Mobile Home Park Investing For Passive Investors

Mobile Home Park Investing For Passive Investors

A couple of months ago I decided to listen to a podcast called the Millionaire Mindcast Podcast.

I must admit that it really opened my mind to how millionaires think about investing and money.

Paul Moore of Wellings Capital was an interviewee who had a fantastic story and also helps others with self storage and mobile home park investing.

I reached out to Paul for an interview to discuss the different trends in real estate investing and those that we should pay attention to.

Here’s Paul’s thoughts….

Multifamily Investing

Paul started in real estate investing by doing:

• fix and flips
• rent-to-owns
• flipped some waterfront lots at resorts

One day he realized the Forbes 400 wealthiest people in the world are building wealth by investing in commercial real estate.

This was something that Paul wasn’t a part of, but like most of us that want to get into real estate investing, he didn’t know where to start or who to trust.

Do you?

He found an opportunity during the oil boom in the Midwest where oil workers were lining the roads, Walmart parking lots and rest stops sleeping in their trucks.

He decided to build a multifamily facility and that’s how he got started in commercial multifamily investing.

This inspired him to write a book, The Perfect Investment, about multifamily housing and why it’s such a great investment class.

Shortly after publishing it, he realized that the perfect investment was no longer perfect if you can’t find any deals that make sense.

A few years ago he began looking into other asset classes and settled on self storage and mobile home park investing.

He noticed that the opportunities within both of those areas were huge. Paul noted that 93% of multifamily that’s 50 units and above are owned by corporations.

But about 90% of mobile home parks and 75% of self storage are owned by individual and small operators.

These people either don’t care or have the resources to maximize the income and value.

And so these mom and pop operators are leaving incredible amount of meat on the bone for a lot of these facilities.

And it’s a great opportunity for investors.

Self-Storage Investing

Paul recently wrote a book on self storage investing that’s being published by Bigger Pockets Publishing.

In it, he identified three major strategies:

#1 Retrofitting an existing building

Paul had a friend that retrofitted a super Kmart in Reno, Nevada. He bought the building and sold off the parking lot for $3 million to an apartment developer.

He cut the building in half, retrofitted it for storage, and he’s got $2.5 million in cash in it. He’s also got $5 million in debt and recently acquired an offer for $27 million.

So that would be a 900% return on equity if he would choose to take that offer.

Not a bad strategy if you can find the right building.

#2 Ground up construction

This strategy is a bit risky but can have some really nice returns.

The main point to make if you go this route is buying in the right location.

#3 Purchase of an existing under-performing facility

This is Paul’s favorite strategy as these are usually purchased from a mom and pop operator.

These units can be upgraded, refinanced and then either held or sell to a REIT for a much higher price than originally paid.

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Mobile Home Park Investing

Paul told a story about his friend that focuses on mobile home park investing. They have a team working full time on the phone calling self-storage and mobile home park mom and pop owners.

They do this eight hours a day, five days a week. And so they’re calling something like 700 to 1,200 people a week.

They’re making connections, building relationships, and trying to stay top of mind with these folks when they go to sell.

Here’s an example of how powerful this strategy is:

Their company called an 88-year-old owner of a 240 lot mobile home park in Michigan 7.5 years ago.

At the time, he wasn’t ready to sell, but they continued calling him every quarter to stay in touch.

Several years later his niece called and said they convinced him that it was time to sell out of the business as he was pushing 95-years-old at the time.

They were able to make the deal because of the amount of great follow up that was performed.

Taxes and Returns

I asked Paul, “If I was someone that was listening to this interview (or reading) and wanted to know more about the returns possible or tax advantages, what would you tell them?

Tax advantages

People love investing in commercial real estate because there’s about 11 or 12 major tax benefits that allow people to claim a loss on their tax return even though they’re putting cash in the bank.

A good syndication will allow the investor to get what’s called a K1 form instead of a 1099 for their taxes.

That K1 means that all of the losses, profit and losses of the facility, will flow straight through to the investor.

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Potential returns

A well-run mom and pop self storage or mobile home park that’s been significantly upgraded are typically seeing a cash on cash return in the 5 – 7% range and a total annual return, counting appreciation, in the 15% range.

If you get a great mom and pop deal and you put a lot of value add in it, you can see returns easily double that.

How To Lose Money

One of the questions I wanted to make sure I addressed with Paul was regarding the title of his podcast, “How To Lose Money.”

He came up with the name from events he used to attend where successful people would talk about their road to success.

Guess what paved the way throughout? You guessed it. Failures.

Paul became more encouraged when he realized that people had failures, pain, and insecurities along their path to success. (I know I have.)

So he decided to start a podcast that interviewed successful investors, entrepreneurs, business owners about their pain, failure, loss, relationship problems, money problems, and bankruptcies on the road to success.

Paul stated that the universal thing that comes out of that is, “I feel hope. I feel encouragement. I feel like I can do this because they had the same pain and insecurity along the way that I’m having today.”

I can certainly attest to this as I wouldn’t be in the position that I’m in now if it wouldn’t have been for set backs, losses and failures.

Especially when it comes to real estate investing.