Mobile Park Investing: The Affordable Housing Alternative to Multi-Family

In this episode of "Raise Private Money Legally," join special guest Mario Dattilo and host Attorney Kim Lisa Taylor as they discuss "Mobile Home Park Investing: The Affordable Housing Alternative to Multi-Family." 

Mario has built a portfolio of manufactured-housing communities in the Southeast United States, primarily in Florida. He will share his knowledge of the state of mobile home park investing; why it's a great alternative to multi-family, and how you can learn more so you can add this asset class to your own toolbox.

Episode at a glance: 

• Where is the best place to buy mobile home parks?
• Characteristics to look for when buying a mobile home park
• What kind of amenities do you look for in a mobile home park?
• How Mario self-manages his mobile home parks
• How Mario found investors for his early deals

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Transcript

Kim Lisa Taylor:

Good morning and welcome, everybody. Welcome to Syndication Attorneys' free monthly podcast where we talk about topics of interest to real estate syndicators with the opportunity for live questions and answers at the end of the call. I'm attorney Kim Lisa Taylor. Before we get started, please note the all of our podcasts will be recorded and may be used for future promotion, posted on our website or a broadcast and a podcast available to the public. We are live-streaming on YouTube.

If you don't wish to have your voice recorded, please schedule a one-on-one consultation instead of asking questions during the live call. The information discussed during this free podcast is of a general, educational nature and should not be construed as legal advice. 

Today our topic is “Mobile Home Park Investing: The Affordable Housing Alternative to Multifamily,” with our special guest, Mario Dattilo.

Mario is a long-term client of Syndication Attorneys. He's had a number of deals with us. We have enjoyed working with him a lot, and he's going to share his wisdom with us today. Mario, welcome.

Mario Dattilo:

Hey, thank you, Kim. Appreciate you having me on. I've enjoyed being a client of yours for a long time, and I appreciate the opportunity to get on here and talk with your listeners. I'm going to do my absolute best to add value, whether they're investing in mobile home parks or any other asset class.

Kim Lisa Taylor:

That's fantastic. I'm so glad to have you here. Yeah, you're right, because the things you learn here, a lot of them, are broadly applicable across any asset class, any real estate asset class. If you're going to be doing a startup, the securities laws are the same, but the structures that you might use for your entities, you might use a corporation instead of an LLC.

A lot of the stuff we talk about here is relevant to anybody that's raising money from private investors, regardless of the purpose, as long as they're passive investors. Tell us a little bit about you and your background and how you got started in this.

Mario Dattilo:

Originally, I barely graduated high school, did not go to college, started a business straight out of high school that did pretty well for a few years. It was a marketing business, so completely unrelated to real estate or syndications, but ultimately got into the real estate brokerage business. 

Around 2008, things were very distressed and I went to my dad, who had a lot of construction experience, and I said, "Look, I'm handling all these acquisitions and dispositions for clients. Why don't we just start buying these assets ourself? You handle the construction, I'll handle the capital and the acquisitions dispositions."

And that's what we did. From 2008 to about 2014, we're buying and flipping single-family homes. And then we decided, “You know what, let's get out of the transactional business and let's get into the cashflow business” and started targeting apartments, which I believe is where I met you originally. I was looking for apartments and was struggling at the time, believe it or not. In 2014, I thought I was overpaying for things. Somebody came along to me, a commercial lender that I knew, and said, "Hey, look, I know you're looking to buy apartments, but there's this mobile home park that I think we can buy the non-performing loan from a bank on. Would you be interested in that?"

I had bought non-performing debt before and looked at the deal. This looked kind of like an apartment, at least operationally, and pursued it. And that was our first deal. It was a pretty complex deal for a first one, but ultimately had a huge success on that one. And after that, we really pursued mobile home parks about the majority of time. I do own a little bit of self-storage as well, but for the most part the focus has been mobile home parks since then. Been buying in several states, syndicating. I've got some a couple general partnerships as well. But generally speaking, they've been syndications. Kim, you've helped us with that, which we're thankful for.

Kim Lisa Taylor:

What do you like about mobile park investing versus multifamily that's kept you in this asset class?

Mario Dattilo:

Yeah, that's a really good question. What I really like is, number one, it's very niche. Not many people know about it, not many people are familiar. We're going through consolidation in the industry right now where apartments, self-storage, other property types have for the most part consolidated into institutional or professional owners. I'm still buying from mom-and-pops who developed the park with their bare hands, call it 50 years ago, and they're getting ready to retire.

Their motivations are a little bit different than ours and a lot of times they've run those properties as lifestyle businesses where they've left a lot of meat on the bone for us to come in and bring in professional management and maximize the value of these properties from where they are today. There's a lot of timing benefits to it. Also, I like that I'm dealing with residents who own their homes, and so I'm not having to maintain their homes. I'm just maintaining the land infrastructure and common areas, which there's still management involved.

It's just different management. We're more like a homeowners’ association than an apartment building from a management standpoint. But generally speaking, I just like the grittiness of it and I like the fact that there's a lot of opportunities still in the industry that hasn't been bought up by institutional or other professional investors. We can go down some rabbit holes for sure on all that, but that's the high level.

Kim Lisa Taylor:

How many parks do you currently have or have you owned in the past?

Mario Dattilo:

We're at 16 parks total. We've acquired over 21. We've combined a few of them operationally. Twice we've acquired three communities and combined them into two big ones. It took six communities, turned them into two large ones that were all contiguous, which worked out pretty cool. We've been doing this since 2014 I think was your follow-up to that. We're over a thousand lots.

Kim Lisa Taylor:

I've had a number of clients we've had that have done mobile home parks. Tell me if this is your strategy: is it usually get in, fill up the vacant lots. Do you bring in new trailers or mobile homes? I guess you call them manufactured homes, right? Nobody calls them trailers anymore, right?

Mario Dattilo:

It's okay. You can call them trailer parks if you want. I don't care. I'm not offended.

Kim Lisa Taylor:

Mobile home parks. I mean, ultimately, it's on wheels. At some point, you'll skirt it in. You take out the wheels. They don't move anywhere.

Mario Dattilo:

Correct. Our strategy is what's unique about mobile home parks (compared) to almost any other real estate type is it is a hybrid business model. We've got a rental model on the dirt and we act kind of like a homeowners' association, as I said. We don't own their homes, they own their homes. We own the land infrastructure and common areas, and we can hold them accountable to maintain their homes and pay lot rent. But ultimately, we don't do the maintenance on their homes. Ultimately, we are also like a builder-developer.

Because when we've got vacant lots, we bring in homes, we set them up, and then we sell those homes to residents who then start paying us lot rent. There's a lot of that. We also typically bill back utilities if they're not currently being paid for by the residents. We will make physical improvements. We'll bring rents up to market and implement more professional management with good rules and regs, leases and accountability to the residents to make sure that the community is as good a community as it's ever going to be.

Now, a lot of these homes are older because the communities have been around for a long time. We're not in a rush to go taking homes out. Even if we get one back through eviction, we're still typically renovating, making it a nice home again and reselling it. But for any vacant lots, yes, we are bringing in new homes and selling those homes as well. It does become a little bit more of a complex business model because you do have that rental and sales model blended together versus other property types that are usually one or the other. It does make us a unique business model in that sense.

Kim Lisa Taylor:

You mentioned evicting a tenant, so I imagine that's got to be a little bit more complicated than just evicting a tenant that's not paying rent in a multifamily project because they do own the home. What are the complexities involved in that?

Mario Dattilo:

I'm definitely not a fanboy. I'll tell you the good and the bad of any property type. 

I think the good thing about apartments is when you get a tenant in there and they're not following the rules or they're not paying rent, it's much easier to get them out. Also, to clean up a property and turn all the units and make them nice, it's in your control because you own the units. You own all the buildings. You can just go in and paint all the buildings. You can do all of the hallways. You can rent all the apartments and it's within your control. 

When you buy a community where the residents own their homes, it does take a little bit longer time to get them to clean up. It takes time and effort to get that pride of ownership back into a community where they own their own homes. In the case where someone does stop paying rent or they're breaking the rules, we go through a very similar eviction process as an apartment building. It is an eviction which removes them and their home.

They're being evicted and so is their home. And in each state, this is a little bit different, so just take this as a generality, but we basically evict them and their home. It's very expensive to move a home. Just to get the home on the road to the next location, you're talking thousands of dollars. But then the setup at the new location could be $5,000, $10,000, $15,000 just to set it up at the new place. If someone's not paying a $400 lot rent, then chances are they're not going to be investing thousands of dollars to move it.

Nine times out of 10 what happens is after the eviction is complete, we've gotten rid of possession and that resident has been removed, then we go through what's called an abandoned title process, which is kind of like an abandoned car. If someone leaves their car in your yard or in your parking lot, you go through an abandoned title process, which basically puts the title in your name. It's like a repossession of a car, if you want to look at it that way.

Because our manufactured homes are basically titled through the DMV, it's very similar to an abandoned title process with a car being left on your parking lot. And that's really what we are is we're a big parking lot, right? They park their homes and it's there forever usually.

Kim Lisa Taylor:

How long does that whole process take?

Mario Dattilo:

It depends on the state, and it even depends on the county because there's a big discrepancy even office to office. It's government, so they typically do nothing right and it's a very big cluster mess. But basically you can go to one DMV office in the county and go to the other one and they're having you do things differently. That's something that we really need is manufactured home title reform. I'm going to run for office on that request or on that motivation. But ultimately, it can take anywhere from 30 to 90 days is the average for an abandoned title process, depending on the state.

Kim Lisa Taylor:

It's better than having to go through a non-judicial or a judicial foreclosure process, which could take a year or two in some states.

Mario Dattilo:

It could., yeah, exactly. And in some states it's easier than others. But there's real need for some uniformity through manufactured home titles because it's a mess, which I will say is probably one of the biggest secrets in the mobile home park industry that most people don't talk about is mobile home titles. When they buy a mobile home park, the first time they ever learn anything about a mobile home title is their first eviction. There were titles that weren't sorted out and weren't transferred to them when they bought the park from the previous owner.

And then they figure out, wait a minute, I got to go through this whole process? And it's a bit of a mess. It's something that I definitely teach to my students is the manufactured home title process and what's involved in that. There's just nobody talking about it.

Kim Lisa Taylor:

Wow. Well, thank you for sharing that secret with our listeners. Let's see, 30, 90 days plus the regular tenant eviction process. You could still be six months into it before you get possession of the mobile home. And then what? You either got to go in and you've got to renovate it. Or if it's beyond repair, you need to remove it. I would assume that there's places that you can take old mobile homes?

Mario Dattilo:

Yeah, to the dump. You're exactly right. Whenever we can salvage a home, we do. We'll get that home back. It goes into our dealership. Our dealership has a project manager that oversees local vendors that renovate. Just like a house flipping company, right?

We've got a house flipping business inside of our business where we renovate that home and then we turn around and market it, and then sell it to a new retail buyer, often with retail financing through a bank or other manufactured home lender that cashes us out on our basis or our cost in that home. It really is like a house flipping business inside of our communities.

Kim Lisa Taylor:

You've got to bear the expense then of removal or renovation or whatever. Do you ever rent out your homes, the ones that you own, instead of selling them to a new buyer?

Mario Dattilo:

It's extremely rare. We've done it on a handful of times over the years, over the last nine years, but we really don't like the rental model. And that doesn't mean that it can't work in some locations. Some markets just don't support a sales model. Really the only model that's going to work is a rental model, it's typically an area with very low rent rates. If it's a very-low-income area where the rents for an apartment are 450, your lot rent is going to be in the 100s. It just doesn't make sense to run a business off of $100 lot rent, so that area really is going to have to be a rental model.

We don't want to own rentals for a couple different reasons, and I know you've got a lot of apartment sponsors that you work with. It's because really it turns our mobile home park into an apartment building. If I'm going to operate an apartment building, I want apartments. There's a lot more turnover. There's a lot more make-ready costs. You're losing rents whenever a unit turns over. Where for us, think about this, when you've got a sales model, the resident wants to move out, they don't just move out, they sell their home to the next owner and we don't miss a beat on our rents.

All we do, similar to a homeowners' association, is we do a background check. We approve that resident to move into the community. They buy the home from the other resident, and we don't miss a single month of rent. We didn't touch that unit. We didn't have any make-ready costs. That's how the majority of turnover happens. Where when we start going into the rental model of homes, now we're back into having maintenance people. We're back into having turnover crews, and we're losing rent between units being made ready to lease again.

It really puts us into more of an apartment model. If you're going to buy mobile home parks, buy them for the benefit of owning a mobile home park. Otherwise, if you're going to buy an apartment building, buy an apartment building. That's my thoughts on it.

Kim Lisa Taylor:

Do some of your mobile home parks also include RV spaces?

Mario Dattilo:

Yeah, we've got some communities that do have an RV aspect to them. I do have one long-term RV park where it's 100% RV, and it does bring in a little bit different aspect to the operations. We don't do any overnight or short-term rental in the RV parks. They're all long-term RV lots where people come in and they stay at least on a monthly basis. It does simplify it and brings it back more to a mobile home operation. You don't need to have the extra staffing. You don't have to have a lot of turnover, and it's much more predictable.

But you also don't get as high of rents. On a transient RV model where people are coming in for the night or the weekend or the week, you definitely get higher lot rents for that, but it's management intense. You need to have people there around the clock moving people in and moving them out constantly, more like a motel. RV parks, they're more like a motel or a hotel, and that's where we try and avoid that. Your costs go up quite a bit.

Kim Lisa Taylor:

Are there certain states that you do buy in or don't advise people to buy in?

Mario Dattilo:

Yeah, all right, Kim's bringing in the politics.

Kim Lisa Taylor:

Not necessarily politics, but also they require to have your own water treatment system or something like that. I mean, are there places that are just...

Mario Dattilo:

Oh, don't worry, I'll be bold about it. I don't buy in communist states. Okay? Let's just be clear about that. I'm not buying on the West Coast. I'm not buying in Illinois. I'm not buying in New Jersey, New York. Any states that hate landlords and make it difficult to do business, I'm not going to give them my business. We avoid pretty much any landlord-hating states, and that's probably the best way to look at it. That and if the state is a very-low-rent state. I don't typically look in Louisiana.

There's a couple of markets that I would maybe do in Louisiana, but generally speaking, I'm not buying in Louisiana because the rents are really low. Same thing with Georgia. We actually own communities around Atlanta. But other than Atlanta and Savannah, we're not buying there just because the lot rents are very, very low, and it's more of a rental market than a lot rent model. That being said, I'll buy in any state that is landlord-friendly for the most part.

Kim Lisa Taylor:

Are there issues with water treatment systems and stuff like that that you have to consider?

Mario Dattilo:

Yeah. We'll buy communities that have private utilities, but we're just going to be much more conservative on pricing and making sure that either we can connect into city or we've got enough in reserves to replace that system. I was just looking at a community yesterday that has a wastewater treatment plant. To operate it, it's not too difficult. But when you have to replace it, you've really got to have the reserves. Smaller communities don't typically support that capital expense.

If you buy a 20-space community with a wastewater treatment plant, that wastewater treatment plant is probably several hundred thousand dollars to replace. The community might only be worth $500,000. I would be very cautious on buying a wastewater treatment plant. Lagoons are also a dying breed. Most states are trying to get rid of lagoon systems. I'm not buying a lagoon system unless I can connect it to city utilities. But overall, I don't know of any specific states that are worse for private utilities than others, but I'm sure there are discrepancies.

We do buy communities with wells and private sewer systems. We do have a couple communities with septics. But ultimately, you are taking on more risk. You are taking on issues with government. We deal with more layers of government when we deal with well and septic and wastewater treatment plants, and you just have to know what you're doing. I wouldn't recommend a new investor buying something with a more complicated utility system, unless you're very familiar with it.

Septics tend to be fairly easy to maintain. I would get them inspected thoroughly by a professional in your due diligence process to make sure that you know the status of them. And if you have septics, you need to have room to expand. When one system dies, you do need room to put a new drain field. Otherwise, you start cannibalizing your community and having to take out homes to put septic systems in, which can eventually wipe out your community. I know I just gave a lot of detail on one topic there, but I think it's important to understand.

A lot of buyers, they want to buy a mobile home park and they hear that it's got septic or it's got a well or it's got a wastewater treatment plant and they don't recognize the higher level of risk that's involved in those systems.

Kim Lisa Taylor:

I want to tell you a little story. My husband and I were looking at a mobile home park with another guy. We were thinking about buying, and it turns out that it was built on top of a landfill.

Mario Dattilo:

I've seen that deal. I know which one you're talking about.

Kim Lisa Taylor:

We were driving through the property. I don't mean to laugh. I mean, I felt bad for the people that lived there because they really cared about their homes. But I mean, it was like you were driving through a rollercoaster, right, because the land was subsiding and there's probably methane being leaked out all over the place. The poor seller was a physician, of all things, and she's basically trying to give the property away. I just said, yeah, no.

Mario Dattilo:

It looked like a sweet deal though, didn't it? From the numbers, you're like, whoa, I could buy this thing in a 12 cap going in? And then you're like, oh, it's on a dump, basically. Oh, but it's been tested and it's clear. Yeah, but that's a tainted property. I think it's important, a lot of times we get excited about the upside on deals without recognizing the downside risk to an investment, whether you're syndicating or buying it yourself. Just like apartments, just like single-family homes, you've really got to get educated.

You've really got to understand what you're doing, because just because you've bought apartments, just because you've bought self-storage doesn't mean you know how to buy mobile home parks. Well, you might, but you might not know the due diligence aspect of it. They all have their own little nuances, and there's definitely risks involved with any property type.

Kim Lisa Taylor:

Well, that, and if you are... We've already talked about some of those, the utility issues, do you have your own private utilities that you now then have to maintain, do they need to be completely replaced, built on top of some environmental risk? I mean, I was looking at that project from an environmental consultant standpoint, because that was my previous profession, and I was just saying, oh yeah, I don't think this is something that you want to take on.

Mario Dattilo:

Unnecessary risk, especially for a newer investor.

Kim Lisa Taylor:

Well, and just the aesthetics of it. Whoever thought that was a good idea and who permitted it in the first place is really what the question comes to mind.

Mario Dattilo:

One thing that I always teach too is buy things that other people are going to want.

Kim Lisa Taylor:

That is a great philosophy.

Mario Dattilo:

This came up in a coaching call yesterday. One of my clients said, "I'm looking at this community in New York. I know nobody likes New York, but I think there's an opportunity here." I said, "Yes, there might be. Everybody's exiting New York for good reasons." You might be a contrarian and say, "Yeah, well, we can go on and buy them cheaper." That's true, but timing being a contrarian is important. You're at the very beginning stages of an outflux of population. You've got people leaving.

The timing for that would be good as the state is making changes and making it a more attractive place to live, not when they're doubling down on their mistakes and people are leaving even at a higher pace. I just told him, I said, buy things that other people want. In the beginning, every deal really counts. Doing one bad deal can wipe you out completely. Be more conservative. Buy things that are going to have a good either buyer pool to pick them up or a lender pool. There has to be appetite for that asset.

Otherwise, just because you're buying it cheap doesn't mean it's going to be a good deal. Buy things that you can get liquidity from, either by selling or refinancing. I can tell you, most people aren't wanting to buy mobile home parks in New York. That's why you can buy it cheap, and that's a risky deal for you. You're going to have a lower demand for tenants. You're going to have a lower demand for financing and buyers. Just position yourself to benefit from the trend. Don't try and outsmart the trends.

Position yourself. And if that means you have to look in a more competitive market, that's okay. Just be patient and find good deals and do those. Don't go in areas that nobody wants to be.

Kim Lisa Taylor:

I learned a slightly different lesson when my husband and I were buying apartment complexes. We bought a property in Columbus, Ohio, that was probably a little too far on the edge of the C and D neighborhood instead of the B and C neighborhood. I think now it's probably a C neighborhood, but at the time it was really the very, very beginning stages of that gentrification.

My philosophy that I got out of that project was don't buy a property that you wouldn't want live in. Because when we got there, we had some issues and we ended up living there for four months. It was like, oh my gosh, I don't know. It was like you couldn't leave the windows open. You had to look out the door and make sure there was nobody hanging around before you went to your car.

Mario Dattilo:

You can't change the neighborhood, right? That's something that you can't control.

Kim Lisa Taylor:

We improved it a lot just by buying it and cleaning it up, but there was still crazy stuff that went on there. That's just inherent in those kinds of neighborhoods at the time. We were fortunate to get out of it, but we owned it for nine years and we syndicated that with some friends. My philosophy out of that is, don't buy something you wouldn't want to live there. Because if that property is in trouble and you've got to fix it for your investors, you're living there because you don't have money to go stay at the nearby hotel, unless you...

Mario Dattilo:

You might be living there. That's right.

Kim Lisa Taylor:

You might be living there. Beware, you might have an air mattress on the floor in that apartment complex and you might just have to have to suck it up.

Mario Dattilo:

So true.

Kim Lisa Taylor:

That's good stuff. What kind of characteristics do you look for in the parks that you would recommend people buy or that you buy?

Mario Dattilo:

Let's talk about maybe the ideal scenario first. Let me give you the picture-perfect scenario on a property. It would be city, water, and sewer in a market of 100,000 or more population. It's in a basically A or B market with very high rents and a very desirable neighborhood, and 50 or more occupied lots with paved roads, with all resident-owned homes. And that's about it. I mean that and city utilities. That is going to be the picture-perfect property. Now, let's talk about maybe some varying degrees of that that I'm comfortable with and I'd recommend other people be comfortable with.

You could maybe go down to a slightly smaller population market that has good work options, good employment options, as well as population growth. Things that are definitely a positive for the area that are driving people there. You could maybe go to a smaller market. You may be open to doing septic or well, but you need to understand that there's going to need to be reserves and you need to understand how to do due diligence on those items.

I would also potentially consider buying a park with some rentals in it where the residents are renting the homes and then converting. There's some vacancy maybe, physical vacancy, where there's some empty lots in the community, you can bring in homes, but there are going to be varying degrees of risk with each one of those. If you are at a very low physical occupancy, I would not buy that. I've never been the one to buy a community that's 50% vacant. There's a lot of professional operators out there that are comfortable with that. They're buying them with very low occupancy and filling them up rapidly. And that's fine, but that's a very heavy lift. 

I can't tell you how many times someone brings a park to me and they're like, "Hey, this looks great. It's a hundred-space community. There's 15 homes in it. We can fill it up and get rich." I'm like, do you know how long that's going to take and how much capital that's going to require to do that? For a first community, first 10 communities, don't do that.

Buy the communities that are 70%, 80% occupied, and then buy it where the numbers make sense with your current physical occupancy. And then everything from there is gravy. You can add more homes slowly. You're not pressured to get your occupancy up in order to hit your pro forma. Your infill bringing in homes should be upside to you. You should not be paying for future income on vacant lots. Really those vacant lots are costing you money because you have to maintain them.

There's plumbing in there that (when it) breaks you’ve got to fix. There's costs involved. You're insuring it. You're paying taxes on it, and it doesn't produce revenue. I know I got a little bit off track on that, but your best-case scenario — and then maybe some areas that you can get comfortable with or what I talked about — I would avoid communities with lagoons, wastewater treatment plants if you're new in the business. I would avoid high vacancy, physical or economic, meaning a ton of vacant homes.

Do buy communities that have light value-add strategies that are already producing income and hopefully producing positive net cash flow and just create additional upside. Don't buy these assets that are super-negative where you're losing money day one and you've got to hurry up to get to a break-even point. There's no reason to do that, especially when you're getting started. 

One other thing that's going to probably rock some people's world is we look at small properties often as less risky. (They say,) “I'm going to buy a single-family home for my first property. I'm going to buy a duplex, or I'm going to buy a three-unit or a five-unit apartment building and start off small.” I am one to tell you that's actually more risky. The reason I say that is because the larger you go — excuse me, the more diversification you have across your tenant base — the more additional room you have for error. Where when you're buying a three-, five-, 10-, 15-, 20-space community, it doesn't generate enough income to handle some really big surprises.

I always tell people go 50 or larger occupied lots, because with that size of a community, you're going to be able to afford an onsite manager and their payroll. You're going to be able to afford some surprises typically. You're going to be able to handle it when you lose a few tenants. If you lose one tenant in a hundred-space community, you're now at 99% occupancy. If you lose one tenant in a 10-space community, you're now at 90%. You can see how quickly that's going to hit your bottom line.

You're going to feel every expense a lot more on the smaller property. Although we see bigger numbers and it feels like more risk, it's actually the opposite. I would say on a 10-space community, when you have a plumbing break, you're probably going to wipe out cash flow. Especially in the northern states where your plumbing is buried really deep, you might have a $4,000 plumbing repair easily. Well, you probably don't even cash-flow $4,000 a month, so you could be going negative for several months on one plumbing break.

Just think big, think scale. I'm not a big fan of small mobile home parks just because the rents on lot rent is typically between $250 and $450, and that doesn't give you a lot of room to breathe when you've got surprises.

Kim Lisa Taylor:

Have you created a brand for your mobile home parks?

Mario Dattilo:

Yeah, our management company is Celebrate Communities.

Kim Lisa Taylor:

Okay.

Mario Dattilo:

Yep, Celebrate Communities. We do not brand each community to that name. Each community's got its own name, but our management company that operates across all of them is Celebrate Communities.

Kim Lisa Taylor:

That's a separate property management company that you've created that hires your onsite managers and maintenance personnel and all of that, right?

Mario Dattilo:

That's correct. It's offsite management for the communities that manage the onsite community manager. Correct. They do all the reporting, accounting, all of that.

Kim Lisa Taylor:

Celebrate Communities is what it's called?

Mario Dattilo:

Correct. CelebrateCommunities.com. We manage for other people as well. We've started doing that this year for third-party management. There's really not anybody else doing — I shouldn't say that — there's very few management companies in the mobile home park space because it is a weird rental and sales model hybrid, and there's a few very good managers, and that's about it.

Most owners of communities are starting their own management company to manage their own properties. And that's something that if you're getting into the mobile home park space, you should be aware of that. Unless you're going to hire one of the very few third-party managers in the industry that are any good, you should plan on starting your own property management business and self-operating your communities.

Kim Lisa Taylor:

Don't you also have to have some kind of a dealer's license to be able to sell the mobile homes?

Mario Dattilo:

Yeah, you do. Each state is a little bit different, but similar to a real estate license ... Actually it's a little bit different from a real estate license because in most states, you can buy and sell as much property as you want. But in the manufactured housing space, most states have a limit. You can only sell two or three homes without a dealer's license even if you own those homes. Yes, you do need to be a licensed dealer, and that's something that a lot of people don't know. You can get yourself in a lot of trouble without that license.

Kim Lisa Taylor:

Could you hire a dealer to sell for you?

Mario Dattilo:

Yes. Our dealership is actually doing that for other communities now, where if they want to infill their community, they can use our dealership. We'll order the homes. We'll bring it in. We'll set it up, and we'll sell those homes inside of their community. We'll even do their existing homes that they take back through eviction. We will oversee the renovation and sale of those homes inside of their community as well. But there's not many doing that.

Kim Lisa Taylor:

I could see where that would be a challenge. What kind of common areas do you look for or avoid or try to create?

Mario Dattilo:

Within the communities, you're going to have anywhere from no common-area amenities, I believe that's what you're asking, all the way up to very-high-end amenities like you would see in some class A apartments. Especially in states like Florida, Arizona, parts of California, you have very nice manufactured home communities that are 55-plus with clubhouses, pools, all kinds of gaming things, drive-in movie theater stuff. I mean, just some really wild features. Our communities mostly don't have that.

Ours are primarily affordable housing communities. We do have a few 55-plus communities that maybe have a pool. But generally speaking, our communities will have a clubhouse and an office on site. They might have some shuffleboard courts, things like that, but relatively limited on the amenities. One thing that I'll tell you about amenities is they are a nice feature for the residents and it attracts your higher-end clientele. But in many cases, they don't get used and they're just an expense to the community, which then requires you to have higher lot rents.

On a community that doesn't have any amenities, we aren't typically going in and building out all kinds of expensive amenities that are going to require a lot of maintenance. But one thing that we do a lot of times is we'll bring in picnic tables or things that are low-maintenance that give people a place to come together and build community. We've got a little pavilion at one community. We've got the clubhouse that we do utilize and open up for them to rent out for family parties and things like that, birthdays and family events.

We do have some small groups that will come in and do church in the clubhouse, but we're not typically adding large amenities. We try and keep the cost down because these are affordable housing communities. We're trying to keep the rent down.

Kim Lisa Taylor:

Sure, that makes sense. You've syndicated some of these properties. Tell us about how did you find investors, what kind of people like to invest in mobile home parks, is it different than people who invest in multifamily? What are your thoughts on that?

Mario Dattilo:

I mean, really the way I started it, I was raising money for single-family home flips, and that was debt. We were doing short-term debt on the single-family house flips. A few of those investors came over into our syndications for mobile home parks and self-storage. But really, I would say I'm probably different in the sense that our syndications have, for the most part up until last year, have not been individuals putting in $25,000, $50,000 or $100,000. I found some larger investors that were typically writing the full check for the deal. I would maybe have two investors in one deal.

I wouldn't say that's necessarily typical. But because some of the debt investors were comfortable going into the equity side and they were scalable enough, we've been able to build relationships with those guys. Up until last year, I really had five very scalable investors that invested with us and would typically write the full check or darn near that amount. Last year I've shifted a little bit and started bringing on some smaller investors, and that's because I had a lot of people coming to me saying, "Can I invest? Can I invest? Can I invest?" They see my YouTube channel.

They see my podcast and the social media presence that I'm building up around the brand. They're just asking for it. I hate to turn away money, but one thing that I've tried to limit is investors that are able to invest with us on multiple deals and are scalable to a sense, just because, as you know, Kim, the syndication side of it is a separate business. I mean, you're managing another business, which is the capital management business. I try and limit that and limit the number of investors in each deal.

But we have started opening it up to other investors that want to invest slightly smaller amounts, but in multiple deals with us. I would say a good amount of the interest has come from investors that are either selling off their portfolios that they've actively managed and they want to still be in the game, they want to be doing deals, they're deal junkies, but they just don't have the time or don't want to have the time anymore to operate it, but they like the space and they're picking out a couple of jockeys that they want to invest with.

They like the mobile home park space, and so they found us as a good sponsor for that. And then the other one would be high-net-worth investors that aren't necessarily in real estate but want to diversify into it and don't want to learn the operation side of it. In the beginning, I used to always tell people, “Oh yeah, you’ve got to run your own deals. You’ve got to manage your own stuff so you have control.” What I've really seen over time is that there's a difference in people's situations in their life, and some people just really shouldn't manage their own deals.

They should make the money in the area that they're really good at making money. Maybe they're an awesome attorney. They're an awesome doctor. They make great money in that. Take that money, invest it with someone who has a business of finding, sourcing, doing due diligence and managing property and roll your capital in there and just keep making your money where you're good at it, where you can make the largest cash flow and then put it into those investments with professional operators.

And then there are the people who really want to make a business around it. That's what this is. When you're syndicating, even if you're just investing in your own deals and managing it, it is a business. There's no real estate investment that is truly passive. You just needed to know where you are in life and where your income is coming from. I wouldn't shut off really good income to go start buying and investing in real estate. Make the money, and then deploy it with professional sponsors that do it all day every day.

Kim Lisa Taylor:

Unless you're in a business where you just want to transition out of your business because it's not what you're good at. You don't like it. It's not your chosen profession. It's not your dream job. When I teach, I often ask the question, “How many of you are here because you want to transition out of your current job?” And we get a lot of people raising their hands.

And then, “How many of you are here to augment your income?” And that's the category you're talking about is that we want to have a place to invest our money, but really we should just keep doing what we're doing and passively invest with those that want to be active in the business.

Mario Dattilo:

You hit it on the head though. You said leaving something to do something new. If you think you're going to be a full-time doctor and go put together these deals and run them the way they need to be run, you're going to be surprised that it takes a lot more work. It's not passive. You're right. Yes. If they're transitioning out of a profession and want to make real estate a business, I 100% agree with you.

Kim Lisa Taylor:

All right, you have an opportunity. Let's talk a little bit about your coaching program, what things you can offer people that are interested in learning more about this space. Whether they want to be a passive investor or they want to be an active investor. I always recommend you learn about the space just as if you were going to be the active investor. That way you know the people you're doing it with are doing it correctly. You have to learn about syndication, learn about the asset class you're going to be investing in.

Go to the same training classes that the active investors go to. Once you have that knowledge, now you're sophisticated enough to know whether it's a good deal, a bad deal, or a good operator. Tell us about your training opportunities, Mario.

Mario Dattilo:

That's a really good point, Kim. Actually I’ve got to give thanks to Kim. She's actually done some modules in my coaching and course program. “Real Cash Flow” is the name of the coaching program, and it's solely focused for serious mobile home park investors. I always tell people, if you're curious about it, you want to learn a little bit more about mobile home parks, how they work, check out my YouTube channel, check out my Instagram. You're going to get tons of little nuggets on how it works.

But if you're like, “Hey, I really want to own these communities either actively or passively,” then Real Cash Flow is definitely the way to go. I've got a coaching program, I should say a course, where I teach everything, and that's where Kim did a section on syndication, but then also I've got ongoing coaching where I'm looking at your deals with you. I'm doing deal reviews. I'm basically filling in the blanks. Anything that you can't just put into a recorded module, I'm there weekly doing coaching calls with my clients.

I partner with students, actively partner with them. If they want to co-sponsor deals with me, I do that. What's great about it is start-to-finish. Anything and everything you need to know about mobile home park, sourcing, underwriting, I have a very in-depth breakdown of how to underwrite a deal and model out the financials, due diligence process, raising capital— which Kim did the security side of that — and then also how to close operate, prep for sale, how to flip communities.

It's very in-depth, and it's for serious people that really want to get into it. Now, I will say we do have some clients that got into it because they want to invest in syndications as an LP and they just wanted to understand the business firsthand so they can pick the right sponsors. I agree, it is a great way to do that. But if you're curious, check out my YouTube channel and my Instagram. Subscribe and follow there. But if you want to take that next step and really learn, go to getrealcashflow.com, and happy to help people.

Kim Lisa Taylor:

It's getrealcashflow.com?

Mario Dattilo:

Yeah. We actually have an option for our students as well where they can get on-site with me. This is different from what anybody else is doing. This isn't like a classroom where I'm walking around and teaching you about what I'm seeing out on the property. It's a real workday for me, where I'm either doing due diligence on a community I'm buying, or I'm doing a site visit to a community I already own. They're taken along with me. They got a clipboard. I'm having them do things so they're actively involved in the day.

That way when they go buy their first community, it's not the first time they've done real due diligence on a property, or it's not the first time that they're doing site visits on a community. They've done it already in real life. It's actually very interactive, and I only bring one person, one to two people, on those visits with me because they're actually working with me that day. It's not like a classroom style visit. It's pretty awesome and people have gotten a lot of benefit out of that.

Kim Lisa Taylor:

I actually went on a mobile home park tour one time in San Diego I think it was, and that was really enlightening. Because I'd probably driven by these places a million times when I lived there and I didn't even think about what was going on inside the community. And then you drive in and people are pointing out to you, "Well, this is good, this is bad," getting your impressions of it firsthand or just walking through the community. It was really eye-opening.

Mario Dattilo:

Until you touch and feel it, you really can't learn everything, that's for sure.

Kim Lisa Taylor:

Well, my biggest eye-opener was one of the parks we went to was just in this prime location and there were mobile homes in there. They were in pristine condition. They looked like they were from the '40s or '50s.

Mario Dattilo:

Snapshot in time.

Kim Lisa Taylor:

Yeah, it felt like that. It really did feel like that a little bit. All right, so we are going to go to live Q&A. We've got a couple of questions.

Mario Dattilo:

Bring it.

Kim Lisa Taylor:

Before we do that, I just want to tell you that if you want to know about us and you want to schedule an appointment with one of our team, go to syndicationattorneys.com. You'll see a place to schedule an appointment. You can either schedule an appointment with me or one of our other attorneys, or you can schedule an appointment with one of our team and we can figure out what you need and how we can help you with that. If you don't have my new book, “How To Raise Capital For Real Estate Legally,” you need to get it. It's available on Amazon.

Or if you do want a free copy of it, you could text the word “SYNDICATE” to our phone number, 844-796-3428. 844-796-3428. That's text the word “SYNDICATE,” and then we'll mail you a free copy. Make sure you're serious about doing it because this is a serious book. This one's over 300 pages long. We still do have the other one if you are more in the beginning stages of real estate and you want it step-by-step:” How to Legally Raise Private Money.” This is still a great book for you. This one is only 160 pages, so it's a little easier read, more step-by-step.

This is more for beginners. This one is really great if you want to have that desktop reference. It goes into pretty much every different kind of structure that you can think of and every different kind of capital raising strategy that you might want to employ. Get them both. Get the one that's relevant to you either way. If you want a free copy of this book, you can get a digital copy at our website, syndicationattorneys.com. Just click “Free Book” under the Resources tab.

Mario Dattilo:

Can I say something, Kim?

Kim Lisa Taylor:

Yeah, please.

Mario Dattilo:

I'm here because Kim and I do business together, and I don't do business with people out of obligation. I really enjoy working with her company, and they really know their stuff. They are experts in real estate syndications, commercial real estate syndications, which is why we've worked with Kim for a long time. It was funny, when your book came out, I bought the book just to support you. I just was like, “Ah, I'll just order it because I want to support what you're doing.”

When I was talking to Mola, we started talking about a very technical topic that we were looking at. She goes, "Well, actually, you've got the book, right?" I said yeah. She said, "Well, go to this section because it talks in-depth about that." I opened it up and actually started reading. I'm like, “Oh crap, this is a manual to syndications and into securities law. It's not like a high-level fluffy, which is what a lot of them are. It is very in-depth and something that I learned a lot from.” So then I read the book because it's like, okay, this isn't just like you can syndicate and get rich raising money.

It is in-depth legal detail. If you want to know the business, I highly recommend the book. I was surprised and excited when I actually opened the book and read it.

Kim Lisa Taylor:

It has a very detailed table of contents because that's how I like to write.

Mario Dattilo:

It's a reference book.

Kim Lisa Taylor:

It helps keep me organized. It really is a reference book. It's like, “Hey, I want to start a fund.” Oh, go to chapter 14.

Mario Dattilo:

Complex strategies too, not just high level.

Kim Lisa Taylor:

What do you need to know? “I need to structure a deal for residential assisted living.” It's in there. All that stuff is in there. Highly recommend it. That's the level of detail in the second book. If you go to Amazon, if you want to just buy them on Amazon, you want them on Kindle, or you want a physical copy mailed to you right away, then you can get them on Amazon. Just search for Kim Lisa Taylor, you'll see both books there. We'd be happy to have you do it. Also, look for the bonus materials because there are some bonus materials in both the books that you can get for free.

You've got to click on that link or put it into your URL, and then you can get those free bonus materials. But let's go to our questions. Shirley asks, “How delinquent would somebody be before eviction?”

Mario Dattilo:

Well, for us, we have a “no-pay, no-stay” policy. If someone exceeds the fifth of the month, they get a notice. And then there's a certain number of days that each state requires before you send it to the attorney. And then we send it off to the attorney and they evict. I would say most of our communities —  we're in five states right now — most of our communities, actually, all of our communities are to the attorney by the 21st of the month. They vary a little bit.

Each state has a little different guidelines. They might say, well, you need to count the number of days, including weekends and holidays and all this. But generally by the 21st, it's to the attorney and going through eviction.

Kim Lisa Taylor:

And then Shirley asks another question, “Do have recommendations for financing institutions for manufactured home parks?”

Mario Dattilo:

That's really a good question because it's something that we didn't talk about and there's this big misnomer that there are no banks financing mobile home parks. It's actually untrue. There's a very high demand for manufactured housing lending. Not saying that every lender will do it, but Fannie Mae, Freddie Mac, CMBS, life companies and local, regional, and national banks all finance mobile home parks. I think what's really important to note.

Kim Lisa Taylor:

Does HUD do that?

Mario Dattilo:

HUD does not actually, which is kind of surprising. They should. But what's really important to learn is how to quickly determine if a lender will finance or be a good lender for mobile home parks. There's a whole process that we go through to weed out all the lenders that aren't going to be a fit. Especially if you're looking at local and regional banks, they might say that they'll finance a mobile home park, but they're not the right lender for it.

There's a list of questions that we go through with lenders to quickly weed out the bad ones, and so that we're only focused on the ones that are going to give us attractive terms. I’ll give you an example. There was one community that we bought in Pennsylvania. I went through 22 banks to find a good term sheet in that market, but I knew the process to go through it and I was able to quickly weed through all those banks and find a really good loan option in that market.

I don't want to make it seem like every bank is a good lender for mobile home parks, but knowing the right questions to ask will be quick to weed out. But if you're going institutional — so like the agency lenders, Fannie, Freddie, CMBS and life companies — there are some specialized brokers that focus on manufactured housing. There's not a lot of them, but there are a few and they know all the great lenders to take those loans.

Typically, what we do is we buy with banks, we turn the community around, and then we refinance into long-term non-recourse debt with those institutional lenders. And that gets us off of a personal guarantee so we're now non-recourse and they're long-term fixed debt and very attractive financing.

Kim Lisa Taylor:

Okay, that's what I was going to ask is that some of these local banks might require personal guarantees, right?

Mario Dattilo:

They do.

Kim Lisa Taylor:

Is there a minimum finance amount before Fannie or Freddie will consider the loan?

Mario Dattilo:

I'm not an expert on Fannie and Freddie, but I know that they do have a small balance loan option just like they have with apartments. I want to say it goes down to a million or $800,000. Don't hold me to that exact limit, but yeah, typically institutional gets involved around a million and the banks, credit unions, things like that will go under a million. Now, that doesn't mean that you can't get a life company to do a loan for under a million. I have. CMBS, same thing. But there's got to be a compelling reason why they're willing to do it. Maybe it's very low loan to value.

Maybe you've got a long-term relationship with them and they're doing other loans for you, so they can look at it from a little bit different angle. But typically, the million-dollar loan line is where you get the institutional. Otherwise, you're going banks. You're right. You're going recourse five- to seven-year debt with 20- to 25-year amortization with banks. And that's why we will get out of those as soon as possible and go to the non-recourse institutional debt. That's also another reason why I want to buy bigger communities, more attractive communities than I can get into that more attractive debt.

Kim Lisa Taylor:

Well, and a little word to the wise here, we're in uncertain economic times right now. The people that really got hurt and had to declare bankruptcy in the last economic downturn in 2008-2010 were people that did short maturity dates on their debt. They had like three- to five-year maturity dates, and then those came due while the prices were depressed and they weren't able to sell the property for enough to even satisfy the loans, so they ended up walking away from a lot of loans.

If you had recourse debt in any of those situations, then that means you're personally on the hook for any deficiencies the bank might have if they sell it to somebody else. You've got to be super-careful about doing personal guarantees right now. You've also need to make sure you've got long maturity dates so that you can weather and ride out any economic downturn. 

We've got a report that our professional editors have written that is available to our clients if they want to use it for a lead magnet or something like that, but it's a hundred years of contrasting real estate versus other stock market investments, things like that. It's specifically geared toward multifamily. But the whole point is that over a hundred years, we've seen a lot of dips, but we've also seen everything go up. It always comes back. It always goes higher than it was before.

You just have to be able to ride it out. As long as you've got a long enough maturity date that you're not stuck having to refinance or sell a property during the middle of an economic downturn or when the financing is not so readily available, then you can ride that out and you're okay.

Mario Dattilo:

Absolutely.

Kim Lisa Taylor:

Lower loan to value ratios, we're seeing a lot of that right now too. That will help manage that risk. Because if the property values drop 35% and you've only got a 65% loan to value, well, you're still probably at least even if you had to refinance out at that point. Just a word to the wise there. 

Nancy asks, “Are all your mobile home parks rented units, or do you also buy parks where the units can be purchased, but pay the rental fee for the mobile home?”

Mario Dattilo:

I think what she's asking is, are all of our communities lot rent only, or are some homes rented out as well? I'll just quickly touch on this. There's two models. You've got a lot rent model and then you've got a home rent model. Home rent model is like a horizontal apartment building. The community owns the dirt and the homes and they rent out both. The residents just rent it like an apartment unit.

And then you've got the sales model where the community only owns the dirt and then the residents own the home and they just pay lot rent. All of our communities that we own are the lot rent model. The residents own their home. They pay us lot rent. Whenever we get a home back or we fill a lot, we sell that home to a resident. That's the model we prefer.

Kim Lisa Taylor:

Okay. Well, Bruce asks the question, “What resources do you suggest for finding mobile home parks in our area?” I'm going to answer that for you. Bruce, you need to get Mario's coaching program. Go check out his website. Give us your website again.

Mario Dattilo:

It's getrealcashflow.com, getrealcashflow.com. I think somebody dropped it in the chat as well, but it's getrealcashflow.com. You can find out everything that I'm doing over at mariodattilo.net, but the coaching program is definitely getrealcashflow.com.

Kim Lisa Taylor:

Mario Dattilo, can you spell your last name so we get it right?

Mario Dattilo:

It's Mario, M-A-R-I-O, last name Dattilo, D-A-T-T-I-L-O, .net. That's got all my companies. It's got a way to contact me, everything, mariodattilo.net. Correct.

Kim Lisa Taylor:

Good. All right, Mario, this has been great. I hope everybody that was on the call got out of it what you were looking for. We appreciate all of you being here. We appreciate the questions that you asked and please keep supporting us. You can sign up for us on YouTube. Also, if you don't know, this will go on our podcast, which is called “Raise Private Money Legally.” If you haven't subscribed to that at all, go ahead and do that.

There's over 70 episodes on it now. We just counted them just the other day. There's a lot of listening. If you're driving in the car, you want to listen on your podcast platform, you can do that. Mario, thank you so much. Appreciate having you as a client. Appreciate having you as a guest. We look forward to doing some more business with you in the future.

Mario Dattilo:

Thanks for having me on. This has been fun. I appreciate it. Thanks, guys.

Kim Lisa Taylor:

Bye, bye everybody.