On this episode of The Mobile Home Park Lawyer, Ferd speaks to a new mobile home park owner Mark Bibas. Mark tells us what he’s already learned about the business and shares some great cautionary tales to help us with our own ventures. Enjoy!
“I’ve certainly made a lot of mistakes in my due diligence that I’m coming to learn right now being a first-time park owner. I’m really trying to embrace the whole mindset of you either win, or you learn, there’s not really any losing.”
HIGHLIGHTS:
0:00 – Intro and background on Mark
2:07 – Ferd asks how Mark is dealing with the new business he’s in
4:37 – Mark explains how he’s finding deals in the current climate
7:12 – Mark talks about why he’s excited about the asset class and how he’s embracing the mindset of you win or you learn
12:15 – Mark has noticed the newer homes with sidings have energy bills that are a lot lower
13:53 – Mark shares a tip about bank financing, as Ferd and Mark share their bank commitment stories
22:25 – Mark tells the story of how Ferd helped him with a back rent contingency
26:03 – You can get in touch with Mark via email at mark@sosacapitalgroup.com or check out his Instagram @mhpmark
FIND | MARK BIBAS:
Email: mark@sosacapitalgroup.com
Instagram: @mhpmark
FULL TRANSCRIPTION:
Ferd Niemann: Welcome back mobile home park nation. Ferd Niemann here again today. My guest today is a new first-time mobile home park owner. He’s actually diving full in, all in, he’s in one of his mobile homes right now he’s getting his hands dirty. He’s under trailers as we speak, well not really as we speak, but last night and probably more today. I’m excited to have this guest on. Please help me welcome Mark Bibas. Hey, Mark, how you doing?
Mark Bibas: I’m doing great. Thank you for having me Ferd. How are you doing?
Ferd Niemann: Good, man. Well, I’m excited to have you on. It’s been fun to kind of watch your journey here. Excited to get in this asset class and jump right in, I think you’re doing it right, you’re down in the trenches, as I like to say, and you’re going to learn a lot. And you’re already off to a good start. But tell us how you got into the business. And tell us, you know, a little bit of your background, and we’ll dive into some more MHP stuff.
Mark Bibas: Sure, sure. Thanks. So essentially, I would consider myself pretty young graduated from USC a couple years ago, and I was working in the music industry actually. And originally from Miami, that’s where I grew up, born in Colombia, but grew up in Miami, and I was working out of a co-working facility essentially. And I met a gentleman there, Larry, who I know, you know, as well. And he’s been super helpful in my mobile home park journey, essentially, I met him at that co-working facility. And we were talking a little bit and he had mentioned that he was looking for somebody to help him out and grow his real estate portfolio. And he was only doing, he was doing multifamily at the time. And, you know, we stayed in touch and it didn’t work for me because I was working in the music industry. And he wanted to know if I had any college friends willing to do it. Anyways, two, three months pass. And I had really given it some thought. So I gave him a call and said hey, I’d be interested in doing this. And he took me under his wing a little bit. And it was a little bit of a learning curve. But he was real patient with me and taught me the ropes. And I started to really love the asset class. And over time after helping him acquire property and doing due diligence on it, I got really, really excited about mobile home parks and decided to get, go, and get one of my own.
Ferd Niemann: That’s great, man. That’s great. Learn the business as fast as you can and then dive right in. So now you’re up in Iowa. It’s cold as it is going to be up there. Tell me how that’s going, your new ownership. You know, we’re having the same problems with frozen pipes. It’s been a bad winter for that. But what are you learning? And how are you tackling this new assignment?
Mark Bibas: Yeah, so I mean, a lot of what they teach you in terms of due diligence, for mobile home parks, I think it goes for a lot of regions where they don’t deal with the brutal winters that we’re dealing with up here. So a lot of that stuff gets left out. And you know, I did due diligence in late summer, early fall, by the time it comes to closing, you don’t really see all the problems that are going on, and we’re facing a brutal winter, something that me being a Miami boy wouldn’t have been very aware of a lot of the stuff that goes on, and I’m learning the hard way on a lot of stuff. But even that stuff is a good lesson for the future.
Ferd Niemann: Sure, no, I think definitely, the more you can learn, you know, I used to have an internship with the army jag corps, and the guy that trained me says, the education from the school of hard knocks, and he’s like, it’s ideally you pay as lower tuition price as possible. And if you can get away with $2,000 or $3,000 or $4,000 or $5,000 in tuition to learn a big problem and how to solve it, then it is better off. Some people, they don’t learn until it is a $100,000 problem, it is a million-dollar problem. So definitely tough. We’re learning stuff all the time in here our company too. So it’s part of the business. I know you’ve been chasing a number of deals lately. Tell us how you’re finding deals. It’s a competitive market. Like I said you’re young, just getting going. How are you building rapport with sellers? How are you meeting sellers and compete in a crowded marketplace?
Mark Bibas: Sure. So I’m doing a combination of direct mail, cold calling, and ringless voicemail. Actually, ringless voicemails worked really well for me. So what I’ll do is I’ll send out a handwritten letter that obviously I’m not writing myself. And I’ll follow that up with a ringless voicemail about two weeks later. And are you familiar with how ringless voicemail works?
Ferd Niemann: Yeah, I get them all. I get them all the time. They’re annoying. But it works for you, great. I get it from my church. I’m like, I blocked it. But I still get the voicemail.
Mark Bibas: Yeah, exactly. So I mean, it’ll essentially just deliver a voicemail into somebody’s phone. So on your iPhone, you know, you’re turning your phone on and you see that you have a missed call, even though the call never came in. Listen to the voicemail. So I’ll send something that essentially says something along the lines like, Hey, this is Mark Bibas, not sure if you received my handwritten letter that I sent you a week or two ago, I’m really interested in buying your park, please give me a call if you have any interest in selling and you know that one mail sometimes doesn’t work, but the mail coupled with the ringless voicemail, I’ll get calls back and I’m doing a lot of that. And then I’ve got a priority list on parks I like and I’m just cold calling them, and it seems to be working. I like ringless voicemail because I’m sure like yourself I hate cold calling. I don’t know if you do any of your cold calling, I have people do it, I’m assuming you have people do for you. But nobody likes to cold call. So ringless voicemail has been working well for me.
Ferd Niemann: That’s great. Yeah, I don’t do cold calls much anymore. But I’ve done a ton of them in the past. And I used to do back in the day I did like 100 in a row. They’re brutal, but I’m sure there are people doing 1000 in a row. But it is a numbers game. But I think you’re doing, I think it’s pretty wise you’re doing combination strategies. We do some similar follow-up type stuff that works. I think handwritten letters make a difference. They just take more time. You can’t send 30,000 of those easily, especially like I do it on my own. I write it myself, you know. My handwriting on my stationery and put a personal note in their stuff as opposed to the printed ones. I send them targeted, if I do five a day that you know, you do it every day, you know, 50 parks you want. It does pepper people with you know, personal touch. The problem is my handwriting is horrible. So every once in a while, I get a call like, are you calling for this, this park was demolished three years ago. Oh, sorry. But anyway, well, that’s great. Tell us what else you’re excited about. What are you learning so far?
Mark Bibas: Yeah, I mean, so I’m really excited about the asset class. But right now the way I’m looking at it is, I’ve certainly made a lot of mistakes in my due diligence that I’m coming to learn right now being a first-time park owner, but I’m really trying to embrace the whole mindset of you either win, or you learn there’s not really any losing. And I think that comes true for first-time park owners. I know me and a community of a bunch of others, you know, we pay a good amount of money for mentorship or tools, everybody’s going to this Frank and Dave, Mobile Home Bootcamp. And so at the point where you’re spending a ton of money to learn about this, yeah, maybe you get your underwriting off by a thousant, or a few thousand bucks on some stuff. But being actually out in the field and learning it for the first time is a ton of valuable knowledge. So I’m trying to stay positive about everything. And I’m just super excited to be learning. If you want me to get into some of the lessons learned, I’m more than happy to get into those specifics.
Ferd Niemann: Yeah, yeah, please do.
Mark Bibas: Yeah, absolutely. So I mean, first things first, if you’re going to be buying in a cold-weather place, like Iowa or anywhere else, where it’s super cold, I think it’s really important to actually get down underneath the home. And you know, open up that skirting pull it back and inspect the belly, because I think a lot of people don’t really check the belly and the belly is what really insulates these homes. If the belly shot your insulation is going to be shot and then they tell you to check to make sure that the tape is there. Well, there was he tape on every single one of my homes where I went wrong was, I didn’t put the back of my hand to the heat tape to see if the heat tape is actually working, you know, it might be attached in there in the outlets for 20,30 years, but it hasn’t. In addition, I think it’s really important to factor the total cost that the tenant is paying, you know, so you can always look at rents and say, Okay, these guys are paying $500 a month for rent, and a two-bedroom apartment is 1000, I could bump it up. But if you’ve got an old home that isn’t insulated, it’s important to consider how much they’re paying in energy. So ask them when you’re doing due diligence, hey, how much is your mid-American energy bill costing you because a regular home might only be paying $80 a month to run their furnace. But because these homes are poorly insulated, they could be paying $180, $200 in some cases $300. So your whole plan to go in there and jack the rents is not reasonable. When their total costs, which you’re not seeing, you’re only seeing the rent payments, you’re not taking into account the total cost. You can’t go in there and start boosting their costs. At that point, it makes more sense for them to just go to a single-family home.
Ferd Niemann: That’s a great point. I think that was missed all the time. And I’ve learned that from my tenants, not by myself. I learned, I bought a single-family house, I don’t know 10 or 12 years ago, and it was, the lady was in there was a section eight renter, so she didn’t pay any money. So she paid like $30 a month, section eight paid the rest. Well, she moved out because it’s too expensive. And she’s like moved out of nowhere. She’d been there for years and I said, I’m like what do you mean too expensive? It is $30 and she said my heat bill is $800 bucks a month. I said what? I had never inspected the attic. There’s no insulation in the attic of that home. So she was heating her house through her stove. Which is also a safety issue if you’d open the stove. And then she moved out because of utilities and then another instance, I had a really nice home to sell, and had a guy in the park that was ready to buy in cash. And he looked at it and said, Oh, it’s an electric furnace, no deal. I was like, electric? What’s the big deal? I said all the new ones are electric. He’s like, Yeah, but it’s cold, because the electric bill is going to be twice as much or three times as much than gas she says, I’ll buy it if you convert it to gas. Not going to be inexpensive to convert it to gas at that point. So in colder markets like you’re up in the South Dakota, Iowa area, it probably makes sense to buy some more gas furnace homes, gas heat instead of electric, it’s a little more expensive to manufacture it, but your residents can better absorb it, and better save money. And that which does give you an opportunity later to increase rents more, but also, it makes it just more of a certainty of gas is so much cheaper than electricity. And a third item I learned from a resident was putting, I am forgetting the name of it, I want to call it a heat pump, a heat pump on your water heater. So that you don’t have to heat because it’s cheaper. Basically, it’s like $1,000 upgrade to make sure your electric bill cheaper by $100 a month or something. Some guy who was a plumber was moving into a house and said you need to do this. I didn’t know about that. So yeah, I think you definitely hit the nail on the head that you got to look at the total cost. Especially parked owned homes where you had, you know, you got the home rent and a lot rent, you want to try to reallocate the two items, you can only do it to a degree that is reasonable in the marketplace, because your residents are going to know. People ask me, what’s it cost to heat these? I’m like, I don’t know, I never lived in one. I only have them under vacant for a minute, you know, I don’t have any idea. So I’ve asked some people who work for me in the parks, what is your bill and I’ve kind of had a representative sample based on like, this is a single woman who is in a new home, this is a family with an older home, and I can then gauge what the actual electric bill was.
Mark Bibas: Yeah, absolutely. That’s a great point. And I’ve come to notice that, you know, the homes that have the newer siding, as opposed to the old homes that are just painted on the old metal or the wood or whatever, homes that have siding, their energy bills are a lot lower. So you know, starting to learn how to factor that if the home has siding, then the total cost is going to be a lot lower for the tenant.
Ferd Niemann: Sure. And then while we’re talking about energy preservation, especially up north you can get insulated skirting. It’s considerably more expensive than standard vinyl skirting. So you know, it might not make economic sense in the Midwest, but up in the north, it probably does and, in some degree, maybe necessary to keep pipes from freezing. We’ve had more pipes freeze in last week than we had five years combined. I mean, it’s just been unbelievable. This cold has been unprecedent. So I mean, I’m not even sure we made the wrong decision not getting insulated, it is hurting. But it’s definitely an option. And checking the heat tape is crucial. Because, you know, we’ve had it happen too. Heat takes on, it worked. And we did a test in October, November it works. We didn’t go back two weeks ago. And we actually installed that ourselves and didn’t work. Somehow feasible on that outlet. And the entire home is frozen up into the water heater and it’s a huge nightmare. Had to replumb the whole house. So yeah, definitely lessons learned. So you’re learning them young, but I’m learning them old, it is still the same problem. That’s great, man. What other tips or tricks you have for us Mark?
Mark Bibas: So I guess a tip, and you’re familiar with my crazy bank financing story. If you’re getting bank financing, make sure you get that bank approval in writing on a bank letterhead, from whoever your commercial loans officer is. If they give you their word that yes, you’ve got financing, or Yes, you’ve got approved, don’t take their word for it. Because crazy stuff does happen. Make sure you get that approval in writing, it could seriously save your entire financing process.
Ferd Niemann: Now, let me touch on that, that’s a good point. If you don’t mind telling the rest of that story, it’s a good one. I think I listeners would like to hear it. The document I think you’re referring to is a loan commitment. So typically, when you go talk to a mortgage broker, or actually the bank, they’ll give you a term sheet, which will have some sort of technical fine print, at the bottom but it says this is not a commitment to lend. It’s pending a further underwriting typically make an application with the sales guy, who’s typically a vice president of commercial lending or like a relationship manager for the title and you make an application, they give you the, yes thumbs up, I’m going to fight for you, man. But rarely does that person have the authority to give you a loan. They typically have to go to a loan committee and depending on the size of the park, depending on the size of your portfolio, depending on a number of factors, you may need to go to beyond loan committee and go to the headquarters committee. I had a deal, man, it had almost burned me. So I’ll tell my quick story and you tell yours. But I had a deal where I already had a business relationship with the lender. I got like 2 million in loans, so we, you know, it wasn’t a tiny loan package. And it was going well. I asked the local guy, Hey, can I get another loan? Sure. It was like a $700,000 or $800,000 loan. He said, yep, we’ll get it done. And the regional president Kansas City happened to have signature authority under 2 million, you can just eat committee because I can sign that I can sign off. It’s no big deal. But as a matter of course, I typically go to the committee as a courtesy to them. So he did it. So we went to the Kansas City committee. 7-0, I pass. But now with your other loans, it’s going to put you over this threshold of 2.5 million, which means you got to go to headquarters Committee, which is a different city, which this guy sat on the board. It goes to the headquarters committee. It gets approved 7-0, okay. No big deal. I’m winning, you know, I’m ready to rock. I didn’t have my written loan committee yet. I had a vote from my guy, hey, 7-0, we are good. I let my earnest money go firm. I spent all my money on third-party reports. I am 15 days off in closing, this is a deal that I’m buying at a 15 cap on the first days on the market. So I really want to close it because it’s going to go fast the next day. I get the call. We didn’t realize this was in Illinois. What do you mean, that is the address, been in the Illinois the whole time. Oh well, we realized, but the CEO didn’t and we’re a Missouri bank. So we don’t do all of it. And we do follow our clients like you to other states sometimes, like Illinois. So he vetoed the loan. What do you mean, it is 7-0? Yeah, he was out of town. And then they had the bank audit that week, so they admit they missed the loan committee. So anyway, long story short, I had 10 days to close this deal. And I had no loan commitment. So luckily, I had a different bank that I had a good relationship with and the two banks together, shared the appraisal. Two banks shared the appraisal and then I was able to close that deal 10 days later, and it’s been a home run of a deal for me, and I almost missed it because the bank let me know. Luckily, another bank stepped up and to some degree they both stepped up. So your point is well taken with me that you know a burden and is worth two in the bush. And that’s my bank commitment story. You want to share your recent story in that saga?
Mark Bibas: Yeah, absolutely. I mean, it was crazy. But luckily, I had your guidance to guide me through the situation, we got it all going okay. But essentially, I had been looking for a local bank to finance my transaction for a long time. And after calling a ton of banks, you know, they had all said that they weren’t willing to do the loan, I had finally found one, which was a little bit surprising to me, because the park is in Iowa, and the bank was in South Dakota. But the gentleman I spoke with, you know, he sold himself as Oh, I’m super mobile home park-savvy. And I’ve got a ton of mobile home parks on my portfolio. And I would love to do this loan. Amazing. I was super excited about the whole process. And I asked him at one point. So how does the loan committee process work? And he told me that because of his seniority at the bank, and the fact that you know, he’s well respected there, it didn’t have to go to the loan committee that he could just approve it. So, Okay, perfect. I’m super excited about it. Not only does he tell me that he could approve it, but I had thankfully asked for approval in writing, in which he sent me an approval letter on the bank letterhead with his name. Now, he has been telling me for months that we’re good to go and that he even told me that the appraisal had already been ordered. Told me who the appraisal had been ordered by, and we’re about three days before closing. And this guy goes AWOL, I can’t get ahold of him. He’s not answering my calls. And finally, he responds saying, hey, I’m so sorry, I don’t know how to say this. But our bank president has vetoed your loan. I said, excuse me, what do you mean, he’s vetoed my loan? And he said, Well, your primary residence is in Florida, and the bank is in Iowa. And that’s, you know, it doesn’t fit our criteria. I said, hold on. You’ve told me that all along. You’ve known this. I communicated this from the very start. It’s not that I was hiding anything from you. How could you do this? So I contacted the president of the bank. And luckily, you had guided me properly and said, hey, look, if you’ve got that approval writing, there are serious reputational damages for the bank. So I tried playing my big ball cap, you know, my attorney. We’ve got all this going on, and essentially communicated this to him like, hey look, I’ve got this approval letter. And the president of the bank was shocked. He had never heard about this story. It had just been brought to the committee that day. My loan officer had been saying that he had seniority at the bank, he had barely been working there for a very short period of time. And the bank had no interest in doing the loan. But because I had that approval in writing, they had no choice but to complete the loan. And so I got very lucky there.
Ferd Niemann: It was great. Yeah. I love that you called me and said, not only is the guy is not senior, he’s been there, like 35 days. And he’s never done a loan and he is representing, he’s got committee approval. And then the last best part of that is when they sent the loan terms through you were supposed to get a five-year fixed rate, they give you a 30. They give you a 30-year loan. Which is like the best small bank loan in America and you got it. You know, via the president three days before foreclosing, and they never met you, it’s just, it worked out. In the end, I think it worked out better than it could have. That’s great. There is definitely some lessons learned there. Make sure you get the loan commitment, but also, you’re on top of the guy and you got it in writing. And that was so prudent. And the fact this guy told you the Oh, we got John Smith from CB already doing the appraisal. Like, why would you make that up with no idea, he was fired wasn’t he?
Mark Bibas: I’m not sure if he was fired. I think he, so I called into the bank a couple of days later. And usually, they had this lady who would answer the phone, the secretary and he answered the phone. And so I was like, oh, maybe they demoted him to answer the phones for a little bit of time. But then when I went up to the bank, to actually pick up my cheques and introduce myself once I closed because I wanted to show face and give them the confidence that they didn’t just have to do this, that I was really going to put my foot forward. It’s a very small bank, and everybody has their own cubicle. It’s about only six people that worked there. I looked around, and I couldn’t find him there. So I have no idea.
Ferd Niemann: Wow, that’s crazy. That’s going to be a great story for years. Hope the next one’s not so stressful. That’s great Mark. Before we go, any other things you want to share? Tips or tricks or anything you want to ask me or discuss?
Mark Bibas: Well, yeah, before we go, I do want to I kind of want to pat your back a little bit, because you helped me out with the back rent contingency, which I would like to tell the story real quick if you don’t mind. So I know you had…
Ferd Niemann: You can pat on my back on my show all you want.
Mark Bibas: Awesome, awesome. Yeah. So Ferd had an episode a couple of weeks ago about closing contingencies. And one of the things was, make sure that you have access to all the background that’s owed to you. So perfect. Ferd, did my closing documents and included a phrase in there that any back rent that’s due, and is received in the future is completely mine and not the sellers. And we’ve got some section eight tenants in, someone’s knocking on my door, I’ll ignore it for a sec. And we’ve got some section eight tenants in our community. And I come to find out from HUD that one of them was about $2,200 in back rent that they had never paid off. And the day after closing, literally the day after closing, HUD had found out that she had owed $2,200. So they sent the check over to the seller since he was signed up for ACH payments of $2,200. And he tried not telling me about it. I got lucky that I found out through HUD after my conversation. And so I brought it up to him. And I said, Hey, I heard that you got this check for $2,200. This contingency indicates that his mind he had no choice, he signed me a check for $2,200. So that’s $2,200 that I got for free, thanks to a nice contingency from a well-educated attorney.
Ferd Niemann: Hey, man, that’s great. You know, I’ve never got that lucky from my own provision. So yeah, I think the key there is, I think it’s reasonable for that like today is the 17th of February, it’s reasonable for the seller to get any February rent that has been already been allocated to you on the closing statement via prorations. But as far as months that preceded February, I think it’d be unreasonable for the seller to go get March, April, May, June, July, all the way to January rent, because frankly, they already had the opportunity collected, they didn’t. And I learned this from doing retail deals because I didn’t want the previous owner, the seller suing or garnishing, my tenant making their ability to pay me future rent more challenging. And practically they don’t have the, they don’t have the right to sue for possession. So their only real right as a seller would be to sue for garnishment. And I don’t really want to harass my tenants. And so I basically would pitch these guys look, if you could have collected it you already would have. It’s a bad loss for you. But for me, maybe I collect it. Because I have found the new muscle of possession. Second, I can forgive it and be a nice guy and get some goodwill. I often do that. Hey, I’ll forgive this rent. As long as you start paying me, I don’t care about paying the last guy or third, I can forgive it and write it off on my taxes. Because when I bought the rights to it as part of the purchase via this closing documents, assignment, and lease document, I bought the rights to it. So it’s a receivable, which is an asset for me. If I never collected and I forgive it, my receivable goes to zero, which is a loss. So it’s a, it’s didn’t really cost. It’s kind of like depreciation, it’s a paper loss, that doesn’t cost anything. So it’s generally pretty easy to negotiate that against the seller, in your case, it actually just happened to be, you know, poof, you know, 2000 bucks, man, that’s great. So thanks for sharing sort of me previously. I appreciate that. And thanks for sharing it with our listeners here is going to give them something to learn from as well.
Mark Bibas: Absolutely. Thank you Ferd.
Ferd Niemann: Yeah, man. Mark, thanks. It’s been fun. Tell us where do people can reach you and how they reach out to you after this episode?
Mark Bibas: Yeah, if you want to reach out my email is mark@sosacapitalgroup.com. And on Instagram, I’m just @MHPmark, and I’m throwing up pictures of all the rehabs I’m doing, how I’m fixing pipes and whatnot. So if you want to just see real-life videos of how I’m tackling things and just kind of learn during my highlights, you’re more than welcome to check them out there.
Ferd Niemann: Alright, sounds good. Thanks, Mark.
Mark Bibas: All right. Thanks, Ferd, appreciate it.