Announcer: Welcome to Creating Wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing, fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible.
Jason is a genuine self-made multimillionaire, who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it. And now, here’s your host, Jason Hartman, with the complete solution for real estate investors.
Jason Hartman: Hello and welcome to another edition of Creating Wealth. This is Jason Hartman; glad to have you with us today. We are going to talk about a very exciting topic today. We are going to talk to you about an event coming up and I want you to join me for it. It is not our event and we have never ever, ever, ever promoted someone else’s event. So this is the first time. And it’s because I have a lot of confidence in this guest who you are about to hear from. And this event coming up, I’m going to be there and I want you to join me there as well. So we’ll get to that in a moment.
But before we do, I just thought I’d tell you about some of the other great shows we have coming up. Today we’re going to talk about mobile home park investing, and also mobile home investing. You can do this as a big investor, as a small investor, and it’s just pretty darn exciting really. I’ve been very interested for many years and I’m glad to have this show to present to you on that very subject. So, before we get into that, upcoming shows.
Our next show will be Show No. 100 and remember on every 10th show we do sort of a non-investing topic. And I’m interviewing a guy, who is a great guest. His name is Jeff Myers and we’re going to talk to him about passing the baton, about leadership, about building a legacy, and I think you’ll find that one very interesting. So that’ll be coming up on Show No. 100.
And then on Show No. 101, we’re going to be talking to Joel Grasmeyer about the new iPhone application for Property Tracker™, and tracking and managing your investments in general as well.
Our next show will be on the Wealthy Bag Lady, where we will talk to Linda Hollander about how people can create success from nothing, kind of a rags-to-riches story.
And then we’ll have Andre Eggelletion to talk about his book Thieves in the Temple, which is about the nearly 100-year scam that is being perpetrated on America and on really humanity in general because it applies to almost every country on Earth. And then we will talk about self-storage investing, if you’re interested in self-storage investing. Another one I’m very interested in, that’s coming up on a show real soon.
And then we will have Happy Real Estate with Leon d’Ancona. And then John Mauldin, who is a very famous financial writer, he’ll be on the show as well. So we’ve got a lot of great stuff coming up and keep listening in.
Now, what is this show about? This is a fairly long show, so I don’t have time to do listener questions. I will get to those, I promise you. I know I have a bunch of unanswered questions that we need to get to. But on this show and on the event coming up, the boot camp our speaker is going to present to us, we will talk about how to find and evaluate mobile homes. Remember, you can invest in these as a very small investor and develop real nice cash flow from them.
But you can also invest in them as a mobile home park investor and scale it up very, very big. We’ll talk about how to evaluate mobile homes and mobile home parks. We’ll talk about: how to perform and complete due diligence; what entity structure is the best to use; how to lock up a good deal; how to buy and refurbish repossessed mobile homes; how to assemble and manage a rehab crew; how to develop an effective management team; how to market and advertise and fill your park; how to create the ideal mobile home park environment; and how to get top dollar when you sell your mobile homes, or when you sell your mobile home parks.
Remember I said big or small. This applies to all investors. So, you listening, you’re not too big, you’re not too small for this because you can really work on either side of the scale here. And this event that we’ll talk to you about at the end of the show is coming up in St. Angelo, Texas which is outside of Dallas. I will be there myself. It’s in mid-June and I hope you join me for it. Again, this is not my event. We’ve never promoted anyone else’s event. But this one, I really like and it’s the first time I’ve promoted anybody else’s event, so you know I must have some real faith in it. Let’s go to the interview with my friend, Corey who is going to talk about mobile home park investing.
Oh, and one more thing, we are finally, finally, it’s been a long time, finally launching our new show called “Holistic Survival”. So if you’re interested in picking up another great show, you can go to www.HolisticSurvival.com and you’ll also be able to find this show on iTunes. And I think you’ll like it very much. And the thing we’ve been waiting for – we’ve already done several interviews on this show – but we’ve been waiting because we had to develop the first show. And the first show is on none other than the core content – the Ten Commandments of Holistic Survival.
Oh, and by the way, on Creating Wealth, we’ve got Addison Wiggin coming up, Thomas Woods, who wrote the book Meltdown – a lot of great stuff that I didn’t even mention before. But enough said, let’s go to the interview with Corey and let’s learn about how we can make millions investing in mobile homes and mobile home parks. Here is the interview; let’s listen in.
Interview with Corey, Mobile Home Investing Guru
Jason Hartman: It’s my pleasure to welcome my good friend, Corey to the show. He is an expert on mobile home parks and self-storage investing. Welcome Corey.
Corey: Why, thank you, Jason.
Jason Hartman: It’s great to have you here. What you have accomplished in this field is really impressive and you’ve just done a great job at it. I think the first question most people have when they think about this is they think it’s for the big wigs, the big players, the people that are like on the verge of being institutional investors that have a lot of money to start out with. Can someone start on a shoestring budget in the mobile home park world and make money?
Corey: Definitely. First, is they could buy a mobile home that’s existing in a mobile home park and buy it wholesale and then go ahead and sell it retail.
Jason Hartman: So what you’re saying here is not actually buy the park. This is a way to maybe work your way into the business of owning the real estate. At first, you just buy the mobile home?
Corey: Definitely, and so you’d be taking baby steps. So basically, what would happen is you would buy maybe a 1970’s mobile home for a couple thousand dollars and then go ahead and sell it, on like say an almost rent-to-own kind of a program. And then buy a second one and buy a third one and keep going. And then you could buy a mobile home park.
And then there are other people that want to jump right into the mobile home park and they go ahead and they buy a mobile home park, and there’s two different ways you can do that. The first would be buy conventionally, where you’re going to go get a bank loan and maybe 10, 20, 25 percent down. And then basically, you would, at that point, just get financing. And then the other way is you could go and get seller financing. And that’s right now, which is so great about mobile home parks at this point, is that you’re able to go ahead and you go and get seller financing because the mortgage markets are so tight at this point.
Jason Hartman: Okay, the seller financing is really the way to go, because the contraction in the lending industry has hit the mobile home park business, too?
Jason Hartman: Really? Okay. So you have a special name which I think is really cool. You call these “Lonnie Deals”. Before we totally leave the subject of not owning real estate, let’s talk about mobile homes. Tell us about a Lonnie Deal. I mean you already touched on it, but is there anything more to know?
Corey: The Lonnie Deal is a term for Lonnie Scruggs. And back about 25 years ago, he wrote a book called Deals on Wheels, and it’s an amazing book. It’s probably one of the top ten real estate books out there. And the premise is very, very easy. It’s, basically, buy a mobile home in an existing mobile home park, maybe a 1970 or a 1980 is what he likes. And then go ahead and you sell it on terms. So, for an example, what you would do is you go ahead and you buy like say, for example, he likes a 1982 12 foot x 60 foot. You purchase that for $6,000.00.
Jason Hartman: That’s the feet? That’s the measurement.
Corey: Oh yeah, I’m sorry. That’s the feet. So it’s a 12 foot by 60 foot home. It’s typical for say a 1980’s product. He would buy that for about $6,000.00. Maybe what he does is he buys it on an installment sale from the seller, or he could pay it cash. At that point, he turns around and he sells it for $12,000.00. He sells it for $1,000.00 down payment and then he amortizes the rest with maybe a 13 to 15 percent interest rate and creates a cash flow, which is absolutely amazing. What he’s done over the last 20 years is he’s been able to buy these homes, buy them wholesale, sell them retail, and create these cash flows that have produced enormous income for him.
Jason Hartman: Okay. So that’s the Lonnie Deal in a nutshell basically. One of the things you do, I believe, is you provide contracts and documents for this at your boot camp?
Jason Hartman: When you’re looking at the mobile home park world and investing in these, what are the four major profit centers?
Corey: Okay, great question. Before I answer that, who do you think is one of the smartest investors out there?
Jason Hartman: The name that most people would bring to mind is Donald Trump, or Warren Buffett, or something like that.
Corey: Well, Warren Buffett, do you think Warren Buffett ever got into the mobile home park business at all?
Jason Hartman: Not that I know of.
Corey: He bought a company called Clayton. They own mobile home parks. They own manufacturing. They own a financing piece of it. They own all of that. He basically bought this and he’s invested over $7 billion into the mobile home park industry. Nobody would ever think that Warren Buffett is part of the mobile home park industry because most people think of, when they think of mobile homes and mobile home parks, you think of Jerry Springer.
Jason Hartman: Yeah, right, you think of cheesy and sleazy, right? Yeah.
Corey: Yeah. You think it’s got a connotation to it. But he’s invested over $7 billion into the mobile home park industry. It’s amazing.
Jason Hartman: Yeah, to make it more institutionalized. Okay, well, tell us about these four profit centers.
Corey: Okay. The first profit center is lot rent.
Jason Hartman: Okay, the rent of the actual pad.
Corey: The rent of the actual pad. I don’t know anything better than renting dusty old dirt. I mean there’s no maintenance to it. There’s nothing. It’s incredible and so, basically, the first profit center would be the lot rent. And increasing rents basically has very little turn over. So, for example, I bought a mobile home park in San Angelo, Texas, called River Bend Estates. The rents were $135.00 and market rent was $175.00 and it was 161 spaces. How many people do you think moved when we moved their rent from $135.00 to $175.00 over an 18-month period?
Jason Hartman: I’m going to say not many because it’s rather difficult for them to move, isn’t it?
Corey: Definitely, because what happens is you have life-long customers. It costs over $3,000.00 in order to move a single-wide and over $5,000.00 to move a double-wide.
Jason Hartman: Right, and in a lot of areas, there aren’t really that many choices of places to move to, whereas, if you’re renting an apartment, there are a lot of choices usually in most communities, right?
Corey: Definitely. So it’s pretty amazing and really with the profit center of the lot rent, each space that you rent goes right to the profitability. So say for example, you have a mobile home park and the mobile home park is 50 percent occupied as you keep increasing the occupancy of those spaces that goes to profitability because your expenses are fixed. You don’t have really any incremental expenses by renting another space or bringing a mobile home into that mobile home park.
Jason Hartman: Are there situations where you might buy a park, it has a certain number of spaces, and then you can go and put more spaces there? Like go to the city and get permits for more spaces in the same amount of land?
Corey: Yeah, you can do that. The challenge a lot of times is that just bureaucracy and also with the costs of putting the pads in, putting the infrastructure in. And a lot of times what happens is–
Jason Hartman: Yeah, but it’s a lot cheaper than building another house or apartment.
Corey: It is, right, but what I would do, I would just go buy another mobile home park at that point in order to do that because the other thing is that sometimes, they’ll make you upgrade the whole mobile home park when you want to add 10, 15 spaces, where the current would be grandfathered, whatever that is at that point to do that.
Jason Hartman: Right, there are a lot of reasons why people do that, and you see these old tacky bathrooms. And the reason they can’t fix them because it kicks in all the retroactive ADA laws and so that makes for a really junky environment in a lot of ways.
Corey: And then the second profit center would be buy wholesale, sell retail. Now I know you love buying wholesale and selling retail, like any investor out there. And what you’re doing is buying homes from the bank or even from other mobile home park owners or mobile home owners. So for example, in Texas, we’re buying say 1995 to 2000 product, a single-wide, maybe 16 ft x 80 ft, where normally would sell for $20,000.00, we’re buying it for about $8,000.00, moving it, and having about $10,000.00 into it.
Jason Hartman: Okay, but how are you buying it cheap? I mean why doesn’t, if it’s such a great deal – the obvious question is, if it’s such a great deal why doesn’t someone else buy it before you? How do you find that deal?
Corey: We actually buy a lot through the banks right now because the mobile home park industry went into sort of the doldrums about five years before the stick built market did. And now the mobile home park industry is coming out of the doldrums where the stick built market is halfway into it at this point.
Jason Hartman: It’s kind of halfway in the middle of it yeah. So how do you find bank-owned mobile homes?
Corey: At this point, there’s about four or five large banks, one that’s owned by Clayton, which is called Banner Built. There’s also Green Tree Conseco, and then there are several small ones, like Bank of America handles a small portfolio and they will give out lists every single month.
Jason Hartman: Okay, so you just like go to their website or something?
Corey: Yeah. You can go to their website and then you bid on the homes. So it works out pretty well. And then also you’ll find other times where mobile home parks will be shutting down in order to go ahead and redevelop for commercial building. Almost like what happened in Costa Mesa. We have some valuable land and those people need to move out those mobile homes, and you can buy them very inexpensively.
Jason Hartman: Yeah, you’re talking about the one on Newport Boulevard where they built the new medical building?
Corey: Yeah. And then the third one is becoming the banker. This is what Warren Buffett loves the best.
Jason Hartman: This is the third profit center?
Corey: This is the third profit center. So basically, what you’re doing is you’re buying a home for $10,000.00. You’re going ahead and selling it for $20,000.00 and you’re putting about anywhere from 12 to 15 percent interest rate on the money.
Jason Hartman: Wow.
Corey: Yeah. And then in addition you’re able to rent out the space that was vacant that was not producing an income, you’re renting the space where it all goes to profitability. So you see the combination of those three profit centers just it produces you an enormous cash flow, enormous equity.
Jason Hartman: Yeah, it seems though when you become the banker, does that get a little complicated? I mean there’s a lot to manage there, isn’t there? You own the park, so you’re managing renting spaces. Then you own the mobile home that you had to go buy and source somewhere. Would it have been already there? Or are you always moving it onto that?
Corey: Sometimes they’re already there. And basically, it’s a repo in your own park. But a lot of times you’re buying a mobile home that’s outside the park and bringing it in.
Jason Hartman: And how much does that cost?
Corey: Roughly, it probably costs about $2,000.00 to move a single-wide, to break down transport and set up.
Jason Hartman: Okay. And it depends how far you’re moving it?
Corey: Yeah. Usually, we do it within 250 miles. But you see what happens is that you can get a person, like in Texas, we have one person that buys all our mobile homes for us. We give them $500.00 per home and they go out and they look at the home and then they deal with the bank. And then they line up the transportation and all that, so we don’t have to do anything whatsoever.
Jason Hartman: Oh, that’s great.
Corey: So it works out really well.
Jason Hartman: Okay. All right, good. What’s the fourth one?
Corey: The fourth one is the big one. Like the first three are huge cash flows and also produce equity. The fourth one–
Jason Hartman: Okay and just review the first three as bullet points, if you would.
Corey: Sure. First one would be lot rent. The second would be a buy wholesale, sell retail.
Jason Hartman: Okay and that’s just talking about just buying the home itself?
Corey: The home itself, yeah.
Jason Hartman: Not the real estate?
Corey: Not the real estate. And then the third would be the financing.
Jason Hartman: Okay. Becoming the banker?
Corey: Becoming the banker and then all that produces the fourth, which is basically it’s a retirement. It’s a huge nest egg at the end of the day. So for example, each vacant lot that you rent out, it goes right to profitability. And say that space rents for $200.00 a month, which would be $2,400.00 a year. Based on a ten cap rate, that space when you rent up is worth $24,000.00. So say, for example, by bringing in ten homes and I rented those ten spaces by bringing my home in and then selling on terms, I’ve just increased my property, my mobile home park, by a quarter of a million dollars.
Jason Hartman: Because when you bought it, those weren’t rented?
Corey: They were not rented.
Jason Hartman: Right.
Corey: Now they are rented and that $200.00 goes right to profitability because you don’t have any additional expenses because of that. So you bring in 40 homes, you’ve increased a million dollars of equity.
Jason Hartman: Okay, so every real estate investor who’s been kind of following this type of thing, this investing game, they read maybe one of Donald Trump’s books and it’s all about adding value.
Jason Hartman: The obvious question is you need to source the mismanaged, poorly operated park out there now. It just sort of begs the question, why isn’t the guy who already owns it, why doesn’t he see that? Or why can’t he fix that problem? Are there times when the problem maybe isn’t fixable so that you can’t add value like that? Like you see a park that’s got 25 percent of the spaces are vacant.
Jason Hartman: I mean why isn’t the guy who owns it already fixing it?
Corey: A couple of reasons. One is that they might not have the knowledge or the financial resources in order to be able to bring homes in and rent it out.
Jason Hartman: Okay, so what you’re saying is it’s a lot easier to rent a home and a pad at the same time – really you’re selling the home and becoming the banker and renting the pad – than it is to say, “Hey here’s a pad, bring in your own mobile home”?
Corey: Because the challenge is is that in the last couple of years financing on mobile homes in a mobile home park is almost non-existent.
Jason Hartman: For the consumer?
Corey: For the consumer.
Jason Hartman: Okay, so you’ve got to be the banker as the owner of the park?
Corey: Correct. Or you have to convince other people to bring their mobile homes in as investors and set them up and then sell them on a rent-to-own kind of program.
Jason Hartman: So, those would be Lonnie investors?
Corey: They’d be Lonnie investors, correct.
Jason Hartman: So other people that are doing Lonnie Deals might fill your park for you?
Jason Hartman: How do you find those people?
Corey: They’re pretty frequent out there. If you go to like “Mobile Home Universe Forum”. We have a forum on ours where we have probably about 200 people a day that come just on that forum and they talk between themselves. There are other ones out there as well that do that.
If I was going to buy a park today and everything that I know about mobile home parks, what I would do is I would buy a park on a lease option, meaning that I am leasing it from the person for a net of whatever it is today. So say it’s 50 percent occupied, I’m leasing it for the net. And then I have an option on it for the next five or ten years, so that I would be able to take advantage of that equity of all the growth that I’m doing.
And why we do a lease option is you have very little risk and you have a lot of reward. You’re not putting down 20, 25 percent. You’re not trying to get a bank loan, which makes it very difficult in these lending times. Then what I would do is I would go out and I would buy maybe 10 or 20 copies of Lonnie Scruggs’ Deals on Wheels book and I would give that out to all my colleagues, my friends, my family and say, “Hey you know what, if you’d like to do a Lonnie deal in my park,” and I’ll take a 5, 8 or 10 percent management fee to do that. And if you would ask, “Why would you do that?” Simple is that real money is made in the dirt, not in the mobile home.
Jason Hartman: Right, right. But the mobile home is a decent way to get started if you need to sort of parlay up to a bigger thing.
Corey: Yeah, it’s a decent way and also if you want to create cash flow. So, for example, Fred Balke who a lot of people know on our website, Fred was working at Cosco and he’s roughly about 55 years old. His wife had Lupus. So he determined that there’s no job security at Cosco. So what he wanted to do is he wanted to replicate what his income was and it was roughly about $3,500.00 a month. He went out and he bought one mobile home in a park as a Lonnie Deal. He went and bought a second one, bought a third one. What he did was he incentivized the park manager to go ahead and find him mobile homes in that park. He paid her and then he paid her to sell them to people. He actually ended up having over 45 Lonnie Deals and he created income – cash flow of over $9,000.00 a month. And he did that in less than 24 months.
Jason Hartman: For most people listening, I mean that’s not like making it to the big time, but in today’s economy, Corey, $9,000.00 a month passive income – you’re riding high compared to what’s going on with everybody getting laid off out there and the total lack of job security and you know their jobs are getting sent over to India and China, etc. Yeah. That’s fantastic.
Corey: So there are many different levels that you can take this. All the way up to I know several people who are making over $1 million of cash flow every single month. Now they’re on a completely different level, but you can go anywhere in between with the mobile home parks. The biggest thing why I love mobile home parks and also mobile homes to a degree as well is that it’s all about numbers. If I had a four-plex and I go up $10.00 a month on a rent increase, that’s roughly $480.00 a year rent increase that I made from that previous year. That’s great, but it’s not exciting. But if I go a $10.00 rent increase, say for example, in my park that I have in River Bend Estates down in San Angelo, Texas – 161 spaces – I go up $10.00 rent increase, that equates to $193,200.00 of equity that I’ve built in that mobile home park.
Jason Hartman: And what do you do with that equity though? Is it really equity you can realize? Or is it just something you sort of see it and it’s all on paper? How do you really take advantage of the equity?
Corey: You take advantage of it two different ways. Is that with the equity piece of it, I realize the increased cash flow. With the equity piece of it, if I’m able to refinance out, or maybe I’m buying another property and I’m able to put a second on there, I’m able to instead of giving the owner some additional cash, I can say, “Hey, I’ll put a second on my property, because I have a lot of equity built into it.” So there’s different ways you could do that. What I do with River Bend when I do most of my properties back before the lending got very tight, I would go in there and I would increase cash flow by increasing rents. I would also increase occupancy and then I would refinance it out, refinance all my money out, where I have nothing left in that deal. And that’s where I’m able to make the cash flow. On some of these parks, I cash flow about $20,000.00 a month. Now, I put some work into it, increase the rents, increased the occupancy, but $20,000.00 a month passive income is not a bad position to be in.
Jason Hartman: Not at all. And how long ago did you buy your first park?
Corey: The first park was bought back in 2004.
Jason Hartman: Really? Four years and a few months ago, depending on what time of year you bought.
Corey: Definitely, and the only reason that it’s funny and the only reason why I got into mobile home parks and self-storage was I found I had a very large portfolio of real estate of single families and duplexes, four-plexes and some apartment buildings. And in 2004, I could see the writing on the wall in the California market and I needed to get that money out of California to be able to protect my equity. And I always heard mobile home parks are huge cash cows.
And I learned from the very best out there, which is Ernest Chu. And subsequently, he’s had a stroke and he no longer is in the business anymore, but he taught me about mobile home parks. And he showed me how they were such large cash cows. You just have to have the education in order to be able to do that. Or understand the profit centers and understand what to do and how to put it all together.
Jason Hartman: Hey, back to the idea of buying a park on a lease option. That’s a great idea. It sounds great when you say that, but the hard part I’m assuming is going to be finding the seller or the current owner of that park who’s willing to do a lease option with you and not only have that, but at the same time have all the other fundamentals of the park being right. Is it the right property in the first place? It might be the great terms, but the wrong property, right?
Corey: Definitely. And it’s going to be important to do your homework. I mean, you’ve hit it right on the head; it’s that there are over 40,000 mobile home parks out there, the large ones.
Jason Hartman: In the United States?
Corey: In the United States – of the larger ones, you know over 50 spaces. And there’s gonna be some parks that aren’t going to be worth it. Say, for example, something in Michigan right now, by the auto plants. That might not be the best source of a mobile home park. One of the great things also about mobile home parks is that most of them are mom and pop owned. They’re not owned by large corporations. So you’re not dealing with a sophisticated investor.
Jason Hartman: A sophisticated seller?
Corey: A sophisticated seller, yeah.
Jason Hartman: But I mean that’s becoming more that way though. I mean as more and more people hear about this, are the deals picked over? It sort of begs the question.
Corey: No. They aren’t. It’s amazing. You know, I hope Jerry Springer stays on for a long time because the connotation – or COPS – you know those shows give a connotation of a mobile home park. I mean, for example, most people don’t wake up in the morning and say, “Jason, I want to buy a mobile home or mobile home park today.” Because if you told your –
Jason Hartman: They want to buy a high-rise in Manhattan like Donald Trump, right, with glass and steel and shiny?
Corey: Definitely. Or even self-storage is very sexy. But mobile homes and mobile home parks are not sexy. People will have thought you’ve lost your mind by doing that. And so the way people usually get into mobile homes and mobile home parks, they get into it because they know somebody’s who is making a lot of money and is doing very very well.
Jason Hartman: Okay.
Corey: And so you don’t have a lot of competition that way and also, everybody seems to help everybody else in the mobile home park industry. You don’t have the cut-throat that you do in the single-family investing market.
Jason Hartman: Yeah. But that cut-throat in the single family investing market has kind of calmed down some.
Corey: Petered out, yeah.
Jason Hartman: Because the national media is so negative, yet there are still really good local markets. It just depends where.
Corey: Yeah, it was viscous there for a couple of years.
Jason Hartman: Oh, it sure was. Yeah, it was crazy back in, up to 2005, I’d say.
Corey: And then just to answer your question more about why would somebody do it? You’ll find that a lot of people had some great times in mobile home parks that are 100 percent full. And then over the last five to eight years, homes have been coming out because they’ve been getting repo’d. These people either don’t have the wherewithal knowledge-wise or financial-wise in order to do anything about the mobile home park. So let’s say, for example, they’re managing it, they’re actually managing the mobile home park and they’re making $2,000.00 a month. If you came along and you said, “Hey, you know what I’ll do is I’ll go ahead and I’ll lease option this park from you. I’ll give you what your net is today, $2,000.00, and all I want is an option in the future in order to buy this park.”
That would be a pretty good deal for somebody, for a seller that said, “Hey, I’m making $2,000.00 a month right now cash flow, but it’s up and down with the rates of the mobile home park. If I can have a guaranteed $2,000.00 a month and not having to deal with management headaches, a lot of sellers will jump to that. And also there’s very little financing in any of the commercial out there, so sellers don’t have an option of saying, “Oh no, I’m not going to do seller financing.” They don’t have the option. Like a year, two, three years ago, they did.
Jason Hartman: They could turn it down.
Corey: They could turn it down. They could get conventional financing, but the conventional financing is not there.
Jason Hartman: But none of the buyers can find the financing. Tell us about that deal – like that hypothetical deal you said where they’re making $2,000.00 a month. I mean what size deal is that? Like how much is that park in that example? How much might it be?
Corey: Say for example, it’s a park, $800,000.00 to $1 million. It’s 120 spaces. And say it’s 50 percent occupied.
Jason Hartman: Okay. Now, really it’s going to be 50 percent occupied?
Corey: It could be anywhere between 30 – 90 percent occupied. But say this one is 50 percent occupied.
Jason Hartman: Okay.
Corey: So they have fixed costs right now. So if I stumbled upon it and this person was making a net $2,000.00, having to actively manage 50 percent of the spaces and only making $2,000.00, this person is probably pretty burnt out at that point. So I would come along and say, “This is what I’d like to do. I can’t give you a huge down payment and all that, because I need to bring mobile homes in, or make this park better. I’m going to lease option it from you. I’ll give you what your net is today. You don’t have to worry about management of this park, daily, weekly, monthly. It’s a fixed income that you’re getting every single month. It’s a huge win for you.” The money that I’m putting into the mobile home park would buy mobile homes, and you know maybe infrastructure repairs, or anything else, will only make your park more valuable. So even if I walk away from it two, three or five years from now –
Jason Hartman: You’re still better off.
Corey: You’re still better off.
Jason Hartman: Yeah. You can take your homes with you, though?
Jason Hartman: But it’s going to cost you money, and they know that, so you’re not likely to walk away, right?
Corey: Right, correct. And also maybe you tell the seller, say, “Hey, what I’ll do is I’ll give you 25 percent of the up-side and I’ll take 75 percent.” So there’s a lot of ways you can do seller financing.
Jason Hartman: Yeah. Okay. So seller financing or lease option is what you’re saying?
Corey: Yeah. And really lease option is disguised 0 percent seller financing.
Jason Hartman: Yeah right. Well, depending on the option price, the exercise price, yeah. And any thoughts on setting that price? So if you option it, how long would be sort of a typical option period?
Corey: I would go definitely a minimum of five years. I would go for ten.
Jason Hartman: I mean most of the sellers are older people, aren’t they? Would you say that’s a fair assessment?
Corey: Probably you know it’s all over the board, to be honest with you.
Jason Hartman: The reason I mentioned it is the older they are the less likely they’re going to want to do anything long-term.
Corey: Yeah, somewhat like that, but I think ten years is okay. The other thing is with the mobile home park industry, it comes in cycles. And what happens is you have the repo’s, there’s no financing in the mobile homes, and then five to seven years later all of a sudden all these lenders get into the mobile home park industry. They lend. The parks get completely full. And then five to seven years again, you have all the repo’s. So it’s a constant cycle. Five to seven years from now you might not even need to bring mobile homes in yourself. These dealerships will be filling your park for you. And that’s what happened back in the late ’90’s.
Jason Hartman: It just seems like a lot of sellers are going to object to a long lease option like that that’s five, seven, ten years especially.
Corey: You’d be surprised with people that there’s no financing out there, they’re managing a park day to day and they’re tired of managing. And you’ll find it’s more common place. I’m finding seller financing is much more common place today than the conventional financing in the mobile home park industry.
Jason Hartman: Okay. So I want to talk a little bit about analyzing a park.
Jason Hartman: All right? What is the difference between turnkey and turn-around?
Corey: Turnkey is a park that is 80 percent occupied or greater. And then turn-around is anything less than 80 percent. Now is that something written in stone? No. But it’s sort of a guideline that I go with. And a turnkey is great because what happens is that you can just bring in maybe one or two mobile homes in a month, or maybe one mobile home in a month and over a two year period, you have a park that’s full. And it’s cash flow. It’s making a lot of money right from the get-go.
Turn-around park, say it’s 30 or 40 percent occupied, you’re still going to have those fixed expenses, whether it’s 30 percent or 80 percent, so you might be under water. So you might have to bring in two or three mobile homes every month in order to get that occupancy up to maybe 60, 70 percent, where it’s cash flowing.
Jason Hartman: Okay. So what’s the better opportunity?
Corey: The better opportunity, what I would say is that if somebody has a lot of family commitments, work commitments, all that, I would look at a turnkey mobile home park, one that’s going to require minimal activity and that’s what’s going to be more important. But say for example, like my brother, he’s 30 years old. He wants to create some enormous equity and cash flow. I would tell him to find a turn-around mobile home park that’s maybe 40 or 50 percent full. He goes in there, uses knowledge to build up that mobile home park. The equity and cash flow, I mean, he could be set for life just with one mobile home park. So it depends upon how much energy you have and how much time you want to put into that mobile home park, and also proximity of the mobile home park. Turning around a park 3,000 miles away is not something I would recommend. But a turnkey mobile home park, say if you’re in California and you’re buying one in South Carolina, as turnkey, there’s really not a lot of moving pieces at that point.
Jason Hartman: Right. That’s pretty simple. A lot of times the owners live in the park.
Jason Hartman: Yeah.
Corey: Actually, I find not many owners live in the mobile home parks.
Jason Hartman: Oh. Okay. They’re rich. They don’t have to live in the mobile home park.
Corey: They’re the investor. But sometimes the manager lives in the mobile home park.
Jason Hartman: So, do you keep that same manager usually? If it’s turnkey, you might, I assume you’re going to say?
Jason Hartman: And if it’s a turn-around, you get rid of the guy.
Corey: If it’s turn-around, probably one of the reasons it is a turn-around is because of the manager.
Jason Hartman: Yeah. The manager. Take us through like a typical deal, if you would, Corey. When you say a turnkey park, I mean that’s what every investor wants, right? So looking for a turnkey park, where you’re also going to get the seller to do the terms you want and everything’s great, I mean that’s going to be a hot commodity, isn’t it?
Corey: It isn’t because with investors at this point, a lot of investors are a little gun-shy at this point.
Jason Hartman: Everybody listening, that’s exactly what I’m telling all of you, all the time, not specifically, but I’m going to say it specifically now. Two great billionaires – J. Paul Getty and Warren Buffett, “buy when everybody’s selling, sell when everybody’s buying” – that’s Getty. And Buffett said, “Be greedy when everyone is fearful. Be fearful when everyone is greedy.” If you’re buying little residential, single family houses, if you’re buying four-plexes, apartment buildings, mobile home parks, whatever it is – you want to be on the right side of that equation. That’s exactly what you’re telling them, aren’t you, Corey?
Corey: Oh, definitely. I mean this is an opportune time.
Jason Hartman: This is an opportunity, yeah, right.
Corey: Buying a mobile home park today is an opportune time and for a number of reasons. One is there’s very limited financing out there conventionally, so it forces the seller to do seller financing and give some incredible terms in order to sell the park to somebody.
Jason Hartman: And it’s also lessened the number of investors looking for deals.
Corey: It’s lessened the number of investors looking for deals. And then thirdly, there are still repossessed homes out there that the banks have. It’s starting to get less and less. I mean there was a glut of these mobile homes back in early 2000. Today, they’re getting less and less. Give it another 18, 24 months, there’s not going to be any more bank-repo’d homes to a level that we’ve seen in the past. Homes are getting more and more expensive, those repossessed homes. People are going to have to start buying brand new. And brand new could cost you $25,000.00, where I’m buying homes for $8,000.00 to $10,000.00.
Jason Hartman: What did you see in the post-Katrina world and with FEMA? Are there any sort of opportunities that investors worked there? I’m just kind of curious. Like FEMA had all those trailers and then they had mold and you know, now they’re taking them away. What went on there with investors, anything?
Corey: There was nothing at all. Like I mean everybody was salivating over those homes. Everybody was like, “What’s going to happen with those homes?” And we thought that we’re going to get them. They actually, a lot of those got destroyed and/or they went to non-profits is where they were ear-marked. But yeah, I haven’t seen or heard of anybody buying any of those.
Jason Hartman: You didn’t hear about that, yeah. I was just kind of curious. Okay.
Corey: I think they destroyed a lot of them because of the mold and different things.
Jason Hartman: Okay. So, keep talking about like analyzing a park – like optimum size, optimum price, optimum location.
Corey: Okay. So size-wise, if it’s within 30 miles of your house, it could be any spaces. No worries whatsoever.
Jason Hartman: But if it’s further away, you want to have some scale to it so it’s worth it?
Corey: Definitely, and so what you want to do is you want to have at least 60 spaces. You know, that’s not set in stone, but at least 60 spaces, and the reason why is because you’re going to have a good manager on site. If it’s close to you, you can drive by. You could have a mediocre manager. I mean I always recommend putting a good manager in, but especially long distance. You’re going to have to have a top notch manager to watch your back, to watch the park. Now, with regards to how much down or how big a park, it really depends upon if you get seller financing, I know some people, like a school teacher that bought a million dollar park in Jacksonville, Florida and she put down $20,000.00 of option consideration. She did the lease option and that’s how she created her first mobile home park because here she’s a school teacher.
Jason Hartman: Did she close the deal yet?
Corey: Yeah. She’s actually had it for 18 months, or 24 months.
Jason Hartman: Okay. So she exercised her option and bought it?
Corey: She has not exercised the option. She probably won’t until for another five to eight years, until the option is actually fully expired.
Jason Hartman: Okay, so the caution there is, you need to line up your financing and make sure you’re in a position to close the deal. Otherwise, you could lose your – you could really lose out. There’s a big danger there, right?
Corey: Yeah. And really the risk with the lease option is your lease option expiring. So the longer you can go out, the less risky it is.
Jason Hartman: The less risk you have, because you have more time.
Corey: And you could always write into it where basically, say it’s a five-year option, you could always say, “Okay, I get another five-year option,” and give them $25,000.00 option consideration. So I would always write in clauses to really minimize any risk that you have with that option. So there are a lot of things you could write into that agreement in order to minimize.
Jason Hartman: Okay. So keep going on like the optimum deal here.
Corey: So optimum deal, I would look at that. I would look at parks that have reduced lot rent. So for example, I found a deal called River Bend Estates in San Angelo, Texas. The rent was $135.00. Market rent was $175.00.
Jason Hartman: Per pad?
Corey: Per pad. Now people say–
Jason Hartman: That’s amazing how cheaply people can live in these. I mean that’s really serving a real market.
Corey: Yeah, but the rents go anywhere from say $100.00 I’ve seen, all the way up to roughly a $1,000.00 say here in California. So there’s a huge spread between that. And a lot of people ask, “Why was it only $135.00 when it was a $175.00 market rent?” Well, the owner had not raised rents in 13 years.
Jason Hartman: That’s unbelievable. What do they think, someone is going to move if you raise the rent $10.00 a month? That’s crazy.
Corey: That’s exactly what he did. And I asked him, “How come you haven’t raised it?” He said, “I was afraid that people were going to move on me.”
Jason Hartman: Wow.
Corey: And so in 18 months, we raised the rents $40.00 and not one person moved.
Jason Hartman: It’s $40.00.
Corey: I raised it $40.00.
Jason Hartman: That’s hardly anything.
Corey: Yeah, definitely. Well, to a lot of people who were paying $135.00, it was significant, but over time, we raised it to $175.00. They were okay with that.
Jason Hartman: Yeah. Okay.
Corey: I would look at parks that you could do rent increases. The next one I would look at is I would look at occupancy. If you have some vacancy, say 20 percent vacancy, it would allow you to be able to bring mobile homes in, set them up, and then you’d be able to get that profit center. You’d be able to get that lot rent that’s currently zero. You’d be able to do buy wholesale, sell retail. So you’d be able to buy equity by buying that mobile home, and then also the financing.
Jason Hartman: So the vacancy really is the opportunity. And you know what I love about this too, Corey, is that unlike being a typical developer, if you had say a plot of land that had two houses on a lot and you were allowed to build two more. That’s a big deal to build two houses. Right?
Jason Hartman: You know, it’s expensive, it’s permits, it’s contractors, it’s everything. Whereas, a mobile home park that has 20 vacant spaces, like you said you can add two a year. You can add one a month. You can do it as fast or as slow as you want.
Jason Hartman: And that’s a very comfortable thing for the investor, isn’t it?
Corey: And the other thing is that even when you have homes in your park, they are owned by individuals. A lot of times they need to move and they can’t sell it to anybody. Numerous stories like this, where somebody would go ahead and they would offer their house at $10,000.00. No takers. All of a sudden, a couple of months later they come to us and they say, “Hey, could you buy it for $7,000.00?” And I would say, “Not interested.” A couple months later, “Five?” “Not interested.” We ended up buying it for $2,000.00 because what happens if they move they’re still responsible for that lot rent. So they’re tied into that lot. So we buy it for $2,000.00 and we go ahead and resell it for $10,000.00. So your very best deals with buying homes are homes in your park.
Jason Hartman: Uh huh, right. Buying the houses that are repo’d right in your park, yeah.
Corey: Then it becomes an income stream. So I would look at that. Another one I would look at is mobile home parks that the owner is paying the utilities because you can bill back the utilities. You can bill back water, sewer, trash, gas, and usually electric is already billed back.
Jason Hartman: Are they separately metered?
Corey: The water wouldn’t be. But what you would do is you’d put a submeter in. It costs about $35.00 with just the equipment itself. It’s just a–
Jason Hartman: Per unit.
Corey: Per unit.
Jason Hartman: Per pad, okay.
Corey: And then you’d just have your maintenance guy – it’s probably about $10.00 for the maintenance guy put in and $25.00 for the unit itself. And then you bill back water and sewer that way. You could also bill back trash, which is roughly $8.00 to $10.00 a month. And there are bill-back companies that will go ahead and do this billing, but that could be 10 percent of your expenses that you could pass back onto the tenant.
Jason Hartman: Right, but isn’t that just what you were talking about the $40.00 rent increase? That’s just a rent increase.
Corey: It’s a disguised rent increase. Yeah.
Jason Hartman: I understand that but you know?
Corey: But you could do both, in fact in this park we did both. We billed back the utilities and all the other parks are billing back utilities. So that was equal footing. And then we went ahead and we moved the lot rents from $135.00 to $175.00 because that was market.
Jason Hartman: So really the rent went up about $80.00 a month?
Corey: No, roughly about $40.00 and then about $15.00 or $20.00 more or less on their utilities.
Jason Hartman: Depending on their usage?
Corey: Yeah, usage.
Jason Hartman: Okay. So electric in parks is usually separately metered already.
Corey: Electric use is separately metered, but water, trash, sewer and gas is not.
Jason Hartman: Okay.
Corey: Or a lot of times it is, but if the owner is not savvy enough in order to be billing it back, I mean instantly as soon as you sub-meter and bill it back, all of a sudden your equity is blown up, because your cash flow’s blown up in order to do that.
Jason Hartman: Right. Okay.
Corey: But one of things is that you just want to make sure – and you alluded to this before – you really want to make sure that you’re buying a mobile home park in a good area and you have the demand as well. If you’re buying where there are so many mobile home parks and there’s not enough industry in order to support those mobile home parks, or those mobile homes and mobile home parks, you’re dead in the water. You’ve just bought somebody else’s problem. So you really need to make sure and do your due diligence. Make sure you’re buying a good mobile home park in a good area that has a lot of demand, is not over supplied, and also that the infrastructure is very good because infrastructure can get very expensive if you buy the wrong mobile home park.
Jason Hartman: Sure. So how do you know if there’s enough demand? Say you see a park there and it’s got a bunch of vacant spaces. How do you know if you stick some mobile homes on those lots that they’re going to lease?
Corey: I would do two things. One, is I would look at the competitive market place. I would look at all of the mobile home parks that surround the area. Look at their rent. Look at the condition of the mobile home park itself and also look at occupancy. Immediately, you’ll be able to know whether, I mean if everybody’s at 50 percent in the local area, you know that there’s going to be an issue with the local area. But if everybody’s 95 percent and you’re 50 percent, well, you know there’s something wrong with the mobile home park itself. Maybe it’s the management. Maybe it’s the condition of the community. Maybe it’s the location. But that’s really what you want to do.
Then with regard to the mobile homes, if you bring mobile homes in, you want to know if you’re going to be able to sell these things or not. So what you want to do is you want to get a cell phone of that local area. Put it in the paper, “Mobile home for sale, $500.00 down, $500.00 a month,” and see what kind of people. You might have a lot of people that might call you. But maybe they’re not the right kind of people. So that’s what you want to do in your due diligence. Due diligence, you really want to make sure you do a great job on due diligence.
Jason Hartman: How much time do you get to do that, though? How long can you tie one of these up before you have to?
Corey: You can close at 45, 60 days. You could write it in there that you want 20 days in due diligence. So it would just be like any kind commercial property that you want.
Jason Hartman: Right. So, you’ve got to get a cell phone, place ads, where? Craig’s List, or?
Corey: Where we find most of our customers – we used to spend a lot of money in marketing. We did billboards, we did radio, we did TV, we did flyers, we did banner signs, but 95 percent of all of our leads came from 5 percent of our dollars. What do you think that was?
Jason Hartman: I don’t know.
Corey: Thrifty Nickel, Penny Saver, or Green Sheet.
Jason Hartman: Yeah, all the old fashioned stuff. Wow. Yeah.
Corey: They love that. It’s free and that is where we get 95 percent of our leads from.
Jason Hartman: Okay.
Corey: So that’s what I would do. And you could easily get a phone in that local community and that would give you the demand.
Jason Hartman: Tell us about a couple of the deals you’ve done real quick.
Corey: One that I love, River Bend Estates, it’s a community that’s right along a river and it was a 161-space mobile home park, 120 spaces were occupied. I bought it for $1,350,000.00. I put 20 percent down and I got a loan for 80 percent. Now the seller, a lot of people think, “Why would a seller sell this mobile home park?” What it was is this gentleman had it for 40 years. He passed away. His two sons inherited it. His two sons started fighting as soon as they got the mobile home park. Within a year, they’d stopped talking to each other and then it became a court-appointed sale. So here, I got the mobile home park. The rents were $135.00.
So what was my strategy on this? My strategy was two-fold. One was I wanted to move the lot rents from $135.00 to $175.00. So I mean huge cash flow when you move that from $135.00 to $175.00. Second is I wanted to increase the occupancy. So I wanted to bring homes in. And so that’s what I did. I brought in roughly about 50 homes and I increased the appearance of the park. Like I got rid of any boats or any – you know people didn’t skirt their mobile homes and all that – really increased the appearance of the park.
Jason Hartman: You made it look a lot better, yeah.
Corey: Made it look a lot nicer. And the average tenancy, by the way, at this mobile home park was 15 years.
Jason Hartman: Wow.
Corey: So it’s amazing. So you don’t have to worry. I mean, these people can’t move out over night. You see them Friday and they’re out Monday. That doesn’t happen with a mobile home park.
Jason Hartman: Yeah.
Corey: So it makes it really, really nice. And what I did was I bought these homes. I bought them for an average of $11,000.00. Now, we sold them on an average of $20,000.00 to $22,000.00.
Jason Hartman: Okay. So there’s your Lonnie Deal part.
Corey: So there’s my Lonnie Deal part.
Jason Hartman: And then you were going to talk about your banker part in a minute.
Corey: Yeah, we charged 13 to 14 percent interest, depending upon the tenant.
Jason Hartman: Okay. And what type of loan is it? Are you amortizing it? Is it 15 years long? What?
Corey: Yeah, we’re amortizing. What it is is we –
Jason Hartman: And is the mobile home structure under the DMV in that state, or is it a piece of real estate? I know there are two ways it can be considered.
Corey: Yeah, like in Florida, it acts just like as if it’s a car. In Texas, even though it’s personal property, it acts as if it’s a regular home.
Jason Hartman: And in California I believe it can be either way, or something?
Corey: I think so. I’m not sure about California.
Jason Hartman: Okay.
Corey: And then also it was that we added a late fee structure. This gentleman what he did was, the previous owner, he would charge $5.00 for the month if the person was late. So, on the 5th of the month, if people were late they could be late all month, and it’s only $5.00. We implemented where it’s $25.00 on the 5th of the month and it’s $5.00 a day each day after until they paid in full.
Jason Hartman: What about the laws on this stuff? Do you have a regulatory climate that doesn’t let you do stuff like that in a lot of places?
Corey: In most states, you’re not up against that. But the other thing is that mobile home parks are such a niche. Nobody has their arms around mobile home parks.
Jason Hartman: In terms of the regulators?
Corey: In terms of regulators, everything along those lines.
Jason Hartman: Okay.
Corey: I mean it makes it more difficult I think that way, but we’re trying to incentivize people to honor their commitment of when the rent is due, because we also have our commitments that we need to pay.
Jason Hartman: Yes, of course. Of course.
Corey: So that was River Bend, what I did was I refinanced. So I bought it for $1,350,000.00. I refinanced in 2006 for $1,500,000.00. So, I refinanced it for all my money I had in it, plus $150,000.00. So I refinanced it for more than I bought it for. Now, did I put $150,000.00 into my pocket? No. Because I was buying homes at the time in order to fill that. And what I got was a conduit loan on it for a 30-year fixed.
Jason Hartman: Tell everybody what a conduit loan is.
Corey: A conduit loan is basically a long-term loan. It’s sold off into the secondary markets.
Jason Hartman: And these aren’t really around right now, but they’ll be back some day because everybody in the U.S. has a short memory. But go ahead.
Corey: You know, with this kind of loan you could have done a national with the same thing where you put 6.1, 6.2 percent financing back, then a 10-year balloon and a 30-year fixed rate. And so it worked out very, very well. So how does it look for us based upon a 9 cap rate, the park is worth $2.5 million. So I increased the equity about $1.15 million. How did I do that? I raised the rents and I increased occupancy. And that’s all I did and it was very simple. This park has not taken a lot of my energy or time whatsoever. The homes that I bought, I bought roughly about 45 homes, you know that retail value today is about $1.1 million, so I’ve added about another $550,000.00 equity by buying those homes. So you can see how you can build cash flow and equity. And the numbers are huge. Like I mean if I did with a four-plex, you could buy a four-plex in Orange County for $1 million.
Jason Hartman: Yeah.
Corey: I bought this park for $1.3 million.
Jason Hartman: Well, you’d be lucky if you could buy a four-plex in Orange County for a million. I mean, that wouldn’t be in a real nice area.
Corey: Yeah. Definitely.
Jason Hartman: But it could be done, yeah.
Corey: Yeah. Definitely. So, with this park, you know as it stands today, our park, it’s $33,800.00 what we bring in every single month in this park; $33,800.00. I clear roughly about $10,000.00 of that. So this park is just enormous with regards to what that looks like. In addition, every $10.00 rent increase that I do in this park, every year we do a $10.00 rent increase – that brings $193,200.00 of equity.
Jason Hartman: Okay, so a rent increase on a lot rent of $175.00? So $10.00 is 6 percent annually probably, something like that?
Corey: Yeah. So it’s just huge compared to when you look at those numbers when you have 161 spaces versus a four-plex, four spaces. You can see the numbers. That’s why I love mobile home parks so much because it’s all about the numbers game. You make small little tweaks and it just makes the numbers huge.
Jason Hartman: Sure. Yeah, that’s great.
Corey: It’s enormous what happens. And then really the other thing is that it’s an easy to manage park. I mean we have one full-time manager managing two mobile home parks within a mile of each other. The parks combined have 400 spaces and I have 200 homes.
Jason Hartman: And that manager is like a full-time employee?
Corey: A full-time employee, yeah.
Jason Hartman: Okay.
Corey: And they spend half the time in one park and half the time in the other park.
Jason Hartman: Okay.
Corey: So it works out very well. The other thing is that you don’t really have much maintenance either because what happens is you’re only responsible for the common areas and you’re responsible for the infrastructure up to the point of connection. So on their lot, the point of connection is where the shut-off is. From that point, all the way into their home, it’s their responsibility. So you don’t have to worry about electrical, plumbing, mold.
Jason Hartman: Toilets, garbage disposals all of that, yeah right.
Corey: Yeah, all that stuff. It’s all you know yester-year.
Jason Hartman: Unless it’s your home. The other way is besides be the banker, I suppose you could put your own home on there and rent the whole thing as a package.
Corey: You could.
Jason Hartman: But the better way to do it is to sell the home, rent the pad, and then you don’t have many maintenance headaches, right?
Corey: Definitely and what happens when you sell on a lease option, if we were to rent the home, people don’t take care of it. If we sell it on a lease option –
Jason Hartman: They feel like they own it.
Corey: They feel like they own it.
Jason Hartman: Just like in regular residential.
Corey: It’s amazing. We hardly ever get a home back that’s in bad condition. But if we were to rent them, we would get them all day long. It’s just more the mentality of the people.
Jason Hartman: Sure. Okay.
Corey: So, you excited yet?
Jason Hartman: Yeah, very excited. It’s great. I think this is a great graduation from sort of the residential side of the business. Because residential has been such a proven thing. It works so well. But it’s definitely a slower route. It’s a very proven route. You know, it’s worked for tens of millions of people, there’s no question about it. But you can use a lot more creativity here which is I kind of think good and bad for people, Corey because people need to pay a little more attention to this, but they can definitely add value to it.
Corey: Oh, enormous value.
Jason Hartman: They’ve got to be a little more creative. They can’t just hire a property manager and sit back and do nothing. Like if they buy a few four-plexes, they can do that.
Jason Hartman: You know, it’s all very standardized. All the customs are very defined clearly. But here you can add value. If you go source some cheap houses and put them on the pads, you can really make some big money adding some big value here.
Corey: Definitely. One thing I like about the mobile home and self-storage is that I have one manager. Like for example, I have this one manager of 400 spaces, 200 mobile homes. They are an employee of mine. I have a number of rental homes in different parts of the country and sometimes they have a mind of their own. I’m a number.
Jason Hartman: Managers, yeah.
Corey: And with that, sometimes I feel like I just don’t have the control like where I like having control and be able to control my destiny. But again, single families are awesome and I have them and they’re great. I just can’t see the big appreciation and I can’t have the effect like I can with mobile home parks where I’m able to increase lot rents. I’m able to maybe do away with some utilities by passing them back onto the resident. Bring in mobile homes, setting them up.
Jason Hartman: Right. There’s more creativity, no question about it and more added value.
Corey: And a lot more different options in order to be able to do that.
Jason Hartman: Sure. Now one thing I think we should say, going back into adding value because you talked about, throughout the interview today, how you increased rents, and billed back utilities and so forth and increased income and that added maybe a quarter of million dollars in value to a park that you own. Okay. One of the things we should say is that you may not be able to realize that because the financing is so tight. So you can’t really refinance it now, can you?
Jason Hartman: But the value is there and ultimately when the lending comes back, you can pull it out in a refinance, right?
Corey: Definitely. You could definitely do that. And the one thing with mobile homes is that when the stick-built market was getting very, very hot and the financing was cheap and easy to get, we saw a lot of our good residents move out of the mobile home park and move into stick-built homes. Now, a lot of people are coming back from the stick-built, back into the manufactured housing communities because that’s a very economical way of living for a lot of people. So you know with the stick-built having its woes right now, the mobile home park industry, like our mobile home parks, we’re selling a lot of homes.
Jason Hartman: Because you’re at the bottom of the market at the bare necessity housing, yeah.
Corey: Yeah. Bare necessity and a lot of people like that. But they were able to move up to stick-built for that brief period of time.
Jason Hartman: Right. You know I kind of want to ask you about that just on a societal level here.
Jason Hartman: What do you see going on out there? I see the American population getting quite a bit poorer. I think Washington, Wall Street have kind of colluded to make people poorer. And I think it’s really too bad. I also think it’s sort of a symptom of the fact that during the sort of Alan Greenspan credit bubble, Americans were maybe never really as rich as they thought they were either. You know?
Jason Hartman: It seems as though there is a good future for bare necessity housing. Would you agree?
Corey: Definitely, yeah. I definitely agree. And I think a lot of people, even if they’re making the same salary that they were making a year or two, three years ago, with all these increased taxes, like our sales tax –
Jason Hartman: Oh, my God.
Corey: You know, all these taxes are just killing us. It’s amazing, so they are getting poorer.
Jason Hartman: And the decreasing value of our dollar, which will come in a couple years. That’ll be pretty severe too, yeah. You know, the one thing I say when people ask me, “Well, Jason, you’ve become sort of pretty pessimistic about the economy.” And you know I have. I’ve moved from optimist to opportunist. “Will there be someone to rent my house, or my mobile home, or anything?” And I always say, “Yes there will.” But if you had a conversation with that tenant, they will tell you a story about how years ago they used to live in a much nicer home. There’s a market; it’s just what step on the stairs is the person? And I say people are moving down the steps right now.
Jason Hartman: So your tenant might be renting the house you bought from us or the four-plex you bought from us for $1,200.00 a month, but years ago, they lived in a place that was twice the size, in a nicer area. There’s always a demand for every level pretty much. It’s just that the person being able to afford that keeps changing.
Corey: Yeah. Definitely and really with us, our competition is not the stick-built market. Our competition is the apartment market.
Jason Hartman: Yeah. In the low-end apartment market, probably too. Yeah.
Corey: And so for example, like in San Angelo, Texas, the average two or three bedroom is between $550.00 and $650.00.
Jason Hartman: So it costs $180.00 a month to rent your pad?
Jason Hartman: And plus utilities, let’s just assume that’s equal in the apartment, you know we’ll just call it a wash. What’s it cost to own the mobile home? Say they bought one from you and you’re the banker, how much are they paying you per month?
Corey: You know what we do is we match exactly where we need to be. So we back into our payment and that’s how we amortize everything. So if a two-bedroom is $550.00, we’ll give them a three-bedroom for about $25.00 less. So, $525.00 is what their monthly payment is. And how we back into that number is we have $180.00 lot rent, and then their insurance and taxes, we impound those and say that’s roughly $75.00. The remaining is their mortgage payment, or their lease payment. And then what happens if they make their lease payment every single month, for say it’s 10 years for 120 months, they get the home. So the way we sell it is that they could pay rent and live next to people above, below, next to each other. They have rent increases that come. They have all those different things that happen, or they could buy a mobile home on a lease option, make all their payments, and then basically, they’ll have the home. So they have an investment.
Jason Hartman: Right.
Corey: Versus just rent that’s going out the door. And also they have some land. You know it’s more of a community versus just a rental apartment building.
Jason Hartman: Yeah, absolutely. So the thing they always lose in the mobile home though is the tenant is they never get a garage or a car port. Maybe a car port, occasionally?
Corey: Sometimes they do and they can even bring them in if they want. We allow them to have a car port or something. So it depends on the mobile home park. Some of them are very nice and some of them are very scaled back.
Jason Hartman: And a lot of the apartments will have car ports. Some will even have garages. Corey, I think the one thing that we didn’t talk about yet is you’ve got a lot of accounting going on here. Do you have like a whole team of bookkeepers that are doing all of this stuff? I mean there’s a lot to keep track of here.
Corey: I have one person, a part-time bookkeeper, for all the properties.
Jason Hartman: You’ve got to be kidding?
Corey: No. It’s very easy. We use a program called “Rent Manager,” and so for most of our properties, we don’t even have the person paying our manager. What they do is we give them a deposit slip for their own individual lot.
Jason Hartman: I would kind of assume a lot of your rents are collected in cash, no?
Corey: They were prior to us buying the facility, or mobile home park and then –
Jason Hartman: I would be concerned about manager fraud there obviously.
Corey: Definitely, so if we went to the deposit program with the local bank, they had to do a money order, cashier’s check, or a personal check. And then if we get a bad personal check, it could only be money order or cashier’s check. But what we do now with the local bank is we actually have individualized deposit slips for each one of the tenants. And they are responsible by the 5th of the month to come in and deposit into the local bank, which is Wells Fargo there. So our manager doesn’t even touch the rent check because what we found is –
Jason Hartman: That’s good.
Corey: Yeah, because what we found is a lot of times they’ll come in and they’ll want to talk for a half hour or they–
Jason Hartman: And they waste the manager’s time. Yeah.
Corey: –have this problem or that problem. So the most efficient model for them is for them to do a deposit program. Also we hardly ever get any bad checks.
Jason Hartman: You know I’ve got to just comment on that talk for an hour thing. That’s one of the things I keep thinking about my own business. If I just like got rid of my office and didn’t have everybody congregating together, all this talking stuff. Like people come in and visit us and it’s like, you know, I love to see them. And I love people, and it’s all great, but you know they’re chatting with my staff for all this time. And I’m thinking, “This is costing me so much money! I need that person doing stuff.” You know?
Jason Hartman: Yeah, so it’s the same thing with your manager, you know?
Corey: It’s amazing. Yeah. Definitely. So, a much more efficient model for us and also we don’t have as many bad checks either because people are very scared to give a check that they know is going to be hot or a bad check, giving it to a bank, they feel like they’re just –
Jason Hartman: Oh, they feel like they’re walking into the real place.
Jason Hartman: I got it.
Corey: We had to do that.
Jason Hartman: Good. Do you want to tell us about some of your students? We kind of touched on this suggestion here of how to value a mobile home park, right? Do you want to just tell us about a couple of your students real quick?
Corey: Let me give you a couple–
Jason Hartman: I mean you talked about the school teacher. That’s a great story.
Corey: Yeah, let me give you a couple stories real quick. One is Jamie Richardson, school teacher, 2nd grade school teacher, amazing, amazing person. Her dad wanted her to get into real estate, told her about mobile homes, and mobile home parks. She’s like, “Dad, you’re crazy. You’ve gone off the deep end. There’s no way.” And so she actually came to one of our events that we had down in Florida. She instantly said, “This is the way to do it.” She had very little money to do it and so she joined a local REA club down there – Jacksonville REA and she let everybody know in REA that she was interested in getting a mobile home park. And one day a guy came in and said, “Hey I’m looking for a manager for a mobile home park.” She said, “Hey, would you be interested in selling it?” He said, “Possibly.” They started talking. They came up with a lease option. She put down $20,000.00 in order for the option consideration, and leased it from him every single month, and then she’s gone on. It’s been about 18 months now. She’s already created cash flow of $8,000.00 a month and her equity is over $400,000.00.
Jason Hartman: You know, that’s an interesting story because my ex-girlfriend from several years back, her parents made a fortune owning mobile home parks. Her father was a pilot for Delta Airlines, and on the side, he just over the years was buying up some mobile home parks in many states. And wow! They had this gorgeous home in Palace Verdes Estates. I mean this land that that home was on was just worth a zillion dollars. I mean it was an incredible one of a kind like lot, you know? I probably should have married her, you know? Today, I wouldn’t even be working.
Corey: And you know, you bring up a good point. It’s that with these mobile home parks, they’re large masses of land and the older that they are, they’re usually very well situated geographically. It’s at some point, the highest, the best use is not going to be used as a mobile home park; it’s going to be as a redevelopment.
Jason Hartman: One of our clients bought an apartment building in Kansas City. You know kind of an old apartment building, but very good cash flow, an excellent investment. And it wasn’t real big. It was just 33 units I believe. And the real opportunity there, ultimately, was yeah, you’ll do well with the investment, but it’s in the middle in downtown in this big redevelopment area. And you just know that land is being eyed by some developer who wants to do something big and combine a couple of lots and do what they call an assemblage and do something big there.
Corey: Yeah. And it’s eventually going to happen, I mean because they’re looking at masses.
Jason Hartman: And they’re going to need that one piece to make their deal work and pay a real premium on it.
Corey: Yeah. Definitely. It’s just amazing what’s going to happen. Second story is a lot of people think, “Oh, you know, I’m here in California and how could I do it in Texas?” Second story is Scott and Travis Mann. Travis lives in Australia. Travis finds the deals. He searches the internet. He does direct mail, PC. He does all that from Australia.
Jason Hartman: To Texas?
Corey: To Texas and to different places. What happened to these two –?
Jason Hartman: We have Australian listeners and New Zealanders who are listening probably to this show right now, so.
Corey: Perfect. And Scott is in the military and he’s Special Forces. You know he’s been all over the world in the Special Forces. So these two brothers, when they were growing up, their parents had one mobile home park. And they thought we do not want to work for anybody. We want to continue buying mobile home parks and so they started buying their mobile home parks. And they have already bought two mobile home parks and the equity that they have realized is enormous, say it’s like over $1 million already. And they’re creating huge cash flow. But they’re doing it 10,000 miles away. Travis does all the management. He finds the mobile home parks, he does everything from Australia. His brother does all the due diligence and he does the site visits. And so if two brothers can do it from 10,000 miles away, any of us can do it.
Jason Hartman: Okay, one more thing. You mentioned Texas in that one. And I want to ask you the question that I bet a lot of people are thinking.
Jason Hartman: Jason, you’re talking about these mobile home parks and every time Oklahoma or some areas of Texas a tornado rolls through, look what happens. It’s a bunch of matchsticks.
Jason Hartman: What do you say about that?
Corey: I mean I’ve had a number of parks in Texas here for quite some time and we have not had anything with regards to tornados all that. These mobile homes they’re adhered to the ground pretty well. We use either rock anchors or auger anchors. They’re all done by straps that adhere to the ground. Now, if a serious enough tornado’s going to come along, it’s definitely going to take the home and everything with it, including houses and buildings and all that stuff. But I have not encountered that whatsoever. But potentially, if you’re in maybe Kansas or something and a real high tornado area, or even say in Miami, I mean I know a couple parks got wiped out in Miami back quite some time ago, but I have not heard or seen the stories you know with that.
Jason Hartman: It’s not affected you in any big way?
Corey: It hasn’t. And that’s what insurance covers as well. Insurance covers loss of income and covers the structures themselves. It covers all that, so you know you still have insurance.
Jason Hartman: Okay, for your own properties, but for the other residents?
Corey: For the other residents, right, what they would do –
Jason Hartman: They have their own insurance policy hopefully.
Corey: The other thing is we also have insurance to guard against the income.
Jason Hartman: Right, yeah. So, for loss of income, sure.
Corey: So loss of income would do that so.
Jason Hartman: How much does your insurance cost?
Corey: Not very expensive. I think for like a 150-space park our insurance is roughly about $4,000.00 to $5,000.00 a year on the land. And on the homes themselves, roughly –
Jason Hartman: And the land is the loss of income part and the loss of income from the pads.
Corey: And liability. Yeah. And comprehensive liability. And then the homes themselves, roughly about $200.00 a year rather.
Jason Hartman: For the home? Okay, all right.
Corey: But the tenant is paying that policy. We’re just collecting the income. And we get umbrella policy on all the homes collectively.
Jason Hartman: The tenant who is lease optioning from you?
Corey: Correct, yeah.
Jason Hartman: Okay.
Corey: They do that. So the third story, and a pretty exciting story, is Alexander Bern Hannock. Now Bern actually has been an investor of real estate for a long, long time. He has followed one of the big gurus out there – Jack Miller. And his son said to him, “Dad, I want to start investing in real estate.” So he thought and he thought, talked to Jack, and Jack said, “You know, you might want to get him started in mobile homes.” So he came to our boot camp last year.
He was a 16 year old student. And so what his dad did was he helped him buy some parcels of land. I think they were $1,000.00, $2,000.00 and then he basically has his son make a payment on every single month. His son had saved up some money and bought his first double-wide, put it on the space, went ahead and did a lease option, got the money, the down payment, used that to buy a second house, and now I think Alexander has got roughly five mobile homes on five different individual spaces that they call sort of land-home packages because it’s not in a big mobile home park. The payment is roughly between $710.00 and $720.00 a month.
So here is a sophomore in high school – a sophomore in high school doing one deal at a time, has already got five deals under his belt. And what do we call him? We call him a high school student by day, mobile home mogul by night.
Jason Hartman: You know just when I thought I was ahead of the game.
Corey: Yeah, it’s amazing.
Jason Hartman: That’s a great story.
Corey: It’s amazing. I think he’s already created roughly about $40,000.00, $50,000.00 worth of equity. And he’s already got a cash flow of about $1,500.00 a month. So he’s already making $18,000.00 a year and he’s a sophomore in high school.
Jason Hartman: That’s incredible.
Corey: And you could do it at any age, any kind of background. That’s what’s good about mobile homes, you could start with a mobile home park, you could start with mobile homes. You could do a lot of different things.
Jason Hartman: Right, there are a lot of levels to this.
Corey: And the sky is the limit.
Jason Hartman: So Corey, this is all great stuff. But I want to make sure that we invite people to check out two things. Number one is your boot camp, which is going to be offered through our website at www.JasonHartman.com and also your home-study course.
Jason Hartman: Tell us about those two things real quickly if you would.
Corey: Sure. Well, the Mobile Home Boot Camp, we started this probably about five years ago because a lot of people wanted to see the properties in person. So June 10th to 12th this year, 2009, we’re going to have one Mobile Home Boot Camp.
Jason Hartman: And I will be there, folks.
Corey: Yeah. It’ll be perfect. So June 10th to 12th how this works is it’s three days and it’s three intensive days. So you’re going to want to make sure you get a lot of rest before you come down and plan a couple of days afterwards sort of to recoup. The essence of the boot camp is we want to have you spend half the day in the mobile home parks. Looking, seeing, feeling exactly what a mobile home park is. A lot of people ask us, “Why do we do it in San Angelo, Texas?” We do it because I own three mobile home parks down there: a turnkey, a turn-around, both roughly about 120 to 160 spaces, and then a big mobile home park that’s roughly about 260 spaces.
So we’re able to show you the mobile home parks. We’re able to show you all about the infrastructure. We’ll be able to show you every component of the mobile home park. In addition, we bring down – not only am I down there, but Steve Case, who is my partner in Mobile Home University, he’ll be there. My brother will be there. My brother does all the long-distance management and we use a lot of high tech tools. We use thing like DVR cameras. We use Rent Manager. We use a lot of programs that link into the computer system, like Go To My PC. We do a lot of long distance management because we are here in California.
In addition, we’ll bring the person that buys our mobile homes rather for us. We bring in our rehab crew. We bring in our tow-to truck driver crew. So we have a lot of people who come to Mobile Home Boot Camp in order to be able to help show you what’s that all about. The other half of the day is actually in the classroom and we go over every component of a mobile home park. So with regard to how do you find them, where do you find the best deals out there, how do you analyze a deal, you should be able to analyze a deal within 30 seconds to determine whether it’s a good mobile home park or not. Like 90 percent of the mobile home parks you’re just going to get right off your table and you’re going to focus on the ten.
You’re also going to look at management. We bring in our top managers in order for you to interview one-on-one. So it works out very, very well. Also, you know, how to lock up the good deal, what forms to use because we’re going to give you all those forms. And by the way, we also video tape and audio tape the entire Mobile Home Boot Camp and you’ll get a thing called a “Boot Camp in a Box”. So you’ll be able to bring that back home with you.
You also can come back to the boot camp any time for free, which is really nice because at this boot camp, we’re going to have a number of people, just like Jason and I talked about, Alexander Bern Hannock, they are going to be back at the boot camp. They’ll be in class, also with the school teacher; she’ll be back in class. So roughly about 30 or 40 percent of the people in the boot camp who have already gone through the boot camp, gone out and bought parks, are now coming back to see us again. So it makes it really neat in order to have that component. So that’s three days.
I also own a self-storage facility down in San Angelo, Texas, where we’re going to allow people to come to that self-storage. We’re going to spend about three hours in an evening, over an evening period, in order to learn about that. So you’ll be able also to get the self-storage component of it.
Jason Hartman: Okay, good. So, that’s great.
Corey: So it’s going to be a crazy three days. We start about 7:00 in the morning and we go go until about 11:00 at night.
Jason Hartman: All right. Wow. That’s tiring. That’s boot camp for you.
Jason Hartman: How much does it cost?
Corey: You know, we know with everything with the recession all that, it used to be $3,495.00. But since we’re doing this once this year, we’re not going to do it until probably June of next year, because Steve has a lot on his schedule and I’m travelling. I have a lot on my schedule as well. We’re going to do a $2,695.00. So, $2,695.00 that will include, you will be able to come back for free. It includes the boot camp in a box. And if you have a family member that wants to join us that will be $1,000.00, or if you have a business partner, it would be $1,500.00. So say if you had you and a business partner it’d be $2,695.00 plus the $1,500.00 split in half. It’s even a better deal for you.
Jason Hartman: Right.
Corey: The boot camp is what is definitely going to give you crystal clear as to what to do to go get your mobile home park, how to make it all happen, and really what size park were you going to look at. Everything is going to be determined over those three days for you. And then we also give you a lot of access to us afterwards to help follow up because you’re still going to need some help after that.
Jason Hartman: Travel-wise what is the best airport to fly into for San Angelo?
Corey: What you would do is you would fly to Dallas and take a connecter to San Angelo.
Jason Hartman: Okay and accommodations?
Corey: We actually have a conference room at I think it’s the local Hampton Inn. It’s roughly about $69 or something to stay there. We’ll cover the food during the day and also we’ll cover breakfast and lunch.
Jason Hartman: And the hotel, the attendee pays for?
Corey: And the hotel. We have vans and all that, so we take everybody back and forth to the parks.
Jason Hartman: Okay, so the expenses are limited to just a few things.
Corey: Really all it is just your hotel, and then your evening meal, because we’ll pick you up at the airport, drop you off at the airport.
Jason Hartman: And your airfare, of course.
Corey: Yeah, your airfare. Correct.
Jason Hartman: Okay, good. And how about the home-study course?
Corey: The home study course, that is a program that we did that Ernest Chu had put together and it really gives you the base necessities about learning about the mobile home parks and mobile homes as well. It’s a great course. It has all the audios and the DVD’s and also all the forms, roughly over 200 forms. And you’ll also get this if you go to the boot camp. But it’s a great course. It’s going to give you a real introduction about mobile homes and mobile home parks, how to progress. You know how to put together a deal. All those factors can be real, real important in order to have.
Jason Hartman: Cool. And price?
Corey: That’s $397.00
Jason Hartman: Good stuff. Anything you’d like to wrap up with, just so people will kind of get the overview statement here?
Corey: If I were somebody who was an investor, I would look at mobile homes and mobile home parks. Don’t let the stigma turn you away because there’s an amazing amount of money that’s made.
Jason Hartman: Corey, everyone always wanted to own a few double-wides.
Corey: Yeah, definitely. But it’s amazing. It’s amazing how much money is created. It’s really, it’s in your own hands – your destiny – because there’s so many profit centers that you can go ahead and incorporate in a mobile home park in order to achieve your dreams.
Jason Hartman: Good stuff, Corey. Thank you so much for the invaluable information. We really appreciate having you on the show.
Corey: Thanks, Jason.
Jason Hartman: All right. I hope you enjoyed that interview with Corey. And I hope you’re as excited as I am to spend three action-packed days June 10th, 11th, and 12th in San Angelo, Texas. Corey and his partner Steve will be talking all about mobile home park investing. And I tell you these guys are the real deal. I’m really excited about attending this myself. So I look forward to seeing you there. Again this is a big heavy-duty thing. The reason it’s in San Angelo is because a lot of it is actually held on the properties, on the mobile home parks that Corey owns.
Now the price of this – I was able to work a special price for our listeners. The price of this is normally $3,495.00 for this one-of-a-kind boot camp. And again, this is real specialized knowledge, that’s why it is worth the price. But the special deal, sort of an economic stimulus for our Creating Wealth family is $2,695.00, and I will be there as well. You can bring a business partner for an additional $1,500.00 only. And you can bring a family member for just $1,000.00 extra. So, hope to see you there in San Angelo, Texas, on June 10th, 11th and 12th. And these are big, long days. There’s a lot of content here, and I’ve been to Corey’s stuff before, and it is good. It’s the real deal. Register now at www.JasonHartman.com. Click on Events or just go to www.JasonHartman.com/events and register today. I’ll see you there.
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Duration: 74 minutes