Case Study: How Adam Successfully Bought Three Mobile Home Parks

Adam lives in California yet owns three highly successful mobile home parks in Illinois. In this Lecture Series Event, we discussed with Adam how he found the parks, negotiated them, financed them, improved their profitability, and now operates them. He also revealed his lessons learned about mobile home park investing — both the good and bad.

The host is Frank Rolfe, whom the New York Times calls “the human encyclopedia of all things mobile home park.” This ensures that the conversation moves quickly and that no topic is taboo.

After watching this video – if you are interested in learning more about mobile home park investing – consider following the same path that Adam did. He attended our Mobile Home Park Investor’s Boot Camp as the first step to getting into the business. It’s a three-day immersion weekend that shows you the correct way to identify, evaluate, negotiate, perform due diligence on, renegotiate, finance, turn around, and operate mobile home parks. It’s 100% live yet 100% virtual so there is no travel time or cost, and you get a complete recording of the event that you can refer back to at any time. The event is Q&A throughout with no questions left unanswered.

Case Study: How Adam Successfully Bought Three Mobile Home Parks - Transcript

0:00:01.7 Frank: Welcome to our lecture series event. We're very glad you took the time to join us. We have a very, very interesting speaker tonight Adam from California. Now we've titled this Follow the Science because we've been trying to distill down the science of how to make money with Mobile Home Parks for 30 straight years. And no one exemplifies this theory more than Adam, who follows every single one of the tenets of science that we've developed and has done phenomenally well with his Mobile Home Park. So, Adam, are you here with us?

0:00:33.5 Adam: I'm here, Frank. Thanks for having me.

0:00:35.8 Frank: Well, thanks for being here. So Adam, let me ask you, first off, where did you ever even get the idea of investing in Mobile Home Parks? When was the first time you ever heard the word Mobile Home Park? Were you in fact ever in a Mobile Home Park prior to buying one?

0:00:50.6 Adam: Yeah, it's a good question. So I was in a Mobile Home Park when I was growing up. My aunt lived in a mobile home here in California. I never really thought anything of it. And so there was a pretty decent area here in San Diego. So it was never the stigma and the fear and any of that was never really something that resonated with me. And like I said earlier, we have a mutual friend, Justin Donald, who had told me about Mobile Home Park investing in 2015, 2016. So that's how I learned about it.

0:01:25.5 Frank: Okay. And what was your initial impression on Mobile Home Park investing? Did you face it with fear? Curiosity? What were your initial thoughts when you heard or heard of the idea of Mobile Home Park investing?

0:01:38.4 Adam: Yeah, I faced it I think with mostly enthusiasm. So how I had met Justin Donald we were both 20 year guys with Cutco Cutlery of Vector Marketing kind of direct sales company. I still run the sales training for North America for our business gift program, but that's a different conversation. So I was already pretty open-minded to doing weird stuff like selling knives. So when I heard I could make a lot of money in buying Mobile Home Parks, I wasn't afraid of it at all. It seemed like a great idea to me. I had bought three single family homes between 2008 and 2014, and San Diego did really well on 'em. I still have two of them right now. And then when I started looking at apartment buildings here, there was just no return on the down payment.

0:02:23.9 Adam: And so when I started talking to Justin about cap rates and returns, et cetera, the finances started making a whole lot of sense to me. And so I think I approached it with a whole bunch of enthusiasm and just, all right, this, this is what I'm gonna do. And then when I went to your bootcamp in 2017 in Austin and we had all the fun people there picketing and boycotting the event, I was like, well, obviously I'm in the right place because if, if there's this much people going against it, I'm usually looking to go against the grain here. Anyway, so this is perfect for me. Knives and trailer parks.

0:02:57.8 Frank: There you go. Let me me ask you this. You're located in California.

0:03:01.4 Adam: Sure.

0:03:02.0 Frank: Did you, how did you choose where to look for a Mobile Home Park? Did you initially think of California or did you choose a certain region? How did that all happen?

0:03:11.3 Adam: Really good question. I ideally wanted to buy in Wisconsin. 'cause I had always heard you, how you spoke about those residents and just the culture and everything like that. And that was kind of where I started my search. And I started by just direct cold calling as sales guy. So I was cold calling, cold calling, cold calling, and I just wasn't getting much traction. So I opened it up to northern Illinois too, which is where my wife's whole family lives in northern Illinois. And when I did that that's just kind of where I ended up buying park number one in Rockford. The story's kind of interesting, which I guess I could go into unless you have another question first.

0:03:53.2 Frank: No, I was gonna ask you how you came to own the park in Rockford. So tell me all about that. How that happened.

0:03:58.5 Adam: So yeah, I bought the first park closed basically five years ago. As of next month, I've owned it for five years. Great Park. Like I said, we've never missed a rent payment in five years. Never had an eviction, never missed a rent payment. Pretty rare, but essentially what happened, and you had Casey Tom on your call at the affordable Housing Summit. I bought it from Casey was the broker one of our fellow investor club members Jack was the owner, I won't give his last name, but essentially I'd been cold calling in Wisconsin, wasn't getting anywhere. So started looking northern Illinois and I basically got a lead. I got a bite on a park. The park ended up being in the Rockford area 96 lots. And it was city utilities and it was all looking really good.

0:04:43.4 Adam: And then I basically found out the whole thing was in a floodplain. Most of it was in a floodway. And essentially I backed outta the deal, but I had really good rapport with the seller. And so I said, Hey, I sent it to Casey. I was like, Hey man, this thing's too risky for me, but I got great rapport. Here's what the seller wants. You could probably, I didn't know about assignments and making money. I didn't really care about that. I was looking to be a buy and hold investor anyways. I didn't want short transactional money, so I just gave it to Casey. I'm like, here's the listing, here you go, man. If you ever find anything in Wisconsin or Northern Illinois let me know. And a couple months later he came up with the first park and he is like, Hey, I got this listing.

0:05:24.4 Adam: Guy wants this price. And started doing due diligence on it and the numbers made sense. It was little park 30 pads with one apartment unit. It was all city utilities. I'm very risk averse. So all city utilities, no flood plain, no density issues. I mean, the Rockford MSA now is like 400,000 people. I think two of the top five employers are medical and government. And so it seemingly was good. And I just moved forward with it. I bought it for, I did bank financing on it initially, so it was 30 pads. The lot room when I bought it was like 325. Paid 400,000 for it for 30 occupied with city utilities. And so I'm like, when I talked to you about it five years ago, you're like, Hey, I mean, you're getting such an insane cap rate on this that I know I was a little nervous that you're like, Hey, you're, the chances of you losing money are pretty [laughter] pretty slim here.

0:06:24.4 Adam: So bought that park and like I said, in five years we've never missed a rent payment. We've never had an eviction, we've never had cash for keys. It's a mostly Hispanic community and we're now at $500 lot rent. So about 50,000 a patent in value. So that one's worth about 1.5 million. And I got kind of being an entrepreneur and having money from another business that I have, another real estate, I got a little bit I didn't really like getting quarterly emails from my banker and I don't really like being told what to do, so I just paid that park off cash. And I figure one way to hedge instead of getting institutional debt is to buy a park really cheap, pay it off. And here I am year five, I've already gotten all my money back just in cashflow because the NOI is the income, right?

0:07:13.4 Adam: So basically over five years I've gotten my 400,000 back. So technically I'm in infinite return land, even though it's a free and clear park. And being a philosophical person first and then a business person, I realize that most people don't need that many parks or that many lots to hit their financial freedom goals. People get real competitive, want a thousand lots, this and that. But for me, the whole thing's about freedom. If I wanna have fun, I'll go snowboard or surf or play with my kids or do something for me. That's actually fun for this. This is just a means to an end to have a lifestyle of freedom. Very similar to Justin Donald's lifestyle investors. So that was kind of park number one. I have three parks. I can go into the other ones, but.

0:07:55.2 Frank: Well, lemme, let me ask you on that first park you have there. So just in a very, very rough ballpark what kind of cap rate going in? And then where do you think you sit right now as far as cap rate based on purchase price?

0:08:08.1 Adam: Oh my god. I mean the going in cap rate was about like a 15 cap I mean cap rate right now. I mean 30, I don't even, I don't even know how.

0:08:20.1 Frank: I mean, 30 it sounds like roughly.

0:08:21.8 Adam: 30. Yeah, I mean, I bought it for 10,000 per occupied lot. And it's $500 lot rent [laughter], all city utilities and water sewers paid by, for by the tenants too.

0:08:34.2 Frank: Right. Why do you think the seller sold it that cheaply for, I mean, for people who are watching this who are out of the apartment space or single family home space where it's a bidding war and there's very little profit built into the equation. How did you get it so cheap? That's what the average person would say is like, how, okay, how did that happen?

0:08:53.4 Adam: And that almost stopped me from buying the deal. And even the other two deals I bought too is you get so involved in being like, why is this person selling it to me for so cheap? And I've done all my due diligence. And so what I think is it was a bootcamp member, maybe he's watching the call. We're good. We're still good friends of this day. I would think that he was wanted to move all his assets to Texas for his own reasons. I think he was moving his family to Texas, wanted his assets to be there. I think he was a little spooked by looming rent control, which is another reason why I think I'm getting pretty good deals in northern Illinois right now is that actually keeps some people out of the state, which is interesting. And so I think he was kind of afraid of that. And also he had followed the bootcamp method of buying it for nothing from the seller direct. He bought it for like 200 grand. So he sold it to me 36 months later for 400 grand. So he still did okay. And so it was but could he have cash out refied and pulled out 400 probably. I just think he wanted to get out of the state for his own reasons.

0:10:00.9 Frank: Did you have any CapEx you had to put in? In other words, did you have to redo roads or water or sewer lines or anything like that?

0:10:08.2 Adam: No. So him being, again, a good bootcamp, like Guy white vinyl fencing sign, it's still there to this day. And he had just PVCed the sewer pipes for me, like most of them. So really the only thing we've ever had at that park is just some water leaks with the old galvanized lines. But other than that, it's been perfect.

0:10:24.5 Frank: Okay. So from Park one, you bought it was doing well. So tell us all about park two. How'd you find it? Finance it? What was the turnaround plan? How did all that work?

0:10:38.0 Adam: Yeah, so park two, buying it was a little bit of a nightmare. And it did take me two years to buy Park one. I do wanna say that too for people that are, I went to bootcamp in 2017, closed in 2019, and I was making offers the whole time. I had park in Peoria, Illinois. I had a park in Peru, Indiana. I'd been doing a lot of due diligence and it's can be tough to find park number one when you don't know what you're doing. But after I found Park number one, I had great manager, great experience. Everything was good. It obviously sets you up for Pringles can't just eat one of 'em. And so oh, so who sent me my deal that I bought park number two in Springfield, Jack the guy who sold me park number one, he's like, Hey man, I've been flyering and calling all the parks in Illinois for so many years.

0:11:23.6 Adam: And I finally, this seller I've been working on for five years, and Jack's like me, he doesn't want short-term money, so he didn't want to take an assignment fee or whatever. And he is like, since we're buddies, like, here you go. And he just introduced me to this seller and didn't, I offered to pay him, he didn't want anything. He is like, here you go. You know how it is. It's like a fan club. We're all helping each other out. And so I tied that deal up for 1.3 million, 52 pads in Springfield. It was about 30 occupied. And I was in due diligence for maybe like six months and going through it, and it was a little bit more challenging 'cause there was a lot of vacant. First one I bought was 100% occupied, 100% tenant owned homes, city utilities.

0:12:09.0 Adam: This one, there was a little bit of Orangeburg, which kind of scared me. It wasn't fully occupied at about 30 occupied, there was like 14 vacant park owned homes that were in bad shape. And the lot rent's a little bit lower in Springfield by about 100 bucks. And so it was making me a little bit nervous. And so I called Elephant Capital Jason and Nick Najar, who's a investor club member who you know, and I was like, Hey, I know you guys do assignment fees. Usually I don't care to make an assignment fee, but I've been working with this. I've spent a bunch of money and time on due diligence. So just handle it for me. Assign this thing and just pay me half or whatever you think's fair. I'm not gonna buy this thing. It's too much from a far, my manager and handy people are in Rockford and I just don't wanna deal with it.

0:12:52.6 Adam: And so, and then Nick basically said who I, who was also from the, the Cutco world, had basically said to me, and we go back 17 years, he is like, Hey, let's just buy this thing together. I'll run it and let's just do it and, and buy it. And so I said, all right. And Nick got involved and we were able to negotiate the price down to a million bucks. Which at the time we got a five year, 3.4% interest rate. So at the time it was a decent deal for something that was 52 pads and about 30 occupied with some meat on the bone with some of the park owned homes. And we bought that about two and a half years ago. Lot rents were only like 320 now. We're up at 400 for lot rent there.

0:13:33.4 Adam: And we're at 41 occupied. And once we finish these next six rehabs, we'll be at 47 occupied. And I think that one's gonna be more of a capital gains play where I think we'll look to sell that here instead of ReFi in about three years when the notes due. And so that's we bought it for a million bucks and probably worth about 1.6, 1.7 right now. We'll probably only sell it for about 2 million. But better. We probably, probably didn't do as well as we may have wanted to, but I think at the end of the movie we'll sell it for 2 million and bought it for a million, that'll be fine.

0:14:12.9 Frank: And give people just a rough idea of the going in cap versus where you're at now. Where do you think those numbers are?

0:14:19.6 Adam: Sure. Yeah. Going in cap on that one, we were at about a 10 cap on that. So it's been cash flowing decently, but basically we take all the cash and we put it right into rehabbing the next home essentially. So the Rockford Parks and I can go into the other Rockford Park I have here in a second. Those ones are cash flowing because you know that that's the play there. Whereas the play on the Springfield Park is just put it all back in. And then we got timeout communities in that area. Yes, communities in that area. And it's actually right adjacent to another park that's 80 spaces. And there's just a fence in between. It was all one park as well. So we know we have multiple exit plays for people. Like if we sell it to our neighbor who's a sophisticated Wells Fargo banker all of a sudden he has 130 pad park all in one. Right, right. So we know we can get a decent going out price for it.

0:15:15.3 Frank: Okay. Tell us about the third park, which is the second one in Rockford.

0:15:18.5 Adam: Yeah, so the second one in Rockford, that one. So I'm just a student of of yours, obviously Frank, I owe a huge debt of gratitude to you. And so I'm one of the few, I just follow the playbook. Everything you say to do, I just do it. I don't question it. I'm not the expert. I just copy it. And so I call every single park in the Rockford metro area for lot rent comps every single year. And so what happened after the first few years, obviously, is I started building relationships mom and pop, they have questions or how do you do this? Or how do you do that? Or have you heard the city's doing this? And I wasn't really interested. I had kind of enough cash and assets and other business stuff going on where I was in a financial freedom place already.

0:16:07.9 Adam: My first park in Rockford was kind of the final piece of that. And so I wasn't really interested and I'd listened to some of your lecture series about, hey, some one lady who bought one park and then she had paid it off and all she needed was 50,000 a year on top of her pension. And she was good. She's like, why would I buy more parks? And that podcast really resonated with me that, that you had done with her. And so I wasn't in the market for more parks, but I was talking to this seller and he was like, yeah, okay, our lot rent still at 350. And I'm like, oh my god five years later. And he's like, but I'm not doing so good. He was like 87 years old.

0:16:43.1 Adam: He is like, I really, I need to sell this park. And I'm like, okay, well I'm not, I'm not looking to buy anything, but just outta curiosity what would you want for it? And he is like, well, the tax assessor thinks it's worth 365 or 370, something like that, and I'm not greedy and whatnot. And he wasn't very good sophisticated operator. Obviously his wife had inherited the park and he is like, I don't know, probably 395 or something like that. And I'm just sitting there knowing it was city utilities 35 occupied with a duplex that each side rents out for 700. And I'm like, okay, this is like another, this is like what happened on the first park? I'm gonna get this thing for 10,000 an occupied lot. I know the lot Rent's 500 and then I called you about it, Frank, and you're like, you're buying that thing for less than half of the replacement costs.

0:17:37.2 Adam: He's, and you told me, literally, you probably don't remember, you're like you have to buy this thing, right? And I was like, I know [laughter] So basically I bought it, it was '60s and '70s trailers, couple '80s ones. We got one newer home in there now. And I was also able to get the seller who I just got the phone with now the widow 'cause Ted passed away and they were willing to do 10% down non-recourse five year note at 5% interest. This was 15 months ago. And so I just, they had eliminated any of the risk of like, some of the homes being older, which really is not much of a risk the way that I see it anymore 'cause they have no mortgage. And we've been able to turn it around, new sign, new white vinyl, we've the infrastructure's great. No density issues, no floodplain. And so that park has just been running amazingly we've had no evictions there. We've had three cash for keys situations, but we've been able to get 'em for one, for 1000 bucks and the other two for two grand. So as terrible as mom and Pop did running this park we were able to cash for keys, the problem people. And we got the rents up in 15 months to 498.

0:18:50.0 Adam: So call it basically 500 and we're going to do RUBS on that one here this, this summer and I just got off the phone with the seller cause I always listen to you about staying in relationship, right? If I need an extension or something happens. And for me, I have a good sizable amount of CASH which is nice right now in these times. And so the seller, her and I are, I text her pictures of my kids every month, every time the mortgage is paid and we have a good relationship and she's 87 and she only had about $30,000 in her checking account. And she just had 29,700 of it get stolen in a scam. And so now I owe her $348,000 as of today, but she's entertaining me paying her off early in full for 250,000. So get about a hundred thousand on our discount just because she's just in some financial distress. So staying in touch with your seller and banker, obviously even after the closing is never a bad thing. That's who I was literally on the phone with right now. So...

0:19:51.9 Adam: But if that one doesn't happen, that'll be paid off here in three and a half years. And so based, I did the numbers between the duplex, the apartment, the 35 occupied and the 30 occupied from the first park, the two Rockford Parks paid off will be CASH flowing about 270,000 a year.

0:20:08.5 Frank: Got it. And what was your cap rate on this third park, roughly going in and then versus today?

0:20:14.6 Adam: Yeah, again, because the lot rates were low about a 15 cap, but again, I'm sitting in probably about another 30 cap or more, which I know seems crazy, but, and it is, so I realize there's a little luck involved here for sure.

0:20:29.9 Frank: Sure. Well, well, there's, there's some luck, but the, you have to take the effort to get in the position to get the luck, right? So you got to be there. You got to show up and be there.

0:20:41.1 Adam: I stayed around the rim, right? As they say in basketball, right? You hang around the rim, you'd probably get a rebound and get a put back. And I feel like that's what happened here.

0:20:51.1 Frank: And on Park number one, you went right through COVID, right? 'Cause you bought that Park in 2019 ish?

0:20:56.0 Adam: Yep.

0:20:57.9 Frank: So tell me what your experience in COVID was, because I know we're all worried that the current administration is so wild and wacky and the world is so crazy right now that we may go into some other natural disaster. I don't know what it might be. How did your Park fare during the COVID disaster?

0:21:17.8 Adam: Yeah, amazingly, we, we did our biggest lot rent, besides the second Rockford Park, because we kind of rode the, the inflation thing. We lost nobody. I have a really good manager, so we have, oh, everybody's on autopay. A hundred percent of our rent is on automatic payment. And so my manager was just really good about communicating that that sure you don't owe it right now, but you're going to owe it. And all the people are so happy living there that they, again, being, having your residents be stakeholders in your business. It's just, I think it's, you talk about it often, but I think it's such an underrated part of this business that I've owned single family and apartment, like if you own an apartment building, they're not a stakeholder in the business, like at all, they just hate you and use your thing and leave you in a terrible, like, so having them actually be stakeholders in the business, I think was really everything.

0:22:19.4 Adam: And as you said all of my people were still working because half of them are retired. The other half were the landscapers that were outside or they were working essential jobs, the Uber driver, the Amazon delivery guys. So, yeah, we never, we never missed a payment. And it was we raised our rents more than we ever had. So I don't know how many sectors of real estate could say that during COVID. And I think that's really made me want to then buy that Springfield Park, which had fell out because of COVID. And then I put it back under contract as COVID was starting to end, I stayed in contact with that seller. And so because of all the having gone through some difficulties and seeing nothing but amazing results, it made me it made me want to continue.

0:22:57.1 Frank: Well, what are some of the lessons learned you have from those three Parks? I mean, Park number one, that Park has been completely problem free. So I don't know unless you have any lessons learned from that one, other than when you see a really good deal, you need to pounce on it and not not buy it because you think it's too good. What about on Park number two and number three? Any lessons learned from those that have changed your viewpoint going forward on things you would not buy or would buy or things you would do differently?

0:23:24.4 Adam: Yeah, a lot learned on Park number two, because there was a lot of not just vacant Park owned homes, but I think what I left out out of the 30 occupied when we closed on that, there was only 12 tenant owned homes. So out of those 28 Park owned homes, I don't maybe I didn't listen closely enough on some of the investor calls. Even even if economically it makes sense, you're going to lose some of those people. Right. I think we lost probably 60 or 70 percent. And we were not expecting that. Right. So when you have a bunch of Park owned homes, you try to make them into owners, even if it makes economic sense, some of them just want to be renters. So you got to be ready for that. And then you also had to be ready for the fact that nobody wants to work anymore. So it can be very difficult to then get a contractor would rehab a home and then they would just disappear forever. And we were finding it really hard as we were losing some people and then taking the Park owned homes back to get somebody to consistently be able to rehab the homes.

0:24:30.2 Adam: And so that was we worked our way through it. But that was definitely more of a challenge to convert the Park owned home to tenant owned home and rehab it in the middle in a place where nobody wants to work. That was a bigger challenge than I think we were expecting. So that was a big learning lesson on Park number two. And the other lesson learned on Park number two is just about and that's why I'm going with RUBS on Park number three for Rockford is just people stealing meters, meters breaking, people stealing our copper water lines, just like absolute nightmare type of stuff. And we also have to pay this which we're on city utilities in Springfield, but we have to pay $350 a month to have the city test the water that we're getting from the city. It's a total racket, obviously.

0:25:08.2 Adam: And so I'm just like I'm done with meters breaking. I'm done with meters. If somebody is going to leave the Park over RUBS, let them leave. We'll just replace them. So I'm going RUBS, 100 percent recapture, totally legal in Illinois, no more meters breaking, no more people stealing our water, like just going to cut down on some of that water sewer nightmare. And then in terms of the partnership that I have with Nick on the on the Springfield Park, obviously, I wanted to be majority controlling interest because it's always good to have somebody have the final say. But I also learned from you, Frank, to have alignment if you're going to have a partnership, have different skill sets, whereas Nick's managing that one, but also have alignment in terms of like Nick's not getting a management fee or an acquisition fee or anything. Him and I are owners. If he takes a draw, I take a draw. Everything is exactly the same.

0:26:03.1 Adam: And so there is no like, well, he's still making this eight percent management percentage over here, even though the Park's losing money. Right. So you taught me that. You're like, hey, most park of the risk here is not the Park. It's the partnership. So if you partner up, the best way to preserve that friendship and make that work is that you guys want to be in full alignment. And I think that's not always the case in some syndications. And so I was able to learn that from you before we did the operating agreement. But yeah, when I bought the third Park, it was all tenant owned homes and learning what I learned about I think Neptune and Metron meters are fine. And I get that fosters conservation and all of it. But sometimes if you're going to hold Parks for the long term, it can be better just just to do RUBS.

0:26:57.3 Adam: So I think I was a little bit all over the place with some of that. But vacant Park owned home rehabs can be a little bit tricky, would be learning lesson there and aligning. If you're going to have a partner on deal, make sure that you're aligned with them. So one person is not winning while the other person's losing. And then, yeah, definitely just even if you're if you're not in the market like I wasn't, but an opportunity comes up to buy something below replacement costs, you got to buy it even if you assign it or flip it or sell it a year later. But those opportunities like the great Charlie Munger talks about, they don't come up that often. So when they come up, you got to be ready to pull the trigger.

0:27:39.2 Frank: Right. And for those who don't know what the term means, RUBS does not mean a massage parlor. RUBS means Ratio Utility Billing System. You come up with a constant. So you charge, for example, one bedroom is X, two bedroom is a Y and a three bedroom is Z as far as water. Just want to clarify that for a moment. Let's talk about management for a second. What what software are you guys using as far as management parts?

0:28:00.9 Adam: Rent manager.

0:28:01.2 Frank: Rent manager, same thing we are. So, again, people ask me all the time, as you can see, rent manager is the dominant force in that. And then about for someone watching this who's never managed a Park, about how much time a week would you say that you spend or have spent managing a Park? What does that look like? How much time?

0:28:28.2 Adam: Good question. I think it depends on the week. But if you actually average it out over the course of a year, I think when I first took over the first Park because I didn't know what I was doing, I had to do all these calls with rent manager just to learn the software. So obviously there was like a learning curve. But once once I knew the systems and I had the manager and obviously the first one was stabilized, I mean, a couple hours a week, maybe. I mean, even my property taxes, everything is on autopay. So not much. At this time, the first Park I bought five years ago, zero hours a week. Everything's on autopay and my manager's so good. This is where I can't talk up enough. The difference between having a good manager, my manager who manages the two Rockford Parks, she's just like Diana Daly, sounds like her, acts like her. She's a beast, right? Just she handles violations. We do yard of the month like she does everything perfectly.

0:29:21.7 Adam: She's proactive. Like if I didn't have a great manager, it might take longer. But if you have a great manager, once things are stabilized, I mean, you can get away with one hour a week or less, really, because there's there's nothing to do, even if there's a violation or a water leak or a rotor router. I don't need to be involved because my manager has built the trust where she knows how to handle it. She knows how to get multiple quotes. And I'll even split the profit with her if she's able to negotiate somebody down. We have that kind of trust. I don't recommend that with most Park managers. But once you build up that level of trust, once there's trust and competency, you can really get hands off and start to teach them, hey, here's how you negotiate it.

0:30:02.5 Adam: Here's how you do it. And then obviously, I inspect what I expect, trust, but verify and I get videos and FaceTime video. So I'm always making sure that what she's saying is legit, even though we're five years into a relationship. But [0:30:14.4] ____ to have my phone in airplane mode for three months. Everything's still going to be fine.

0:30:25.8 Frank: And you're in California, all the Parks are in Illinois. How many trips have you made from California to Illinois over the last five years? Would you say roughly?

0:30:39.4 Adam: Probably, probably seven or eight. So and I think most of those were in due diligence, realistically, which is interesting. So the first Park I bought in Rockford five years ago, I'd go to that Park once a year. That's it. And same with the second Park in Rockford and the one in Springfield because Nick's managing that. I think I went to it three or four times before we closed. But since we've closed, I've been there once because I just with all the videos and pictures and stuff, they're just not not much need to to go to the Parks. I don't add any value. And so yeah, you don't I think it's, I bought there 'cause I knew my wife's family's there. Somebody could get there if something happened or I could get there. So I think there is that nervousness.

0:31:15.4 Adam: But realistically, I think it's helpful if you're a sophisticated operator and you're willing to learn some systems, there's really no reason to be drivable to your Park, especially if it's in a major MSA where you could take a direct flight. I don't know what would happen in a city utilities Park with all tenant owned homes that would really need you to get there right away.

0:31:50.9 Frank: Right. And the the Parks you currently have are obviously in the northern part of Illinois, for the most part?

0:31:55.6 Adam: Right.

0:31:55.6 Frank: And let's talk just a minute about the strange construction of Illinois, because it's a state that is dominated by Chicago. Chicago, I believe, has more than half of the population of the entire state in a city. But the state as you proceed south gets stranger and it kind of you kind of fall off a cliff once you get outside of the St. Louis Metroplex. Right. That's about as south as you go. Would you see it kind of that way? In other words, we've also owned Parks in northern Illinois, but we don't really go south of St. Louis. Would you go south of St. Louis or are your feelings about the same?

0:32:29.0 Adam: Never. Yeah, never. Because you can buy a three bedroom, two bath home with a basement in southern Illinois for forty seven grand. That's a decent working order. So you're just not going to have the I don't even know how people make Parks work down there. I talked to a lady who just bought three Parks in Rockford and her Parks were in southern Illinois and she said they were just a nightmare. So, yeah, I think you still need some of those basic hundred thousand median home. You got to have you have to have an affordability issue. If you look at the minimum wage in Illinois right now and then you understand that that applies to southern Illinois and they have fast food and Chipotle and all that stuff there. If you're making minimum wage there, you can buy a nice three bedroom, two bath home with maybe even a four bedroom, two bath working at McDonald's.

0:33:10.0 Adam: So there is no demand for Parks in that market. So, yeah, you do have to be really, really careful.

0:33:29.8 Frank: Yeah, the Parks I've seen in southern Illinois, my wife is from southern Illinois and there's a Park in her hometown. It's kind of where people go who cannot make it in a real world. I mean, as people living in there on disability, making seven hundred a month is people who don't have any credit or down to ever buy a house, because as you say, you can buy a house there for next to nothing. I've seen houses in there that were actually decent for in the 30s, something like that. I mean, crazy low. The mortgage on that has to be one hundred grand a month. Right. But it seems like the Parks there are filled with people who just can't make it in the mainstream. So you see all kinds of strange items like the no door on the trailer, just a sheet of plywood because they can't afford to replace the door.

0:34:13.8 Frank: It makes it rough. But the northern park of the state functions like most other states. But for someone watching this saying, oh, I know this little Park in the southern tip of Illinois, be careful because Illinois is not created equal. It's very different as you proceed north. Let's talk for a minute about rent control in Illinois because it's a topic we also own Parks in Illinois and the rent control of Illinois. It's almost like just something they do as an annoyance because they have talked about rent control for, I'm going to say seven years now. I don't know how long Pritzker has been in office, but he came in and wanted to be the great future Democratic presidential nominee or something. So any woke issue, no one embraces them more than him. He loves to talk about any strange social issue you can come up with. But I don't think at this point, having it been dangled for so many years, that rent control in Illinois probably really is on the table. What are your thoughts on that?

0:35:08.4 Frank: I mean, every time they get everyone in an uproar, oh, there might be rent control. It never goes anywhere every single time. It's it's like it's like the boy that cries wolf. I almost think it's a PR opportunity just to get on TV to talk about rent control. But you don't have the votes and it's never going to happen. What are your thoughts on that?

0:35:32.9 Adam: Yeah, I would tend to agree with you. It feels like if they could have passed it by now, they would have type of thing. It's always interesting, too, with Illinois being so much the population in Chicago. But when you drive Parks in Illinois, when you're in Rockford and Springfield, it feels mostly red and you and you also have to think that these municipalities don't want to be losing money and property taxes with rent control. And again, most of the state has that red feel. And so I don't know, like you said, and you'd mentioned on your call this past week, now that Washington got shut down, shut down, it's kind of like I don't really think it's going to happen in Illinois. I always could, but I'm always trying to protect myself against it by being aggressive. So like the newest Park in Rockford in 15 months, I went from 350 to 498. That's pretty aggressive. And I don't you know, it's it's I got to protect myself.

0:36:22.6 Adam: I'm the one taking the risk here. And if you guys don't want to live here, I understand that. You can go rent a two bedroom for 850 a month. But the value is here. So I don't understand why people don't talk about eggs or sandwiches or like, why do I have I don't understand. Right. So that's why I protect myself by being aggressive with rent raises. And honestly, by going back, going to RUBS and also billing back for trash, because if I'm these Parks are going to be paid off and I'm holding long term and I talk to you about it, I know I'm doing a nontraditional, non leverage, non syndicator route, but everybody has their own goals and freedom number and whatnot. And so for me, billing back for trash and going RUBS also helps a little bit with that too, because if the trash bill gets out of control or the water sewer gets out of control, that's already in place. I'm just charging them what my bill is.

0:37:29.5 Adam: Versus like I could just raise the rent another 30 or 40. But what if what if rent control did happen seven years from now or something? And then all of a sudden trash and water sewer are crazy high and I'm still paying for those as the Park owner. So I like billing back for trash and doing RUBS if you can, when you can to help hedge against that, because if they did cap me, let's say they cap me, both Parks are paid off. And let's say they even went New York style rent control and I can only do a three percent raise off five hundred fifteen bucks a month.

0:37:52.0 Adam: Okay, well, I'm not killing it, but it's like a pension for me at that point. I'm still making money because property taxes aren't going, property taxes are gonna go up a little bit higher, so will insurance, but what I'm paying my manager is not going up that much, and I've already gotten water, sewer, and trash off the actual bill, and since I bought them for next to nothing, I'm still profitable, and so I like protecting yourself against rent control, but also understanding that if it hasn't happened by now, it's probably not going to.

0:38:25.2 Frank: Right, and let's talk for a minute about, and not on an Illinois perspective, but a national global perspective, raising rents, which we raise rents, you raise rents. Tell me if you would agree with the statement that when people write articles and complain about raising rents, they're not looking at actual nominal value of the amount of the rent, they only wanna talk about percentage. So for example, every time you see an article on the evil mobile home park owner who dared to raise his rent from 300 to 400, and it's such a huge percentage, that $400 rent is in a market where the single-family home is, let's say, at 400,000, and the three-bedroom apartment's at 2,000 a month, and we're being criticized for having the cheapest rents known to man because they only wanna talk about one aspect, which is park of the punishment for being so cheap, right?

0:39:16.5 Frank: So if you start off life at $100 rent, and you go to a $200 rent, that's 100% increase, and 200 is a ridiculously low amount. I mean, it parallels Dollar Tree, which in my small town is probably one of the most active businesses we have because everyone loves Dollar Tree. I love Dollar Tree. I don't know if you ever go to them, but I buy all my office supplies at the Dollar Store. I buy all kinds of stuff at the Dollar Store, batteries and you name it. And they went from $1 to $1.25 a couple of years ago, I think, massive criticism. How dare you do that? You're up 25% in pricing in one whack, and you never see that kind of price adjustment at the grocery store, but it's $1.25. I mean, if they had gone from $1 to $2, got up 100%, cheapest store in our town. Got up to $3, 300%, cheapest store in our town. What are your thoughts on this kind of new woke agenda on the evils of capitalism exemplified by park owners raising rents? Are our rents ridiculous or are our rents fair? What are your thoughts?

0:40:19.8 Adam: I mean, our rents are more than fair. And I just, I don't care about any of that. I never did. I don't feel bad. Like 21 years, again, being a North American sales trainer for Cutco's business guests, we always sell an American made Cutco knife for as much as we can get for it. What the hell's wrong with that? Like we sell it for what we can get. If it's too much, then I guess we gotta bring the price down so we can move more of these units. That doesn't, isn't that right?

0:40:54.2 Frank: Does it not seem weird that mobile home park owners are the only people in America that try and quantitatively ease the pricing on their own product? Have you ever seen such a thing? I mean, I come out of the billboard industry. You were proud if you could get the highest rent on the entire highway. You'd be like, well, I get 1,200 a month from Horseshoe Casino. The other guy would say, gosh, darn it, I only get 1,000. Our industry, people are so afraid of being criticized that when the apartment right down the street is 1,800 a month, they feel badly going to 450 because it's $60 up from three something. It's a very unusual position.

0:41:33.5 Adam: It's weird because I my single families that I have in San Diego, one of them's an Airbnb home in downtown San Diego. And when you're in the Airbnb asset class, which is my not, I do not like this asset class. It just happened to work out because I had a home in downtown San Diego right by the airport and the zoo and the beach and stuff. But you brag to other Airbnb owners, hey, we're going to get $500 a night in July and we can get this much here, we can get that. And that's good, that's what you should be doing as a business is trying to do well. That's what businesses should be doing. And so an Airbnb is not like, it's like a hotel, but really it's affordable hoteling because it's for the people that can't afford 600 bucks a night for a hotel room as a couple.

0:42:20.0 Adam: They can go in this house and have six couples and pay $500 a night and divide it. So it's, we're helping people that are middle income or less be able to afford vacations. I call it affordable hoteling, but still Airbnb owners that talk, they brag about how much more they can get. And it's like a thing people are proud of, but in mobile home park land, it's the total opposite. So to me being, it's bizarre to me, I don't understand it, but I just don't care. It's like, listen, I'm following the rules. If you don't like it, leave. So my rent raise was 26% 15 months ago, my initial rent raise, which was terrifying to me because I know you got, I'm such a student of you. It's like the $50 cap, the $50 cap, the $50 cap. And I was just like 10% down non-recourse finance and I'm buying this thing for nothing. I don't care if everybody leaves, makes no difference to me. I'm like, let's see how this $88 rent raise goes. We lost nobody. And...

0:43:12.4 Frank: Well, you lost no one because there's nowhere else you can go that cheap, right? When you see the articles in the paper where people complain about a big rent increase and then they say, but I've got nowhere else to go. I'm trapped, I have nowhere else to go. That's because it's still so cheap. If we raised our rent to two grand, yeah, you have somewhere to go, the apartment down the street.

0:43:32.3 Adam: Right, and we have a duplex in the middle of the park and this park was not nice when I took it over. Each side of the duplex, they're one bedrooms, tiny, one bedroom, one bath. Each side of the duplex rents out for 700 a month. I'm going from, I'm raising from 350 to 438 for the first shot here. And the one bedroom duplex in the middle of the park with one bathroom is renting for 700 in the middle of the trailer park. So I'm like, put me on the news, please put me on the news. I don't care. Like, let's talk about this, right? And then you can go in the other angle of, well, it's five acres, I could redevelop it. And then I have nowhere to live. That's the whole, that's a whole other one. But it's just like, I think the indifference is coming. It's starting to happen, but it's just like, who cares? Like, we're not forcing anyone to do anything. There's no gun to anybody's head.

0:44:28.9 Frank: Correct. And also people don't realize that people in mobile home parks who cannot afford the rent could always just sell the home, right? There's always this narrative that park owners raise rent and then people run off. We don't want anyone to ever run off, right? If someone runs off, I have to take them through abandonment, rehab it, sell it. And what do I gain? The same rent I had before. It just doesn't, I think people just generally don't understand the business.

0:44:52.9 Adam: Well, you know, it's interesting to add to that too, Frank, because we made the park nicer, white vinyl fencing, new sign, we fixed potholes, we trimmed trees, we skirted all the hitches, we painted the homes, rusted roofs, we made it a really nice place. So when we did that initial 26% raise, which is only 88 bucks, like you said, they get hung up on the percentage. I had Brandon, because I know a lot of people probably don't do this. I took him up on that. Hey, with your fees, you can have them make a website, made a website. I had my manager promote it to the tenants. We got 11 five-star reviews the first couple of months. But we raised 26% and if you go to our website, we got five stars on Google.

0:45:34.1 Frank: Yeah, I was gonna ask you, what percent of your residents do you think are happy? Because, you know, if you read the media, they try and portray it that most are miserable. In most of our parks, in a hundred space park, I might have one unhappy person who is unhappy at life in general. They just, you can never make them happy. But in general, our people love us, wouldn't you say?

0:45:53.8 Adam: Yeah, nobody's unhappy. The only people we lost are people that, like you said, they're on disability, something where they couldn't afford the seven, you know, they were only having 700 a month come in. They needed government or charity programs, which is not my job as a business.

0:46:09.7 Frank: No, we're not the government, we're a business. I mean, the, you know, Section 8 is there. There are other government programs. The problem is they can't take any more people in because they're basically maxed out.

0:46:20.9 Adam: Yeah, absolutely.

0:46:22.0 Frank: That's a government issue. I mean, for all the money we send to other countries, you could revamp the Section 8 program pretty much overnight, right?

0:46:28.8 Adam: Yeah, absolutely. Absolutely.

0:46:30.4 Frank: Let me ask you this but you, you're, you mean Anyone watching this can tell you're a happy guy. You're an optimistic guy.

0:46:37.8 Adam: Sure.

0:46:39.2 Frank: Most park owners are happy people. Why are park owners happy people? Like if apartment people, I'm sorry, but most apartment people I know are very dour. They're not happy, they're unhappy, they're pessimistic on life. Why are mobile home park people such a happy clan? What is that all about?

0:47:01.0 Adam: We're just positioned perfectly right now. You know, again, never say anything forever, we're just positioned perfectly. Like you've talked about every mega trend, affordable housing, as we hit this recession, look how low the savings rate is right now. Like people are about to get into some trouble and they need affordable places to live. And we're just on that trend. But I think park owners are also really happy too because of predictability of our revenue. And that's a big part of this because of lack of turnover, right? So we just have very, again, being a little bit exposed to Airbnb asset class, you wanna drive yourself nuts, go buy a bunch of Airbnbs. I mean, it is the least, like, if you like predictable cashflow and knowing what your revenue is gonna be and your turnover and having sticky residents, which also save a ton of money.

0:47:49.5 Adam: This is and if you want to be in an asset class, again, you being billboard sales guy, me being in the knife sales business, I've been in the knife sales business for a long time. I'm used to having to run through walls to make revenue happen. It's just so bizarre to me that we finish a rehab and put it on marketplace. We got 50 people showing up at the open house. My manager's like, we can't get like, the demand is insane. And so I think park owners are happy knowing that we have predictable revenue. We have really sticky tenants. We're positioned really well in good times or bad. And also we don't have to, hey, you're first month free, you're last month free, give a bunch of incentives. We just, when you can sell a used home for about the same price as a lot of used cars or less are driving in the area. Like when we sold our last used home in Rockford for $16,000, I'm like, you gotta look at a lot of just the used cars on the road. It's a two bedroom, two bath house with HVAC and a roof and all, like you can't buy a used car for what these people are living in as a detached dwelling with a yard and a porch and parking in front of their home for less than what a used car costs.

0:49:01.7 Frank: Right. All right, let me ask you some philosophical questions here and put on your predictions hat for a moment. So what is your personal opinion on when interest rates will decline, do you think? You're a guy who reads a lot, thinks a lot. When do you see rates start to decline? Will it happen this year, next year or never? What are your thoughts?

0:49:21.7 Adam: I mean, I'd say end of this summer, if I had to guess, is when they're gonna start slowly bringing them down, probably go down maybe a point this year and then maybe hopefully another point in a quarter next year would be my thought. Obviously we got an election coming up and we just we have this looming recession that just hasn't hit yet, right? I see it here even in San Diego, people losing their jobs or people going from 200 down to 150 or they're just, the savings rate is just insanely low. Credit card rates are insanely high. So it's just, I don't know what's happening. It seems like we're in the twilight zone or something that we're not, maybe we're in the recession right now. Obviously it's backward looking, but with an election year coming up, etcetera, I'd say end of this summer, they're gonna start to decrease rates.

0:50:09.6 Adam: And if there's no black swan event, they'll do it slowly, right? Quarter, half a point at a time if there is some crazy black swan. Obviously we know there's gonna be regional banks failing with that are carrying the paper on all this commercial office and retail space that's about to go bust. So we know there's a pending doom coming and everybody knows this, the Fed knows this as well. And so I'd say end of this summer, they're gonna start to slowly do it and unless there is some big banking collapse or black swan, they'll do maybe a point this year, point in a quarter next year and then kind of see where that lands us at.

0:50:45.2 Frank: Okay. And you just mentioned one item I wanted to ask you about, which is the commercial real estate apocalypse because you've got $2 trillion of office and retail mostly coming due for refinancing this year and next year. I know there's a lot of rosy commentary by the Fed and others in the Biden administration. I see an absolute catastrophe coming, largest office building in St. Louis. Sold for 4 million at auction. It cost 100 million to build it. I mean, let's get serious folks. I don't think most of these office towers and shopping malls are worth even, even I'll be kind and say 50% of what they are carrying on the mortgage docket. I think the bank failures will be spectacular. I was there for the Texas savings and loan crash in '88 there. We had 3000 banks fail in the state of Texas. People went up in arms recently when three failed, right? And as though it was the end of the earth. So I think people are way underestimating the power of that tsunami of debt coming due. What are your thoughts on that?

0:51:55.0 Adam: I couldn't agree more. It's just the slowest incoming tidal wave ever. You can literally see it. You cannot convert these office buildings to apartments. It costs more than the building is worth. It's not a viable business plan. And the trends aren't trading. People are shopping online and Amazon and not going to the office. And that's not gonna change in the next 24 to 36 months. So it's gonna be an absolute catastrophe. Banks are gonna go under. And so, again, we're positioned really well as park owners, but I will say being highly conservative myself is you just wanna be aware of what's gonna happen when lending dries up. For me, I always hold a lot of cash because you can't, look at Warren Buffett. You can't have too much cash. I mean, sure, leverage gets us better returns in here, but I like the fact that a couple of my parks are gonna be paid off and I could even pay off the third one if I wanted to.

0:52:49.6 Adam: So if things do go wrong, and I know not everybody's in that cash position, I have the liquidity to solve that problem with a wire. And so I know that's not the case with everybody, but people should be thinking, okay, if I can't get lending here, what is my plan B and C? Not just like, well, we're gonna ReFi here and this is what it's gonna be and it's gonna be all smooth. Like, you better have plan B and C figured out now. Is it non-recourse? Is it full recourse? If it's full recourse, what are you gonna do? And then do you have that kind of risk tolerance or are you in that chapter of your life where you can take that hit if you can't ReFi, right? I think it's serious. I think people really need to think through how much liquidity in backup plans they need right now.

0:53:38.5 Frank: Yes, I agree. I think the park business is somewhat insulated because Fannie Freddie represents over half of all mobile home park debt and it doesn't have any apocalypse coming 'cause it only does residential, right? And then there's a huge amount of seller financing out there as you know yourself from experience. The danger point I think is gonna be the larger banks. Obviously small town banks, they did never did an office tower. Like the banks of my tiny town in Missouri, I don't know anyone holding paper on a 30 story, often glass office building somewhere. And I think those more of the regional larger banks, not the ones that are too big to fail, not your chase banks. Although I think they probably carry a lot of this debt too and they just won't talk about it.

0:54:22.1 Frank: I think that's where people are gonna get really, really hurt and I think it's gonna scare people but they may create buying opportunities because you'll have people who normally would be buying things that don't, which give people the ability to buy if they can figure out the financing on it. But I think as you were mentioning earlier, it's really a time to stay in contact with your bank all the time because you wanna know exactly where your banker is at and what's going on. Typically if you have loads coming up, the obvious thing you could do is not talk to your banker for four or five years and suddenly call about your renewal only to be told the banker isn't even there anymore, right? That would be the worst nightmare imaginable.

0:55:00.9 Frank: Let me ask you, where do you see the industry? You're a younger person, you're significantly younger than I am. Where do you see this industry being 50 years or more from now? And let me just give you in certain subsets. Number one, where do you see lot rents being 50 years from now? Well, mobile home park lot rents always have to be a fraction of prevailing market rates. And if not, like where did things top out? You're already at a thousand rent in Denver, you're at 2000 in Los Angeles, you're over a thousand in parts of Florida. Where do you start actually reaching market levels? If you just take out this whole mom and pops being afraid of their own shadow, quantitative easing stuff, where what are mobile home parks really worth? What would rents really be decades from now when the stigma has somewhat worn off and people are just literally pricing things based on supply and demand? Where do you think that would be?

0:55:55.8 Adam: It's a really good question. Yeah, I'm 39 now. I have two little kids, one year old and three year old. The two Rockford parks, I think about keeping them forever, legacy assets, passing them down potentially. We'll see if that's the smartest move or I don't know exactly. But so I do think about where it's going and where it's heading and where we're at right now. To me, it's just bizarre. And even some of the other podcasts I listened to where park owners are telling other parkers, hey, cool it, whatever. I just, with the rent raising, I just don't understand why we should be so much less than the two bedroom apartment. If people see more value in having a detached dwelling with a yard and a deck and a parking space right out front, they should be able to pay for that. I literally think, I mean I did an $88 raise 15 months ago and then another one and I went up 150 bucks in 15 months and lost nobody. And it makes me think all the time, like, hey, if I did another $80 rent raise next year, the year, like, even if I lost people, I'm still gonna have people coming and seeing the value. And so I think obviously in every market that...

0:57:08.2 Adam: As any size MSA at all, you need to be at least a $500 lot rent, in my opinion. At least 500, if not 600. And so where they're heading, I think they're heading, I mean, sky's the limit just depends on all the factors. But I think being at maybe 80 or 90% of the two bedroom apartment, because the value is there is my opinion. And because people can't afford to buy homes, I was literally just talking to my, one of my best friends from Portland, Oregon right now, you have to make, it's like median home price, 450,000. You have to have a net income of like 170,000 a year in Portland, Oregon right now to buy a house, which would put you in the top 1% of income earners in the Portland, Oregon area, just to buy the median home value. So, homes are not affordable and they're not going to be affordable because we're 4 million housing units under built. So people don't want to live with their families in apartments, people like detached dwellings, even if they're single or married, people just like the, so why can't we be at two bedroom or higher? I don't think there, I think my answer in short is there is no limit. Maybe will be more than apartments someday.

0:58:20.0 Frank: Right. Well, we have your, I mean, the benefits of the mobile home over the apartment are pretty big, right. You don't know when no one knocking on your walls, park by your door and have a yard. I mean, that should be worth something. I mean, I don't know why we would have to be even at parity with them. Let me ask you this, we all know that mobile homes are ugly. I mean, I've never been in a park and thought, my gosh, what a great looking home. Never occurred. I've seen some that residents have taken it upon themselves to do almost an architectural rehab on. You see that in California frequently. They look far better than anything any factory can build. But what will parks look like 50 years from now? See, I think the dilemma, a lot of people think the futuristic park, we're going to replace all those old homes with 3D printed or something. But the problem is, it's hard to make the economics work because we're just, we rent land.

0:59:12.9 Frank: And the person who has the paid for home can clearly pay more of a market rent than someone with a giant mortgage on it. So I don't really see the transition. Do you see a transition? I mean, I know back in the day, I had a park in Grapevine, Texas, about 30 lots, phenomenal location, right. It just kept getting better. They were building literally million-dollar McMansions just around the corner, walked to school, just happened to be the best park of Grapevine. And I seriously thought maybe I should kick everyone out and bring in these two-story little San Francisco things they were making at the time with the garage below and the home on the top. And I thought I could, well, I could probably mark those up and sell them for 100 a piece. Buy them for 60, and get the lot rent. But when I ran the numbers, it still didn't make any sense, because I would have all that risk and all that capital just to basically get back to where I started, plus maybe a little money on the homes. You see the way parks look changing 50 years from now, or will it look just like it? I mean, take your Rockford Parks. Will your Rockford Parks look just like they do today, but maybe a new fresh coat of paint on the homes or what do you think the future looks like?

1:00:20.8 Adam: Yeah, they're going to look just like they do today. In my estimation, you might have some tiny homes sprinkle in so the park I just bought most recently, the municipality does allow tiny homes. But who's going to bring in a $100,000 tiny home that's 300 square feet when they can buy a stick built tiny home for 170,000 in the market. Right. So. Tiny homes are welcome, right. We even have that on our website, but we haven't gotten any, they're kind of trendy and expensive. I think you'll see some tiny homes scattered in to some of the parks, obviously RV as well. But no, at the end of the day, if you're in your house right now, you know this and my homes in San Diego were all built in the 1950's, you can keep a home going forever, right. People get really big onto this whole like, "Oh, we got to scrap." It depends on the market, right. But if you're in a major MSA, even if it's a two bedroom, one bath, 580 square foot home, you're going to sell that thing and fill it, no problem, in my opinion.

1:01:21.9 Adam: So why would we scrap it and bring in a brand new $100,000 home? No, let's just fix everything. So like even my rehab crew in Rockford for the most recent park, when we closed, I literally took two condemned stickers off of two of the trailers, ripped them right off. And we basically rebuilt those things. We just have the metal, you can rebuild anything on these homes, the flooring, the walls, the roof, the windows, the doors, you can mediate the black mold. You can take it out. You can literally have a 1960's or '70s metal on metal junker home that's falling over. And if you put 15 or 20,000 into it and literally replace everything, you got a brand new home and you're going to sell it, it's going to be a lower mortgage, affordable for that person. They have five, six, 700 square feet to live in, even if they're living there as a single person. And so why would I knock that down? Now I got to run piers. Just moving a new home is $10,000. The brand new home is 80,000 or $90,000. I got to block it, I got to tie it down, I got to connect, reconnect it to water, sewer, gas, electric. Why would I do all that when I could just rehab this home, make it perfect, put new paint on it, redo the roof, put shutters on it, paint the shutters. It just makes, it's just, even if it's a little bit smaller people are willing to live a little bit smaller if they can buy a home for 20,000 instead of 80,000. If there's enough demand.

1:02:46.0 Frank: Let's talk for one last item which is the the element of park ownership which is not numerical and that is time, right. So my favorite factor of being a park owner was the ability to go to all of my daughter's sports games she played, every sport so I was there for all of it. Basketball, track, cheerleading, the whole thing. Never missed a game. Always took her to practice. And it looks to me like right now you look like you're in an RV. Are you in an RV?

1:03:13.0 Adam: I work in an RV in my driveway.

1:03:18.0 Frank: There you go. Right, so.

1:03:20.0 Adam: Yeah, we have a three-bedroom, two-bath, and we got two little kids. And so as a park business, my wife was able to retire from recruiting because I was able to replace her income with the park income. And when we were rescheduling this call a couple times on me today, I was like, "You're my only call the first three days. I got nothing going."

1:03:41.6 Frank: Let's talk about that for a minute because one interesting aspect of mobile home parks are you basically are getting paid just for ownership, because you don't really create value. So that was a big, and I knew you probably the same issue. So when you're doing stuff with Cutco, you create your destiny, right. You're the guy that makes it all happen. And I had the same thing in the billboard business, if it wasn't me making the cold calls, knocking on the doors, burning the midnight oil, the business just sat and died. We had no money coming in. And then this whole mobile home park thing is still kind of bewildering because in a good Italian restaurant, for example, the owner goes table to table saying, "How's your meal?" Right. And he imparts value. I don't impart value to the parks, nor do you, right.

1:04:33.6 Frank: We get paid because our entity is on the title. But it's a strange niche of business because, it's almost kind of lonely and boring at times, right. I mean, it's just, it's odd and you fill your time doing things you like or doing things with your family. But we're kind of paid to stay home, right. I mean, really, because if I go to the park, I'm not sure I don't actually cause more problems than good. Because I'll maybe overthink things, which there is no problem. I'll be bugged by things that the tenants could care less about, right. I mean, I might get all up in arms because someone has one too many toys in the yard, not even realizing the one toy is going in the house 30 minutes from now and I'm wasting everybody's time. Talk to me about the spatial time element of mobile home park ownership.

1:05:27.9 Adam: I mean, it's the greatest thing ever, it's bizarre. It does take some getting used to if you're coming from being an entrepreneur or commission only sales or some combination of both where you restart at zero every week or every month and you got to recreate the revenue through your own effort and skillset to just have money coming in and then being able to raise it, and raise it, and, it just, you have to almost change your identity a little bit and kind of relax and be like, it's okay that I'm not doing a bunch for this. This is how it works. It takes some getting used to, but it is, it's the best thing that's ever happened to me in terms of business or lifestyle.

1:06:11.8 Adam: I mean, again, I owe a huge debt of gratitude to you and everything that you guys have done or I would never would be here. But it's a perpetual Saturday. I can do whatever I want, whenever I want. I was talking about, so before our call, I was literally, it's San Diego, so the weather's perfect here all year round. I was training my wife in the backyard because we have a one-year-old and he was taking a nap. And so we're doing bench press and shoulder press and helping her do a workout in the backyard. You push the call back, I'm like, "I got no other, I got nothing else going. No big deal." It takes some getting used to, but it is a perpetual Saturday. Peaceful day of the week. You do whatever you want to do. And it's the best.

1:07:00.8 Frank: Let me ask you, you've been in a bunch of different businesses, you've owned different things, have you ever seen an easier business than mobile home park business?

1:07:10.1 Adam: No. Again, just the short window into the one Airbnb home I run in downtown San Diego. I mean, you get messages at midnight because they're one towel short. It's an absolute, you can't even scale that. And.

1:07:27.7 Frank: We lost you. There you are. We lost you for a second. There you go. Okay. Now you're back.

1:07:33.0 Adam: Yeah, if you want to scale to six Airbnb's, you just, it's so management heavy, management's expensive. It's a nightmare. And if something happens, you got to give them a refund. If I have a water leak, I got to shut the water off in my park, I'm not giving anybody a refund. If something happen, If I'm one towel short at the Airbnb, here's $4,000 back. It's outrageous, [laughter] Airbnb doesn't side with you. And so, yeah, being in the sales business and, there is truly nothing, again, I've never done a triple net lease that might be comparable or better. But in my experience, having had duplex apartment, Airbnb commission only sales, et, cetera. There's nothing like having all lot rent parks with good, with a good manager, on city utilities. There's just nothing like it.

1:08:21.0 Frank: Yeah, I think the problem with triple net lease is when the lease comes up, you're typically screwed, right. That's the, you have no energy for 20 years until you get the building back because nobody wants it because the neighborhood has transitioned. And now you'd have no idea how to ever have income with it again. And then you sell it and you lose half your money. That's kind of, most triple net lease people I've talked to, that's kind of the end of the movie for that. Well, we really appreciate you taking the time to be here again. It always startles people that we can get people on the lecture series who can just honestly talk about their business because in most businesses it's so competitive like I could not in the billboard arena no one would have ever talked to me because we were all arch competitors who hated each other and if you were to talk to someone you'd want to throw out bad information hoping to scare them away because they might steal your Arby's or McDonald's advertiser or something.

1:09:11.8 Frank: I think it's refreshing in a modern world where you can have people just talk as adults, unfiltered just on what's going on. And I haven't seen an industry other than mobile home parks that the people are willing to talk openly, I think it's, we kind of have a fellowship because there's so few parks and so few park owners that we just all feel like we're in the same club, like some kind of mobile home park country club or something. And we really appreciate you taking the time to be here. Although it sounds like you got plenty of time.

1:09:38.8 Adam: Plenty time, [laughter]

1:09:39.1 Frank: So I mean, what the heck? Well, we'll be doing it tomorrow, but we really appreciate that. And again, we also appreciate everyone who tunes in for the Electric Series events because whether you buy park or not, at least it's good to be educated on how it works. What the in's and the out's are. It does not fit for everyone, but it does fit for a lot of people. We like exposing people to a new idea at a time when America is literally going down the tubes. And all of your traditional investments are not either doing well or won't be doing well soon. So we think it's important people know that they do have options out there other than just stocks and bonds and pain and suffering and fear and loathing. You can actually own something that does well when times are bad we have lots of demand for. So again, Adam, we appreciate you being here. You're a great guy. Always good to talk to, fun guy. And again, we'll talk to everyone again soon. So thanks, everybody. Hope you enjoy this, and we'll talk to everyone again soon.