MFREE 119 Full Episode with Cory Harelson: What If Your Rock Bottom Is the Start of a Better Life?

In this episode of the Multifamily Real Estate Experiment podcast, host Shalon Hutchinson welcomes Cory, a former structural engineer and founder of Freedom Investing Group, who transitioned into mobile home park operations. Cory shares his journey from a demanding engineering career to real estate investing, driven by his desire to spend more time with his family. Cory discusses the value-add potential of mobile home parks, including the significant impact on affordable housing and financial stability for investors. He dives into a near-catastrophic investment mistake that cost him a million dollars, highlighting the importance of diligent due diligence and personal resilience. Cory also offers insights into why mobile home parks outperform other asset classes and the profound social impact of improving and maintaining these communities. The episode emphasizes the significance of taking incremental steps towards large goals and the importance of trust, verification, and community impact in real estate investment.

00:00 Introduction and Guest Welcome

03:34 Cory's Journey from Engineering to Real Estate

05:57 Discovering Mobile Home Parks

10:47 The Value of Mobile Home Parks

16:16 Impact and Community Building

22:18 Challenges and Mistakes in Mobile Home Park Investments

22:41 Understanding Mobile Home Park Investments

23:18 The Pitfalls of Capitalizing Rental Income

25:16 A Million Dollar Mistake

25:41 The Wastewater Treatment Plant Disaster

30:42 Overcoming Financial and Operational Challenges

33:40 Lessons Learned and Moving Forward

37:26 Focus Round: Fun, Opportunities, and Skills

40:10 Defining Success and Making an Impact

40:57 Conclusion and Contact Information

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Transcript

Speaker: 0:00

Wah Gwan Welcome a multifamily enthusiast. Welcome to another episode of the Multifamily Real Estate Experiment podcast. I'm your host, Shalon Hutchinson, and this podcast is a place where we talk about, we explore stories, strategy, and system that helps you own more of America. Today's guest is someone whose story, stops you in your track. See, Cory is a founder of Freedom Investing Group. He is a structural engineer turned mobile home park, operator who have left. An 18 year age engineering career behind to focus 100% on improving communities. He and helping investor achieve financial freedom. So since 2016, a couple things that the man have done, man, you purchase over 18 communities has built a portfolio of over 500 lots. He has completed a full cycle sale of three cash flow and refinances. You have raised capital for communities designed to be clean, safe, and of course prosperous. And if you are a military veteran or a working class, listen to this podcast. There is a small chance that you have either lived in a mobile home park. You have a relative or a friend that lived in a mobile home park and sometimes they don't always have the best reputation. You're about to listen to a man who prides himself in ensuring that people have a clean, safe, and a prosperous place to live. Cory, welcome to the podcast brother.

Speaker 2: 1:39

Hey, thank you very much,

Speaker: 1:40

Hutch. I'm, excited to be here. Yes, sir. Man, I'd like to ask my guests, before we get into the meat and potatoes of, what you do. I wanna ask you, do you have a quote mantra or mindset principle that has guided your journey from engineering to full-time investing.

Speaker 2: 1:57

I would say, I'm a big fan of the, the Teddy Roosevelt quote. I've actually got on my wall back there, the man in the arena. It's a bit of a long quote, but like the gist of it is like, just try and do you, if you have a goal, you've gotta actually try and go for it. And if you fail, you're the person at least in the arena fighting. And it's way better to be the person who's trying to do things. And falling down and getting back up and trying again than the person who's just sitting on the sideline, criticizing that person. yeah.

Speaker: 2:26

I tell you what, man. every September we see a lot of folks doing a lot of pushups and stuff like that for people who've, military men, military members, or veterans who have suicide. And I deal with some of that from tough, from time to time. And when you talk to those people who are going through those things, a lot of times it's not having a clear path forward. You know what I mean? When you talking about having goals and hitting those goals, the man in the arena, right? The man in the arena. Fighting, and never stop fighting, A lot of us, when we are fighting for a life, it gives us life a lot more purpose. And when you have people around you, whether it be coaches, whether it be business partner, good family foundation, a solid unit with good camaraderie, it fosters an environment for you to be able to thrive. So I totally understand man. Success belongs to the man, in the arena. So keep fighting. Whatever you, if you listen to this podcast, people, I know, we're just getting started off right. So whatever you fighting for. It, you have to understand two things when you wake up every single day, why you fight and what you're fighting for. Cory, let's get into it, brother. your story started long before, the first park was purchased back in 2016, man, and in your resume you describe burnout, family pressure, and, you, the last straw moments. That, forced you to rethink everything. Can you walk us through, what pushed you from structural engineering into real estate and why you chose Mobile Home Park of all other asset class? Yeah, absolutely.

Speaker 2: 3:58

So I, when, 10 years ago I was working as a structural engineer, I knew nothing about real estate investing or investing at all. I was just like, I put a little bit of money in my 401k and figured I'd figure it out when I turned 65. And that was as much thought as I had put into it. Unfortunately, I would do that differently if I had to do it again, but, so I was working, I was working 60 to 80 hour weeks. It was a very demanding. There's, I was working on very big projects, hospitals, college, campus buildings, a lot of big buildings with tight deadlines that had to be met, and so it was always just a super grind. So I was working a ton, even though it was a fun career, I was working a ton and, which that was great until I had kids and then I realized I wanted to actually get to spend some time with my kid. So I had just had my first kid, he was Max, he was. One years old and I was just never felt like I was never getting to spend any time with him. There was a whole week straight where I literally did not see him awake. I went to work in the morning while he was still asleep and by the time I got home. He was already asleep again. And so finally it was, I think it was a Sunday I was in there and I was like, screw this. I'm gonna go home and at least put my kid to bed. And I left the office, and I got home. I went to take my son from my wife to go, give him his bathroom. Put him to bed. And he did that like stranger danger thing where it's if we had just handed him to an uncle or something that he hadn't met, and he started freaking out crying, trying to get clawing, trying to get back to mom. He acted like he didn't even know me. And, that broke my heart. And I knew I had to, I didn't know what, but I knew that was when I was like, I can't do this until I'm 65. I have to do something different. And so then I just, that kind of shocked me out of my. Just, track that I was on. And, I started looking around for things. Somebody gave me a copy of Rich Dad Poor Dad, which so many people have read that, that because has, I think, changed the trajectory of a lot of lives. But so I read that and I was like, oh my gosh, assets that pay you. Like I'm an engineer, I should have been able to figure this out. It's not that complicated. And so I was like, okay, we're gonna go buy some real estate. So my wife and I, we decided, we, if you read the advice, a trap that a lot of people fall into is analysis paralysis. So I wasn't gonna do that. they said, you just have to pick a direction and go. So I was like, fine, we'll do duplex, threeplex, fourplex, we're gonna go buy one of those. And we, we had saved, we had a little bit of money saved. We also had, I was able to tap into a HELOC on my house. I was like, okay, we, I think we can go, I think we can do this. And so I built a spreadsheet and started analyzing deals because I'm an engineer, that's what I do. I'm a nerd. I started looking at deals and they all looked bad, like nothing looked good. I was analyzing a lot, and I got discouraged. I was like, where's all this cash flow that Robert Kiyosaki was talking about? These all suck. And, I, as I was like looking around and hunting for things, I stumbled across a mobile home park for sale on Craigslist. It was, I didn't end up buying that one, that, that was a little nine unit thing that I punched into my spreadsheet and was like. Oh, that looks way better. Whoa, what's, what am I missing here? And so I just, happened into it. And I took a, I went and took a buddy out. The only person I knew in the world who had rental properties. I took him out. He was our real estate agent. Matt, I took him out for a beer and I said, Matt, I'm thinking of doing something crazy. I'm thinking of buying a mobile home park and I need you to talk me out of it and I need you to tell me why. And he was like, no, I know guys who own those. They're cash cows. And yeah, we sent out a bunch of, we, we switched it up, we sent out a bunch of letters and found our first park that we bought in 2016. Amen.

Speaker: 7:14

That, that is so cool. And you did something really good there. He wasn't really looking for validation as to the museum that you have created for yourself. You wanted somebody to challenge that belief and it sound like you really trusted his buddy. One, he had experience and he was, I assume where it was somewhat successful in the direction that you wanted to go. And the crazy thing is that there's so many people around us that, that are doing things at the next level that we want to aspire to, but not a lot of us are taking, the necessary steps together. There's this famous quote that says that your network is your net worth, right? Tons of people know Elon Musk and they're not multi-billionaires you know what I mean? Because they're not thinking at that level. They're a lot of them just probably satisfied with getting a job and not really, thinking a lot bigger. One of the things I've been talking to a lot of my veterans about even active duty service members as well, is that a lot of us, we get out to when we want to get a contracting job. To want to get a DOD job. And those are amicable job, admirable job, and also high paying. Good job as well too, right? He also give us the opportunity to leverage our experience and, leverage our leadership. However, one of the things that I've been thinking about and talking to folks about is instead of getting that contracting job, We should be more considering, bidding for those contracts because that's where the money is, right? Instead of seeking employment, seeking the entrepreneurial, get your business, get a LLC, especially if you're a disabled veteran, get your LLC, get it registered as a disabled veteran owned business, right? Yes. and then. Use that business to bid for contract after you exit the military. As an

Speaker 2: 9:00

engineer, we used to actually partner with those exact firms. We used to do work for the va, we used to do buildings. we used to do, we did several VA campus buildings. some of'em, I'm in Boise, Idaho, some of the VA here. But yeah, same thing. There were veteran, it was exactly, it was veteran owned businesses. And the government actually sets aside a bunch of those contracts that they're like, these are going to go to these veteran-owned businesses. And even if you don't feel like you can do it, you can get that contract and partner with a bigger firm that can help you do, if it's too big of a, maybe it's like a big project and you're like, I, As long as you, yep. You, it's, that's a very viable route. Yeah, for sure. Oh, one

Speaker: 9:33

one, 100%. so yeah, so I, I like that you're thinking on that level. And I think the reason why we like to share a stories on these podcasts is you, the listeners, if you're listening to this, the reason why we like to share a story is, with myself and all the guests that came, come onto this podcast is that. If you have a dollar and I have a dollar and we switch dollars, we end up having just$1.$1 each. However, throughout your life, you have gained some life experience that a lot of other people will never be able to attain because we all travel our own journey. But when we share this information, we are hoping that you are taking some of these experience in and you are able to execute in some of the things that you may not have thought about before, so you can level up your life. You know what I mean? I trust that the com, the strategy we just shared as far as thinking on an entrepreneurial level. right? the rich dad, poor dad, the cashflow quadrant kind of concept, right? You can level up instead of, and also get out of, or why you transition from the employee mindset because this is America and there is, and less opportunity, in this great country, man. So you've said that Mobile home park have, value add potential, more than any other assets or most other asset class today, right? Maybe not every but most asset class today. Can you break down why do mobile home park or outperform apartments in certain markets? what fundamentals make this asset class, so compelling for investors seeking stable cash flow. And of course, this is a big one, impact.

Speaker 2: 11:13

Yes, a hundred percent. So the, in a nutshell, it's because they are the most affordable form of housing. And if you've listened to any news over the last several years or just looked at how much it costs for rent, we are in an affordable housing crisis in the country. So you have this crisis level of affordability with housing, and this is the most affordable form of housing. So it's like the best supply demand matchup. You could, you could find. And so there's people that need this housing and then you pair that with. The fact that most of these were built in the fifties, sixties, and seventies. A lot of them are still, almost all of them were built in the fifties, sixties, and seventies, and a lot of them are still owned by the same either like the original owner or maybe a second generation owner. They're getting older, they're getting ready. They're tired. They don't wanna do it anymore, and the mortgage has been paid off for them for decades. So the cash flow's been good enough. They haven't really had an incentive to put money back into it to address the deferred maintenance, to fill in the empty lots. So it's crazy if you go drive around and look. Just wherever you are, go drive around and look at some mobile home parks. You might find some nice ones. There's some nice ones out there. We try to make ours. I like to find ugly parks in nice places and make'em nicer, but, but you'll find some ugly ones for sure. And you'll find'em with empty lots, which is insane. So you have this thing that is. In crazy high demand. And yet there's vacancy. So there's vacancy that's not due to a lack of demand. And the reason there's vacancy is because it takes money, it takes work. It's hard to fill empty lots in Mobile Home Park. You have to go. Find the home. You have to pay for the home. You have to pay somebody to move the home, come in, set it up. If it's a used home, now you've gotta get somebody to renovate it. Now you've gotta turn around and sell it. It's a lot of steps. And so if you're older and the cash flow's good enough, ah, we're just gonna let that empty lot stay empty. And so that, that happens over time. And lo and behold, you have this thing where. You can, as an investor, you can come in and buy these and pay someone a fair value based on the money that it's bringing in now and then, but it's, once you fill these lots in, it's worth a whole heck of a lot more. So the way that all commercial real estate, apartments and everything work is, the value. This is different than single family homes. The value. Is proportional to the income it brings in. So if you double the income, you double the value, right? it's just you, it's just based on how much money it's bringing in. And this is the way apartment operators work too. For a value add apartment project, if you can increase that net income that it's bringing in, you increase the value. So by a lot. And the, usually the multiples, like 15 to 20 x compare that to businesses. That might be like three to five, to maybe 10 x. So you, there's a whole lot of potential if you find things where you can increase the income. So what that means is in a mobile home park, like the areas we operate, the rents, the lot rents are 500, 550 compared to a, and this is for, a three bed, two bath, you've got a yard. It's, no one's banging on your walls. And, a three bedroom apartment might be 1500, 1800,$2,000. So it's way less expensive. Even if they had to take a, a short term loan out to buy their home, it's still way less expensive and they're building equity. So it's really good. And the cool thing is that, that when you have that home there and that resident, the lot income that's coming in from that rent, that resident adds about$90,000 typically of equity. To the property. So yes, you're getting a little bit more cash flow, but you're shooting the value way up. So for every 11 lots you fill, you increase the value by a million dollars. Basically is the way the math works out. So it's really cool. And then there's 11, and if you listen to any of the stuff about the affordable housing crisis. All the economists say what we need is more affordable housing. Like they try all these tricks, different ways to do it. We need more affordable housing. You are literally adding affordable homes for people who need them. It's the only type of affordable housing that doesn't require government assistance. So it doesn't. The people like, two, two parents making, working at McDonald's can afford to live in, one of our communities. So it's a really good, it's a, residents get the affordable home they need. We raise the value of the property from the lot rent. And so because there's that big equity kick, you don't even need to, like, when we bring the homes in, if we can make a little bit of a profit on the home sale, we will, but Right. But. We don't even need to. If we sell'em at break, we just break even. We're still coming out way ahead. and the resident is, and the investors are, everybody is. So that's why when I was like five years into this, just buying for cash flow before I realized that math, and that's when my, the light bulb in my head went off. I was like, oh my gosh. there's, you can really shoot the value up if you can just, fill in these empty lots. And address deferred maintenance and do all the other things too.

Speaker: 15:41

Yeah, man. we have seen a lot of those as well. Same thing in apartment complex, right? When our property has been honed for a very long time, the focus has been, just keep it occupied because it's cash flowing for the current owners who have owned it for a very long time, and it doesn't really need to increase this revenue stream, because it's paid off, right? They probably love what they do. They'll hold em up more for more. They're holding on more for sentimental value than it is cashflow. However, additionally, in the mobile home park because it's affordable, that a lot of folks really, it's have more of an emotional attachment of helping people out. So let's talk a little bit more about impact, because I think we all understand that there are stigmas around, around Mobile Home Park. Help us to break that so we get it. It can make a lot of money. However, let's break the stigma around Mobile Home Park and why it's a, how you can make an impact, in people's life with that level of investment when you choose to be a passive investor or an active operator, who will running those, complexes?

Speaker 2: 16:43

Yeah. I, and I think a lot of the stigma comes from a lot of the like. TV shows and movies and everything out there. You watch Trailer Park Boys or something. They just portray the residents in a really negative way and. It's just actually not true. If you take any group of people, you're gonna have all sorts of different people in there. So you might occasionally get like a troublemaker, but you would get the same thing in an apartment. I know people who do class A apartments and have some crazy stories about, but it's always like one out of a hundred. And so it's the same with us, almost all of our residents, they're nice people. The typical profile for our residents is either an older person who is retired, and so we have a lot of like a large cohort of like older kind of retired people. And this is, maybe they sell some old, they, they, they sell some other house somewhere and then they buy a mobile home for way cheaper and they can use the rest of the funds from their house to just retire. Good for them. And or, it's families that just need an affordable place to live. And so there's a, we have a lot of families, and that's why like the bigger homes tend to sell better in our parks.'cause it's usually. Parents with kids. And the jobs that these people do are, they're driving, they're driving the trucks that get everything everywhere. They're, working food service, working in the grocery store. They're the ones that keep society going, right? And so they're, and they're just generally good people who need. An affordable place to live, and they're tired of having neighbors banging on their wall every time their kid cries in an apartment. That, that's who it is. And it's, for example, like during COVID. When the COVID shutdown came, and a lot of people lost their jobs unless you were an essential employee. Our collections were the best they've ever been because all of our, all of my residents are the essential employees. They're the ones who are still going to work.'cause they're literally the ones who keep society going. They're driving the trucks. They're working at the grocery store. They're doing all those things. we had one, one resident, when we bought our, one of the sad things about mobile home parks is they're not building any more of them. And when some of these go into disrepair, like there's kind of two ways someone could buy this and make it more economically viable. One is you could bring the community back to life and fill in the empty lots. The other is. You could just demolish it and build a Home Depot or something. And that's really sad when that happens. Yeah. A lot of people lose their homes. it's expensive to move those homes. Maybe there's no availability at other parks nearby, so that's a really sad thing. We had, we bought a park down in Arizona in 2021 and it was like right after we bought it, we had one empty lot that was ready to go. Other ones needed some work, to the utilities. And this lady came through just a couple weeks after we bought it, and she was almost in a panic and wow. She was like, we, her and her husband, they lived, they're in their fifties. Their kids are grown and gone. They've lived in this home for, I think it was 17 years. The park that they were in was just getting shut down. So they just got a notice that was like, get your home out. She didn't know where to go. Wow. She didn't know what to do. She thought they were gonna lose this home that they had invested in you, and they loved their little home. And so we were able to help her get it moved. We, we helped her with some moving costs and things and got her moved into our park. But she, she works at the doctor's office. She's like the front counter person that smiles and, sets up your next appointment at the doctor's office. and he worked at the golf, he worked at like the local golf course. So they're just like nice people that didn't need an affordable place to live. That's really who. These communities are full of. And yeah, it's, it's not the way it's portrayed, in the shows. I dunno if that answered your question.

Speaker: 19:53

No, man, we definitely appreciate folks like yourself who. One, make some money, but at the same time, value, people's wellbeing and, their safety and of course their joy as well, right? So as much as that as we can provide for people, I think it's a good thing. You know what I mean? Because yes, life is short. Time goes on forever, but life is short, right? And impact we can make in somebody's life. For example, I was talking to our property manager, recently, and everyone. I would say everyone, we all have our stuff going on. Some of our stuff ends in monetary decline month over month and, or just maybe just one month or a gap, so my biggest thing is talk to these people, right? Ensuring that we communicating to them, with them, frequent and early, not just about, collecting rent, but other things that's going on in the community, likes, dislikes, foot traffic, all the good stuff to make sure they understand that the goal is to provide. A good environment for them to raise their child or their grand, their children or grandchildren. That, that's so true.

Speaker 2: 20:54

And

Speaker: 20:54

it's not even

Speaker 2: 20:55

sometimes, can I share a story about that? Sometimes it's not even that hard. So this one, this was that same community actually down in Arizona when we bought the community. We went door to door and knocked and said, Hey, we're the new owners? Here's, we're doing a new lease. Can you sign a new lease? We, but we also said, Hey. If you could do one thing to just make this community better, like no promises, but like what would it be? And, no one was asking for, gold plated swimming pools or anything? No. But by far what everybody said was, the trash service is terrible. Like the dumpster gets full and we have to race our neighbors, when they come pick it up to get our trash out, and if it's full, then we have to leave our trash on the porch. It was like, that's what everyone said. It was like, that's. A, that's not okay. there's not that many things you have to get right as the park owner. But trash, water, sewer, like there's some very basic things that you have to get right. It's that's not okay and b, that's really easy to fix it. It didn't take some giant, we did other stuff too, but that was everyone's number one complaint and it didn't take some giant. Capital infusion. It took us calling the trash company and saying, Hey, can we get one more dumpster and increase the pickup from two days a week to three days a week? And then everybody was like, you guys are, it was like that's literally everybody was like, wow, you guys care, like the residents. We got such good feedback from the residents. it's, so sometimes it's just previous owners setting the bar really low and then walking around and talking to people and, solving one little

Speaker: 22:14

problem. Man, that's, that is awesome, man. Thank you so much for doing great things like those. Man, man. Cory, you've been featured on, the best ever show, cashflow Connection, Brandon Turner about, better Life Podcast, and one theme keep coming. There's one big mistake that investors make, when they switch from apartment to parks, right? What is that mistake and how can investor avoid it? Yeah. And this is actually a

Speaker 2: 22:39

little bit into the weeds. Yeah. So if you were, if you're coming from, and there's actually quite a few people, like looking parks have gotten more popular right now. So I actually get this question a lot, but it's an underwriting mistake. Mobile home parks are different from apartments in the, in an apartment you own the whole thing and you're just renting each space. Correct. Pretty simple. So all of the rent. Counts towards that bottom line. And remember I said earlier where there's, it's technically you divide by a cap rate, but it's the same thing if you call it a multiple on the income. You can take all of that rent and multiply it by that to come up with the value, divided by the cap rate to come up with the value. So you're capitalizing the rent, is what that's called. Okay. Okay. With a mobile home park, usually when you buy a park, I like to have it where the resident owns the home and we own the land.'Cause then they're an owner. We're an owner. We're both in the same boat that we want the community to be nicer. We're both invested. but you'll oftentimes have it where instead of them owning the home, the park owner owns the home and they will rent the home to a resident. And the mistake you can make is using that multiple, capitalizing that part of the income, because what that is actually personal property, not real property. This gets a little bit into the weeds. Like I said, that's personal property, but it's a big consequence if you get it wrong. That's the thing. So that, that's personal property. It's actually titled through the DMV. That thing can go away. So the bank. If you were gonna go get a loan, the bank will not consider that part of the income as part of the property value as far as your loan to value or anything else. It will just ignore it. And so if you as the buyer come in and capitalize that income, maybe you're all excited because you got a seller finance deal and they're gonna give you this sweet seller finance loan and you got this, you got this much income and you divide by your cap rates, you're like, this is how much the park is worth. I got a great deal. And oh man, I got seller financing. Awesome. And then maybe that seller financing balloons in a couple years. And you have all these rental units that are generating so much income for you, and then you go to try to cash out when you're gonna balloon your loan's gonna come due, and the bank says, no, we're not gonna count half your income. Oh wow. So you, you can't refi out. You can actually lose your property to a term default. It's like one of those things, if you play chess where it's like you, you make a mistake and somebody checkmates you in four moves, right? it's a simple thing that you just know oh, if you just don't move this way, then you don't have to worry about that. But the moral of the story is you just ignore the rental income and if you want to add back in the value of the home, you can look, there's like a. It's called nata. It's like a Kelly Blue book of values for the homes you can add back in the value of the home. But in general, that rental income will cause you to way overpay for that home is what it will do. So hopefully I explained that a little. It's a little No, no. Complicated. But yeah

Speaker: 25:15

Man. This one really caught my eyes as I was looking at your one pager man. you said that your worst deal cost you a million dollars. Yes. Can you break that down for our listeners? What happened there? What did you miss? How did that experience shape, the way you underwrite deals today? Yeah.

Speaker 2: 25:29

Yes. I have purchased 19 mobile home parks. Most of them have gone really well. The good ones have outweighed the bad by a lot. But yeah, I had one where I made one very small, very big mistake. So this was a community on a river. Nice locations, standup paddle borders going by on the river. Okay. Maintained tenant owned homes. We came in, we did all, we infilled the, we brought in brand new homes and infilled the lots. We sub-metered and build back water sewer at one point, so we water at least'cause, so we, we increased the revenue, but when I bought the park, it was. There was no city sewer, so it was on private sewer. And so we have parks that are private sewer and they're septics and that's not, you can get it inspected and it's not generally that big of a deal. But this was too close to the river for septic, so they had a wastewater treatment, a private. Wastewater treatment plant called the package plant. And so the sewage, from the homes would go down this pipe to a lift station, get pumped up into this thing. It comes in as sewage, it does whatever it does in the plant, and it comes out the other end as clean effluent that gets pumped into the river. And I was scared of that. Obviously. I knew I had to do due diligence on that. And, but they, I interviewed the operator. I had it inspected. I talked to the city, the county, the state, the federal, EPA, everybody. They had their operator taking daily samples that he was submitting to the EPA, and it was clean and every, everything was good. So it was, I feel like I did all the due diligence I was supposed to do. I said, okay. But the mistake that I made was, this plant was housed in a building, like kinda a little barn kind of building thing. And, I took the appraiser's word for the insurance replacement cost. I didn't double check that. That was the, if I had done this one thing, this deal would've been a home run. That one thing. So the, whenever you buy a property, you get an appraisal. And for a mobile home park, a lot of times there's not a lot of stuff for them to insure. They're ensuring the business income, but if there's any structures they'll give you, the appraiser will say, Hey, this is how much. You how much insurance you should get for that thing. That's how much it would cost to replace that thing. And they're an appraiser, so they're an expert, so they're supposed to know, right? They had a replacement cost of this barn and wastewater treatment plant building of$70,000. And I remember looking at that, thinking like, is that right? And I was like, I've got, if it was a hundred, if it's, nothing's gonna happen. And if it did. If it was a hundred grand. I've got reserves too. Yeah. So I was like, it's probably fine. So I, that's all, that's as much thought as I've put into it. So about a year and a half after I bought the property, I got a call on a Saturday from the onsite manager, from the property manager. And there was a fire, actually, the call would've been. Was it on a Sunday anyway, it was a Saturday or a Sunday, and I was like, that's not good. Why am I getting a call on the weekend? There was a fire in the building and the building burned down and totaled the wastewater treatment plan. That's a big deal. Yeah. And the replacement cost that we had insurance for was$70,000. So they managed to get someone for the operator. Was doing this as a side gig and he worked at the actual municipal sewer plant. So he managed to like, make a deal with the municipal plant and we got some trucking company to come and because we're like, the sewage is still flowing, right? Like people still live there. Yeah. They're not gonna stop gonna the bathroom. Or showering or anything. so we get this truck to come and start it. It would fill up the lift station. And the truck would come and pump it out and take it to the sewer plant. We had to pay fees to the sewer plant to deal with it and to pay the, so it ended up, the replacement cost. And I was like, oh, like what are we gonna do? the replacement cost, we had$70,000 of insurance. The replacement cost ended up being$670,000, off by almost a factor of 10. So I'm like, I had some good reserves, but not that much in reserves and then it gets worse. That actually wasn't even the worst part. The worst part was those trucking charges were$800 a load, multiple loads per day. It worked out to, once I started doing the math on it, worked out to around$50,000 a month. Wow. And the community netted, sorry, grossed. So like the total rent coming in before we paid any expenses, before we paid the mortgage, anything was$25,000 a month. And I had personally guaranteed the loan. So I didn't know what to do. So we had the, there was some kind of extra special insurance coverage that kicked in. There was another a hundred thousand dollars that kicked in to cover some of the pumping. So that bought us two months. Basically a hundred thousand dollars was gonna buy us two months to figure something out, and then that was gonna run out. And I didn't know what to do. I was like, I, we can't cover$50,000 a month. The property can't cover it. I don't know what to do here. We were looking at, I was like, do we, and the replacement of the thing, it was gonna take a year to get a new wastewater treatment plan. Imagine they gotta design it and build it. They gotta get EPA a approval and all this stuff. So it was like, I was like, I didn't know. I was like, do we just evict all the residents so that the sewage stops flowing? I didn't know what to do. I had a but then you got no residents, so then your property's worth nothing and you got 50 people, 51 residents who would lose their home. So it wasn't just, even just me, it was this whole community that was like, at risk here. And so I don't know. I remember having a really. Teary conversation with my wife where I was like, I think we're losing everything on this. I think it's, and I was calling everybody. I did not know what to do. I was just trying to figure out something. Like I, I wasn't sleeping like I was, like I, I had no idea what to do. And finally I had talked to a buddy of mine, he was like, dude, you just gotta call your lender and level with them. So I made the phone call that I never want to have to make, because if somebody gives me money, I don't care if they're a bank or an investor or anybody. If somebody gives me money, I don't wanna have to. Lose your money that you gave me. That's like horrifying to me. So I had to call the lender and say, John at for Secure Bank, who's a great person. I called him, I was like, John, I'm so sorry, but here's what's going on. I don't know. I was like, I just I have no idea what to do, but here's what's happening. Yeah. and he goes, oh, you're gonna be okay. So I was like, did you hear what I just said? Did you hear the numbers that I just threw out there? And he goes, like you bought it. So I bought it right at the COVID dip. So I got at a very good price, right? We had raised, we had done all the things about raising the income. So we had done that value out thing we raised, so we had actually a ton of equity in it. So he did a fast cash out refi for us. Wow. Like a, it was really like a second. It was like a, anyway, yeah, he gave, he loaned on the equity for the construction. And so we managed to, and then all these other things, all these people came outta the woodwork to get us outta this'cause. So it was like, okay, we have the capital. We can actually replace the thing, but how long is it gonna, it's gonna take too long. That still won't be enough money. And so we, we had an engineer who was already looking at it'cause we were looking at doing upgrades to the plant anyway, so that was. Really fortunate. And so he hooked us up with a contractor who does these rep, who specializes in just this thing. And the contractor talked to the company that makes'em, they had some other customer who apparently wasn't in a hurry and gave us their place in line. So okay, we can get one of these faster. We went through the EPA approval on it, which was super, this was in COVID when, like the, I don't know why the people, it seemed like they had all brand new people there who didn't know how to do a code review. But they worked with us on it and we. We got it done and it was like we, we got it approved. We were finally, we were like running, it was like we were gonna it was like, I forget, it was like sometime mid-June where I was like, that's the drop dead date where like all of a sudden we still run outta money because I put all my money in, plus this cash out refi and plus the HELOC on my house. I was like, we gotta get this thing taken care of. And so we had till mid-June, and then it was like, we're gonna just barely make it. And then they're ready to drive this thing over there and set it there and hook it up. And it's the spring thaw. It was in Michigan. Apparently in Michigan. They lower the weight limit on the roads during the spring thaw. And the contractor's we can't drive it. I don't know how long it's gonna, it's no. So I had to call up the highway department and get like an emergency exemption for them to ship this thing. Wow. It was crazy. But we got it hooked up and flowing. We replaced the plant. At the end of May, we turned it on and it was like, oh my God. We did it. I dumped everything I had into it. And then we managed later to, we sold the property for, about$800,000 more than we bought it for. So I, the total all in cost of the project was 1.2 million. Insurance after all the little pieces covered 200,000. So there's my million dollar net worth loss. Wow. But, so there's a million dollar network worth loss, but I got 800 back. So I ended up still down. But I just, I'm chalking it up to a Ivy League education and infrastructure replacement.

Speaker: 33:39

Oh, no, man. So I didn't want to cut that story short, but I'm telling you, passive investors, if you are listening to this podcast and you're thinking like, I don't want to deal with all that. Yes. As a passive investor. You don't have to deal with all that. However, to ensure you're not dealing with all that, you want to work with an operator who had this sticktuitiveness right, and care enough because you could have walked away from the park and be like, accept that loss. Foreclosures, no. Got my problem. And walk away. That'd be a freaking horrible thing to do. However, because you understand your responsibility, to the people that live at the park to ensure we, you can provide a good park for them to live and a sanitary park for them to live, you stick to it and you ensure that you solve that problem. Even though you are going to lose your money, you are able to ensure that those people in the park maintain at least some level of peace or happiness in what they call their home. So passive investor, these are the kind of challenges. You want to talk to your operators about to ensure that they have withstand some of these things and they have this sticktuitiveness, they want to go all the way through to ensure that, the business model is successful, that the residents are taken care of. And of course, if you have capital in deal, your capital is preserved as well. You know what I mean? Cory, thank you so much for that story, man. And. You have had a journey that have built your resilience, right? You felt like, what, 1,900 feet, you run a hundred miles, like little things like these man, that, that speaks to your resilience, right? How does that help you in real estate, man?

Speaker 2: 35:16

I think The big thing that I've figured out is in real estate, you're trying to do really big things, right? whether you're trying to go for some big goal or you're like, oh crap, this thing just burned down. I gotta replace a wastewater treatment plant. I dunno how to do it there. There's these big things and you see where you want to get, but you can't see all of the steps between here and there. And that can be. Extremely intimidating. And you might often just say that's too big, I can't do it. I think that the thing and this like when I was, I have run some ultra marathons and things. And there's this thing where it's if you can just take one more step, I don't know, there was, when I was running that a hundred, I ran Leadville, the Leadville 120 14. And I remember being, what was it, mile 74,'cause I, I was, I remember thinking like, I have a marathon to go and my legs are so shot, I can barely walk. I can't run a marathon right now. There's no way I can, it was cold. I was having this big pity party. And it was like, I could walk to the next aid station's just a couple miles away. I could literally just walk. And I was like, okay, so I'm not done. So if you can just, and this is getting things done, by David Allen's a great book where he breaks these down. When you have big projects, you need to know what is the goal, what is the finish line look like? And you need to know what that means so that you know when you've got there. And you need to know the very next step. And that's all you need to know. You don't need to know the, then take that next step. And once you take that next step, then you'll be able to see what the following step is. And so by doing that, you can just focus on and say, that's where I'm going and this is what's right in front of me right now. And so I think that applies to a lot of it. So if you're just getting started, there's all these things like, okay, what is the very next thing you need to do to hit your goal of investing in real estate? Maybe you need to go to a real estate meetup and just meet some people who are doing it, and then you'll get some ideas on what that very next step is. Or maybe you need to go figure out your, can you get a loan? Or how are you gonna fund it? Or you need to find someone you can trust. Okay, Where do the really good if you're, you wanna invest and you don't wanna have to do the work? Maybe where do the really good operators ha who do you know that, that does this too? Maybe your next step is to talk to that person. But if you can just take one step at a time and focus on that, then it's much less overwhelming and you can keep going.

Speaker: 37:23

So that, that is so awesome, man. Thank you for sharing that. Now, Cory, we gonna get into the focus round, just the acronym focus, what do you do for fun when you're not buying parks and running, a hundred miles.

Speaker 2: 37:34

Ooh. Right now I'm pretty obsessed with Jujitsu, so I, okay. I train, Brazilian jujitsu, so That's awesome, man. It's a lot of fun. My kids do that too, so it's something we get to do together. Together.

Speaker: 37:43

That's great. Yeah. yeah. What opportunity changed your life forever?

Speaker 2: 37:49

That would have to be just discovering the whole real estate thing. No matter what road you go down, once you figure it out, you're like, oh my gosh, this is. That's awesome. Amazing.

Speaker: 37:58

Yeah. Yeah. So what communication skill does every great operator needs?

Speaker 2: 38:03

Oh, this is one. I got some really great feedback from a colleague when I was in engineering. We were meeting about something and he looked at me. He just said, you're a terrible listener. And it like shocked me and I was like, what? He's normally this really quiet, nice guy. I was like, and I did some thing about it. I realized I was actually, I am naturally not a good listener and so I, I read a bunch of books. I'm trying to figure out like how to be a better listener. So I think like really good listening. I've gotten so that I have to consciously do it, but, it's a skill you can build up and then it really. Will allow you to, if you're trying to get deals, trying to, no matter what you're doing, focusing on someone else and not on yourself and what you want to, focusing on what they need. is a really, that's, I would think the most important skill that I've worked on.

Speaker: 38:51

Yeah, I,

Speaker 2: 38:52

I like

Speaker: 38:52

that. So it's the, that self-awareness, right? If some of your distractors, some of your limitation, and if you choose to improve it, a lot of us, we get people to who has the strength in the areas that we weak can, however. If that's like a personality trait that you want to address, then as long as you have the awareness and the conscious, effort, you did a conservative effort to address it, chances are we can get better. And listening is one of those things that takes effort. You know what I mean? What do you wish you understood earlier about risk or business?

Speaker 2: 39:26

What do I wish I understood earlier about risk or business? Mean, the fact that I should double check the appraiser, that's huge. I dunno if I could get that specific.

Speaker: 39:36

Yeah. Maybe get a second opinion or funny gut feelings. That would, that's a good one.

Speaker 2: 39:39

Yeah. Double trust, but verify. H How about that? double check. The important, it never hurts such, just double check.

Speaker: 39:44

Oh, yeah. So trust is a big thing in the military for us, right? And however, as a leader, that's one of the things that is ingrained in our head. Trust, but verify, inspect what you expect, so Cory, after near death fall, right? I think approximately 900 feet, million dollar loss, and, ultimate time freedom journey, right? What does success mean to you now?

Speaker 2: 40:10

Right now it means, Building a business that, that I can be proud of and that my kids would be proud to say their dad does it. so I want to, help other, on the investor front, I wanna help other investors get to, because for me, I started out more as a, Like selfish sort of motivations, like for me and my family, like I wanna have time freedom so I can spend time with my kid. And it's, and that's, that was the first thing, but then you get into it and that was why I got into mobile home parks. But then you get into it and you realize oh no, there's like a big problem here with affordable housing and this is actually a good solution to it. And I think helping other investors on their financial freedom journey and putting a dent in that affordable housing crisis are two things that I would.

Speaker: 40:52

Keep me going. Yeah. That is awesome, man. Yeah. create an impact in people's lives, man. So that's awesome. Cory, this is an exit strategy man. This episode, on mobile home park education, passive investing opportunity, And, just making an impact and having a sticktuitiveness to solve problems in an effort to help people to maintain or improve their peace, right? Of especially if that peace is having affordable home in a mobile home park, place where they live. So listeners, thank you so much for taking the time to listen to another episode of the Multifamily Real Estate Experiment podcast. And look, there's multiple ways to own more of America, right? You can do by yourself or you can level up with a team. Cory, if your listeners wanted to get in touch with you, how did they go about doing that?

Speaker 2: 41:39

Yeah, I've got a, video I put together that's a little more information about mobile home park investing. It's at passivemhp.com. Okay. I appreciate that man. And you can book a call there too if you want to talk to me.

Speaker: 41:51

okay. Sounds great. All right, Cory, thank you so much for joining us, brother.

Speaker 2: 41:55

Hey, thanks Hutch.

Speaker: 41:56

And listeners, thank you again for spending time with us, on the MFREE podcast. And we're here to give you the knowledge that will help you own more of America in multiple different ways. I'm Hutch Marine Investor out.