Many of the best deals out there come from “contract assignments” – buyers who have placed mobile home parks under contract and then sell those deals to a willing buyer. With many buyers having the capital to make a purchase but lacking the time to pursue the perfect opportunity, the contract assignment business model has been flourishing over the years. In this MobileHomeUniversity.com Lecture Series Event, we’re going to go over the entire process of buying and selling contract assignments, with our guest Jimmy Johnson. This is an important part of the mobile home park industry that few people have ever heard of yet is a win/win for both buyer and seller.
If you want to learn more about mobile home park investing, take the same course Jimmy took which was our Mobile Home Park Investor's Boot Camp. You'll learn how to identify, evaluate, negotiate, perform due diligence on, finance, turn-around and operate mobile home parks. The course is taught by Frank Rolfe who, with his partner Dave Reynolds, is one of the largest owners of mobile home parks in the U.S. To learn more, Click Here or call us at (855) 879-2738.
Mobile Home Park Contract Assignments From A To Z With Jimmy Johnson - Transcript
Frank Rolfe: Welcome to another mobilehomeuniversity.com lecture series event. We're going to be going over Contract Assignments from A to Z, and with me is going to be Jimmy Johnson, a very prolific seller of assignments, that I thought would give us a great perspective her, because I've bought a lot of assignments, but I haven't sold a lot of assignments.
Frank Rolfe: Before we begin, let's start off with just some overview on Contract Assignments. A Contract Assignment is when the buyer ties the property up under contract, and then rather than going forward and buying it themselves, they sell it to another buyer who wants that property for a fee. They are really the unsung heroes of the industry because there's many people out there, ourselves included, who are always looking for great deals and have capital, but we don't have always the deals in plentiful enough form to buy. Some of the best deals we've ever bought came from Contract Assignments.
Frank Rolfe: In fact, in certain years, we paid more than a half a million dollars alone in Contract Assignment fees. It's a part of the industry we thought was very important, and what was equally odd, when Brandon and I were thinking of ideas that were new for the lecture series event, we realized we'd never actually done one on this very necessary and important feature of the industry. Then we thought, "Well, who could we do it with?" We thought, "Well, let's do it with Jimmy Johnson." Who is somebody who went to boot camp, and who has been selling assignments very successfully. We thought he would give a fresh, new perspective to it on the sales side.
Frank Rolfe: Jimmy, are you here with us?
Jimmy Johnson: Yes, I am, Frank. Thanks for having me on.
Frank Rolfe: Well, you bet. Well, I thought we'd break this up into two parts, Jimmy. We'll do A to Z of selling assignments, which is mostly going to be focused on your information on the A to Z of buying assignments, which is going to have a little more of me in it, but I thought before we start that, let's start off with an overview of, who is Jimmy Johnson? Let's turn back the clock and let me ask you, I guess initially, how did you even get interested in Mobile Home Parks to begin with?
Jimmy Johnson: Yep, no, great question. Originally, I started in multi-family, as I think a lot of people maybe do before they transition into Mobile Home Parks, and really enjoyed that. Then I just started to hear people talking about parks, saw a lot of your guys' content and started to do a little research and listening to podcasts and reading books and the forum and whatnot. Then I said, "I really think that this is the road I want to go." Just kind of piqued my interest. Next thing you knew, I jumped in 24/7 into parks, and I'm sure happy I did.
Frank Rolfe: Which boot camp did you attend? How long have you been doing the Contract Assignment stuff?
Jimmy Johnson: I went to the Austin boot camp. I think that was ... What? About five months ago, six months ago.
Frank Rolfe: Okay, all right. Then tell people how many deals you've done so far.
Jimmy Johnson: So far, I've assigned three parks and have two closings actually a week from today, on the first. It will be five as of next week.
Frank Rolfe: You're averaging one a month, right? Since Austin.
Jimmy Johnson: Yep, about one a month. Yeah. Things are really moving and grooving now. I've got those two closings and another four that are closing the month after that.
Frank Rolfe: Wow. Okay. All right. Let's tell people, I guess, the A to Z of selling assignments. Don't give out any of your secrets, because one thing I want to say on the front end here is that everyone who is successful on assignments has traditionally honed their own certain pitch, their own strategy, and I don't want you to give that out. Okay? Because that's not fair, because you created what's working for you. That's really not what we were trying to do on this lecture series event, is not try to tap into, "Okay, how does Jimmy do it? Let's copy what he does". But give people just an overall idea of the very macro basics of the entire assignment process.
Jimmy Johnson: Right, right. I think, yeah, as a lot of people do, don't have too many very secret sauces. I'm doing exactly what you guys teach, building the relationships with sellers, a lot of direct mail marketing, a lot of cold calling, and I think it's ... A lot of the people that I work with and sell assignments to, they're very busy, and they don't have the time to do that, but because I'm doing this essentially full time around the clock, I'm able to really focus on building those relationships with the sellers.
Jimmy Johnson: Whether that starts with the direct mail letter, and then they're reaching out due to that, or if it's just the cold call, those are primarily the two biggest ways that I am getting the leads and the coming in. Then from there, I mean, it's anywhere from probably half a dozen calls with those sellers to maybe 15 total, and it's just call after call, building those relationships, chatting about what they like to do. I mean, I can't tell you how much time I've spent on the phone talking about fishing and hunting with these mom and pops. You've just got to listen, and whatever they want to talk about, you just have to be very personal and really just click with them.
Jimmy Johnson: I think that's really what I've been focusing on, and some of these sellers have become almost friends, because we have had so many calls and have really worked through so many different things.
Frank Rolfe: Once you get the deal and the contract, Jimmy ... And again, for those who are not familiar with this, almost all Mobile Home Park contracts all stipulate and/or assigns. We do that, because every time you buy a park, you typically form an LLC and put it in the LLC. There's every reason that they should all have that. After you get the contract with the and/or assigns language, then how have you been finding buyers for that, and then how have you structured everything?
Jimmy Johnson: Yep. Yeah. Really, as soon as I do have it, especially under contract, I now have a lot of people who, buyers that I speak to on a daily and weekly basis. But really, how I first started with the first few assignments was, whether it was people that I actually met at the boot camp, or really your guys' forum. I posted an intro post on there, saying, "Hey, I just came back from the boot camp. I have, you know, four parks that I'm looking to assign. There was just an overwhelming amount of response from that. I've met people, yes, from the boot camp and from the forum who have went on to buy either past assignments or the current ones. That started it, and now it's a lot of word of mouth. People refer people, and every day, people are calling and emailing, saying, "Hey, I heard you have a lot of parks. You know, I'm working a full-time job, or you know, I just don't have the time to do marketing." It's a good way for them to pick up parks to buy, as well. It's really just spread day after day with people reaching out, but it all started with the forum and just a couple posts on Facebook, and whatnot.
Frank Rolfe: It seems to me, Jimmy, that I think, probably the forum is the number one spot that's going on. Don't you think? Because I see posts on there frequently of deal under contract, deal [inaudible 00:07:12] buy, and there's a flurry of people saying, "DM me." And all that stuff. Which I'm not a millennial, so my technology skills are low. But it looks like wouldn't you say that's probably the number one people are starting these days in doing assignments?
Jimmy Johnson: Yep. Definitely. I mean, I think from a deal perspective, I mean, the bulk of my buyers list and people that I've met have come through the forum. Really, any even personal questions I have, or if somebody comes to me with a question, I always say definitely post that on the forum, because that is basically your one-stop shop just to either get a deal or ask a question about a deal, or even sell your own park. I mean, it's really the place to go to really just meet everybody.
Frank Rolfe: This is one of the great mystical parts of assignments is the pricing, right? Because it's so freeform. Everyone wants it to be all scientific. But I mean, how do you price your assignments, because you can't really just put a flat percent, because that's not really fair to you. Because if you've negotiated a deal really, really cheaply, then obviously, you would deserve an even bigger assignment, because it all revolves in the end around the value of the property. How do you price it?
Frank Rolfe: If someone says, "Hey, Jimmy, I want to buy your assignment." How do you price what your assignment is?
Jimmy Johnson: Yeah, no. That's probably one of the most common questions I get. Like you said, I think people want a very scientific answer, but a lot of it is just the merit of the deal, the size of the deal, as well. I've had one or two of the parks that have already closed, I mean, they were very high cap rate on actual expenses and income and a big difference in how much info the mom and pops can give me. I mean, if they're collecting cash, they're paying expenses in cash, the records are gray. You see where I'm coming from? It's tough to really pin down that exact expense ratio, and whatnot.
Jimmy Johnson: But really, it's a combo of the cap rate, the cash on cash, if there's seller financing or if it's low down, that plays a part in it, as well. I've had people approach and say, "Hey, I'll buy, you know, multiple of yours, 8%, or 9% of the purchase price." It varies and fluctuates, but the biggest thing is just what is that, the cap rate, and what is the cash on cash.
Frank Rolfe: Give people an idea of just dollar size, and don't give them any specifics. But in a macro level, 5,000-foot elevation, most assignments are selling for a range of what to what?
Jimmy Johnson: I would say-
Frank Rolfe: I mean, 20,000 to 100,000? Or what are you seeing out there as far as just roughly the dollar size on a giant macro universe?
Jimmy Johnson: Yeah. Well, the bulk of the parks I'm assigning are in the 20 to 80 space range. In that, I mean, really varying from, I would say, probably 20 to 40,000 is the average for those smaller parks. Then for the bigger park, and once you're getting closer to 100 sites, then 40 to 80,000. But a lot of the smaller parks, if they're quick, easy cash deals, I mean, the assignment fee isn't much, because just the size of the deal and the purchase price. If it's under 200K purchase price, that assignment fee isn't going to be 40, 50,000. I would say the average, though, is 20 to 50, depending on the size of the deal.
Frank Rolfe: Right. You are, as I recall from boot camp, you are acquainted with the legend known as Jeremiah. Correct?
Jimmy Johnson: Yes.
Frank Rolfe: Yeah.
Frank Rolfe: For those who... Right. For people who are saying, "What the heck are you talking about?" It's a guy who ... We never get out his last name, at his own request, but he's based out of Nevada and really was the first superstar that I'm aware of in the assignment business. I mean, we've been buying assignments from Jeremiah for ... oh, my heavens ... 15 plus years at least.
Frank Rolfe: To give people a dollar idea of the scale of the assignment industry. We've had years in which we ... with just us ... [inaudible 00:11:41] single buyer who paid half a million dollars on assignments to Jeremiah. The reason I threw out Jeremiah's name is ... or the concept, to give people and idea of the scale here, because we're talking really serious money in the assignment business, which people don't realize. But it's its own separate industry. It serves an incredibly useful purpose, because many buyers out there, again, have capital, but they don't have the time, or they have not found that lucky seller where they can call them, like Jimmy is doing, and they ultimately will say, "Yeah, okay, I'll sell to you."
Frank Rolfe: They need a deal, and they got the capital. When you assign, what you're basically doing is you're acting almost like a matchmaker between the park owner and the ultimate buyer. It's really a win/win for everybody. But I want people to realize the scale of this, because we're not talking $500 commissions here. We're talking, as Jimmy said, $50,000 commissions, all the way up ... We've paid $100,000 commissions. I think we've paid $200,000 commissions on deals before. It's probably a large dollar industry. Jimmy, you've now found someone who wants to buy, let's say, off the forum, or somebody that you've sold another assignment to, and you've established a price on it. If you have multiple people looking at the assignment, how do you choose which one to go with? What is your methodology where you say, "Well, let's see, yeah, Tom wants it, Sally wants it, Jim wants it. I'm going to go with Sally because blank." What is blank? What makes you want to go with a certain person?
Jimmy Johnson: Right. It's a good problem to have, but I think it's definitely pretty much every assignment that I've had I've had to make that selection. It's just so competitive now. Really, I look for a core four or five things when I am making a decision. Number one is if you already own a park. Somebody who approaches with four or five parks, and they're looking to grow, I mean, I know that they've seen a park before, they've been in it. They know the ins and outs and the nuances, so that's huge for me. But I've also sold to first-time buyers before, which is great.
Jimmy Johnson: But it's really, A, do you own a park? Or at least, what's your real estate experience? Whether multi-family, storage, single-family. I like to always have that intro, call, get the background, and really pin down the experience level. Then next would be what's the plan for the purchase? Is it paying cash? Are you going to get financing? How much time do anticipate? Then the cash buyer who needs 30 days to close is just a lot better for everybody involved, including the seller, than somebody who is going to hope to get financing and need 90 days.
Jimmy Johnson: Third would be just the speed of it. Again, how quick can you get out there, do your own site due diligence? I do a ton of the behind the scenes and due diligence that I can without doing it all. I provide all that and really look for somebody who an move quick and show that they're serious and motivated.
Jimmy Johnson: After those three things, then it's a matter of earnest money, the most you could put down, the better, just to show you have skin in the game and that you're serious. Then lastly, it's the fee. I've had a couple deals before where there was everybody checked all the initial boxes, and it was a matter of who is going to put down the most earnest money and the highest fee, just to secure the deal with their highest and best offer.
Frank Rolfe: Okay. Then, Jimmy, how do you do the paperwork? Someone says, "Yeah. I want to buy an assignment of this deal." What do you do next?
Jimmy Johnson: Yep. I use your guys' assignment contract that you provide in the document library. I use that. Before we execute that, what I do is I show them a copy of the purchase contract, so they can take a look at that. Because essentially, that's what I'm assigning them. I want to answer any questions that they have, really have them take a good look, if they want their attorney to review it. They do that, and then all of the due diligence documents that I have, as well. They take a look through all that and make sure everything looks good. Then that assignment contract is basically filled out with when their due diligence period ends, when their earnest money goes [inaudible 00:16:22], what day the closing is. As you know, it's a simple ... It's a one-page doc.
Jimmy Johnson: As soon as that's ratified, then it's full steam ahead.
Frank Rolfe: Then how do ensure, Jimmy, you get paid? In other words, the deal, obviously, it's in the title company, but how do you make sure that after the agreement and the contract and the whole deal, how do you ensure that you actually get paid?
Jimmy Johnson: Yep. You get paid at closing. There's always the nervous, as with anything, getting to that closing day. I try and help the buyer out as much as possible. I'm there as a resource. Really, I've, from that signing of contract up until closing, helped them with as much or as little as they need. We stay in very fluid conversation. Then to really ensure that the check does come through, I mean, they put down the earnest money with the title company. The title company holds that assignment contract, and it's a part of the closing. It has to be in the closing statement that they're going to pay the assignment fee.
Jimmy Johnson: Luckily, haven't experienced anybody at the end trying not to pay us, because there's just so much of a selection process that goes into the buyer and all of the buyers that I work with, we do come pretty close and hopefully do multiple deals together. I think it's definitely a respect on both ways sort of thing.
Frank Rolfe: Okay, now, one overriding question that I'm sure people are thinking here, which would be logical. You've gone in and created the bonding with mom and pop, they've put it under contract with you. Now what happens when it turns out it is not you as the buyer, it is this third party. Do they get mad at you? How do you work through those issues.
Jimmy Johnson: Yeah. From the start, my first calls and conversations with the seller, whether I'm meeting them in person, it's always me and my partner are interested in buying the park. I never really give the name of who partner is ... or it's a group of us. Which is true, I mean, I do have a partner, and I have people that I work with on multiple deals. It is the case. For the on site due diligence, I actually have a buyer now on one of my assignments who ... he's been there for three days now doing everything on site at the portfolio of three parks. He's spending the day at each park, and he's there with the seller. Basically just prompts them and said, "Hey, my partner is going to be flying out. He's going to be handling most of the on site stuff. You know, feel free to, you know, get everything answered and taken care of with him." It really is never a problem as long as everybody presents themselves well and just sticks with the, "Hey, we're partners on this deal." Which is the case that so far has worked very smoothly.
Frank Rolfe: It's like, that's the way Jeremiah works his things, because, again, we've bought things from Jeremiah, even with seller notes. We come into the deal as not always even referenced as a partner, but someone that he works with. Right?
Jimmy Johnson: [inaudible 00:19:38].
Frank Rolfe: It's always been very smooth. Early on in Jeremiah's career, and early on in our career of buying assignments, that was a big concern. Right? Particularly if you had a seller note. Not if you're buying for cash. Because if you're buying for cash, then you never see the seller again, and often you never even meet the seller in some cases.
Frank Rolfe: I mean, we've had closings where they'd go in and sign the closing documents not at the same time we're there. Then we either go in later or earlier sign our side. Closings, that's not atypical. I mean, it's often like, if you buy a house, often you don't have the seller there the same time as the buyer. In fact, [inaudible 00:20:18] not having both parties there at the same time. There could not be any new friction or anything weird going on
Jimmy Johnson: Exactly.
Frank Rolfe: But yeah. I mean, one of the deals we had once was a purchase of a deal with seller financing with very, very low down payment. Jeremiah was concerned that this would cause a problem with the seller, that they would suddenly become enraged that who the heck are we, and they don't really know us, and therefore, they're concerned about tearing paper. It could not have gone smoother. I think what I learned from that closing, because he was heavily, heavily bonded with mom and pop. But I think that really once mom and pop makes the decision to sell, that as long as everyone is respectful, as long as the money is transferred, it's just all fine. Right?
Jimmy Johnson: Yep.
Frank Rolfe: I mean, I think the bonding really gets the door open to them wanting to sell, but they're not selling just because of the bonding. Right? They're selling because they actually do want to sell.
Jimmy Johnson: Right, right.
Frank Rolfe: The buyer because of the bonding. But we've been, again, buying assignments for at least a decade and a half. We've never had a problem. Although I will tell you that it's also, as Jimmy said, you have to be extremely courteous and respectful.
Frank Rolfe: Back when I had my billboard company, I once assigned a billboard, because there was an assignment portion to the billboard industry, which is identical, where you would sign up a lease to the property owner to build a billboard, and then it was the same exact deal, and/or assigns. I once assigned them to a guy who I didn't realize he was crazy, and we went in to meet the property owner. Within five minutes, I had the property owner screaming, "Get out of my office. Tear your lease up." Because he was incredibly rude to the seller. Right? Right from the get-go when we walked in office-
Jimmy Johnson: Mm-hmm (affirmative).
Frank Rolfe: He said everything you would never say in a meeting. I have no idea what was going on. But again, as long as you act like a normal human and are respectful with mom and pop and courteous and show up on time, I really don't think that's a big issue. But I know a lot of people who are listening are thinking that that's the single biggest issue, because how can you segue from bonding to the introduction of the third party? But again, the way you're doing it is perfect. As long as from the onset they know that there is an additional party, then it doesn't really matter to them who the party is.
Jimmy Johnson: Exactly.
Frank Rolfe: Then I think as long as they get paid, as long as they're getting that payment, if they carry on the seller note, and obviously the closing, the money at closing, it's all fine. We have no nightmare stories ... It sounds like you don't either ... of moms and pops suddenly reacting and getting all mad or bent out of shape.
Jimmy Johnson: No. Yeah. Yeah. Both of the closings next Friday, and both of those actually have seller notes. I mean, it's only a week away, so everything is already hammered out and ready to go. It's now just waiting. There's been no issue there. Everybody is good to go. I think it's just with the bonding and saying, "Hey, it's just, you know, my partner and I."
Frank Rolfe: Right. Got you. Now, let me ask you this, Jimmy." Again, just in a macro area, no insider secrets here. But what general regions of America do you focus on, and why do you like those certain regions?
Frank Rolfe: Again, a 5,000-foot elevation of the US map.
Jimmy Johnson: Right, right. Well, I live in Florida. I mean, I think I'd be probably a little bit different geographic marketing if I lived in California. Right now, I'm just focusing on everything east of the Mississippi. I have [inaudible 00:24:06] assignments in Alabama, the Carolinas, Virginia, the Midwest and Indiana. It's really just doing a ton of marketing. There's a limited number of parks, but there is still so many parks, especially those smaller parks, under 50 sites. I've really just been targeting working my way up from Florida little by little and just hitting everything east of the Mississippi. I haven't really explored too much out West yet. But I mean, I know that pretty much every ... with the right marketing and the seller bonding, any state could hopefully do fairly well in, but right now, it's yeah, a lot of the Midwest, Florida, Tennessee, the Southeast.
Frank Rolfe: Okay. On that note, let me ask you, since you've done deals in Alabama, talk for a minute about the Southeast, because you've got Louisiana, Mississippi, Alabama, Georgia. These are wildcard states. Those are always the four states that no one ... they're almost mystical. No one really has a full comprehension on them. Right? I know that Alabama, because I've been watching Alabama on the stats, and I've been doing deal reviews for people, and the Alabama economy is one of the great success stories probably in the US over the last decade. Right?
Jimmy Johnson: Right.
Frank Rolfe: Because Alabama's economy was really bad, and they've done an amazing job of attracting big employers. Right? A lot of car manufacturing, a lot of other big time stuff has relocated to Alabama. Now the median home prices are up substantially. Most markets I have seen are up all the right stats, a hundred thousand plus metro, a hundred thousand plus home price, a thousand dollar plus apartment rent. I'm feeling pretty good about Alabama. I know people who have bought parks in Alabama, and they're doing great in Alabama. Alabama, I think, has come out of the mystical arena of those four Southeast states. How is Georgia doing? Do you do anything in Georgia?
Jimmy Johnson: Oh, actually, I have a contract out being reviewed by the seller in Georgia now, so that would be my first one there. Really agree with everything you said on Alabama. I think it's definitely out of those mystical Southeast states. It's definitely been the first one to really make a push out, and I have lot of buyers interested in that. Then we'll see how Georgia goes, but this would be my first park there, hopefully within the next week or so. But Alabama has been very well to me, and same to the buyers. I know the ones that I've closed there, they've had a lot of success, and they've raised rents to market, they've done what needs to be done, and they're looking for more. It's definitely that stereotype that follows it around, I think, maybe a couple years from now won't be there anymore.
Frank Rolfe: Right. Then, and Georgia, of course, has this unique advantage over Alabama, because you have Atlanta, which is so very giant. Right? It's six or seven million people, with the exact same stats on it as far as home and employment as Dallas. You've got a state that is ... predominately, the economy has been weaker. But it's like Illinois, right? Where you have Chicago, which represents seven of the 10 million people in Illinois live in Chicago, right?
Frank Rolfe: This extremely heavily weighted part of Atlanta. But what are your thoughts on Mississippi and Louisiana? Have you ever even looked at those states?
Jimmy Johnson: Yep.
Frank Rolfe: I mean, those are just such an enigma in the Southeast. What do you think of those states? I mean, is there any hope in them, or what?
Jimmy Johnson: Yeah. I've put a lot of time into Alabama, and then a little bit into Louisiana. So far, nothing in Mississippi. But I do have a park in Louisiana now that's already been assigned to the [inaudible 00:28:07] buyer, on track to close, and I mean, everything there has gone very smooth and been well. I did very limited marketing there, though. It's not like I really had a dozen parks to speak to. But out of my experience there, it hasn't been what was expected, but I think a lot of people ... When I send down assignments, there is just a huge difference if it's coming from Louisiana or Alabama compared to coming from, let's say, Indiana. I mean, it's tenfold the interesting in the Indiana one, even if the numbers aren't as strong, or if it's not as good of a deal, just because it's that desired, lucrative Midwest.
Frank Rolfe: Got you. All right. Let me ask you, Jimmy, one question, which is true of all buyers, whether it's an assignment or just trying to buy a park, period. Again, don't give away any of your secret weapons. But do you have any non secret publicly known weapon to try and move along the seller who is undecided? Who is like, "I don't know. I don't know if I want to sell, Jimmy. You're a nice guy, but I don't really know if I want to sell it." Any ideas on that? But don't give away your secrets, but just any macro ideas?
Jimmy Johnson: Yep. First, you always know most of the sellers don't live near the park, and especially when I'm doing them all over, I can't go and meet them in person. But I always offer, "Hey, if you would like to meet in person, I'd gladly drive or fly there." I think that goes to show them I'm not just some random guy that can't put a face to a name. I'm willing to put the skin in the game and show up. I think it's that, and then I do a lot of just talking about, "Hey, what are you, you know, what are you doing this weekend? Or how was the holiday?" Or just a ton of chatting to where they know ... When we have our calls, they'll be asking me, "Oh, hey. How was, uh, how was your fishing trip over the weekend? Or was ... was your vacation good?" We really get to know each other well. I try and email really anything that, whether it's another park that I've assigned, or other ... just some knowledge and info on the area, and anything that you could show them it's somebody buying a park directly not off of an assignment.
Jimmy Johnson: You could show them proof of funds, or really anything that could ... Hey, I'm credible. I know what I'm doing. If you own other parks, you could give them the address to that. There's a lot of tire kickers out there, so anything that you could do to, A, build that relationship, and B, say that I'm serious and I'm going to close.
Frank Rolfe: Hey, let me ask you this, Jimmy. You see a lot of people who are unfamiliar with moms and pops maybe thinking, "Well, why don't they just go to a broker?" Why would you sell to Jimmy Johnson, who calls them up? Why aren't they listing with Marcus & Millichap or someone like that? Why would they go with an individual and not suddenly just say, "Oh, I'm going to list this at a big brokerage firm." What are your thoughts on that?
Jimmy Johnson: Multiple reasons, but one of them is probably how they bought it. Very, very few of the parks that I'm talking to that are mom and pops, they did not buy them off of a broker or an agent. They bought it from their friend who they met at their kid's baseball game or from a neighbor. I think it's just what they know, is you just buy and sell parks different than maybe you would buy and sell your personal residence. I think it starts at that, and then a lot of the mom and pops, they're just more private, and they want just one person or a group of guys going and looking at it. They don't really want the broker listing it. They're very secretive about their info. They don't let anybody know how much money the park is making, and they know if they list it with a broker, that's going to be publicly out there. They like the intimate ... just one buyer, one seller, and not a bunch of showings and really a lot of the aspects that would come with a broker deal. But again, a lot of these mom and pops, they just want it quick, easy, and when they're ready, they're ready.
Frank Rolfe: Yeah, I would agree with all those points. I think also what happens is you've got two kinds of sellers. You have those who are more institutional in mindset, and those that are not institutional. An institutional seller would be somebody who thinks, "Well, my park is worth $9 million, so I'm going to list it with Marcus & Millichap, hoping I can get, you know, $11 million or something."
Frank Rolfe: But most of those deals, I think, at this point have been exhausted, as far as, I think, a lot of those sellers have already been contacted by the brokers, the larger deals, the 250 spaces and up variety of park.
Jimmy Johnson: Definitely.
Frank Rolfe: But I think then when you get on the meat and potatoes of the industry, which is by far the bulk of the 44,000 parks, are not institutional sellers, nor are they even institutional parks on the front end. Right?
Jimmy Johnson: Right.
Frank Rolfe: When you get into those parks that are more like the 20 spaces to 100 spaces, typically the ones that have a lot of hair on them, because the guy doesn't have good records, and he doesn't have that stuff, I think the brokers have, for many years, sent out a negative signal to those people that that's not really what they want. I think a lot of times, they assume if there's a broker involved, then it's not going to go anywhere, because the brokers have created that mystique by, for many years, telling people, "No, your park is too small. Your records are too screwed up." They've always been seeking out what they consider to be institutionally boned, and now on the things which are not, or the seller perceives are not institutional, they prefer just going with the individual.
Frank Rolfe: I mean, if you took back time probably 20 years ago, then you would have more competition possibly from brokers, because a lot of people had never even been contacted before. But I think at this point, they actually prefer the individual, because the individual seems easier to work with and gives them more attention. There's very few brokers I can think of that would, for example, call a seller 15 times and talk to them 15 times, let's say for ... I mean, when you talk to a seller, you talk for what? An hour, 30 minutes, 20 minutes? What is your normal [inaudible 00:34:41] time?
Jimmy Johnson: I think, yeah, I mean, before contract, it's typically ... I'd probably put the average at 20 minutes, 25 minutes. Then after, I mean, there's a lot of just quick calls that are two minutes just asking a question. It's definitely over 10 hours of just time on the phone before that contract is signed, and just relationship building.
Jimmy Johnson: Yes, definitely think that. And the records, I mean, the mom and pops, they're not keeping things online, as you know. It's like you said, that probably turns some of the brokers off. Because I tend to just work with whatever they have. I mean, it's what you can give me is great, this is the list of what I want to see. If they can't produce it, I mean, they can't produce it. We could try and back into it. But I'm never walking from a deal because they're writing down on a piece of loose leaf paper their rent roll.
Frank Rolfe: Yeah. See, the win/win here is, of course, that if you're spending 10 hours on the phone with the seller cumulatively, there's lots of people out there who don't have the time or the desire or the persistence to do that. You're pretty much doing all that front end legwork for them, similar to what a broker does, right?
Jimmy Johnson: Mm-hmm (affirmative).
Frank Rolfe: Because when brokers get listings, they do the front end legwork to convince the seller to sell, and what the price would be. Really, what you're doing in many ways is similar to what a broker does, and that's why it's worthy of the fee, because brokers charge a fee. Right?
Jimmy Johnson: Yep.
Frank Rolfe: But that's why I think you're successful. Right? You've only been doing this five months. You're doing a deal a month, and you've got like four more in the hopper, is because I think there's very much a demand on the part of sellers for people who are not brokers who are willing to talk to them on the phone, who are a lot easier to work with. Right? I mean, and for example, even on the buyer's side, a REIT or a larger buyer is not going to buy a property where the books and records are written with a crayon.
Jimmy Johnson: Exactly.
Frank Rolfe: Or where there's a lot of different maintenance, right? Because that's half your business model. Basically-
Jimmy Johnson: And I know.
Frank Rolfe: What you're doing is super valuable, because that's what people want.
Jimmy Johnson: Yep. I know sellers have mentioned to me before that they were going to maybe list it with a broker, but then that's just the listing price. That's not what they're actually going to get. I think that's been a big thing, is when we go to contract, this is the price, and this is what you're going to get at closing. Whereas one or two of them have mentioned, "I was going to list it, but then, you know, I'm going to put it for this price, and I know I'm not going to get that. I'm going to get a bunch of low ball offers." When we're ready, this is the price, this is the contract, and this is what you're going to get, they love that simplicity, and just it is what you see is what you get.
Frank Rolfe: Right. Basically, on the A to Z of selling assignments, to me, the key part is it's a legitimate business, it's very moral, because you're the matchmaker between the willing seller and the willing buyer, even though the buyer is not necessarily buyer, and it's a win/win for everybody. Right? Because the buyer gets something that they want to buy that they didn't have the time to find, or they didn't have the luck in finding it or the skill in finding it. The seller in the end gets a buyer that pays the price that you had to go out and find the buyer for, they didn't have to find the buyer for, and everybody is happy.
Frank Rolfe: I just want to reinforce that.
Jimmy Johnson: Exactly.
Frank Rolfe: A lot of people, when you talk about Contract Assignments, for some bizarre reason, some people think, "Ew, that's not nice. That's not fair." But that's completely wrong. It's super nice and super fair, because it's exactly what people want, and it's a win/win for everyone involved.
Jimmy Johnson: Exactly.
Frank Rolfe: On that note now, let me segue into the A to Z of buying assignments. Probably not in any way as thrilling as Jimmy's description of selling them. Again, we've been buying assignments for probably close to two decades. Many of the steps are the exact same. Obviously, the mindset, though, is different, because you're on the other team. But here's how we look at it. Jimmy, you throw in your ideas on this, since you work with a lot of buyers. The first thing is that everybody wants deals. I mean, there's a shortage of deals out there. Because there's a lot of people who want to buy Mobile Home Parks. They like the idea of affordable housing. They've got the capital. But what's missing, they don't have a deal they want to buy. They don't have it because they go on Mobile Home Park Store and LoopNet, and they see a lot of listings that are either overpriced, or where they don't like the market, or whatever. Then once you've blown through that, then you can go to your brokers out there and call the brokers ... and we all know some brokers are very bad about calling up back, and they may not have anything that necessarily works, and they may not show you their pocket listings initially.
Frank Rolfe: Failing that, then you have the drudgery of cold calling and direct mail and trying to make things happen. There's just a lot of people out there, ourselves included, who are willing to look at any deal from any source. There's always demand for the deals. When someone brings us a deal that fits our criteria, we want to buy it. We don't care if it's coming from someone assigning a broker, or where it came from. To us, it's a deal. When we look at the pricing on the assignments, we've always been extremely easy to work with. Because what we do is we calculate what is the value of the deal that's a good value right now, and then it doesn't matter to us whether ... if we say that this deal is worth a million two, and it doesn't matter to us if you tied it up for 400,000 and have an $800,000 fee, or if you tied it up for a million one fifty and have a $50,000 fee. What really matters is what the deal is worth. Some buyers get all worked up thinking it's not fair that the assigner should make so much money, because gosh darn it, I only pay the broker a 3% commission, or something.
Frank Rolfe: We don't look at it that way. We look. We think any smart buyer would look at the overall picture. Obviously, you want to get a good deal. Who doesn't? Everyone wants to. But don't get worked up on what percent the fee is of the total deal, because I don't think that that is in any way the important feature. Even though sometimes, it can seem extremely high based on the value of the deal, who cares? You look at the macro price, and you have it.
Frank Rolfe: Another thing when you're buying assignments is you want to get as many days on the clock as you can. I think Jimmy would agree with this. In other words, if the contract has 30 days of diligence, it's essential that you buy that and it be assigned as quickly as you can. Because every day you burn off that is one day less of diligence. Sometimes people want to bring us deals to assign, and we'll say, "Okay, well, you know, what [inaudible 00:41:54]?"
Frank Rolfe: Oh, well, let's see, I've got like six days of diligence left. That's impossible. Right? Six days of diligence, I can't get any third-party report. I can't get a phase one. I can't really get a material handle on it. I think the timing from the buyer's side is essential that you've got to have plenty of diligence time. Obviously, financing time is important. Paperwork is the same as Jimmy is talking about, it's just a simple assignment agreement, effectively. Then you get out there, you do your diligence, you do your financing, and you close. The big concern, obviously, from the buyer ... beside the fact that the deal be good, because bear in mind when you're selling an assignment, it's not as important to you on the diligence side as it is for the buyer, the ultimate buyer. Because after the closing, you're not part of it anymore. But I think another thing that always concerns people buying assignments is what happens with mom and pop. Because if you haven't done it before, you feel awkward. I can tell you as a group that has bought a lot of assignments, that that's an unfounded fear. Because what we find is that most of the sellers, as we've already discussed, are just perfectly happy, as long as you act nice and cordial and professional with them, and the introduction of a third person into it doesn't really cause any problems.
Frank Rolfe: You can, and we have in certain select cases, if you've got a very, very attractive seller note, if the assigner feels that they've done phenomenal bonding and is terrified there will be some kind of derailment if they're not actually in it, you can sometimes ... I don't know, Jimmy, if you've done this, but you can sometimes have the buyer give the assigner an incredibly small percent of the deal, and you can truthfully say that you are ... This is my partner, Jimmy Johnson, because Jimmy Johnson behind the scenes has one one hundred millionth of a percent of the deal. It is legitimate.
Frank Rolfe: That's one way you can ... the concerns, if someone says, "Well, I'm not a good fibber, and I don't think I can do this." I mean, you always have that option. But again, it's never really come up.
Jimmy Johnson: Right. Right. Yeah.
Frank Rolfe: But the way we look at buying assignments is we look at buying assignments no different than buying something from a broker. It's just instead of us ... the money at closing going to Marcus & Millichap or [inaudible 00:44:32] or whoever, it goes to Jimmy Johnson or whoever. But we don't get all worked up about it. Again, we look just at the overall value of the deal. We don't have a parameter, "Oh, well, we can't pay more than this percent of the deal in assignment fee." That's ridiculous. It doesn't matter at all.
Jimmy Johnson: Right. Right. No-
Frank Rolfe: As far as finding deals to assign, the forum is key. I think that's where most things [inaudible 00:44:57] anymore, is on the forum. Then, I'm sure, Jimmy, you have how many people that you now regularly talk to? I mean, probably I don't know 50 or a hundred people, or something like that?
Jimmy Johnson: Yeah. I would say there's, yeah, a core probably 50 to a hundred, and you'll have the people ... similar to brokers, you always are told, "Oh, stay in touch with your brokers." I have people who call and talk to me and email me sometimes daily, but a ton of people who are weekly. They're doing everything that they can to see that deal first, because they know it's just competitive. But yeah, probably a core 50 to a hundred, and then another hundreds and hundreds more that have maybe reached out once or just said, "Hey, you know, put me on your list." And I'll see what comes through, or they have specific criteria.
Frank Rolfe: Yeah, exactly. How it works is basically you try and build a network of people who sell assignments as a buyer, and you just add that to your arsenal of deal leads. Ultimately, what you end up with is you end up with, obviously, the online listings. Then you've got your brokers. Then you have those people who sell assignments. Then you've got cold calling, direct mail, dropping by the seller. But it's just one more tool in your bag of tools to trying to find a park to buy. But again, it's a very large, very legitimate industry. Been going on for as long as I've been in the business, and certainly as long as David's been in the business. Again, many of the best deals we've ever had came from Contract Assignments. It's a really interesting niche that probably the average American has no idea exists, but it does exist, and it's very lucrative, and most importantly, not only is it lucrative, but it serves a very necessary purpose. Because there are so many people out there who want to buy, but they haven't found it. If you can't find it, why not pay Jimmy Johnson or somebody else to find it for you?
Jimmy Johnson: That's what a lot of people are saying, Just because they're just so busy and they don't have time to do a lot of the strategy that you listed, let alone even stay on top of a dozen different brokers or do direct mail or cold calling, so other than some of my buyers, this is their only outlet is they're just trying to buy assignments. Everything else just hasn't worked for them, especially some of the first-time buyers, because the brokers won't pick up the phone. It's because the seller wants to make sure it's going to somebody who has a couple parks. Especially first time buyers, I think working with assigners is a great way to get that first park.
Frank Rolfe: Right. Absolutely. Again, it serves a very needed function of the industry. Let me also add, and Jimmy, you can expand on this. But there's such a mystical nature to the connection between humans. Right? Because in cold calling and direct mail, a 99% fail rate is still considered highly successful. In direct mail, if you can [inaudible 00:48:09] out 500 postcards and get five calls, which is only 1% response, that's an A plus. It's the only industry I know of in the world in which you can have a 1% success rate and get an A plus. Right?
Jimmy Johnson: Exactly.
Frank Rolfe: When I went to high school, if you wanted an A, you got to have 90%. Right?
Jimmy Johnson: Right.
Frank Rolfe: This is the flip side.
Jimmy Johnson: Exactly.
Frank Rolfe: Because of that, it is possible you could just be unlucky, or you could basically just not have whatever unique force of nature that gives you a natural charisma to bond with sellers. In that case, the person doing the assignment is a surrogate for you, because you just either don't have whatever it is. Of course, we can't define it, because again, a 99% fail rate is the success. It means the odds of success is so very small and is totally based on volume. You could literally take a seller, and you could get 100 people to call him, and he will select one out of those 100 people ... That's a 1% success rate ... as the person he bonds with and wants to sell with. No one can define how. If they could define how you do that, then that's what all marketing firms would work on. But no one's ever been able to figure it out.
Jimmy Johnson: Exactly.
Jimmy Johnson: Yep. Now, and a lot of it is. Yeah. Yeah.
Frank Rolfe: Yeah.
Jimmy Johnson: It's adding the following up.
Frank Rolfe: Right. But I mean, somebody knows when you call, and you've got ... What is your accent? You have a very unusual accent. Where are you from?
Jimmy Johnson: I'm from Chicago, and the accent, I have no idea where it comes from.
Frank Rolfe: Okay. Well, I mean, I'm just saying, in other words, there are sellers who would hear that accent and say, "Ooh, I like Jimmy Johnson. I like that accent." It could be nothing more than just how you say your name. "Hi, this is Jimmy Johnson." They're like, "Oh, that's kind of upbeat." Right?
Jimmy Johnson: They always remember the name, and there's the jokes about the football coach and the sandwich shop. I try and play off of ... work with what I got.
Frank Rolfe: Right. Well, exactly. But in other words, we know from calling thousands and thousands of sellers over the last 20 years, that it's a very, very imperfect science. That's, again, what causes the need for Contract Assignments, is some people just don't have whatever that magic ingredient is, or the luck to actually pull it off. They might actually put in the time doing it. Typically, if you do enough of it, you ultimately do prevail. Because if you make enough calls, enough direct mail, you ultimately ... the heavens reward you with that seller, because you put in the effort. But again, some people just magically have whatever that charisma is. I think that's what's propelled Jeremiah over the years into being the LeBron James of assignments is that he for some reason exudes that charisma that gives him that little extra edge over those other 99 people who called that same seller. He ends up with the deal. Then, of course, when you're selling the assignment, you're really being monetized for, A, putting in the effort, but for B, having that charisma. Right?
Jimmy Johnson: Yeah, exactly.
Frank Rolfe: That's also part of it.
Jimmy Johnson: Exactly. No, no. Yeah. Like you said, a hundred people could call, and I mean, there's more qualified people, as there always is, and there's people who can maybe close quicker or do it easier, and it's a little bit of [inaudible 00:51:44]. It's luck, and it's a little mystery. But it's really just playing to the seller. I mean, I have one seller that every Friday, he wants me to call him at nine o'clock at night. A lot of people aren't going to pick up the phone and want to talk to a pop at Friday at 9:00 p.m. There's been a lot of times I've stepped out of dinner. I've done this, I've done that. But I call him every Friday. I mean, it's just sometimes they're weird with their requests, but it works. It's just that charisma, like you said.
Frank Rolfe: Yep. Absolute correct. Well, let me ask you this, Jimmy, are you ... I mean, Jeremiah in the end ultimately started buying parks. Do you see yourself buying parks at some time, or are you just going to always do assignments? Or what is your five and ten year future plan?
Jimmy Johnson: Yes. I really am loving the assignments now, and I've got some people in great parks. They say, "It's ... Thank you. You know? This park, you know, changed my life. Or this is my first park or my best park." I really do love what I'm doing, and I think I'm going to keep on doing this for a while. Started to talk with people, whether buyers or just prospective buyers I'm building the relationships with. They said maybe in lieu of the fee, we could just do equity in the deal. I think that may be a road that I end up just owning pieces of some of them. Eventually, I think, yeah, when the right deals come along, I'd be interested in, of course, buying some myself or buying with some of the partners and buyers that I'm meeting. Really, no sign of stopping with the assignments. A big goal that I'm trying to hit this year for it, and would love to start doing a mix of buy some, have equity in some, and keep on assigning the bulk.
Frank Rolfe: Well, Jimmy, let me ask you this. For anyone who listens to this and either has just a general question ... I mean, obviously, I would not give anyone your insider secrets of exactly what you say or how you do it and/or want to get on your list of being able to contact you for assignments, is it possible to give out your email address. I wouldn't give out your phone number, because people may drive you insane. But could they email you and say, "Hey, Jimmy, can I get on your list?"
Jimmy Johnson: Yeah, yeah. Of course, yeah. I would be happy to give it out.
Frank Rolfe: Then go ahead.
Jimmy Johnson: Okay. It's my first name, just Jimmy. J-I-M-M-Y, and then the at sign, and then my first name, last name, so Jimmy Johnson, J-I-M-M-Y, Johnson, J-O-H-N-S-O-N dot co. A lot of people will type dot com. It's just dot C-O. [email protected]
Frank Rolfe: Okay. Again, I got a little confused at that email. It's [email protected] Not com, dot co? Got it.
Jimmy Johnson: Yes. The dot com was available for sale for a couple hundred thousand, so I went with the dot co for ten bucks.
Frank Rolfe: Yes. Well, of course, because he's the famous football coach. Right? That also will make it even more difficult. All right. Well, again, Jimmy, we really appreciate you taking the time to be on this lecture series event about Contract Assignments. It's odd that we haven't done one of these before. We really appreciate you being on here to help educate people on the process. Again, I can't emphasize enough that Contract Assignments not only are a lucrative byproduct of the industry, but also very, very necessary and very needed. We really appreciate you helping people find deals and acting as a matchmaker for deals. Because of your efforts, there's a lot of sellers out there who are able to get their parks sold at a good price.
Jimmy Johnson: [inaudible 00:55:34].
Frank Rolfe: And there's a lot of buyers out there who are able to get the park they've been trying to buy that meets their criteria but had not been able to find it yet. You're serving a huge positive to the industry, because you're matching buyers and sellers in a matter that people don't traditionally do. We have a lot of brokers that we work with and a lot of great people in the brokerage world, but their role is not always as difficult as what you do is, as far as the time you have to spend to find the buyer and to tie up the seller. We think that that's ... it's a great service that you do.
Jimmy Johnson: I appreciate that.
Frank Rolfe: Again, yeah, really appreciate you being here on this lecture series event. Again, if you've got any questions on any of this or just want to talk to Jimmy and get on his list, by all means, email him. Again, we thank everyone for taking the time to listen in. We'll be back again shortly. Again Jimmy, thanks for being here.
Jimmy Johnson: Oh, thank you so much, Frank. Really enjoyed it, and it was a pleasure.
Frank Rolfe: Great. Thank you very much, Jimmy. Thanks, everyone. We'll talk to y'all again soon.