Interview with Andy Freeman of Enjoy Communities
Updated: Nov 9, 2022
Listen on Apple Podcast here: https://podcasts.apple.com/us/podcast/interview-with-andy-freeman-of-enjoy-communities/id1520681893?i=1000583845522
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 Andy Freeman from Enjoy Communities. Andrew and Andy discuss what passive investors should look out for before investing into mobile home parks. They also discuss how agency financing (Fannie Mae and Freddie Mac) and supplemental loans fit into the mobile home park model and the lessons that they have learned from managing mobile home parks in northern colder states.
Andy Freeman is the founder of Enjoy Capital Group. Enjoy Capital is an emerging real estate private equity investment group with a growing portfolio of mobile home parks. They currently have over 300 lots under contract. Before this, Andy worked as the Vice President of acquisitions for Third IV Properties from 2020 - 2022 helping to facilitate the purchase of 10 mobile home parks in the midwest and actively participated as a member of the general partnership to help operate, enhance, and add value to these 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 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. Inorder 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. Thanks ahead of time for making my day with your five-star review of the show.
00:21 - Welcome to the Passive Mobile Home Park Investing Podcast
01:30 - Andy's story and how he got into manufactured housing
04:22 - Partnering with others
05:05 - Mobile home parks in the midwest
06:21 - Enjoy Communities
08:00 - Utilities in mobile home parks
09:23 - The toughest hurdle for acquisitions
11:37 - Finding deals and cap rates for acquisition
15:30 - The hardest value-add component
17:53 - How Andy's strategy has changed over the years
19:20 - Mistakes to learn from
21:05 - Important things passive investors should look out for
24:55 - Tenant owned homes versus park owned homes
26:08 - Andy's team at Enjoy Communities
28:40 - Andy's perfect mobile home park
30:07 - The future of mobile home parks
00:00 - Getting a hold of Andy
00:00 - Conclusion
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Links & Mentions from This Episode:
Andy’s email: firstname.lastname@example.org
Enjoy Communities: http://www.enjoycommunities.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
Andrew: Welcome to the Passive Mobile Home Park Investing podcast. This is your host, Andrew Keel. Today, we have an amazing guest in Mr. Andy Freeman from Enjoy Communities. Before we dive in, I want to take a quick second and ask a favor of you. If you would mind taking an extra 30 seconds and heading over to iTunes to rate this podcast with 5 stars, this would help us get more listeners and it also means the world to me for you to take the time to do that. Thanks for making my day with that five-star review of the show. All right, let's dive in. Andy is the founder of Enjoy Capital Group. Enjoy Capital is an emerging private equity investment group with a growing portfolio of mobile home parks. They currently have over 300 lots under contract. Andy formerly worked as the VP of acquisitions for Third IV Properties from 2020–2022 helping to facilitate the purchase of 10 mobile home parks in the Midwest and actively participated as a member of the general partnership to help operate, enhance, and add value to these mobile home parks. Andy, we are excited to welcome you to the show.
Andy: Andrew, super excited to be here. Thanks for having me.
Andrew: Let's dive right in if you don't mind. Can you tell us about your story and how you ultimately got into manufactured housing communities?
Andy: It seems to be a common theme. A lot of these people with the same background and how they got into it is because of podcasts. They pique your interest. But before I even got into podcasts, I was doing accounting out of college, decided it wasn't for me, pursued a job in sales with Toyota, really hit the ground running with that, became a top-level salesperson in my second full year, and sold 560 something cars. It's a number I look back on. I can't even believe I spent that much time and worked that hard, but two-plus cars per day on average for a year. I did that year in and year out until ultimately, I burnt myself out and said, man, this is fun for now, but I can't sell cars at this pace at 60. I need to get into real estate, get some passive income, or put my money to work while I'm sleeping and not have to show up at the dealership every day just to make the money. Ultimately, balance and podcasts. I think I saw Kevin Bupp on BiggerPockets. That really resonated with me. He was a great ambassador for the industry. I just went down the rabbit hole of listening to every podcast. That was 3–4 years ago. I just did databasing, cold calling, got some parks under contract, pursued that, and actually just immediately quit and did that full time. There was no progression where I was balancing two jobs. I just quit my full-time car job, and the rest is history.
Andrew: Wow. So you got some parks under contract and then were looking to assign them or were looking to take those down yourself?
Andy: I was planning to purchase them all myself. The car job kept me so busy. I really had no time to spend my money, so I just banked a lot of money. I also sold my primary residence and lived with my girlfriend and her mother which sounds a little embarrassing, but it was a financial decision to make to save as much money as I could because I was going to buy a mobile home park on my own and generate passive cash flow. It was going to be easy. It's going to cut my hours down, buy a park, cash flow, and live off it. That was the plan then. That's the dream. That's what some of the podcasts told me I was going to be like.
Andrew: Yeah. You don't even have to manage it. It just runs itself.
Andy: Nope. Foolish thinking on my part. I got three under contract and was trying to buy all of them. I took a break from work to go do due diligence, went to Ohio, Iowa, and Kansas City, did the due diligence, and then came the hard part of getting loans. That's another story, but basically, everything I heard didn't necessarily pan out the way I'd thought, so I ended up doing some partnerships. For those first parks, my whole plan was to purchase them on my own and take them all down, but actually, none of that happened. I took them down, but it wasn't on my own.
Andrew: Got you. You've probably learned a ton partnering with others. Did you need a balance sheet partner to come in to be able to get the loans qualified?
Andy: Yeah. I needed someone that was in the area that had banking relationships. My balance sheet was pretty good because I had saved a good amount of money. I was a pretty high earner by selling that many cars, but I didn't have the requisite experience and I didn't live near where the parks were. I'm from California. Banks didn't really want to even have anything to do with me unless I moved to where the park was. It was kind of a chicken and egg thing. I wasn't going to move to Ohio just to apply for a loan in Ohio and then get rejected, but they wouldn't process my application unless I lived there, so I needed someone with banking relationships and an experienced operator with better connections than I had at the time. That's the route I went.
Andrew: Makes a lot of sense. Why did you start looking in the Midwest? You lived in California. What led you to the Midwest as your starting point?
Andy: Being from California, I hear the rumblings from the top. People bash California for being out of state. As you become a landlord and you're operating mobile home parks, you quickly realize that the landlord laws in California are very big in favor of the tenant, not the landlord. It's just not a good recipe for rental properties. I've seen the parks in California. They're super dense, old, and overpriced. I was looking for cash flow, so the Midwest (I thought) had the right balance where you could still have more concentration of mom-and-pop owners and good cash-flowing properties. That's why I focused there at first.
Andrew: It also helps that hurricanes don't hit the Midwest very often. I'm in Orlando today. It's September 27th. Tomorrow, there's this big hurricane that's supposed to be landing here. If you have a bunch of mobile home parks, the next couple of days is a good thing in Florida.
Andy: I appreciate you taking the time to do the podcast amidst a pending hurricane.
Andrew: I love this. This is a hobby for me. Tell us about Enjoy Communities, what the goals are, what type of parks you target, and so forth.
Andy: For Enjoy Communities, the name might sound a little cheesy, but the whole premise was there are 30 different types of parks as you all know. There are stabilized parks with a good tenant base, and then there are the infill projects that you typically are going to inherit not as good of a tenant base, you're going to have to do a lot of tenant turnover, and you're going to have to bring in new homes. It's always adversarial with the tenant base until you get it stabilized. Those parks are more challenging. With Enjoy Communities, the whole goal was to acquire stabilized parks with a good tenant base and a good history of paying tenants. Especially in this current market, the whole goal is not to take on too many large value-add projects. We want to enjoy operating and visiting the parks. We want the tenants to enjoy living in the parks and we want to have that common aligned interests where the tenants and the owners are in unison and get along versus having a continued riff like in some ownerships that you see. We don't want to make the news for hiking up rents too high on tenants. We want to have a good balance where we're doing improvements before rent raises. We want to make sure that anything we do to increase rent, it's because we've done an equivalent upgrade of the park itself. That's the background we're based on. We're not necessarily targeting 100-unit or 200-unit parks. We're trying to get in that 50–100-unit space acquired from mom-and-pop. Our ultimate goal—maybe this will be the answer to your question later on—is we want to find a park that's well-run by the previous owners but where they don't necessarily treat it like a business and are not necessarily operating it as financially smooth as we would ourselves as operators. That's the overview of what we're trying to do here.
Andrew: Very nice. Stabilized parks, not big infill value-add projects, and then you're just tweaking the knobs to run it a little bit better than they did. Is that about right?
Andrew: About 50–100 units. What about utilities? What utilities will you buy or not buy? Are you just looking at everything and anything?
Andy: City utilities are strongly preferred. For sewer systems, we try to stay away from lagoons and treatment plants just for the size of the parks we're buying, the 50–100 units. The capex for a failed treatment plant could crush us more so than if it's a 200-plus-unit park. On the utilities, we're trying to stay with city utilities. We'll consider well water as long as the wells are newer and everything's in order, but primarily, city water and city sewer is the goal.
Andrew: Nice. That's the same with us. We've just noticed that it's tough to run those private utilities, specifically the well. There's a lot of liability that comes with it. If you potentially poison your tenant base inadvertently, that's a huge liability. I agree. City is definitely preferred. Let me ask you. What do you think is the toughest hurdle for most operators in mobile home park ownership? I know you've done more than just acquisitions previously. What do you think is the toughest hurdle?
Andy: The toughest hurdle is at first getting started and finding that you're going to underwrite so many deals. It's hard to actually pinpoint one, and once you finally do get a park under contract, you're going to either talk yourself out of it or talk yourself into it. It goes both ways. If you're too afraid to pull the trigger, you might talk yourself out of it, but if you're committed to the deal and you're spending your hard earned money on due diligence, you're going to talk yourself into buying it. You really just have to look at the park from a high-level number standpoint. Make sure it makes sense on paper before you dive into it. I would say 99% of people just getting started are going to underestimate capex and other items. I just made a post about the stuff you see missing on broker proformas and prospective buyer proformas. They leave out so many items like trees, security deposits, or utilities. There's a huge list of stuff you just don't factor into capex. You're going to experience those things on day one. If you're not prepared for it and you're using all your money, you could sink before you even get started.
Andrew: I agree. You got to have a miscellaneous category because there's stuff you don't even know that you need to have depending on the size of the park. I think $50,000 is a minimum to have on the sidelines to be able to cover those hidden capex costs that come up because if you don't have them, like you said, it'll cause a turnover, it'll cause problems, and then you're using cash flow that otherwise was going to be paying your pref. I agree. Also, I can totally relate to talking yourself out of deals. We've done that multiple times this year. I don't know about you, but it's just been a really tough year for us to get parks at a reasonable price that makes sense. We don't want to overpay for the upside potential that's there, but at the same time, cap rates haven't caught up with interest rates. Interest rates are now well above 6% and sellers are still expecting these lower cap rates from a year ago. Maybe you can comment on that, how you're finding deals, and what type of cap rate you're looking to acquire that makes sense with your stabilized model.
Andy: Sellers certainly haven't caught up with the times and the rates. They don't care. They're always going to be like that. That's my price. That's what I want. They're still in the 5%–6% cap expectations even though rates have exceeded that. Fortunately, for the parks that we have under contract currently, I don't know if this was by luck or by design, but two of them have assumable Fannie Mae loans. One is at 3.55% on a 10-year fixed. Another is at 4.67%. It's going to give you a little bit lower leverage. There are still 10+ years left on these loans. We're going to get a little bit less leverage than we would with a new loan, but it allows us to keep a nice spread between our purchase cap rate. Also, the debt service coverage ratio is pushing 2%-plus because we're putting down 45%–50%. It's going to cash flow nicely. We want to pay investors in a pref. The only way we've been able to make a deal work in this current market is to find a park that already has a good agency loan on it, and then assume it. Then, to piggyback on that, it is possible to get a loan assumption and then get a supplemental on top of that Fannie Mae loan at assumption, but the supplemental loan would be at the current rate. You could lock in that assumable rate at 3.55%, but then if we put a supplement on there, it'd be 6.255%, so we decided not to do that at this time.
Andrew: That's very interesting. I've actually spoken to people about assuming the financing, but the biggest issue is that new buyers want to put a proper amount of leverage on the deal to make the numbers work. You said lower leverage. You're putting 45%–50% down as a down payment?
Andy: Correct. That is a larger down payment. The numbers still work with some of these parks. [...] 6% cap on purchase. Then, with that rate, it's a 3.55% rate, so you have about a 2.50% spread going in. Both of these parks that I'm talking about with similar loans have a lot rent increase potential, they're under market lot rents, and the park is paying for the water and sewer. While there's not a huge infill opportunity, there's still bringing the rents to market and billing back utility, so we can push the cap rate to a decent mid-6% to a high 6% in year one and create a nice spread. While it does require more money down and more capital, after three or four years, we should have a substantial amount of equity in the property which would make getting a supplemental at that time easier to do assuming the rates come back down. That's the big if. And if the rates don't come back down, then we still have a 3.55% rate for 10 years and it'll cash flow nicely. We're pretty excited about this one. Everything else on the market, like you've mentioned, I haven't been able to make work because sellers want a 5% or 6% cap, you're getting loan term sheets at 6.25%, and it might even go up. That's what we're doing at this time.
Andrew: I know there's a minimum supplemental loan amount. I think you have to add $1 million worth of value to the property. Your supplemental loan has to be at least $1 million. Is that the case with these deals?
Andy: Yeah. You're going to need to put $1 million of value. By year four or five, we would have already $1 million added. It's not necessarily a value-add component infill, but by just improving the efficiency of the park and bringing lot rents to market, we would add at least $1 million in value.
Andrew: Very nice. It seems like a very conservative approach. You're having very low leverage, and then you're going to add value. That's interesting. Thank you for sharing that with us. What would you say is the hardest value-add component? Why do you shy away from some of the more value-add parks?
Andy: Value-add just gets tossed around day in and day out. Bringing in homes is a challenge. It's gotten a little bit easier now, but for the last couple of years and during COVID, unless you're someone buying 100 homes at a time, you're on the backlist over at Clayton and all these manufacturers. Unless you're a big-time player, you're at the back of the list. You can go after used homes, that's also an option, but significantly, the pricing of the homes has gone up from $30,000–$40,000 for a new home up to $70,000–$80,000. That's a huge factor in that. Also, it's not as easy as they also say on the podcast. There are some agencies. They say go through them, go through the blank-blank program and bring in new homes. It's not as easy to get signed up for that. Unless you're a huge player there, your application could take a couple of years. Just the frustrations that I've encountered. It's not as easy. It looks great on paper, but from a capital standpoint, labor standpoint, and personal brain damage standpoint, it's just a lot more work. You can only do so many large turnover and infill projects at once. As you know from doing it long enough, it takes a lot of manpower. I think you were just on your previous podcast where you interviewed yourself or you were the guest. You talked about someone going there and living there for six months doing the infill. It's literally hands-on. We did some infill projects where they delivered the homes to the wrong park. There are just so many different things that I've been through that just make me want to focus more on stabilized properties. It's not going to look as sexy for prospective investors. It's a more coupon-clipper type of asset than a huge value-add that pencils out at a 30% IRR, but it's going to take years to accomplish.
Andrew: That makes sense. Infill can be difficult. Like you said, it's not super complex. You're buying a home, you're putting it on a lot, and then you're selling it, but a lot can go wrong in the process, so stay on top of things. You need a team, like you said, to be able to just do that. Very cool. Thanks for sharing that. How has your mobile home park investing strategy changed from when you first started to now? Maybe you could shed some light on why.
Andy: First start until now, I was looking more at smaller parks, and then you hear over time everyone just goes bigger and bigger. To repair a sewer in a 20-unit park is going to be the same as in a larger park. We tried to just go bigger and then marketed with higher lot rents just because the higher the lot rent, it's also the same price for a $200 lot rent market. The home price is typically the same as in a $450 lot rent market. We don't necessarily have to be in Denver, Colorado but try to be in markets with lot rents pushing 300–400 and then also parks with 50+ units. At the beginning, I didn't necessarily look at the end game, which is the refinance. Then, we're going to put that permanent agency debt on there. They're going to want 50+ units, so we try to look for 50+ units, have off-street parking, and identify what the agency lenders, Fannie Mae, are going to want when it comes time to refinance.
Andrew: Very smart. [...] who was on the podcast was a mentor of mine. His strategy going in is, hey, if the park doesn't qualify for Freddie Mac debt and we can't get a supplemental on it, we're not going to buy it. It's very smart. The criteria are will this qualify for agency financing and will we be able to put a supplemental loan on it? It just seems like yours is very similar which is very smart. What mistakes have you made that we could learn from?
Andy: Just not being all the way up to speed. I've told people before that being from California, I didn't even know what heat tape or frozen pipes were. Thankfully, at my first park, I partnered with an experienced operator. I told this story on Valentine's Day. The pipes froze up and the tenant is calling. I had to take the salamander heater to the property. The whole park was frozen up. We're under the homes with the salamander heater unfreezing the pipes. I'm freezing cold because it's -15°. My body's never going to be able to adjust to that cold. I'm melting my hands and my gloves with the salamander heater, and now, I got burnt hands.
Andrew: How dangerous is that process? I've done it myself, but literally, for those of you that don't know what a salamander heater is, it's basically a flame thrower that's throwing flames right underneath this home at the waterlines. It's not a huge flame thrower. It's a small one. But that's pretty much what it's doing, right?
Andy: Yeah. It is throwing flames. You must think it's something you buy in the store. It shouldn't be that dangerous. But it literally can burn your hands off. I don't know if I could have prepared for that or not, but just not knowing everything. You're going to make those mistakes and you learn by doing. Now, I know that when purchasing a new park, if it's somewhere where it's cold, check for heat tape. Make sure all the homes have heat tape. I also learned it's not the best to close in mid-December or early January if you're in a cold state in either the Midwest or Great Plains. Time you're closing. I don't know if I'm going to say stall until it gets warmer, but something to really pay attention to is the timing you're closing the season.
That's good feedback. If you can do that. What are the most important things passive investors or LP limited partners need to look out for when investing in mobile home parks in your eyes?
Andy: This gets said a lot, but obviously the sponsor and their track record. If you're an LP, it's not a fund, and it's an actual one-off deal, if I was an LP, I would go visit the property if possible and see it with my own eyes. We've had an LP on one of our current deals who flew out to Ohio to look at the park with us. He's considering placing a significant amount of money. I don't blame him for wanting to see the property. Look at the property. If you're a GP or a sponsor, you should be confident in the property and you should want them to come to see it. You can show them, hey, look how nice this property is we're purchasing. It works for both. It helps you convey the beauty or whatever of the park. Then, as the investor, that gives them much more comfort having seen a property. I know as you get bigger, you can't have every investor come out to your property and inspect the park under contract, but when you're starting out, to form those relationships, that might be something to do.
Andrew: What should they look for? If they go to the property or they have someone go take pictures, what are they looking for for the untrained eye?
Andy: Ideally, if it's a senior park, there'll be people maintaining their yards, mowing their yards, making it look better, and hopefully not working on cars on jack stands. You're working to improve the park's appearance versus taking away from it. You want people to be gone during the day. That means they're at work. If it's a senior community, you want them at home working on their yard and maintaining that high quality of ownership. Then, just look at anything that seems out of place. It's not going to be the same as looking at maybe a single-family house, but there are some similarities. You want nice, maintained yards and you want the roads and just the general overall aesthetics of the park to be nice. Trees trimmed, grass cut, and just presentable products.
Andrew: That makes sense. One thing that I recommended in a previous podcast is are the majority of the homes flat-roofed homes or are they pitched-roof homes? Because pitched-roof homes are usually manufactured more recently than flat-roofed or round-roofed homes and those homes have a longer life expectancy. It's post-HUD, post-1978 when they started to be manufactured and they will last longer, so you'll have potentially lower turnover which is something that can be high. A park that's all 1960s and really small 12-wide homes are really hard to fill quite honestly with what people want today.
Andy: That's actually a great point, Andrew. The older home inventory is a huge factor in the parks that we purchased. You can tell by the aerial quickly. You can see a shingle roof or pitch roof versus a flat metal roof with rust. It's a night and day difference managing a park with all newer homes versus all '60s and '70s homes even though some parks are still floating around with '50s homes. The age of the home is a huge deal, so that's a great point to make if you're a new investor or a passive investor. Look at the homes. If it's pitch, it's good. If it's flat or a little bit rounded, not good. People can't see me if they're listening to the podcast, but if there are different elevations and different levels on the roof, it's usually a 60s home. Those are not good.
Andrew: Not as desirable. There are some of them that are in really great shape that people have maintained well, but most of the time, they need more work and will have more turnover. That's a great point, the age of the homes and the size of the homes. The smaller the home, if it looks like a 12-foot wide home, it's going to be tougher to get a long-term tenant to stay in that home compared to a 14x70 bigger home that's newer. That's awesome. Tell me, what's your preference, tenant-owned homes or park-owned homes?
Andy: I'm big on tenant-owned homes. Out of 300 lots, we're looking at every single tenant-owned home. I would take park-owned homes because in a small number, if there are some park-owned homes, they can be sold. We've had some good luck getting vacant park-owned homes that are in decent condition that can be sold. You can pick your tenant, and then you can also get a little bit of extra cash flow to investors based on home sales, but for the most part, we want all tenant-owned homes. We'd rather just rent the land rather than have to get into the landlord game of renting out individual homes.
Andrew: Totally agree. On the tenant-owned homes in our portfolio, we did a study. Literally, the turnover on a tenant-owned home was around 5% annually. Those are typically in older homes that were not in the best shape, older or rougher-looking homes. On the park-owned homes, the turnover rate was much higher. It was closer to 50%. Even if they're sold on a contract or on a lease-to-own type of arrangement, the turnover was much higher. The faster you can get them to be tenant-owned, the better in my eyes. Let me ask you this. What does your team look like?
Andy: From an operations standpoint, my fiancé is the numbers expert. When I was at the car job, she was a finance manager, so she's very strong on finances. She does the bookkeeping. She does more on the finance side. As far as management, we just have on-site management. We're grooming a property manager to oversee them. We're trying to stay light in that regard. Once you start taking on the park-owned home model, then you're going to need more so an onsite manager. We're trying to stay lean and then be able to manage most of the parks in-house based on the parks that we're purchasing. Keep it a leaner team. Then, if we were to take on infill projects, obviously, that would have to expand to have more in-the-field staff, but for now, pretty lean staff under five people.
Andrew: Nice. Really, from the corporate office standpoint, it's just you and your fiancé right now.
Andrew: That's tough. I remember those days. For the first five parks that I bought, because there are a lot of fill-the-gap tasks from who's opening the mail, who's manning rent manager, and who's doing all these fill-the-gap tasks, that can be a lot. But I think you're doing it right. You have to just slowly scale up to be able to add team members for sure.
Andy: Andrew, I see on your Instagram that you're traveling. You're doing your Iron Man and all that stuff. I'm like, man, I want to get to that stage where I have that much freedom because right now, I'm back to the car sales times. I'm working every day hard, but eventually, you get there, build the team a little bit bigger up beneath you, and have a little more free time. I'm definitely envious of the things you're able to do.
Andrew: I appreciate that. I love fishing. It just takes time to get there. Early on, you're going to have to sacrifice and you're going to have to put in the work, but one thing I will say is as you're able to grow a portfolio, you can afford team members and you can silo off their jobs for different parts of the business. That has been monumental for us. We manage parks way better today than we did when it was just me because now we have talent that can do just home sales, just infill, or just utility bill audits every month to make sure that our water sewer recapture is where it should be. It just takes time to get up there. In the beginning, there'll be a lot of work, but just put your head down and get through it. What does the perfect mobile home park look like in your eyes and why?
Andy: You sort of touched on it. I was going to bring this up in the previous question you asked. This is not an answer that you always get, but the perfect mobile home park is one that's being run pretty well by the current operator. Ideally, a mom-and-pop, but they do some things that make you scratch your head. The most perfect park that we've purchased before was all tenant-owned homes, but there were five vacant park-owned homes. We got into them. Every single one was in perfect condition. They had for sale signs on them but just no phone number. When we took over ownership, people drive by and say they'd been trying to buy that house for five years. We sold them in the first month and we had no rehab, so we got some nice cash flow from that. But on top of that, a park where every tenant has an email address and you can get them set up on auto-pay is the perfect park. It's a lot easier to try to process, scan every check, and take pay-up payments by tenants telling you they sent it in the mail. If you can get everyone set up on Epay going through the rent manager, it makes everything much easier. The perfect park would be all tenant-owned homes and everyone set up on a PayLease.
Andrew: That's a must. PayLease for sure. Otherwise, you need a full-time person just to do that. Open the mail, deposit the checks, and keep track of everything. I agree. PayLease has been a huge help for us as well. Thanks for sharing with us, Andy. What does the future mobile home park investing look like in your eyes? How do you see mobile home parks fitting in with the direction the economy's going? There's recession being mentioned quite often. Interest rates are above 6%. How do you think that will affect mobile home parks?
Andy: I think mobile home parks are going to still be recession-resistant, but the thing to look at is there are a lot of people that took loans either 5 or 10 years ago whose loans are coming due or are needing to refinance right now in this market that might have had lower rates from back then, 3% or 4%. Now, they're in this environment where they may not be able to refinance at a 6% or 7% rate. There might be people selling for those reasons. Then obviously, the rates going in are a lot higher, so there's going to be some change. Sellers are going to realize, hey, I can't get my price anymore. That's going to change, but I still think it's going to be recession-resistant. I know you're big in storage. I think self-storage is going to shine. Mobile home parks might take a little bit of a hit, but RV parks, mobile home parks, and self-storage are going to still lead the pack when this recession does hit.
Andrew: Yeah. One thing that I saw recently that I thought was really intriguing is that the bottom 50% of income earners have 50% more money in their bank accounts now than they did before COVID. That's powerful. It says a lot about the working class. They also have leverage now. They're getting higher wages. Inflation obviously is eating some of that away but I do believe that the lower income demographic mainly in affordable housing who we serve, I think they're doing better. They have that money in their bank accounts now. That was a good sign for mobile home parks as a whole.
Andy: I haven't seen that, but that is very good because it doesn't necessarily mean they can go rent up to a Class B or Class A apartment but that means they can make their payments, afford more in a mobile home, and be a better tenant. That's great.
Andrew: Exactly. Then, through COVID, there were a ton of those rental assistance programs from the state and federal level that really helped tremendously to cover when people did get into buying. I agree. Mobile home parks should do well. The interest rates will affect things. Like you said, people are trying to refinance right now like we are in a couple of our deals. It's not a good time, but when you look at the broad spectrum of the average interest rate over the last 50 years, it's actually around 6%. It's not 3% that we got used to, but over the broad spectrum, it's still a reasonable rate that we could still get deals done at.
Andy: What are you guys going to do? Are you just going to continue and refinance? It doesn't look like it's going to be going down anytime soon, so are you just going to bite the bullet and refinance at the current rate?
Andy: Yeah. It's an agency Fannie Mae loan, so the interest-only component, we don't proforma for that, but that's just really gravy on top that really helps when you can get 5 or 10 years of interest-only on a portfolio. We're going to bite the bullet, but it's not ideal. I wish it was 3%, but the value-add wasn't done a year ago. We couldn't do it then. I think we'll be alright overall.
Andrew: How can listeners get a hold of you or Enjoy Capital if they would like to do so, Andy?
Andy: You can reach me at email@example.com. Enjoy Capital is the capital arm of Enjoy Communities, so it's firstname.lastname@example.org. Or on LinkedIn. I'm trying to be a bigger poster on LinkedIn, but it's just Andy Freeman on LinkedIn. It's probably the best way to find me. I really appreciate you having me here.
Andrew: Yeah. Thank you so much for coming on the show and dropping some golden nuggets. I really appreciate it.
Andy: Awesome. Thanks, Andrew. I'll see you around.
Andrew: Awesome. That's it for today, folks. Thank you all so much for tuning in.