Todd manages his own real estate investment company called Blue Elm Investments. He used to work in corporate finance but shifted to real estate in 2013 when he started investing in single-family homes. Later, he transitioned to a syndication business, building mobile home parks. Todd was in my podcast back in Ep. 20, and he’s back today to give us an update about his business.
In 2019, he closed on a couple of parks in Georgia that had 71 spaces. He is currently finishing up the equity raise for another park he got in Tennessee.
Being in the mobile home business was a learning experience for Todd as he had to learn how to manage the park, deal with issues, and turn around parks to be sold.
A lot of things happened due to the pandemic. The courts in Georgia stopped taking evictions, so some of Todd’s tenants decided they weren’t going to pay rent anymore since they couldn’t be evicted.
Some tenants suffered job losses, but Todd tried to work out an arrangement with them with either a payment plan or to waive late fees until they got back on their feet.
Rents in mobile homes range from $350-600 a month. With the courts now back to work and people getting their additional unemployment and stimulus checks, things are expected to be better.
Todd works with a professional property management company to help him run his mobile home parks. He doesn’t accept cash for rent. Tenants would have to pay either by check or money order.
He also had to do lots of deferred maintenance and put in an onsite maintenance guy. Slowly, he is making the park a little bit nicer with 3 refurbished, used homes brought in.
In the beginning, occupancy dipped after he took over because he wouldn’t accept cash. Plus, some tenants weren’t used to following the rules. Having inherited tenants that he didn’t screen, there was also higher delinquency.
As an asset class, mobile homes vary by park, by market, and how long they have been run. Todd doesn’t see any consistency market-wise. Investing in the space could either be a hit or miss even if you’re investing in a similar market.
There are variations in the way collections are done. It also depends on whether the investors themselves screened the tenants or the tenants were inherited.
Todd was able to purchase the Tennessee mobile home park for a great deal, but he had to buy the park himself. Now, he is raising money for an LLC to purchase it and fill in the vacant lots.
He got the park in October 2019. But as he didn’t want to do things during the holidays, he delayed pitching to his investor group until March 2020 after he got the business plans sorted out. By then, the pandemic was in full swing, and people were worried and distracted.
His initial plan was to fill in the park and sell it in 5 years. But now, he is offering to fill in the park to 50% occupancy and sell it in 3 years. While the returns would be lower, it offers the investors the chance to get out earlier.
Todd had to learn to pivot when the environment is changing. But he believes the Humboldt, Tennessee park to be a good investment as Tyson Foods is building a chicken processing plant there which could result in available employment.
With the current climate, investor sentiment has gone both ways. Some are scared, while some want to get more involved.
There are investors whose stocks have plunged, so they won’t convert them to cash now. But there are also investors who are interested to buy stocks during the dip in the market.
People are still interested in buying mobile home parks. The interested investors are either individuals, syndicators, or partnerships. But they all look for the same things: a good market, a strong employment base, and some upside they can add to the park.
Conversations involving buyers and sellers tend to revolve around off-market parks because sellers don’t want to tell their managers or tenants that they’re in the market.
Mobile home parks tend to be recession-resistant. With rents at around $350-600 a month, two people working a minimum wage job or even 1 person working a blue-collar job can afford the rent.
Families who need bigger homes would have to shell out $850 a month for a 2-bedroom apartment. Compare that with a mobile home where they can get a nice, 3-bedroom mobile home for $600 a month.
Since a lot of homes are still run by mom-and-pops, they are less sophisticated than the equivalent to an apartment operator. Plus, they get better pricing.
Todd is still focusing his webinars on mobile home parks. As a business, not everybody understands how it works, but it has gotten popular in the last 3-4 years.
While there are challenges to running one on an operational standpoint, the profits are pretty good.
It’s difficult to tell from the outside how a park is being run. People often wonder who owns mobile homes. The homes can either be owned by the park who rents it out or by the tenant who then pays to stay in the lot.
However, Todd’s business is predicated on the park-owned home. While tenant-owned homes have less maintenance, with only $175-200 a month being paid to stay in the park, his business earns more if they own the home.
This is because the $400 difference a month in rentals that he can collect far exceeds the maintenance costs he spends for.
Mobile homes are an inexpensive asset class. You can find mobile home flippers who will refurbish an old home and install it on your lot. Todd actually got 3 homes that are late 1990s models, which he purchased for $20,000 installed.
Considering he could charge $600 on a $20,000 home, he benefits from a good rent ratio.
After leaving his 9-5 job, Todd had to become responsible for everything: sales, marketing, finances, and administration. A part of him still misses being part of a team where a lot more people are there to get the work done.
He has faced some challenges since going out on his own. One of which is determining where to spend his time. Usually, he talks every day with CCI Investments in terms of management issues in his parks. Or he might go looking for deals, prepare for a podcast, or talk to investors.
Todd is planning to set his goals for the second half of 2020. He’s on the lookout for parks he can buy, although he is not as confident as before. It might take him more time to find the right park.
On the CCI Investments side, he wants to grow his consulting business.
While he sees some sellers are still not motivated to sell, he thinks they might be willing to take a discount at the end of the year. However, some sellers are expected to still hold out. So Todd doesn’t expect a huge fire sale.
At the end of the day, he just wants to make sure that he doesn’t overpay for anything.
Now is not the time to be scared. Education is the most important piece for those starting their journey. If you’re ready to make the move, don’t hold off because there are good deals out there.
Who knows, 5-10 years from now, you’ll be happy that you bought that property. Remember that the best time to buy real estate is either 20 years ago or today.
Continue to educate yourself by asking as many questions as you can. Reach out to people who have invested in the space and learn from them. Keep working to help to pull money out of Wall Street and get it into the mainstream market.
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