Discover the incredible success story of Gary, a Mobile Home Park Boot Camp graduate who achieved impressive returns in the mobile home park business. In this recorded webinar, hosted by Frank Rolfe, we delve into Gary's story and the unique strategies he employed to build a $10 million portfolio with only $140,000 in capital. We also explore how Gary was able to secure four out of five parks with zero-down payment, a possible world record. Whether you're considering alternative investments or have an interest in the mobile home park business, this video provides valuable insights into the opportunities available in this sector. Watch now to gain valuable knowledge and take your investment strategy to the next level.
Additionally, if you're interested in pursuing mobile home park investing and want to learn from experts in the field, consider enrolling in the Mobile Home Park Investor's Boot Camp, the same course that helped Gary achieve his impressive results. The course covers everything you need to know about identifying, evaluating, negotiating, performing due diligence on, financing, turning around, and operating mobile home parks. Taught by industry expert, Frank Rolfe, who is among the largest owners of mobile home parks in the U.S., this course provides unparalleled insights into the mobile home park business. To learn more about the course and its benefits, Click Here or give us a call at (855) 879-2738.
In & Out of Mobile Home Parks with $5 Million Profit - Transcript
Frank Rolfe: Welcome to our lecture series event called In and Out in seven years. This is Frank Rolfe. We're glad everyone could join us. We've got Gary from Idaho here with us. Hey Gary. And he's got a fascinating story that we thought everyone could learn from. Gary bought his first park in roughly 2015, build up a little portfolio and sold the whole darn thing off. And he's here to tell us the results, how it worked, lessons learned. So Gary, we really appreciate you taking the time to be here to help to educate people on this crazy trailer park industry.
Gary: Good to be here.
Frank Rolfe: And so let's just start off with the basics. So how the heck did you ever get the idea about mobile homes to begin with? Had you ever seen one, grown up in one, knew someone in one? How in the world did the idea of those wobbly boxed trailers ever come into your brain to begin with?
Gary: Yeah, when I was a kid we lived in one on a piece of land. And then when I was a student at university lived in a mobile home park for a period of time on a, I paid rent. And then from 1996, I lived in a double wide mobile home on a rented lot here locally for about 15 years. And so I'm very comfortable with mobile homes in general. And I guess how I got started was when the meltdown of 2008 hit, my consulting business took a hit a couple years later and I said, Man, I got all my eggs in one basket with my company and I probably need to diversify my income stream. So I got to looking and I didn't want to get into real estate in the truest sense.
Gary: But I did notice that the trailer next door to me looked like it had been abandoned. So I tracked that down. And long story short, I bought the trailer next to me. I paid the lot rent and fixed it up and rented it for a while and then ended up selling it on a contract and stumbled on Lonnie's book, Deals on Wheels. And that one really got me fired up 'cause I was just thinking scalability. I said, I wanna do 10 of these deals and then I'll have so much mailbox money coming in. And I think that got me involved in meeting all the park owners here locally and convincing them to let me do this. Most of them are owner-occupied. They didn't want renters and people like me in there.
Gary: But I did a pretty good sell job I guess, and I got in with most of the parks locally and I think all in over the course of before buying my first park, I probably had 45 of these deals I flipped, just locally here. And some I made good money on, others I didn't but as a net portfolio is just kind of averaging out. I probably made 25% on a year profit where if I wasn't buying and fixing them up. So that was not bad scratch for doing that. And I was at the Delta Sky Club in Salt Lake City killing three hours. And I started googling and came across Mobile Home University. And it got me intrigued, it got me to thinking like, hmm, what would it be like to have a park?
Gary: And so I reached out. I signed up for your resources. I got a bunch of the resources, purchased them, purchased the CD sets, et cetera, and I really got fired up. And so I think it was the spring of 2015, you had a bootcamp in Las Vegas and... 2014, 2015, somewhere in there. I can't remember Frank exactly, but I went down to the Las Vegas bootcamp. And that was I mean, it just blew my mind wide open as far as content and information and motivation. And I came out of that with a goal that I was going to, within two years, I was gonna save enough capital to put a down payment on a park. That was my goal when I came out of there. And I worked out.
Gary: And lo and behold about six months into that later this park, I had a couple trailers in and I knew it was for sale and he was having some challenges getting the deal sold. And so I had called him up and asked him how he was doing, and he says, yeah, we're at loggerheads about... I don't know, park inventory homes, I guess something like that. And I said well, what's your bottom line on this? So he told me the bottom line and I think it was $850,000. So I called you to do a deal review. We went through it and you said that's a good deal. You got a lot of upside, a lot of value add, get it under contract. And you sent me a contract and I kind of edited as best I could and gave it to him to sign. He had a realtor, he had it listed and he had a realtor. I didn't have an attorney, I didn't have a realtor or anything, so I just kind of just went on my own with it. But we got the deal done. And it was September 1st, 2015, I bought my first park.
Frank Rolfe: And Gary, how did the first one turn out in the end? It had a good ending, correct? Don't give me the ending yet. But it was a good one, right?
Gary: It was a good...
Frank Rolfe: It was a good deal.
Gary: They say, you'd say your first deal's never the best one. That one was my first deal.
Frank Rolfe: Right. So I was correct in my analysis, right?
Gary: Yeah, you were absolutely correct.
Frank Rolfe: Okay, so tell us on the first deal, how did you find that first deal?
Gary: Well, I was doing local mobile home investing with the Lonnie stuff. And I had... So I knocked on the door of the manager of that park and got some intel and stories of the situation. I was looking at a couple of them, maybe buying a couple of their park owned homes. So what happened initially was when the seller was at loggerheads with his trying to offload the park. I said, why don't you give me the park owned home, put them in a package deal, give me all these... I will fix them up, rent them, you get them off of your books, and then you can do the deal. And so, he did, I did. And for whatever reason that deal fell through. So I called him back just checking up and said, "Hey, how's it going?" And he goes, "Ah, we're still stuck." And that's when I said, "Well, give me your bottom line." And that's how it happened.
Frank Rolfe: How did you finance that first deal? Did you use a bank? Did he carry, or how did that work?
Gary: So I did... So it was $850,000 purchase price. I put my portion $120,000 in at closing. The seller did a 10%. So it was something like 80, 85 grand or something like that. And then the bank did the rest.
Frank Rolfe: Got it. Okay. And what was your turnaround plan on that park? Was this a park you had to fill lots or raise rents.
Gary: Yeah. It was, 92 pads plus a house, plus three bedroom, one bath house plus an apartment, there's one bedroom apartment inside the office building there, mailroom and washroom or a laundry room and stuff like that. And it was 45% vacant, so it was barely... When I bought it, it wasn't quite cash flowing, based on the lot rents and the vacancy. So my task number one was to, obviously increase the cash flow on that thing. And this vacancy was the big thing. So I had 11 uninhabitable mobile homes that came that he didn't sell me when I did that first part of it. But, so those came with. And what I ended up doing was basically putting a promotional thing a mobile home rehabilitation program. If you come in, you do this fix up, you start paying lot rent immediately. You do all these fix ups, check them off the list, I approve it, you get the title, and then I give you three months lot rent credit on the back end. And I had about seven people jump on that. Ultimately about six of the 11 homes were salvaged, five were scrapped out. Some of them had two or three people try and fail until it stuck. But that was the step one to get the cash flow going. And then... Go ahead.
Frank Rolfe: Sorry. I just said, so how did you fill the next round of lots?
Gary: Yeah. So, let's see. The next step was advertising, to get organic move-ins. And I probably had about six total come in, over the course of me owning the park that they moved in. A couple of them I like financed the moving for them or whatever, just help them get their ducks in a row to get it in. And then the final thing that I did was the 21st mortgage cash program. And in 2016, the year after I bought the park, I bought two homes, set those up, couldn't sell them. It was kind of a cruddy park, saying these are brand new homes in a cruddy park. But they rented pretty quick so I got them rented. The next year I bought three more, a similar situation. One of those sold for cash to a student. The other two were rented. So that was 2016 and then 2017, and then in 2019 I bought five. And those were all rented and occupied within a month of being set up. So I brought 10 new homes in, brand new ones through the cash program.
Frank Rolfe: Got it. Okay. And the cash program worked for you on the used homes, obviously as well as the new, correct? So it's...
Gary: You know, I didn't do anything on the used homes for the cash program.
Frank Rolfe: They're not used, just new?
Gary: Just the new ones. Yep.
Frank Rolfe: Got it. Okay. And what other challenges did you have on that first park? Did you raise rent or cut costs, or?
Gary: Yeah, I raised rents. I think it was 285 when I started, and then I didn't raise it a lot. Like when I sold it last year it was 375. So it was just kind of steady raises. I think it was like, I did 25 the first year, something that maybe one year was 10, but after talk with you, you said just 20 bucks a year is kind of steady and train them. So that's what I did. I could have gone higher, but I wasn't really trying to put the squeeze on people. I did have a challenge with, just deferred maintenance throughout that park was just a lot. So the... I mean, I spent 30 grand on perimeter fencing and made it look really good.
Gary: Lot cleanup, demo. Yeah, it was a lot of just manhandling garbage and stuff like that. Your classic turnaround. And it had been managed by a shady property manager prior to the one that I bought it from. And there was a culture of drugs in there. There was probably... And they were trying to... They were making progress on it, and I had to finish that off. So I got rid of about five known drug problems, and these are the type of people that all their buddies come in all the time and on the way in and out, they just kind of pick up stuff out of people's yards to... So we got, I went and visited the police chief locally and said, "Hey, I'm pretty naive on the drug scene. What can you tell me about my park? What do I need to watch out for?" He was so impressed and thankful that a property owner would come and wanna work with the police department to kind of clean the place up.
Gary: So that was helpful. And I got extra patrols in there and that kind of stuff. And we got the drug culture out. The park was called Terrace Gardens, but it was locally known as Terrorist Gardens because of the drugs and violence in there. I mean, shootings and that kind of stuff. Not a lot of shootings, but I mean, just drugs in general. But there was a couple of shootings in there. Nobody got killed, but just people discharging weapons. So we got that cleaned up and then it was just a matter of maintenance and the last thing I did to fill the spaces was I got approved for year round RV living in the city and they changed the city ordinance at my request essentially and they approved that so we could get year-round RVs, tiny homes, modular homes, you name it. The city was really looking at affordable housing and saw the mobile home park as really the most affordable way for people to live.
Frank Rolfe: How many of those items are in the park today as far as RVs, tiny homes?
Gary: Oh, in that park there's probably 15.
Frank Rolfe: So it's a significant portion of the park right?
Gary: Yeah. I got it up to a 100% occupancy by doing that.
Frank Rolfe: And what was your hot button with the city to get them to grant you the ability to bring RVs in? Did you sell them on the fact RV people are more scaled than mobile home park people, so therefore it was... Or did you sell them on the fact that there's very few kids in RVs, or what was the big selling point.
Gary: No, I didn't really have to do a hard sell on. I talked about the benefits of affordable housing and that we've got some transitory, we've got construction workers coming in for more than six months at a time, and the previous ordinance you had six months and then you had to get out and go somewhere else, and that wasn't gonna work, and I said we've got retirees, we got students, grad students that wanna... And they're quiet and they... If they're coming into the... And if they're not living in the Greek system or in the dorms, they're here and they're not wanting to party. So that was kind of just the discussion that we had. But the city was really primed ahead of time, say, We need affordable housing here. 'Cause this is expensive, so.
Frank Rolfe: And then part number one, obviously you did not self-manage, you had a manager. Correct?
Gary: So I hired a third party local property management company and they did all the lease applications, leases, rent collections, deposits, all that stuff, and then I was the operations, basically the cleanup, the move-ins all that stuff working with you guys just trying to learn and trying to to find ways to make the place nicer.
Frank Rolfe: Got it. Okay. And so then you've got the first park, you're getting it turned, it's cash flowing, and now you come upon park number two. How did you find the second park?
Gary: So one of the things I started doing was I started networking locally with other park owners, and I found out who owned parks, and I put them on an email list, and I started asking questions and then I hosted a couple of networking events at my house, some barbecues and stuff, and just years prior to getting these other four parks after park number one, and I just built good rapport with these guys and girls, and then I... So three... Let me see one, two of the four parks came out of that networking group that came my way. They didn't even... When they sold they didn't even want to sell to... They didn't wanna put it on the market, they just sold it to me. So they were off market deals. And then one park was next door to the big one that my first park. I tracked him down. He was over in the Portland area, I think. And so we got to talking and met when he came over to do some stuff. And he said "Well, I'm not ready to sell but in a couple years I will be and I have two parks." So he had one about 45 miles away. So when he was ready, he says "Hey, I'm ready." And then it was an off market deal two park deal, and got that one done as well.
Frank Rolfe: And how did you finance those four parks?
Gary: Yeah, those four parks was... Each of them was zero down because they were off market. And basically what I did was I put $5,000 earnest money per park, essentially. That's all I put into the deal. The banks did the financing, did 70% LTV, and they collateralized my first park which had so much equity in it. And then they allowed 25%, or they allowed the remaining 30% essentially minus my little deposit to be done by the sellers. So the sellers all carried seller carryback notes.
Frank Rolfe: And with that construction, the seller was in a second position, correct?
Frank Rolfe: How did you sell them on that second position? Was that a tough sell or were they fine with that?
Gary: No, I think they trusted me personally. They knew enough about me, and they all saw what I did with my first park. They said, Holy cow, you know what you're doing. And that bred some confidence. And I said, Well, if something falls off the rails, you get the park back, and you just sell it again on the market... Put it on an open market sale or something. So that was kind of their safeguard, I guess. Right.
Frank Rolfe: So similar turnaround plan, fill vacant lots, raise rent, cleanup, anything.
Gary: Yeah, so similar plans, park number two and three, which were my neighbor, and his two park portfolio. The 145 miles away was 100% occupied, turnkey. Several older folks in there really kept the yards. It's the nicest park that was in my portfolio, just aesthetically stable, et cetera. Then the one next door to my original park had a little bit of vacancy to cure. And we did that through the RVs and got that to 100% as well. And some rent raises and some cleanup.
Frank Rolfe: How did you change your management by the fifth park? Was it still, did you use a management company or at that point did you change a different structure? How'd that work?
Gary: Well, I was still under the same structure, but I was feeling the effects of the scale. And at some point I needed to do something different. I needed to either hire somebody to do what I was doing. So we were at that point and I was starting to feel the pinch. It was starting to affect my day job and time and energy and stuff like that. So we didn't break through that level. There was a variety of things that came into play at the same time last year that it made sense for me to take the whole thing to market.
Frank Rolfe: Got it. And you've had it throughout this entire period from 2015 to current, you've had this day job that you were doing in addition to this.
Gary: Full time.
Frank Rolfe: Correct? So how much time did you spend, would you think, weekly on the five part portfolio? How much of your time?
Gary: Towards the last park I... First park was a turnaround, the last one was a turnaround, but when I had four parks going it was probably 25-30 hours a month. My Saturday morning was two to four hours of accounting and bookkeeping on my end and dealing with a bunch of stuff. And then plus tenant calls and stuff during the week, et cetera, or things I had to deal with from the property manager. But when I bought park number five, that one was on the verge of closing. It was its own lagoon and well both of which were failing. And the state DEQ, Idaho, DEQ had them on notice that they're not in compliance with their lagoon and they're either gonna have to hook up to city sewer, or close the park, so.
Frank Rolfe: And I assume you got hooked up to city sewer then, that was your solution.
Gary: Still in process. I did all the... Put in 9,000 foot of line. It was a half million dollar project, to the lift station, all that stuff. Then we were waiting to power the lift station. It was a technical issue. It's a three phase pumps, and we only had single phase power, and then we had to wait for a year and a half for remote computer drives since COVID supply chain issues. Those just showed up last week actually. So we're gonna get that powered up. And then I got to decommission the lagoon. What I did with that park was I did a $200,000 hold back escrow to cover the rest of the cost of hooking that up. So I'm working with the new owner to make sure that project gets completed.
Frank Rolfe: Sure. Would you have done the fifth park again since it's so complicated with the private utility redos? Would you have done that one again, if you could go back in time or...
Gary: Yeah. Absolutely. Because the seller was just in such a position that he gave it to me. He didn't give it... Well, he almost gave it to me essentially. But with the capital expenses, it was like a $300,000 purchase for a 59 space park with about 25 empty spaces and a big crumbling infrastructure. So we negotiated some stuff down, so I knew that even if I failed I wasn't gonna get hurt too bad, so.
Frank Rolfe: Okay. So you bought the first park 2015, the last park what? 2021? Is that correct?
Gary: Yeah, October 1st, 2021, I got the last one. Yeah.
Frank Rolfe: Okay. And so then... And then tell people what happened. So you got these five parks, you're minding your own business, you're running them, and what happened?
Gary: Yeah. What the heck happened? So my retirement plan was to sell my day job, sell my shares in a couple years here. And then use the parks as kind of, not totally passive as you know, but residual income. That was gonna be my retirement stream. Because as a business owner myself, I didn't have a pension per se. I had an IRA.
Frank Rolfe: Right.
Gary: That's about it. So this was gonna be my cash flow plan, but a few things kind of conspired in 2021. My father came down with lung cancer at the end of 2020. And we knew he had a short time with us, so that was weighing on me. And then the brokers they keep calling and kicking tires and stuff. Since I bought the park, I had been kind of turning them down. I said, "Well, I'm actually looking to buy, so here's what I'm looking for." And they said, "Okay, we'll keep you in mind." Well, this one guy called, and I told him the same story, and I said, but I've made an offhanded comment. I said, Well, I would consider doing a portfolio exit, sell everything off when I get my asset value up to $10,000,000. And I figured I was probably about seven, 7 1/2, maybe 8 million, based on my calculations. He said, "Okay, tell me about your portfolio." So I told him, and he said, "Okay, thanks." Three days later he calls me, he says, "I got you an offer for 10 million." I'm like, "What!" I said, "You're kidding me, right?" And he goes, "No, we work with this guy. He's got 60 parks. He's solid. He knows what he's doing. He's looked at the numbers and he's willing to offer you 10 million."
Gary: And I said, "Well, here's, so here's... I know how these things go. I said, here's the initial offer and then there's a chisel down on the process due diligence process. I wanna let you know, 10 million at close, or I'm not playing." So he said, Nope, should be fine. So long story short, it took a little longer than we thought, but we closed October 18th of last year, all five parks, $10,000,000. One of the park I had to do a two year interest only loan on until he... 'cause his lender didn't like that particular lagoon or whatever. So he's in a process of finding another lender to cash me out, but we had two years of interest only payments, which is fine, so.
Frank Rolfe: Right. And you called me when you got the offer because I remember I was walking...
Gary: Yeah. I did.
Frank Rolfe: Walking down the hallway.
Gary: I said, Frank I need your advice.
Frank Rolfe: Yeah. You called me up and said, Hey, I got this offer for 10 mil. What are you thinking? What did I tell you?
Gary: You thought about it for about an eighth of a second and said...
Frank Rolfe: Heck of a deal.
Gary: Take the deal.
Frank Rolfe: I said, Take the deal. So I was correct on that one too.
Gary: Yeah. Absolutely. Yeah, and with the market being as hot as it is, evaluations, interest rates going up, this, that, the other and my notes, my bank financing variable at five year breaks, you know?
Frank Rolfe: Yeah.
Gary: And my dad illness and stuff like that. And it was honestly Frank though, it was about three weeks of real emotional...
Frank Rolfe: Sure.
Gary: It was emotionally hard for me because I was thinking going this way... With my retirement plan, and then all of a sudden it's like this.
Frank Rolfe: Yep.
Gary: It took me several weeks to process that, and I remember signing the documents, I was crying... I just had, it was like, whoa, you know? Yeah. Just the little bit of grief of the change of plans, combined with my dad's stuff, but also some tears of joy at the financial windfall that just fell into my lap. Right. I was just like, whoa!
Frank Rolfe: Right. Yeah. You always feel bad in those situations 'cause you feel like you let the team down or let yourself down. Right. 'Cause you committed, you'd be doing it for a long period and then all of a sudden...
Frank Rolfe: You don't.
Frank Rolfe: And it's just a weird deal. Back when I had the billboard business, an old guy, he was in his 80s who did billboard appraisals back when I had that company. He had worked with Ted Turner's dad.
Gary: Oh, wow.
Frank Rolfe: Ted Turner inherited his money. He didn't earn it. I mean, he'd made some with his other ventures, but Ted Turner Outdoor was what paid the bills. And so he negotiated with the dad to sell it, and they agreed to the price they were going to meet in the morning to sign up the docs to actually close. They'd been in a contract for a while in due diligence, and they show up at the title company to close it. Turner doesn't show up because he was so upset about selling it that he jumped out the window of his hotel and killed himself. Which made no sense to anyone.
Frank Rolfe: Because making... Back then, this was back in the '70s, maybe early '80s, he was getting... The net profit on it was, I'm gonna guess maybe $30 million, which in those days would've been comparable to, I don't know, a couple hundred million dollars. But it was the act of selling that he found so demoralizing because he had always dreamed of running the business with Ted Turner who was in college. Then he killed himself in grief over selling, not over the end result. And obviously that was crazy.
Gary: Oh my gosh.
Frank Rolfe: That's how emotional people can get on selling parks and businesses. So yeah, that's...
Gary: The psychology. I know you've mentioned it on several of your ...
Frank Rolfe: Yeah. That's just...
Gary: It's huge. And understanding that, and reading that, I think from buyers to sellers and being empathetic with that, I think is key to successful deals.
Frank Rolfe: Absolutely. Correct. That's why it's so critical when you buy a park, which you expertly did, is you bond with the seller because that's how you save the seller from that moment of grief.
Gary: Yeah, yeah, yeah.
Frank Rolfe: Yeah, this is kind of sad, but I didn't let everybody down. I got this really good guy who's gonna pick up the ball. But that's why, if the seller sold us some unknown private equity group out of New York, they never met. Maybe even for more money than what you paid. They get filled with grief and remorse because they think they let the residents down, themselves down, everybody down. So part of the ... as I'm watching this obviously you come off as a very direct likable guy, and so I can see a seller saying, "Oh, you know, I hate to sell this, but I know that Gary... Well, he was the right guy for it, right?"
Gary: Yeah, yeah.
Frank Rolfe: Most American Pickers. And they come out and they say, yeah, this is my dad's beloved Hot Rod. But since you love Hot Rod so much, I'll go ahead and sell it to you. And it takes some of the sting off because they know it's going to a happy home. So that's why bonding is so critical. And then bonding is how you got those other deals obviously when you started...
Gary: It is. Every one of them.
Frank Rolfe: Right. Okay. So now where do you go from here? Are you gonna buy more parks? Are you just gonna hang out and play golf? What's the Gary plan? And I know you don't have much time to think 'cause you just sold the stuff, so it's...
Gary: Right. Yeah. We closed October, just a few months ago.
Frank Rolfe: Right, so what are you thinking here?
Gary: Yeah. So when I talked to you about this offer and you and I talked and you were very generous. You gave me almost a half hour of your time. So I really appreciate that because that did really kind of set the stage for me to make this move. And, really, like you said, hey, you can hit pause for as long as you want. You can take the money, just hit pause. Take your wife on a vacation. I'm taking my wife on her honeymoon to Fiji next week. So thank you very much for that. So that's one thing. I had a couple things I had to... Hassles I had to deal with. I had this huge capital gain issue. And you, my financial advisor, my CPA all said, "Pay the tax now, and then just go into the market, whatever you need to do." But I bucked that advice, I found a way to defer taxes for 10 years and then another 10 and another 10 through a trust process. And the value of this thing is I can put it into real estate. I could put it into the market, I could put it into crypto. I could just T-bills, whatever.
Frank Rolfe: You stay away from the crypto, Gary. Okay.
Gary: Yeah, yeah, yeah. Exactly.
Frank Rolfe: Now you're scaring me. Okay. Other than crypto. Yes.
Gary: Yeah. So I didn't want to deal with the 1031. It was having all that hassle and timeframe. And my dad kind of deteriorating. It was just like... And I thank God I found this mechanism to defer. Gives me lots of time, no time constraint, total flexibility. So that gives me plenty of time to just, okay, I get a quarterly payment that's totals more than my salary and my day job, thank God. And then that grows. So really what I'm doing is hit and pause going entirely passive. And that's really what I wanted at this point, was to get out of active real estate management, investing and that kind of stuff, park operations and just get it into a passive. And I didn't want to get into the stock market, so found some other alternative investment vehicles that generate 10-25% pretty predictably and they're in the trust. So like...
Frank Rolfe: And I think Gary, when you called me on this idea to begin with, I think I told you, which I tell most people, it's all about your quality of life. So if you got the money in the bank and you want to travel and hang out with your dad and just say, screw it, go with that. There's nothing that says you gotta go in business, buy a mobile home park, buying anything unless it improves your quality of life. But let's be honest, back in '15 and even in '10, going into the Lonnie thing improved your quality of life, right?
Frank Rolfe: And then the mobile home park thing totally improved your quality of life. So a lot of times owning parks or not, it's just based on whether it's helping you out or hurting your quality of life.
Gary: Exactly. And it got to the point where it was stressing me a little bit with the other stuff going on, but I'm like right now it's like, yeah. Wealth in my mind is enough time and enough money to enjoy the pleasures of life. That's wealth in my mind.
Frank Rolfe: Yeah. Totally agree.
Gary: And there's enough. I got enough. I mean, I'm an entrepreneur. I'd love to do more. I got that drive in me. I'll get that in me again, but right now it's enough. Just enjoy it. Right?
Frank Rolfe: Right. So if you never go back into parks again, which no one says that you must, could you share with people maybe your top three or so lessons learned about the business, particularly stuff that people... Maybe aha moments you had in the business that were different. I'll start off, for example, my first big lesson learned in the business coming out of the billboard industry, which I don't know what your day job even is, Gary, but my billboard industry job was nothing but rejection. It was 100 sales calls to every occupied billboard. It was the most depressing lifestyle imaginable. All I would do all day long is cold call people who would hang up on me, send direct mail to people who would throw it in the trash. And if I ever had a actual warm prospect, I would then bend over backwards. I would stay up all night making artwork for their McDonald's, praying to God they could sign the lease only to then repeat the same day.
Frank Rolfe: So I was always chasing people. It was like a game of tag. I was never it. I was always the chaser. And then when I got my first part, Glen Haven, my first initial, "Aha, this is not what I thought." Was when I read that very first ad in the Dallas Morning news for Glen Haven saying that I've got mobile homes for rent, and my phone freaking blew up. And I for the first time ever realized, you don't have to be a chaser in life that people actually needed cheap places to live. And I thought I was in heaven because I was so used to rejection. I could not believe I had people chasing me. So based on that kind of an idea, what were some of your key moments?
Gary: Yeah. I think lessons learned. The first lesson I wrote down was always be learning, doing my homework. And when I stumbled on your website, I ate it up, ate it up, and then I acted on on it. I made a decision I'm gonna go. I bought the resources and I learned about it, and I'm like, "Okay, I'm signing up. I'm going." So learning how to do things better, but actually acting on that insight when I have it. And that was the big one, right? Just to take that initial leap and then it translated through the general operation. "Okay, go ahead. Sign up for the 21st cash program. Go ahead, get my Idaho retailer's license for new manufactured homes so I could qualify for that." And so that was... I had to take a test for that. That was not my finest moment, but I needed a 70% to pass. I got a 72%, and that... Pass all it took, right? So first test I took since college. So just, so really, really just acting on good information I think is key. Another one is network, network, network. Talk to as many park owners as I could. And I was always asking for referrals. "Hey, who else do you know that owns parks?" I was positioned to buy more parks and some of those relationships take 2, 3, 4 years to come to fruition. But always be networking with other park owners or operators or whatever.
Gary: And then I think the last thing that I wrote down was pay it forward. So as I ran into tenants of mine or... Who were trying to build wealth, I would coach them. In order to build wealth, you need to do a one of two things. You can have your day job and trade your hours for salary or dollars, but really you need to get some passive income or some real estate income or own your own business that you can scale. And like my day job I've got 70 employees and my shares are worth several million dollars after 30 years. And I'll have an exit on that here at some point and another windfall. So, just kind of pay it forward. So I was investing in, I could think of about four guys that I came across in my park operations who now have their own handyman businesses as a result of our interactions.
Gary: And I fed them enough work to get them started, told them how to advertise and told one guy, I said, "You do really good work." I said "And you're gonna have to sell your business." I said, "You're missing half of your teeth. You need to go get that fixed because when people see that, it kind of comes across as drugs so go ahead." And he did. He took that advice, he went and got some dental work done, got some things done. And just the ability to influence in a positive way and just be willing to invest in others and pass it along, pay it forward.
Frank Rolfe: What would you say to people who have a horrible stigma against trailer parks, trailer park residents? What have you learned to be the actual truth behind the false narrative that mobile home parks are nasty and gross, everyone who lives in one is a hooker or a drug dealer or a criminal. What would you say to critics who proclaim that to be true?
Gary: Well, after I bought my first park, I would say it's half true.
Gary: No, I had to clean that element out of the park.
Frank Rolfe: I know.
Gary: But no just... In all seriousness, Frank, a lot of people like that community style living. They like the detached housing. They don't like the apartments and they like to have their own little space. And there are a variety of stripes of people in there from retirees, retired veterans to people on disability, to young families starting up with their first home, to... Who are upwardly mobile and they're gonna be there for a few years until they save up for their stick home. The stigma was there. When I told my family that I bought a mobile home park, the shock that... They're like, "What?"
Gary: Are you nuts? 'Cause the big park that they live close by was, that's where all the crime and drugs were, so. Anyway, so a well-run park doesn't have those issues and not to that degree anyways, so I think, I would say the stigma is somewhat based in some thing of truth, but it's exaggerated by media and the echo chamber essentially.
Frank Rolfe: Other than park number one, in the pre-turnaround phase, but after you got it cleaned up, turned around, people having sense of community pride of ownership. How many times did you ever feel physically threatened in your parks? Like if you had to go to one of your parks right now, which are no longer your parks, somebody else's parks, but before closing and you had to go out there, get out of your car and walk once around the park, how threatened would you have felt?
Gary: Never. There's some awkward people, there's some awkward interactions, some people that are skittish or whatever, but I've never had anybody threatening, or intimidating or anything like that. And so I've always felt safe. I've never... I mean, I can pack a pistol here in Idaho, but I never took one into the parks at all and never, in this all seven years I've had them, no need. And a lot of tenants have my phone number, and I could bond with some of them as well and they would give me intel on what's going on? Hey, the cops were over here, that kind of stuff. So I've really had nothing but really great respect for all the tenants, essentially. Even the ones that were problems and on drugs and stuff like that, I tried to keep let them leave with some dignity intact, trying to incentivize them to go once in a while I had to do an eviction. I probably had to do six true evictions in my tenure as a mobile home park owner and operator out of 243 spaces. So minimal on the evictions and mostly just working with people and generally most people wanna do right.
Frank Rolfe: Right. And then for those who think there is great difficulty in convincing banks to make loans on these things, it sounds like you never had... Did you ever have any big lending problems?
Gary: I haven't. From when I came into the industry, I think things had the banks were catching on, I don't know what it was like prior to you, you've been in it for so long.
Frank Rolfe: It was tough in the '90s. Yeah.
Gary: Yeah. Yeah. So I think where I had a little bit of difficulty was because I was a business owner and if my business had a bad year, they're always looking across the fence at my total financial picture, which is quite complex.
Frank Rolfe: Yeah.
Gary: Because I got some moving parts, but it wasn't because of the parks. If you just isolated and said, here's the dollar proposition on the park and the blah, blah, blah. That was pretty straightforward. I did have, if there was environmental issues like the lagoon and stuff, some banks that I normally worked with would said, No, no, we're not gonna touch that. And then I find somebody else and he says, Well, we can kind of do a construction loan and get that hooked up to the city sewer. And then once it's all cleared, then we convert it to a mortgage and it's more traditional that way. So he was creative, he got the deal done, but by and large, I think I've had really good success with the financing, both the commercial lender as well as the sellers.
Frank Rolfe: Yeah. And one final item, Gary, which makes your story extra remarkable, is because you did four deals for virtually zero down. You obviously had to have, you had to plow some money into the failing Lagoon in the last park. And you got a really attractive deal with the seller on park number one, right? You had him carry a lot of the down on the second, so your total out-of-pocket capital in the entire five park empire was roughly how much?
Gary: So, 120 on the first deal, and then four 15, 20,000 on the other four. So 140,000 cash out of pocket.
Frank Rolfe: Okay.
Gary: And then as they generated cash, I'd put that back into upgrade and pump up the value, so.
Frank Rolfe: But in the end, you sold it for 10 million.
Gary: Out of $140,000.
Frank Rolfe: You had 140 and you netted 5 million.
Frank Rolfe: That's when you came up with.
Frank Rolfe: But what makes the story crazy is for the average person watching this, if they were doing it and they had five parks at five million, they would have about 1,500,000 in it, right? 30% roughly. Just to make the numbers easy. And you had a 10th of that.
Gary: Yep. Yeah.
Frank Rolfe: So your rate of return was staggering because...
Gary: Yeah, return on cash was just...
Frank Rolfe: Five million on a million five, that would be good. That would be 300%.
Frank Rolfe: But your numbers come out to more like 3000%. That's...
Gary: It's ridiculous.
Frank Rolfe: It is ridiculous, Gary. So now you've freaked people out and people watching this will probably say, Oh, this is just a pile of crap.
Gary: A liar.
Frank Rolfe: And Gary is a paid actor and this is all a big joke. But no, that's just the way the numbers work. And that's why I wanted to get you on here because that's... Can you think of any other sector of real estate you could do that?
Frank Rolfe: No. 'Cause there isn't any, I mean, I'm sure you've invested in other stuff. I mean, you're not gonna go out and get a single family home empire that you're gonna get for that little amount down at that big a price in the end. Right? So that's the value of all those little widgets. And I don't know if you ever did the math. We sometimes when we sell stuff, do the math on the contribution of each turnaround policy. It sounds like you filled over that span... How many vacant lots did you fill total? You have 250 lots roughly in the end, right?
Gary: 240, I'd say 240.
Frank Rolfe: Okay. So 240 lots. So how many did you physically fill in your tenure, do you think?
Gary: Let's see, 45 on the first park, or 44 on the first park. Five park number two. So I'll just say I've filled 50 lots.
Frank Rolfe: Okay, so 20% of your gain will be attributed to filling lots but the bulk of your gain sounds like it came from two things, number one, raising rents, because even though you raised the rents only $100 over that span on some of the parks, that's still 50% up from where you started roughly. And the rest was cleaning it up so you could get a buyer like this guy who paid the big bucks 'cause he wouldn't have touched it in the original condition right. He would not have.
Gary: Well, I don't know that. But you're probably right, it would certainly sort some buyers out.
Frank Rolfe: You couldn't get in the bank, you got a bank that bought off when the value is 10 and you wouldn't have gotten 10 when you were at the "Terrorist Gardens", right?
Gary: That's true.
Frank Rolfe: Probably it wouldn't gonna happen.
Gary: No, no.
Frank Rolfe: No.
Gary: And then I think the other thing out of our control is just the whole groundswell economy.
Frank Rolfe: Oh sure. The market. But even if you still had it today and just maintained your trajectory, you would be able to offset the difference in the interest rates off your loan. If you just look at that number, if you had five million in debt, and the rates went. You were at what rate? Three? Four?
Gary: I was getting a 4.22 was kind of what the rates I was getting on my mortgage.
Frank Rolfe: So let's say it goes up to 2%, so you're gonna go up 2% on five million and 10% would be 502 million, so you'd have to go up 100 of NOI, but that was eminently doable with what you had. Right?
Gary: That's right. Yeah.
Frank Rolfe: So you would have survived that and then when rates go back down again, which they will, when we hit the Great Depression, which is probably coming up any minute now, then you'd end up about the same spot or your rates would have even been higher. Right?
Gary: Right. Yeah.
Frank Rolfe: But the problem we all have in life, which you faced is this whole issue of timing and the unknown of America going forward, and you could have said, "Well, I'll hang in there because one day it'll be worth 15 million," which it could maybe. But then there could be some other terrible thing. They could affect rent control in Idaho, a massive flood, pestilence, famine. Who knows what.
Frank Rolfe: We could elect President and we could all have to wear swimsuits and watch Baywatch 24 hours a day, no one has any idea but the long and the short of it is you made the right decision 'cause you hedged all that risk, and most importantly, it worked for you in the end and gave you the quality of life you wanted. And so that's the key. The whole story here is, you gotta do what's right for you. And in this case, it was a great ending you only live once, so if you hadn't...
Gary: That's right.
Frank Rolfe: Rent the mobile home park, you had an entirely different life. Right?
Gary: That's right.
Frank Rolfe: You would have continued on with the day job, maybe done...
Gary: Grind, grind, grind.
Frank Rolfe: Grind, grind, grind, made three million in the end, after 30 years.
Gary: Time worn out and burnt out and missed out on all the opportunities.
Frank Rolfe: Timed out on life basically. Right, and this gave you a chance where you didn't time out.
Gary: That's right.
Frank Rolfe: Where you get the chance to basically retire much earlier and although you still have a day job, right? You still doing day job.
Gary: I still go to day job. I'm 53 right now.
Frank Rolfe: You have a day job, so it's like...
Gary: I got a day job that kinda keeps me engaged, I'm gonna hopefully put this company to the market in two years, so hopefully around the time I'm 55.
Frank Rolfe: Alright, but even if... You are under no pressure.
Frank Rolfe: You don't care. You could.
Gary: I bought a condo in Belize at a new resort being built.
Frank Rolfe: There you go.
Gary: And it's like I'm going fishing, I'm going snorkeling.
Frank Rolfe: Indulge your passions. Buy some kind of crazy car, whatever. Bottom line is, it's all a happy ending story.
Gary: Yeah, it is. It is really.
Frank Rolfe: So I'm profoundly happy the way it all turned out for you. I totally remember all of these calls you're describing, I remember doing that first analysis with you and told you if you didn't buy that, you were an idiot.
Gary: Yeah, you did.
Frank Rolfe: I also remember you calling me on the sale and me again, telling you if you didn't sell it you were an idiot. Well, I'm glad you did both, so you in fact weren't an idiot and that it all worked out so good in the final timing. And so...
Gary: Thank you so much, Frank. I mean, You've really changed my life and the ripple on effect with the family and everything else, so it's thank you for what you are doing.
Frank Rolfe: Hopefully, this broadcast will change some other lives of people who are looking out there saying, You know what, I gotta get into alternative investing and so forth, 'cause I know now you've got that five million in the bank.
Gary: Trusting so much in flexibility.
Frank Rolfe: You look at other investments out there, and they just all stink, you know what I mean? You can watch any financial news network you want. You're never gonna make any money in the stock market.
Gary: That's right.
Frank Rolfe: I mean, if you do it the Warren Buffett way and you buy it. And you buy into the S&P 500. Last year the S&P 500 was down 20%. They got inflation, you lost 30% of your money. You never get to lose...
Gary: You are hoping that when you need the money it is on a higher value.
Frank Rolfe: Yeah, that's right. So basically, in today's world, stocks, bonds, screw it. Never gonna be an inflation. Not happening.
Gary: That's right.
Frank Rolfe: It didn't happen for the last several years. The key, you gotta get an alternative investment that you believe in, and you basically found mobile homes initially mobile home parks later.
Gary: That's right. Yeah.
Frank Rolfe: And I will also add here, which you may or may not know this, but the guy that wrote the book, Lonnie Scruggs he wrote a piece, didn't get published much because people didn't want people to know it because it would hurt his book sales but when Lonnie died, right before Lonnie died, he wrote a thing to everyone out there to let them know that he did the math, and if he had bought one single mobile home park he would have made more money than all of his Lonnie deals combined over those 30 years.
Gary: I believe that.
Frank Rolfe: He even gave an example of the math of how he calculated it. So if he actually had bought just the park where he had done his first Lonnie deal, which I forgot how big a park... It was like a 50 space park or something, when he computed the gain, the monthly amount he would be pocketing plus the final sale, the whole Lonnie thing in the end was stupid, and he actually wrote a thing on this and not many people... I read it, but not many people saw it 'cause it was expunged from all those really estate websites, it was only in book.
Gary: Oh men.
Frank Rolfe: But that was the final... Final telling story was, if you're gonna be in the mobile home business, the park part is the, that's ...
Gary: For a while, I had both going and after a while, I'm like, You know what, I saw that next was seeing that in the results, and I said, I'm just gonna start selling off my notes, my rentals, whatever that kind of stuff, and just focus on the park and then the next four parks and the scale just obviously at exit was just ridiculous exit, so.
Frank Rolfe: That was a smart move. Anyway Gary, it's an incredible story. I mean it is a true...
Gary: Thank you, Frank. Thank you, Frank. Thank you, Frank.
Frank Rolfe: You got it. Well, we appreciate you being here. We appreciate everyone for joining us because we know everyone has many uses of your time, and we appreciate all those who tuned in for this Gary's wild adventure in his seven years in and out. So thanks, Gary, for being here, sharing the story. Thanks everyone. And we will see everyone again soon.
Gary: Thank you, Frank. Bye guys.
Frank Rolfe: Later Gary. Thanks everybody.