailer trash. You think it can once again be respectable? How many more years in the future until we were actually getting our respect back like Rodney Dangerfield? How far off?
53:43
Steve: I'll tell you like this. My wife, who happens to be a real estate attorney as I mentioned before, she came home one day and said that Blackstone pulled off a $300 million plus deal. And that shook me a little bit, because for many different reasons, because they're taking parks that Alex and I potentially can no longer buy. They're driving the costs up, they're driving the price up, but what they're also doing I have to believe that these people are going to make a real effort to make their asset a better asset. And when they start promoting it, the way that they're capable of, the way that you guys promote it, the way that Zell promotes it, and now Blackstone is in the game and who else is coming in we don't know. These people have real power to change demographics. They have the power to change marketing, they have the power to change perception on a massive, massive scale. How could they not change the perception of this industry? I just don't see any other way about it now that everybody's engaged.
54:53
Frank Rolfe: Guys, I totally agree with you. And, again, we really appreciate all of your views and thoughts on the industry. So for those listening as well-
55:06
Steve: It all comes from you, Frank.
55:08
Frank Rolfe: Well, I appreciate that. But any anyone who's listening to this and says, Wow, you know, this sounds like interesting stuff. And if you want to reach out to Alex and Steve email, Brandon, who will happily forward it on. And I appreciate you joining the fellowship of spending the time to talk to people.
55:26
Alex: Absolutely, it's a pleasure.
55:27
Frank Rolfe: For no material benefit, other than just the fun of it's kind of like going to a car show where people show up at car shows in the Midwest where I am. And they open their hood and tell people the whole story of the car, answer their questions. People say, "Gee, I don't know, maybe I'd want to buy that classic Camaro." And they'll tell me "Oh, yeah, well, here are the top five things you'd need to know about them. These are the good things. These are the bad things. This is the guy that sells the parts." And people would go to those from other cities and say, "What a weird thing people like standing around, talking to each other with no way to make any money." Well, that's what the whole concept of humans I think is about. That dignity is lost in a lot of other business sectors. But fortunately, it still survives in the mobile home park arena. So we really appreciate you taking the time to be here. So this concludes this lecture series event, but again, very, very thankful to Alex and Steve for being here, sharing their experiences. If you want to reach out to them, by all means email, Brandon. And again, guys, thanks for spending the time. Thanks, everyone for being here tonight. All right. Thank you very much, and we'll talk to everyone again soon.
56:37
Alex: Thank you. Take care. Bye.