Freedom Without Burnout: Building Family-First Wealth That Lasts (Live Q&A)

Ladies and gentlemen, we're back. We have the famous Corey Harrelson with Freedom Investing Group, the master of mobile home park investing, here with us again today to answer the questions that you guys put out to us on investing in mobile home parks and how our fund to fund works. Now, as we said last on Tuesday, a strategic approach to passive income that increase, that creates lasting wealth while prioritizing what matters most, that is your freedom, your family, your time, and basically living life the way you want to live life, way you want to live life on your terms. I define that as being able to do, do whatever you want to with whom you want to, when you want to, why you want to, how you want to and where you want to without having to worry about how the how to fund that. So we're going to get started here. Corey, I'll let you go ahead and take these questions. We've got a couple more that came up since we built this slide. So once you answer these first and then we can go to the ones that came in late.

Yeah, absolutely. Happy to, Jim. So a couple of the ones. The question on the screen here is this really passive. It depends on who they're talking about. If it's you, the investor. Yes, it is. If it's us, it's clearly not because we're, the way we set these syndications up is we're doing the work. We raise the capital from investors and then we share the profit. So, so yes, for the investor, it is, it is truly passive. The work that the investor, you, the investor would need to do is your homework, your due diligence. You want to make sure you're comfortable with us, comfortable with the deal. That's really where the work comes in for you. And then once you're funded, it's really just sit back, get the updates as they come in. So we keep you in the loop. The deal's doing, you know, what's going on with it, the, the good, the bad and the ugly. And then we start sending distribution checks. And so that's, that's, that's really all there is to it. So, so yes, it is, it is passive. That's one of the great things about syndications is because you can invest passively, it frees up your time to either focus on your career, to generate more funds for more investments, or on your family and things that matter. Like Jim, Jim mentioned the goal being to have that Forrest Gump moment where you get to sit down and say, well, so and so told me that now we don't have to worry about money anymore. So that's great. One less thing. So, yes, number two, what if things go wrong? I would actually rephrase this question to say what happens when things go wrong? Because there's always going to be things that go wrong. And so one of the big things that we are doing leading into a deal is a ton, a ton of due diligence, trying to a, head the big things off of the pass, and B, we have contingencies in place for the things that we can't control. So maybe, you know, maybe there's a storm that comes through. A question I get a lot is what happens if a tornado comes and hits the property? Something like that. Like it's. I have not had a tornado hit our property, but there have been mobile home parks where that has happened, right? So there are things that can go wrong. And so like in that case, we have contingencies for every single thing that we can possibly conceive of to go wrong. We have contingencies in place to, to make sure that we keep us afloat. And protecting your capital is always number one. So to take the example of the tornado thing, we have what's called loss of income. It's business insurance. So for a mobile home park, the residents own the home, we own the land, we don't own the home. So we actually don't have the homes insured. We encourage the residents to have their homes insured, but we do not. What we have insured is the income because what we have is we have lot rent income that they are paying us for their space. So if something comes through and wipes out the tenant owned homes or a portion of the tenant owned homes and that income stops, we have insurance that kicks in and keeps that income going so that then we've still got our stream of income coming in. And we can work then with the residents to help bring in new homes. And we work with. It's the number one insurer in the mobile home park industry. It's mobile insurance. That Kirk Kelly is the founder of it. You can find him on tons of podcasts. He talks about all kinds of different stuff, including the tornado. And I've actually had this conversation with him and he's. He's had several parks actually go through this where they've been hit by the tornado. And it's a really year of hard work. Like the distributions for that year are probably going to go down, but in, in every single one of the situations that he has been through that with parks that he has insured, he Said at the end of it, they actually end up in a better spot because the tornado doesn't just hit your park, it hits other places around there too. And you can reach out and let people know, hey, we've got extra empty pads for people that need homes. Typically FEMA comes in and helps to actually install homes for maybe some of the other residents in the area that were under insured. So he has said that typically your housing stock ends up newer and you end up fuller after you go through the recovery process. So that's one example. There's a, there's, there are the, the real, the reality is with any investment, whether it's a stock or real estate, there are things that can go wrong. And so all we do is we, we, we plan for them to the best of our ability. We try to raise extra capital, extra reserves so that we can withstand shocks, you know, protect your capital, which is always number one.

Let me, let me interrupt you there, Corey. Isn't, is it really true that mobile home parks are tornado magnets?

Not tornado magnets. There's no such thing as a tornado magnet. But, and yeah, tornadoes hit a large percentage of the country.

I am just kidding. I am kidding.

But they're not, they're not magnets, though. But I mean, we do, I mean, the point being we have insurance and we have protocols in place for what, you know, what happens if that day comes. We at least know the steps to take. We've got the contacts at FEMA that we could reach out to, you know, we've got the steps to take. And, and same thing. So some other, some other issues you might think of are floods. So we always make sure that we're looking at, like making sure we're not in some kind of super deep flood zone where the whole thing's going to flood. Mobile home parks actually are more flood resistant, believe it or not, than standard structures because they're typically set up a couple of feet off the ground. So from a flood perspective, you've also got that added layer of protection there. But there's, certainly, there's, you know, there's also just other capex things where we'll raise extra. We, we always raise more capital than we need so that we can deal with things as they come up. So I think that, I think that answers that one. There's, there's 20 other risks. I could probably go through each one and it's all a different story. But sufficient to say that's the general, general answer there.

I think what we'll do, Corey, one of these days, we'll, we'll get you back on here and let you talk about some of the risks and how you vetted it. And that's, you know, one of the things we do is from Iron Mountain Capital Group's perspective is we make sure we're working with people like Corey. We want to make sure that we're dealing with operators that are the best operators in the business. And you know, Corey is a great example of a top notch operator and not on top of just an absolutely wonderful guy to work with. The next question is, how can I trust you? I think that's more directed toward Iron Mountain Capital Group and let's, let's, let's each take a shot at that. Corey, from Iron Mountain Capital Group's perspective is, you know, we invest our money right alongside you. The money, I have money out of my pocket just like you do. And you know, I have enough confidence, enough faith in what we're doing. I, to put my personal money in there. So a good piece of my personal wealth is tied up right next to yours. So I want to make sure that the guys that we're working with are the best, you know, such as Corey and there's some other ones that we're working on. We'll have them on, in, in on future podcasts or future webinars. But you know, Corey, why don't you, you know, they're still no matter even despite the fact that the investor is investing with me and, and Iron Mountain Capital Group. How are they comfortable? How can I give them some comfort in you and in your group? Yeah.

So I think this is probably the most important question on the screen because one of, if you're investing as an LP in other real estate deals, whether it's mine with Jim or somebody else's, the most important thing is the phrase I like is bet on the jockey and not the horse. So you want to look at the deal specifics, but not until you've gotten comfortable with whoever's running the deal. The actual, if you get the best deal in the world, but if you've got someone who's going to run off to Argentina with your money, it doesn't matter. So you need to know that you can trust the person. So there's, so that is really the right place to be focused. So there's, there's, you know, first is, is talking the person getting comfortable with them. Some people are good talkers. So ask to speak to other investors who have invested with them. You can do that. You can look at the Track record is, you know, are, is the operator, is this a rinse and repeat business plan or is this the first time they're doing this right? And just know, you know, maybe if it's your, you know, son or daughter or niece or nephew who's taking their first thing and you believe in them and want to bet on them, it's okay to do a first time kind of thing. But if it's the first time, that's, that's something that you would want to be careful with versus if someone's done this a bunch of times before. Some other things that you could watch out for is ask operators what's gone wrong. I haven't had everything as I, we haven't been hit by tornado, but we have had other things go wrong and we've had to deal with it and ask them what, what have they done when things have gone wrong. The nice thing is that the real estate in general and the asset class in of mobile home parks, the good tends to way, way, way outweigh the bad. But it's just like anything, it's, it's not a smooth road. If it was easy, the returns wouldn't be as good because everybody, everyone would be jumping in. So, so, and if someone doesn't have a story of something, if they can't tell you about a time something went wrong, that's probably a yellow flag too. They're either lying to you or they're not very experienced. So I would say that's another good question to ask. But largely it comes down to just you doing your due diligence and making sure that you ask the questions to make sure they know what they're doing. There's someone you can trust with your money. I mean is your hard earned money. So that's, that's really the most important question on the, on the page. I feel like Corey, another, I guess one other thing I would add there, sorry Jim, is the deal structure. You want to have things, you want to make sure that the deal is structured in a way where it's called aligned incentives. So as the operator and as Jim as well, is most of our compensation comes when the deal does well. So we have to make this deal succeed for you in order to get our share of the profits. And so we do that with a number of ways. So we do have some fees that we charge that we need to charge to run the deal. That's large, that's up to this point, all of it and more has just gone to our staff. Right. So that's what we need to run the deal and software costs and everything else. But the lion's share of our, of our compensation comes at the end. After we've delivered your preferred return. You've gotten your return of capital. So you always want to make sure you're aligned. So a key thing to look for is always so one thing is a preferred return. So that means that you need to get your return on your money before the investor gets theirs. So hypothetically let's say it's a 7% preferred return, you need to make 7% per year on your money and then everything above that gets split at some ratio. So there's, there's some things like that. As far as the deal structure, if most of the sponsors compensation is coming in their fee up front, that is less aligned. So those would be a few other things to look for. Just as far as how it's set up, you really want it to be set up so that in order for us to win, we all have to win.

That's a great, great point there, Corey. One of the guys I was talking to asked me how do you vet your deals? How does Corey know that he's buying a good prospective mobile home park?

Good question. So we, I use, we have a few steps in our process. When we have a potential deal come in, we have first off our big kind of big picture, like just a checklist of no go's. And so it has to pass that first initial screening for us to even spend time on it. Then we've got actually a whole color coded acquisition criteria sheet that looks at all sorts of stuff and comes up with basically is the location okay? Is the infrastructure okay? Is this a deal we want to spend time underwriting? And then that says no to a whole bunch of more deals. And then if it passes that, then we say okay, this is actually a deal worth spending the time to underwrite because we spend probably at least eight hours doing an underwriting model really, really diving in before we even do an offer on a deal. So, so the first thing is just how many deals can we say no to? And the criteria that we screen them on. I like there's an acronym ideal. Ideal. So it's, these are the five kind of categories that we want to make sure that we are, we are hitting on for mobile home parks. That's infrastructure, density, economics, age of homes and location. And so that's the order that the, that it is in the acronym. The most important one of those is location because the other four you can solve if, if you get A good enough price that justifies bringing in more money. You can solve the other four with money but you can't pick up the park and move it. So the very first thing we're looking at, we have a whole bunch of location metrics. If it's in an area that we already own then, then that's great. If it's a new area, we study the heck out of it. We're looking at, you know, population, population growth. We're looking at median housing costs. I like to see over 200,000, $200,000 median home price. We're looking at the median two bedroom and three bedroom rents in the area to see because our competition is really apt. And so that really dictates how much we can charge on the lot rent and still have it be a really good deal for the residents. We're looking at crime, we're looking at flood zones, we're looking at, it's, it's. I've actually got this if anybody wants it re, reach out to Jim and he can put you in touch. I, I actually have a copy of this. I'm willing to share our whole criteria analysis spreadsheet that's color coded and pretty cool. But I'm biased because I built it. But so, so that's the density. Density is a big issue, like making sure that we can actually bring in homes and infill those empty lots. If the lots are too small and you can't meet the setbacks, then you obviously don't want to pay for those lots. The economics, right, like the price has to work, the returns have to be good enough age of homes to know what we're getting into from a rehab cost perspective. Especially if we have a bunch of old empty homes that we need to reh, you know, what condition are those in and how much is that going to cost? Yeah, so those are the five areas that we look at.

Cool. You know I was looking, you know one of the, I've been doing my, you know, I do my own due diligence and I've been looking at, at selection criteria. It was interesting. One of the, one of the guys I was talking to, his selection criteria was how close is the closest Walmart?

That's one of our criterias and that's for a couple reasons. So one is, so that is literally one of the color coded cells on there and depending on the miles it turns green, yellow or red. So. And it's, it sounds silly but it's actually a very good. So, so for one thing Walmart does a Ton of due diligence on their own. So if you're in a location where there's a Walmart, it's already past their team's due diligence. So you're kind of piggybacking on their due diligence team. They believe in the area if there's a Walmart there also. Walmarts are an important part of our collection process. So in order for us to automate collections on the operations side, we always have a few residents who are older. Landline, telephone, no cell phone, no Internet. So we can't just say you have to pay online because they literally can't. But so we partner with that group called zgo, I believe I mentioned this on Tuesday. So that the residents who don't want to pay online or can't pay online, they can just go take their number to the customer service counter at Walmart and pay in cash, check, credit card, any form of payment that Walmart takes, they can pay their rent there. So that also is like a key piece of our operation. So that's actually two different reasons why same thing. We definitely look at the distance to Walmart.

Awesome. Awesome. So I guess, you know, that was pretty much what we didn't really have a whole lot of questions and you know, we, you've covered, you've done just a masterful job of covering, you know, why mobile home parks are, are a really, really good investment when you know and you know, hell, you kind of sold me on it. I was my, I was taking Iron Mountain Capital Group in, in a little different direction with some other experts that I was working with. And meeting you at Race Masters and talking about, about mobile home parks pretty much sold me on moving my, my efforts into that, in that direction. So I thank you very much, Corey, Appreciate your friendship. And guys, it's easy. You know, what's next for you guys, let's talk. Give me a call. I am not a registered investment advisor. I'm not an Ed Jones or a Schwab or something like that. I am an entrepreneur. I'm a, I'm a serial entrepreneur. I've been involved in multiple investments that are cat, that are passive income investments. I love passive income. I call it mailbox money. And you know, my job is to find the best investments and invest your money wisely alongside my money and in passive investments. I, you know, Corey does the work on operating the, the mobile home parks. He finds and does his due diligence and I've do my due diligence on people like Corey and trust them. And spend, spend my time making sure that they're doing their job. You know, I stay on, you know, I stay on top of Corey. I find out, you know, hey, what's been going on? Find out if you know where the, the, you know, where the, where the warts are growing on the projects and what he's planning to do to get the warts gone so that you as the investor don't have to contact me. JamesLakeMore.com or you go to my website, IronMountainCapitalGroup.com or you can call me 888-433-1190. That's my toll free number, 888-433-1190. I look forward to hearing from you. Thank you guys for your time. Come back. We're going to take a couple of weeks off. We won't, we will be back. I'm going on vacation, taking a few, taking a little bit of time with my wife. But we will, we, we will be back on, I think it's September 30th. Let's see, it's going to be. Yep, September 30th with Nicole Kernahan and she's going to talk about the power of words. Y' all have a great day now. Have a wonderful day. Goodbye and goodbye.