93: Generating Passive Income with Mobile Home Parks with Charlotte Dunford

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Hi everyone. Welcome to this segment of the Women Investment Network podcast. I am Sharon Lecter, your host and I get the opportunity to introduce you to people that are really excelling in the area of all kinds of real estate. And, and I get to meet a new friend today, Charlotte Dunworth. And I'm just so thrilled because this is a topic that in my many, many, many years career has always been one of those cash cows that really people kind of overlook and people that get into it become experts. And Charlotte, thank you so much for giving us your time today.

Thank you for having me.

And you are the managing partner of Johns Creek Capital and, and Investment Group, so.

That's right.

And you have some business partners and you guys. And I want you to define this because it says you sponsor the repositioning of 14 value add and turnaround mobile home park spanning nine states. And so tell us a little bit about how you got started in this industry and why you think this industry is still a really positive way to invest in real estate.

Right. So actually by now we have 19 parks. You know, we have kind of grown since we last talked to each other. So I think this industry is in its essence, it's an affordable housing industry. So our country is facing an affordable housing crisis. You know, the crisis is only getting bigger by the day. And this asset class as mobile home park is really one of the only ones that's, call it recession proof where, you know, in a recession where people are losing their jobs and we're kind of in one getting to one right now, people are losing their jobs. The cost that mobile home parks are getting during those times, the volume definitely increases because people are looking for a cheaper option, a less expensive option to live, you know, a lot rent out of an affordable housing product such as the mobile home park lot rent would be around $200, $300 per month. You know, in the, on the west coast, in the Midwest, you're looking at four to five hundred dollars the max. So that's still comparably Cheaper, So much cheaper. There is a huge gap, sometimes thousands of dollars gap between the lot rent and apartment building rent or what you'd be paying if you owned your own home and the mortgage amount. So that's why this industry is attracting a lot of institutional money. And there are people who are in REITs who invested in funds, and there are people from Wall street, they're rushing in to get those millions of, you know, $100 million park. There is just one that I was aware of for sale in the Atlanta area that's selling for $100 million, a mobile home park. And people are going in a 3% cap rate where, you know, they're buying it for the security. So that just goes to show the investor interest has really gone up. So since 2021, I don't see it going down anytime soon. So our focus, Joshua Capital, we focus on the medium and small sized parks where we get it for a incredibly good deal. Really, really price under market value, over 50%, extremely cheap and around 8 to 10 cap rate, which is hard to see in other asset classes. We get that cheaply and then we're looking for a big exit and then sell it to the buyer prospect. Buyer, when we exit would be the institutional buyer. So that's kind of our, our strategy. And you know, obviously in this affordable housing crisis, this product really, you know, is popular. You know, we don't really let a day go by without receiving calls wanting to, you know, ask about a product and tenants want to know, you know, how much the trailer is for rent. And you know, it's just. Yeah, well, I think that's great.

So tell me how you originally got into this industry.

So I graduated from Georgia Tech. As you know, you work in Atlanta, so it's a, it's a college in downtown Atlanta. So I was a business major at Georgia Tech. After graduation, I worked a corporate job as a business analyst. You know, I was in charge of a lot of data analysis and business analysis processes. I was really interested in business. And after a year and a half working in corporate, I thought, you know, I was doing a real estate on the side when I was working corporate job, using my salary to qualify for a house and a duplex. And I was thinking, you know, I can scale this. I can really put, push it to a larger scale. And then I quit my job. I quit my job after a year and a half. It was, it was a big decision for me and for my family because at the time my husband hasn't graduated college yet and he didn't have a job yet. And I only worked for a year and a half. And the little, little bit of money saved and little 401k that I had over a year and a half was not a lot to launch a business, let alone live on it for a few years before my business took over. But I think, you know, with the strategic planning that I had and the firm believed that I had what it takes to push this through, I think I made the decision to take the job because, you know, it was a calculated risk to me, and I think there's definitely reward for, you know, certain calculated risk. That's what I did. So I think about two years now later, I am happy to be where I am. And, you know, starting from a little duplex in a house to one mobile home park, two, three, four. And then it kept on growing to now 19 mobile home parks. So I think we're definitely looking to grow more this year, and we're only accelerating.

You mentioned earlier that you were looking to sell them to. So are you looking at basically repositioning them and then selling them to larger investors?

Yes, yes. Yeah, that or another type of prospect. Prospective buyer that would have would be individual investor who would be getting a bank loan and just someone, you know, say they work a corporate job. And then those buyers reach out to me as well, that they work a corporate job and they want to invest for their family and they want to have a natural income. And that would be another type of buyer. There are different types of buyers in the market, but I think, you know, when it comes time to sell, I think that would be the major two types of customers that we're focusing on.

So, you know, most of our listeners and viewers are women looking for ways to invest. So can you share your thoughts for women out there that are trying to figure out what the first step is and how to get going? Give a little advice because you took a calculated risk and a lot of people kind of sit back and they don't take action. So talk a little bit about where they can go to get started.

Yeah, getting started is always the hard part. So I came to the United States when I was 16 years old, actually, and I just turned 17. When I came to the United States, I came by myself without my parents. So I didn't speak English. I didn't have any resources. I live with the host family. I went to high school, and I had very little resources to push myself up. But I think I used the skills there to help me launch this venture. Because the same courage, persistence, Resilience and skills were needed in launching this venture as the 16 year old myself was facing. So I would say how to get started would be, first of all, you have to believe in yourself. It sounds so cliche, but it is 100% true that you have to take a risk. You have to take a risk, you have to take risks in general to be successful. But I think, you know, you have to take a calculated risk. But I think something that other than strategically, what you need to do to start in real estate, I think definitely to learn, you have to read a lot. You have to, you know, read, listen to podcasts, read business books. I remember I had a three hour commute from my home to the corporate job and every morning and every afternoon on Marta, on the train I was taking such a long commute, I was listening and reading, listening to audiobook, reading nonstop. So every day for three hours I was reading and listening, learning about real estate. And then I wasn't wasting that time on the train, I was studying. So that's very important to learn. You need to learn every day and I still read every day and learn about different business strategies. And that's extremely important to keep up with what's going on in the world and you know, better yourself from a business sense, essentially it's a business. So to get started in, to learn, you need to know what you want to invest in. You need to look for, you know, financing options, understand how your model, you know, looks like. You don't need to know exactly how it's going to work because you don't really know until you, at the end of the day you exited. So I think the most important thing above anything else, above learning about knowing about real estate, about all the business knowledge, is that you have to take the first step. You have to step up and be courageous and just take action. Taking action is so much more important than the best strategy. The best strategy, you can let it sit on the shelf and you don't do anything about it, is the most useless thing in the world. You're not doing anything about it. So I think it's scary. I think personality definitely plays into it. Some people, for some people, taking action is not difficult and they think about it, they don't think too much about it, then do it. And some people, they just kind of investigate and test and they don't ever take the first step. And I don't think that's a good way to approach if you want to be successful. So I would suggest women out there to just be really Courageous and take the steering wheel of your own fate and just jump into it and take action. Even if you fail, you need to fail quickly and pick yourself up quickly so you can move forward.

Well, thank you, Cheryl. I think that's fantastic and I think doubly important. Let's not forget what you just shared about constantly learning three hours a day. You take that risk, but it's an educated risk. It's, as you said, a calculated risk because you've educated yourself and you've learned how people have done what you want to do correctly. And probably along the way you find out how they've done it incorrectly and that helps you take the right steps.

So absolutely.

Education, armed with taking action.

Absolutely.

Definitely important. So what are your goals, Charlotte? What are you looking at from a standpoint of the next three to five years in your business?

Right, so the next three to five years midterm goals. I think we want to really scale the business to. Right now we have 19 parks. We want to 10 times that, tenfold that number, you know, in the next three years and definitely, hopefully 100 fold that number, become the one of the highest small to medium sized mobile home park, if not the biggest small to medium sized mobile home park owner in the country. So I know that the top 10 mobile home park owners in the country, there are I think a few thousand doors, but I think we are approaching that slowly. But we want to accelerate that process. It's really just scaling in the next few years and really exit some of the properties that we currently own to give our investors a great return exceeding their expectations. And that would be our goal and telling more investors about our product.

So how do you structure, do investors invest in particular parks? Is that how you handle it? Yeah.

So structure is. So we usually form an LLC around each deal so to keep the liabilities separate. So usually if this park is called 123 Main Street. We just name it at 123 Main Street. LLC. For each LLC, we have an operating agreement that specifies the deal structure. Usually we do it on a waterfall structure, meaning that once we hit a preferred rate of return, right now it's at 8%, meaning that a preferred rate of return is pretty much a return that, you know, if we hit that hurdle, the cash flow gets split into the 70, 30, meaning the investors have 70% of the profit, we have 30% of profit. And then there's the next hurdle, which is 10% and that is another split at 60, 40. So that's the waterfall structure that we're structuring our deal at. And the preferred rate of return is the only, the only hurdle that we have any sort of guarantee on that. You know, usually we obviously all our projections exceed that. But the preferred return is really just if we don't hit the preferred return, we don't get paid for investors. So if we hit the, we don't hit it the first year, all the deficits will go into the next year preferred rate of return. So it adds up. So investors will have peace of mind there knowing that we're working hard for their return. And also certain fees that we charge, a very industry standard asset management fee.

So.

So in a deal, really, the deal structure itself, they're pretty standard. The only thing that I think we do differently is that we really separate all the risk through forming an LLC for each entity, for each part.

Yeah, well. And it gives you the incentive to make sure that those returns go up.

Absolutely.

Yeah. So Your website is www.johnscreekcapital.com?

That'S correct.

People want some more information and certainly I want to appreciate you, Charlotte, for sharing your expertise and time today. And I just want to reiterate, learn every single day.

Absolutely.

Take the first step.

Absolutely.

And how old were you when you took the first step in real estate?

Oh, that wasn't too long ago. I was 25. Yeah. I was 24. 25. Now I'm 27. So it's only two years ago.

Yeah. So it's never too early and certainly it's never too late to start taking action. So thank you so much, Charlotte. I appreciate you. I appreciate your wisdom and I thank all of you for listening to this podcast, this segment of the Women Investing Network. I'm Sharon Lecter. For more information, reach out to me, infoheronlector. Otherwise, go out and have a great day and take some action.

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