EP28: Exploring Investment Opportunities in the Mobile Home Park Industry with Frank Rolfe

Our industry has maybe the biggest moat in America because cities will not allow parks to be built and they have not allowed them since about the 1970s. So for about 50 years now you can't build mobile home parks. And when you look at the problems that, you know, other real estate niches have had through overdevelopment like self storage is currently experiencing, or office or retail have had, it's because cities will let you build an office building or a retail center or a self storage facility pretty much anywhere you want to build it. So all that holds people back from building everywhere is available land and the economics. But in our industry, even if you have the financing and have the land and want to build it, they won't let you build it. So that's, that's our key attraction.

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Hey, hey, hey. Welcome back to another episode with Think Outside the Stocks. And I have a very special guest here today, Frank Ralph from Mobile Park University. But before we go ahead, I do want to mention that this is information and education purpose only. Whatever we are providing as an education on this podcast, please be sure to do your own due diligence on it. Consult your tax professionals, your lawyers so that you can implement this strategy in your financial structure. Frank, welcome to Think Outside this Talks. I'm so grateful to have you here.

Thank you very much. Very glad to be here.

Thank you so much. And today we are going to talk about mobile home parks. Yes, you have seen this around, around the freeways when you're driving through it. And if you're wondering that what is the kind of community, what kind of people stay in there and is there an investment option? Yes, there is an option in there and we are going to talk just about that. We have our industry expert, none other than Frank Ralph with us today. And Frank, I always like to introduce my guest with three fun facts. So let's get into your three fun facts. Number one, Frank has been investing in commercial real estate for over 30 years and he has about billion dollar in portfolio. That's very, very interesting, Frank. The second fun fact is that he is the fifth largest mobile home park in USA. He has done massive, massive amount of mobile home parks kind of ownership and going through as an investment option. And we would love to hear all about that, Frank today. And then also the last and the most favorite fun fact of mine, that he is an educator and an influencer in this industry before, before even the influencer term as such started. Right. So he has been teaching little less than 20 years. About 18, 19 years he has been teaching and he has, you know, following, you know, about 30,000 students. So that's incredible. With that, Frank, let's jump into today's discussion and let's talk about your favorite topic, mobile home parks. So first of all, I would love to know from you that, you know, what is it about the mobile home park that attracted you and how did you start your journey? Thinking that this is the asset class that I'm going to start investing in.

Sure. Well, before I got into mobile home parks, I was in the billboard industry, which is just as weird. It's those big metal and wooden billboards you see along the freeway. And I started that back in 1983 and I sold that to a public company in 1996. And when you were in the billboard business, one of your daily activities is to study zoning maps. Because billboards are federally regulated, they can only be in certain zonings nationwide. So you're all the time looking for areas that are zoned properly. And I noticed when I was in the billboard industry, I rarely saw MH zoning, which was the Dallas equivalent of mobile home park zoning. It was very, very rare. So I knew there was a scarcity issue to it, but I never thought about investing in it. And then when I sold my billboard business, I started calling the property owners I built billboards on to try and find a new industry to be in. And as I'm calling through my 300 different property owners, I call a guy named Ron and I built two billboards on his mobile home park called Glen Haven down in Dallas. And he offered to sell it to me right there on that call for $400,000 with $10,000 down. And he would carry the financing. And so knowing nothing more than it was incredibly attractive financing only two and a half percent down. And the mobile home parks have scarcity I decided to go ahead and buy it and risk $10,000 to see if that business had any value or not. And that's how I got it. It was completely random. I was attracted more by the financing than I really was the that niche of real estate. And then once I got into it, I unlocked the puzzle of how it worked, which was not that complicated, and then just started buying more mobile home parks. And then fast forward to today. You know, we've bought and sold about 500 parks right now we own about 160 parks. But that's the whole story. It's not any more exciting than that.

That's amazing. So you got into it quite accidentally and you saw that scarcity is there. So let's talk about that. Why do you think that mobile home park has a very unique advantages? I mean commercial real estate, we see this multifamily self storage and little bit glorified. Right. Mobile home park addresses a very peculiar community. So what is that scarcity that you still see in the mobile home park? What makes it stand out?

Sure. Well, you know, Warren Buffett talks all the time about a good business has a moat and a moat is a barrier to competition. Right. And he doesn't like to buy anything that does not have a moat. Our industry has maybe the biggest moat in America because cities will not allow parks to be built and they have not allowed them since about the 1970s. So for about 50 years now you can't build mobile home parks. And when you look at the problems that, you know, other real estate niches have had through over development like self storage is currently experiencing, or office or retail have had, it's because cities will let you build an office building or a retail center or a self storage facility pretty much anywhere you want to build it. So all that holds people back from building everywhere is available land and the economics. But in our industry, even if you have the financing and have the land and want to build it, they won't let you build it. So that's, that's our key attraction. Our other key attraction is we have a very unique relationship with our customers. So unlike any other real estate niche, they own their homes and we own the land. So we're effectively stuck with each other. So they, they are, they become basically a stakeholder in the business model. They don't own any of the stock in the park, but yet they care because they actually have skin in the game in the form of their home. So it's a little different relationship than an apartment building. And then additionally we don't have to repair their home. So very much unlike an apartment building, we're actually in the parking lot business. So our closest relative in the real estate sector is your good old parking lot. Whether it's at an airport or sporting event or wherever it may be. We basically rent land for people to park mobile homes on.

Right.

So that's why it's just so very weird.

Yeah, that's very interesting. You know, you, you indicate that you are in the, into the parking lot business. So let's elaborate a little bit of that. You know, mobile home industry has been known as renting the dirt. So let's talk about the renting the dirt part and, you know, how does it work? Are these all, you know, home. What is the investment thesis per se? Are these all parked on homes? Are all these are rented homes or is there a combination? And what works from the investment perspective?

Sure. Well, as a mobile home park owner, you don't want to own any of the homes if you can help it. Now, when we buy mobile home parks, often mom and pops have rental homes. They even have abandoned homes that are just sitting there. So now we have to get titled to all those things and then we have to set about trying to get them all sold off. But the dream situation is that you don't own any of the homes at all. We just own the land. But it may take you a while to get there, it might take you 2, 3, 4 years to get them all sold off, such that you're just in the land rental business. But that's, that's where we all want to be. And that's where the lending all, that's where it all wants to be. Whether it's conduit lenders or Fannie Mae or Freddie Mac or your regular bank, they want nothing to do with the homes, Right. The appraisers want nothing to do with the home. So basically everyone is aligned. They don't want anything to do with the homes. We just want to rent, rent land and that's all.

Yeah. And then you talk very peculiar about having the skin in the game and the tenants to have the skin in the game. What makes them to have that skin in the game? I mean, of course they are the owners of the home itself. They're renting that. But when we see the turnaround, right, typically in, in other industry, whether it's self storage, whether it's apartment, this turnaround is really, really low in the mobile home park industry. Can you elaborate a little about that? Why that turnover?

Yeah. Our average Resident stay period in our parking lot is 14 years, which compared to the average apartment, I think is a year, roughly. So the reason we get 14 times greater duration of the tenant being there is because it's their house. And also because it is their house, they have the absolute lowest cost of housing of anyone in that market. So at a typical mobile home park, the US average lot rent is 300amonth. So if you have a park with a 300amonth lot rent and the customer owns their own home outright, then they're paying 300amonth to live in that city. But the nearest apartment might be 1200amonth. So they can't really ever leave the mobile home park. If they leave the mobile home park, they would only leave to go live with a family member, basically because there's no way you could live any cheaper. I mean, you can't get any cheaper than 300, except maybe with your aunt Gladys or something. So as a result, they. They don't really ever leave. And when you say, well, but they do leave in 14 years on average, you got to remember that half of all mobile home park residents, up to almost all residents in many properties are older Americans who are retired. So they all have a biological age clock ticking where they may have to go do assisted living or a nursing home or something. But we have many residents who have lived in some of these parks as long as the park was built. I've met, we have a park up the highway in Arnold, Missouri, that a couple. And in fact, she served as the manager for a while. They moved there when the park was built in 1961. So that's a long tenancy. And they stayed there the entire time because they own their home free and clear and it was very inexpensive living for them.

Yeah, that makes totally sense. Right. And even if they want to continue, and there is not like they have an option of changing the parks for that 300 or a little bit cheaper, a little bit better kind of a living. Right. The transportation itself, it adds a lot of cost. Right. If they decide to change the park.

Yeah, it's about five to $10,000 to move a mobile home from point A to point B. But equally important is the fact that you can't move any home built earlier than 1976 because it does not have a HUD seal. So the city will not allow you to bring it back in if it was built prior to 76. And then if it was built from 76 to probably 89, it's probably not wise to try and transport it because when you pick up something that's been sitting in one spot for that long, it's very possible it'll, it'll break apart. So those rarely get moved. Right. So now you're into your 1990s and newer homes and those are going to cost you about 5 to $10,000 to move, which is a lot of money to move a mobile home. So what happens is normally if someone wants to leave, they don't move it, they just sell it where it sits and then they move into whatever other housing they're doing.

Yeah. And even if the owner changes, your rent is a fixed thing that's coming to your cash flow that is not going to get impacted even if the owner of the home changes. Right. And you were talking also about a particular issue of affordability. In America, home affordability has been becoming bigger and bigger challenge. Right. The home prices going up and the interest rates are going up as well. That has created a peculiar challenge. People are not the, the American dream that used to be owning a home that is not the dream anymore. Right. And there is a lot of community, there's a lot of members who are coming from different areas. There is, you know, workforce which are working at the low level job, the hourly jobs, immigrants coming to the country. Right. These are the, these are the kind of people who cannot afford to be in that apartment even at times. Right. Because the apartment rent is also growing. So this become viable option. Right. When there is a recession hit and people, there's a kind of A, as we see the downward kind of movement, right. The apartment A, the class A goes to B, B goes to C and C. Where do they have option to go? They go to the mobile home parks. Right. And you rightfully said that, that anything down from that is going back to their, you know, parents home, their basement. That could be the next option if they cannot afford it. But affording that $300 rent, you know, nationwide average, I think that's an incredible, incredible kind of a place that they can stay. And if they own the home, typically in whatever period, they, they just have to worry about getting that 300 out of their paycheck. So that's a very interesting factor. So walk us through a journey of a mobile home park owner. Right. If they're earning this hourly age, they're, you know, earning really, you know, like a bottom line income. Right. If they want to get that home, purchase the home. Right. There is a 300 lot rent plus the purchase of home too. How do they purchase these homes?

Sure. Well, let's Go back a step because, you know you've got 44,000 mobile home parks in the US the average lot rent, or the average lot we think is roughly about 60. Right? So you've got, they say 8% of all Americans live in mobile homes, but of Those, only about 40% live in mobile home parks. So we're this little unique subset. And in that little subset, about 80% of every home and every park in the US is already owned free and clear. So there's only an actual traditional mortgage on about 20% of those.

I see.

And so on the 80%, which is where most people end up living, if they buy that mobile home, they're only talking buying it for maybe a thousand dollars, $2,000, something like that. So for 80% of our customers, the lot rent is the only cost they actually have on the ones who buy the homes, which requires going traditionally getting a mortgage like a regular single family home, but at a much higher interest rate. Our typical interest rate on a chattel mobile home mortgage right now is probably 12%. So it's not quite double the mortgage amount. So that mortgage may be, I think the US average is probably $500 a month on that. So if you still take a $300 average lot rent and you add on $500 for a 1990s mobile home, you're still at 800. And comparably in that market that you're in at 800, it'll still be on the apartment rent, probably 1,214, 1600, something like that. So for those 20% of the people, the, they're still way ahead of the game. But for the 80%, they have an insane advantage where they're paying maybe 300 when the rent is 1500. And going back on what you said a minute ago, it's important for people to remember that the average retiree in the US makes 1200amonth. That's the average Social Security check. And the majority of people no longer have pensions. That's, that's from another generation back maybe. But you know, our average customer, if they have a pension, it's very small. So let's assume they just get $1,200 a month. If you have $1,200 a month and you're retired and you pay $300 a lot rent, and you have utility bills of, let's say, another $200 for cable and, you know, phone and everything else, now you're still in the game, right? I mean, you got 1200. You have no income tax on that. And now you have 700 remaining to pay food, medical insurance, gas for your car, car insurance. It's possible to live, it's not possible in an apartment. If you make 1200amonth and the rent is 1200amonth, then how do you eat? Right? And so that's why mobile home parks have always been really popular with seniors, is because it's actually attainable now on the family side and they're the ones more prone to have the mortgages. In fact, you rarely see a senior in a home with a mortgage on it. I see on the younger people aspect with the new minimum wage laws and just the general trends on employment you can now make at McDonald's, you can make 30,000 a year just as the person who does the cash register at McDonald's. So even if you're a one income household, you're now making 2,500amonth. You probably have very little tax at that level. And once again, even though your payment of lot and home is, let's round it even to 1,000, you're still in the game. You got $1,500 a month left over to pay for food, entertainment and car and all that. So the way America has ended up, we're probably really just the only attainable housing for a whole lot of people. Probably for a third of the US Population, we are the only form of housing they can afford. And if they can't afford us, then they're definitely going to end up probably living with a relative.

Yeah, you broke it down so very well, Frank. Thank you so much for doing that. It just breaks my heart to see how tight it could go for this community. And these people still need to survive. These people still have families, kids to support. So being able to afford a home, which is absolute, absolute need, is actually, in a way it's giving back, right? To be, to be able to stay in that segment and even for investors is beneficial, even for the community that you are serving is beneficial. That's incredible amount of kind of giving back thinking about it, right? So let's talk about, with that a little about investors, right? What do you look for when you're trying to invest in a mobile home park, right? So for example, if it is, you know, 80% of them, it's already owned. And typically we look at a value add, you know, from like a multifamily or apartment perspective, right. That how can we increase the value so that we can basically for investors make a good returns, right? So how do you, I mean, can you talk about a little bit around the investment thesis and why this makes actually a good investment option.

Sure. Well, you've got basically five drivers when you're looking at buying a mobile home park. You've got infrastructure, you got density, you got the age of homes, you've got the location. And then of course you have the economics. And so of those five, because it takes a long time to go for each of those and each component of infrastructure and density, et cetera. But in general, the way you make money in mobile home parks is you try and get a three point spread between the interest rate on your loan and the cap rate, assuming about 70 to 80% loan to value. So if you can get a three point spread, that gives you a 20% plus cash on cash return. And that is what most people in our industry's goal is. So if you said, why are you buying mobile home parks? They'll say, well, I'm trying to get 20% of my money. Because even in a world now where CDs are at 5%, 20% is still a four for one. And it's definitely, it outstrips inflation, it allows you to actually build wealth because even though your money is deflating in value by the rate of inflation and even though you have tax on your money, you're still getting somewhere at 20%.

I see.

So to get to 20%, what you would do typically is find a mobile home park. And normally when you buy it, you may not get three points of spread, you may only get one or two points. And then as soon as you buy it, you have a very simple business model. You basically raise rents up to market levels. You try and fill up whatever vacancy you can. You typically try and get out of the utility, utility billing arena and have the residents pay their own water, sewer and trash and then make some other adjustments and costs, typically replacing the manager with somebody less expensive. And that's how you drive your way to that three point spread. But we're if you know in the world of video games, whereas some real estate is so complicated, it would be like a some kind of modern, super wild, difficult video game. We're a little more like pong from the 70s. Our business model is super, super simple. It will always remain super simple. We don't have many moving parts to it because again, we're in the parking business. So we don't really have a whole lot of sophisticated strategies and attack plans. It's basically just raising rent, filling lots, cutting costs. That's about it.

Yeah, that's interesting, right? The three point spread that you're Talking about that's where the returns for investors are. Right. So it does make a significant sense to have us as an investment. But when it comes to the mobile home park investment and when it comes to any other classes of investment, there's kind of a phobia that I see from investors perspective. Right. It's not a glorified investment per se that if they look at the pictures, especially about a class A apartment building where they have great amenities, these great launches, it almost looks close to hotel these days. Right. What do you think? What would be insightful for investors to know that even this is not glorified, this is a good investment option?

Sure. Well, our business is basically what they call necessity investing. So it's kind of an offshoot of regular investing because our whole business model is built around the most basic need, which is housing in the most basic form, which is as inexpensive as you can get it. So we are basically like a dollar store.

Right.

And dollar stores tend to do better when times are bad because people need to save money. So instead of going to Walmart even they'll go to the dollar store. They, you know, when you go to the dollar store and if I go to the dollar store in my small town here in Missouri, I know the products are not always the best quality. Right. Toys particularly are very poor quality. I have my great nieces come over sometimes. We'll go over to the Dollar store and they'll buy a couple Dollar store Barbies. And a Dollar store Barbie will not even last an hour before the arms and legs fall off, whereas a real Barbie would last a lifetime. But that's the trade off you get. You don't always get the best quality product. You don't always get the largest quantity. Right. Dollar store box of crackers has less crackers than the one at Walmart might have. But the trade off is you're only paying a dollar, or in the case today of the dollar store's debt, $1.25. But that's how mobile home parks are. So we make no illusions that we are glamorous, the nicest. We're not the Ritz Carlton hotel. But no one can match our price point. And if you can afford better, that's fine. But we service people who cannot. And so really their only choices are the mobile home park or living with a relative which gets old really fast. So we are kind of that, that in between niche. You know, we didn't used to have such a competitive advantage on apartments. That's kind of a post Covid issue because it used to be the mobile home costs were about one half of apartment. Now nationally, we are one quarter of a point apartment cost. So that's a big deal. I mean, it used to be that we were the least expensive form of detached housing, but we were more competitive with apartments. We had to compete more. Today we don't have to compete at all. I was talking to one of our managers over the weekend who just sold one of our mobile homes, a newer mobile home. And that mobile home, including lot rent, was 900amonth. And their. And their apartment option now is 1,800amonth. So even with the mortgage, we were 50% off. So we've seen apartment rents rise particularly aggressively since COVID And then of course, single family, as you noted at the start of the show, it's. It's just not attainable anymore. The average 400,000 price point necessitates about $125,000 a year of annual W2 income, which. That's very rarefied air. I mean, there that is. I mean, if you look at the stats in America of what the average attorney makes or even doctors in some specialties, they couldn't even get the $400,000 home number. So, yeah, American housing is really screwed up and we're just like part of the solution for that at the lower end.

Yeah, it's very well put, Frank. I think the affordability and what are the metrics that you are running right now that makes this class of people, this housing, affordable and attainable. That's really the key here. And I always talk about diversification of portfolios. So yes, there are options of going into apartment complex, the class A apartment complex as well. But this is a need also, and this is another great investment option. If you think about diversification into different asset classes, your portfolio kind of gets that advantages. So I really talk about that to my investors. So with that, let's talk about the challenges. Right. The first challenge is the current market conditions. Right. We have economic uncertainties. We have interest rates are super high. And even the financing options have becoming really, really different right now. Now. Right. So how is it impacting the mobile home sector per se?

Well, you know, when Jerome Powell decided to raise rates up at the highest level in 40 years, the big. The. The person who got hurt the most from that was the real estate industry. Whether it's a single family home, people trying to get mortgages or commercial properties because of the interest rates comes not only interest rate on their loans, but the perception of value under cap rates. So you've gotten a triple whammy from the rates. Now, that being said, most people have no confidence that Jerome Powell will hold these rates at the current level. You saw UBS just last week said that they anticipate rates to be down three points by the end of next year. And now a lot of other economists are saying, yeah, we also don't think rates will hold. The main reason being people think we're either already in a recession or we'll definitely be in a recession next year. And the Fed, if you look back last 50 years, the average rate reduction during a recession is about 3 points. So people are just using history to give them the future of where rates go. Now, I don't have a crystal ball and I can't tell you where rates will go. I know that the problem you have with what Jerome Powell has done is it's a giant game of bluff. It's like some kind of poker where someone has no matching cards at all. It says, oh no, I'm all in and throws all those chips out there. Because the problem Powell is going to have is I had a business back when Reagan was president and when they raised rates up to 16 18% to try and kill off Jimmy Carter's inflation and when he did that, our national deficit was less than $1 trillion. It was about 800 billion was all the debt the nation had. So our interest payments on the 800 billion were inconsequential. Today, as you know, the US has about 35 trillion of debt. And that 5% interest rate that he's throwing about like he doesn't have any care in the world, that would equate to about 1.7 trillion of annual interest. And the US government only brings in $4 trillion in total revenue. So at his current interest rate, the government is completely insolvent. And he knows it. And anyone who knows the deficit knows it. So that's why no one is taking him seriously at all on the longevity of his rate increase. So he jacked them up. He has the ability to do that, but he will not be able to hold them where they are. When we hit the recession, those 5.5% rate will drop down to 2.5 and you'll see a corresponding decline in mortgage rates. You probably see home rates will go down probably to about 5%. And then interest rates on mobile home park loans will probably also go to 5. And 5 is where rates have pretty much always been through American history. So there's nothing wrong with that. We're never going to go back to zero.25 Again, it's never happening. We're never going to have 3% mortgages again in our lifetimes or anyone's lifetime. So that's never going to happen. But we can all live with 5%. But that's a huge difference because when you look at where mobile home park cap rates were pre Q1 of 22 to where they are today, if you take rates down 3 points, it pretty much eradicates the differential. So that's the first thing about the industry is a lot of people are still buying parks and just completely discounting Powell's rates. The problem when you do that is though, you start to have a financing source. So there's a lot of seller financing going on and there's a lot of people who are just putting more down on the properties. But none of us really know next year is going to be a very strange year. You have more uncertainty in one year than I have ever seen. And I'm 62 and I've been through any number of recessions. I was there in the 70s recession, the SNL crash in the 80s, the.com crash in 2000, Great Recession, 2007, 2008. If you take all the uncertainty of all of those combined, that gives you next year, next year. We have no idea who the President will be. We have no idea the future of interest rates, the outcome of any of our various wars out there, Israel, you name it, Ukraine. I've never seen so much uncertainty. But see it all ends by the end of next year. So by the end of next year, in 2025, we know who the President is. We know what happened with the interest rates. We know if the Ukraine war has ended, we assume the Israel war has ended. And so this year, the year 24 is where you put your bets down based on where you think things will be in 25. So if you think that rates will decline in 25 and that the world won't end, then if you buy something today at these inflated cap rates, you'll do great. Because if rates go down three points, then you look like a genius. So you bought your park with a two point spread and you suddenly have a five point spread, right? But that's how I see this going. It's like everyone's going to get to go to Las Vegas in 24 because you're gambling on how the movie ends. And none of us know how this movie ends. It's like having every football game ever played since 1960 all happens in one year. This coming year, in 2024, and then 2025 will seem so peaceful by comparison.

I love that how you, you know, wrapped around the whole scenario in, in just a snippet, the whole about economic uncertainties and how we can be hopeful about what can happen around 24, 25. Right. So thank you so much for doing that. Seeing that hope actually helps a lot, you know, helps a lot of investors. There's so much fear in investors mind. So I'm sure that they're going to rewind this clip and you know, watch it over and over again to make sure that they understand what you just said. So thank you so much for doing that. So moving on to the different risk. Right, let's talk about, we talked about the market risk. We talked, let's talk about the operational risk. Right. These are the areas where there is a little bit higher crime. Right. There's a little bit of, you know, probably drugs or you know, any other kind of challenges going on. What are the operational challenges that you have over the period of years have faced and how did you handle them?

Sure. Well, our industry gets a bad rap because we don't really have a lot of crime. I think crime is more of a multi family issue. And the main reason being our product is not built for crime. You have nowhere to hide. The police can come in from any direction at any moment. Mobile home walls are very thin, unlike an apartment. So we don't see a lot of crime. So crime is not really even on our list of operational issues. Our biggest issues always revolve around collections because our customers as we mentioned, don't have a lot of money. So you have to stay on top of collections. And the other thing you have to stay on top of is property condition because again, when you don't have a lot of money, you don't make a lot of repairs, you scrimp, you don't mow when you should. So our key battles basically are bringing in the money every month and then making sure that things like yards get mowed, trash gets picked up, that kind of stuff. And so that's really what our, the role of our manager is. We have about in our company we are 92% ACH payment of rent. So our manager's role in rents today is just to knock on doors of the few people who have not paid. So probably the biggest role of the manager today operationally is just rules enforcement going to people saying, you know, our rules do not allow you to have a non running car in your yard. You have to get it out. Because these are some of the Lifestyle attributes of people who don't have a lot of money. And again, you've got 44,000 mobile home parks. They have lots of different personalities or fancy parks. You know, out in Malibu there's a park that has Hilary Duff lives in it, Sean Penn lived in it. So I'm discounting all the fancy parks. But in general, people don't have a lot of money. And as a result, when you don't have a lot of money, you kind of let things slide unless you have someone who says, okay, you got to fix that. But those are kind of our operational issues. Other issues you have are obviously weather related issues. Flooding is a huge issue on the east coast. Fire is a huge issue on the west coast. You've got, you know, hurricane, tornado issues, you have weather issues. We get around those with insurance. So that's, that's how we try and get through that. And then of course you have this, this growing issue in America of litigation because everyone today in America just wants to sue each other because they figure that's the quick way to make a buck. And so you've got to make sure that you stay out of harm's way with that. We carry lots of insurance and almost every outcome we can think of. And then we proactively try and reduce risk by making sure we cut down dead trees and fix cracks and sidewalks and stuff. But those are pretty much our big issues. Again, we are saved from a lot of problems because we're a parking lot. So in other words, someone can't call us up and say I'm going to sue you because my lock didn't work on my door and someone broke in and beat me up. It's not our lock, not our door. We're not in that business. We just rent the land. And that's what we really like about our business is that we can be a parking lot. And in most parking lots, the problem with that is you can't really find a necessity based parking lot investment model because parking in those cases is a luxury. Like I drove by a big multi story parking lot in St. Louis downtown recently that has gone bankrupt. They've shut the big parking lot down. There's a big size, this parking lot closed because office building vacancy in St. Louis is about 50%. So obviously they didn't have enough cars going in the parking lot to pay the mortgage on the high rise parking lot, garage and even out at an airport. It's based on travelers, you know, and I, I assume the way if we hit a recession, people aren't Going to be doing a lot of recreational flying. And so all those park and fly parking lots, they will all have problems. But we're kind of the only necessity based parking lot model that I've ever seen.

Yeah, I like that. The necessity based parking lot and this 10, this, you know, the parking lot where they have parked their homes, they're not going to go anywhere. So that's kind of, you know, there's no change that's happening like a typical parking lot that happens. Right. So thank you for elaborating on the operational challenges. The third thing I did want to talk about is the regulatory challenges. Right. In the regulatory landscape, are there any like recent changes or considerations that, you know, that has impacted this industry positively or negatively? Would love to know more from you.

Well, there's nothing ever in our industry that comes positively from bureaucrats, so there's nothing good ever that comes of that. What you're seeing right now in America is you've got this colorization of America into a map of red, blue and purple. And red states traditionally are stronger on property. Right. Interests of landowners. Blue states are typically less favorable for that. But the only real problem even then, because a lot of blue states also have stronger housing prices and economics. Look at California, for example. Some of the highest home prices in America, but definitely a blue state. The real issue really and the problem with our industry, and I guess all real estate industries boils down to just one item, which is rent control. That is the kryptonite to life. And rent control started during World War I, so it's over 100 years old. And so far to date, only five states, I believe it's still holding it. Five have, have jumped on the rent control bandwagon. So you have California, New York, you've got Oregon, you've got. Oh gosh, what else do you have? You've. I forgot, I forgotten the other states because we don't deal in it. And we tried never to deal in rent control. Yeah, but you have states that, that threaten rent control, but yet never actually voted into play. And I think what you're kind of seeing is there's an old saying that when the tide goes out, we see who's swimming naked. And in this case, what's going on is some states talk as though they are very progressive and very blue, but the problem is in reality they're not. They're still governed by other forces behind the scenes. So, you know, in, in some states, if you look at who actually bankrolls politicians for elections, there's a Lot of real estate people who do that.

Right.

And so, but yet, but yet the people they elect want to take the posture that they're very anti real estate, but they're not going to lose their, their funding, they're not going to want to lose office.

Right.

So they talk it, but they never enact it. So that's really the thing we watch frequently are states that actually appear serious about it. You know, if you look at Illinois as an example, you have Jay Pritzker, who has aspirations. I think he wants to be president or I don't know what he wants to be. But he loves to talk about rent control. He talks about it constantly. He proposes it at least five or ten times a year, but they never do it because at the end of the day, Pritzker himself is a real estate guy. And if you look at who bankrolls politicians, they're all out of Chicago and they all own giant office buildings. And there's no way they want to have any rent control because it would be the end of their business. So Illinois is a state where they talk all the time, but they never do it. And then you have states like Colorado, same story, people talk a big game. Oh yes, we are super progressive, but yet they're really not. And then the all time example was Oregon. Oregon was one of the strangest rent controls of all time. So Oregon passed a rent control which is more favorable to landlords than before rent control. In Oregon you get, you have a. Yeah, you have the right to raise your rents the sum of 7 points plus inflation annually. So that means in Oregon this past year, you could raise your rents 12%. And in raising them 12%, no one could do a thing about it because you just say, well, I'm fully within confines of rent control. Most landlords don't even raise their rents 12%. So what happened in Oregon, obviously is the bureaucrats wanted to appear progressive. But behind the scenes, whoever really pulls the strings in Oregon said, okay, here's what we're going to do. We're going to pass America's first fake rent control bill. And that's kind of what they did. But when you talk about, you know, regulatory issues, that is the big one. There really isn't. The only other regulatory issues in our industry that typically pop up is us having to give notice to tenants when we're going to sell the property, which is not really a big deal, or maybe an extra month to pay the rent before you file eviction. Not a big deal. It's really just about rent control. That's the one big issue.

Makes sense. Makes sense. Totally. So where do you see the future going for this industry?

Well, I don't think the industry will ever go away. I don't think you'll ever have everyone in America so rich they don't need affordable housing. The only thing I would say is I would imagine 50 to 100 years from now the, the product, the mobile home itself will look nothing like it does right now. If you look at a typical mobile home, the way it's built, it's not that it's not at the top of the, the art, it's not at its finest hour. They're not very attractive and they're not very well built. And there are other technologies that are now present which are far superior. You know, if you read a lot of magazines on housing, particularly in other countries, they are light years ahead of us in, for example, 3D printed homes.

Yeah.

Which you know, we could also do, but our uniform building code does not allow it because the housing industry is a gigantic lobby. So going back to bureaucrats again, it's going to be really hard to pass stuff legislation allowing 3D printing. But you could put a 3D printer on a mobile home lot and you could print a 3D home. This is infinitely superior to the looks of a mobile home. The safety of the mobile home, it would not blow one in tornado. It would have better soundproofing, it would have better energy efficiency, everything at less money than a mobile home. Right. And I imagine just like, just like Uber, Uber and Lyft revolutionized taxis. Right? I mean, you know, in the old days when you had to get a taxi, it was so awful, you have to go stand in a big old line and you get a taxi, would be all nasty smell, terrible. And today Uber and Lyft are far superior and everyone knows it. Even though they're illegal. Right. Because the, you know, Uber, Uber Lyft, they call it ride sharing. It's a taxi. And there's taxi laws and taxi medallions and, and, but the same will happen, I think with these new housing alternatives. People will eventually have an uprising and say, I want a 3D printed home. And there's no possible reason why I need to have it build the old fashioned way with wood framing and all that. And I think just like Uber Lyft, they'll overwhelm the bureaucrats and rather than have, you know, them all marching on them with flaming torches, they will say, you know what, we'll just go ahead and amend the code. I'll let you do it. So I imagine 100 years from now, the mobile home parks will still be there, same addresses, but they will look much more like single family subdivisions, you know, much better looking homes. They will no longer be up in the air. You know, people ask all the time, why are mobile homes up in the air? People don't realize the government mandated them to be up in the air. The building lobby is so strong that when the issue came up in 1976, because you could put a mobile home on the ground, it doesn't have to be up in the air. They take the wheels and axles off and you could easily make it flush. The government mandated they didn't to give stick built builders an advantage over them because they knew mobile homes would look stupid three feet in the air. But that's why they are that way. So you could do 3D printed homes at ground level. They would look quaint, charming, very well built, infinitely superior to any current mobile home product. So in answer to your question, that's the future. The parks will exist, there'll still be parking lots, but the cars that are parked in the parking lot will be much more advanced than these goofy trailer things that we currently have.

You painted a really great picture and it kind of gives me hope. It makes my heart happy actually, because this is the community, this is not able to afford the housing, right, but these are still people in it. And what you're trying to do right now is change the people's life, make them feel safer in that community, make them feel happier. You know, they have their kids, they, their amenities that they can afford, they can be happy as a family there. And to take that present and go into the fast forward in the future to make this more secure for them and yet being affordable in whatever world we will be, with inflation, where it's going, whatever made that be, this is going to be still an affordable option compared to everything else that the country has to offer. So thank you so much for painting that picture. So with that, this conversation, immense amount of value that you have added, I'm going to go into the next segment where I would love to ask, how do you think outside the stocks and in terms of how do you diversify outside of the mobile home park, of course, and outside the stocks and how do you protect your assets? How do you protect your kind of a vault, Put that vault around your financial wealth, right, to grow, preserve, protect and pass your generational wealth. Anything that's information, what you do, it's going to be immense, immense value for our Englishness Sure.

Well, the first thing is, anyone listening to this, you need to have some kind of estate plan with a good. I mean, there's no money better spent than finding a good estate attorney and figuring out how to create an estate that you can pass on to your heirs that takes advantage of all of the tax advantages of estate planning, security of estate planning. Because, I mean, I think most people like the concept. I know it's not popular with a lot of baby boomers in culture today where they talk about spending down to zero and they want to die as they spend their very last dollar. I don't. I don't find that to be in line with. With past American behavior or hopefully future American behavior. So, you know, the whole goal here is to try and give people an advantage as best you can. And to do that properly, you need an estate attorney. So that's definitely one thing that everyone should do. I've been doing estate planning since I was in my 20s, so I think that's a very key step. Another thing is to acknowledge that quality of life does not really even stem from money. Quality of life, money is only one component. Best estate plan you can have is to have great relationships with your spouse and your kids and maintain your health and all those issues that no one talks about anymore because, you know, the Kardashians are much more exciting, even though they violate almost all of those covenants. But you want to have a really high quality of life, which you can't actually buy. But by having a high quality of life, it is still extremely financially attractive. Right? Because it's, you know, if you get divorced, you'll lose half of your estate. If you have poor relationships or poor health, that could. That could gut your estate. So you want to maintain those personal attributes as best you can. As far as the investments go, you know, you. You've got to acknowledge that just because things worked in the past, they don't always work well going forward. Right? So, you know, having the ability to ride a horse was a really big deal back in the 1800s. Man. If you could. If you were a good horse rider, you. You were set. You could work at the Pony Express. That skill has no value today at all. Zero. Unless. Unless you have a hobby where you want to go drive your little hobby horse. So, you know, when you look at the stock market and the performance of the stock market as an example, the problem with it is that for the longest time, it didn't do much at all. And then we had one big, steep run up. You know, if you Listen, you know, if someone goes on YouTube, you'll see Warren Buffett gave some really great speeches to college students. Those are some of the best he ever did. If you look him, you can, you can Google up. He would go in and talk to, he would be invited to talk at colleges. And I think because they were colleges, he did not feel he was on stage to promote his own business or things that business people want to hear. And he tells stories like when he started out and he tried to, he had this idea that he would revolutionize stocks by finding companies that were undervalued and going to the people who worked at or owned the companies, trying to convince them to buy their own stock. And he would go to meetings, he said he went to a meeting with a guy who was the CEO of a horribly undervalued company and he said, hey, I have this genius stroke. You should buy your own stock. To which the guy said, are you crazy? There's no money in the stock market. Stock market hasn't gone up in like 30 years. Why would I want to be involved in the stock market? But we've had this, this unique run up. If you look at the graph of stock prices, right, it's a very slow ascent and then it goes almost straight vertical. And history has proven things that go straight vertical up often come straight vertical back down. And Warren Buffett gave a clue to that recently when he said the glorious period of the American economy is over. He was trying to give everyone a hint, perhaps don't do what he's doing because he talked about the fact he anticipated Berkshire Hathaway's earnings to start declining because America has ended this glorious period. I think when he said glorious period meant he meant the glorious period of the stock market. So right now, if you look at stocks and where they're valued based on the old multiple of a 10 price to earnings ratio, that's what I was taught in college back in the 70s. Well, that's now out the window. And people are buying stocks at 100 PE ratios and 200. And we're putting more value on Tesla, which makes virtually no money than all the other car companies in the world combined, which makes no sense. And I don't think people, most young people, you have to be at least 40 years old to have seen the last correction as an adult. So everyone has lost track, they've all lost their path on how the realities of life. So I am, I have never been a fan of the stock market. I find it, I don't even find it investing to be honest with you, to me, it's basically speculation. That's how most people do it. They look at it as a form of gambling. I would have no more interest in gambling in a stock than gambling in Las Vegas, which I don't gamble. So that, to me, is not any good. So if you take stocks and throw them out the window right now, CD rates are good, but CD rates weren't good for the longest time. They suddenly are. For this little blip in time, Powell's rates will go down. CD rates will go back down from 5 down to 2. So once again, you're not even hitting inflation with the cd. So you got to do alternative investing. You really don't have many other options if you really want to get anywhere. And of the alternative investing realm, I like the necessity sector. And necessity is basically housing. As far as real estate goes, people thought for a while that storage was necessity, but it's proving not to be necessity because it's got declining occupancy and rents, because people are now realizing, wait, I don't really need the storage thing. I can cut that, but you can't cut your housing. So to me, it takes you down to then only two food groups, which are mobile home park and apartments. And the problem with apartments is, and I'm not in the apartment industry, but people send me apartment deals all the time. They look very pricey. In other words, the differential between cap rate and interest rate is often so fractional it cannot even be measured. And often that's based on the pro forma of raising the rents again. So that's why I'm pretty much just fully, fully focused on mobile home parks now. At the same time, you know, our world is so scary today. You want to have a fair amount of other hard assets, you want to have some cash in the bank, you'd want to have some gold, you'd want to have some other items for, you know, the. The ultimate meltdown of America scenario, which is probably not going to happen, but it makes you feel better sometimes to have that. But I think the key right now is you. You have to disregard. You can't look back and say, oh, the stock market has produced an annualized 9% return forever. Because I could also say that buggy manufacturers had also done that. But it doesn't mean going forward, it gets you anywhere. So when I look at the stock market graphs and I see that giant ascent, I'm just thinking you'll have just an equal amount of gravity decline. It's probably coming up starting next Year, who knows? You saw it during COVID right? You saw the market collapse in a matter of a month. And even then, when you look at where it fell down to, it was still overvalued based on past, past record. So I don't know, I. I'm just bullish on alternative investing, real estate in particular, because it is backed by actual something tangible, land. And then I like the necessity sector.

Yeah, I love that. A very holistic perspective actually from estate planning to this well rounded alternate asset classes including hard and hard asset classes, the real estate class and precious metal. So thank you so much for that insight with that. Just the last segment going to be a kind of a rapid fire segment where just ask quick questions and 30, 60 seconds answer or whatever quick answers that you could give. I call it rapid fire. Are you ready for that?

Yes.

So the first question is that, you know, over the period of years that you have actually supported this mobile home park industry and the community and people in it, do you remember anything that is, you know, somebody came to you as a tenant, most emotional aspect of it, and told you something about how you changed their lives? Any of that memory that you remember?

Yeah, I remember two memories, both from my very first park which I self managed. The first one was how horrible it was evicting a tenant. And I remember I had to evict a family who had not paid rent. And I realized that I was probably part of the problem, problem on that because I let them get farther and farther behind on a payment plan that they were never meeting. So I let somebody who started off at maybe 3 or $400 in arrears end up being about $2,000 in arrears by constantly giving them payment plan. And I realized then that the correct thing to do was to just say no, pay your rent because they had the money to pay it. And if I forced them to pay the rent, they would have not gotten behind. So me being soft on collections actually is what contributed to them being evicted. So that was one early revelation I had on on that first park. Another one was I had a couple come in wanting to move into Glen Haven and they were just. I mean I never thought of Glen Haven as being a big deal, but when they got in, they were just ecstatic because they could find nowhere that they could afford to move into. And I realized that I needed to recalibrate my own brain because you know, I was always thinking of the differential between Glen Haven and my house. But you know, for many of our customers it was literally Glen Haven or Or nothing or living in your car or a family member. So yeah, I learned a lot from those interactions. I still, I still learn from customer interactions because oftentimes as a real estate investor, your database is based on your own life. Right. And you need to see how other people view the product and it can go both good and bad. I rented a car over the weekend to go out and look at a property and the car rental people said, oh, I have some bad news. There are probably 30 of people in line. We've run out of normal cars. All we have left are electric power cars or full sized pickup trucks. Well, does anyone, will anyone take those? And I was the only one who would take the full size pickup. Not one person would take the electric cars. So they would actually rather have no car than the electric car. That was a wake up call to the electric car industry. I thought, oh my gosh, this is pretty bad when people would rather have to Uber than get their rental car because they're that afraid of electric cars. So, you know, you learn a lot from customers. Sometimes you learn that you're wrong on your product, you're wrong on your pricing, but you know, in that, in the case of mobile home parks, when you have customer interactions, normally the people are very happy.

Right, Right. Thank you for sharing that. My next question is that what is your favorite place to travel to?

You know, my favorite place to travel, I like to do weekend driving trips. I'm not a big long distance driver traveler. I've been, I've been to Europe several times. I even went to college in Europe for a quarter. But I, I'm a driver and when I, I live in the Ozarks, an hour south of St. Louis, you've got no less than 10 major US cities within a five hour radius of where I am. So I can get in a car and I can be in Chicago, Indianapolis, Memphis, Kansas City, Louisville, Kentucky. We have an endless array of driving trips and we normally just can just jump in the car on a Friday, drive somewhere either Friday night, Saturday night, drive back on Sunday. So those are my favorite trips.

And you're a very outdoorsy person too, right? You like doing a lot of outdoor activities as well?

Well, the, the only outdoor activity I like to do is I do a lot of walking outdoors. So I try and walk traditionally about 10 to 14,000 steps a day. That's my, that's my only really big outdoor thing.

I do that. That's nice. And the last question on this show is that, you know, one piece of advice for investors to navigate this fear that they have in mind in current market cycles.

Well, the first thing you have to remember is that, is that the very definition of a cycle is things return back to normal. So I've been through, you know, the 70s recession, the 80s crash, 2000, 2000 Great Recession. So I guess I'm coming up Jon probably my fifth crash coming up. And the way the crashes work are you have terrible fear that the world is ending and it doesn't and it all goes away. So you just have to realize, as Winston Churchill once said, you know, if you're going through hell, keep going. Because at the end it all works its way out. It all comes. So, so, so everyone has inherent fear. But you know, fear can be productive. If the fear makes you diversify your assets, if fear makes you do better estate planning, if fear makes you work harder, that's great on fear. But negative fear is when you just constantly fret and worry and work yourself up in a lather and give yourself an ulcer, there's no benefit to that. So, you know, if you can channel your fear into something productive, if you can say, okay, well, I'm terrified of the way things are going, I am going to spend all of my recreational hours learning about different types of investing or different things. Okay, that's good fear, that's harnessing your fear. But don't let fear overwhelm you because these cycles of the recessions, really, if you look at them on paper, they're not that long. I mean, the typical recession is one year, two years or really short. People think of them as being huge because we always think of the Great Depression, right? So you know, if you talk to people, oh, the Great Depression was 1929 to like 1941. And that's a doozy. Okay, that's a biggie. That's a 12 year recession. That's the only one we've ever had like that. And of course that, that one had all kinds of issues. I mean, we didn't have fdic. There was, people lost all their money in the banks. It was a mess. We weren't diversified as a nation. We were just so screwed up. We were so poorly structured. Today I think we're in much better shape. And I don't think you'll have another Great Depression. I don't see the Great Depression happening. And if you read a lot of Great Depression books, most people were fine during the Great Depression, right? I mean, you had unemployment of 25%, but for the 75% of people who didn't lose their job. They were doing great because they saw home prices come down, food prices come down, and they were having a fine time. But, you know, just, just don't, don't, don't. If you, if you, if you're worried about the Depression or worried about a recession, harness that fear. Say, okay, what am I afraid of? Exactly, and figure out how to better your position. That would be to me the key item.

That's an incredible advice. So not give that fear the power, but take it back from it and kind of harness it and learn from it. Thank you so much for doing that. With that note, how do they get in touch with you if they want to get in touch?

The best way to find me is always on our little hobby mobile home park educational business. At mhu.com which stands for mobilehomeuniversity.com you can find all my, I write stuff constantly. All my articles are on there and you can sign up for newsletters and all kinds of things that we do.

And I have been through your, your boot camp for Mobile Home Park University. It's incredible amount of education that you provide there. You just stand there and talk all day giving everything that you have, all the education, all the information. So that was a wonderful experience with that. I'm again so honored for you to, to have you on this show. Thank you so much. Again, so grateful for this conversation. I hope listeners learned a lot of it from our conversation. Thank you for being here.

Well, thank you for having me.

Thank you so much. And listeners, you heard so many great things about, about the market, about the mobile home park industry itself. I hope you got that, you know, that fear kind of address in your mind. The one thing that you have to do is that just check and balance your fear and take that next step, next action, create your goals and see what you want to do with it. We also have our passive power hours. So I want you to come back and start learning. Use this time to start learning about different asset classes and how you can create your own investment journey. So I, I hope to see you in our next passive power hour as well. Thank you so much, Frank. Again, it was an honor to have you.

Thank you very much.

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