On this episode of The Mobile Home Park Lawyer, Ferd sits down with Andrew Keel to talk about all things MHP. Ferd and Andrew discuss Andrew’s background in MHP as well as some tips on cost segregation and management training.
“Try to focus on your market wherever that is, and find the parks that you really want to buy someday, and cultivate relationships with those owners.”
0:00 – Intro and background on Andrew. How Andrew got into mobile home parks
4:55 – It was tough for Andrew having to raise capital from the outside for his first deal
6:38 – Andrew recommends casting a wide net when considering how to find a deal in MHP, and try to focus on your market
7:47 – Originally, Andrew focused on the Midwest but eventually started adding to that area when he could find deals that fit.
9:31 – Andrew aims for 50,000 in the metro, but they go deal by deal
10:57 – Ferd asks about what tips Andrew has for underwriting
13:57 – Andrew explains how he trains his managers with modern tech
17:39 – Andrew talks about some new tech he’s using called InvestNext
18:31 – Andrew is a big fan of cost segregation studies
FIND | ANDREW KEEL:
Podcast: Passive Mobile Home Park investing
Ferd Niemann: Welcome back mobile home park nation. Ferd Niemann here again today with another episode of the mobile home park lawyer podcast. We’ve got a special guest today. He’s a mobile home park owner, investor, syndicator. He’s even a podcaster. Please help me welcome Andrew Keel. How are you doing?
Andrew Keel: Good. Thanks for having me.
Ferd Niemann: You got it Andrew. Thanks for coming on. Well, I know you a little bit and I think most of our viewers probably do too. You’ve got a pretty, pretty public profile, but in case they don’t, tell us a little bit more about yourself, your background, and then ultimately how you got into the MHP space.
Andrew Keel: Yeah, totally. I started out flipping houses around central Florida. By happenstance through some yellow letters I mailed out, I came across a couple of manufactured houses that were near where I lived in central Florida. Went out, bought them the individual mobile homes. There was two of them and got a great deal on them, bought them both for $2,200 cash and had no idea what I was going to do with them. So, I got on YouTube and I typed in how to make money with mobile homes. And I found a guy named Lonnie Scruggs, a ton of videos on manufactured housing and creating mailbox money and deals on wheels is a book that he wrote. And it’s a classic man. I don’t know if you looked on Amazon for that book right now, it’s selling for like $800. Because they are not printing it anymore.
Ferd Niemann: I’m making a note, I’m selling mines this afternoon. I mean, it’s a good book, but $800. It’s good to read.
Andrew Keel: It’s crazy. Yeah, So I wanted to create mailbox money, so I fixed these mobile homes up and ended up selling them on contract. And that’s what Lonnie teaches and ended up doing pretty well. You know, I was able to get like $3,000 as a down payment and then $250 a month for five years on both of those homes that I bought for $1,100 apiece. So, it was like I was hooked into the mobile home business at that point when I realized the demand that I had for these homes that I was selling. So, ended up doing that 19 more times with individual homes. And through that process just became, you know, obsessed really with the mobile home park business and, and thought that I needed to have millions and millions of dollars to be able to buy a mobile home park of my own because I was still just trading with the homes. And then I met a park owner that told me, you know, about using other people’s money and, you know, being the sweat equity partner and you know, just the benefits of owning the real estate versus the personal property that is the homes with leverage and, you know tax benefits, etc. So eventually started marketing to mobile home park owners, went to the Frank and Dave bootcamp, went to a couple other, you know, mobile home park training seminars and eventually found a deal five states away in Illinois in Edwardsville, Illinois, and contacted someone that I went to MHU bootcamp with and said, Hey, you know, I’ll be the sweat equity. I just need the capital to take this down. And I didn’t have the balance sheet at the time to sign on the loan. So, I needed that as well.
He agreed to partner with me on that first acquisition and he took a chance and it ended up being a home run. I mean, we just hit it out of the park, you know, infilled seven homes, raised rents and just increased, you know, management efficiencies. And then we were able to refi within two years. And then after that, he was like, okay, well, let’s do some more. So, then we did four more parks together. Those did well. And since then I’ve brought on partners, you know, to do syndications, friends and family. And now we’re taking outside investors and we have 23 total mobile home parks that we manage and operate. So, it’s been a fun ride and we love the business.
Ferd Niemann: That’s great. I think you’ve probably got a somewhat similar story to a lot of folks in the business that they started flipping houses. They backed into MHP where I think you might be different; you basically syndicated your first deal. I mean, you had, only one guy with like, bring it on. That’s hard to do. You must be a good salesman because it’s hard to do it. Hey man, trust me, I’ve never done this before, but I need you to sign the note and I need you to put cash.
Andrew Keel: And that guy took a lot of risk and, you know, fortunate for him, the deal worked out cause he had the capital, but he didn’t have the time, you know, cause he was, he had a full-time job and was working a lot and it ended up working out. But yeah, it was tough having to raise outside money for my first deal and have him sign recourse, you know, put their neck on the line for our first deal.
Ferd Niemann: Yeah. My first deal, we were actually looking, my dad and I were flipping single-family houses and duplexes. We both had regular day jobs, but we were doing that on the side and he found a mobile home in this park and he’s like, huh, the house is for sale, maybe the parks for sale. And he called them the park and the guy said, no, we end up looking at about 20 different parks. And they all said, no, or hell no, the first guy ends up saying, okay, maybe at retail price, we’d pay retail price for it. But it was $695,000, It praises like $780. I think it was a hundred percent loan. So, my first deal, we had 0% in. We filled like, similar amount of lots. I think it was at 48. We got up to 54. Sold it for 950, two years later. So, it was like a home run type deal, relegate, like, all right. We need to quit selling, we better quit doing single family. Since sold off those houses, I had a couple of duplexes left that are just kind of easy peasy. But yeah, MHP man is the way to go. So obviously now you’ve got a lot more experience and skill and then, so it’s easier to get the investors. What can you tell us today, today’s market? All I’m seeing here is everything on market I feel like it’s very competitive, somewhat overpriced. We’re very competitively priced, because all the interests come into the space. So how are you finding deals now? Are you buying on market? Are you buying off market? Combination? Any tips you can share for our listeners?
Andrew Keel: Yeah. My tip would be is to spread a wide net. You know, we have a broker relationships that we cherish. We have off market, you know, mailings that we do. We have cold callers as well. I think we’re doing a lot of the same stuff. We’re just very targeted with where we’re going after. And that would be my advice to someone just starting out is, you know, don’t start mailing out to the 44,000 mobile home parks on Frank and Dave’s list. You know, that’s been ran through, you know, try to focus on your market wherever that is and, you know, find the parks that you really want to buy someday and you know, cultivate relationships with those owners. Once you do get ahold of them and start talking to them.
Ferd Niemann: That’s great now you’re obviously out of Florida, but Florida is a pretty tough market to buy in, I think price and everything and competitive. Did you originally decide, you know, you said Amherst, Illinois, did you decide to go outside Florida or is it just how it worked out? And then what about now? Do you specifically pursue only a few States or are you looking in all 50 States?
Andrew Keel: Yeah. Great question. When we first started out, we were actually focused on the Midwest. You know, we were following the Frank and Dave model that was taught at the MHU bootcamp and that’s really where we got started. And then by happenstance, you know, we just kind of started bolting on properties around the portfolio that we already had in the Midwest. We have looked in Florida and like you said, you know, the pricing is very expensive, you know, cause the land, the real estate itself is so expensive. And we just, you know, the returns wouldn’t be as juicy as they were cashflow wise on the properties we were finding in the Midwest. We’re also finding that a lot of the all age communities in Florida, you know, are not of the same caliber, you know, that the 55 and older A grade communities around Florida are very nice. But then, you know, several of the all age communities just were of lower quality and we can get a better-quality asset, infrastructure wise and everything in some more secondary markets in the Midwest.
Ferd Niemann: Sure. Speaking of secondary markets, do you guys, do you have a size limit on the Metro and most people like, you know, we prefer a hundred thousand Metro like Frank and Dave said at the bootcamp, I’ve been to the bootcamp too. It’s a great course to get involved in. But at some point, I got a guy as a wholesaler call me today. Hey, how small will you go? You know, and it’s like 5,000 is a little scary, you know, 25,000, I’m kind of like, what’s the job set status, you know, is there a prison there, a hospital, a university, more than one factory? So, I’ve personally gotten under the hundred-thousand-dollar Metro on several occasions. Do have a firm line like that, or do you look at just deal by deal or how do you go about those metrics?
Andrew Keel: It’s deal by deal. You know, we aim for 50,000 in the Metro. That’s kind of a baseline. Now if it’s under that, then other things need to be perfect. You know, we kind of have some give and take there. But we do spend a lot of time looking at the jobs available in a market. And we probably spend more time on that then kind of evaluating the population numbers and things like that.
Ferd Niemann: Got it, makes sense. So that’s part of your site selection is looking at job numbers and that’s obviously part of, you know, not due diligence as much as like preliminary underwriting selecting where you want to go. What other underwriting tips can you share? Do you have any special sausage you’re willing to share that, you know, or maybe a horror story that, you know, you didn’t count the lots. I had that happen one time where I was at a time, my assistant counted the lots, the appraiser counted the lots, and it was 84 I think, there’s 86 in the park. We got two free lots, but my appraisal didn’t come in as high. So, I had to put in more cash. So, it was like, wow. So, I’m like, we’re mapping them out and two people go verify that the lots are these, that’s a horror story you know, embarrassed to say. We had to come up with like 30 grand extra equity the day before closing because we were off by two lots or something. And we really weren’t. So anyway, that’s a tip I have is count the lots yourself.
Andrew Keel: Count the lots. Totally. Yeah. I would say for an underwriting tip, you know, we spend a lot of time on the utility infrastructure and getting those and we spend a lot of money. Like we just had a deal that we’re working with you on, in Kansas that actually fell apart like a couple of days before closing. And basically, you know, we spent a lot of money on getting the utility infrastructure looked at and inspected from plumbers and electricians. And you know, when it falls apart, you know, in the final quarter it’s unfortunate, but that’s just something that we’re really adamant about is checking out the infrastructure. And then, you know, you can change a lot about a piece of real estate, but you can’t change the market. Right. So, if there’s not diverse employment in some pretty steady stable industries, you know, that’s something we would likely pass on because we don’t want to a one-horse town, as they say.
Ferd Niemann: No, I think that’s prudent. Yeah. I’ve got a park right now that I’m in the process of refinancing on to agency debt specifically to get off the recourse because it’s a two-horse town. It’s not one, but it’s got a meat plant and then like an outdoor sports plan. And I have an all Hispanic tenant base and they work in those two factories. We’ve got a third one, like those places go out, I’m going to be a little nervous. So, I hear you, but when they’re on the due diligence, I think that’s really prudent to spend the money upfront. And it’s hard when you’re getting started. Do I get to spend five grand on this kind of thing. Can I? And it’s just tougher, but I think you need to, on infrastructure you need to on your other third-party reports, like I’ve got a deal here in Missouri, surveyors going out there tomorrow. And the survey’s like 6,000 bucks and I already paid for, I already got loan approvals. So, I got a $3,000 appraisal. I got a $2,000 phase one, I got a 6,000 survey. I’m in for 11. Surveyor says, neighbor came over and told me this property was subject to a lawsuit a couple of years ago, based on a boundary dispute. And the sellers are bastard. And I was just like, you got to be kidding me because he was supposed to in this contract disclose this kind of stuff. Give me copies of prior surveys, which he said he didn’t have, and now I’m 11,000 pregnant and I may have a problem. And it’s like, it’s always hard to stomach that, but it’s just part of doing business unfortunately. So, as I said, it’s hard to hurdle, but I’d rather spend 11 and not buy a problem. Then this is like an 800,000 on a deal, then buy an 800,000 problem. So, it’s easy for me to say as the lawyer, you should definitely, don’t be cheap on legal fees and all that kind of stuff. Self-Serving, but I’ll tell you, Andrew I listened to one of your podcasts on your show, and you were talking about some of your management, in manager training tips with like Trello and Slack and some of these, you know, I got my legal pad here. I’m old school. You got some sophisticated systems there. Can you give us a little insight as to how you train your managers with those sort of, I’m going to say higher tech methodology.
Andrew Keel: Yeah. So, one thing, one software that we use is called Slack and some people may be aware of it. It’s like a communication chat platform, has a mobile app and a desktop version. And that has been monumental for us in our management of these communities. It just saves so much time and we love our onsite managers. I mean, they, I truly feel that a lot of them are underpaid for what they do for us because they are just our eyes and ears, keeping eyes on everything, keeping tabs. But just one thing we’ve picked up is that the onsite managers, they just love to, they just love to chat your ear off. And if you, if you start a conversation, you could, you know, you needed just a quick 30 second answer and that could end up being 30 minutes really quick. So, we switched over to using Slack where it’s a chat platform. We can ask a question and they can respond right in that platform. They can send photos, they can send you know, videos, they can send pdfs and, you know, everything, and then it keeps the log, the history. So, if they asked a question once and you answered it, they can go back and search for that answer again. And that’s just been really, really valuable for us. And we create a channel for every community that we have. And then we put everybody in that channel and that’s how the onsite managers communicate with us versus, you know, text messaging or phone calls, etc. We also do weekly zoom calls with them to kind of, you know, get an overview of that week and discuss the KPIs, the key performance indicators. So that’s one of the platforms we use is Slack, highly recommend that. Trello, as you mentioned, is another like project management tool that we use. And that’s more used by our offsite, you know, management team to just to manage vacant lots, manage infield projects manage homes that are up for sale, collections, etc. That platform is, it’s like a digital whiteboard and just helps us keep everything organized with real-time photos and everything. So those are two pieces of software I recommend, we also use rent manager you know, for invoicing and accounts receivable. So that’s a great platform. And overall those with those three, you know, you have a head start because I think, like you said, a lot of operators now that are like your mom and pop type, you know, they may be using a legal pad or a general ledger, you know, with a written rent roll and things like that.
Ferd Niemann: No, it definitely sounds a little better than the old legal pad methods. So yeah, and then I was kidding. Actually, we use some systems too, but that stuff sounds great. And yeah, rent manager, I just did a little zoom podcast on the other day. I feel like it’s an amazing tool. There’s definitely a learning curve and some brain-damage in figuring out how to use the systems, but once you get up to speed, it’s like, man, that’s powerful. And especially, you know, if you syndicate a deal, you can click a button, kick out, you know, trial balance or profit loss, balance sheet, rent rolls, all that kind of stuff’s a man and that’s just, investors want that kind of stuff. And I’ve invested in some deals in the past as an LP. And I had promoters that didn’t do that kind of stuff. And then it’s like, man, when they see the capability that could have done, it’s frustrating. Like you guys are literally using Excel and you’ve got a $50 million fund. Like blows my mind. You know, rent manager is not that expensive. There’s other similar products out there. It’s not that expensive for what you get. So definitely the way to go, I think.
Andrew Keel: Totally, totally. And we just started using invests next for our like investor management system. And we just sent out our first quarterly emails, quarterly reports through that system. And we liked that so far, you know? Cause you can send like ACH to investors right through the platform pretty easily. So that’s a new one that we just started using.
Ferd Niemann: Great. Yeah. I’ve heard a couple different those types software. You can even send her K1s and all that kind of stuff and just have them uploaded instead of having email them or mail them. I still get some K1s in the mail, it’s like good grief. How many trees are we killing for all these different, you know k1s, but some people like it old school and want a hard copy and who is gonna tell them no. This is great. What other tips or tactics or anything else you want to share with our audience, tips that you’ve learned in the business or horror stories or anything like that.
Andrew Keel: Yeah. I mean, cost segregation studies, I’m a big fan of those, you know, every year on new acquisitions, you know, I just think that that’s just a huge tool, especially with the bonus depreciation. You know, I don’t know what your thoughts are on the cost segregation studies. I mean, a lot of people look at the price tag and they’re like, Oh, that’s expensive, but I think it’s just, it’s worth its weight in gold.
Ferd Niemann: Yeah. We use them and I mean, I think that, we use this company and he kind of recommends us under a half a million. You may not need it over half a million you do. So, I bought a deal too, same time. One was 1.4 and one was 135 just really cheap. It was actually 65 space park I got for 135. So, it was a good deal. But I don’t want to pay for cost SEG on a $165,000 park. So, they basically were talking about CPA for me, but we were able to utilize some of the same percentages in formulas on the cheaper part. We paid for one study, we used it for free on the other. And if we get audited on the other, like we didn’t have the engineer. Cause the $3,000 to $5,000 price tag for those things, it didn’t really make a lot this much sense on a 165, especially with short term old flip, we since sold it. But I was able to use some of the methodologies and yeah, I’m a big fan. I’m a big tax guy. I read the whole, it is 106 pages. I read it to max. It’s like, I’m going to become a tax law expert, because you’ve seen the power of the numbers on those studies, it’s like good grief. You know, I’ve got three deals right now where we’d have to close one in December. We can close two others. Our due diligence would allow us to close them in January. But I told our team, I told the banker, I said, December 28th is, my anniversary is the 31st. I got a party. We are not going to that at the last minute. We’re trying to get them closed in four weeks for that reason to take the tax write off in 2020. Especially with the new administration coming, god fury, what’s going to happen with tax code if Biden gets his hands on it. I’m super biased on that. But I think that’s going to be a big deal for real estate investors, for MHP guys. So, I’m of the opinion, if you can close it before the end of the year, close it.
Andrew Keel: Definitely. Yeah, no, I agree. I wish we had more deals in the pipe to kind of finalize before the end of the year. But yeah, that’s a good point to try to push and get deals done before the end of the year.
Ferd Niemann: Yeah, I think so. Well, this was great Andrew. Where can people find you if they want to reach out to you for your projects or just your podcast? Let us know here.
Andrew Keel: Yeah, for sure. If you’d like to get ahold of me, I do have a podcast called the passive mobile home park investing podcast. You can find me there or you can check out my website, it’s www.keelteam.com. That’s just K-E-E-L team like a basketball team.com.
Ferd Niemann: All right. Thanks Andrew. Appreciate it.
Andrew Keel: It. Yeah. Thank you Ferd, appreciate you having me.
Ferd Niemann: You’re welcome.