From Farming To Brokering Mobile Home Parks With Glenn Esterson

INTRODUCTION:

Join host Derek Vickers in Episode 43 of "THE MHP SHOW" podcast as he sits down with Glenn Esterson, a prominent figure in the mobile home park industry. Together, they delve into Esterson's extensive experience and insights from brokering over a billion dollars in deals.

KEY TAKEAWAYS:

• Esterson shares his journey from farming to becoming a successful mobile home park broker, highlighting the challenges and successes along the way.

• The discussion explores industry dynamics, emphasizing the importance of salesmanship, relationship-building, and understanding market trends.

• Esterson offers valuable advice for new buyers, suggesting strategies for approaching sellers directly and navigating the complexities of mobile home park investments.

CONCLUSION:

Episode 43 offers a captivating blend of personal anecdotes, professional wisdom, and market analysis, making it essential listening for anyone interested in mobile home park operations and investments. Tune in to gain valuable insights from one of the industry's leading experts.

WATCH IT IN YOUTUBE:

TRANSCRIPTION:

[Music]

hello everyone welcome back to the MHP Show podcast I am your host Derek Vickers on the MHP show we talk about anything and everything that has to do with mobile home parks trailer parks whatever you want to call them about the operations crazy stories and we just get into a little bit of everything here and so I've got another guest with us today and if you're in this industry and you don't know this guy or you never at least heard of him before I mean I don't know if you're living on the moon under

00:38

a rock in a cave somewhere but I have Mr Glenn esterson with me Glenn is with Marcus and mchap and correct me if I'm wrong you said that you guys have done over a billion dollars about a billion plus or minus depends on you know if you include equity and all that kind of stuff too but yeah we we do a lot of deals you know you know that's 10 figures you know any way you cut it it's it's still a big number it's not change it's not and I'm excited to have you on the show Glenn thanks for

01:13

coming thank you Derek I'm excited to be here sorry about my attire I'm in my my Friday getting ready to go have fun for the weekend clothes my uh my youngest kid decided to play hookie today so I'm kind of dealing with them a little bit and uh yeah you know it's a little more of a relaxed atmosphere in my home office on a Friday usually so no no worries we're hey look I never I promise I have a suit and nice hair and all that stuff too if you need to see me that way so I Glenn I'll tell you like I I

01:44

used to have like I don't know 30 to 50 suits when I was in the insurance business and every day I wore a suit and tie yeah every day and then after I got out of the insurance business I was like [ __ ] this I'm getting rid of these things so I probably have maybe I don't know maybe 10 suits left I wear them only on special occasions cuz I you know I wore them every day years I just took probably 10 suits to Goodwill you know just a couple weeks ago it's same type of thing I used to for years be stuck in

02:12

a suit every day and I don't know I got lazy as I got older the more success I had the less I wanted to wear a suit so I'm usually in jeans and a sweatshirt you know yeah for sure so you've been in this business for a long time about how long you've been in the business um I I bought my first Park in' 03 I've been brokering deals since 2000 and I've been exclusive to MH brokering 13 14 15 somewhere around there um and I no longer own Parks you know I strictly just broker parks for

02:51

clients I don't like to compete with my clients I don't like hearing about if it's such a good deal why don't you buy it kind of thing you know so I stay away from it I invest in other real estate verticals and I primarily invest in businesses I buy businesses and things like that often um and that's that's sort of where I spend my time but in the MH world I you know have reluctantly learned as much as I know how to learn about this industry and uh being an owner operator to a good oldfashioned

03:22

trailer park and you know BFE Tennessee back in the day you know I learned a thing or two about how not to do things um and that's you know that was the bane of my existence for a long time yeah for for sure and I I you know it's funny how how you say that you learn what not to do and people ask me they're like oh you know how did you guys scale so quickly and I'm like well I screwed a lot of things up in the beginning yeah I did a lot of stuff wrong um is steep yeah yes it is there there's no question about

03:57

it so you bought so what made you buy that that first Park was it just like you just fell into it or how'd that happen I had I had made some money for the first time in my life in uh selling some apartment buildings uh in like 20002 2001 in um South Florida and I had my first sixf figure check ever and it was like going from poverty to going to actually having money and um I said ah I'm I'm so rich now I'm going to retire and I went and bought a farm which is what my life mostly had been before Florida I had

04:32

done a lot of farming in my life and uh lived on farms and just dreamed and drooled about being a farmer and so 25 years old 27 years old I said I can do it now and I went to to Asheville North Carolina bought a farm for like, 1500 bucks an acre and I was out in the boonies like Boonies Boonies of North Carolina and I couldn't figure out how to make money being a farmer so it was uh it was challenging the little bit scrap that I had left over from that check I went and said I need to buy some kind of real estate thing that that I

05:06

actually knew how to make money with and so this realtor called me and said hey you know there's a trailer park for so would you be interested in that and I pretty much just hung up on the guy um and then he called me back and a couple times later he got me out to see the park it's about 30 minutes from my farm and uh I said okay I kind of understand it but I don't understand it enough to give you my money on this so I waited like another six months he called me back he's like please just take a look

05:35

again he's going to give you a better price he'll Finance the deal for you take a look at this thing take a look I must have been the only guy in a 100 miles that was looking at this thing or something and So eventually I said okay did not do any due diligence big first mistake I I looked at the park I said okay they look occupied the guy told me he was making however many thousands of dollars a month and I said okay we did the handshake deal um and 30 days later I closed on the park he financed me for

06:00

an entire year it was so nice one whole year finan realize how hard it was going to be did it wasn't like a single family house that you can just go get financing super easy um and I had a real hard time trying to to figure that out went out but in that one year I watched this more or less stable Dirty Birdie type of Park but stable if long as you stayed on top of people um produce and it was making more money than my farm was making I I was a mushroom farmer of all the crazy things to be in this world I was a very

06:34

large mushroom but still still of couldn't make good good living on it but I loved it it was my passion the trailer park I hated but it made better money so I ended up spending a lot of time in the trailer park and you know in time for a few years it ran all right but it's you can see the slippery slope it was on and then the recession hit um and and all bets were off luckily I had just finally gotten I get got the to give me some extra time I got a loan at some crazy interest rate and got it refinanced in

07:05

six or seven that finally gave me a little stability there but then the recession happened um and you know it was a fiveyear note so I think I had a loan du coming in 2011 of all times to have to deal with you know refi and the city decided in their genius to expand their um their city limits I was just outside of the city limits and you know always better by way put me into the city limits and forced all city limit people to be on City sword I was on a septic that was working perfectly and so my nightmare became extremely real in

07:44

around 200829 and you know almost turned me upside down and left me for dead there in 2011 I I somehow I still don't know how I did it but I went out and got a tractor and dug all these ditches and put in all these sore lines myself I spent like 90 days at the farm digging trenches and putting in pipes never done that before you know so it was uh it was an interesting learning experience and once I got the park you know and during that time I had a revolution at my park I got one crackhead in and the crackhead

08:16

you know spread like wildfire and before you know it I had it's like a 40 something space Park I had like 30 crackheads living there and so I evict everybody and um my homes are trashed and it was was an absolute nightmare it taught me exactly that I never want to do that again and so I found one smart guy that said why don't you just give the trailers away just just give them away and turn them into lot renters and I'm like but my rents my lot rents are $75 and my home rents are only like 350 but that's good money on those homes for

08:50

me despite the fact that I'm spending a gazillion dollars to repair him all the time um he he he he showed me the light this guy and then he took over management and I paid him 10% or whatever my life got so much easier year and a half later new new tenant base everything was stable it was all to and I had you know public sore finally put in and I said just just let's sell this thing and be done with it and uh it took about two years to really get sold I put it on terms uh made my money back I I somehow was made

09:24

whole and I was somehow like left with a very interesting experience still wanting to be a farmer uh not wanting to be a landlord I have a real hard time collecting People's rent I'm like not the right guy to go and collect your rent when you tell me you're your mother's got cancer for the fourth time this year you know and it's uh real hard for me to try and get my $75 eventually I took my rents up to a whopping 150 um and uh you know that was that was an incremental process for sure but that

09:52

that was sort of my you know deep dive into MH ownership and my apprehension to ever be responsible for a family's uh housing responsibilities again and you know that I didn't like that part I liked almost all other aspects of it I didn't like that part So eventually I got a manager not the same guy but a different manager he did a real good job with my Park and uh he was the ball buster that was necessary to be there to keep everybody in line and take care of things and uh eventually when he died he

10:23

died in the park and uh you know he lived there he had a heart attack and eventually passed and when he died I said okay 100% got to sell this thing and that's you know sort of what said okay I don't own a park and I'm not a good farmer what was I good at I I was pretty good at brokering apartments let me go see if I can do that again and so I went and applied with Marcus in Atlanta and was ready to make a big life change was six seven hours away and um five six hours away whatever it was and I said I'm gonna you know if you hire me

10:54

I'll I'll come to Apartments I said we'll hire you but you're definitely not doing apartments and so they put me into doing like uh industrial stuff uh it was pretty good at it but I didn't like it and then an opening came in on MH and I said you know I'll do this MH thing reluctantly because I can at least talk to vernacular and I have some funny stories and things like that here we are today 10 years later you know whatever it is and it's uh it's been a really interesting process still

11:20

don't like don't want to own any trailer parks you know it's uh it's been a really interesting learning curve for me as a broke [Music] and you know I pretty much just follow what I've always known just just be straight with people tell them how dirty things are and see if you can scare them off if they don't get scared off maybe they're your guy you know so it's kind of it's kind of worked out well I have a pretty great team now and I've trained some really great guys in this industry

11:49

that have gone on to come you know do bigger things too and it's been um it's been a really really fun process I'm pretty much neck deep in this industry Now with uh not really understanding what else I would do other than trailer parks anymore no longer the bane of my existence but now it is my existence it feels like yeah yeah that's that's an interesting story um Glenn and like it seems like when you got your first Park you got into that reluctantly and then you started brokering Parks reluctantly

12:17

but what was it I mean you wouldn't have been in this asset class for you know I think he said 14 years or something brokering 20 years now you know yeah brokering for you know 10 plus years Parks but brokering commercial deals 20 plus years now right and and what what has kind of kept you in in that in this asset class like what do you like about it I well I think at the core of who I am I'm like a Salesman I I love I love sales I love doing a good sale uh you know where it's like everybody's got to

12:50

take a little take a little hit but everybody kind of meets in the middle and everybody gets paid and you know you're left with maybe a sort of a sour T taste in your mouth but six months later you're like no this worked really well I'm gonna call that guy back and he's you know be happy to hear from me you know and so that the salesman side of life you know I've been doing I've been selling gumballs in grade school you know and all the way up since then so um that part I really like and now

13:16

you know I had so many good friends in this industry some of my best friends are now in this industry I've helped exit so many people out of this industry who then became some of my best friends and you know I don't know where else I'm going to get that that was pretty that's pretty great stuff you know and so um you know was this the dream I had when I was a kid no is it am I pretty satisfied with how things turned out yeah you know and um the the guys in our industry are the the so interesting people like the

13:46

mom and pops the for sure the syndicators the the institutional guys there there it's such a neat Dynamic of personalities that um you know like I I like it gives me my feel of of interesting things you so yeah yeah for for sure I mean I actually went and met with some sellers yesterday a mom and pop and it was actually it just amazes me how like you know they had their financials they're writing on that green like the paper with the little boxes on it and they're they got it there they had it all ready

14:22

for me and I'm like in this they're actually they were very organized and I was actually impressed with their operation but it's it's really interesting the people that you meet and the backgrounds that they're from and like the the heart that some people actually put into this business because I've met with owners where like they just don't give a [ __ ] about the place anymore which is sad but it was cool to see that these people actually genuinely cared and there is a mix and dynamic of

14:48

of culture you meet I've had I've had sellers reluctantly invite me in to come me with them and the first thing they do is they put their gun on the table and you know and and it's just like it sets a tone you know and I've had sellers come and like invite fly me out to like North Dakota and have me stay at their Ranch and spend a couple nights with them and understand what they're doing and you know you hit it off and like I don't see them all the time but every few years we run into each other at a

15:14

conference and you know it's like we're still buds you know and I've I've been I've had to put my foot you know I've been invited to come to a meeting and I'm knocking on the door and he's like oh you're that broker and he's trying to close the door on me I literally have to put my foot in the door I'm like give me five minutes of your time yeah that guy a bunch of money you know two three months later you know and it's uh you know there's there's a passion I think

15:36

you have to bring at least as a broker and probably as a as a buyer owner that you have to bring in order to get above all the other nonsense these guys are dealing with so they'll hear you out they'll see your vision you'll be able to talk to them like they're not just a paycheck and you know like that you know seems to go a long way and if you have the ability to trade fun stories with people that really just it sets people at ease and it it makes people understand it's not me versus you we're

16:03

just two dudes trying to make a deal and you know it's like one of the best advice I ever got was from one of my old bosses uh he said you know just just think of it it's like two guys at a bar you just two guys at a bar talking you know like the most casual conversation is gonna is going to produce the best results most of the time for for building up the Rapport that you need to to get people to let you sell their biggest asset $10 million you know and uh you know where and then you have to ask for money in return be able to

16:34

ask for a big fee in return and it doesn't it goes a lot better if you're able to to Really relate with these clients and really become a friend with them now you can't be friends with everybody and some people are just difficult and you're on opposing sides but as a broker you should be able to find some Middle Ground as often as possible yeah yeah and I think too like where where you um just this is from my observation like you have a a downto earth personality like I'm from a small the sticks of Virginia like I'm not you

17:04

know my family wasn't wealthy my dad still works a blue collar job like we're trust me like we're not we're not Wealthy by any means and so like I can relate to these sellers I can talk to them like not from an ivory Tower I've never gotten my hands dirty on something before and I think you're the same way and that's huge when you're talking to these people I think so you know I think I think people want to be relatable I think they want some somebody that can understand that even though there's 40

17:31

years between us you know you might be 80 I'm at the time I might have been 30 but we can still have an intelligent conversation and despite my you know sometimes offensive appearance you know big beard tattoos and I don't dress so well most of the time and uh you know we can still really connect over farming stories go a long way in our industry with these with these Mom and Pops I mean they do because almost all of them grew up on a farm at some point you know and and uh you know talking through just

18:01

my path and and my my process which is not not some scary process when when we're talking about selling a deal it's you know it opens up a lot of doors and now that I've got a lot of gray on me it's almost even easier than it's ever been to talk to people um and it's uh you know it's it's a it's a really interesting Dynamic and I I I don't know where else to go I see my friends with better jobs or maybe you know easier jobs or better I don't know how you look at it but they don't necessarily make

18:32

the kind of money they wish they were making and they are still stressed out and so you know I figure any job you're ever gonna have is gonna be stressful if you're gonna try and be any good at it and make money it's got to probably be stressful so here I am I tried my passion farming I couldn't make you know nothing being a farmer and you know I was stressed out all the time also so you know this this seems to work pretty well for me yeah for sure for sure get hired by me all the time and literally

19:01

the first thing I tell them is if there's anything else in this life that you think you would rather do go do that first because once you come into here it's like absolute Misery the first three years trying to be a broker and it's the next 10 years just trying to prove yourself and then maybe maybe you start enjoying the process at some point but for you know it's that whole tell them no a few times and scare them off and see if they come back because that person might actually be a good broker

19:27

be a good owner be a good whatever the 10 years it takes to get good at this business to get really good at this business you know you could have gone dental school and been a dentist and make, an hour first day out of school you know so yeah you know it's uh you know takes a special personality I think to stick with this kind of business and there's in the broker world there's a lot of really great Brokers with totally different personalities and totally different ways of getting to the Finish Lines and some are some are really good

19:54

and some are my good friends and some are maybe not so great but they do very well and you know it's uh it's neat that success is allowed in in multiple variations here in this business of ours you know because nobody was looking at it so it's almost like you know an open territory where it's not everything's all modulated like an apartment kind of deal where it's very prim and proper how you structure these things and in our world you're dealing with books and Records written on paper

20:25

in pencil oh yeah you have to be a bit more creative to figure out had to get that thing done you know for sure for sure and it's interesting you say that about you know the 10 years that it takes to get successful at something there was a quote I read somewhere but like it was talking about how when you know man or person reaches their goal they then get disappointed because they realize what they actually enjoyed was the game in getting to that level and so I think there's something to be said about you

20:56

know me I so sometimes I'm going through stuff and and I'm like God like this is this is rough but like I still keep going and I love it I'm like a glutton for this thing and the pain the rewards are so are so great and I love the game although it sucks sometimes when you're in it but I think you're right I I you know I think you do that's great what you said how you try and weed people out because unfortunately the society that's the way people are being raised now it's like hey oh that it didn't work for me

21:25

in in two months like I'm giving up that it's it's very much like that and for me as the guy who's training you I'm literally putting in a thousand hours a year into you know like an absurd amount of time for your for you to get make it to one year in your first decent check and then say okay with this check I'm done I'm not doing this again and I'm I'm cutting bait because now you just lost you know a lot of time and all this future business and it's you know it can be a frustrating aspect from for my side

21:56

I I mean it it really hurts my feeling ings when I lose an agent to to you know to anyone really if they don't stay with me for the rest of their lives my feelings are getting hurt and it's you know it's kind of how you know this business really is because it's so relationship based and the guy that you know you bring on to your team that creates new relationships with other people that I haven't quite connected with yet well that relationship with that person if that guy leaves the team

22:24

I'm not GNA be able to pick up that relationship immediately maybe sometimes but that guy might not have been triggered for two or three more years to sell you know but you left a little too early now now you're not going to see that that that butterfly chasing kind of thing that uh people have is really really evident in The Brokerage world and especially evident in the MH brokerage world you know yeah yeah because it's not a fast hit people see the highlights of what Brokers do and they think oh that was easy and they're

22:53

like what does it take 30 to 60 days to get paid it's like uh no and some deals literally take me a year to get closed you know from the time that I made that that first evaluation for them to the time that the fourth buyer finally got to the Finish Line you know it's it can be a very frustrating process yeah for for sure and I you know when I was in the insurance business it was the same thing because when I had the big team I was in charge of recruiting and so we would put all this time into somebody you know the sales cycle was a

23:24

little bit shorter than you know obviously brokering deals but still it wasn't you know they weren't going to get paid next week or even next month like because you had to water those seeds right and over and over again and so I you know I used to lose people as well and it would be like a failure to me like man you know what did I do to make this this guy leave but it's just the nature of the Beast to be on there it's the nature of it for sure for sure yeah so so Glenn what what are you seeing out in the market now I know

23:54

interest rates have you know seemingly leveled out out there's more certainty about the future are you seeing or do you foresee more deals getting closed coming up this year 100% you know I mean 22 23 Now gez 23 was uh the kooky year you know I mean interest rates we couldn't we just couldn't say where it was going to land and so you know people are still coming off the highs of 21 you know three caps and four caps and five caps you know 2022 kind of balanced a lot of things out for people but then it gave people

24:34

kind of nerves towards the end that interest rates were just never GNA stop rising and they just kept going and going and going and going and going we were getting quoted eight and a half perent on deals you know like how you supposed to do that right yeah and uh in end of 23 we started getting stable and Q Q four Q3 and Q4 started all of a sudden get more velosophy as people try to deploy before the end of the year um now here we are you know end of the first month of January and it seems like everybody's like okay we caught our

25:08

breath we got money we're not exactly sure how much distress is out there but we we're tired of waiting and now today I just read that um um was it Blackstone announc that the official bottom has been hit and it's all up from here you know so you know true or not who knows but that seems to be a sentiment okay fine like those big those big 10 cap type of deduction type of deals did not materialize because we were in a safer place this year or this last cycle should I say so when the bottom did hit

25:42

it seems like people were better equipped now there's still a bunch of guys with you know some floating debt out there and some two-year timelines out there that are probably still pretty darn nervous you know yeah but uh a lot of that seemed to be cleared up at the in the last you know call it 6 to 12 months and the stuff that isn't cleared up those buyers are now or sellers owners however you want to look at them are now taking a breath of relief saying oh thank goodness it's not still climbing at least here at 6% if you're

26:12

if you're in my age group 6% a good interest rate you know like that's like that's historically a good number you can park against it we can go back to Old School mentality of I want you know two and a half points to spread above my interest rate that gets me to you know this type of return and from here we can start making deals and thankfully the seller high of 21 has moderated and now you know the five cap is not so much the expectation now the expectation is still you know 100 bips off what a buyer wants to pay but it's

26:43

it's moderated for a while there was about 300 bips of spread between what the seller wanted and what the buyer was willing to pay so we're seeing we're seeing the math be a lot easier the pitch be a lot easier the debt be a lot easier and now now we're we're we're finally building up a good pipeline again we're doing some monster deals you know we're seeing a lot of guys that you know didn't want to pull the trigger last year from a sales standpoint or in 22 because they know they missed 21 but

27:11

now two three years you know here we are and they still have Deb coming do in 25 and 26 and they say you know what this is a pretty good number this does get us out and it does say let's let's recapitalize and and Shake loose what uh what we can shake loose here um I think you a lot of LPS I think we're putting a lot of pressure on people there for a minute uh saying what the heck happened to my cash flow what the heck happened to to these returns what are you telling me you told me three-year exit you know

27:39

we're now at year four and five we didn't exit you missed the top you know pressure pressure pressure and I think we're seeing a lot of these type of owners you know the syndicator type of owners uh starting to say okay fine let's let's make the market happen again the Mom and Pops you know who knows the trophy sellers trophies are always going to be four caps three caps five caps you know uh but the average you know C+ B minus stuff we need a spread and we're finally back to having a reasonable

28:08

spread you know so our average cap rate for the last 12 months has been about 6.75 you know um which really isn't too terrible yeah and um you know there's you know we just did like a two cap in Florida for Value ad so I don't how else did a 10 cap you know recently so it's like a very big spread of cap rates but when you look at our last 30 40 50 deals whatever it was it's averaging at you know upper sixes right now on a cap rate PES um yeah I mean the two cap I mean there was probably a lot of value at

28:41

upside with that with oh yeah yeah it was a value ad it was a a big owner you know if I said the name everybody would know him he's a real good friend of mine I I Adore the guy and uh he's like Glen I want this I bought this thing want you to sell it for me I don't want to own it I don't know why I bought it uh we think think it's worth this [  ] man number and I said no I don't think it's worth that [  ] Manny number it's worth this number he said well if you can get that

29:03

number or better you'll look like a hero to us we went out and did did this deal and to my surprise like we got pretty close to the number he wanted and uh you know this 1031 type of end of year closing thing and you know it got done um but it was a flood zone it was like 15% occupied it was you know private utilities it was everything you don't look for deal most of the time so two cap is funny to say but it's meaningless almost you know yeah exactly exactly yeah I mean we bought some stuff some

29:35

heavy value ad stuff there was probably a two cap on the you know the mom and pop who didn't care about the property they're in place yeah cap rate was probably really low but there was tons of value ad upside there yeah yeah the value ad stuff for guys that know how to really do it and can get the homes and can do the cleanup it's a great deal I wouldn't me personally I wouldn't touch with a 10 foot pole if I'm a buyer you know I like I'm a Time Value headache guy and anything better than treasury

30:02

bill looks like a really good deal to me if I never have to think about it and so you know I mean I look at I get tax benefits I get Management in place I get all these things I don't have to do anything and it's better than the t- please sign me up you know I'm fine but I'm a I'm a location type of buyer and you know past that I'm a you know I'm a must have in Place Management must be financeable you know must be as stable as it can be and I it's it's upsides too hard anymore you know so for me anyways

30:32

you know like so I'd rather just go bu you know 10 stable things at five and six caps and just not think about it again because I know it's going to be sellable I know it's going to go up and I know it's gonna be financeable um and so that's how I look at things but guys like you that are doing these big hits it's like it's impressive I I just don't have the tolerance for it anymore in my you know my life cycle it's so the thought of losing the thought of losing scares me way more than the interest of

30:59

winning does you know so um you know for me it's you know a little different the way I look at things but I help plenty of guys do these two cap deals and there's another big group we we sold some parks in Kentucky for or two for a few million bucks you know 18 months later we sold for $17 million you know and uh wow you know some guys really know how to do their upside really well and we're we're always happy to help but I always give my little finger wag warning are you sure you want to put all

31:27

your eggs in that basket boy you know I guess some people get a lot more open with risk when they're using other people's money I invest with only my money I don't use other people's money I don't partner I don't do a lot of that stuff I'll do an LP position that probably you know a couple dozen LP positions where I don't have to think at all but if I'm doing the deal I won't take on partners because the the thought of losing your money would terrify me you know it would absolutely terrify me

31:52

I couldn't sleep with myself at night if if I you know wasn't able to pay that bill yeah so them yeah for sure and you know it's totally true and what you say about value ad deals you know I'm always rethinking the strategy you know if I you were talking about gray if I let it grow out up here and let it grow out here it starts to creep in and I'm wondering if it's from the value ad stuff and you know I remember I actually read your book a few years ago before I got um into the business and your time

32:23

headache thing he I think about that more now in the beginning I was just like screw it dude I'll do any deal I don't care I'm going to go in roll my sleeves up but now it's definitely an in conversation I have because is the upside there is the risk worth the upside you can get with as much of a headache is this going to be because I know this value ad shit's gonna be a headache with code enforcement with the health department with all this stuff well just use a perfect example of just remember in during covid how long it

32:56

took to get homes okay there was a 12 month waiting period to get your homes okay and let's say you were on bridge debt with you know one to twoy year floating rate Bridge debt and you went and just paid a three and a half cap in in August of 21 because you you know we're we're we're gung-ho about the industry and you're hearing all the war stories about how great it is but then you you get told oh yeah your three-month delivery that we told you on the phone might be doable is really like

33:25

6 months and oh really now it's like 9 months and then you couldn't find the vendors to get these homes set up properly and then now you got two three months left on your Bridge Loan and now you're really scrambling now you're probably yelling at your kids more than you like to you're probably getting fussed at with your colleagues more than you like to your LPS are probably going what are you doing bro what are you doing where's the thing told us this thing was going to be materializing already and now you

33:50

know thankfully a lot of people got saved with just how this worked out but in that situation that's the time value headache that I'm talking about you know like it's give give me my treasury bill for me I you know like for me I I could scale that pretty easily it's just I get a lot smaller return but I I don't I don't have to think about it yeah so that you know you can't control the supply of homes you can't control the supply of labor you can't control when your manager has a heart attack and is

34:21

no longer able to to service that Park you can't control so many aspects of the deal that you're taking on a lot of risk and you know is a 20% return or 20% irr necessarily a good reward for that risk you know I question if it is um you know granted I'm not the richest guy I know so you know you might not want to take my advice um but for me it's you know how I look at things and um you know I I I I really I strongly strongly believe you know location first management second stabilize third finan ability

35:00

fourth and then we can talk about maybe doing a deal that has some you know upside on it you know yeah yeah yeah and it's it's true when you're looking at you know these deals you know I have people in my program that they bring me deals they're like hey Derek here's a 50 space park for you know 10,000 a pat there's only 10 homes great sounds great there's only 10 homes there and I'm like okay do you know how much money it's going to cost you to bring those homes in do you know how much of a pain in the

35:28

ass that's going to be to find a legitimate um mover or someone to actually go in and block and level it correctly is like because when you think about that you're like oh I'll just get you know a mover to come in and and you know set sounds easy SS easy right I had I had a friend he you know it's a war story and I'm not going to say names but he bought a park out of state used his inate moving crew to bring these homes to this out ofate Park set them up to the instate Cod type of set standpoints

35:58

not the new state standpoints set them up a little high you know they look kind of odd but that's how they you know that this guy was setting them up now he's dealing with code enforcement like he's gonna pull all his hair out of his head because every home needs to get reset you know oh like who like that's just you know where you cut the corners on these things thinking you're smarter than the next guy it's like it's that's how they get you as they say you know um they use your own arrogance against you

36:25

and your own you know ignorance against you and this kind of stuff um but yeah for sure the value ad deals 10,000 a pads sounds dreamy right but then you got to go buy 40 homes 40 homes of 50 Grand a home that's $2 million you know then you got to try and sell these homes right you know or rent them you know but if you're that guy you know but uh it's you know it's a lot of capital coming what's that 50 Park you know Place worth once you s off all the homes and have it stabilized maybe 50 Grand a pad sounds

36:54

like it's a real winner but do the math do the time and and if the market turns in that time like who knows you know yeah who knows yeah yeah and and one thing you said about cutting Corners I think people if you're getting into this business or you're already in it like the mobile home park business runs in the gray area on many different things right and and you you can't cut Corners because of what just What Glenn just said like you have to do everything the right way you have to get the proper

37:26

permitting for stuff and I've learned the hard way on stuff we tried to shortcut some things in the beginning you know it wasn't big but you know not pulling permits and then code enforcement makes your life a living hell yeah right and then they come in and they hit you for the other 20 things that they were looking the other way on typic so like or you get a little Arrogant with them and then all of a sudden you know like forget it they're now no longer even trying to be your friend 100% they're gonna come at you

37:56

with the hammer you know and it's uh in these small towns all day long this is how they work they get they get offended quickly when when some New York guy California guy Colorado guy Florida guy comes into their Michigan place or into the Pennsylvania place or their South Carolina place and tell them how they should be doing it it's nuts it's nuts these guys they don't like that the best way I've seen people do it is this that the group that I did the uh the Florida deal for like you know and a few other

38:22

groups they go in they they bring in like donuts and and sodas and coffee and they come and sit down and like make a hoopla kind of event around it you know and really buy that Rapport you know and that that really helps in the long run it really does you know it's I wouldn't have thought about doing that kind of stuff when I was a park owner I hated my code enforcer me and him were not friends there was no way around it but you know back then I had dreadlocks like down to here I looked like a hillbilly

38:48

farmer type and you know was was a little tough to look at I have a feeling especially for those guys I'd like to see a picture of the dreadlocks I'd like to see a pict the dread locks yeah I'll show it to you when I actually have it on my phone I could show it now if I wanted to embarrass myself yeah no it's funny like the um so we had some issues with code enforcement a few of our parks and I ended up making like that same par parks are in the same town but the the the zones were different for there was two different

39:17

code enforcement guys and after I like took them out to lunch and talk to them so now if some if there's an issue they call me and hey this is the issue so and so's calling I'm like oh yeah they hadn't paid their rent in six months so we're evicting them so you know typical time to call right um but they let us know we handle stuff um before so much easier so much so much easier yeah yeah yeah so so Glenn what would you say you got a new guy getting into the business they're like man you know I get sent

39:51

deals all the time you know people are ask me where do you find deals I'm like well you know I find a lot from Brokers I got my Acquisitions team wholesalers whatnot but typically if you're new and they call a guy like you it's like hey all right how does that person approach a broker being new in the business in order to start building that Rapport and establishing themsel as a real buyer it's hard it's hard you know um I I would say I do probably more firsttime buyers than than maybe most Brokers

40:24

especially at at this level that I'm at um just because we we happen to have a lot of deals under two million bucks you know um and you know a lot of the the top you know broker teams they're mostly doing larg deals because that's where you make your fees um but just because I came up from the bottom I have just the you know a reource of small deals uh that we know how to process but it's it's still hard because anybody on my team you know we know you as a new guy you're going to need more handholding

40:54

and you have a very low probability of close right out the gate so you know and and we're expensive I mean like we're we're definitely not the cheapest broker team out there you know so you know what we where we set expectations is you know really like on your first deal it's like going from like college into grad school before you get in your job you're gonna pay the piper one more time and you're gonna go buy this really clean Easy Street type of deal and you're not going to make money you're GNA make almost

41:25

nothing on this deal but it's going to be a really good entry point for you it's going to give you the learning curve at a less steep incline than maybe some of these other deals that other people might throw you into usually that scares the buyer away we never hear from again but for the guy that actually buys that deal um he's often or she has often said that was like actually the way we we did it was the right way I started in the shallow end and then I worked my way to the deeper end um but if I'm a new

41:54

buyer and I'm trying to buy my first Park and I'm using my own money I'm probably calling sellers directly and I'm going to go sit down with Sellers and I'm probably buying within 30 to 60 miles of where my house is okay and if I have a million dollars to spend if that means I can only buy 10 Lots then guess what I'm buying 10 Lots because I want to stay home I want to stay close to home I want my location to be something I know so well that if I have to exit that million dollars is guaranteed not

42:26

going to lose it and from there I can start stretching out you'll find a better deal no kidding by dealing with the a seller direct right like 100% of the time right that seller doesn't know what he doesn't know you can kind of run him through the riaru if that's your thing and get a better deal out of them if it ever gets closed right A lot of these guys it's a rug pool over and over again um you know at least with you know with us we tell you everything we know about the deal whether it's you know

42:54

accurate or not it will will be uncovered oring due diligence but at least we we set you up to be in a position that you at least know what you're getting into you're not wasting your time you might you might not necessarily love the deal but you at least know what you're getting yourself into and you can get a deal done quickly that way whereas a lot of time dealing with a seller direct I'm sure you've had this experience it's like yeah I'm a seller and then like a year has gone by

43:19

before they're willing to sign that contract and now you got competition behind you because he started calling all those mailers that have been to him got one of those right now by the way you like it's uh it's you know it's that kind of thing so if I'm using my money that's how I'm doing now if I'm syndicating money I'm setting expectations with my LPS and GPS that guys I'm not the same kind of owner operator syndicator that maybe some of these other groups are where I'm going

43:48

to tell you 30% irr by year three and all this kind of stuff I'm going to probably tell you I hope we don't go broke in year one I think I can return some money in year two and by year three I think we'll have a hang on this thing that we should start seeing better profitability from there but I'm not setting yield expectations I'm setting I'm set the lowest ground expectation possible and if you want to do this with me you'll have a bigger piece of the pie if you don't no problem we'll get you on

44:13

the next round after I prove it myself but then my my pie is gonna be more of my pie than your pie you know yeah and that's kind of how I would would look at it that first deal is is the Humdinger that first deal is where so many people never buy a second deal um and you know for me again best located real estate I could afford to buy as close to home as I could get that's the first rule in in my world of if I'm buying something um past that then you know you gotta really figure out if you're financeable if

44:44

you're trying to buy a Fanny May loan and it's your first Park you probably ain't gonna get it you know um probably not you know you know if you're trying to assume some gigantic assumable loan you know from CNB yes proba probably not going to get it you know um so you have to be realistic about it in the banks you're probably going to get stuck with a local bank six s% interest recourse all that kind of junk uh the down payments are way higher in our industry than people really are prepared for

45:13

they're used to thinking 10 20% and I set expectations 30 to 40% 35% is really what you should kind of count on don't be surprised if they tell you 50% if you're including the homes um you know so it's you know you have to really understand that mechanism of it if you're trying to buy your first park and if it was me I wouldn't work with a broker on my first deal because these sellers they're going to screw you every chance they get just like you as a buyer trying to work with the seller directly

45:40

you're probably going to try and screw that seller as often as you can and then you're gonna have some cockamamy deals set up that probably doesn't make sense and everybody's mad at each other on day 59 you know so you know that's you know at least from my vantage point that seems to happen a little too commonly yeah well the seller the seller they're oh yeah you know the septic system's fine yeah yeah nothing's ever happen you go there and you see a hose in one septic pouring into a ho into a septic

46:09

that's downhill oh this is my overflow valve you know oh okay okay or you see the septic dump truck sitting in the one of the vacant lots that they just use as as the holding tank essentially for all these bad septics you know yeah but on paper it looks fine and most people forget to apply expense to to septic as well they think oh well septic no expense you know like we we underwrite septic deals like it's the South everybody's got septic but there's expensive Beyond just the the pumping that shows up on the p&l absolutely

46:39

there's an art there's there's a cost you know whether it's been reflected in the last year or two is a different story uh you know so you have to kind of pump your numbers a little bit you know $510 a lot uh you know as you know per per month as sort of an expense hold for one that expense actually comes and most sellers love to this was capex this was turnover this was this it doesn't show up on the p&l you know and it's all below the line and you really gotta wonder if that's true or not if you

47:08

don't know what you're talking about you're gonna believe them you know yeah and that that's that's an interesting argument because with with our you know with our uh you know CFO you know I used to talk before like you know we'll have a big septic expense like okay is that below the line or above the line and of course my argument is that it's below the line but to your point um there are going to be septic expenses like that it's just a matter of when it happens and you may look at the t24 and there's

47:39

nothing and just like you said you're like man this is cheapest [ __ ] to run expense it's 20% expenses yeah yeah and then you have to believes that a lot of times I mean I've seen it too much to say it's not true so would you really like industrywide there's historically been this like optimum number okay of expense ratio once you're stabilized you know and in South we use 30% okay as the optimum expense ratio on full maximum rents full maximum occupancy that and and then if you take out all the

48:12

utilities you want to be no lower than 25% okay yeah now if you're up in New York it's a lot higher because you got higher taxes higher you know different things right but each kind of area has an Optimum expense ratio when you bring a mark to Market type of underwriting to it and if you're a deficit in there almost always it's because you're not expensing some of the private utilities properly you know sometimes you know the years ago we would look at it as like well if water and soore in this

48:39

particular town is $25 for water and $25 for sore well then that really should be the applied expense to the private utilities however um I don't know I don't know if I still believe that I used to think that now I really think it's more like a moderated cost of operating expense with the balance being below the line and it seems to be like $5 to $10 a lot per month for well and5 to $10 a lot per month for septic is kind of what you keep at the line you know above the line um yeah because that's otherwise your 30% expense ratio

49:14

tends to get a little uh screwy um you know and so you know the the other thing in the South we deal with a lot is is Park owned homes you know yeah the expenses that you'll see from these these mom and pop sellers on these Park on homes you'll see 25% expense ratios globally on global seen less I've seen less than that yeah it's it's it's a head scratcher but when you talk to them at least me because they know I ain't buying their park and I'm just trying to help sell their park you can at least

49:45

understand their logic that they're not lying about it you know right this well I have my own maintenance team and they work for another company so I expense them out through that company and they you know they sit there and do all this stuff here or you know I own a a trash company so there's no trash expense and I just I run that Center through the trash company you know and because there it's very entrepreneurial type of people and they they often have other businesses Beyond just this mobile home

50:10

park and theyve from their Central standpoint have parlayed what efficiencies they can from this business into that business and vice versa so on the pnls it looks cockamamy and you have to really you know understand what what you're seeing is that guy's interpretation your interpretation might be 50% expense ratio and then a guy like me might tell you well it's probably around 40 42% expense ratio on this deal you know um and then the the appraiser guys will tell you whatever they want whatever you want them to tell you yeah

50:44

so you know you still have to be very cautious with that there was a lot of pretty extensively uh aggressive appraisals giving and then in 20 2122 that I think is causing a little bit of a riff with refi today and with cability today because you know you were just you know you pushed your appraiser a little too hard you know yeah yeah well Glenn I I appreciate you coming on I mean I could sit here and talk with you for for for hours about this stuff um we'll have to we'll have to have you on again or when I get to

51:23

doing these things in person at some point would love to would love to have you on um well where can people find you it's pretty easy uh you know we got a gazillion different websites out there our main one that's sort of our Central Hub website that will take you to other parts the MHP expert.

51:45

com um and that is you know my advisory company and we from there you can bring come over to the deals we're selling and that'll jump you over to the esterson mhct team.com website and on there you can see all the deals and everything that we do uh you know simple Google search I think I am the only Glenn esterson in this country uh so you know it's pretty easy to find me on the internet um my LinkedIn is where I'm most active and if you see me on other social media I promise you it's not me it's one of my robots or one of my

52:13

admins or somebody doing something there uh so I apologize if no one replied to you uh but LinkedIn I'm very active on and uh best way to get through me is just you know hit me up through the website you can hit me up on my cell phone I respond to everyone 423 48349 to I do my best to call back you know immediately if not within certainly 24 hours awesome Glenn well uh thank you and uh everyone thank you for watching and tuning in to the MHP show we're posting every week so we will see you guys on the next show please like And

52:50

subscribe and leave me a good comment if you like the show it takes freaking two seconds right and if you you have a bad comment I guess you can leave it whatever but leave me a good comment don't be a hater don't be a hater we we'll see you guys next week peace thanks [Music] d

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