Ryan from Charleston knew nothing about mobile home parks. He decided that affordable housing was a great place to invest, given the trajectory of the U.S. economy. He went to Boot Camp. He made offers. He bought parks. He quit his day job. He has a dream life.
In this event, we to discuss “The Life of Ryan” as it’s a very interesting journey from an idea to successful implementation of that idea and beyond. We review each of the 8 parks he has purchased, how he found them, how he financed them, and a huge number of lessons learned. We also focus on the game plan that Ryan employed and why it’s not out of reach for anyone who has the desire to invest in the affordable housing sector in the form of mobile home parks.
The host was Frank Rolfe, who not only is part of the 5th largest portfolio of mobile home parks in the U.S., but also taught Ryan and has followed along with his career ever since. If you are interested in the concept of mobile home park investing – and want to know the real facts from real operators – then this should be of great interest to you.
If you want to learn skills that Ryan used to succeed with his parks, attend our Virtual Mobile Home Park Investor's Boot Camp. You’ll learn how to identify, evaluate, negotiate, perform due diligence on, finance, turn-around and operate mobile home parks. The course is taught by Frank Rolfe who, with his partner Dave Reynolds, is one of the largest owners of mobile home parks in the U.S. To learn more Click Here or call (855) 879-2738.
The Life of Ryan - Transcript
Frank: Welcome to our MHU Lecture Series Event. We're titling this the life of Ryan. We're talking to Ryan from Charleston, South Carolina. He's been in the business for a while now. Bought a number of properties. We thought we'd find his story very interesting. Lots of lessons learned, lots of things we can all come away from this presentation with a benefit. Ryan, let's start off with some background. Number one, you live in my wife's favorite city. You also live Brandon's favorite city. How the heck did you get to Charleston? I know you're not from Charleston. So how did you end up in Charleston?
Ryan: My other half as well, actually, she always wanted to move here. Number of years ago, we visited a couple of times. She eventually got a job here and we moved. My job as a mobile home park investor, it's a little bit more flexible, because I don't have to be at a desk every day. So it's a beautiful city. It's a great place to live. And I lived here a little bit over a year and a half. Originally from Ohio, and glad to get out of those winters, especially now that it's February, and they're getting hit by a bunch of ice storms and stuff. It's 60 here. So it's great to be here, finally.
Frank: We're all very envious of your location, Ryan. So let me ask you, when was the first time you ever thought about mobile home park investing? How did the idea even come to you? Were you watching TV commercial, you were in a car accident, hit on the head by a hammer. Why would you ever think of buying or investing in a mobile home park?
Ryan: I would love to say that I got hit in the head with a hammer and I just woke up and had this grand illusion. I looked at every kind of other asset class and other businesses to buy. I looked at doing a flip of a mobile home because a little bit lower capital requirement. And my dad is a contractor, and I was living in Cincinnati at the time. Didn't end up doing that and just kind of stumbled down the rabbit hole and said, "Who owns these things?" I did a little research. I think your name came up.
Ryan: And then the numbers made sense to me as a finance major from college. The numbers and just the overall supply and demand of the industry made sense. And that was in 2015 that I first stumbled on the asset class by chance. And then I went to the boot camp actually in November of the Austin Boot Camp where we had the potential protesters and stuff like that. I'm sure you remember that very vividly, but yeah, yeah. So that was at that one. So that's how I got into the business and haven't looked back.
Frank: Got you. And you lived through the investors storming the building. Remember that? It was a little bit of the capital riot where they actually, ran in during lunch, because they didn't time it properly. But yeah, that was very-
Ryan: Yeah, I remember that.
Frank: Okay. So had you had any prior experience with mobile home parks that would get you feeling somewhat comfortable with the asset class? Had you ever lived in one, visited one, family member in one, got lost and ended up in one? I mean, had you ever been in one before?
Ryan: Yeah, probably when I was younger. I probably driven through them a couple of times. There was a couple at my house. But other than having some relatives live in them just throughout the years, I honestly had no experience. And I had no real estate experiences at all. I've never owned any other asset class. My first real estate purchase was a mobile home park. I fell in love with the asset class as it is. And but no, I really had no experience, and it just happened by chance, I guess.
Frank: What was your stigma? What were your thoughts of mobile home parks before you got into it? When someone said the words mobile home park to you, what came to the top of your mind? [inaudible 00:04:00] 8 Mile, what came to mind?
Ryan: 8 Mile, obviously, I've seen that movie. It's a good movie. I grew up listening to Eminem. I mean, good and bad. Since I had some relatives live in them at the time that I was looking to invest, I didn't really have a preconceived notion about them as I was reading. But as I was going through them, I was like, "Do I really want to buy these things? I don't know." Didn't have anything crazy, because it actually started by me looking to do a... I should have specified that I was looking to do a live-in flip in a class A, five-star community.
Ryan: So I guess my notions were, I was okay actually, living in it right out of college. Some were a little bit cheaper to where I could keep my costs down and maybe make some money on the backend. Unfortunately, I don't have any super negatives, but I always had my, I guess, trailer park ideology, right?
Frank: Right.
Ryan: You always think that. Even when I'm still buying one today, I still have my, I guess, stereotypes or thoughts about, "Is there going to be a bunch of drugs, a bunch of pit bulls everywhere?" And sometimes those come true, but I didn't really have any preconceived notions.
Frank: Got you. Okay. So you had this thought to buy mobile home parks, went to the boot camp, started looking at them and you've bought so far, is it eight? Correct.
Ryan: Yeah.
Frank: And you've sold two of them off, correct?
Ryan: Correct. Correct.
Frank: So tell people, if you could, in-depth, at a macro level on each deal, how you found it, how you financed it, or any unusual things about each deal that come to mind.
Ryan: Yeah. So I went to the boot camp in, it was either 2015 or 2016. I can't remember what year it was. And it actually took me three years actually, to purchase the park. I had a bunch under contract, dropped them for a number of reasons. And just couldn't connect on one. I was still working in finance. And then come 2018, my first purchase was Gray's Creek Mobile Home Park in Fayetteville, North Carolina.
Ryan: As you can see by the slide, this was one of the pictures of the deteriorating roads. We found this one to be an assignment and wholesale. I know you've interviewed Jimmy. Wasn't from him, but it was from another MHU boot camp attendee. And bought it with a few other partners that had some real estate experience and we all put capital into the deal.
Ryan: Got 20% down on the seller financing. It was 75 spaces, well and septic, had a contaminated water well. And that was in December of 2018. We did all the due diligence and we hired environmental attorneys, and did all the due diligence that you would require for this type of buy, right? Heavy value add, heavy turnaround.
Ryan: Two years later, these are the new roads that we've improved. We've connected to city water. And we're actually getting ready to either refinance the park into some long-term agency debt, hopefully. And we brought in a number of newer homes like this one, and we've just increased the overall value of the park by fixing the roads, fixing some of the units, and then also connecting to city water.
Ryan: That was my very first deal. I don't recommend doing that. I spent a lot of time educating myself, speaking with everybody. And then at the same time while I was doing that, I started doing operations with a couple of guys in Ohio, actually. So I got some experience, industry experience, learning how to run parks, learning what the ins and outs are. So that allowed me to take the jump and buy something like this. Just took the boot camp, and now, I go buy a park with well and septic and a failing well system. I would not recommend this for everybody on their first buy. But I mean, it has worked out for us. That was our first buy.
Ryan: And then my second park was actually 60 miles away. It was in South Carolina in Florence. We bought that one from Jimmy. Actually, it was an assignment from Jimmy. Of 50 spaces, we take cash for that deal. And it was majority older park owned homes, but direct billed water and sewer. So older homes were in the process of converting those.
Ryan: I sold that one last year actually, we pretty much made a nice profit on it. And then we bought one outside of Charlotte that was Dawson Mobile Home Park. The lot rents were $90, and it was just insanely cheap in a sub-market of Charlotte. It was direct billed city water, city sewer, and we used a private investor for that one. So, we basically took private money, paid a percentage of a return to that one. And that was 40 units direct billed water, sewer.
Ryan: We sold that one or I sold my partnership rights in that one within basically a year. And then moving along, not really staying in the Southeast, just looking for more deals. I bought Woodland Hills, which is in Morgantown, West Virginia. That is a 22 space park. We bought for 20 grand down, and it was seller financing. It's actually a fairly stabilized park. Lot rents were close to market. We went in, we sub-metered. We still own that one till today. Looking to expand into Morgantown. And then, I also bought one out in Iowa, actually. Iowa is a great market. We bought a 50 unit park out there. That one was bank financing. I believe it was 25% down local bank financed it for us. That was 50 spaces.
Ryan: It was a part of a portfolio. We ended up dropping two other deals. They just didn't work out on that one. And those deals specifically that I've talked about, have all been city water, city sewer. And the majority of them were direct billed which when you're buying some of these rougher parks, if you can get direct billed water, sewer and even trash that's the best thing you can get, right? As I know you know, and our listeners know, it's the best thing out there because you're saving on potential CapEx items, utilities, and then also you're not paying that water and sewer bill.
Ryan: Throughout the last year or two, we had bought four parks. We'd sold two within a year timeframe. That was in 2019. And switching gears, it was bank financing, seller financing, and just good deals, right? Just picking up the phone cold calls. Actually, the two that I mentioned Long Leaf and Dawson were from Jimmy. We bought assignments for Jimmy. The first one, Gray's Creek was an assignment.
Ryan: I found my way into the Lexington, Kentucky market. And we ended up doing a 80 space park there. It's direct billed water, sewer, and we're actually doing a master lease option to purchase on that one. So the seller, he had a mortgage note on it. He couldn't sell it based on the financials. They just didn't really have good financials, so he couldn't get bank debt on it. And he obviously had a mortgage note on it. So we didn't want to put enough down to then wipe that off, so he could [inaudible 00:11:32]. We're executing option to purchase.
Ryan: We picked that one up in the summer of 2020. It was a major value add park, but it's in a significant location, a real good location. They're building 350 $400,000 houses around the park. It's in one of the better school districts of Lexington, and it's direct billed water and sewer. And the roads in one of the parks are actually owned by the County. So we have pretty much minimal expenditures as far as the park is concerned, and the roads were in good condition, and the park where we own the roads. A lot of turnaround homes, the major thing at this park was, there was a big delinquency issue and just a big just trash issue.
Ryan: I've never seen so much trash in some of these people's homes. We evicted a lady, and we had five roll-off dumpsters full of stuff that we had to cart out. Our dumpster bills were ridiculous in the first six months in this park. During COVID, it's been a whole different way to operate, because you can't do evictions. I'm not threaten to do non-payment evictions, but you can't evict in most states on those.
Ryan: So we're not renewing people, evicting on park violations and rule violations, and stuff like that. That was two parks. They're right next to each other. Just here recently, actually last week, we just closed a park in Frankfort, Kentucky. And that is this park right here in the [inaudible 00:13:10] park. It was actually listed with a local realtor, and he was looking to sell the whole property. It was a 25 acre property. We asked the seller, "Hey, would you mind just parceling off the park? We don't really want the other land." I think, he had it listed for a million, and we ended up picking it up for 500 K. It's direct billed water, sewer, nice roads. The water lines are actually brand new, direct billed.
Ryan: He got that done within the last five years. And it actually appraised higher than what we bought it for, which was awesome. And our same manager that manages our Lexington Park is managing this one. And that's basically high-level stuff, and I'm happy to go into more detail about my parks and acquisitions, and any questions you have about it. I mean, this is a fairly stabilized deal, this last one. I mean, you can see some of the nicer homes in there. And this one has a carport. The main play here is to clean up some of the homes, and fill some vacant lots, and raise the rents over time.
Frank: Okay. Let me ask you some questions here. So first off, you're living in Charleston, do you have any of these parks that are more than a five hour driving radius from Charleston?
Ryan: The one in Fayetteville, North Carolina, my very first purchase is. That is 75 spaces with a single family homes. So I do make day trips there, but we do have on-site management. But the ones that I own in Kentucky and West Virginia, my business partner lives in Cincinnati, so we have potential boots on the ground. He lives within an hour to three hours of everything that we own there.
Frank: Do you think it's a good decision for someone first buying mobile home parks to do it within a driving distance? Do you think it's important or what are your thoughts on that?
Ryan: It depends on how large the park is, and what your life looks like. With the competition and the park space now, it's probably something that you do have to open up your radius a little bit more. Especially, if you're looking 75 spaces or more. I would recommend it if you're buying 50 to 100 spaces or more. It's definitely achievable. Because if you have a day job, and you're buying a semi-stabilized park that's more than a day's drive away, or if it's more than five hours away, definitely doable. Because you can get there on the weekends, you can employ on-site staff. Now, if you're buying a turnaround and it's further away, it could be more of a headache, and you may have to travel there more frequently.
Ryan: Myself, since I do this full-time, I'm able to travel during the week and I don't have any obligations as far as, I don't have to take off work. I don't have to ask my boss, "Can I go do this?" I of course, I do have to ask my boss, my girlfriend. But all joking aside. It's doable for me because I'm full-time. But if it's your first park and it's semi-stabilized, I would say that it's definitely doable. But if it's anything under 50 units and the lot rent's not above $300, I would say that you should buy something closer to home. And if it's smaller, that's fine. You just have to understand that your margin for error is a little bit greater, because your number of units are smaller.
Frank: So on your buying criteria, what attributes are you looking for? Obviously, it sounds like you prefer city water, city sewer, and you ventured into master meter gas, master meter of electric, smaller metros. Anything odd and different, or is your criteria pretty much kind of the bread and butter solid foundation that most people buy? What are your thoughts on that stuff?
Ryan: So at first it was all of that, but then again, with my first buy, I threw that out the window. I bought a well and septic park and it was a contaminated well. But we knew city water was there and we bought it. So I guess that's an exception to the rule. I do look for those rules in my 50 units and above, 50,000 metro, medium housing price as high as I can get. Preferably over 100,000. City water, city sewer as less park-owned homes as possible. Yeah, I look for those. But those are in my buying criteria. We bought a park outside of Florence that was 30 minutes from the city that it was in, which is in Marion, South Carolina, all the way to Florence.
Ryan: So as far as best places goes, it doesn't consider it in the metro area. But the demand was there. So we felt comfortable buying it and it was direct billed water and sewer. So the risk reward was there because we were buying it for less than $10,000 a pad, and all 45 pads were filled, and it was direct billed water and sewer. So I bought that stuff before in no metro areas, but something that's right on the cusp.
Ryan: And then, I've also looked at deals where the medium housing prices, maybe a little bit under 100,000. But that for me is probably a deal breaker. If it's a nowhere town or it's a smaller town, but it's got a couple of stable employers like a college, and some healthcare, and some other private sector employers, I'll go for it. I'm not opposed to it. As long as that medium housing price is not 50,000 or $40,000. Because then you know you're in a really depressed area. And the park probably is not going to work. I'm always looking for best school districts, good medium housing price, all the stuff that everybody's looking for. But I'm not opposed to other criterias, as long as the medium housing price and good school districts is there.
Frank: Okay. And you started off, your first four deals were all assignments, correct? It sounds like.
Ryan: Correct. Correct. Yeah. And then my-
Frank: And then I know you did a cold call deal, correct?
Ryan: Correct.
Frank: Did you [crosstalk 00:19:12] direct mail deal? Have you worked much direct mail?
Ryan: I've done direct mailing. In the beginning when I first started, I got a bunch of feedback. And actually, put a couple of parks in a contract, but I've never bought anything from a direct mail campaign. I feel that direct mail is still good to mix stuff in if you've talked with the owner before, but it's like everybody's doing it nowadays. So they get so many mailers. And I still get calls from my old mailers that I found out. Actually, I take that back. I'm under contract for a mailer that I sent three years ago. But I haven't purchased it yet, we're just under contract on it.
Frank: Okay. And when you started doing cold calling, I know you said that you were in finance, how scary was the cold calling? Was it gruesome, or doable, or what would you tell people on that?
Ryan: It depends on your personality and your skillset. I mean, it's definitely doable for me. But my preference is that the seller calls me, which obviously, doesn't necessarily lead to a lot of deals. I am not a salesman by nature. So it takes a lot for me to cold call. So that's why I bought assignments, right? Because I'm better at connecting with people versus actually picking up the phone and calling. I make up every excuse under the book. So for me personally, it was a little bit more of a hassle, but for some people it's very easy.
Ryan: I would recommend throwing it in your acquisition, the way to acquire deals. So I personally, I'm not doing the cold calling. I have a partner that is really good at sales, and he's actually in his career of sales. And he picks up the phone a lot, because he's really good on the phone. So I partnered with him because he's good at doing that type of stuff. And I'm better at the operational piece, and underwriting, and understand the metrics of actually running the park.
Frank: And then on the financing side, did you ever have a deal that you almost couldn't get financing? It sounds like you've done a lot of different financings. You've done bank. You've done seller. You have not done a conduit yet, correct?
Ryan: I've not done a conduit debt. No, like CMBS?
Frank: Yeah. So-
Ryan: No, not yet.
Frank: But when you [crosstalk 00:21:26] have you had anywhere you came close to not getting the banking, or were you able to get the banking on each one you tried?
Ryan: Yeah, there's been a few. On every deal that we've purchased we were able to get bank debt. But yeah, on the smaller deals, it's definitely harder. Because anything under a million loan size, we just make a list of all the banks and we just start calling, and we just say, "Hey, do you guys financial for home parks? Do you guys have anything in your portfolio that you guys lend on? And do you lend out of state investors, if we are out of state?"
Ryan: So we've been close. There have been some deals that we've had under contract that we couldn't get bank debt on. Actually, I have one now where we aren't able to get bank debt, because originally the seller thought or told us that it was a little bit more occupied than it actually was once we got there. And we've had to go back to him and try to get some seller financing, but I'm actually in the process. Gray's Creek, my first park, we're actually in the process of refinancing into agency debt. I know that's not conduit, but we are looking at getting a Fannie loan on that one.
Frank: Got you. And from your forays into banking, what attributes do the banks not like? When you got negative feedback, was it roads, was it location? What kind of things did you get negative feedback or pushback from?
Ryan: Yeah, one, a lot of times it's just actual occupancy, right? So if it's not over a certain threshold, typically it's 70 to 80%. Sometimes it's even as high as 85% on some of the Fannie debt, stuff like that. Other things are the actual records of the park, right? So when they see their tax returns, because a lot of the owners collect in cash and they may not report everything to Uncle Sam. So the tax returns don't necessarily match the quoted profit and loss statements.
Ryan: And a lot of times sellers just don't have records. So we weren't able to get alone, or we had to close quickly because we only had it under contract for maybe 30 days. And a third one is it's too small, right? Because if you're getting a loan, that's $400,000, they can go make two single family loans. And it's probably less risky in their eyes than lending on a trailer park that they drive by every day and they don't like seeing.
Frank: Right.
Ryan: But once a bank lends on a park, they understand the nature of the business, It's definitely a lot easier to work with a bank like that.
Frank: And then on a very macro level, would these deals being more in the mode of filling vacant lots, raising rents, so majoring water, sewer, cutting costs, all the above. What kind of things have you been focused on so far in making money out of them?
Ryan: A little bit of all of the above. A few of them it's been vacant units and vacant pads. Some of them it's been sub-metering and others it's been cutting costs. For example, they may have individual trash service and then they also have dumpsters. Why do you have both? I understand sometimes you need the dumpster, but we got rid of that. We got rid of that from one. We've renegotiated some trash contracts. As far as increasing revenue, something that I've done, I've picked up from you guys was the cable contract stuff where we actually use a broker to negotiate that, anywhere we get the one-time door fee and the reoccurring revenue.
Ryan: And then overall, just getting correct quotes for insurance, getting properly insured. And then just raising rent over time, right? Adding value first to the parks, right? Increasing the aesthetics, maybe repaving the roads. Like I said, connecting to city water, painting some of the homes that we own, taking care of trees, just deferred maintenance stuff, and then raising the rent over time to get to that market rent, or right below it just based on where we are. So, that's all of the above.
Frank: What's the largest lot rent increase you've done so far in dollar amount in one year?
Ryan: We just did one and it was $29.
Frank: Okay.
Ryan: So not massive but not small either.
Frank: Got you. And then as far as filling lots, are you bringing in new homes, used homes, or are you using a finance program, or are you using 21st, or how are you doing that?
Ryan: Doing a mixture of all three. In certain parks we're during the cash program. And others were buying used homes, springing them in, fixing them up and selling them off on. And then others I've used other dealerships programs as well, like Legacy has a program. And what's the other one? I'm drawing a blank. So we've done a mixture of all of it. If I can buy a mid-'90s home for a decent price, I'll buy that pay for the move. In certain markets we've actually paid for organic move-ins as well. I know it's extremely rare, but in Fayetteville we've had two or three organic move-ins, actually. Where people bought mobile homes. They didn't want it on the land or in the parks. So we paid for the move. So we do everything.
Frank: Okay. And then as far as managers go, do you have one manager for each park, do you have managers that share parks, one that does two parks, or how has that worked out?
Ryan: We have a combination. In Lexington, we have one manager that runs three parks for us just due to proximity and size. And then other than that, we have a manager that is at every property. They may live on site or they may live fairly close. We don't always do the on-site management. It just depends on who we can find once we take over the park. On my preference is still to have somebody live on-site, but that's not a requirement for me anymore.
Ryan: I think, just due to the technology and stuff you don't always have to be there 24/7. We've done a mixture of all of it. When we take over park, I've fired managers that were there. I've kept them and then fired them later on, or they've quit. Or they didn't have a manager, the owner was the manager, and we had to hire manager. So we've done a little bit of everything in that regard.
Frank: If you were to group it together, what would be the number one reason of managers you've had to replace? What's the number one defect in the managers that you've had to get a different manager?
Ryan: One was pay. They were making completely too much based on industry standards. And then also, for the actual park itself, they were making, I think, maybe $40 a lot, and they weren't doing really a ton of maintenance. We didn't have any really park-owned homes. They were making way more than they should have. And the overall park just didn't require that. Another reason is that the old owner had two managers for two parks that were really close together. And one manager was obviously better than the other. And they just didn't meet our skillset. They didn't know how to use a computer. They were just tired and worn out. So we just helped them to the door, if that makes sense, when we acquired the park.
Frank: Sure.
Ryan: They just didn't have that energy like they used to.
Frank: Okay. Today, what's been your best day ever as a park owner? Was it the day you sold one of the two parks that you sold and you got a big check? Was it, some residents saying, "Thanks, Ryan, this place a dump." I mean, what has been your best day? Or it could be a couple of days. What have been your best moments as a park owner?
Ryan: Yeah, my best day was when I bought my first park. Because it had been years in the making. Me talking about it, everybody's like, "Oh. But you're still on that? Still trying to buy a trailer park. Why? Why don't you just flip to single family homes or do something else?" Just actually sticking to something and following it through. That was one of my best days. Connecting to city water was another one, because it alleviated the constant thought in my head, "We're going to get sued by the state. We're going to have a lawsuit. We're going to have a movie made out of us." That was a good day.
Ryan: Second, was definitely receiving checks for selling those two parks, because we bought them and we basically doubled the value. And that was good. That was good. And then just some other good days in the park industry is just always new acquisitions, and just seeing the residents actually hearing it from them. It's more of a collective. Because when you do improvements and then you go there, you see that people actually thank you for doing stuff.
Ryan: I showed some slides of that road. A ton of residents have reached out, or just sent emails. Thank me or thank the manager. "Thank you for repaving the road. Thank you for taking care of them." And just overall. Most of the owners that we take over from, they're just tired. They've owned it for 30, 40 years and they're just tired. They're not bad owners. They're just [inaudible 00:31:20]. It's just like anything. So actually taking over a property and hearing, "Hey, thank you for taking over. It seems like you guys care. Can't wait to see improvements." And then actually making those improvements for the residents is always good to hear.
Frank: How did you get around the well with the poisonous water? Did you truck in water to replenish the tank? Why was it poisoned? How did you survive that before you got to connect to the city water?
Ryan: So I should specify. It was combined radium 226 and 228, which is in North Carolina, it was above the certain threshold on... We had two wells. So we actually stopped using one well and just used the other. Sometimes we tested, I think, monthly on it. And sometimes it'll test above it. Sometimes it tests below it. This was a year long process, and it had infractions prior to us taking over. So we did not truck in water. We followed the EPA guidelines in North Carolina. Just continued to give notice, "Hey, it's recommended that you drink bottled water. It's safe to shower." We gave everybody notice, we followed the state regulations and the state guidelines. That's what we did.
Ryan: And then we had some other stuff happened with the well that wasn't anything of our nature. I can't really speak about it just due to some legal stuff that we've signed. It's basically, movie-esque, as far as there's some class action lawsuits from other entities that affected our well and the surrounding areas where we are. We actually had to use an outside service to give bottled water to our residents, not due to our fault. It was actually another contaminant that affects the whole Fayetteville area, actually.
Ryan: And if you just Google Fayetteville water problems, you'll probably see it. We just followed state regulations and state guidelines, and did all the necessary items. And the contaminant that it is, it's not necessarily harmful. It is if you drank three gallons a day or just continually sit in it, according to the EPA, one in 10,000 people can be affected or something. It's really hard to tell.
Ryan: And we spoke to an environmental attorney at length during due diligence. We weighed all our pros and cons. And we actually got a warranty in our contract that the old owner would warranty up to a certain amount if we couldn't fix it, or would give us a check, basically, if we couldn't fix it within a certain amount of time. So we got a warranty from the seller, so that did help weigh down our risk in our eyes.
Frank: What was your worst day ever? What day did you just say, "Ah, I hate the mobile home park business." What had transpired? Just a tenant yelling at you, or that water well issue, or what was your worst moment?
Ryan: That's a tough one, because sometimes you have worst moments than others. It was probably every time I got the well readings. Because it was my first park, I would stress about it. I'd say, "When are we connecting? If somebody's going to get sick, are we going to get a lawsuit?" It was more of a long-term process. I've had some bad days where it's just like, "It's time to sell this property."
Ryan: Because you go there, you think you're making improvements and then you look at your delinquency report or something, collections aren't as great this month. I actually had an old employee that came to the park after he had quit, and basically, called me a slumlord. Even though I knew I wasn't, we're making improvements in park. You always take that personal, somewhat, because you know you're not, and you're trying to provide value. And we're providing safe, clean, affordable housing for people.
Ryan: So that was probably one of my worst days because even though it was an ex-employee. I hadn't fired him, he actually quit. Makes you question, "Am I doing the right thing in this property? What can I do to actually improve it?" The well was a year long stressor.
Frank: Okay. Let's talk about lessons learned from it. I'll break it up into easy to use categories. What of your lessons learned about the residents? I mean, you'd seen it in 8 Mile. You had to have some kind of preconceived notions of what you were getting into. Bought the park, bought the next part. What have you learned about mobile home park residents?
Ryan: They're not as scary as what you might perceive when you're in the park. Because an old home that's not taken care of, and there's beat up cars around it or trash, to me, who I grew up in the suburbs, I wasn't used to that. So getting accustomed to that and getting past that, and actually speaking to people. There are people that, they're retired, they're on disability, social security. The regular people that just want typically, a cheap place to live, clean and safe, right? They don't want trouble on the meth, right? Not everybody's cooking meth and not everybody's doing all these drugs, and they don't have 10 pit bulls in the backyard, and they're not doing all the stuff that everybody thinks mobile home park people are.
Ryan: Now, don't get me wrong. When we buy these projects, there are those residents. And typically, it's one or two bad apples. And then once you get rid of them, the park just seems to hit another gear and smooth sailing. And I've definitely learned a lot more about the residents and I've learned that if they have a flat tire or their kid gets sick, I mean, they're really one emergency away from not being able to afford your rent. And we have worked with people in the past. But I typically give people one chance before we have to move forward. Because it is a collections business after all, and that's the number one thing. And nowhere else is going to let you live there for free. So why should we?
Frank: Okay. And what about mobile home park owners? I know you've been to some industry events. You've met other owners of parks. Is the typical mobile home park owner, nice person, mean person? What are your thoughts on your fellow mobile park owners?
Ryan: Very nice people, very helpful. The mobile home park industry is like any other. Is probably the best industry. A lot of people are willing to help out, regardless of how many pads they have or parks they own. Even if they have one or they own 100 parks, they're willing to help out. You yourself, obviously, have been a lot of help to me. I've been on a lot of these MHU investors clubs events, where it's been literally five people. I think we had dinner at your house a couple of times. I've been there. And there was 10 people. Everybody's willing to help.
Ryan: You do get the owners that they're hard to talk to, or they're bad for the industry, because they're slumlords that they're trying to take advantage of people. But those are few and far between. Even those guys are still easy to work with when you're trying to acquire a park. But yeah, overall, people are very willing to help, very willing to share what they're doing. Everybody's open as far as I'm concerned. And it's easy to chat with everybody versus single families where people were trying to hide deals. They're more secretive. They don't really want to share what they're doing, versus the mobile home park industry. It's kind of, everybody's willing to pick up the phone or at least take 20, 30 minutes to return an email and it's very friendly industry.
Frank: What about lessons learned as far as buying parks? What have you learned that might be different than what you originally expected? As far as just the ways to find them, and that kind of stuff.
Ryan: It's been a lot easier once you buy your first one. Because people no longer see you as a tire kicker. You're serious because you own one. So that was my biggest eye-opener. I didn't realize how quickly it would snowball from one to eight within a matter of basically, 24 months. I have three more parks under contract. So right now that we're set to close in the next 60 to 90 days as well. Let me back up a little bit. When I was first starting those 10 to 12 caps, where you could just pick up the phone, call an owner, I'd send out direct mail and get 10% results. That was still happening.
Ryan: Now, it's a little bit tougher. You have to reach out to brokers, you have to actually reach out to the owner, maybe even show up at their house and knock on their door, or drive through the park and try to catch them. It's gotten a little bit harder to acquire parks, and cap rates have compressed a little bit. But there's still plenty of opportunity out there. That's probably a lesson learned is, I should have bought more earlier on if I would have. Hindsight being 20/20.
Frank: What about lending? What have you learned about banking so far?
Ryan: Bigger deals are easier to finance, especially anything over 75 units or a million and a half on the loan size. Those are definitely easier to finance. You have more people that want to lend on that type of asset class. Because it's not something where they could just go lend on a single family home and get the same type of return. So smaller parks are harder to finance, and the turnaround parks are almost not finance-able at all. And bankers want to talk to people. They're in the business of lending money. I used to view them as not necessarily a partner in the business, which in fact, they are a partner in the business. Just because one lender says no doesn't mean that's your only option. There's plenty of lenders out there that want your business, especially in today's environment.
Frank: What are your thoughts on infrastructure? Obviously, I had my very first water well. You also had water well indigestion. My first well, buy the well, coordinator breaks, the guy tells me, "Oh, no. Wait and see if you get sued." Freaks me out being a pessimist, because I figured then every call for the next month, or it means be sued for someone's sick. And then as soon as I got through that, the well broke and they told me they didn't think they could get the well back on. And I was at rationing water trying to get the city water connected. So my first impression of water wells was, "Oh, my gosh, you got to be kidding me." Dave had much better issues. Dave never had any of those traumas. But what have you learned about infrastructure that you will do, won't do? Things you like, things you hate, what are your thoughts?
Ryan: I would buy another park on a water well as long as I know ahead of time you hire an expert to basically tell you what it is and what it isn't. Some items that I've found in due diligence that shocked me were the clay tile. I didn't realize some of the parks with clay tiles, especially with trees, how much intrusion there can be. And obviously, PVC is the best. I've looked at a park on Orangeburg before and I just ran, basically. I said, "No, thank you. I've moved on." Basically with septics you have to have space to replace them. If you have a really tight park and a bunch of homes feeding the septics almost impossible to replace them. Especially, if you're in closer to the city, they're probably not going to let you.
Ryan: I do due diligence and spend the money on a plumber to give you an idea of what the water lines are made out of and the sewer lines. Because I bought a park and we didn't scope the sewer lines, and we had a collapse without knowing it on the sewer lines. It was black PVC stuff. And in Alder Park, a couple of few thousand dollars later fixing the sewer collapse, digging it up and fixing it. We're all good. But some other items are just, know what you're getting. My preference has always direct billed water and sewer. But even on the direct billed water and sewer, you want to know what you own. Just because the old owner says, "Well, I don't own the sewer lines the city does."
Ryan: Get that in writing from the city, or whoever the sewer, or water provider is because that's not always the case. One park I bought the clay tile, the old owner actually cut out a rectangular clean out to where you could lift it up like a man-gate and see right into the clay tile. And they were hand cleaning it out with a long PVC pipe and pushing it all. And then, it would just all sit at the bottom of the line, basically downgrade. And then they didn't have enough to pump up to the main line. So we actually had to install a lift station after it was basically holding at one spot and we couldn't figure out why. And we eventually figured out that we'd have to install a lift station. So sometimes, get a number of opinions on the sewer lines because the plumber always wants to tell you that you need to replace them.
Frank: Right. And what about location? What have you learned about locations? When you look at the eight parks you've bought, are there any subtle nuances and location maybe you didn't know on the front end and now you're like, "Aha! That's my kind of location." Or what are your thoughts on location?
Ryan: If you stick to where there's a couple of employers that are basically recession resistant, government healthcare, colleges, that is always a plus. Make sure you demand post-test ads. If you're not getting the demand, why? Repost your test ads. Make sure there's demand before you buy. That's been my biggest surprise that some locations that I didn't really think on the front end were worth it. The demand was crazy, and I couldn't believe it based on where it was. We had expected because we had placed a test ad and the demand that we got from it was crazy. And then actually once we closed on the park, the phone just continuously rang, "Hey, do you have housing? Do you have anything rent? Do you have anything for sale?"
Ryan: And some other things that I've learned is, location is a big factor of whether you can sell a home for cash or not and the amount. It's actually crazy that certain markets sell way better than others. I don't really have a specific metric for that, but a lot of times the bigger metros solve your inefficiencies. And there's typically, a little bit more cash buyers than there are not cash buyers. There's a lot more renters that I've found in the Southeast versus the Midwest, in my opinion.
Frank: What have you learned about the home so far? I mean, are they well-built, long-lasting? Do you do even renovate '60s and '70s? Can a customer tell the difference between a 1990 and a new one? What are some of the realities of that product? Not the mobile home park product, but just the homes themselves. Any things you've learned about homes?
Ryan: Just like anything, if you don't take care of it, it's going to rot and fall apart. I've seen some Lucille Ball, those old 1950s, '40s caravans that have been converted into fixed structures. And they're well taken care of and they're beautiful on the inside. Learning about the older homes, we definitely have renovated older homes. They're harder to find the parts for them sometimes. Because the toilets might be a little bit older or actually you have to replace a little bit more stuff. Because you can't just go to Home Depot and find the same toilet size, because they were smaller back then. A lot of the electrical issues are in the older homes, and I've seen some electrical fires. And that's just due to basically, Joe Schmo thinking he can fix it and you got loose wires in the wall, and then before you know it, the homes up in flames.
Ryan: But long-term, the homes can last. Are the '60s homes going to last another 50 years? I have no idea. And I don't know if anybody knows that question, but the newer homes have definitely come a long way versus the 1960 times. But my preference is still the newer homes as a product. But just because I think you can tell the difference, but it's mainly on the size of the home that have changed, not necessarily the actual, how nice it is on the inside. That's all based on the end consumer and the park owner a lot of times.
Frank: What have you learned about the lifestyle of a park owner? Maybe the lifestyle, the big benefit was freedom of location and time. I was able to go to all of my daughter's sporting events, only parent. In fact, the school acknowledged me at the end of her high school. I was the only parent who had ever attended every single game. But at the same time, you have a little bit of loneliness. I don't know how you're set up, but where typically most people your size would have at least one person in-between them and the manager. So, what are your thoughts on that? Are you dying of loneliness? Do you still talk to managers yourself or how are you structured at this point?
Ryan: Yeah, because I only have six parks now. I'm the full operational piece. I don't have an asset manager, or regional manager, or anything like that. So yeah, I mean, entrepreneurship and park ownership is definitely lonely at times, especially during COVID. Because you can't really just go anywhere. I mean, because everything's enclosed or you don't want to go anywhere just because. But yeah, I mean, the park ownership has allowed me for a little bit more freedom. I can travel when I want. I can do certain things. I can be home. But there is some loneliness. In 2021, I probably will hire somebody, so therefore, I can have a little bit more time, freedom to focus on some acquisitions, and just scaling my portfolio a little bit larger.
Ryan: That's how I'm set up right now. But I do talk to my business partner and I talk to the managers relatively frequently, or at least, typically, one to three times a week. And I travel to the properties. I do touch my assets a little bit more than most. I try to get there typically once every other month depending on what we got going on in the park. I don't mind traveling. So I don't have kids at the moment. So all I have is a dog. So my lifestyle is a little bit more I guess, open to traveling and stuff like that. But the time, freedom is probably the most rewarding at this point. And just the ability to do what I want within a certain structure.
Frank: Okay. Pop quiz. Trailer park, mobile home park, manufactured home community. Which words do you use on a regular daily basis?
Ryan: It depends on who I'm talking to and what I'm trying to come across. Typically, it's mobile home park. It's right in the middle. Because when you start saying manufactured housing, it takes too long to process. Mobile home park is more consistent. A lot of the residents actually believe it or not, depending on where you are still, use trailer and trailer park. And a lot of people depending on where you are still, use the term trailer park, which I don't use that. I use mobile home park the most.
Frank: Yeah. So it was crazy, Ryan, and only 10 years ago, it was forbidden to say the word mobile home park in all industry events. I was once actually censored by MHI for giving a speech where I dared to use the word mobile home park repetitively. It was crazy. So I'm glad that people finally gotten onto better topics. So now, what's in the future for the life of Ryan? Buying more parks, getting a strata of management under you so that you don't have to deal with talking to the managers? What's the future look like? What's the five, 10, and 20 year plan here for Ryan. Where are you going with this thing?
Ryan: So I started buying parks in my 20s. I've now entered my 30s. Next five years, I'd like to push over the thousand lot threshold just so I could actually build a company and hire employees, so I don't have to take the day-to-day beating. Because I still talk to residents at this point. I'm not large enough to hand that off. I mean, I am at some parks, but sometimes, the manager can't handle it. I would like to replace somebody in that role. And then, I'd also like to hire maybe, "office manager" that pays the bills, maybe a little bit of an accounting stuff and answers emails, and does stuff like that as well.
Ryan: And then, looking the next 10 to 20 years, honestly, I don't know. You've been in the industry a lot longer than anybody. And I don't know what the next 10 years has in store. I'm still a seller of stuff. I will sell something if it's the correct price. I've always taken that model while I'm a long long-term hold guy, I will sell something if it's the correct price.
Ryan: And I own my stuff with partners. Sometimes partnerships change, the structures change, people's personal lives change. So for the next 10 years, I do see myself still in the industry. Maybe that means 5,000, 10,000 pads. I don't know. We'll see. I do have that ambition to buy that much, but then at the same time, some days I want to do that, some days I don't. I'm in-between on some days. But most of the time I find myself pushing for more. And then in the next 10 years, hopefully, I'm buying a good amount of pads and maybe, some other assets. We'll see.
Frank: You started looking at parks 2015, approximately. So it's been five years at this point, entering the sixth year. If you had to do it again, what would you do differently, or what would you tell people looking at starting now in the year 2021? What misadventures did you make, or what opportunities did you [inaudible 00:55:15]? Maybe not doing something differently or what would be just a few key items you could throw out to people?
Ryan: If you find a deal and you think it's a good deal based on your numbers, and you talk to somebody else that you may look up to or another real estate investor, and they say, "I don't really think it's a good deal." To them, it might not be a good deal based on where they are in their investing life or their lifecycle. If you think it's a good deal and it works for you, buy it. Because the parks are going away faster than they ever have before. They're getting bought up by Blackstone and all the other private equity firms, which average day Joes can't compete with based on the time horizon, and their cost of capital is a lot cheaper than yours, more than likely. And the return objectives are probably lower. My biggest mistake was looking at a few deals, talking to other investors that didn't really think they were that good a deal based on the way that their parameters were set up, and not buying them. Because actually, some other larger big operators had bought them up after I had looked at it and had first look.
Ryan: So that's what I would recommend. And I don't let that happen again. If I find a good deal and I am on the phone with the seller, I'm like, "Hey, I'll send you a contract today." And I send a contract as quick as possible. If I think it's a good deal. Because the nature of where we are is, I'm not for tying it up just to tie it up. But put it on our contract if it sounds like a good deal on the phone, and maybe, you've done some quick numbers. And then, you can figure out the rest during due diligence, because that's what that period is for. Today's environment is more competitive than ever. So you have to move quickly and time kills deals. I've learned that from you. And it certainly does.
Frank: Yeah. And you're totally correct, Ryan. My first deal of Glen Haven, not one single person in North America thought that was a good idea. Every single person I talked to, said it was the dumbest thing ever. Why would I want to buy a trailer park? I was a moron. I didn't get not one single support from any, any living human. Family member, friends, business people, my old billboard banker thought it was stupid. It was a stupid fast. And even after I bought the thing, people were still telling me, "Man, I wish you didn't buy it now. That thing is just the dumbest thing." So, yeah, I totally agree. You cannot let other people control your destiny. When it comes to your destiny, you got to be the person who pulls the trigger, and does things and doesn't do things. You cannot delegate that to somebody else. I completely agree with that.
Frank: And on that note, Ryan, again, we really appreciate you being here, and going over the life of Ryan, mobile home park owner. I remember back when you had none. I remember the early days when you were just asking questions, looking at deals. And it's pretty exciting to me to see that you've gone from that to number one, living in Charleston, which is, Brandon and my wife's dream city. And that you now have bought eight parks, sold two, owns six. I think that's pretty cool. I think when you had dinner at my house at one time, you didn't have any parks at that point, did you?
Ryan: Correct. No. I came to everything. I was living in Cincinnati and I came to a lot of stuff and I didn't have anything. I've met a ton of people throughout the span. Maybe I didn't have the internal confidence to take that leap of faith, because it is a leap. Especially because I had never owned any other real estate. So most people go single families, the own other stuff. I was 25 when I came to the boot camp, or 24, I think. I was right out of business school basically. I only understood really how to work in a corporation. I owe a lot of stuff to you and I appreciate everything over the years. And it's definitely been a fun ride and I look forward to continuing to see what the future has in store for mobile home parks.
Frank: That's great, Ryan. And let me ask you this, if anyone watching this says, "Hey, I want to ask Ryan a question." Is it okay if we email some questions to you? I mean, I'm not going to give people your email address, but would you be kind enough to respond if someone has a question for you? Maybe even on a good-
Ryan: Oh, yeah.
Frank: In Charleston, or you want to join the fraternal brotherhood of park owners and be another nice guy to give knowledge? So, okay. So if anyone has one, send it to us. Brandon, we'll forward it on to Ryan.
Ryan: Yeah, of course.
Frank: And again, really appreciate you being here and being so honest and candid in what goes on. It's a topic that many people don't like to talk about, because they find mobile home park investing embarrassing or odd. And over the years I ran into so many people that I know that actually own mobile home parks, but they would not tell anyone-
Ryan: Mm-hmm (affirmative). Yeah.
Frank: It was kind of embarrassing thing they kept hidden away in the closet. But I'm glad you had the ability to come and talk to us on this. So, again, Ryan, thanks, and everyone thanks for spending an hour of your time with us here at our MHU Lecture Series Event. And we'll talk to everyone again soon.