Andrew Keel, who has gone from doing Lonnie deals to owning three mobile home parks in less than one year after attending the Boot Camp. We’re going to be discussing how he pulled that off, what his strategy was, and what he has learned so far. This event is devoted to the topic of how to successfully get started in mobile home park acquisitions.
If you want to learn skills to succeed with mobile home parks, attend 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 (855) 879-2738.
Frank Rolfe: Welcome to an MHU.com lecture series event. We're going to be going over an interview with Andrew Keel. This is Frank Rolfe from MHU.com. We're going to be discussing with Andrew basically his history and chronology of events and successes and lessons learned in the mobile home park industry to date. He started off with no parks, he's up to, I believe, three now. Lives in Orlando Florida. Andrew, are you here?
Andrew Keel: Yeah, how's it going today?
Frank Rolfe: Doing great. Andrew let's just jump right into it and the first question that most everybody would want to ask you is, how did you get into mobile home park investing?
Andrew Keel: Yeah, I actually started out as a Lonnie dealer. I bought nine mobile homes around Ocala Florida which is notorious for 55 and older parks, retirement communities and there's a couple all age communities scattered throughout there so I bought nine homes and fixed them up a little bit and I was a big fan of Lonnie Scruggs and and Deals on Wheels and Mailbox Money. I ended up selling them like a rent to own contract and did fairly well on them and ran into a park owner that actually gave me some of his homes so that I could fix them up and sell them. I was talking to him one day and he said, "You really gotta get into owning the whole park." I didn't have any clue of how to get into owning a park and I thought that you needed to be a millionaire to be able to even enter that space. He was telling me about it and he basically was convincing me that the wealth that's built is off of the land and off of the dirt underneath the trailers and not the actual trailers.
I researched a little bit and came across a, I was at a new view IRA, it was a self directed IRA event down here in Orlando and Ryan Smith was actually speaking at the event and I was really impressed with it and at the time I had owned seven of the nine trailers still. The Lonnie deals. I went up after the event and spoke to him and Ryan's just a very nice guy. He's with MHC America. He was raising capital for their investments. He gave me a book that his wife wrote called, Trailer Cash. That weekend I read it twice, front to back and became obsessed with it and I ended up going, he taught a class, Ryan did, through his father's network and I went to his class, a three day camp. Three day weekend deal.
There was actually only seven people in the class and I liked it but it was just the tip of iceberg and then a short couple of months later, the Mobile Home University bootcamp came to Orlando and I came across it and called Brandon and signed up for it and my wife and I went to that and just absolutely loved it. That was the game changer for us. We dove in a lot deeper into the mobile home park industry and basically just committed ourselves and said, "Hey, we're going to figure this out and we're going to buy a park." At the time I was cold calling parks, even before because Ryan had said, cold calling's one of the best ways to find leads. I had been cold calling parks and I had a couple that were good deals.
Had no clue how I was going to find the money to buy them but I was talking with the sellers and negotiating and trying to come to terms with them. I was initially trying to get them to finance but these were, I had one good deal in particular up in the St. Louis Metro and after bootcamp I had made some connections and networked a little bit at the bootcamp and after bootcamp I emailed that deal out to some of the people I met at bootcamp and one of the guys said, "Hey, I would love to partner. This would be a great deal. I don't have the time to dedicate to doing the research, the due diligence and finding and sourcing leads, however, I do have the capital to invest." We partnered up and took down Coil Run mobile home park which is in Edwardsville Illinois and it's a 67 lot park. When we bought it had 58 occupied pads. Today it has 67 that are occupied. Bought some used homes and brought those in and it's just been a great little project. That's how we got into the mobile home park business.
Frank Rolfe: Hey, Andrew, let me ask you, is that park, out of curiosity, is that the park that is down the street, there's a large abandoned park. You bought that park?
Andrew Keel: No University Flats is down the street and that one had a big sewer treatment plant that actually had a EPA violation on it.
Frank Rolfe: But you bought the one that's down the street from that.
Andrew Keel: Exactly. I bought the one that's down the street from that.
Frank Rolfe: That's a great park. We actually tried to buy that park at one time. We couldn't get mom and pop to sell it. Kudos on that one, I know exactly the park you're talking about. For those who are unfamiliar with the St. Louis Metro and the Illinois side, Edwardsville is considered to be crème de la crème of the communities, maybe the nicest community in down state Illinois. Dave may also agree with that. It is super nice. SIU, Edwardsville there, the university and for some reason I don't know why the town turned out so pretty, it has nice landscaping but also it just has a real touch of class which you don't get in a lot of the parks in that part of the world. I did not know that's the one that you own. I'm impressed. That's a really great park.
Andrew Keel: Thank you.
Frank Rolfe: Very good. Let me ask you, while we're talking about how you got into the industry, before you ever got into doing Lonnie deals even, what was your perception of mobile home parks when you were in high school or growing up? What did you think about them? The first time you ever drove into one.
Andrew Keel: The first time I ever drove into one was actually down my grandparents used to live in one down in the Florida Keys. They lived in one, that was probably 15 years ago. It was one of the amenity rich ones where'd we go down to Grandma's and go to the swimming pool. I thought it was unique. That was before I went into any of the real ratty trashy ones. I didn't think much of it. I thought it was a nice subdivision the first time I walked through one. And then once I got into the industry a little bit and started buying some of the homes, I went into some real ratty looking trailer parks that have been rundown, a lot of deferred maintenance. Before I started investing in them, I definitely didn't have the highest of impressions of the industry, that's for sure.
Frank Rolfe: But you weren't like me, you didn't take the first time you thought about buying one, I had to get a concealed handgun license. You had a better feel than many people may have. Thanks to the fact that you had a relative who lived in a upscale Florida mobile home park, right?
Andrew Keel: Yeah, yeah, exactly.
Frank Rolfe: Okay, all right. Also I have to ask you since you're in Ocala, have you ever been to the Big Daddy Garlit's Drag Racing Museum?
Andrew Keel: I have not been to that one. Where's that at?
Frank Rolfe: That's in Ocala. I say that when I was looking at parks there one time I was driving down and I found this giant museum in the middle of nowhere and apparently this guy was the drag racing champion of America back in the 70s or something. It's a gigantic museum of every drag racing car and engine ever built. If you're ever around looking at parks in Ocala, you might check it out. So now we know how you got these first park, tell us how you got the second park.
Andrew Keel: The second park we were continuing to cold call. My neighbor, Steven Polcastro, he actually came, we used to workout in the mornings and he actually came on and started doing my cold calling for me. 'cause I also had a different real estate business where I was flipping houses and wholesaling some deals. He came on and started helping me to continue cold calling. And we found this park in Indiana that's in the Marion Metro. It was a nice little park, mom and pop owner that were really hard to get a hold of. You had to call them five times and one of the times you got them to pick up the phone. We communicated with them. They were the typical mom and pop. They owned the park for 20 years and before them their grandparents owned it and it's just been in the family since the 50s. We got it under contract for a steal of a price and they had let it rundown.
There was only 31 lots and there was 23 that were occupied and they hadn't individually metered the water so that was a a big downer that they hadn't done yet so the value wasn't there. But we came in and we bought that one cash and we've already brought in eight mobile homes. We're working on getting that one completely occupied and sub-metering the water. But it was just through cold calling.
Frank Rolfe: On that one, tell people since you're background's a Lonnie dealer, I assume you're much more knowledgeable than most people are on buying homes and bringing in homes. Are you bringing in used homes, new homes, what kind of homes you bringing in?
Andrew Keel: I'm bringing in used homes that are around 1990 to 1995. I find a lot of these off Craigslist. I just call people and make sure they have the title and then I set up somebody to go inspect the home and take some pictures and send them back to me. That's primarily how I find a lot of the homes we get. I did find a mobile home broker that had some used inventory that helped me on the Illinois park but primarily Craigslist has been a good way for us to find some used homes that are transport worthy and we're buying the homes for three grand or less.
Frank Rolfe: What kind of all in cost when you get done renovating them, bringing them in, the initial purchase, what kind of all in cost are you looking at on those homes?
Andrew Keel: About 15 to 18,000.
Frank Rolfe: Gotcha. And those are what? Three bedroom, two baths? Or two ones? Just a mixture? What are you buying?
Andrew Keel: It's two bedroom two baths or two bedroom one bath.
Frank Rolfe: Gotcha. Metal on metal? Or vinyl shingled or what?
Andrew Keel: It's usually that aluminum metal on metal.
Frank Rolfe: Gotcha. All right cool. All right. Then proceed, tell us about the third deal.
Andrew Keel: The third deal was in Dayton Ohio. Very well located in Dayton. Just north of downtown. It's 55 lots. Definitely rundown a little bit there's a ditch that goes through the middle of the park. There's a lot of overgrowth vegetation. There's also a duplex and a single family house on the property that have been rented out but they both needed new roofs. It's just been rundown and it was a mom and pop owner that I'd been speaking, we'd probably been negotiating back and forth for six months. They ended up being willing to finance that deal for 75 grand down. It's city water, city sewer, already sub-metered but they were just lazy and they didn't want to read the meters every month so they just charged everybody $15 a month for the water when really the water bills were closer to 35 bucks a months for each lot. We picked that deal up and it did have quite a bit of vacant lots.
We actually just bought this one recently. Probably 30 days ago. I've been getting approved with the cash programs with 21st Mortgage and trying to get some homes brought in through using that program. This will be the first park that we utilize that program on.
Frank Rolfe: Let me ask you Andrew, on that park for those of you have not have done seller financing. Give people a little parameters on that. What the down was, what the interest rate is, amortization, how many years, that kind of stuff.
Andrew Keel: We got a 10 year term on that loan. The purchase price was 185,000 and we put 75 grand down so it's 110,000, the interest rate was 4.45% and we got a 30 year amortization and a 10 year balloon. Our monthly payment's $553 a month.
Frank Rolfe: How many lots was that?
Andrew Keel: 55 total lots.
Frank Rolfe: 55 lots for 185 grand?
Andrew Keel: Correct. But there's only 11 that are occupied. Plus the duplex, plus the single family house.
Frank Rolfe: It's insane Andrew because the replacement cost on that park if you were to build it today would be over a million bucks.
Andrew Keel: Yeah. That's the upside that we saw and the current owners did not. They saw it as a sore elbow sticking out. They owned other apartment complexes and things that were a little bit cleaner. It was more of a, they wanted those cleaner things to tell their friends about that hey, I own this 36 unit apartment complex and they didn't want to tell people that they owned the trailer park. What's cool about this park too Frank, and this is something that I recommend a lot of other park owners start doing is a good friend of mine down here in Florida got into putting cell towers put up on properties and that's what he does full-time. We actually researched that a little bit and we also researched putting a billboard on the property.
The cell tower, due to zoning and stuff, we won't know for sure but a broker is basically doing all that research for us and it didn't cost us anything out of pocket to get that process going. They're researching. They think that we might be able to put a cell tower on there but we have to wait a couple months before we know for sure but it's also right on I75 there, it borders the actual highway so we contacted and I know you have some experience in billboards, we contacted Lamar out of Dayton Ohio there and they are helping us look at installing a billboard right there on the property as well to try to generate some more income.
Frank Rolfe: What's interesting here is you're the second person who's recently got a cell tower because when we do the Charleston bootcamp, the Adams family which is very nice folks who own a property that in fact we tried to buy that they, mom and pop liked them better than us so once again we lost a property, they recently got a cell tower. There have been some amendments apparently in the cell tower regulations because for a while you could not have a cell tower if it actually fall on a house. Now they've made adjustments to that. Cell towers are awesome. They're getting on their cell tower, I've forgotten how much, it's very significant amount of money. Then billboards are awesome. That was my first industry we have probably eight billboards on parks we own. You can't beat a billboard because it's very small amount of land mass that used, about nine square feet. That all sounds great.
Let me ask you this, I get calls from people all the time saying there's no deals left like the one you're describing where you can get 50 space park for 200 grand. How did you find that deal? Was that a cold call? Direct mail or how did that one pop up?
Andrew Keel: That was a cold call as well.
Frank Rolfe: Just called the mom and pop and said, "Hey I want to buy your park." And they said, "Man, I want to sell it." We're you shocked at the price at how low the price was on that.
Andrew Keel: Yeah, I was. They started at 225 and we brought them down and after some onsite visits realizing that the duplex and single family house were going to need roofs, we were able to negotiate more off the price. There's definitely deals out there. There's no shortage in them, you just gotta be willing to put in the time and Ryan Smith, he definitely told me the right path. You've reiterated it as well. Cold calling is good. Direct mail is good. I've tried a little bit of that. And then also in some markets that I want to buy in, I really like the Omaha Nebraska market so I contacted a couple brokers up there and basically said, "Hey this is what I'm looking for, this is my criteria." And they send me deals every so often. This company called RV Horizons is buying everything up so it's making it really hard for anybody else to buy anything up there.
Frank Rolfe: Gee, I wonder who that might be? We really like the Omaha Nebraska market. I will tell you, there are a lot of parks in Omaha Nebraska and there's a lot of them that are smaller than what we buy today. It's not like we're monopolizing the market. But we really like that market.
Andrew Keel: I was just giving you a hard time. There's a lot of opportunity.
Frank Rolfe: I know that. All right so tell people the, you've gone from zero to three parks, really in three completely different markets. What have been the key lessons you've learned so far from buying and operating these things?
Andrew Keel: The main thing is really take your time on due diligence and every park is going to be different. I got the 30 Days of Due Diligence Handbook and we go through that step by step. On all three of these parks, we would call the planning department and the city or in the county and every single department said, "Oh we don't do zoning certificates. We don't do that. We don't know what that is. We don't offer that." On the first call, all three of them, they all said that. But after we pursued it a little bit more, all three of them sent us a zoning certificate or a letter at least, on their letterhead stating what the zoning was for the area. Just because you get turned away the first time, I wouldn't give up there, I would continue and pursue it a little bit more and ask a couple other people. That's been some of the best things and just be persistent and don't give up too early.
All three of these parks are definitely parks where we're going to have to do some work and get our hands dirty and bringing in homes and things like that but the Quail Run park, it only has one vacant lot now. Once it gets to a certain point, the workload is really, it's not a lot. Once you get the homes moved in and things like that, I was expecting more, a lot more time to go into it but it's quite easy. Another things would to get a good manager the Quail Run park has a really good manager up there.
The other park in Indiana the managers are really good people but they're just not very tech savvy so I would recommend people adapt to that. They're good managers, they're a good fit but they're just not very tech savvy. We just had to do things a lot differently. They can take a picture and they can send a picture from their cell phone so when they deposit the rent money, we just have them take a picture of the deposit form and just text it over to us and then we handle filling out the rent roll stuff. Wherein our other parks the manager is responsible for taking care of the rent roll and filling that in. That's just a couple tips.
Frank Rolfe: What have you done as far as increasing rents? What rent levels have you started at and how much have you increased rents?
Andrew Keel: Right when we bought each of the parks, we increased rent about 15 to $20 a month. All of the parks were low for the area so we increased those right away. We plan on raising those about 6 to 7% per year.
Frank Rolfe: Okay. Let's talk for a minute about the amount of time you spent, because that you mentioned something that you thought you'd spend much more and that's true of almost everybody, myself included. How much time do you spend a week managing these three mobile home parks? Just roughly. And tell people a little bit about what you do.
Andrew Keel: I would say 20 hours or less per week for the parks and that's while we are, I basically call each three of them are their own different project. 20 hours or less a week and then the managers on site, we leverage them for being our eyes and ears. Meeting with contractors. Meeting with setup crews. Collecting the rent, depositing the rent. We like Google drive a lot and that helps us where people can just snap a picture on their phone and upload it into that park's folder. That just helps us keep track of all our paperwork and it's been a very good transition for sure.
Frank Rolfe: So roughly six hours a week per park basically.
Andrew Keel: Yeah, yeah, that's accurate.
Frank Rolfe: And then how do you do your collections? There's a lot of different collections methods out there, what is your collections method?
Andrew Keel: It's no pay no stay. Same as you guys. They get the five day grace period and then on the sixth day they get a notice on their door and a lot of people luckily, we've been lucky with this, a lot of people pay us within 24 hours of getting that notice. That tells them that hey, we're serious, we're not going to, it's just not fair is somebody else is paying and you're not that you should be able to stay. We're very strict with that.
Frank Rolfe: How do they pay you? Obviously checks and money orders. Do they mail it in? Do they give it to the manager? Do they have a lock box? How does it work?
Andrew Keel: Check and money orders. They either give it to the manager or they put in the rent drop box that we put up in the park. Just like a locked mailbox that's on a six by six pole that they can just pull up next to in their car and drop it in there. And then the manager comes on the first and she's required within 24 to 48 hours to deposit that in the bank account. We don't collect any cash so that erases that. We have a deposit form that basically says, "Hey what tenant is this check from? What's their lot number? Is this a check or money order? What's the number for that?" And she also breaks down what portion of their check is for lot rent, what portion is for water if we're sub-metering and we're billing it back to them. And then what portion is for late fees or et cetera or if there's any application fees the deposit form breaks that all down. And then she'll just scan us a picture of the deposit form with the bank receipt behind it and that just helps keep everything organized.
Frank Rolfe: Okay. Let me ask you this, Andrew. Three parks now, you just started buying parks how long ago at this point? What year was your first park?
Andrew Keel: Last year.
Frank Rolfe: Last year. You're little over one year in, you've got three parks, what's your ultimate plan? How many parks you trying to buy? How many lots? What's the future plan?
Andrew Keel: I'm a big goal guy so I want to get 10 parks in the next three years. I got that written on my refrigerator so I see it every day. That's my goal. I want to keep growing. I definitely think that we can reach that and more. I've shifted things instead of trying to get parks I realize that just as much work went into buying the 67 unit park and through due diligence and everything, as went into buying the 31 space park. We've realized that we want to increase the number of lot and not just the number of parks. That's something that we're working on and we have two bigger parks under contract that over 60 units, 60 lots. That's what our goals are is try to increase the number of lots that we are acquiring per park.
Frank Rolfe: When you say get to 10 parks, you're saying maybe get to 1,000 lots?
Andrew Keel: Yeah, 1,000 lots would be a really good goal.
Frank Rolfe: Gotcha. And my next question would be when you get to 10 parks, why would you not go for another 10? Like the Lays potato chip ad. Why would you stop?
Andrew Keel: I definitely want to keep growing, I definitely want to keep things going. I'm 29 years old so I have time on my side to keep acquiring. That's just the first step is to get those 10 then I definitely think we'll keep going from there.
Frank Rolfe: Gotcha. Now let's turn things around for a bit 'cause you're in three completely different states with the first three parks. I know you've driven around and seen lots of different parts of America as you went out to visit those parks. What areas are you liking? What parts of America are you think about? What makes you like Omaha? What have you learned about America? I personally, I look at America as Europe where each state is like its own country. In some cases they do have their own language. They have different scenery. The people are completely different. The scenery's completely different. What do you think of the different markets out there? If you look at the map of the 49 states that have parks in them, are there certain parts of America you favor? What do you find as far as the way tenants operate in some states over others? What have you learned so far?
Andrew Keel: I definitely started out with the Midwest as our goal of where we want to buy parks at. It's been very true to everything that I've been told. When I do due diligence and I do my onsite due diligence, those three days that I'm on site, I am at that park the majority of the time. I'm there every night to see what happens when it's dark out. Who's outside, who's doing what around the park. And then every morning I was at the parks at seven AM just to see if people we're going to work, if it was quiet, what was going on. I usually go up on a Thursday and come back on a Sunday so I'll get to see towards the end of the week, who's going to work and then on the weekends, what does the park look like at night and that type of stuff. One thing I have to say is in the Midwest, seven AM in the morning, you sit there til eight, people are backing out of their driveways and going to work.
Down here in Orlando Florida, I've gone to some parks and seven AM in the morning, people, there's no sign of people and then you wait around til about 10 o'clock in the morning and people are just sitting outside of their homes, playing cards and it's just a different culture for sure. I favor the Midwest. We have a park under contract now in Pennsylvania so I'll be flying up there in couple weeks to take a look at that one. I'll be interested to see how that goes. The Midwest has definitely been a good place for us. Blue collar workers and especially the one in Edwardsville, like you were saying, Edwardsville's a really good little pocket outside St. Louis. There's a lot of good industry there. It's right next to SIUE, the Southern Illinois Edwardsville campus and Amazon just built a distribution center about 10 minutes away from that park so that brought a lot of jobs to that area as well, which was great.
I favor the Midwest and I'm just getting started in this so I'll be on the lookout and I'll look at deals anywhere obviously, as I'm sure you guys would. But it'll be interesting to see how the park in Pennsylvania goes and how the other ones throughout the country go as well.
Frank Rolfe: Which of the three parks has the best collections? Which one has the most on time payment?
Andrew Keel: The one in Edwardsville has the best. Everybody pays by the fifth. We never have a late payment in there. The one in Dayton Ohio needs some work. We just took that one over and somebody is actually moving out today and tomorrow as we speak because they didn't want to pay their rent increase that we were enabling and they didn't want to pay for their own water. We're just getting started.
Frank Rolfe: Let me ask you on that one though, they're moving their home out or they're just moving out?
Andrew Keel: No, that was actually somebody that's in the duplex so they're just moving out and we're going to rent it out to somebody different.
Frank Rolfe: Yeah, I have found, maybe you already have had so far, no one would leave anywhere for 20 bucks. I've always found when people tell me, "I'm moving out, I can't afford the rent raise." There's more factors going on than that, don't you agree?
Andrew Keel: 100%
Frank Rolfe: It costs you more than $200 to move.
Andrew Keel: Exactly.
Frank Rolfe: They always like to needle park owners by saying, "You raised the rent on me $10 and I'm leaving." And it makes absolutely no sense. Typically if you talk to any other neighbors, no, they were already leaving because the person's spouse ran off or they lost their job or whatever. Only a complete bonehead would move out over $20 because the cost of renting the moving truck would wipe out next three years of increase.
Andrew Keel: Exactly, exactly.
Frank Rolfe: What is your lot rent level in Ohio? What is your lot rent?
Andrew Keel: In Ohio it's 265 a month right now and we increased that from 249 a month.
Frank Rolfe: Right, and you're probably still low for Ohio. Ohio rents are typically in the threes.
Andrew Keel: It is still low. We plan on increasing that the next couple of years.
Frank Rolfe: Gotcha. How often do you go out and visit these? Every how many days, months? What is the typical plan?
Andrew Keel: It's been nice because Dayton Ohio to Marion Indiana to Illinois, it's only about four drive from one to the other. When I went up to do the due diligence on the one in Dayton, I stayed a couple extra days and drove to the other parks. I plan on visiting them two or three times a year. As we get more parks up there I'd like to check on them as much as I can but every month on the 15th of the month the managers in each of the parks send me a drive through video and I go through with the managers and point out violations. I don't really necessarily need to be onsite.
Frank Rolfe: How do you, you're in Orlando, right?
Andrew Keel: Yeah.
Frank Rolfe: None of these properties is in Florida, has that been an issue for you?
Andrew Keel: Not at all. Not at all. When I tell people that, they're like, oh my gosh, don't you worry? Don't you want to go drive through there and check on things? It's not been an issue at all. The managers that are onsite there, sometimes they get easily excited and call me and they say, "Oh there's a septic tank that's backing up, we need to get Nolan's Septic out here immediately." But there hasn't been any sort of real emergencies or any reason that I would need to be onsite that I can't handle from Orlando.
Frank Rolfe: Gotcha. Have you ever been to the Villages there in Orlando area?
Andrew Keel: I have. I have been up there.
Frank Rolfe: Okay, because that was originally a mobile home park. People don't realize that. If you Wikipedia up the Villages, it was, it's now a city of 100,000 but it began as a single mobile home park. It just grew and grew.
Andrew Keel: It's unbelievable. I met a guy who transports homes and he said last year he transported 360 mobile homes out of the Villages and to other parks throughout the state of Florida because they're transitioning now into regular single family homes versus mobile homes. It was a big park.
Frank Rolfe: Exactly. It just shows how a bit crazy our industry is because it began as a mobile home park and they're hugely embarrassed by that fact so they've over time, they've done enormously well with a Delwebb retirement model of stick build homes. They're trying to erase the early origins of mobile home parks. Really it's just because the stigma which is sad because there was a time when mobile home parks were considered cool. But not anymore. But it's an interesting fact most people in the Villages, in fact it's the fastest growing or was the fastest growing development in the US for a long time. But really it just began as a mobile home park.
Now let's start into the pop quiz department and our pop quiz today is what do you call it? Is it trailer park, mobile home park, manufactured home community or land lease community? What is your preferable terminology and why?
Andrew Keel: I keep it at mobile home park and I only use that term when I'm either talking to a banker or I'm talking to a colleague but when I'm ever talking to a tenant or one of the managers, I typically, I don't even refer to it as any of those. I just, like our Quail Run, I just to refer to it as that. We don't put mobile home park on the sign. It just says Quail Run, welcome home and then the phone number. Same thing with the other one in Marion. I don't like to characterize it as one of those but I do refer to it as a mobile home park when I'm talking with the people outside of the development.
Frank Rolfe: That's actually the right answer. Dave recently pulled the stats again and based on SEO mobile home park is clearly the leader. It's 88% of all searches are for mobile home park and trailer park I believe actually outranks manufactured home community which is pretty pathetic. What we found is people who use the term manufactured home community have already learned that there's absolutely no pull on the internet for that off your ads in any way. They hypocritically, even though have been criticized for it, actually online call themselves also mobile home park. I don't know if you saw the Clayton ad that was on TV during the college football games but if you watched that ad, which you can pull up on YouTube, you'll see they do not use any of the words in it. It's not a mobile home, it's not a manufactured home, it's just a home. Their slogan is now have it made, which again, does not refer to any of the terminology and even in their own commercial, they never one time said manufactured. The whole industry's getting away from that nonsense.
Let me ask you as far as crazy tenant stories. Any crazy stories like my crazy Glenhaven stories of which I have zillions in my brain? Anything crazy happen so far? Surely you had something crazy in Ohio, probably not Edwardsville. Edwardsville, the craziest thing in Edwardsville would be someone forgot to put their trash out on trash day or something, wouldn't be very interesting. Ohio sounds like a park where maybe something crazy's happened.
Andrew Keel: Yeah, so far, we've only owned that one for just over 30 days now so there's no crazy ones but I'll be sure to tell you or shoot you an email when I hear one. One that I did have is I had a guy, I hired one of the tenants to go look at a home that was about 30 minutes away just to go inspect it. It was one I found on Craigslist, just wanted to pay someone to go look at the home and send me some pictures. This guy, he said he would go do that for us and he went to go look at the mobile home and we had agreed, I was going to pay this guy, it was $4,000 for a nice 2002 model mobile home and we had agreed and agreed to the price and how I was going to pay him and everything.
And then the tenant goes down there to look at the home and proceeds to tell the seller how nice their mobile home is and how they can't believe that they're selling it for only $4,000 and that he thinks the mobile home is worth at least $8,000. So then I get on the phone with the seller of that mobile home and he proceeds to tell me that he won't take a penny less than $8,000. Just shows that I didn't have the right person on my team there going to look at that mobile home.
Frank Rolfe: That's a pretty sad story actually. Not sure it's a crazy tenant story. It's more of just a sad story.
Andrew Keel: Yeah, it was for sure.
Frank Rolfe: One thing that we get asked, I know people would ask you if they were here right now live chatting with you because you found three great parks off of cold calling, what is your standard opening pitch? Everyone has their opening pitch. The phone rings, seller says, "Hello?" What do you normally say?
Andrew Keel: I say, "Hi. My name is Andrew and my wife and I are interested in purchasing your mobile home park, are you interested in selling?"
Frank Rolfe: Okay, that's the way that we do it. Just a direct to punch. Go ahead.
Andrew Keel: And then typically a lot of times we don't have the seller's direct number so we'll get a hold of the park manager and then the park manager will say, "Hey I'm not the owner." And either they will give us the seller's number or pass along a message. That's just what we've had the best success rate with.
Frank Rolfe: You've actually gotten warm receptions from managers? Typically managers tell us to go screw ourselves. They're worried they're going to get fired, typically the problem.
Andrew Keel: I've had a couple that have really been very friendly and helpful and got me in touch with the seller. Everybody that you talk to, it's building that rapport. It's just typical sales. You just have to make nice with them and and we've gotten lucky. It's worth it just to take your time and to just try to source and find out who that person is and to always followup too. I got a hold of one manager and immediately said, "No, they're not interesting in selling, they're not interested in selling." And then after we talked to them for a little bit he said, "Well he did just have heart attack, who knows." We followed up a couple months later and sure enough, he was tired of the business and wanted to sell. That deal in particular didn't work out but it's worth it to followup.
Frank Rolfe: On the park in Edwardsville that they wouldn't sell when we called them, what had transpired there? Or why did the guy want to sell?
Andrew Keel: That's a funny one. We actually were calling for a different park that we had under contract in Arkansas and we were calling to get lot rent comps and I was calling around some of the different parks and they own some parks in Missouri down in Lake of the Ozarks and some of those nicer parks and I got to talking with him and it was a manager that I was talking with at one of those parks and he said, "Yeah I think they're interested in selling but not this one, they want to sell one up in Illinois." The seller called me, we started talking and basically they wanted to liquidate some funds because they were doing a development of some sort, like a golf course development and they wanted to utilize the funds for that. It was just good timing. It was just being in the right place at the right time. It was nice deal that just fell into our lap.
Frank Rolfe: How many of these, when you cold call people, how many typical volleys of a back and forth exchange does it take until they'll sell to you? From starting with the first call? Is it 10 calls in they say, "Okay, I'll sell it." Or is it five calls in? Or on the very first call? How many exchanges?
Andrew Keel: I would say four or five until they're committed and they decide it. Usually they're like, "Ah let me think about it and talk with my wife." And then they aren't very good at following up with me so then I would followup with them a couple of weeks later and touch base. Sure enough he said, "Yeah we actually spoke and we decided we want to sell but we're not sure on price." So I said, "Okay, well think about it and get back to me." And they didn't, so then I would followup a couple week later and they'd say, "Okay well this is the price we decided." It was just a lot of followup and being persistent. That's helps.
Frank Rolfe: All right. Well let me ask you this, Andrew. You've obviously done well, bought three parks, learned the business very rapidly. Sounds like made some really good maneuvers, bought a park we tried to buy once. It's a really nice park in Edwardsville, got an insane buy on the park up in Ohio. What would you tell people who are considering doing this? Turn the hands of time back a few years on Andrew, what would you tell people who were considering getting into the business. Is it good to get in, not to get in, some of the realities you learned, give people some ideas of just what your thoughts are now.
Andrew Keel: It's a great time to get into the business. The cap rates are going to continue to go down. It's a great industry. Affordable housing is a huge need. I was reading an article the other day and they said that it was three out of four people that qualify for section eight housing are not being served. They don't get any money for that. They have to have a place to live and the mobile home park industry is a great business to be in for sure.
Frank Rolfe: The three out of four that came off that National Geographic thing we were on where the reporter went out to Hudd's office in DC and met with the guy. That was the stat is they turn away three out of every four qualified applicant. That is insane. It's not like people who didn't qualify, it's people that are saying, "Oh yeah, you need subsidized housing." People are like, "Okay, how do I get on the plan?" And they say, "Oh I'm sorry, we can't take you." The demand is truly astoundingly high. Let me ask you this also, are you seeing, 'cause you're obviously out there very fluently buying parks as we are, are you seeing cap rate compression at this point? Clearly not on the deal in Ohio. What do see in that frame? 'cause people out there are think, "Oh yeah, all the good deals are already been bought and everything now, some broker told me now that the five cap is the new 10, what are you seeing on that?"
Andrew Keel: Yeah man, the deals that I get from big time brokers are the ones that are compressed and seven, eight cap properties and the ones with the 100 plus lots are the ones that you're seeing that are listed with brokers. When you go direct to a seller, you avoid all that. It's you ask the seller what they think the property's worth and go from there and you don't look back. It's amazing when you don't have them going through a broker. You can work your own terms, you can get financing. You can, I haven't got any zero down deals yet but I've heard about yours, that's something that I'll be on the lookout for. When you go to the seller directly you avoid any sort of cap rate compression that might be in the typical market.
Frank Rolfe: Have you experimented at all with direct mail or are you just, is it all been done off phone cold calling? Have you tried direct mail?
Andrew Keel: We have tried direct mail. We sent out it was 250 letters to people in Indiana and we followed up the letters though with a call to the sellers. Our second park that we bought, they might've got the letter and then we followed up at the right time. I do like direct mail, it's a good option as well.
Frank Rolfe: Okay, but it sounds like you have not really worked the broker pipeline much at all at this point.
Andrew Keel: Not really. A lot of people when I first started, a lot of the brokers that I would contact, they always asked, "Hey, how many parks do you have currently." And I would say, "Oh I have one or oh I'm working on my third." They want to work with bigger players and they don't have time to, from my impression anyways, but they don't have time to play around with a newbie. Is what my impression has been with some of the brokers is they want guys that know the business and are going to close. And I get it from their perspective. They get paid off the transaction so if you're working with a broker, you gotta be very honest with them. You gotta give them the feedback. We haven't closed one yet but a deal was, a pocket listing was sent to me the other day, it wasn't for us, it was in a smaller metro that we didn't want to really followup with but you can get some good deals from brokers. You have to be honest with them and you have to close the deals they bring you.
Frank Rolfe: Right. One problem with a lot of the brokers are they fail to grasp the fact that often the people that are actually going to pull the trigger and buy things are people who are getting into the industry or just have a few properties. If you have a lot of properties often you're not a good buyer because you have no sense of urgency. Years ago there was a guy, I don't know if he's still alive or not, it was older gentleman out of Chicago and every time we went to a auction, like an REO auction, the guy was always there but he never bid on hardly anything. I realized he owned about, I want to say 40 mobile home parks. He's probably in his late 80s. He was just fishing around for an insane deal. I remember I was at one auction where we weren't going to bid more than 500,000 and it ended up selling for a million, which was insane but I noticed he stopped bidding at about 250 and that made absolutely no sense. That was on a 100 space property.
A lot of brokers are wrong actually thinking that people who own a bunch of parks are their best buyer because if you have a bunch of parks you're probably going to hold out for a really, really, really, really amazing deal, or then why would you even bother adding one more on. I would think at three parks you're probably a much better buyer. And even when you were looking for the first park than a lot of the folks out there who already own parks who just bounce around to brokers seeing what they have 'cause they never close. They buy stuff up and then they basically talk themselves out of it because they already have a bunch of parks and this next one just isn't compelling enough. You might still get some deals from them but it sounds like you're doing great on cold calling. Why not stick with what you got.
We're running out of time here. If people have any questions of Andrew Keel, is it okay for us to forward emails onto you?
Andrew Keel: Yeah, or they check out my website, it's keelteam.com. That's just K E E L T E A M.com.
Frank Rolfe: That's fantastic. Every time we do one of these things we get tons of people are going to want more general information, specific information. Things like how do you find the laws of Illinois? All of that kind of stuff. Again, Andrew we really appreciate you being here, giving people the lowdown of how you got in the business and what you've learned so far and all the things that are going on. Because again, that's fantastic and very helpful for everybody. Again, we hope everyone enjoyed this lecture series. I know I did. I want to thank Andrew again for being here and doing such a great job. Thanks a lot everybody and we'll talk to everyone again soon. Thanks a lot Andrew.
Andrew Keel: Thank you.