Agents Building Cashflow

EP 173: Mobile Home Park Investment Strategies with Andrew Keel

Andrew Keel

In this episode of Agents Building Cashflow, Randal McLeaird dives into the world of mobile home park investing with Andrew Keel, the owner of Keel Team, LLC, a top 100 operator of manufactured housing communities with over 3,000 lots under management. Andrew shares his journey from flipping houses to managing mobile home parks, offering valuable insights on syndication, value-add strategies, financing options, and the unique depreciation benefits of mobile home parks. 

He highlights the benefits of working directly with mom-and-pop park owners and explains the importance of understanding utility infrastructure when assessing investment risks. This conversation unveils actionable steps toward successful investing. Tune in to uncover the strategic advantage of mobile home park investments!

Key takeaways to listen to:

  • Discovering the high depreciation benefits of mobile home parks.
  • Targeting value-add opportunities by purchasing from retiring mom-and-pop owners.
  • Avoiding cash flow pitfalls with effective water and sewer management.
  • Exploring creative financing and syndication strategies for scalable growth.
  • Learning how on-site management and tenant stability increase park value.

About Andrew Keel

Andrew Keel is the Owner of Keel Team, LLC, a Top 100 Owner of Manufactured Housing Communities with over 3,000 lots under management. His team currently manages over 40 manufactured housing communities across more than 10 states. His expertise is in turning around under-managed manufactured housing communities by utilizing proven systems to maximize the occupancy while reducing operating costs. He specializes in bringing in homes to fill vacant lots, implementing utility bill back programs, and improving overall management and operating efficiencies, all of which significantly boost the asset value and net operating income of the communities. Check out KeelTeam.com to learn more.

Andrew has been featured on some of the Top Podcasts in the manufactured housing space, click here to listen to his most recent interviews: https://www.keelteam.com/podcast-links. In order to successfully implement his management strategy, Andrew’s team usually moves on location during the first several months of ownership. Find out more about Andrew’s story at AndrewKeel.com.

Connect with Andrew Keel:

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To connect with Randal and learn more about passive investing, visit www.ridgelineig.com and follow our social media pages below!

[00:00:00] Andrew Keel: Mobile home parks, RV parks, and golf courses have like some of the highest depreciation out of all commercial real estate assets because they're mostly land improvements. So you're, you know, you're able to depreciate typically 70 to 80 percent of the purchase price and for mobile home parks, that's over like 17 years.

[00:00:17] Andrew Keel: So if you buy something for a million dollars, you know, you can take 700, 000 and spread that out over 17 years. And that's how much that you can add to your P and L as a phantom expense to offset your taxable income every year, approximately, obviously, this is subject to change with tax laws and things like that, but that's how it is right now.

[00:00:36] Intro: If you're a real estate agent earning 200, 000 a year, and you want to grow your passive income. This show is for you, learn secrets, other agents use, and hear from experts in our field who will guide you on your journey to investing in assets like apartment communities, so you can take your commissions and turn them into cashflow.

[00:00:55] Intro: Here's your host, Randall. Let's dive in. 

[00:00:58] Randal McLeaird: All right. We're [00:01:00] talking mobile home parks today with a massive operator, Andrew Keel of the Keel team. I mean, he's one of the top 100 owner of Manufactured Housing Communities. He has over 3, 000 units or lots under management, and he's got over 40 different parks across the United States.

[00:01:18] Randal McLeaird: So, great conversation. If you are looking at mobile home parks as an investment opportunity, I know that he has offerings from time to time. And, uh, You can go straight to the show notes and reach out to him through the show notes. Again, wealth of knowledge has a ton of information. We talk about underwriting.

[00:01:33] Randal McLeaird: We talk about how to find sellers and some basic tools that you can use. And some of the things that you need to do as far as due diligence goes when you're looking at parks. So it's a great conversation. If you're getting value out of the show, please go on, rate and review, gives us a better rating and helps us bring on guests just like Andrew and without further ado, let's jump in and talk to him.

[00:01:50] Randal McLeaird: Here we go. Andrew, welcome to the show. It's good to have you on. I appreciate you taking the time to share your knowledge with us. I want to jump in. We're talking mobile home parks heavy today. So if you could [00:02:00] tell us the areas that you're investing in and really what you're focused on as far as the size of mobile home park and maybe some of the just the high level points.

[00:02:08] Andrew Keel: Yeah, we're buying mobile home parks, 50 lots or more in the middle of the United States. So from North Dakota down to Arkansas, across to Georgia and up to Pennsylvania. That middle, uh, core is what we're targeting. Looking at like secondary markets like your Indianapolis, your Sioux Falls, Des Moines, Iowas.

[00:02:27] Andrew Keel: Fayetteville, Arkansas, those are the markets we're going after, and we're looking for mobile home parks that are owned by mom and pops that we can add value to. A mobile home park value add is pretty straightforward. You know, there's a 70 lot park, there's 60 lots occupied and paying, and then there's 10 vacant lots that the mom and pop owner can add value to.

[00:02:47] Andrew Keel: Just the home would move out and they just never invested the money to refill it. So they just sit vacant and we'll come in and bring homes in to set on those lots. And we'll bill back water and sewer because a lot of the landlords are including that. And just [00:03:00] try to cut expenses to increase the income.

[00:03:02] Andrew Keel: And ultimately get our investors double digit returns. 

[00:03:05] Randal McLeaird: Awesome. Having done this for a number of years, why settle on 50 plus? Like where did that number come from? And how did you get to, I guess, your current buy box? 

[00:03:15] Andrew Keel: Yeah, so we do syndications where we pool together investors and there's a, you know, the threshold just needs to be enough for it to be worth it for everybody involved, right?

[00:03:24] Andrew Keel: The cash flow needs to be high enough. So we find that 50 lots or higher, you know, gets the gross income up to a high enough level where everybody involved makes a decent chunk and it's worth it for everybody. You know, we started out and we bought some smaller deals that were 30 lots or so, and they were harder to manage, right?

[00:03:41] Andrew Keel: The expense ratios are higher because your, your revenues are lower and you have some fixed costs, right? Like management and, you know, your taxes and insurance and things like that. So yeah, we just found that we can get the ideal returns at those 50 plus lot parks. Okay. You 

[00:03:58] Randal McLeaird: said one of Valiad items [00:04:00] is moving homes on.

[00:04:01] Randal McLeaird: So you're buying them, moving them on. Are you Doing a lot of guys that I talked to mobile home. They are like totally against having any park owned homes And so do you do something on the back end? Are you rent to owning that home? Are you owner financing that home like or are you just like 

[00:04:16] Andrew Keel: that's exactly right?

[00:04:17] Andrew Keel: Yeah So we'll bring in homes and then we'll do like a rent to own arrangement with the end resident So they are buying the home and eventually they will own the home and just be paying lot rent to be on the pad Okay. So 

[00:04:29] Randal McLeaird: yeah, you have two separate leases or do you have rent to own single lease until they actually 

[00:04:34] Andrew Keel: own it?

[00:04:35] Andrew Keel: So it's not like an actual rent to own arrangement. It's called a rent credit arrangement. Just basically some Dodd Frank, you know workarounds, but then we'll have the lot lease agreement for the lot Then we'll have a rent credit agreement for them, you know buying the home and then Yeah, it basically will pay, you know, the homeowning entity and the real estate owning entity Alright, 

[00:04:57] Randal McLeaird: how did you even get into this?

[00:04:58] Randal McLeaird: Let's go back a little bit more [00:05:00] because I know some people who are doing it, you know, like locally I talked to them, some of my kids, friends, parents at school, you know, they're talking to me about it and I've seen it being around real estate for a long time. So how did you get into it? Was it like your first, like, I know this is growing up.

[00:05:14] Randal McLeaird: I want to be a mobile home park operator. Like what was it that got you into it, man? 

[00:05:18] Andrew Keel: Yeah, no, I was like, I thought I was destined for wall street. I was going to be an investment banker and went to school for business administration and finance. And that was kind of my, my path. And then, uh, I, Geez, I started in sales out of college was selling to real estate agents.

[00:05:34] Andrew Keel: And I noticed, you know, the commercial guys seemed to just really be the guys that were crushing it, you know, that were making really good money. And so I was just naturally attracted to that. Started flipping houses on the side of my W2 sales job, you know, doing like four a year, nothing crazy and doing some wholesaling, you know, trying to find off market houses.

[00:05:55] Andrew Keel: And then I, through that, uh, I was mailing out yellow letters, got a [00:06:00] lead for two mobile homes about an hour and a half north of where I live in Orlando, in like Ocala, the villages, and it was a motivated seller, went up there, bought these two mobile homes for 1, 100 a piece, came home, got on YouTube and typed in how to make money with mobile homes.

[00:06:15] Andrew Keel: And I found this video from a guy named Lonnie Scruggs who wrote a book called Deals on Wheels. He basically teaches people how to buy mobile homes and then sell them on contract to an end buyer. And you're just basically creating mailbox money that he called it from selling the homes, not the mobile home park, just the homes themselves.

[00:06:32] Andrew Keel: So that's how I got into manufactured housing was doing Lonnie deals. I did like 20 of those. And that's how I got out of the rat race. Cause I had enough money coming in that was offsetting my monthly expenses. So I was flipping houses, doing Lonnie deals on the side. And that's kind of how I started. I met a park owner then who started giving me homes in his park and became friends.

[00:06:54] Andrew Keel: And then he kind of mentored me and said, Hey, this is how you syndicate. You should buy the whole park, the real [00:07:00] estate. It's more scalable. There's tax benefits, you can get financing. And he basically taught me like The syndication model where I could raise money for the down payment and improvements.

[00:07:09] Andrew Keel: And then I can, you know, share a piece of the equity with the investor pool. And I just went all in on that once I learned that that was a thing. So when was that, like what timeframe year? I was like, that was 2015. Okay. When I like had that meeting with that mobile home park owner. Yeah. And after that, I like paid 3, 000 to go to like a bootcamp and literally at the bootcamp, I, you know, I'm a Christian.

[00:07:33] Andrew Keel: I believe that God set this guy next to me who happened to be an executive at Goldman Sachs. And literally that guy was my first money partner. My first LP was that gentleman from Goldman Sachs who literally wrote me a check for like 5 million. And we bought our, my first five mobile home parks were just me and him.

[00:07:50] Andrew Keel: And I still own all five of those to this day. Yeah. But then that helped me build a track record. And then since then, friends and family have wanted to invest in my deals. And, and now we've grown a portfolio [00:08:00] of almost 50 parks. You got a 5 million 

[00:08:02] Randal McLeaird: check from sitting next to a guy at, okay, we could have an entire show about just how that, how that comes about.

[00:08:08] Randal McLeaird: It was 

[00:08:09] Andrew Keel: a divine moment, you know, divine intervention. Obviously there's hard work. Obviously there's taking initiative and making decisions, but there's things that happened in my journey that were outside of my control that I, I truly believe that God was like, Hey, you need to meet Tony. Yeah, him. And I did those first five deals and I moved on site to those parks and rehab to myself, moved the homes in, you know, I was there.

[00:08:31] Andrew Keel: And those were a success and then I had a track record that I could show, you know, then I had aunts and uncles that were like, Hey, you know, here's a hundred thousand. Here's, I want to be in your next deal. And it just kind of compounded from there. 

[00:08:43] Randal McLeaird: Yeah. Awesome. Okay. That's incredible. I mean, that's why you go to a conference, I guess it, one of the many reasons to network and talk to people and tell them.

[00:08:50] Randal McLeaird: So, I mean, Again, that's a very unique setup to meet somebody and then they give you that capital. So obviously you had something that you [00:09:00] were doing. I don't know if it was like my egos checked at the door, I'm here to learn and this guy sees my enthusiasm. And so again, what do you think led to that happening?

[00:09:09] Andrew Keel: I mean, he took a chance on me, you know, at the end of the day, like he took a risk, but I think like I showed him, you know, some of my flips that I had done. And he knew that I had like the project management experience. From doing that, but you know, and I showed him the Lonnie deals that I was doing. So he knew that I, I kind of knew basic project management and construction, but I mean, and we started with one, we didn't just buy all five at the same time.

[00:09:33] Andrew Keel: We bought one park that was outside of St. Louis. That was 67 lots. Off market. I was cold calling. That's how I got that deal, got all the info, shared it with him, put a business plan together, and he committed to that one. And then when that one was successful, where we were able to return his money before Jesus, I think it was 22 months.

[00:09:52] Andrew Keel: We owned it and I had already rehabbed. And refinanced and pulled out the initial money. Yeah. And then we went and did another one and then, you know, the same [00:10:00] thing. So it, it was, you know, over the course of a couple of years, but yeah, I mean, he took a chance. 

[00:10:05] Randal McLeaird: Yeah, yeah, no, that's incredible. Obviously. Yeah.

[00:10:07] Randal McLeaird: You had to go do the work. And so you found a deal. I just didn't know if he gave you money and he's like, You can do this. Figure 

[00:10:14] Andrew Keel: this out. No, I have a 

[00:10:15] Randal McLeaird: deal and it's not a blind pool fun type deal, deal, you know, it's like, okay. And 

[00:10:20] Andrew Keel: he was at the bootcamp. So he, he had a general knowledge of like, Hey, is this a good deal or not?

[00:10:25] Andrew Keel: So I think that's awesome. 

[00:10:26] Randal McLeaird: Okay. Well, that's an awesome story, man. Getting that deal, getting the first one. And I love that you moved into the park to rehab them. I had a lender I was working with a long time ago and he had this problem property in Corpus Christi, which is like two hours south of us. And he's like, I just need to do something with this.

[00:10:41] Randal McLeaird: Like, I don't even know what to do with it. And I went down there, did the same thing. It was like, I'll solve your problem, went and took care of it for him. Moved in. He's like, That was insane. And you know, anyway, it's just one of those stories. Like if you put in the effort and you show that, then it pays off tenfold.

[00:10:55] Randal McLeaird: So it's very cool that you moved into the park and you were there. Thank you. At the [00:11:00] time it was, 

[00:11:00] Andrew Keel: yeah, it was very nerve wracking and there's a stigma, right around mobile home parks in general. And that's the elephant in the room, but. I think when you're there and you're living there, which I lived there for four months, you know, you meet the people, you meet the residents.

[00:11:14] Andrew Keel: Like these are, these are not eight mile. These are not like the mobile home parks you see on cops. You know, most mobile home parks are just nice subdivisions for just lower income families. Like they're normal people. They're not like, you know, I think there's just a stigma. They're like, Oh, there's just so much crime in these things.

[00:11:30] Andrew Keel: And it's just such a bad place, which couldn't be further from the truth. 

[00:11:34] Randal McLeaird: Yeah, no, I, I agree with that. No trailer park boys like jokes or anything need to happen. I'm sure you've seen 

[00:11:41] Andrew Keel: that there's there's apartment complexes. There's housing subdivisions that are trashed, right? Like, and there's mobile home parks that are trashed, right?

[00:11:49] Andrew Keel: It's all based on the management and all of that. But like, most mobile home parks are not that right. Like, most of them are actually fairly nice. And in the Midwest, the stigma of [00:12:00] living in a mobile home is not as strong as it is In the Southeast, in my opinion, like it's, it's more normalized. Hey, you go to college, you get married, you live in a mobile home, you save up until you can buy a house and then you go buy a house and, and that's just more normalized and affordable, way more 

[00:12:16] Randal McLeaird: affordable.

[00:12:17] Andrew Keel: Yeah. You 

[00:12:17] Randal McLeaird: know, we were just talking again, the guests I just had on, we were talking about affordability and how they're trying to figure out and solve that problem. It's, it's such a difficult problem to solve, but mobile homes, I think it's definitely one of the avenues that these are. Okay. So let's talk Lonnie deals real fast before we move on, because your strategy was And then you were, did you have to move them to a park?

[00:12:38] Randal McLeaird: No, they're already in 

[00:12:38] Andrew Keel: the park. Got it. Okay. Buy them, the sellers are very motivated to sell these things because they're stuck with lot rent. So the guys that I bought these two homes from, he was paying 600 a month a piece for lot rent. Plus utilities. Cause he had to pay like the minimum utilities, even though utilities were shut off.

[00:12:54] Andrew Keel: So he was very motivated to get rid of these things and he just wanted to get rid of them. So he sold them to me for 1, 100 [00:13:00] each. And these are like vinyl sided shingle roof homes. They probably, you know, I just knew they had to cost like at least 20 grand each to build these things. So I knew I was getting a deal and he just wanted rid of them.

[00:13:10] Andrew Keel: It was like a probate situation. So yeah, bottom, I paid the lot rent for a couple months while I cleaned them out. There was a bunch of like old furniture and, you know, Weird stuff in it. So I just cleaned it out, fixed some of the holes in the walls and things like that. Didn't even paint it, just cleaned it really well, put it on Craigslist, which back at the time was like the go to place to sell these things 

[00:13:32] Randal McLeaird: for sure.

[00:13:32] Andrew Keel: Yeah. But now, you know, Facebook marketplaces, you know, the new Craigslist, and I have like 25 people reach out the first day and then they go get approved at the park, fill out a background check, get approved at the park. And then I sold them, I think it was two grand down and 250 a month for five years.

[00:13:49] Andrew Keel: That's what I sold each of them for. So then I had that two 50 coming in and I already got my money back from the down payment. So it's, uh, anybody could do it. You just have to [00:14:00] take initiative. You got to get out there and you gotta catch them quick because they do sell fast. 

[00:14:04] Randal McLeaird: Yeah. I bought one. 1, 000 this lady needed to get rid of hers, I paid 1, 000, very similar.

[00:14:09] Randal McLeaird: They moved out, left, and then I just owner financed somebody for like 3, 000. It was not a nicer home, right? But they gave me 1, 000 down. I was like, okay, I'm, I'm net. You're full. Monthly cashflow coming in. She moved in and there were, there were like cats in the walls. It was like you turned into this. That one turned into this whole thing, but that strategy and that model, I love that model because yeah, I've done that a lot on different 

[00:14:32] Andrew Keel: types of assets.

[00:14:33] Andrew Keel: And if you're not starting out with a big capital base, like I didn't have, you know, mommy and daddy money, right? Like I didn't have like a big nest egg I could fall back on. Like I was starting from scratch. I knew that being a landlord was like a pathway to financial freedom. You know, rich dad, poor dad was in the back of my head, but like I didn't have the money to go buy an apartment complex or something like that, but this was very low basis way to get into something that was going to provide, you know, residual [00:15:00] income and, uh, yeah, I'm a fan of that model.

[00:15:03] Randal McLeaird: Yeah, I am too. So, all right, you are buying these things. So one, I want to get into like the value add programs that you're doing. Maybe give it a second. First, start with, you went from those deals into these larger deals with your backer. Right, Goldman's, your golden ticket, and then you got friends and family on the deal.

[00:15:22] Randal McLeaird: So I'm kind of curious, like, how did the, either the financing or the partnership model change from going solo, spending your own cash, now you have a partner. Was that a 50 50 split, or was there some kind of like promote set up? Compared to what you have now, just so that a lot of what I always want to talk about is, you know, we are earning commissions and what do we do with those commissions as agents?

[00:15:44] Randal McLeaird: Like we need to invest them somewhere. And so what does the return profile look like for some, this type of asset class? You know? 

[00:15:50] Andrew Keel: Yeah, that's great. Yeah. Jeez, where do I start? So my first investor, I didn't have a track record, right? So I offered him a 10 percent preferred return. So [00:16:00] he got the first 10 percent that the property generated, the cashflow generated.

[00:16:03] Andrew Keel: And then he got 50 percent of the cash flow on the back end after he got his money back. He got 10 percent on his money while it was out. Then we refinanced, he got his money back. The 10 percent stopped, but then he got 50 percent of the cash flow into perpetuity after that. And then I got the other 50%.

[00:16:19] Andrew Keel: But I didn't have to put any money up. So, you know, his money was prioritized, you know, first. And then after the fact, after I was able to return his money, you know, we split it on the back end. And on that deal, I didn't even take a management fee. Because I was like, Hey, I'm not going to take a management fee.

[00:16:34] Andrew Keel: Like this is my equity is going to be my benefit. So that's how I set up my first deal and like managed it for free for a few years and then got his money back. And then it was, you know, we were good. At this point, my deal structure is different. I have a broader investor base and my investor base really just wants like as close to a guarantee of a double digit return that they can get, you know, versus leaving their money in a CV or something like that earning 4%.

[00:16:58] Andrew Keel: So, you a 10 [00:17:00] percent preferred return where they're getting 10 percent on their money. And then after that, you know, depending on the deal, there's a split of the cash flow after they get their money back plus 10%. Then there's a split of the cash flow after that, which usually we try to refire deals in five years and return that initial equity.

[00:17:14] Andrew Keel: So that's kind of how we set up our deals from like an LPGP standpoint, but it's always prioritizing the LP money. It aligns us with our LPs. I invest as an LP in every one of our deals. I'm typically the the person putting in the most money. And yeah, it just gets you a good return on your money. Also, the tax benefits aren't talked about enough.

[00:17:34] Andrew Keel: Mobile home parks, RV parks, and golf courses have like some of the highest depreciation out of all commercial real estate assets because they're mostly land improvements. So you're, you know, you're able to depreciate typically 70 to 80 percent of the purchase price. And for mobile home parks, that's over like 17 years.

[00:17:51] Andrew Keel: So if you buy something for a million dollars, you know, you can take 700, 000 And, you know, spread that out over 17 years, and that's how much that you [00:18:00] can add to your P& L as a phantom expense to offset your taxable income every year, approximately. Obviously, this is subject to change with tax laws and things like that, but that's, that's how it is right now.

[00:18:10] Randal McLeaird: Yeah, no, that's interesting. I didn't know that's how you're doing it. And I was going to ask you about cost seg, if there's anything that you do on that front. To accelerate the depreciation or if it's just a straight 

[00:18:20] Andrew Keel: line 17 year land. It is right now, you know, I think it's 60 percent this year. They've been phasing the 100 percent bonus depreciation, which was even better down 80 percent and 60%, 40%, I think.

[00:18:31] Andrew Keel: And then it's going to, you know, the bonus depreciation will phase out, but yeah, we're still getting cost segs on our parks. I mean, it's just really helps us offset and get our investors, you know, a negative number on that K one, which helps offset some other income or it cannot help offset other income.

[00:18:46] Randal McLeaird: Okay. Thanks for sharing that because again, I always want to know the structure. Are you, are you typically doing accredited or are you doing 506 B's? Are you doing crowdfunding? Like how are you? 

[00:18:56] Andrew Keel: We've done both 506 B and 506 C. So [00:19:00] 506 B is like just friends and family. 506 C is accredited investors only where, you know, we're like marketing for deals and for investors to come join us.

[00:19:08] Andrew Keel: We've done both. It just depends on the deal and kind of how much capital we need to raise. 

[00:19:13] Randal McLeaird: Yeah. So this leads in perfectly to talking about what you have, the transition from those initial deals to kind of what your portfolio looks like now. And what you guys are targeting. Are you trying to go out and buy a hundred million dollar parks?

[00:19:27] Randal McLeaird: Does that even exist? What's a high end, low end, you know, like. 

[00:19:31] Andrew Keel: They definitely exist. Yeah. We're our model is pretty consistent. We were more of the sniper approach instead of the shotgun approach. In my first couple of years, it was kind of a shotgun approach. Let's just send out a lot of letters and cold call a lot of owners.

[00:19:44] Andrew Keel: And, you know, we bought some smaller parks that now looking back. You know, our expense ratios are higher on those smaller parks. We just have, you know, less revenue coming in. So to offset some of our fixed expenses, but now, you know, it's more 50 lots or above and those secondary markets [00:20:00] buying direct from mom and pops or cold calling owners, 99 percent of our properties have been bought off market direct from the mom and pops.

[00:20:07] Andrew Keel: And we sleep well at night knowing, Hey, we're buying this from a baby boomer who wants to retire. There's 10 or 20 vacant lots. They're including water and sewer in their rent, and we can build that back. We use a system called, like, sub meters called Metron Farnier, that we put under each home, so we track the water that's going in, and we can build them for that.

[00:20:27] Andrew Keel: And it helps us identify if, like, for example, the flapper goes bad in a toilet, and the toilet's just running water all day long. And then, you know, in some parks, The landlord doesn't notify the tenant, and next thing you know, they have a 400 bill for the month for water, and then the tenant is having affordability issues.

[00:20:43] Andrew Keel: We're like, we're looking to do a service for our residents by saying, hey, within 24 hours, Metro Enfrontier sends us an email and says, hey, lot 12 has very high usage compared to the norm. There's something going on here. And then our on site manager goes and knocks on their door, gives them a notice, says, Hey, something's going on in here.[00:21:00] 

[00:21:00] Andrew Keel: You know, you're using a lot more water than normal, and maybe they have guests in town or something like that. Okay. But a lot of times the toilet's running and we help them, you know, we'll have a local plumber come and let's just replace your flapper for 15 bucks and save you, you know, a lot of. Wasted water, you know, it's good for the environment, good for the resident, good all around.

[00:21:19] Randal McLeaird: For sure. And I knew that there was leak detection equipment like that, that you could put on, I didn't know that it was tracking and you could use it for like sub metering almost like, like rebilling purposes. So that's fantastic that it, it tells you the usage. Not just like it's higher than normal. And that 

[00:21:35] Andrew Keel: was, that was one of the big areas where it could eat up a whole month's cashflow, right?

[00:21:40] Andrew Keel: Because think of these are affordable housing, low income tenants, right? They need to get their brakes replaced in their car. And then that same month, their toilet flapper breaks and they have a 400. A lot of them, they get in a bad situation and they just leave. They just abandon the home and they're like, I got to move back in with my parents.

[00:21:57] Andrew Keel: I can't afford all of this. Where [00:22:00] if we can get ahead of it and help prevent some of those lost expenses, it just does wonders. It helps the 

[00:22:05] Randal McLeaird: resident and helps us. All right, let's talk about this then, because I want to get into the value add approach and some underwriting, like what you're looking at, some assumptions that you guys make.

[00:22:14] Randal McLeaird: So, I mean, you've touched on them, but you're going into a park, and let's say that it's a 50 pad park, and 20 are vacant, right, completely gone. What is your cost to get 20 new homes? You know, like what's a per home cost and then how long does it typically take you to fill that thing and what is your cash flow on a per unit basis typically like you're targeting because I honestly don't know like the return profile that a park should be kicking off to say, Hey, this is a good deal.

[00:22:45] Randal McLeaird: You know, as a 10 cap, is it a, you know, like a lot of questions, man. A lot of questions. 

[00:22:49] Andrew Keel: Yeah. Yeah. So typically, you know, we like used homes and new homes, new homes. To bring one in and get it set up and everything's probably around 45 to 50, 000, [00:23:00] which isn't bad. And there's, there's chattel lenders out there that you can use to finance those used homes.

[00:23:05] Andrew Keel: You know, you can typically infill for 20 to 25, 000 on a vacant lot, a used home, but there's risks with that, right? The home condition, you may need to rehab it. A lot of older homes can't be transported, and the newer homes are, you know, better quality, and you can get a better quality tenant typically. So, it just depends.

[00:23:22] Andrew Keel: You have to analyze the park, the demographics, and the median home price in the area to see, hey, are people going to be able to afford to buy a new home, or is this a used home market? And in most of our secondary Midwestern markets, we usually go with used homes, you know, but good quality, pitched roof used homes.

[00:23:37] Andrew Keel: From a return standpoint, we're looking at, can we get this to a nine cap or higher by the end of year two? So it's, you know, we're looking at what do we need to do here? What can we do to trim expenses or increase revenues to get this to a nine cap or higher by the end of year two? And then you're typically using local banks for our financing and doing a five to seven year fixed rate.

[00:23:58] Andrew Keel: And then our whole goal [00:24:00] is to refinance with agency debt. They're the best debt you can get in the asset class. That's Fannie Mae and Freddie Mac. And, you know, they're government sponsored lenders that are basically incentivizing you to invest in mobile home parks to preserve affordable housing.

[00:24:15] Andrew Keel: Because there is an issue with mobile home parks where a lot of them are being redeveloped and torn down and And raised into other asset classes because they have that multifamily zoning that they'll tear the mobile homes down and build multifamily apartments, you know, grade A apartment complexes that are not affordable housing.

[00:24:32] Andrew Keel: So it's like one of the only asset classes where there's more being torn down every year than there are new ones being built because it's very hard to get new mobile home parks zoned, you know, because of NIMBY, you know, not in my backyard and other initiatives against it. So. It's unique in that aspect.

[00:24:47] Andrew Keel: But yeah, that's kind of the return profile. We're, we're looking for Randall. 

[00:24:51] Randal McLeaird: Got it. Okay. And so are you buying mainly in cities that have NIMBYism or is it like outside? NIMBYism is 

[00:24:58] Andrew Keel: everywhere. I mean, it's [00:25:00] everywhere. It's, it's crazy. I mean, in Texas, there's some new parks being built, you know, like in the county where like the zoning's, you know, a little bit easier and things like that, but it's, that's 

[00:25:07] Randal McLeaird: what I mean.

[00:25:08] Randal McLeaird: Elsewhere, it's, it's, 

[00:25:09] Andrew Keel: Yeah, it's very hard in the city to get something, you know, zoned and approved and, and to get the utility infrastructure, you know, like to get city sewer city water, which is more valuable. It's very hard to do that where, like, in the county, you put in a wastewater treatment plant or septic and, you know, those parks are worth less, but you can get them zoned outside 

[00:25:28] Randal McLeaird: outside.

[00:25:29] Randal McLeaird: Are you doing any development? 

[00:25:31] Andrew Keel: We're not. Yeah, we still believe that for the next 5 years, there's. You know, lower hanging fruit on existing mom and pop own mobile home parks because like 70 percent of the mobile home parks, something around there are still owned by mom and pops that only own like one or two assets, one or two parks.

[00:25:48] Andrew Keel: So, you know, they're not sophisticated. They're not running it. You know, professional management isn't running these things. They're doing it themselves. And there's a lot of meat on the bone. Typically, you know, value ad wise, uh, if we can buy direct. [00:26:00] 

[00:26:00] Randal McLeaird: Yeah. All right. So then on the, I've heard you talk about the expense ratios quite a bit.

[00:26:04] Randal McLeaird: So you know, multifamily, you can get 50 to 55 percent expenses on a ratio. So on a mobile home park, what are you typically seeing or trying to target when you are looking at your underwrite? Yeah. Yeah. 

[00:26:16] Andrew Keel: Yeah, some states, you know, have higher taxes than others, but typically we're looking around 35 to 40 percent expenses is kind of what we're performing that we can get it to.

[00:26:26] Randal McLeaird: And the biggest, aside from taxes, like, what are you seeing as the biggest expense that 

[00:26:31] Andrew Keel: Taxes and management. I mean, this is affordable housing, so property management, you know, we typically have an on site manager that lives in the park and is like a resident manager that keeps an eye on things. And then off site management kind of dictates, hey, deliver this notice or creating statements and taking payments, those type of things.

[00:26:48] Andrew Keel: Got 

[00:26:49] Randal McLeaird: it. Okay. And so getting back to the value add, when you're going out and buying these parks, biggest, Easiest low hanging fruit. Is it adding the homes? I mean, that seems like a [00:27:00] big expense. So it's may not be the easiest, but 

[00:27:01] Andrew Keel: it's labor intensive to infill and fill the vacant lots. I would say the biggest value add that's like right away.

[00:27:07] Andrew Keel: No brainer is the water sewer bill back. A lot of landlords like just include that in lot rent and lot rents are low Also compared to like how apartment rents have gone up, you know, lot rents are on average across the country I think like 350 400 a month, you know in the markets that we're buying in so You You know, lot rents are low and they're including water sewer, well, you know, nobody, you know, most apartments everywhere is billing back for utilities for the water sewer usage, so we can go in and drop our expenses typically by like 5 to 10 percent of our gross revenues by just billing that back off of usage and then it also conserves water.

[00:27:42] Andrew Keel: We see that the total consumption drops by like 33 percent when we bill it back compared to when the park just included it free for everybody. 

[00:27:49] Randal McLeaird: Yeah, 

[00:27:50] Andrew Keel: somebody just leaves the water running. 

[00:27:52] Randal McLeaird: Yeah, we had, we used to do, we had duplexes and some things like that. And we have, Hey, we'll take care of the water and electric.

[00:27:59] Randal McLeaird: And it just [00:28:00] turns into like windows open, doors open. We've got the AC running all day. The day we turned it into the, Hey, this is on you. It's like, yeah, yeah, it's obvious, but you know, at the time we thought we were doing the right thing. Okay. So let's look at this as though, you know, I've never bought one of these.

[00:28:16] Randal McLeaird: Right. So if I'm going out and I'm shopping around, I'm literally on Crixi right now looking at all kinds of stuff. Right. And I wanted to buy a park or I wanted to go direct to seller. Take it back that far. What are some of the best strategies for finding the lot owners and going direct to them, either by calling, you know, like what's the, what's the best lead source and how to contact 

[00:28:38] Andrew Keel: them?

[00:28:38] Andrew Keel: So I think you want to pick an area, right? I know you're in San Antonio. Great area. Pick an area and then get on like the GIS for your county and search mobile home parks, you know, try to find that like zoning or that layer and find all the mobile home parks and then create a list of all of them that, you know, meet your criteria.

[00:28:58] Andrew Keel: Maybe you want ones that are 30 lots [00:29:00] or more. Right. And then create a list of all of those and get the owner name and get their, you know, address of where they get their tax bill. And then typically you can go, there's a website for free. I think it's called fast people search now. Yeah. Fast people search.

[00:29:14] Andrew Keel: com. It's like a free website where you can type in person's name and their city, state. You know, where they live and it'll pop up their phone numbers, like any of the phone numbers that they've had, like it'll, it'll free skip trace. So I would just start there and then just send like a mass text to all of them that says, Hey, just wanted to reach out about your mobile home park and see if you'd be open to an offer and then just.

[00:29:37] Andrew Keel: See if anybody reaches back out, you know, maybe just, you know, text them, you know, consistently and maybe try to call them to just start a conversation and build rapport, you know, a lot of people aren't going to want to sell the first day you reach out to them. But if you just build that rapport, you talk to them, you know, over the course of a year or two, if they meet the profile of a baby boomer generation.

[00:29:57] Andrew Keel: You know, chances are they're going to sell in the next five or so years. [00:30:00] And, you know, if you've built that rapport, you have that relationship with them and they have your contact info, you know, they'll call you. You know, that happens to us all the time. We're like, they weren't ready whenever we called them a couple of years ago.

[00:30:09] Andrew Keel: We sent them a letter. So they have all of our contact info. Now they're calling us and saying, Hey, it's time. I want to move to Florida and retire. 

[00:30:15] Randal McLeaird: Okay. Good advice. I always like to get down to the nitty gritty and figure out like what you're doing to make it make sense or to get direct to the seller.

[00:30:23] Andrew Keel: Are you doing self storage? We do a little bit of self storage. We bought some in 21. We bought 11 facilities in 21 and 22, and we're actually exiting that asset class. We have two that are under contract to be sold right now, and then we have Three others that, you know, are ultimately not doing great. You know, self storage is kind of in a drought right now and with interest rates being higher, less people are moving.

[00:30:46] Andrew Keel: So a lot of people don't realize this, but most self storage users that are renting storage are in transit. They're like moving. And that's where a lot of our customers come from. So yeah, I mean, occupancy [00:31:00] levels were high during COVID, you know, like people were moving more and things were good. So yeah, that was a whole, we could do a whole podcast on that, you know, just my learning experience and being very granular with my management because things weren't going great, but yeah, I mean, thankfully the ones we're selling will make a nice profit off of.

[00:31:18] Andrew Keel: Not as high as we had hoped, but the three that we're not able to sell because they're underwater right now. We just got to roll up our sleeves and get to work on those because we got to do more marketing to get more move ins and to really increase our revenue. That's our main focus right now. 

[00:31:33] Randal McLeaird: Okay.

[00:31:34] Randal McLeaird: Yeah, no, I just see that you had, it's on my list of notes. I just didn't know if you were heavy into it, still going hard because to me that market got saturated. A lot of institutional buyers went into it and institutional money went into it. And, um, It just seemed like something's got to happen here.

[00:31:48] Randal McLeaird: Like it's like, 

[00:31:50] Andrew Keel: but I mean, there's, there's good deals in the things with storage is like when it's hot, it's hot. Like when we had low interest rates and people were moving a lot, it was hot. I mean, occupancy rates averaged like [00:32:00] above 95 percent and you can raise rents. Like the way he rents more, it's kind of like apartments, but it's faster, right?

[00:32:05] Andrew Keel: These are month to month leases. So when you have high occupancy, you have high demand, your rates go up, right? It's like, it's dynamic pricing. But when occupancy and your demand is, is flat or it's kind of leveling off, you can't raise your prices. You're moving people in at promos. You're trying to match the big guys, the public storage, the extra space.

[00:32:23] Andrew Keel: You're trying to match their pricing and promos to get people in the door. And then it's a revolving door. You know, like every month you can expect to lose 10 percent of your tenants and you got to bring in another 10 percent to replace them. So if you're not ready for that. It's a lot to keep up with, you know, and with mobile home parks, it's like the opposite.

[00:32:41] Andrew Keel: They're very sticky, you know, like 95 percent of mobile homes are never moved from the initial spot that they're installed in because they're not that mobile. They cost like 5, 000 to 10, 000 to move a mobile home, even just a thousand feet. Cause you got to unhook all the utilities, block level tie down and move it all the way over there.

[00:32:59] Andrew Keel: And it's expensive [00:33:00] and requires certain permitting and all that. Parks, with the sticky tenant base, definitely gives an advantage over self storage, in my opinion. 

[00:33:08] Randal McLeaird: Do you have parks that you are still owning some of the homes, even if they're We do. Yeah, yeah. So, do you try to shy away from that, or do you try to put everybody on the Rent to Own program?

[00:33:20] Andrew Keel: Like, with some of our new homes that we bring in and we have loans on them, we're not allowed to do the RTO program, so we'll just straight rent them, you know, on annual leases for a few years until we pay those homes off, and then we can, you know, sell them outright to someone that, like, gets financing, so we've done that on occasion, and then also Fannie Mae and Freddie Mac allow for up to 20 percent park owned homes, so having a few rentals that are those newer homes that are still under warranty, Helps us increase our cash flow, you know, because there's typically less maintenance on a brand new home compared to a, an older vintage.

[00:33:53] Randal McLeaird: Yeah, that makes sense. Let's talk financing in general. Just how are you getting, like, what does the debt look like when you're [00:34:00] going direct to the bank? What's the LTV? What are they offering you? And you said five years, give or take, is when you're refinancing out into agency. So just kind of curious about, one, the setup, the front end financing, and then what it looks like to go agency.

[00:34:11] Randal McLeaird: What kind of terms they're giving you as far as LTV and rates that you're seeing these days. 

[00:34:15] Andrew Keel: Yeah, typically we'll go in with a local bank. They'll do 70 to 75 percent LTV and rates right now are around seven, seven and a half percent typically with a 20 to 25 year amortization and a five year balloon or like five year fixed rate and then it'll either you can get the rate to change, you know, into a variable at five years or you can balloon the note.

[00:34:39] Andrew Keel: That's typically what we see. Okay. And then when we go, and that's recourse debt, that's an important thing to note. And then when we go to refinance into agency debt, it turns into non recourse debt, which basically means your personal liability is off of you if things go bad. And they're, they're taking more of the property as the collateral instead of the property and [00:35:00] your financial net worth and well being.

[00:35:03] Andrew Keel: So you, that's a big differential, but then the, the terms are typically 10 year fixed rate and lower rates, you know, probably 5. 6%. Yeah. And, You know interest only for maybe five of the ten years or full, you know Ten years of interest only based on how much leverage you take and you can get up to 75 Ltv on the the agency debt as well So, you know you come in you buy something you invest another million dollars into you know, infilling homes putting new roads You know fixing it up then you take it to the agency And you can pull out another 75 percent at the new higher value now that you've, you know, increased the income and done these improvements to, you know, make it a better, better property.

[00:35:42] Randal McLeaird: When you're going agency, what are you seeing? Obviously, it's going to be vary by region wherever you're buying, but like what value are they giving you on a cap rate basis for the NOI for your refinance? 

[00:35:52] Andrew Keel: It really depends, you know, I mean, the last few years when rates were, were lower, you know, we'd see things as low as 5 or 6 [00:36:00] percent cap rates, you know, we haven't done one in a little while, but I would assume that those have gone up to, you know, 7 or 8 percent cap rates at this point, but, you know, using a nationwide appraisal firm that understands the asset class and mobile home parks, you know, they typically will give you a, an income method and they will give you a good multiple on, you know, the asset.

[00:36:19] Andrew Keel: Okay. Versus like the small mom and pop appraiser that the credit unions use. 

[00:36:23] Randal McLeaird: Yeah. 

[00:36:23] Andrew Keel: Okay. 

[00:36:24] Randal McLeaird: Got it. Again, like a ton of stuff that we could spend another like two hours talking about, but it's like some, uh, what's your advice? I guess somebody trying to break in, somebody trying to do it, you know, somebody looking to invest.

[00:36:38] Randal McLeaird: What would your takeaway be that you'd want to leave somebody 

[00:36:41] Andrew Keel: with? Yeah, I think at the end of the day, you have to ask yourself, you know, do you have the time one to do it yourself, right? Because if you could do it yourself, you can make the phone calls, you can get hands on, you can create the list and you can follow up with the owners.

[00:36:53] Andrew Keel: You know, you can get a bigger piece of the pie. You can buy your own park, you know, potentially. Or would it be better for you to [00:37:00] partner with someone? I just Think you should really get educated up front, you know, go to a bootcamp or something like that. Like the Frank and day bootcamp is like the most well known educational event for, uh, the asset class, get educated, you know, that's going to be first and foremost, or, you know, partner with someone that is an operator that does this, that can do the proper due diligence.

[00:37:19] Andrew Keel: Because I think the biggest risk in buying mobile home parks is going to be that the utility infrastructure by far, that's like the biggest thing that you need to understand is. The utility infrastructure is very expensive, especially like wastewater treatment plants. You know, you buy a 30 lot park that's on a wastewater treatment plant.

[00:37:36] Andrew Keel: The treatment plant goes bad because it has a 50 year life expectancy. You could have to put 600, 000 to a million dollars into that park to buy a new wastewater treatment plant if it goes bad. So, There's risks like that that you really got to be aware of, you know, we, you know, we camera the sewer lines before we buy a property.

[00:37:56] Andrew Keel: So do due diligence is key. And literally like every park we've bought, [00:38:00] we've added something to our due diligence checklist, because a we've made mistakes. And we've learned from those. And we've added that to check things before we buy. And then, uh, Yeah, just confirming the income and, and getting hands on and visiting the asset is going to be important, but I think if you're going to spend time on anything, understanding the utility infrastructure is going to be the most important thing, because if you have water leaks every month, you know, and they, they're underground, you know, in some northern states, the water lines can be 10 feet underground.

[00:38:27] Andrew Keel: You know, so that's going to cost you like five grand every time to fix one of those water main leaks and that'll eat up your cash flow quick. So just understanding that a lot of these mobile home parks were built 50 plus years ago and making sure that you're doing proper due diligence. And if you do it yourself or partner with someone that does know the due diligence process so that you don't get into trouble.

[00:38:48] Randal McLeaird: Second, that that's awesome advice. I mean, I think we wrap it there. I'm going to leave all your contact info in the show notes. It sounds like you have offerings. Peace. Periodically that are coming up and you have things that people can invest in and, and, or, [00:39:00] uh, reach out to you if they have questions about how to do this.

[00:39:02] Randal McLeaird: So, again, appreciate you jumping on, sharing your information, talking about your business, what you're doing. So, um, good luck in the second half of the year here, man. Thank you so 

[00:39:11] Andrew Keel: much, Randall. I really appreciate it. Yeah, the website's just keelteam. com. That's K E E L Team, like a basketball team. com. Feel free to fill out the contact form.

[00:39:22] Andrew Keel: We'd love to connect with you. You know, even if you're just kind of interested in learning more about mobile home parks as an asset class. All right, guys, catch you on the next episode. 

[00:39:30] Randal McLeaird: Did you know that 80 percent of the agents we speak with got into real estate in order to gain passive income so they could obtain financial freedom and become work optional.

[00:39:38] Randal McLeaird: If you want to stay up to date, the best way is to make sure you're subscribed. So if you haven't done that, go ahead and do it now. We'll catch you on the next episode. 

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