Secrets to wealth through MH and RV Parks with Ryan Groene

INTRODUCTION:

Join Derek in this episode of the MHP Show podcast as he sits down with Ryan Groene, an experienced investor who has built a thriving portfolio of over 1500 lots in mobile home parks. Get ready to dive into Groene's journey from college baseball to corporate finance, and ultimately to successful full-time park ownership.

KEY TAKEAWAYS:

• Explore Groene's entrepreneurial journey, from exploring various businesses post-college to stumbling upon mobile home parks as a lucrative investment opportunity.

• Gain insights into the transition from a corporate finance job to full-time mobile home park ownership, including the challenges and triumphs along the way.

• Discover valuable perspectives on the differences between long-term and transient RV parks, the affordable housing aspect of RV living, and the unique considerations of RV park ownership compared to mobile home parks.

CONCLUSION:

In this enlightening episode, listeners are treated to a wealth of knowledge and firsthand experiences from Groene's journey in the real estate industry. Whether you're an aspiring investor or a seasoned pro, this conversation offers valuable insights into the world of mobile home and RV park investing.

WATCH IT IN YOUTUBE:

TRANSCRIPTION:

[Music]

hey everyone welcome back to the MHP Show podcast back to you with another episode this week um and on the MHP show we talk about anything and everything that has to do with mobile home parks operations crazy stories the the good and the Bad and the Ugly of investing in this awesome asset class and I've got another guest with us today I've got Mr Ryan grony Ryan he played four years of college baseball and without getting too deep into it because I'll let him do that and now he owns over 1500 Lots um Ryan's

00:41

company treeside Capital has been operating mobile home parks for how long now uh eight years eight years yeah six to eight years so something like that that's awesome well yeah well welcome to the show R well thanks for having me Derek I appreciate you uh having me on um I enjoy the podcast and hopefully we can uh help some people out or you know just get to know me a little bit better and uh I think I met you few years ago um just through a you know a local uh person that we both know and um you know looking to connect some more yeah for

01:13

sure for sure so I always like to start the show with um my favorite question of the show is like what was your what was your first entrepreneurial Journey before you got into trailer parks uh I wish I had a glorious story and I which I had something where I was like selling baseball cards when I was like 10 years old or something um I don't have that unfortunately I my first entrepreneurial Journey was um like true business-wise was probably um more of a a a book right I read Rich Dad pad in college while I was

01:51

going to school for finance right and while I was going to school for finance I mean they were training us to basically go work on Wall Street right um basically work in Investment Banking or be a private Equity guy um I am nowhere I found out quickly I was not smart enough to do that and I went to New York City once I didn't like it I didn't want to live there um and I didn't want to work a 100 hour weeks um really at all um and so my entrepreneur entrepreneurial Journey kind of started in college red Rich Dad pad graduated

02:19

college got a corporate job Corporate Finance job um started looking at businesses to buy laundry match car washes um small apartment buildings um and then I actually stumbled on uh Mobile Home Park um just by pure chance I was living at home at the time and my dad was my dad's a general contractor he's like hey what if we flip a mobile home um you know low cost entry you could maybe live in it for a little bit and then uh like in it and this was like a this was in Cincinnati Ohio where I'm from was a festar community um actually

02:47

technically was a retiree Community but not legally um so I was still allowed to live would been the youngest in there by like 50 years but um was still allowed still allowed to live there so that didn't end up happening I kind of went down the rabbit hole of who owns the mobile home park went to the Frank and Dave boot camp um in 2015 and then that kind of started my whole journey into mobile home parks um now kind of backing up my entrepreneurial Journey from a kid um you could say that um early on um my

03:15

parents looked at buying car washes laundry mats like looked at buying a bunch of stuff and then never actually bought anything so I guess maybe subconsciously when I was a child um like 10 to 15 they were looking at stuff dragging us around looking at that stuff um and then my dad actually went out on his own probably when I was like 16 17 so um he he's his own uh general contractor um so long long long story short I basically I don't have anything uh crazy I just knew that I wanted to do this a long time ago so whether it was

03:47

and the vehicle just happened by chance to be mobile yeah that's great man and so did you have a ninto five job did you have like a nine-to-five job before you started investing yeah so when I got out of college I was a financial ADV visor um financial planner um had my all my licenses could sell stock and get commission all that fun stuff that lasted of about six months and then I went to work for a Fortune 500 company um in the kind of financial um analysis type role um did that for a number of years up until

04:20

2017 um knew I wanted to do mobile home parks or apartments or something when I was like in 2015 145 right um so I had a 9 to5 up until 2018 um so my first Park I had a I had a job actually my first few Parks I still had a full-time job um and then I have not had a full-time job quote unquote where I was a W2 employee um since 2018 I've been doing this full-time now since then um the first couple years were you know you're always kind of feeling it out but I was in my 20s um so I was 25 when I started um and

04:56

I I knew I could take a lot more risk because I didn't have any kids um and I wasn't like 50 years old where I was throwing my career away I mean I was making good money but I wasn't making like you know half a million dollars a year doing you know Finance right so if that was the case might have been a little bit different but um the corporate uh lifestyle was not for me um and I it was it didn't fit my personality right um it was a I'm not a person that is a nine-to-five person um I don't mind working um it's

05:26

just um I had a little bit more entrepreneurial basis in me than the normal 9 to5 there's nothing wrong with that and it's a good place to start it's actually a good safety net um in mobile home parks allow you a lot of times to have a full-time job because that's what funds your Parks that's what givs you a bank loan and it also allows you to um you know put more money into the park instead of being buying a park and be like now I got to pay my bills and because I don't have a job right so I

05:52

would actually advise typically I advise people to keep their job um unless they have enough saved or they have other sources of income where they don't need it anymore more right um I just I mean I kind of just kind of quit on a whim or um some might say got asked to leave but that's that's a that's another another topic um but anyways um long story short I mean I went out and then I you know I did some side you know side jobs here and there and I still do right I you just you just take it what you can get

06:20

um but you know 20 Parks later I mean this is my full-time job and kind of not going back so I can always so yeah for sure like once you once you get out of it and so my my job it was you know I was it was a corporate job for sure but it was 100% commission I was a quasi entrepreneur and so I could make my own schedule to a degree but you still had to answer to you know this person that person and it just definitely wasn't for me yeah I think the easiest transitions that I've seen collectively from whether

06:54

it just be full-time career to real estate or even another business as a whole is a lot of guys that are in sales right that typically which your role was a sales role if I'm not mistaken yeah my business partner miles he has a sales um background um and then other guys that I know um have had a sales background because it can lead to where you're already a little bit more based on yourself right right you're the you're the end all be all because it's commission based right um when you have

07:21

a salary you know 95 it is a little bit harder of a transition potentially because they used to that paycheck right and it does become the first couple times it's scary right and when your bank account gets real low and you've dumped all your money into a park um I mean that's like 100% in right there's no plan B um been there plenty of times um and sometimes it doesn't work so what what allows that is if you do it young enough um or if you have a spouse that has a job still right you know you can

07:50

go out and do it um if you're on the same page with them um or you pay yourself from the park maybe you be the manager for a little bit maybe you just take a little cut uh of the pay because you're the asset manager there's plenty of plenty of income still within the park related business that you can pay yourself um you may just have to do it for a short time period I've managed man of parks just by myself um because we either let a manager go or we take over a property and and I pay myself that role um I

08:17

don't necessarily do it as much anymore but I used to when start yeah and I mean it's a once you've got all 10ed own homes it's not it's not rocket science how to run these things so you can you can do it especially if you still got a full-time job and and I agree with Ryan completely like I think you should keep it like I kept mine as long as I could until it wasn't feasible anymore and so I hear from people all the time that they're you know apprehensive or they use that as an excuse of having that job and it doesn't

08:47

allow them to freedom to do things but you just got to get better at managing your time like how did you do that were you cold were you prospecting for Parks when you still worked or how did that Dynamic actually work when you were still working that job yeah so when I went to the Frankin day boot camp which was like the three-day boot camp back in the day uh my first experience was hey we're going to go toward this park in Austin there may be people protesting because we raised the rent right and I'm

09:12

like what the hell um and you know it was a trailer park right I'd only been in a few I didn't grow up in one I grew up a pretty normal life um always had whatever I needed so I'm not like you know I you know I did boot bootstrap my way once I got into the park business but growing up I had everything I needed so um I'd never really been in a mobile home park um and so you know um kind of that that that transitional period um sorry I like totally blanked on the question all good all good my I started

09:49

talking about the boot camp and kind of the the nin to-5 and kind of uh you know that transitional period is is um a little bit tougher for some um but it can be done so and I so basically back back when I started prospecting wise um I would go home I'd have my database I'd actually handr write my own mailers um and back in 2015 16 even 14 you could handr write mailers to the guys that owned a 200 side park and you would get a response um and they'd be like I'd sell it for X price and then all of the

10:19

experts are saying you know hey you should buy at a you should sell you should buy at a nine 10 cap uh because interest rates back in 2014 were 15 were like five and six% they they Iz what they were now but they are um they were 5 six 7% certain instances um and a lot of times you know you would look at the deal and be like e that's that's too costly um the deal flow was a lot greater then I was very inexperienced sales-wise I was very experienced real estate wise so I just missed a lot I did miss a lot of opportunities for guys

10:48

that had reached out to me I'd send a 100 100 handwritten letters or even typed letters I'd probably get eight to 12 calls or at least emails back saying you know um and that's a it was a 10% % response now it significantly dropped off in like 201 18 to 20 you would get less than 20 less than 1% response nowadays um because a lot of those Parks have turned over to institutional guys like me and you that aren't even institutional but we're we don't just own one and two parks we're not mom and

11:15

pop but um and then even then you know the the smaller guys that have built portfolios are now selling those to the larger portfolio the larger guys right so it's been Consolidated um quite significantly over the last eight years that I've been in the business and when I started it was I built I did everything myself so it was it was cheap um and I'm glad I did it that way because like if somebody's like hey I got this park in this area I'm like yeah I know the park I know who owns it because I know my database literally

11:41

it's like by memory it's almost like a Rainman type uh like you just can I can remember every single Park and it's it's a it's a thickness but um I did that because I built my own database um I may not know it as much anymore in certain areas because we're a little bit spread out but like in Cincinnati area Indiana and parts of Ohio I pretty much know all the parks and all the owners that to some degree so I'm glad I did it that way now I would I would do it a little bit differently if I had more disposable

12:09

income at the time um I would have probably paid some vas paid some higher level uh staff to build it and then I would take all the calls myself um because if you have time to take the calls um you're going to connect with the owner a lot more than paying a VA or paying somebody um unless they are true sales role and they understand the concept of of real estate um but you have a lot of single family wholesale guys or transition like guys that flip that transition into into mobile home parks and they think it's all about

12:40

leads and volume in the park business you don't have a lot of volume because there's only 50,000 right and of that 50 you're probably going after like 20 to 30 right y thousand so the leads are need to be handled with a lot more um like higher level Personnel or just somebody that understands that every lead it could lead to the lead five years from now right so you know you can you can pull up any neighborhood in the United States and you have 100 houses in a little town right so that's way more

13:08

than and they may only have one mobile home park so your leades have to be handled with a little bit more um finesse than like just hey okay what's the price move on to the next one right you can do that but um if you're only buying in select areas you may only have a 100 parks within a three hour radius of you right it's not very many so you're you're your handling of the of the acquisition and the lead the lead flow need to be handled with a little bit higher level Personnel in in my experience we still handle a lot of our

13:37

own leads right we may have an appointment center um but we still handle a lot of the the the day-to-day of the acquisition now there is a certain point where your business will reach a level um but nowadays there's a lot more wholesalers there's a lot more Brokers that are a lot better at the business than what it used to be so I get more leads from off Market leads from those two sources than we do by just cold calling so yeah for sure and I can we we we get the same amount I mean we get a lot of deals and deal flow from

14:06

wholesalers and and Brokers now I mean there's some of them that have have gotten better at what they do not all of them but um is created equal right and a lot of the Brokers a lot of people don't know and I don't even know if I shareing this little they also own Parks so um a lot of people same with any other industry um it's it's the same consistency apartment Brokers single family they own real estate right they're selling stuff that maybe they may not be meet their criteria or it's just they they don't

14:38

want to buy it right and a lot of times they're not buying every lead they're buying a select few here and there so take that with a grain of salt uh to the listeners but Brokers know Parks right they know they know real estate a lot of times commercial brokers are on the whole probably a little bit better um than if you have a than if you had a residential broker listing a mobile a lot of times they know the deals they know the the game because they've been added so um but deal flow in 2023 yeah I

15:04

was going to say is it 2023 I'm already on 2024 has significantly dropped off um we have not bought a single Park both RV or mobile home park this year and it's just been it one it's because of the rates um and two it's just deal flow uh has slowed up because people are still wanting prices for 2021 um in 2020 prices and I want the same right if I sell the park I don't want to sell it a 10 C I want to for cap too exactly so guys that are selling are just like I'll just wait till rates go down if they go down

15:36

but um also I will say there are more deals getting creative um that I've seen kind of come back on the table right maybe they're entertaining seller financing there's people are still doing deals lending is still happening lending is not like what it was in 2008 or even during covid um lending is still out there you just have to have a little bit more down potentially and your rate's going to be higher so it's not penciling out right from a DCR perspective which is the the debt coverage ratio um it's

16:03

just not penciling out like it was two three years ago I mean the the it's way more costly to borrow than what it was so yeah definitely and I think you know I tell when I people that aren't familiar with the industry Ryan I tell them you know I've got investors they're like oh you got any deals you know I'm ready I'm ready I'm like so let me explain to you this like so in 2021 if and you can tell me what your thoughts are on this but if we looked at 20 deals you could sort of make sense of all of

16:31

them in a way now you look at 20 maybe one of them warrants step two like maybe um so I don't know what you're seeing but that's what what we're seeing I mean it's just a big we have to look at a lot of deals now yeah it's basically kind of the deals that we talked to maybe two three years ago is circling back right I'm ready to sell but it's like okay you want that price from a long time ago so you're either going to have to carry the paper right and and we can even do terms that make

17:02

sense but um you know you can't get your price in your terms unless it's the really good price right um but I'm yeah I mean we're seeing the same thing I'm seeing I'm not seeing as many guys um or gals raise money um like they were right I don't see as many emails about I got this deal going on I'm raising um more of it's just uh like a lot of guys are just refocusing on their portfolio or they're recapitalizing Deals they already had um right um they're like because now they're like well now that

17:33

we're not growing maybe let's infill some homes let's take this money here infill infill some Lots make some rehabs fix some stuff right um and it's not a great time to refinance I mean there is still still some Fanny May debt but what I'm what I'm seeing and hearing a little bit more deal wise um is is the is The Fanny May loans that were done in 2020 um or even 2019 for that fact um are now coming up people are like well after I'm at the end of my three-year cycle fiveyear cycle I want to sell or they

18:02

just want to be out of business completely and and assumable Loans the assumable assuming the loan is becoming a little bit more popular right you're still going to have to have some cash still going to have to have a a pretty decent balance sheet to get on that loan um but that is that deal flow above two three million um purchase pricewise is happening um I know for a fact I probably count two or three people that I know that are doing that right now so I would still I would still do those deals because that interest rate is

18:30

locked in at like 3% 4% right um so you can buy at it at a six cap right and um those deals are kind of tricky um because a lot of times you're gonna you're going to be um typically in the 50 to 60% uh LTV range you're not going to be in the 20% because have to you're gonna have to give cash to the buyer or to the seller and then also Fanny May want some reserves or some some some loan pay down in the meantime as well because an assumptions are nice but um still they're still it's basically like

19:01

a brand new purch still to do your due diligence they still do their diligence on you but the good thing about Fanny May and uh cnbs dead is that it's non- recourse um I I don't hear many people doing cnbs at the moment but I still do hear agency is is still out there and still getting done um but yeah I mean those are kind of where we are it's it's a it's a it's a stagnant business at the moment um with a lot of commotion still um right there's still guys doing deals but I would say on the whole the deals

19:30

that are getting done are sub 50 sites so is what oh yeah yeah yeah I've been seeing a lot of smaller stuff get done for sure and we just I just got sent a deal the other day with the situation you were just talking about it was an assumable Fanny loan but like you know our guys ran the numbers I'm like this guy's not making any money like it's it's still like too big of a number to even make sense of and the rate was like I don't know three or three and three quers or something and it just it still

20:01

didn't make sense I'm like no wonder this guy wants to get out of it because he's like dead um yeah it was it was really interesting yeah but um they may have to take a price reduction too right so basically just means uh the loan assumption the the LTV may be a little bit you might be a little bit higher um but I think deals can still get done so yeah for sure and I'm selling a park right now where we just want to we just want to sell the park um we just we don't want to put more money into it we're kind of done

20:32

with our play um and we're somebody asked us to carry a small second and we're actually doing it um I wouldn't normally do that um actually it's not a small second we'll be in first position because they're they're basically paying cash and then um it's a small Park it's like 30 Lots um it's my smallest park to date um that I still own um and we're basically getting off the we're get they're they're cashing us out and then we're going to carry a a small position

20:56

but it's first position so um it's for a short time period it's like 24 36 months so yeah that is that is also coming back a little bit the creativeness and uh I think deal flow is going to pick up but I think it just depends on uh what's happening macro and and then also even within your own little towns too right so and and and different places so um yeah yeah and and that's good insight and i' I've seen I don't know if you've seen this but I've gotten you know let's

21:24

just say six months ago I got sent deals from XYZ br broker and wholesaler at 3.5 million and I'm like dude there's it's no like it's not going to happen you know I'm at 25 and now they're coming back and they were like you know Screw you and then they come back around and now they're like hey he'll take three is your offer still on the table I'm like well rates I could still get six and a half then now I'm getting you know I have to go with eight so I I I don't even know if I can

21:54

get to that number anymore so there's I'm seeing some like a little little movement but still not where we need to be yeah we had it happened to us we put a deal under contract that we were selling um back in like May and then uh we had some legal stuff going on with the actual uh not the entitlement but the like some variance and some actual zoning issues so that takes time right and when we all got it passed it was like fall and from June to then it went from six to or even five and a half to like eight% so I was like I knew it was

22:30

coming um we said no um so it ended up falling out of contract essentially so right because I mean I I couldn't take that big of a price reduction um just because you know we it just happens I mean it it you're going to fall out of deals when you sell when you sell Parks it's going to fall out of contract um I've done enough transactions typically you know when something's going to move forward or when it's not um but then I've been I've been surprised too when when I've when I've sold Parks or bought

22:57

parks that we didn't think we were going to buy and we end up buying it because you may have to ask for a legit concession or a price just because some things could be wrong for example in 2022 we were buying a mobile home park that was septic City Water um we're like What are all these septic bills like why are you pumping each month he's like oh I just I just pumped the tanks just good good good uh good main oh yeah I'm sure no failing so we got them inspected and they were failing we're like hey so give

23:27

you your price but you're going to have to that money is going to have to sit in escrow so we can we can either reduce the price by this amount or you can let it sit in escrow um I think they think they're going to get that money back but it's it's set we're going to use it all because sewer conversion is really expensive especially in the last three years prices have gone up significantly um so and that project's been 18 months we're still not connected so we still pump the septics once a month because

23:55

they the Lee Fields are are are they don't work so and we're in an area of the country where uh it's not like a sand base so we're in a clay base scenario so you don't really have a lot of good filtration you need a lot of land and long long uh uh leech fields in order to make that um permeable so yeah yeah I still like the park business um we also in 2021 to 2023 we started buying RV parks as well um we kind of transitioned into that um just because the deal flow was was a little bit better cap rates were better and we were

24:30

getting the same debt we were getting four and 5% debt on ourv Parks um that not not Fanny um but still recourse um through local banks um and we were getting the same debt that we were getting in mobile home parks so we started buying those a little bit um we run them more like a mobile home park um from like a a non-transient basis we like long-term customers um but overall if you were to ask me which business I like better relative to the the return um I like mobile home parks better I mean it's a more stable cash flow and

25:01

it's less management intensive so it's still business um but the RV business is more of in the hospitality realm and it's way more businesslike than the mobile home park business the mobile home park business is a is a real estate business RV is real estate with hospitality and and then some other stuff going in there as well so yeah great and kind of fit hand inand but um it's just different different assets yeah for sure and I'm curious about the the RV business and so and we've looked

25:32

at R like we have some RVs scattered around the portfolio you know like three or four in a park or something and so all the tenants that we get are totally longterm like they come in and they stay forever so are you are you buying mostly long-term stuff I know you mentioned something there about long-term and transient so there's three different types of RV parks and with our Rubble home portfolio we also have some RP so you're exposed to the asset class where the customer kind of initially anyways and a lot of your Bobble homes B

26:01

home parks especially if you own in like the southeast there's a lot of people that live in them in the South especially in the winter um in the US and um so basically there's three types of RV parks there is a um your traditional Campground like think of a KOA jelly Stone where you come in you camp on the weekend you leave right um that's that's what's called a transient Park and then there's a seasonal Park um where people leave their campers there maybe year round or have like in Ohio

26:29

you have a season from April to October right where you're open people leave their campers there all the time right they don't take them home they got decks they got sheds they got all kinds of stuff they don't live there it's a secondary home it's a cheaper version of a of lake house or Mountain House or right somewhere to get away for folks right um and then there's the third option which is like the extended s RV parks that is more of a living scenario where people live there in their campers

26:52

there's about four to five million Americans that live in uh their campers full-time that number where I think is actually a lot higher um because I think the last time they did that was like 10 years ago um some of those stats are and that could even be like six months out of the year they live in it right um they may like for example we have some campers in Ohio that come up in Ohio they live in their RVs during the summer and then in the winter they go back south or they go to the Sun Belt and they have homes there condos Town Homes

27:18

apartments right where they have or they just may live in their camper six months out of the year so the Extended Stay is more like a mobile home park run right you you it's just they there so you're you're enforcing rules um you're a little bit more you have a little bit more um uh you have a different little clientele then uh sometimes it can be somebody that maybe should be living in a mobile home park but they're living in an RV because it's a little bit cheaper form of life and they like to travel um

27:43

but then you also have the the higher end of customers that the guy might be making a million bucks or just sold his business and they got a million dollar fifth wheel or or RV where they pull in but they're still next to the Extended State camper because you're the only Park in town that will allow it um we have all three and then within that you have blends of those communities to where you might have seasonal section a transient section um but on the whole my favorite is the extended CRV um because

28:08

it's affordable housing right so kind of falls under the umbrella of mobile home parks um our investment thesis on why we bought the RV parks and kind of what we look at when we're looking at a deal we want 70 80% full hookup water sewer electric right um and we want to be in a good location because you can't fix location I can fix everything else I can't fix location um and that holds true regardless of what asset business you're doing um and then our investment thesis basically is if the economy tanks

28:35

or housing becomes so expensive people aren't going to live in a mobile home right because there's a lot of inventory a lot of a lot of stigmas that go with the business they would rather live in an RV because they may have a camper paid off their house just got foreclosed on or they sold it and now they have proceeds but they can't buy another house because that house that they just sold is now worth something that they wouldn't pay so now they're living in an RV right over the next 5 to 10 years I

28:57

think think more people are going to be living in RVs along with mobile homes than before because I think housing is going to continue to get out of out of hand um even the mobile homes nowadays when I was buying homes in 2018 they were 30 grand now they're 50 and their worst product right so it's like what even from our standpoint where we're providing affordable housing um where does it become not affordable right and I don't know where that line is um I think we're going to breach it here in

29:23

the next 24 months pending what happens with some uh overseas stuff um but it's a it's a it's a weird time to be in the business um because you also have a lot of these parks that are 50 years old and you have to go in and you have to redo the entire water lines you got to redo the roads the sewer system they're they're past their useful life and we now have to fix them and that is a uh you know I don't know how old you are Derek but I'm 33 and if I continue to be in this business for the next 20 30

29:50

years I'm probably GNA have to replace every single utility Road in all of my parks and that's even the electrical um and a lot of people don't realize that when they look at a park they're like yeah it's working but what is that working like in the next 10 years right so you have to start saving for it now which is you basically your replacement reserved set aside 50 to 100 bucks a lot per year put it in a bank account don't worry about it um over the course of 10 years that will that'll be your safety

30:17

cushion potentially um I would actually for the older parks and if you have private utilities I double it and put it at 200 a lot um because that's probably what it's going to cost to connect Public Utilities because a lot of municipalities are and states are forcing people to get on public once it fails so yeah yeah I mean the RV business we like um we're not buying any at the moment we will buy deals um but it's an affordable housing play if there's a crazy downturn and like depression wise or even if if affordable

30:47

housing gets so high people are going to live in an RV personally I'd rather live in an RV than a mobile home and an RV park because a lot of times they're better destinations um you also have some amenities up the mobile home parks on that so yeah yeah for sure what do you guys usually see from an expense ratio standpoint on your RV parks I guess I'm sure it's different for each of the three types that you mentioned but can you kind of unpack that a little bit Yeah so uh mobile home parks were

31:14

typically you know 30 to 45% expense load right depending on who pays utilities um and then the RV park business is typically 43 to 45% um to to 55 to 60 depends on really if you pay electric that's the biggest expense you're going to you're going to see item wise Water and Sewer not going to be that big because they're not going to use as much um because they may not be living there all the time right and even if they are they may be using your bath house um so the water centralized to one place um your electric is going

31:44

to be your big biggest exp we're typically anywhere from $50 to $200 per site on electric um and a lot of times we build that back we don't build all of our communities back but nine times out of 10 we're building it back or passing through what our rate is right so we're recouping that cost um but the but the overall quick evaluation on an RV park is very similar to a mobile home park the only difference is is your Top Line you want to take you really want to look at the last three years of the top line

32:14

revenue right so what are they bringing in the last three years throw 50% expense ratio on it and then multiply by the cap rate you desire or the price they're asking right you're not going to you're not going to run the park unless you're managing it yourself doing all the maintenance you may get 30% but the RV parks are going to be 50% because things break a lot more right um You have water lines like spets septic I mean there's a lot more stuff that goes into it also you have to put more back

32:41

into the community um not saying we don't do that in the mobile home park world but like we have pools at all of our stuff our insurance rates are higher we have docks we have airbnbs we have hotels we have wood we have a liquor store um at one of them like we sell beer and wine um and people expect amenities so you have to spend a little bit more just to give back we have bands um that come in so it costs a little bit more to run an RV park on the whole than it does a mobile home park because it's housing versus uh it's necessity housing

33:11

versus wants right A lot of times people want to be at that RV park they don't necessarily have to be so it's a little little bit different of a mindset um now that doesn't mean we're catering to every need they have um right they got to pay their rent no pay no stay and no play no stay we still run that type of business um we're just a little bit more we're not as Frugal as we would be in the mobile home park right um we still are putting back safe clean affordable housing that's what we try to provide in

33:37

the mobile home park play but we're not spending as much as what we would um per customer um like we do with the RV parks so yeah know that's interesting that's good Insight because we we've been looking at some RV parks and I've been looking at you know the electric expense is just freaking crazy um and so so you guys bill that back like you'll just charge them back for it or you charge like a flat amount or how does that it depends on the park um we typically the old owners will have

34:07

submeters if it's a seasonal Park um if it's a transi so let me start the transient parks where you come in stay for a week leave you're not going to buil for electric you're going to eat that cost because your rates are going to be a little bit higher per day so that kind of makes up when you have a seasonal Park where people live there Extended Stay you want to put meters on or at least charge a flat fee right we have meters on all of our all of our sites um except for one park and we just include it in the lot

34:33

rent basically we just raise the rent to kind of compensate enough for it but we're still getting we still we'll probably roll out nextt year like a flat electric fee on top of lot rent um but a lot of times you you got to have meters Metron has meters electric meters and then also uh there's a company called wild energy both are remote red um you know directly to your phone you know integrates with rat manager Wild energy I don't think integrates with rat manager but obviously Metron does um and

35:01

it's the same kind of like scenario as water and sewer water water submeters or heck you and I can put in water submeters it's it's actually really easy quickly just cut it hook it and and glue it at the same time um but depends on the water lines too depends on the type of line but anyways electric meters are you need a professional put those in a lot of times because there's a little bit more um depending on the pedestal and the type of meter um it's a little bit more nuanced to to putting

35:27

but overall yeah we always charge for electric and you should right um any apartment house you know that you live in or rent you're going to get charged electric nowadays unless you're living unless it's just included in the rent but your rent might be a little bit higher so yeah yeah what's the what's the what's the recapture rate on the electric right because I know water is you know it's iffy yeah so it really depends on the park right it depends on and this kind of goes for for mobile

35:57

home parks too and even apartment buildings um it depends on how many amen amenities you have um because your electric bill if you have a pool and you have a clubhouse and you have all these other amenities your electric bill is going to be a little bit higher so the recapture is going to look a little off if you're if you just have like you know electric bills and then recapture um we're always modeling for around 70 to 80% that's what we're looking for going in um overall typically we're around

36:25

that um we might be at like 60% % uh recapture in like some parks um and then some parks I have water meters on the on the park but it might just be too small to even worry about so we just start to Flat Fe um sometimes because it also depends on state law too right A lot of times we put meters on the home water-wise just to gauge the usage right to know if somebody's got a leak in the dead a winter maybe they're not there um and there's a leak just spraying and we're like we get the notification right

36:53

hey maintenance you know our maintenance got to go fix it right same with electric we to just know usage right and if somebody's got stuff plugged in they're going to know and we typically will tell them hey you got a little bit I don't know what's going on but you got something a little bit higher um so recapture is very similar to water um somewhere in the 60 to 80% range across our portfolio we're never at 100% um we may be occasionally close to that on a monthly basis if you were to take away

37:21

all the other amenity stuff but overall on the electric bill um you know you're because you're going to have to people people are going to move out and not pay their bill we have that at a lot of times people be like oh done with the park and you know you're billing in a rear so um they're going to leave and that's why you take an electrical deposit a lot of times too that kind of that kind of t uh compensates for that a little bit if you take like a 100 bucks when they move in or take a security

37:46

deposit when they move in on the transient or extended state parks uh sorry not the transient but the the seasonal parks and the the extended state parks even mobile home parks take a take a security deposit because there will be a time where you'll have to use that most yeah for sure for sure a lot what was that you what was that you said you went out like it muffled up there for a second what' you say um I said especially when you when they move out and they leave like a mess or you have to evict them right the security deposit

38:21

come yeah no you if you evict somebody they leave a mess we've never had that happen exactly or or uh my favorite story was we were um evicting of lady and she had the cable guy there the cable guy showed up as we're setting her stuff out she didn't think we were gonna follow through with the eviction so yeah we had that we had a lady I was uh talking to a guy earlier about this like her you know she was in the eviction process like just a disaster she had these Helen of kids in the park and I get a picture one

38:53

day the kids now mind you this park has trees around like there's a lot of trees in this park and these kids have a a fire that's probably 10 foot in the air going in the middle of the park and we're getting calls like I'm getting pictures and it's like oh my God like that could have uh that could have gotten pretty bad quickly but um yeah it's it's it's crazy I don't even know if a security deposit would have did anything with with that yeah but um for deny we did stuff that as kids but

39:24

so yeah anyways yeah yeah so what do you so like for somebody new starting out in the business like do you think I guess a you know what what's your opinion on starting now and should they start now I mean my my theory on this is that you know I wish I would have bought more stuff in 2021 and at the end of 2020 I wish I would have gotten in earlier and I tell people in two years you're going to wish the same if you didn't get in now so what what's your thoughts on that um I would say uh I would agree with that um I would say

40:02

if you're looking to be a real estate investor um define whether mobile home parks are for you or even RB Parks or what asset class is is is going to fit your need right um and then there's no reason why you got to go buy 100 site Parks City waterer City Super there are plenty of guys that have bought plenty of parks that are 10 Lots 20 Lots 30 Lots right maybe you want to get your feet wet um and you want to buy a small park because it doesn't require as much of a capital commitment doesn't require

40:29

necessarily as much time um depending on if you're buying a turnaround or not um buy a park that fits your lifestyle um meaning like if you only want to get your feet wet buy a small Park do not go buy a 200 site Park unless you got a lot of capital to to to place you're going to lose more money if you don't know what you're doing um but at the at the same time um I didn't start flipping houses I bought a 75 site mobile home park um with four people that I met on the internet um and literally emptied my

41:04

401k so I'm not a great example of how to start I just kind of knew what I wanted and and went all in right um so sometimes you have to do that um if you're 45 years old you got three kids and and a and a mortgage um and your spouse doesn't work um I would say don't quit your job unless you got a bunch of savings and you're not going to use that for a down payment um keep your job because it makes you bankable um lending people even in the commercial realm they like people that have jobs even though I

41:31

may have a a greater net worth and and make more than them W2 up until about $2 million $3 million people still like anything above that it kind of gets in a different lending category but yes if you're going to become a real estate investor plenty of deals out there start now because if you don't start then it's going to be you know 10 years from now and you never bought anything um right you can always you can always sell it um you can always turn it over to a a third party manager um obviously if you buy a

42:00

larger park there are some some advantages of that than buying smaller do not go out and buy a 10 site Park six hours from you um unless literally your your family lives in that area and they're going to help you manage it because you're not going to be able to manage that effectively go out look what your like like get educated first there's plenty of free education there's Derrick's podcast there's 10 podcast and on Mobile Home Park investing um there's plenty of books nowadays there's plenty

42:23

of people there's plenty of forums um there's plenty of stuff there is way more stuff now than what there was even when I started in 2015 there was like three guys um and and the one guy's still doing it the other two I think are um as far as like courses go right and um you don't have to spend a lot of money to become educated in the space get educated and then maybe even like Ride Along go to parks with people there are plenty of people that'll allow you to go with them um I know what Mario was

42:52

doing that for a while he was like letting people go with him to the parks and stuff like that I'll do that too I don't do it all the time but um I mean there's plenty of like I take calls all the time from people that that want to just like you know get into the space talk about the business um and honestly if you find a deal that's the number one value right now or um if you have money right there's three legs to a deal time what is it time to run it uh money and then what's the third I always forget

43:18

the third one the deal itself maybe I think that's the third one yeah yeah yeah I really know but if you got time or money um or you got both um then you know you're in a good position if you got money you and you don't have time you're also in a good position you got a bunch of time and no money get educated um because then you become you can become the expert to the person that has money right um because they'll put up the cash and if you run the park um you then will become a little bit wealthier

43:44

park by park it doesn't happen overnight right it takes you know a couple parks to to build your net worth um you may find that lucky outlier nowadays where you buy a park for 100 grand becomes worth a million that really rarely exists anymore um I mean you're more like doubling or even giving like 70% of the parks value what you bought it unless you're doing huge infill or turnaround projects at the different uh ner but the the businesses changed a little bit returns have come down a little bit than what they were 10 15

44:16

years ago um and that's one just due to consolidation and popularity and kind of the just speaks to the safeness of the asset too um if you buy a park and do nothing 70% of your residents if they're good residents will still pay their rent um it's the it's the old 8020 rule 80% of people still pay their bills even if you've never talked to them send them a bill they'll still mail you a check I guarantee it um people still pay their bills I still believe in people you the other 20% are going to cause you hell um

44:44

and you just have to deal with that so that's part of the business I me you are dealing with another asset class um that there's going to be some stuff that may shock you um but that's in any rental business even in the higher end luxuries there's plenty of people that are disgusting um like you need to evict don't pay their bills and they could be worse of a person than the person living in the mobile home park so on a whole good business I like the business in the next 10 years you got to start now

45:11

otherwise um you'll never get started so yeah for sure deals talking to people being in the space and then putting deals under contract that's that's the next step yeah definitely and that that's like you know I I I always preach the same thing and I mean that's great advice from Ryan in telling you like you gotta actually assume like hey look what Ryan's doing every day he's he's looking at deals talking to people putting things under contract all that so you got to do the same thing right you have

45:41

to do the same thing it's the only way you're going to learn how to do it and I mean nowadays like there's so much stuff I think people worry like if you put something under contract and then you have to back out of it for whatever reason I mean as long as you're not backing out of it just to back out of it like you're you actually find legitimate reasons like I don't it's not it's not the end of the world people do it all the time I mean there's groups that put stuff under Contra a contract planning

46:05

to retrade a week before closing and like that's not my game but people do that um but you just got to get in the game and start yeah exactly and there's plenty of uh older guys younger guys middle-aged people that'll help you it's a very very small space um when I first got started I could I didn't understand that the people at the top can be reached right um You just got to find out how to how to get in the same room with them so that can be done um and you're GNA also as being a business owner because you are a

46:38

business owner not just a real estate owner if you're a true co-owner operator of the park not just an LP a limited partner or just a money partner you're going to do a lot of stuff for free um in the beginning um a lot of stuff for free heck I still do a lot of stuff for free um right I don't have a consult Consulting business I I I don't charge people for my time um I do every now and then if they want more of a of an advanced uh conversation right but an initial conversation I'll spend 20 30

47:07

minutes talking with somebody getting to know them U because what that does for me is I put in a a lot of a lot of free time with people and then they think of me in the future um and that's kind of one of my skill sets is I'm I'm I don't mind talking with people I like talking with people um I like you know educating people and then also I like hearing people's stories in the future because there may came come a where I I I call him and I punch that uh I punch that you know kind of relation relationship

47:32

transactional value right because there is a lot of that in this business too um and at the end of the day it's a people business it's not a um just sit back and and collected type of business so you have to go out and and collect your money so that's my number one is it's followup followup followup with these people um and nine times out of 10 uh if you don't if if they haven't paid you got to go and knock on their door and you may have to follow through so 80% of people will pay without any questions

48:01

asked but the other 20 you got to go get it so and there's I've I've bought parks where it's been like these people have been in these parks for two years and they never paid rent because the owner never knocked on their door so because I I still don't get it because people will be like the owner never knocked on my door so I never baited but I got it all sitting right here in money orders I'm like we ran into that I'm like like that just doesn't yeah anyways we we've seen

48:29

the same thing and it's uh it's super funny and and comical but um but Ryan dude I appreciate you coming on man and uh sharing knowledge I mean I know I I was taking notes over here and so I know um our viewers are going to get a ton of value out of our conversation man so thanks for being on yeah appreciate having me on and uh maybe look forward to connecting in the future yeah definitely so where can people find you uh I used to have a LinkedIn page but it got hacked so I do not have a LinkedIn page or I do but it doesn't have my

49:00

profile picture I'm trying to get uh get that redone but I'm on Facebook Instagram um our website is also treid capital.com um you can just go to connect with us and uh you can find us there awesome awesome well thanks Ryan and that's it everybody for the MHP show we will see you all next week please go on iTunes Spotify YouTube like And subscribe to the channels um if you love it leave a comment that's how we get pushed up the uh the algorithm there so please show us some support if you like

49:31

the show and we will see you next week [Music] peace

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