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  • Andrew Keel

Ground Up Mobile Home Park Development with Jim Glasgow of Palace Way Management LLC

Updated: May 26




SHOW NOTES


Welcome back to the Passive Mobile Home Park Investing Podcast, hosted by Andrew Keel. On this episode of the Passive Mobile Home Park Investing Podcast, Andrew talks with Jim Glasgow of Palace Way Management. Jim and Andrew have a great discussion about various topics including: property zoning needs for manufactured housing, different housing types and the need for affordability, ground up development processes, budgeting within a ground up mobile home park development and also what backlogs and supply chain constraints there are in the current construction market and how this is effecting real estate.


Jim has over a decade of experience in real estate investing and syndication. He also has experience on the corporate side as an executive and business owner. His experience in real estate includes residential properties, mobile home park investing, commercial real estate properties, land, real estate development, and construction. He is a general partner at Palace Way Management and Palace Way Syndicates and is currently developing mobile home parks and industrial business parks in Texas.


Andrew Keel is the owner of Keel Team, LLC, a Top 100 Owner of Manufactured Housing Communities with over 2,000 lots under management. His team currently manages over 30 manufactured housing communities across more than ten states. His expertise is in turning around under-managed manufactured housing communities by utilizing proven systems to maximize the occupancy while reducing operating costs. He specializes in bringing in homes to fill vacant lots, implementing utility bill back programs, and improving overall management and operating efficiencies, all of which significantly boost the asset value and net operating income of the communities.


Andrew has been featured on some of the Top Podcasts in the manufactured housing space, click here to listen to his most recent interviews: https://www.keelteam.com/podcast-links. In order to successfully implement his management strategy Andrew's team usually moves on location during the first several months of ownership. Find out more about Andrew's story at AndrewKeel.com.

Talking Points:

00:21 - Welcome to the Passive Mobile Home Park Investing Podcast

01:40 - Jim's journey into real estate and an overview of his portfolio

07:41 - Jim's process to developing the numbers for his ground up development budget

10:10 - The types of housing Jim prefers on his mobile home park lots

14:22 - Market study and analysis

16:25 - Jim's partners

17:20 - The contract process

18:47 - Important advice for limited partners or passive investors in mobile home parks 21:23 - Zoning restrictions

26:23 - Getting a good rate of return

30:00 - The origin of Jim's startup money

32:30 - How long will the backlogs last

35:08 - Reaching out to Jim Glasgow

35:52 - Conclusion



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Links & Mentions from This Episode:

Jim's email: edwardjim59@yahoo.com

Palace Way Management: https://palaceway.com/

Keel Team's official website: https://www.keelteam.com/

Andrew Keel's official website: https://www.andrewkeel.com/

Andrew Keel LinkedIn: https://www.linkedin.com/in/andrewkeel

Andrew Keel Facebook page: https://www.facebook.com/PassiveMHPinvestingPodcast

Andrew Keel Instagram page: https://www.instagram.com/passivemhpinvesting/ Twitter: @MHPinvestors

 

TRANSCRIPT


Andrew: Welcome to the Passive Mobile Home Park Investing podcast. This is your host, Andrew Keel. Today, we have an amazing guest in Mr. Jim Glasgow, of Place Way Management.

Before we dive in, I want to ask a quick favor. Would you mind taking an extra 30 seconds and heading over to iTunes to rate this podcast with five stars? This helps us get more listeners and means the absolute world to me. Thank you for making my day with that review of the show. All right, let's dive in.

James has 35 years of real estate investing in syndication experience, as well as 28 years on the corporate side as an executive and business owner. His real estate investing experience includes residential properties, mobile home investing, commercial properties, land, real estate development, and construction. Mr. Glasgow is the general partner at Place Way Management, and Place Way syndicates and develops mobile home parks and light industrial business parks in Texas. Jim, welcome to the show.


Jim: Glad to be here. Thank you for inviting me.

Andrew: Definitely. Would you mind starting out by telling our listeners a little bit about your story and what got you into mobile home park development?


Jim: I've been a real estate investor for the first 30 years. It was part time because I had my own company I was running. I made $3 million or $4 million over those 30 years as a real estate investor. I happen to believe it's one of the best ways for people to get wealthy, especially people who don't have a leg up to start with. It's just a great way to go.

Then I retired, which didn't work out too well for somebody who's used to working. People with money came to me and wanted me to help them buy apartment complexes and half a dozen wanted to buy mobile home parks, small ones anyway, up to 30 units or so, rather small.

I help those, I guess there's five or six of those guys out, and then the apartment complexes as I researched that industry and we've done a 48 unit building over the years and several smaller apartments. I just couldn't make the numbers work for the buy value add. It was just a little bit late in the supply chain. As it turned out, with increasing rents that would have worked out okay, but I didn't know that at the time.

Mobile homes were something I had been buying and selling for years, and small parks I helped people would buy turned out to be cash cows. I told the investors if you put up the money, we'll get in there and get it done. I've done lots of development over the years, so we can certainly do this. It's not difficult to do other than it's just time consuming. That led me back to mobile homes, and if you do the research, you'll find that mobile homes have a much greater return on investment than even multifamily.


Andrew: Definitely. Could you go back and tell us a little more about your development experience? I know you said a 48 unit apartment complex. Did you develop that and oversee the building?


Jim: For 30 years, I bought and sold houses, rent houses, and offered small office buildings. I've rehabbed the office buildings and then eventually sold those. We did a 48 unit apartment building. It was a value add, we bought it, owned it for quite a few years, and then sold that. One of my partners wanted out of that deal. We were 50-50 partners, he wanted out, so okay, get out. We sold it and I was fixing to retire anyway. I started downsizing, not owned as many houses as I used to own; I think I've got five left. I did a development of a mini storage in San Antonio about 25 years ago; it's been a long time.

I've been through all of the ups and downs, the land accumulation, and entitlement process and all that. I knew about all that. I've been raising money from private investors for 30 years, so I knew about that too. I had all of the skills necessary and now that I'm older, I just want to do bigger deals, or go buy a house, and turn into rental property or flip a home. It just isn't exciting for me anymore and I'm too old to be doing it that slow in the process. That got me into larger deals and mobile home parks.

In this case, it really needs to be a hundred units or higher to make the numbers work, and 250–500 is the sweet spot for development and because of the cost of development. Now I'm doing a $13 million project and because I'm the developer and the syndicator, I'm working on a small percentage of that for my share. The project has to be big enough to be worth me putting my time in.


Andrew: Oh, totally. Yeah, I know.


Jim: It's not like nobody's paying me, right?


Andrew: Hey, I totally understand, totally understand, Jim. Can you tell us a little bit about and most recently, I know you're working on one mobile home park development right now, that you said has been a long process. Previous to that, what else have you developed most recently?


Jim: That’s the most recent one at the moment, and I have a light industrial business park in San Antonio. We bought that land last summer and we're in the process of planning that also. It needs go quicker because it's 28 acres not 60, and it's 17 buildings not 250. It'll go much quicker to do that.

Part of the delay of this project, about a year of it, is just because of COVID. When COVID came out, I didn't think it was going to affect us much, but people working at home, it's just not efficient in a development business. It may be in some other industries, but it sure isn’t when people need to look at plans, go down the hall, talk to somebody else, and get back with the information that we need to be able to continue with the development process.


Andrew: Yeah, that's amazing. Tell us about this project. You said it's a retirement project for you to develop this mobile home park, and you said it's around $13 million. Is that your cost basis so far?


Jim: We're estimating about $13.5 million all in. We would like to do 10 mobile home parks over the next 5 or 6 years, but you have to have one-up to show. When you're raising money from people, they want to have something to go look at. They want to see that you know what you're doing so we've got to get that demo project up and running.

We raised $6 million for that, which we've got commitments for all of it, but some of them will fall out, so we probably got room for maybe another million. I'm not taking people's money, I'm just putting them on the list, in case people fall out, which they always do. That's just the way it is.

Then we'll borrow about 76%, 75%, 70% of the money from a bank to do the development, then we'll take out a loan. So 250 houses, 259 actually, but some of them are mini houses, so 259 units, probably close to $2 million cash flow when it's completely leased up. Return for investors, we're shooting for 15.9% but we think we'll do over 20%.


Andrew: Wow, that's fantastic. How did you come up with the numbers for budgeting purposes? How much does it cost per lot to get all the utility, infrastructure, everything but the home there? So far what does it end up looking like? I know you're still in the planning phases. We don't have any bulldozers moving yet?


Jim: No, we just bulldozed those roads in to get the [...] trucks in to do some tests. [...] bulldozed we've had on a property so far. We're pretty close to doing that now.

Cost estimating for mobile home parks was difficult in the beginning. When I first started, when you google mobile home parks, all you got was don't build a mobile home park, go buy one and fix it up. Over the last three or four years, that has changed and the interest from all over the country has greatly picked up.

Even the manufactured housing institute is holding their first full day seminar on how to develop mobile home parks in April in Florida. The first one that's been held in 30 years. It's been a long time coming and it's about time that it got back up there.

Coming up with numbers was a difficult task, but having been through the development process before, one of my business partners is a civil engineer and he worked in residential home development. Basically, that's what a mobile home park is. It's a residential development. It just has a lot more hoops to jump through than a residential development and the density is heavier. Instead of 4–5 houses per acre, you're trying to stick in 6 or 7.

Thirty years ago, you would have put 10 houses per acre but nowadays people want more land. Coming up with a numbers was difficult, but having been through this process several times before, we came up with working numbers and we got up to $48,000 per site, all in, that's land and everything not counting the houses of course. Ready to sell the house to somebody. We're at about $48,000. We're thinking we're going to come in between $45,000 and $54,000 of investment per home site.


Andrew: Wow. That's higher than I thought it would be.


Jim: Most people think it is $35,000, but when you go buy an existing mobile home park today they're $45,000–$85,000 if they're in a good market that can come in $500 or more per month, and they're selling like hotcakes. Even at 2% or 3% return on investment, they're still selling them as quickly as they go on the market.


Andrew: What type of houses are you going to put on these lots? Are they going to be all double wides? They're going to be all single wides? What is the average cost of those homes?


Jim: Keep in mind that I'm an indicator and developer, and we only own a project for 10 years and then we sell that. When I look at that, I look at what does the market want? What can we get finance 10 years down the road? That means that you don't want more than 30% of the homes to be rental homes and you don't want more than 50%, preferably 40%, to be double wides. Now that's changing somewhat. Our goal will be 60%–70% single wides and we will keep the number of units that are owned by the park and rent it instead of sold at 30% or less.


Andrew: Okay, but what about the cost of those homes? Because when I was talking with Fannie Mae, they wanted double wides. They wanted more double wides than single wides in one of their metrics. They wanted, I think, less than 20% park-owned homes. Tell me about the cost of those homes. If someone wants to buy a home in your community, how much is that going to cost for them? Are these going to be, I would assume, all brand new homes? Then you said lot rent target, after someone owns their home is around $500 a month. Is that right?


Jim: The target is $650 because the cost of construction has been going up and the total cost of the lot. When you're looking to buy land for a mobile home, if the going rents in a metro are less than $500, I pass. We're looking for property now to build a 500 unit. I've gotten investors interested in doing it. That's the metric and 650 lot rents will work ideally $550–$650.

The cost of the home, single wides are going to vary from installed with skirting tied down, with a storage room in the backyard, front porch, back porch, two car parking space and we're looking at about $60,000–$80,000 on a single and we're looking to from $70,000–$110,000 on a double. Again, depending on the size and quality issues because you can have paneling or you can have sheetrock inside. You can have flat ceilings, cathedral ceilings, there's a lot of options. The quality of the mobile homes are just superb today.

We're not going to dictate the prices, we're going to put 12 houses on the lot yard to show and then the people come in, they'll tell us what they want and that's what we're going to bring in. If that means more double wides, that's great. That means more singlewide, that's great. But we need to keep the metric for the mix to what the banks will finance. I'm glad to hear that Fannie Mae will do more double wides, but that's a little different from financing a complete park unless they put something out that I'm just not aware of yet.


Andrew: I'm not familiar if they have any new development loans.


Jim: They have a 40 year take-out loans at really good interest rates, but only one of us has been approved in the last 10 years. You can say they've got it, but that doesn't mean you're going to get it. It's a long process to get it. It can take up a year just for the application. I'm not excited about that. The local bank is still a local business.


Andrew: Wow. That's crazy. What market is your current development in?


Jim: It's in San Marcos, Texas, over by their airport. About 3 ½ miles from the downtown. That town has about 69,000 residents. It has 30,000-something students who go to the university there. Were 50 miles from San Antonio and about 34 to Austin, so excellent location.


Andrew: Is it 34 miles to Austin?


Jim: About 34 miles to Austin, on the south side of Austin. Then we're about 54 miles to San Antonio.


Andrew: Oh, very cool. I'm curious about the market study beforehand. Did you call all the parks beforehand, get a market analysis of what the average lot rent was, then the average home price, because having a cost basis around $150,000 just to get homes there. You get the lots ready and get a home on it.


Jim: But you can't look at it that way. You've got to look at it as what does it cost you to develop a park space to park a house and what is the return on that investment. If you can get $600 a month for rent and your cost to develop is $54,000, the numbers are pretty good for that. That's a five or six year payback? I'm going to run a calculator on your show, but that's a pretty good return. That's about 11% cash on cash if I'm right and that's without leverage. With the leverage, you should get around 16% or 19% just on the lot rent alone. Remember, you're renting dirt so there's really no cost like painting the walls or anything.

The house you're going to sell. The person-buyer, comes in, they buy a house. Let's say they buy a house for $70,000. They put $5000 down, finance $65,000 to 22 years at 6%. Their total payments for $1100 a month for a three bedroom, two bath, brand new home that they can park in the front yard. That's not bad. That's affordable housing.

Andrew: Yeah, and you're right in the middle of Austin and San Antonio, that is a really hot market right now.


Jim: I've gone out to smaller markets in Texas and little parks that are less than desirable we're getting $500 a month rent now. The rent base has really come up. Part of the reason is just a lack of competition in the business. Most all the parks are full, even those that report that they've got some vacancy. When you go talk to them, they don't really have a vacancy. They were looking for a vacancy so they could put a house in there and sell it to make a few dollars.


Andrew: Yeah, that makes a ton of sense. Tell us about your partners. You said you have one that's a civil engineer. Do you have any others on the GP side of these too?


Jim: Yes, we do have a gentleman who is a property manager. He's in the property management business. The civil engineer is closing down his engineering business to work on these developments for us full time, because we'd like to do at least two developments a year and the process takes a while, so you need to have four or five in the process. If any one time you're going to start two projects a year, you better have four or six in the works because of just the lag time and getting things approved. Like I said, the lag times of the process of getting approvals has really stretched out in the last 24 months.


Andrew: When did you go ahead and get this property under contract for the current development?


Jim: A little over two years ago. We got the zoning approved last June 6th, which is a real struggle getting zoning approval. That's when we started the development process.

We'd actually started a little ahead of that and then we were hoping it to be done by April of last year. Here we are coming up on April again, so we're about a year behind. We purchased the land and paid it off last summer.


Andrew: Wow. Obviously, Covid threw you a curveball there.


Jim: It has for everybody. I was feeling really bad. Like, gosh, I need to do a better job of managing my projects. Then I went and talked to some people that are doing the same thing we're doing. One of them, it's 3 ½ years just to get a sewer permit. I wasn't feeling so bad after talking to him because everybody's behind.

If you want to build a house on Austin, Texas, it could take you seven or eight months just to get a permit to build a house. That's ridiculous. It used to be four, five, or six weeks and you could go down to pick your permit up. But it's seven and eight months long. People working from home for municipalities has not worked very well.


Andrew: Yeah, geez. Where are you based out of? Are you close to the San Marcos area?


Jim: I'm in San Antonio. I've been there for about 40 years. We've been all over the state of Texas. Right now I'm sitting in Dallas. I do business all over the state of Texas.


Andrew: Very cool. What do you think is most important for limited partners or passive investors? What do you think is most important for them to know prior to investing into a mobile home park development, that they could listen on this podcast and take that away as mobile home park development maybe becomes more popular? Because the demand for affordable housing is so strong, what do they need to know prior to investing into something?

Obviously, the timeline, I think could be one of the big things that they need to know. Hey, this could get pushed out and you're not going to have much cash flow for possibly a couple of years while this gets approved. What else should they know up front?


Jim: As far as popularity, it's rapidly becoming the in-thing to do and it's going to be happening all over the United States. Over the next five years, you're going to see a lot of new mobile home park developments, assuming we can keep up with the manufacturing [...].

As far as the timeline, it's new development. A new development is going to take 24 to 36 months and maybe 48 months before it cash flows from the time you put your money in. If they're ready to start construction, you might start cash flowing in 24 months. But even if they're ready to start construction, it's just going to take a while.

Here's the advantage to that. When you're buying into a development, you're buying the wholesale. You're not paying retail. When a syndicator goes out and buys an office building, he's paying retail for that office building. Then he's going to rehab that office building and improve the profitability of that. That's where the return on the investment is going to come.

When you develop it, we're talking about a brand new park. When we finish ours out, we will triple the value of the money that we've spent. The return to the investor should hit between 20% and 30% at the time we sell it.

Keep in mind, a lot of that comes when you sell it, but the internal cash flow is 14.9%. That's without anything but the internal cashflow, so you can catch up rather quickly. When you sell the park, the return is great.

The numbers are really high when you just plain spreadsheet it, but I know from experience that we need to tone them down. We tell investors that their average rate of return will be about 15.9% and then we'd like to blow that out of the saddle if we can. That's the advantage of development.

If you look around anywhere in the United States, it's new development. They're going up everywhere. All the money is chasing that because the return is better than anything else you can do, unless the stock market doubles tomorrow.


Andrew: Let me ask you this. You said earlier that with developing a mobile home park, there are more hoops versus a single family subdivision that has less hoops. Would that be involved with the zoning?

From what I've heard is that the zoning pushes back on mobile home park developments with people not wanting to have a mobile home park in their backyard. Also the costs in the average mobile home park tenant versus what they cost the municipality. Maybe you can shed some light on that.


Jim: [...]. The truth is, it's the only unsubsidized affordable housing that we can put together. We can do it rather quickly and we can do it in very large numbers. If we really truly want to solve the affordable housing issue, this is the only play thing that really makes any sense. Everything else is more expensive. They're trying tiny homes and all that, but that's even more expensive.

Manufactured housing is the solution, because where can you buy a house for $60,000 that's three-bedroom, two-bath? Even if you rent the lot, you could get under $1000 if you have a little down payment or one of a little lower quality. Most people want to upgrade a little bit, so I always tell them around $1100. That's all in. That's taxes, insurance, and everything.

It's super affordable. You can't rent a two-bedroom apartment for that, hardly. Not a good one anyway. It's still a good value and homes are appreciated a little bit. You're not going to make a ton of appreciation on the $60,000 house.

Even if it just holds its value for 10 years, and you sell it, and walk away with $30,000, $40,000 for a down payment for a stick-built house 10 years later, and have a nice place to live, it's a pretty good deal for someone who can't afford something better or different. Then there are people who want to move to mobile home parks.


Andrew: I totally agree with you. I don't think anybody is going to argue with you about the demand for affordable housing and the affordability piece of it.


Jim: That's what you have to do to get the zoning approved. You have to sell it on the affordable housing issue. You just have to ask the city. I don't think the people should have the traffic.

Okay, in your town, if you don't do affordable housing in this area that we picked, where are you going to do it? I can tell you, they don't have an answer. If you ask them, who has an affordable housing project going on in your town? We do. Now, do you want to not approve this? You want to tell people I don't have a solution and I turned down the one solution that's out there. That's what you got to do to get them convinced that they need to approve the zoning.

Zoning is an issue. From an investor's point of view, though, they need to look at the developer and see if they have any experience. They need to look at the project itself. They need to look at the return on investment and how is my money going to make me money. What is the investment stack or what's the waterfall?

When I'm going to get my money, how am I going to get it? When did my money start earning money? (1) You don't want to put money in to an investment that has a lot of front fees and expenses because you want your investment in the project, and (2) you want your money to start accruing interest to your account immediately to be paid when the project begins to make money. Otherwise, you might as well wait till they're ready to start selling houses before you put your money in.

By then, it's too late, though, because if they wait till I start construction, we won't need them. So you got to get in early. That's just the development business and it's that way everywhere. As you look around, it can only drive down a highway. You don't see a new development going on. It's because it's super profitable.


Andrew: That's true. I live in Orlando. I see a lot of multifamily development when I go around. I see subdivisions, but I don't see many mobile home parks.


Jim: Because of two things: (1) People don't know anything about it, and (2) the finance is a little more difficult. You have to actually go out and sell the house to somebody. There are 250 of them on 59 acres.

In a residential development, they're selling the lot and the house right away and paying off the bank right away. It's not a long-term hold. What we've done in the mobile home park business is we've married development. We're developing a subdivision and the rental business in one. That's what makes it so lucrative.

There are companies out there that own 1200 parks, that have 50,000 people paying them rent. It's amazing how good the business is and how their cash flow is. It's 30% more profitable than multifamily because you don't own the toilet. If you don't own the toilet, you don't have to fix it. It's just the way it is.


Andrew: The biggest sell in mobile home parks is the lack of maintenance. But isn't there a lower hanging fruit, Jim? Isn't there mom-and-pops out there that have these mobile home parks that they've had, and they've just taken their foot off the gas, and now there's 75% occupancy instead of 100%? Isn't it easier to get a good return?

That's been my model anyway, just to fill up the remaining 25% tweak, build back utilities, and things like that, versus the risk associated with waiting (potentially) three years to be able to put a shovel in the ground and start a new development. And then, wow long is it going to take to finish? Is it going to take a year to finish the development once it starts?


Jim: It will take from once you start construction to the time you sell the last houses probably 44 months.


Andrew: 44 months?


Jim: Five or six years, but you've taken a $13 million project. That's cash flowing $14 million for a year. At a 6.5% cap rate, that's $33 million.


Andrew: I know some guys, the Spartan Investment Group. They just developed one up in Seattle. Before the homes were even delivered, they were able to sell it at the certificate of occupancy. They were able to sell it to some big group and they were going to bring the homes in.

I definitely see it. I just think it's very market-dependent. You need to be in the hottest markets around Austin, Texas, Seattle, others that are really going to be able to sell the homes. I think in that park in Seattle, they were able to sell the homes for like $250,000 every single home.


Jim: Seattle is a specialty market. I wouldn't want to bank on that, but the returns are there no matter what. They're good returns. It's sad that it takes too long to do the development. But if the investors can average 15%–20% of return on their investment over a 10-year period, even though 60% of that comes when the project is sold or refinanced.

Ideally, what you do is five or six years in, you'd refinance as soon as you are full. Give the investors their cash back that they put in. Now they have no money in, but they still have whatever percentage they bought in at. Now they're getting their cash flow from the project and future appreciation, but they've got their money back to go do another project. The numbers are better than it first appears to be.

When we design one of these projects, we want 11%–12% cash on cash return. When we leverage that out, we know we can hit 16%, 17%, or 18% on cash flow. Then we’ll add in the appreciated value. I can sell the mobile home park today and it's not even developed yet. I could sell it for everything that I've gotten in it, plus pay all the investors money back, plus pay them 8% interest on their money. That's how good it is, the market is there.

There are plenty of investors lined up wanting to buy my project right out from under me. If they want something, they want something that's shovel-ready. That's why we plan to do 10 of them over the next 5 years.

The hardest part as a developer is coming up with initial cash flow because you need a million-and-a-half dollars to get the project off the ground. You may go through two or three properties before you finally get the zoning approval.

A lot of our time when we spent the first year putting properties under contract, we couldn't get the planning and stuff done, and then we moved on to the next property until we found one where we can get it done. In the process, we learned some stuff and we were able to cut that down.


Andrew: Where does that money come from? Where's that money come from, Jim? Is that your money?


Jim: The original startup money is going to come from whoever your syndicator is, like me. I've got to come up with a quarter of a million dollars to get off the ground. Then the investors start coming in after that. They're not buying a plan on a piece of paper. Where's the property? Have you got it tied up yet? Is it under contract? Where are you at in the process? All of those legitimate questions. The better I answer those, the easier it is to track money.

We've raised or got commitments for $6 million already and half that's already paid in, so we're doing quite well. [...] right from under us, but we're not interested in selling it. Besides, we have a commitment to our investors. Once this project is up and running, the next one will get easier. We'll be able to take people around and show it to them.

If you build in a first class facility, which is what you have to build today, which is one of the reasons that the cost per lot is higher, you need a clubhouse, tennis courts, swimming pool, and all that stuff. There are more amenities than you have in a typical subdivision.

For instance, one of the hoops you have to jump through that the subdivision generally doesn't is we have to provide off-street parking for boats, RVs, and a mobile home park. You don't have to do that in a subdivision. That's just one example.


Andrew: In the local municipality, the local zoning is requiring you to do that?


Jim: Yes. There are park fees set aside. Twenty-five percent to 30% of your budget is for, I call them standby fees, but sewer and water absorption fees and that sort of thing. Part of the reason your cost to develop, not just us but houses and everybody doing any kind of development, is all the fees the city have put on us.

It's not unusual to have $20,000 worth of fees per lot. Fees. We haven't done a shovel. In this particular case, we've got $15,000. One of the projects we penciled out was at $19,500 in just fees that we have to pay before we can start them.


Andrew: I think one of the big things that the listeners would want to hear about when we're talking about this is the timeline to get the homes on the site. I know Austin is a special place. I've talked to some others that they said dealers will bring in homes and sell the homes on their lots in the parks.

I wouldn't say that that's very common across the entire US. But when you say the backlogs right now, do you think that's going to last? Where will those be next year and the year after?


Jim: Texas has one new factory that Clayton opened. A gentleman in Waco built a factory three years ago and he's doubling the size of it. The demand is there.

I've talked to one guy from Arizona and he was getting houses in Texas. That's pretty bad because they don't have any supply out there at the moment. But it's changing. They're going to catch up. Every manufacturer out there is trying to figure out how can we build more houses.

They'll go to triple shifts if that's what it takes to get it done. These big companies aren't going to leave the money laying around on the table. They're going to put it out there if there's a demand for the product. So we're looking at about six months.

All that means from our point of view is that we have to figure out that we need to set two houses a week, so I need six months for the houses. Do the math. I got to order that many houses to come in. I'll have two houses being set every week. Whether I sell them, rent them, or what, I better have a plan.

You need a plan to fill the part. Dealers are only one part of the plan. We don't expect dealers to represent more than 5% of our sales. We're going to be selling most of them ourselves, so you'd have to have a sales organization. Again, it's just kind of a different situation.

And we'll do some rentals. I've got plenty of investors that would love to do rentals inside of our parks. For that, there's money. The manufacturers have programs for that too.


Andrew: I agree. I went through Memphis Blues, which was the community of the year up in Memphis. It was a property owned by UMH. They took a park, scrapped it, and rebuilt a new one. It's all rental homes with brand new homes. They're doing really well. It's full.


Jim: There's a market for that, but I've been a landlord for 40+ years. We all do rental business. We generally do a five-year rental program and then sell it for whatever. Let's say a house cost of $60,000 a set. We'll rent it for five years and then sell it to somebody for exactly what we paid for, $60,000.

Good deal for buying and you don't have any markup on the house. You get a bargain price on the house. About the time that we would have to pay new things, that's turned over to somebody else. That's the way we'll do our rental business. We will only rent them in the event that we've got to maintain two sales a week. If that means rentals or sales, we're going to do two a week.


Andrew: I love it. Jim, thank you so much for coming on the show. If any of our listeners would like to get a hold of you, how would they best do that?


Jim: My email address is pretty simple, edwardjim59@yahoo.com or go to palaceway.com. We have our website there. Go to either one of those. Email me or go to the website, and I'll be happy to respond. I love this business. I love real estate investing. I think everybody ought to get into it. The only way we can do that is to help other people do it.


Andrew: Awesome. Thanks again, Jim, for coming on the show.


Jim: It's been a pleasure. Thank you, sir.


Andrew: That's it for today, folks. Thank you so much for tuning in.


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