The Land Geek Podcast #84

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Hey, it's Mark Podolski, the Land Geek with your favorite favorite niche real estate website, www.thelandgeek.com. and today I've got one of the most successful and impressive mobile home park entrepreneurs in the country. Frank Rolf is a big deal. Let me give you Frank's bio here. Frank has been an investor in mobile home parks for almost two decades, having owned and operated over 110 mobile home parks during that time. He is currently ranked with his partner as the 18th largest mobile home park owner in the US with over 80 communities spread out over 17 states. So Frank is going to tell us his story and journey from being from going from zero to, you know, 120, 110 sites. Frank graduated from as an economics major from Stanford University, little University maybe some of you have heard of. He is also the chairman of the Landmarks Commission. He lives in a small town in Missouri with his wife and daughter, Landgate Community. Let's welcome Frank Rolfe. Frank Rolfe, how are you?

Hey Mark, thanks a lot. Let me tell you, if you thought those stats were impressive, let me give you the current stats.

Sure.

That bio is even a little old. We own currently around 140 communities. We have about 14,000 lots. We are now 10th largest in the US so we keep on growing. I think we have 20 parks under contract right now. So we may be up to 160 something like that here probably by the first quarter of next year.

Frank, this is unbelievable. Why mobile home parks? Why not what, you know, the sexy and glamorous DIY HGTV fix and flip or you know, commercial real estate or self storage parks. Why mobile homes? It seems like, I don't know, you know, tough, tough to deal with mobile home parks I would think.

Actually, actually that's a bad rap mobile home parks get. It's very, very easy business if you can get over the stigma, which is a pretty high hurdle for most people. When you think mobile home park, you think trailer park, you think the show cops, you think Jeff Foxworthy, you think all the nasty things that go on in that poor people world that you don't even want to think about, but that's really not the business. There is that Part of the business. But the stuff we deal in is a notch up. It's called affordable housing. It's basically, we house people that make minimum wage to probably 15 bucks an hour. The key item is they have jobs. Most of the stuff you see in Jeff Foxworthy and Cops, those folks don't have jobs. That's the big difference. So they have no money. So they're the true poor of America because they have not a penny to their name and they live on the dole and social programs and borrowing from their grandparents. Our customers have jobs, they've got cars, they've got lives, they've got kids. So when you understand and get over the stigma, it's a whole new world. But it takes a while to get over the stigma, because we've all been classically trained that trailer parks are filled with poor white trash and we should all avoid them like the plague.

So that's not the case. I know there are some very nice home, like mobile home parks, like in Arizona, like, really nice, like you and I wouldn't mind living there.

Yeah. Well, if you'll go, you know, a little bit farther west, you know, Malibu. There are two parks in Malibu, Point Dume, and can't remember the other name. And Pam Anderson has lived there on and off. Sean Penn's lived there on and off. You know, the mobile homes there go. They start half a million, go to 2 million.

Okay.

And the rent is about 2 grand a month. You're literally on the beach of Malibu. They want one of the best locations in Malibu. So it's a big, wide world in trailer parks. There's poor people, there's rich people, there's everything in between. The stuff we deal in, though, is what's called affordable housing. So we're that lowest 20% of America that is struggling to get by. Not making a lot, trying to have a nice life, but not having a lot of cash.

Sure. But that's a big market. It's a huge, huge market. So when did you get started in this, and how did you get started? What's the story?

I'll have to give you the long story for it to make any sense. Got out of Stanford, degree in economics, got out a year early by taking extra classes. So I have one year to burn. Going to go on to get an mba. The key thing back then, not today, maybe back in the early 80s, if you were going to apply to Stanford or Harvard Business School, wherever you were going to go, the number one thing they liked was for you to start a business and have that as a piece of your application. That was considered the ultimate in book reports. A book report on yourself, starting a business, how it went, and then you'd go on to business skill.

Sure. I think that still applies today. They want you to have some real world business experience.

There you go, right? So I got one year to kill. So I call people up, hey, I got one year to start a business. What should I do? People have all these stupid ideas. Start a restaurant, start a rocket factory, stupid stuff. One person says, billboard business would be good, doesn't take a lot of capital, and you can shut it down real fast and you can keep whatever you build at the end of the year. Okay, I thought that sounded pretty smart. I asked other people, they said, yeah, that actually is not a bad idea. So I jumped into billboards with absolutely no idea what I was doing. And so my goal was to get a few signs by the end of the first year. I have three signs, but I have a bunch more pending. So I decided to wait one more year to apply to business school. You can guess what happened. I never applied to business school, never went to business school. Fourteen years later, I was the largest private owner of billboards in Dallas. Fort Worth, had about 300 billboards. And now the issue is, you know, what do I do now? And I think I'm going to just do that the rest of my life. And instead what happens is I get a call from a public company out of the blue saying, we want to buy you out. So they wrote me a check for 5.8 million bucks. And I said, here are all my billboards. And I retired at the age of 30, 36. That got really boring for. It was interesting for about two months, and then it got really depressing and boring. And I realized that retirement is a lousy way to live. So I had to go back into something, but I couldn't go back into billboards. I had to non compete. So I thought, what do I do now? And then I remembered I built two billboards on a mobile home park called Glen Haven in Dallas back when I had the billboard business. And the guy used to call me up all the time wanting me to do favors for him. Normally go by the manager's little trailer, knock on the door, and find out why he would not answer the phone. And normally it was because he was drunk or he was high. And so I felt like I knew this part. So I called the guy up just to ask about the business. And the guy says to me on the very first call, you really need to Buy my park. And I said, I'm on exploratory mission. I'm not really into buying a park. And he said, I'll make you a deal so good you cannot say no. And I said, well, how good do you talk it? He said, I'll sell you the park for 400 grand with 10,000 down, and I will carry $390,000 non recourse, fully advertising over the length of the load.

Wow, that is. That is a deal you can't refuse.

Yeah, so I can't refuse that deal. So even though I did not intend to buy that park, I said, okay, I'll do that deal. And I tell my wife, you know what, I'm going to try this out. This is a $10,000 learning experience because you know I'm going to give it back because I'm not sure I want to do this. So I get in there, I start going to that park every day, nine to five, little trailer inside the park. And after about a year, I think I know the business pretty well. I buy another park and another park and another park, another park. Then the story is I just kept buying parks. I got up to 28 parks. At 28 parks, suddenly the world changed because all these California 1031 investors were swamping the world wanting to do these 1031 purchases.

Sure, sure.

And so the cap rates plummeted from about 10% down to as low as 4%. So I started selling everything off so rapidly as I bought, I rapidly sold everything off. And just like a Raiders of the Lost Ark movie, I slid under the giant stone wall that came crashing down right before the 2007 collapse. So my timing was phenomenal. My last park sale was 2006.

Wow.

So I went into the great collapse with no parks at all, no baggage. Did Nothing then until 2010 because interest rates, again, nothing was compelling. Cap rates were awful. Nothing good going on 2010. Suddenly, cap rates were attractive, lending was attractive, and I started back up buying parks. And we've just been buying ever since. It's myself, my partner, Dave Reynolds out in Colorado. We've just been buying up good deals now for four years now of just nothing but buying nothing.

But how big is your organization? Because I would think you're gonna have to have a due diligence team, someone to go out and management team.

It's true, we have about 200 employees, but every park has an on site park manager.

Okay.

So there's about 140 of them.

Okay.

The rest of them are people in the office who do Things like accounting, titling, that kind of stuff. And then we have another group out in the field that manages the managers, and we call them district managers. So if you still look at how large we are for such a small group of people, we're still a skeleton staff compared to the apartment industry or most any other industry, because again, we just rent land. So we're not. We have a few trailers, but most of what we rent is land. So it's not a very high management thing.

Right, right. And you know, that's my thing is I buy and sell raw land throughout Southwest and Florida. So I bought a subdivision in Texas, goes under and the POA goes under. And so there's no POA fees and there's like, let's say 100 zoned mobile home lots.

Right.

And I don't know what to do with them.

Right.

And I'm thinking, oh, in right now there's a, you know, There are about 25 mobile home lots. And it's what you were talking about in the very beginning of the podcast. I've got the Jeff Foxworthy group there.

Right.

So, you know, it's. People go out that subdivision, they're scared.

Right.

So I'm thinking to myself, what am I going to do? Can I.

Right.

Can I buy some inexpensive mobile homes and rent them out and do cash for keys and get the bad element out? So, Frank, if you were me, what would you do?

If I were you, what I would do is, I mean, you can buy homes from manufacturers such as Legacy, where they will self finance. If you put down a third, they'll finance two thirds. There's a company called True T R U which builds one of the cheapest homes in the US you can buy, I think, a true double wide for under 30 grand.

Okay.

And so the one option would be you'd buy the home. The key item you're going to have initially is people who have jobs don't like hanging out with people who don't have jobs.

Right.

And so what problem you have in what you're describing, which is I think called land home is what we call that animal. Because they own the land. Right. That's how this works. Or would they.

No, I own the land.

So they would never own the land.

Well, technically, I mean, I could, I could do a land home package.

I mean, the problem. Do you have any.

Oh, you mean the people that are there now, do they own the land? Yeah, I don't think so.

Oh, okay.

I'm not sure.

Yeah. So what you have to do is you have to manhandle people to a certain minimum standard.

Right.

Or you just can't attract people with jobs. And if they don't have jobs, then you're stuck with the Jeff Foxworthy mess.

Right.

So to make that deal work, what you have to do is you'd have to get everybody in there now up to a minimum level. All the dangerous breeds of dogs would have to go. All of the rusted non running vehicles would have to be gone. You'd have to get the yards presentable, the homes presentable. It's just basically paint and a weed eater and a lawn mower and that kind of stuff so that it's presentable.

Sure.

Then you'd go more into the marketing phase and what you do is you probably get one mobile home and use it as a model is one way people do it. Just like a single family deal. People come in and say, hey, I really like this home. And then you either sell them that home and bring another one in, or you bring one in and maintain that as your model. Same thing. Subdivisions work. But the difference is you can have that home there lickety split. Right. It's almost like Walmart. So it's not like, yeah, we'll build you one, let's sign the papers and you'll have your dream home in a year. This would be like, sign the papers and you have your home here in a week.

In a week.

Unbelievable. Yeah.

So, so, and I'm not doing the financing on the home, I'm just renting out my, my land.

Well, you would. It depends on the quality of your customer. Right. If they're decent quality customer, they could get their own financing through 21st Century Mortgage or Vanderbilt or something. If they are, you know, minimum wage people, you probably have to, you would probably have to do the financing.

Okay.

In that case, you could go through legacy and they would finance 2/3 just on your signature and you would put up one third of it. So that, that's kind of what you would do with that, I think. Okay, but I've never seen it. But I mean that's just kind of how. What it sounds like.

Right, but this is different from your model. Your model is you're going to establish the mobile home park.

Right.

And you're buying it at a certain cap rate.

Right? Typically, yeah.

And then you're taking, you know, you're making it better, you're improving it and you've got a cash flow.

Right, right, that's correct. What we typically do is we try to find what we call a stabilized with Upside park, that's a park that's done, it's finished, probably built in the 1960s to the 80s, already has a tenant base. And we groom it so we don't start off at zero. We start off with a park that may be 60 to 80% occupied. We go in and clean it up, get rid of the bad people, bring in nice people, fill some lots, raise the rent, clean it up. That's the model. It's just classic mobile home turnarounds. That's what it is.

That's fantastic. That's fantastic. And how competitive is that market? I mean, how tough is it for you to get deals? I mean, it sounds like you're dominating this niche.

Well, you gotta understand that our because of that hurdle. I mean, you know, if you look at single family and other things where there's no stigma, right. It's not hard to get people turned on to it. So if I said, hey, I flip houses, people think, I could flip houses. I live in a house. I know houses. I can do this. When you say mobile home park, how many people are willing to climb over that stigma? Not many. Most people say, God, trailer park. I drove through one once. I was terrified. Or I saw cops last week. Oh, it's a terrible idea. That's why there's not much competition. Most people are terrified of the idea. And so that's why we can find so many parks. If you go to mobilehomeparkstore.com as an example, you'll have at any given day, 800 to 2000 parks on there for sale. No. Big neiman's catalog of 1 to 2000 items for sale right there.

But you wouldn't touch those.

No, we do. We buy a lot of those. Oh, you would?

Okay.

Yes, we do. It's one of the few real estate niches where you can pop up a huge amount of volume really, really fast. Okay, and again, why is that? It's just people are terrified of the industry. I mean, it's just there's no other reason than that. It would be no different than these folks that, you know, retire on their Social Security to some of these foreign countries and live like a king. I know some people who've done that and, you know, I'd be terrified to do that. Yeah, but I mean, you know, so they think, you know, that you're crazy not to do it because you can, you know, live like you're making a million a year in the Philippines on a grand a month. But why can they do that? Because the hurdle is so high. If Americans start pouring into the Philippines, it'd be the price of all the homes up hugely and the opportunity would be lost. Same in this. It's just we have this giant iron wall which is like about 9ft high, of mobile home parks and how people are so afraid of them, so they won't climb over the wall. And that's what makes the business tick, is that stigma. And that stigma, if you look at it, that stigma's been going on since at least the 70s. So there's almost 50 straight years of wall building of people making fun of trailer parks and trailer park people. And that's what's created. The opportunity was thanks to the media and Hollywood and every show you see where the crazy character lives in a trailer.

Yeah, yeah, yeah. It's still going on. Yeah, absolutely.

Well, even the show Myrtle Manor today. Have you ever seen Myrtle Manor?

I haven't seen Myrtle Manor, but you.

Know, it's a show where half the tenant base in the show doesn't have a job. Now, I never understood if you don't have a job, how you can even pay your, you know, your water sewer bill. I mean, I don't think you in the real world have people living in homes that are presentable without job. That's what Myrtle Manor tries to portray, which is because it's not in any way not even sure it's real people. I'm not sure how the show is set up, but just because you're poor does not mean you are unemployed and scary and dangerous and stupid. It just means you don't make a lot. And there's people who go to Harvard and Harvard people that wait tables. So I mean, it's not like that everyone who has a low income is an idiot. It's just that people are just afraid of that bottom 20, 30% of the US population. It's like they have the plague. Yeah.

I mean, these are hard working, honest people. Yeah. Trying to, trying to make ends meet and survive.

Right.

And yeah. And providing them affordable housing is an unbelievable, you know, service.

Yeah, yeah. You know anyone out here who went to McDonald's today or taco Bell or Arby's or any of those drive thrus and you looked in your little window to pick up your Arby's burger, you're looking right at our customers. Right. You know, we have a ton of fast food workers. We have a ton of people who work in everything from cleaning hotel rooms to changing tires. And just that all those jobs that people don't want because you have to wear a Dorky uniform and do nasty stuff. Those. It's crazy in America, but those people get paid a fraction of what you get paid to wear a suit and have air conditioning and have breakfast at Tiffany's or something kind of upside down. To me, that digging ditch pays a fraction of that. But those are our customers. They're everywhere. You see them every minute of the day.

Yeah, I mean, I tell you what, Phoenix teachers, they don't make a great wage.

Absolutely. They still probably make a little. In other words, most teachers in America, I think the median is about 40 grand. So that's still more than our typical customer has a household income of 2020.

Okay, so what's the US poverty level?

Well, I'll blow your mind with some stats here. These stats came from the government, but they hate these stats. Right. The first stat is that 20% of the US population has a household income of 20 grand a year or less. Actually, it's like 19, 5, 20%. That's huge because the poverty level in America for a family of four. So what we're saying is roughly 20% of the US population is in poverty. If you combine those stats together, that's kind of what you get. Then they came out with a new stat which said, oh, by the way, we kind of screwed up on that last stat I gave you because we kind of left off all of the folks living in America who are not US Citizens and therefore escaped the census. So now they're saying if you add those on, braze that number to 30%, that make 20,000 a year or less as a household. But you won't find them on the poverty list because since they escaped the first census stat, they therefore cannot go and get any social program help. So if you're an undocumented worker, then you can't go down and get food stamps and stuff. Right? Right. So it's a pretty big slug. About a third, roughly a third of the US Population is financially challenged, shall we say. And you probably saw the stat during the Obama election that 50% of all Americans are on a social program. 50%? 50% either on Social Security or welfare or food stamps or some other government program.

So this is a massive market of supplying affordable housing. But now when you say you're providing affordable housing, you're not really going out and buying the house from those vendors. They're already there. You're just renting the land. Which sounds a lot simpler to me than having to go through that process.

Yeah. See, what happens is the owner of the parks dictates what the park looks like is we control the people in the park under the park rules. It's a lot different than when you have a house in a subdivision. The city, if you look at your actual rules in the city, they're few and far between. I have 1000% more rules in a park, and I then basically selectively enforce those based on what that park needs to make it a functioning, happy part of society. So there's some parts we don't have to even enforce rules because the people all do a magnificent job of keeping up their property and everything else. And then there's other parts where seemingly nobody has the idea that it's not okay to put junk piles in your yard. So when we're providing what we call safe, clean, quality, affordable housing, it basically means just being. We have to be like the kindergarten teacher or something here that sets down the law of what you can and can't do. And that applies whether they own their own home or if we even own the home. But that's the big news story. People don't talk about much is what fuels the mobile home park business is the poor performance of the apartment industry. What goes on there right now is we all see class A apartments and aren't they pretty? And look, that new one was just built. And that's great and everything, but after class A apartments get kind of old, after maybe a couple decades, they go down to class B and they go down to class C. Class B and class C are those guard departments that are from the 70s that you see. Class C is maybe some of the stuff in the worst part of town. Those landlords do a terrible job of maintaining that stuff. There was an article in the Harvard Business Review recently that the reason they do a terrible job is it would take you 30% of the entire revenue of the complex to be reinvested continually in capex to maintain them, because they're falling apart. And the problem is the class B and class C owners are moms and pops. So typically, the park, the complexes are built as class A by big companies, and then as they get old and run down, they sell them off quietly to moms and pops. Moms and pops have no money. So what happens? We have tenants come to our parks all the time that give us these stories like, I was sitting on the toilet and I fell through the floor. Oh, my gosh. Or my shower hasn't worked in two years. And you're like, didn't you call and tell him you need to fix it? Yeah. And he said, he's Gonna do it. And he told us that every day for two years. So we gave up and we moved to your park.

Wow.

You know what makes parks look really attractive to tenants right now is simply the apartments are so awful.

Yeah.

Yeah, that's what's happening.

So tell me a little bit about Mobile Home University. I know, I know we're running out of time, but if I want to learn more about how to invest in mobile home parks, this is where I would go. Correct.

Yeah. What happened was about 20 years ago, Dave and I, when we got in the industry, there was actually no one writing on the industry at all. There was no book. There was nothing. And so everyone taught themselves as they went. And Dave owns the website Mobile home Park store, and he wanted to have a little book on there. So Dave and I wrote a book. And then we had an avalanche of people saying, we love the book. We want more. And we thought, okay, well, we can write. It's kind of fun. So we just kept writing and writing and writing. And when you add together 20 years of writing, you end up with this thing we call it the home study course. It's basically about a thousand pages long, and it tells you everything about the industry that's kind of become the bible of the industry. Not by design, but by default, because nobody else has ever written anything.

Sure.

Right.

I mean, I wouldn't either if I've got the secret little niche.

Well, it's nice to see it's not a secret niche because the stigma is so.

Yeah, that's true. Yeah.

There's no secret. I mean, you know, If I tell 100 people, hey, you can make 20% a year with a park. Out of 100 people, one might be brave enough to try and scale the wall.

Yeah.

And the rest will just blow it off.

I mean, the same thing the land is. I tell people, I flip land, I make 300% to a thousand percent. No one believes me. And then. Yeah, it's exactly.

We're all afraid of the unknown. Right, Right. And it's like, whatever. The man that first ate an oyster was a brave man. Indeed. Or whatever that quote is. I mean, most people, they like sticking in their safe zone.

Sure.

But the problem is, you want to make money, you typically have to get out of your safe zone. It's a choice you make. I mean, you can either buy blue chip stocks, or you can take a wild flyer on a company called Apple or something in the early days, and it's kind of like, which do you want to do? I mean, if you're looking trying to make 5% a year, then I guess stay with established junk. But if you want to get higher yields, you got to take risk. Key item from Stanford Economics 101. I mean, it's risk reward. I mean, if you take more risk, you have a higher return.

Exactly. Exactly. All right. Well, this is the point in the podcast where I get to put you on the spot and ask you what is your tip of the week? Something actionable, something that the Lane Geek listeners can go and do today.

Okay. My tip of the week would be to read Warren Buffett's annual letter to his stockholders from this year, because if you've not read it, it talks about income, real estate. So here you have Warren Buffett, who owns no real estate inside of Berkshire Hathaway, and he talks at length about two things he owns. He owns a shopping center across from a college, and he owns some farmland that actually grows crops. It's a fascinating diatribe on owning income property. The part I couldn't figure out after reading is why the heck he doesn't own more income property. Because he talks about it. It's two of his favorite investments he owns, Best performing every year. He wonders at the fact that he can have something that makes such a high yield and yet he could at any moment sell it. Right. And I was amazed it did not get more press when it came out, because it's just kind of strange that a guy who has made a fortune in stocks and bonds writes to a group of people who invest with him in stocks and bonds about the real estate business. Just didn't even make any sense. So he must be a huge advocate of income property, because why would he devote their annual letter where they normally talk about things having to do with Berkshire Hathaway, to random income properties that he owns? And the whole point of the article was to show that that's the kind of stocks he buys. But I guess my takeaway is why don't you just own more real estate if you love it so much?

So it might be a management issue.

I don't know, Just. But I suggest people read the article because if you assume he's the best investor of all time and he loves real estate, then he must know what he's talking about.

Yeah, he's a genius. He's a genius. All right. Well, that's great. Well, I'm definitely going to go. I can get that online.

You can absolutely get it online? Absolutely. Yeah.

Just Google it.

Just Google Berkshire Hathaway letter to investors, and it'll Pop right up.

All right, I'll do that and I'll link to that site on the show. Notes. So my tip of the week is going to be learn more about Frank, Learn more about mobile home Investing. Go to mobilehomeuniversity.com and see how to do this. Just like Frank said, the risk reward ratio. And I mean, if you're listening to this podcast, you're already that kind of person that buys into alternative investments. I mean, the average person, I tell them I buy and sell raw land, their eyes immediately glaze over, and that's the end of the conversation. So check it out. Mobilehomeuniversity.com Frank, are we good? Is there anything else you want to talk about?

Well, I would also invite people as a minor action step. When you're out driving down the road and you drive by a mobile home park, just turn into it. It's not illegal. You can just take a drive, take a left, go in that thing. It might help you scale that giant wall. Might give you a ladder to get you over the wall if you actually looked inside a park. So many people who tell me, oh, my God, parks are terrible. Oh, my God, how can you be in that? I'm like, have you ever been in one? No. Right, right. Go look in one.

I'm guilty.

It scares you. It doesn't scare me at all. The myth is way bigger than the reality.

All right, great. Well, I want to remind everybody, Learn more. Go to www.thelandgeek.com download for free the Passive Income Blueprint. Get the ebook how to Avoid the three Fatal Land Buying Mistakes. And of course, always get this informative and engaging podcast delivered each week to your email inbox. I want to thank you again, Frank, for taking valuable time out of your day to enlighten my listeners about what you do and how you do it. And this is really a phenomenal podcast and I can't thank you enough.

Yeah, thanks a lot for having me, Mark.

Alright, thanks, Frank. And we'll see everybody next week.

Thank you for listening to another episode of the Land Geek. Join us next time for more tips, secrets and information that will help you succeed. Stay connected with the Land geek on Facebook. Facebook.com thelandgeek.