Interview with Andrew Keel of Keel Team Real Estate Investments

Listen on Apple Podcast here: https://podcasts.apple.com/us/podcast/interview-with-andrew-keel-of-keel-team-real/id1520681893?i=1000580080773

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 tells his story. Today Andrew is on the other side of the mic as he is interviewed by his current COO and business partner, John Squartino. On today’s episode Andrew shares with us where his passion for mobile home parks started, his personal opinion on what to look for before investing with mobile home park operators and the hardest component of value add in a mobile home park investment. Andrew also shares some of the mistakes and lessons he has learned over the years he has invested in mobile home parks.

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 is also a father, husband and an entrepreneur who enjoys competing in Ironman triathlon events.

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.

Are you getting value out of this show? If so, please head over to iTunes and leave the show a quick five – star review. I have a goal of hitting over 200 total 5 – star reviews by the end of 2022, and it would mean the absolute world to me if you could help contribute to that. Thanks ahead of time for making my day with your five – star review of the show.

Talking Points:

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

03:35 – Andrew’s journey into manufactured housing communities

08:00 – Andrew’s first mobile home park and how he built Keel Team real estate investments

10:30– The toughest hurdle for most operators in the mobile home park ownership world

12:11 – The hardest value – add component in MHP’s

16:00 – How Andrew’s mobile home park investing strategy has changed over the years

18:13 – The best opportunity or strategy right now for mobile home park investors

19:28 – The mistakes that Andrew has made and learned from

22:50 – The most important thing passive investors need to look out for

24:15 – Andrew’s perfect mobile home park

26:22 – The future of mobile home park investing

28:35 – The best way to reach out to Andrew

29:05 – Conclusion

SUBSCRIBE TO PASSIVE MOBILE HOME PARK INVESTING PODCAST YOUTUBE CHANNEL https://www.youtube.com/channel/UCy9uI3KGQmFgABsr9lUtRTQ

Links & Mentions from This Episode:

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

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TRANSCRIPT

Andrew: Welcome to the Passive Mobile Home Park Investing Podcast. This is your host, Andrew Keel. Today, we’re going to do something a little different; I’m excited. We had a listener reach out and request that I be interviewed on the show. So today, I’m going to pass the mic over to our COO and my business partner, John Squartino, and let him interview me. I’m going to flip the roles here. Hopefully, you all enjoy it and take away some golden nuggets from our conversation.

Before we dive in, I want to ask you a real quick favor. Would you mind heading over to iTunes and rating this podcast with five stars or wherever you listen to the podcast? This helps us get more listeners and it means the world to me. It lets me know that there are other people out there listening and tuning in. Thanks for making my day with that five-star review of the show.

All right, John, I’ll pass it over to you.

John: All right, let’s dive in. Andrew, I appreciate you bringing me on the show today. To give you a little introduction. Andrew Keel is the CEO of Keel Team, LLC, an MHU top 100 owner of manufactured housing communities with over 2000 lots under management. His team currently manages 33 manufactured housing communities and 9 self storage facilities across more than 10 states.

Andrew’s current commercial real estate portfolio totals over $92 million in assets under management. His expertise is in turning around under-managed manufactured housing communities and self storage facilities by utilizing proven systems to maximize occupancy while reducing operating costs.

He specializes in bringing in homes to infill vacant MH lots, implementing self storage revenue management, starting utility build back programs, and improving the overall management of operating efficiencies, all of which significantly boost the asset value and net operating income of the properties.

In order to successfully implement his management strategy, Andrew’s team is known for being very hands-on. They usually move on location during the first several months of ownership. I know you and I had our fair take in on-site move-ons for some new acquisitions over the years.

Andrew: How many have we done together where we’ve moved to a location? Was it three or four?

John: I think it’s about three or four. All memories will forever live in infamy in my brain.

Andrew: I think the best one was in Ohio when my daughter, Arya, was one year old. Moved into the front house in front of Deer Run.

John: That’s right. Oh, my gosh. She’s how old now, man?

Andrew: She’s five. She’s in kindergarten.

John: Brings us back. This is really cool. How does it feel to be in the opposite seat here? I know you’ve been doing these interviews and now it’s a little bit of a reverse role here.

Andrew: I think it’s a great idea. Like I said, one of our listeners reached out and was like, hey, we’d love to hear your story, Andrew. I didn’t really realize that I haven’t had an opportunity other than the show notes, to really tell people about what I offer and what I do on a day-to-day basis. I’m excited. This is cool.

John: That’s actually a perfect segue. I’d love to hear about your story. Can you give me a little bit of the backstory of you getting into the manufactured housing asset class?

Andrew: I know you’ve heard it multiple times, but for those who haven’t, I started out in Orlando, Florida, flipping houses and wholesaling single-family real estate. Through some yellow letters that I mailed out to a probate list, I got an opportunity to buy two mobile homes up in Ocala, which is like an hour-and-a-half away from Oviedo, where I live.

I went up there and bought these two 1990s mobile homes that were really nice. I mean, vinyl-sided shingle roof homes. I bought two of them for $2200. I’ll never forget that number, $1100 a piece. Got the titles and had no clue about mobile homes.

I just came home, I got on YouTube, I had the titles in hand, and typed into YouTube how to make money with mobile homes. I came across a guy named Lonnie Scruggs who taught a course and wrote a book called Deals on Wheels where he teaches people how to buy mobile homes and fix them up and then sell them on contract to create mailbox money.

That’s exactly what I did with these two homes. I fixed them up, just cleaned them up a little bit, removed the debris that was in there, fixed some of the holes in the drywall, and put it on Craigslist. I was astonished by the demand I had to buy these two mobile homes.

I was able to sell both of them for $2500 down and $250 a month for five years. Those are my first two Lonnie deals. I was hooked at that moment. I was like, wow, this is where it’s at. The demand exceeds supply. I need to be doing more of this.

I actually did 19 more of those Lonnie deals while I was also flipping a couple of houses a year. Then I met a park owner who started funneling me homes. He’s like, you rehab mobile homes? For sure, come over to my park. I just want a lot of rent. I’ll give you the mobile home that needs work, you fix them up and then sell them. I was just astonished that this guy was going to give me these homes for free.

We went out to lunch one day (the park owner and I) up in Ocala, and I said how does this model work for you? He basically laid it out and said, hey, when you own the park, you really want to capitalize the income from the lot rent and not the park-owned home rent because all the maintenance costs and so forth make the expenses higher.

I had an aha moment and then he also planted a seed and he said, hey, you don’t need to be a millionaire to buy a mobile home park. You can pool together a group of investors and they can pay for the down payment and the improvement costs.

That was it. Literally, after that meeting, I stopped all the flipping of houses and I just went full cycle into learning about mobile home parks and how to purchase them. I went to seminars and boot camps.

At one of the boot camps, the MHU Boot Camp with Frank and Dave, that I did in 2015, I met Tony, who is our very first investor. He basically said hey, I’m interested, but I don’t have the time to do this, and we connected.

I ended up finding a deal off-market up near St. Louis and we did it. I got it under contract, and reached out to Tony who had a full-time job and didn’t have the time, but he had money that he wanted to invest in the space. That was a park in Edwardsville, Illinois. You know it very well. Still own it to this day. Well-run.

It was 67 lots, 5 states away because I was living in Orlando, but I moved up there after we bought it, infilled (I think) 8 homes, and rehabbed a couple more. Within less than two years, we were able to refinance that and pull out all the initial capital and then some.

Then Tony said, hey, let’s do it again. We ended up doing five mobile home parks together, my very first five. After that, friends and family started reaching out and wanted to invest. I was able to get on some of the other podcasts in the space, Kevin Buffs and Jefferson Lilly’s, and those helped create additional investors that wanted to reach out and invest with me. The rest is history. Now we have 33 parks, and I know you’ve been involved in a lot of them, and it’s just been an awesome ride.

John: You’re telling me 2 mobile homes to 30-plus mobile home parks.

Andrew: It’s crazy. God definitely had a huge role in all of this. Certain situations, certain people that I’ve met that otherwise, without His divine intervention, I wouldn’t be where I’m at today.

John: I totally agree. I couldn’t agree with you more, man. What I would do to have Andrew Keel by my side as a Lonnie dealer. I think we can do some real damage in the parks for sure. I appreciate that introduction and giving us the backstory.

How about the Keel Team? Where are you today? When did you buy your first park? I know how many you’re up to, but give that back story as well. Then how many have actually gone full circle? How many have gone through to the end?

Andrew: We’ve purchased 34 mobile home parks. We sold one a few months ago. The price was just too good to pass up. Typically, we’re not buy-and-sell, like flippers of parks. We typically buy-and-hold long-term and refinance every so often.

We’re at 33 parks under management now and I was counting them up. We’ve actually done 20 that have gone full cycle. Twenty parks where we’ve purchased them, improved them, and then refinance them, pay back the initial capital, and now they’re into long-term financing, most are with Fannie Mae.

John: Wow, great. Just a little side subject here, what’s the timeline on those full cycles? I know it obviously probably varies quite a bit, but just wondering what that timeline looks like.

Andrew: Typically when we buy one, we put it on a five-year time horizon. But with interest rates going up recently, we’ve just expedited that like crazy. We’ve just done all we could to infill as fast as possible.I know you spent time last year up in Michigan for six months trying to help expedite that Michigan portfolio.

It’s just with interest rates rising, we wanted to lock in that long-term debt and be able to refi as quickly as possible. There are some case studies on our website, but I wouldn’t say that’s standard. We were able to do some of these in less than two years where initially they were on five-year business plans.

John: Those case studies that you have on the site, those are great. Super informative, lots of information on start, from acquisition up through (like you said) a full cycle. Really good read on each of those case studies.

What do you think is the toughest hurdle for most operators in the MHP ownership world? What would you say that would be?

Andrew: I would say it’s definitely management. The property management side of the business is very intensive and it’s not like other asset classes like apartments, for example, where you can hire a local third-party property manager that has experience in understanding how to run the property.

We had to scratch start our own mobile home park management company and that’s tough. I had to forgo cash flow on those early parks to be able to hire some employees to come to help me at the management company. That just took a lot of sacrifices to be able to set it up to the point where it is now.

I would say some people think that mobile home parts are passive and you can buy them, never worry about them again, and they just put money in your bank account. I would say that that is not true. It’s an active business, you have to be watching it.

I got it written up on the wall here. Collections, occupancy, the water sewer recapture expense, property condition, and the budget actual difference. Those five things are most important and you need to have your finger on the pulse of those every month. Otherwise, it can get out of hand and fast.

John: Those are the top metrics that we look at daily. As you said, I think the manager company building that up and being in it on a day-to-day basis. Definitely it’s very tough, but it’s also gratifying at the same time. Just seeing the evolution of the properties, too, is really cool.

Andrew: It is.

John: I know you’ve done a lot of value-add parks. What would you say is the hardest value-add component in the MHP? And why is that?

Andrew: I think infill is going to be the hardest value-add just because of the process and the third parties that you’re having to wait on and time appropriately. Infill is going to be the toughest, just because it’s not super complex, but there are just so many moving parts and you need to stay on it. It’s a full-time job to stay on the infill process.

You buy a home and it doesn’t stop there. You got to set up the transportation. Even before that, you gotta tear it down wherever it’s at. You got to get it on the axles and wheels and then you got to transport it. A lot of times the transporter won’t do the tear down.

So you got to have a teardown guy, you got to have the transporter, you got to have the installation crew, you got to have the guy that does the skirting, the guy that does the plumbing, the electrical. It’s just a process.

For someone just starting out that’s just learning that on the fly, they could underestimate how complicated it really is and then their timelines are going to get pushed back. I would say that’s one of the things you want to respect.

One of the mistakes that I made early on, is the concrete foundations. We bought a park in Illinois, we bought brand new homes, and to get HUD-certified, they had to have (I think it was) 48-inches deep, 24-inch diameter concrete footers under where all the blocks would go. That was really expensive because we were initially planning on used homes, which for some reason didn’t require all that extra concrete work. It’s just a complex process and you want to make sure your budget is appropriate and your timelines are appropriate.

John: I remember that transition from that used home model to the new home model and how much it ended up having to shift gears very quickly, how quick we had we were fighting the elements, the weather was coming. That was an experience. It’s awesome to see that park finally fully occupied.

Andrew: Yeah, and it’s doing well. It’s the little stuff that you don’t think of upfront. You get the concrete work done, and then you gotta let it cure. I think you have to let it cure for two weeks. We’re like, all right, the concrete is done. Let’s go. Let’s get these things installed.

They’re like whoa, whoa. You have to let the concrete cure, which basically makes it harden. You have to wait to make sure it hardens before you can put a home on top of it. Little things like that, if you don’t know ahead of time, just push your timelines further and further away and can eat away at your profits.

John: Those kinds of hurdles that we had to climb ultimately have postured us to a point in knowing those things today, which has helped us tremendously in being able to hit those timelines, or at least forecast what those timelines do look like.

Andrew: I was telling an investor yesterday that from every single mobile home park that we’ve purchased, we’ve added something to our due diligence checklist. Our due diligence checklist started I think it was 100 items, which was a pretty solid base. We got it from the boot camp with Frank and Dave. Since then, it’s grown to over 300 line items.

It keeps getting bigger because we keep learning things. It’s like hey, we need to check on that ahead of time next time. Hey, we need to add this. I think that’s where track record comes into play and experience plays its role.

John: I feel like you got to continue to do that. You’re not ever going to know everything. You can be very knowledgeable of one in particular, but from one community to the next, I think we’ve always found that there’s some little nuance that we learn from, and then, as you said, it gets added to that DD checklist.

Andrew: Exactly.

John: How has your MHP investing strategy changed over the years in business and why? Obviously, with the landscape of things evolving just over the last two years, so much has changed. What strategy have you guys changed into over the years?

Andrew: I think a couple of things have changed. One being the utility infrastructure. In the beginning, we were taking on more properties with private utilities and now that we’ve run those properties for a while and we’ve come across some of the issues with private utilities, we’re shying away from them.

We haven’t purchased another property with a well since deer run, because of all of the issues, the maintenance, and the cost associated. It’s not necessarily more expensive than the actual use of it and the recapture, but it’s just the headaches and the risk involved with running that system. We’re taking on fewer parks with private utilities and more with the public.

Then the other thing is my second park, Lidl. We bought that park, 31 lots. I wish it was 90 lots. I think going after larger parks, more so between 50 and 99 lots, instead of going under that, because it’s the same amount of work.

From a management standpoint, if you got 30 lots, it’s actually harder to manage than a 70-lot park because now the manager at the 70-lot park, you can actually pay a decent wage to get more of her attention. Those are just a couple of things about how our strategy has changed.

John: I think you hit the nail on the head. The management of those larger communities in comparison to the smaller communities that are stabilized, ultimately is about the same. It is a unique dynamic, for sure.

Andrew: The expense ratio on the larger park that we’re able to pay a manager more is usually less. It’s usually like 30% or less, whereas Lidl and Sunnybrook, it’s closer to 35%–40% because there’s just less income coming in.

John: Same management, less income, and like you said, the manager, unfortunately, their compensation side of things, it’s tough to elevate that at all. Where do you feel is the best opportunity or strategy in the marketplace right now for MHP investing?

Andrew: I would say it’s the hardest value-add component, but it’s also the most lucrative, is infill. Infill opportunities, value-add mobile home parks, where you’re able to come in, buy a property that maybe has 50%–60% occupancy, and then infill that park with a mixture of used homes and new homes to get it full because the demand is there.

I think you were telling me just yesterday we sold a home for $80,000 in one of our parks. A brand new home that we had just brought in, and now we can recapitalize and go do it again. The demand is there if you can get the homes on the lots and you can get them ready to be occupied. I think infill projects for people that have the ability to execute on them are a great way to invest right now in mobile home parks.

John: I couldn’t agree with you more. Obviously, the hardest part, the infill side of things, that obviously, the most value-add that you can find in bringing in good homes, bringing in nice homes. I think the dynamic of used and new is something that we’ve been doing as of late, and I think it’s been a huge success for us.

Andrew: Agreed.

John: The success side of things, how about mistakes? What mistakes in MHP investing have you made that the audience can learn from?

Andrew: There’s been many. I think that’s one thing I don’t shy away from. As I said, we’ve learned something from every single deal that we’ve done and added on and learned from it and added to our DD checklist. One thing that just comes into mind is the transformer issue we had in Smithville, where we purchased this park, we brought in 20 new homes, and then we found out after the fact that we got an electrician to inspect the pedestals.

That was the extent of the inspection. We didn’t do due diligence. We didn’t actually have the engineer from the power company come out to tell us that, hey, you got one transformer feeding 26 homes and they’re all daisy chained. The last guy in the run was getting brownouts and was having problems blow-drying their hair because it kept flipping a breaker.

Issues like that, that now every property we buy, we have the engineer from the power company come out, show us where the transformers are, how many homes are being fed by a transformer, and making sure that we’re accounting for that if there’s an additional need and we have to pay for them.

Another thing early on, just for other operators out there, that I didn’t do on our first five deals is I didn’t take management company, I didn’t take management fees. I think I wasn’t able to hire fast enough. I was doing everything myself, from paying all the bills, to managing infill projects, to managing collections. Doing all that with one person is really tough.

When the cash flow was there, I was taking the cash flow and then hiring other people to be able to help. I think you need those management fees because you’re going to be able to run the properties better if you do have a team that can silo off and is like hey, you’re responsible for background checks, you’re responsible for marketing, you’re responsible for collections. It will make you more specialized and you’ll run a better operation. That was one thing.

Then not hiring fast enough early on and then also hiring the wrong people. Hiring people that didn’t have the personality type for the role they were going to be doing. When I learned about the predictive index, that was a huge step in the right direction because now I’m hiring people that have the analytical skills to be able to do the analytical jobs that are part of the company. Those are a few mistakes, but I’m sure there are many more.

John: The growth of the management company, I know you and I have been part of that right from the onset, the evolution of that has been tremendous. How many employees do we have that helped to manage these communities now? It’s a pretty big number, isn’t it?

Andrew: It’s huge. Across the whole organization. I just added it up yesterday and it was 79. And that’s the sales business, the acquisitions business where we wholesale mobile home parks and self storage facilities, and then also the property management company for storage and for mobile home parks. It’s a big operation and you need good people in the right seats, not just on the bus.

John: That’s right. That’s running the parks. Now we’ve got the other side of the coin, the investors. What would be the most important thing that passive investors should be looking out for when investing in mobile home parks?

Andrew: I love this question. I love all the answers from the different operators we’ve had on the show. I would say number one is track record. Experience matters. That should be obvious at this point.

Then the other thing that’s a little bit different from what the other operators have said that I think is important when I’m investing in operators, is the liquidity of the operator. If the operator is broke and they’re putting a deal together and something slides, which stuff happens like going over budget, for example.

If you don’t have the liquidity as an operator to come in quickly and loan the company money or something, or fix something with that extra cash, it’s going to take longer and delay the project if you have to go to the bank and apply for a line of credit or something like that, or go back to the investors. If you have a group of investors, maybe not all of them want to contribute or something like that.

I think track record and experience and then also the liquidity of the operator are two really important things that you’d want to look out for before investing into a mobile home park.

John: Something that you talked about, the speed at which things move. There’s nothing worse than not having the capital to keep the train moving and trying to hit on all of those benchmarks that are set forth to the investor group. I would have to agree with you on that.

What does the perfect mobile home park look like in your eyes and why would you say so?

Andrew: A good question. I would say it would be a 99-lot mobile home park with 70 occupied and paying tenant-owned homes, and another 29 lots that are all plumbed and have the utilities sitting there. All they need is a home brought in and set up. It’s going to be public water, public sewer, direct build, which is a really attractive piece because that means that the municipality or whoever the water sewer company is, is going to be charging and billing the tenants directly for their usage.

I would say it’s in an MSA that has 50,000 in population or more and is growing year after year. The average home price of over $100,000, average three-bedroom apartment rent of over $1000 a month. I would say that it has mainly new homes or newer homes, mainly pitched roof homes.

There are a lot of parks out there that have older, 1960s-age homes. What we found from our experience is that those have higher turnover. Even if they are tenant-owned homes, there’s going to be a higher turnover because the homes are older and less efficient from a utility standpoint. I probably could talk for another five minutes about this, but I think that’s a good, high-level, perfect mobile home park.

John: I agree. If I were to add any two cents to that, I would say the direct bill of utilities would be something that would just open up my eyes and raise my eyebrows to a point of satisfaction. Not having to have your hand in that cookie jar makes things tremendously easier.

Andrew: Yeah, I agree. All PVC water and sewer lines would be a perfect park as well, underground.

John: Find me that. Where’s that? Andrew, what does the future of MHP investing look like and how do you see MHP fitting with the direction of the economy as we see it today and the way it’s going?

Andrew: I would say mobile home parks, being the most affordable form of non-subsidized housing, are going to do well. Especially the tenant-owned home parks. I think that’s going to be one area that we see do better because it’s so inexpensive to live there.

If they’re just paying a lot of rent, they’re paying their utilities, they own their home, they have that pride of ownership. There’s going to be less turnover and we’ve seen it. The business model works. If they own their home, the turnover is 5% or so per year on the tenant-owned home model.

When you have park-owned homes, even the ones you’re selling on contract, you’re going to have turnover. There are going to be things that happen in those people’s lives and it’s not expensive, but it’s still a higher monthly payment that they need to make. When their incomes are lower, they’re more fragile.

I would say that as the economy, I see us going into a recession. I think the Fed has to continually raise interest rates to get rid of and stomp out inflation. I think there are going to be some ill effects in the economy in terms of unemployment and so forth. I see mobile home parks being as steadfast as they have been in the past.

Same thing with self storage where they’ve performed well. They’re not recession-proof, but recession-resistant. I feel comfortable in the asset class with our investments and I think they will do well.

I think cap rates for mobile home parks have been really low. The pricing that people are paying for mobile home parks is getting competitive, but I think with interest rates going up, we will see some prices get reset. I’m excited to try to pick up some good opportunities from some situations that maybe go south for other operators or other owners.

John: Good insight there. Andrew, this interview has been awesome. So much valuable information. I imagine those that are listening now probably want to have some platform to be able to reach out to you. Where could listeners reach out and get in touch with you?

Andrew: The best way is our website keelteam.com. You can just go to the contact form and fill out the contact us and we’ll get in touch. You can even set up a one-on-one call with me. It’s just keelteam.com.

John: Good deal. Andrew, do you have any final words?

Andrew: That’s it, man. I appreciate you coming on and interviewing me. I know we have an interview coming up where I’m going to be interviewing you so I’m looking forward to that one. That’s it. Thanks for doing this.

John: No problem. I really look forward to that interview as well. Kind of flip the coin yet again, now you’re interviewing me and I look forward to it. Thanks so much for coming to the show and I appreciate everybody tuning in. That’s it for today.