Interview with Brad Rymer the former CFO of RV Horizons

Listen on Apple Podcast here: https://podcasts.apple.com/us/podcast/interview-with-brad-rymer-the-former-cfo-of-rv-horizons/id1520681893?i=1000518782128

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 Brad Rymer about mobile home park investing, tips for getting into the manufactured housing industry, and stories from his point-of-view as the president of Cloverleaf Capital Group and formerly as the CFO of one of the top five manufactured home community portfolio owners in the United States (RV Horizons).

Currently based out of Denver Colorado, Brad Rymer has been president of Cloverleaf Capital Group. Cloverleaf Capital is a mobile home park loan broker which specializes on loans under $1 million dollars. Prior to co-founding and becoming President of Cloverleaf, Mr. Rymer served as the CFO of RV Horizons. At RV Horizons, he had many responsibilities including serving as the company’s Business Intelligence Officer in 2018. Brad received an MBA from Regis University and a BA in Fine Arts from Wabash College and began his real estate career with Marcus & Millichap in 2000 as a specialist in sales and marketing.

***Andrew Keel and Keel Team Real Estate Investments (Keel Team, LLC) do not endorse any interviewee. This interview is for informational purposes only and should not be depended upon for investment purposes. ***

Andrew Keel is the owner of Keel Team, LLC, a Top 100 Owner of Manufactured Housing Communities with over 1,500 lots under management. His team currently manages over 20 manufactured housing communities across ten states – AR, GA, IA, IL, IN, MN, NE, OH, PA and TN. 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.

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 100 total 5-star reviews by the end of 2021, 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

00:51​ – Brad’s journey into manufactured housing communities

04:24​ – The most important things passive investors need to look out for when investing in mobile home parks

06:18​ – Common mistakes on mobile home park financials that people should look out for

09:34​ – The most valuable lessons Brad learned from his time as CFO at RV Horizons

11:25​ – Lessons about mobile home parks which operators and investors should know

14:40​ – Which models performed better over Brad’s time as CFO

22:00​ – The analytics and data in mobile home parks

25:59​ – The hurdles that the manufactured housing industry faces moving forward

29:50​ – What happened in the multi-family sector

31:56​ – How a $15 minimum wage would affect the industry

33:38​ – Brad’s perfect mobile home park

34:55​ – The value proposition at Cloverleaf Capital Group

38:00​ – Brad’s last tip for operators and investors

40:32​ – Getting a hold of Brad Rymer

00:00​ – Conclusion

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

Links & Mentions from This Episode:

Cloverleaf, LinkedIn: https://www.linkedin.com/company/cloverleaf-capital-group/

Brad’s Phone Number At Cloverleaf: (303) 525-4850

Brad’s Email Address: brad@cloverleafcapitalgroup.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/PassiveMHPin…

Andrew Keel Instagram Page: https://www.instagram.com/passivemhpi…

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 have an amazing guest, Mr. Brad Rymer.

Before we dive in, I want to ask you a real 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 it means the absolute world to me. Thank you for taking the time to do that. All right, let’s dive in.

Brad Rymer has been president of Cloverleaf Capital Group since its inception. Cloverleaf is a mobile home park loan broker focused on loans under $1 million dollars. Prior to co-founding and becoming President of Cloverleaf, Mr. Rymer served as the CFO of one of the top five manufactured home community portfolio owners in the United States, which was RV Horizons, which a lot of you know Frank and Dave. Helping lead its 16 separate funds, comprised of over 1,500 investors over a 4-year span, Brad had responsibilities spanning all business segments.

In addition, he served as the company’s Business Intelligence Officer in 2018. Brad received an MBA from Regis University and a BA in Fine Arts from Wabash College. He began his real estate career with Marcus & Millichap in 2000 as a specialist in sales and marketing. He’s based out of Denver, Colorado. Brad, thank you so much for coming on the show.

Brad: Thank you very much. I look forward to presenting here and just talking about the industry, very excited about it.

Andrew: This is fantastic. Maybe you could start out by telling our listeners a little about your story and how you ended up in manufactured housing.

Brad: Sure. I’ve been in commercial real estate basically 2000 when I moved out here to Denver, It wasn’t on purpose to land into commercial real estate. I had the opportunity, as you stated from the Fine Arts. I actually jumped in to be a graphic designer. Right out of the gates with Marcus & Millichap, real estate really clicked. Not only the real estate side itself but the investment side and the mathematics.

I started off really understanding it. I guess understanding the flow of how transactions take place in all commercial sectors, and that’s all the major four food groups—retail office, industrial, and multi-family, which obviously manufactured housing falls into. Obviously, back in 2000 and 2001, manufactured housing still had that negative stigma that it’s now leaning off today.

Throughout the years, over the past 20+ years, I worked in several roles in commercial real estate, we stayed focused on it. It ranges from managing consulting firms, acting as a lender on the private capital side, running my own consulting firm—Rymer & Company, which we’ll talk about in a little bit about business analytics. Then working with Century Communities’ sister company, Regency, as a Finance Director, and working towards the development of multifamily. Then eventually, hitting, working, and connecting with Dave and Frank to become the CFO. That’s when I really, really became entrenched in the manufactured housing side. Shortly following that, I took some time to collect and started Cloverleaf, and now we are here today.

Cloverleaf being the parent company, Cloverleaf Capital Group, as you had mentioned, being one division of the three. But Cloverleaf Capital Group is truly an investment consultant connecting clients looking to invest in mobile home communities. Which a lot of them […] underneath the million dollars. That’s kind of my niche, that’s my space to really help clients and investors land their communities, land their investments.

Andrew: That’s fantastic. Brad, what are the most important things that passive investors need to look out for when investing in mobile home parks? You mentioned the 1500 investors through all those funds with RV Horizons. What are the big things that Limited Partner (LPs) need to look out for in the asset class from your experience, from your standpoint of the former CFO, and kind of seeing all the things that you saw in your experience?

Brad: I think a unique position for me to be in is having the investors that we’re passing. We had true passive investors, and we had investors in the portfolio that didn’t want to be part of the numbers and didn’t want to be passive. They wanted to touch, feel, and understand the communities themselves. I was able to learn, cater to, and work with both sides.

As the CFO you’re also acting as investor relations. Working with them, I’d say, with passive investors, the thing to look out for obviously is as a passive investor, you’re working with somebody who’s going to be guiding the portfolio. You want to know and entrust in that person who’s guiding the portfolio who you’re investing with and in to know that they have their directive in place: the assets that they know, the areas that they know, the amount of improvements and work that needs to be done, and also understanding the market.

I think that the major thing that is important is knowing that the person who’s driving the ship, the captain who’s driving the ship knows the route if that makes the most sense because they are passive investors. They’re hoping that their money turns into the returns that they’ve been seeking and beyond.

Andrew: Definitely. Maybe you can shed some light. I spend a good part of my month reviewing financials. I’m sure as a CFO, you had your fair share. What are some common mistakes on mobile home park financials that people should look out for?

Brad: Yes, sure. This is one element that I think separates us from the standard. That’s the reason why I don’t like to consider Cloverleaf’s Consulting Group a mortgage broker because it’s so much more. That’s why I call it an investment consultant. My clients reach out to me. They understand that I was the CFO. They understand that booking certain transactions, even through acquisition, the initial acquisitions are a lot different. There are no tricks to the trade, but there’s a methodology that you should employ to make sure that your balance sheets and you feel that your books are following protocol that’s not hurting you in the end because obviously, most investors on the smaller side are not going to hold on to these things long term. I say long-term, over 10 years.

A lot of them and the majority are looking at a five-year term around. Tracking your balance sheets and accounting properly is probably the number one thing that I look forward to extending my menu of services towards the end of the year and going into 2022 and moving forward.

I think the number one thing is knowing how to book the transaction itself. Understanding how is it accounted for? How is it going to be taxed? Consulting with your CPA and making sure that that CPA understands that this transaction is not a traditional real estate transaction. It truly is a business transaction. I think that’s the number one thing. I don’t want to peel back and start to jump down that rabbit hole of how to locate amortization, depreciation, and all those fun things.

Andrew: Sure.

Brad: I think overall, that’s the number one thing I would look out for. I would say, secondly, in your day-to-day, month-to-month, and annual practices having a diversified chart of accounts for your profit and loss statements to account for home business versus the community business. Because we are getting into the era where mobile home communities are no longer one of those children left behind and one of those soldiers left behind. It is now at the forefront, especially in this time where low-income housing is much needed.

As we recover from this pandemic, I think overall, understanding what your asset is, how you need to perform your asset, and having a home versus community separation. I don’t know how much in your forum or podcast you discuss that. But I would say from the CFO position of a large portfolio, then also talking to clients who are investing in these, and understanding from the finance side, those two separations of business are critical for today.

Andrew: We just interviewed insurance broker, Kirk Kelly. From his perspective, why it’s important to have those two businesses separated. It’s nice to hear that from the accounting standpoint, it’s important as well. Tell us, Brad, what were the most valuable lessons you learned from your time as CFO at RV Horizons?

Brad: Sure. I would say several things. I mean, obviously, things strictly with manufactured housing. Dave and Frank are truly the gurus. I was honored to learn and have the crash course from them. I had worked in manufactured housing sparingly over time on the multifamily side. Obviously, one of the things developers look for that are building Class A, Class B apartment buildings are finding pieces of land that are already permitted or plotted for multiple units, and one of those is mobile home communities.

I started to really understand the mechanics of it and learned the basics. But I didn’t know the true science of it until I joined David and Frank. I think overall, the crash course and having to learn quickly, it’s not like I was able to jump in as the CFO and have a year or two years to learn the amount of knowledge that those gentlemen have. I jumped in and really had to learn quickly. I leveraged the experience from within the company to learn the business itself.

I would say, number one overall is just what dynamics of the area that the macro and microeconomic elements, the geo-economic elements are definitely important. What other factors come into play to assess and analyze what a community can be worth, what you’re buying it at, and then what’s your strategy is going to be down the road? Is this going to be a 3-year, 5-year, or 10-year strategy?

Andrew: That’s great insights there. Based on your advanced experience in probability analysis, what have you learned about mobile home parks that operators and investors should know?

Brad: I would say, overall, understanding what the market’s doing. So many times I spoke last year, and I’m not acting like the sage of all time, but you and I spoke early on in the year about what’s happening with the market and knowing that before you actually get into the transaction itself.

Being late to the game is obviously always something that you want to avoid. But in this time, when the cat is out of the bag, I would say so to speak with manufactured housing, understanding what cap rates, what the market’s doing, what your assets can do, what you need to do in terms of capital improvements to, again, perpetuate what’s your strategy. You want to hold onto this thing for five years. What is the market going to do in five years?

Right now, just overall in the current market’sstatus, we’re in the cap rate compression area. We have a very popular, in the real estate asset class, that many private equity firms, many large, large corporations are jumping into. There’s a lot of articles being released. The higher popularity and the lack of financing or I guess the abundance of financing, and the lack of other alternative options to acquire real estate make this a very proper class. I’ve seen cap rates jump down, 50, 60, even 100 basis points on average in certain areas.

Understanding that in itself and what you want to do with the strategy is, number one, of the most important things. Understanding where rates are going to go, understanding what the treasuries are doing, understanding what bank rates are doing, what leverage points they’re offering in terms of recapitalization or refinance. I would say, probability overall is really based on the probability of how you can achieve your exit goals, your return goals on your asset. That goes back to what’s the market doing, what’s financing doing.

Andrew: That’s a good point. Maybe we could dive into that a little bit more. There’s a couple of different models, right?

Brad: Right

Andrew: I’m sure that in RV Horizons, you guys diversified across several of them. The one big one that we kind of struggle with is this idea that there’s like this low cap rate, primary markets. There are mobile home parks in those asset classes. Those types of assets, the ones in primary markets that are very five caps. Since it’s a growing metro, you probably could increase rents probably more consistently over the long term to generate appreciation in the asset, right?

Brad: Right.

Andrew: Then there’s this other model of buying higher cap rates, more cash flow heavy, but there are more secondary and tertiary markets. With Frank and Dave’s model, they kind of talk about the midwest, kind of secondary, tertiary markets a lot. I know they also own assets in those primary markets. Maybe you can shed some light on which ones performed better over your time as CFO so that we can kind of look at both models and decide which is best for us.

Brad: Sure. Assets real estate in any sector, as what happens through any cycle, that what was is going to change. I would say that we are definitely on the evolutionary side of the business, we’re changing. Even 5 years ago, 10 years ago for sure, you could say that you’re purchasing an asset of the true 10% cap on actuals today. Anticipate maybe a mid-seven cap at the lowest 10 years ago, 5 years ago.

Now, it’s more of you’re buying it at 7% or 8% cap actual. Just again, going back to just community-only performance, a lot of the agents and the brokers to pay the sales brokers that are getting these listings are combining that home and community revenue, which is a dangerous way to assess the deals. You have to be able to separate that stuff.

But I think in today’s market, you’re buying these assets at what you would call a lower cap rate, anticipating that not only raising rents, maybe bill back, bringing down, creating efficiencies in the expenses like utilities if there are leaks. But also, expense inefficiencies that you can bring down and actually increase the NOI on today’s numbers with a little bit of improvements, bumping the rents, and bill back. You’re actually looking at it saying, I’m buying this at a low cap, but in today’s true market it’s a higher cap.

You’re buying it at today’s 7% cap on actuals, the seller’s actuals. But when you employ your methodology, rent increases, or bill back, you’re technically buying it at a 10% cap. Does that make sense? I think those numbers have changed. That 10% cap number has resonated and stuck with us for a long time, especially when I was there as a CFO and overseeing these are the transactions that took place. I would say the anticipations would be different.

I would shrink that by 100–150 basis points today, and I’d say, buying it at a 7% cap and hoping to underwrite today at a 9%, or maybe selling it three, five years down the road at a 7% cap, maybe even lower. I think the cap rate is still going to compress over the next 24 months. That’s how you look at the business. You have to look at the actuals and the anticipated change, what your cap rate is on your secret sauce, and then what you can exit at. Does that make sense?

Andrew: It does. I guess my question kind of talks about there are the primary markets that are 100% occupied, you’re buying these stable assets, and your plan for the value add like it’s already sub-metered. Your plan is basically to raise rents every year because it’s in Austin, Texas, and it’s a booming market. You’re expecting rents to be going up more than the average, right?

Brad: Yeah.

Andrew: Maybe 10% plus increase.

Brad: The managers have—I guess to a certain extent—grown familiar with the tenants. Didn’t raise the rents. I guess the tenants were just too familiar. We say the markets, $100 more than what you’re currently offering per month for just lot rents, again, that’s what’s important. Your goal is to bump rents. I think also to add to your question, I think what you’re seeking as well is what markets or what areas have the best foresight.

Andrew: Which one performed better?

Brad: I would say your midwest markets. If you look at your coasts, both coasts, those types of assets that you’re buying and selling at those low cap rates, those are for investment-grade or public companies that are looking for steady returns that they can return their shares or their shareholders. Those shareholders are anticipating anywhere from 4%, maybe 5%, 6%.

Your true value add is in the central plains, is in the midwest where you have maybe some industry issues, you have some economic issues where there’s been unemployment. Or say, for example, what does the pandemic cause? The auto industry, steel industry, manufacturing plants, shipping, international shipping, all those types of areas that need obviously some low-income housing because you’re not going to have your standard middle-class rents and everything like that. But you still have the ability to grow rents that it doesn’t get unaffordable.

You have the markets that the tenants are always going to stay occupied. You have occupancy consistency, you have economic consistency in the communities themselves, and there’s employment. I’d say your central plains, your midwest. Where I’m from, Indiana, I call midwest Illinois, Michigan, Indiana, Ohio, Kentucky, Minnesota. Then the central plains being your North & South Dakota, Nebraska, Oklahoma, Kansas. Those obviously perform well because they’re most consistent.

You’re not sitting there looking to sell this thing at a 4% cap because that will never go. You’re expecting to maybe get 200–300 basis points changing cap rate from your actual purchase. Those are the ones […], and that’s where you could have the most value because there’s also a lot of improvements you can add at minimum dollar amounts like paving the roads that give just that initial kick to get a return on investment. Then also let the tenants know you’re not just bumping the rents to gouge them, make sense?

Andrew: Yes. I mean, that’s what our portfolio is right now. We have 24 parks mainly across the Midwest and that’s what we’ve been doing. We look at some other operators that have different strategies in the more primary markets and buying more stable assets. Now, they have different costs of capital, different end goals.

Brad: It’s uncovering those, it’s picking up and looking underneath all the different rocks. I have several clients today that are finding these markets that you would never think—again, existence is one thing, but you’d never think are still available but they are. A lot of it is the effort itself and the markets, understanding the markets. Again, it’s also understanding where you want to keep pockets because you don’t want to spread yourself too thin. Have one in Kansas, one in Texas, one in Illinois because you’re going to have a manager in each one of those.

For yourself as an investor, your investors themselves, traveling to each one of those is quite the effort and it’s also costly. You want to keep […] that as well.

Andrew: Definitely. Prior to our call, Brad, we were talking about analytics and data. I know you’re a big fan of artificial intelligence. I’d be curious to get your opinion on the analytics and data in mobile home parks. What does it show about the industry, and what do you think the future holds for mobile home park owners?

Brad: I think the artificial intelligence side has still yet to be tested. I have visions of what I think it can do. I think the artificial intelligence side is more driven towards being able to properly and efficiently process business by reading emails or reading contents of documentation, understanding what those files are. Especially in my industry where typical consultants or brokers want to make sense of all the effort that’s evolved. The AI that I’m employing to my platform itself, my proprietary platform is there to help create some efficiencies in how businesses process.

I would say, overall in the market itself, one of the things that I’ve noticed is looking at what rents are doing from the different sources of data that are available, either for pay or free from the government. Things like, where are two-bedroom and three-bedroom rents for the urban development, […], fair market value rents or FMR, to the government. What are those trends offering in those specific macro and micro view economical areas? Like MSA.

Typically, an MSA, you can look at a broad area. But when your community is sitting in like a Denver, Metro. If it’s sitting in the Highlands versus Aurora, that’s two different areas right there. Understanding what those trends are doing with the market, and then also having all the data points together with AI will start to associate what trends are actually moving according to each other.

That’s what I’m employing with my platform. It takes millions of data points over several years for it to actually develop some pattern. You combine what you do know from all the experience I gained, and you plug those certain sectors and components into each other, but you let the AI tell you everything else. That’s why I’m employing it now. It’s still, obviously, in its beta phase. There’s still a lot of data points that are merging together. It’s got a lot of data points to review before I start identifying a trend. That’s the fun part for me. That’s where I geek out, so to speak.

Andrew: Are there any data points that show that rents are increasing at a certain rate? Can you give us an idea?

Brad: I can peel back the layer a little bit, peel back the curtain for the […].

Andrew: Please.

Brad: I would say, there are a lot of data points that are associated. I’m sure that Frank has said it in a lot of the calls and speaking especially with Mobile Home University. The actual time sensitivities, the chronology of the data points themselves with the actual statistics on the economy, the major employers, the schools, the population, the home values, what are rents for apartments?

If you employ all those together with certain data points along the chronological scale, you can start to say, okay, I’m seeing patterns in this fashion for this specific micro-market. Without giving too much of the secret sauce, that’s some of the stuff that I initially pull out right out of the gates.

Andrew: What hurdles does the manufactured housing industry face moving forward?

Brad: There is some new development, but I would still say that developing new communities is going to be difficult. I think the diversity of what is trying to be plugged into these communities like the small homes, like RVs, all those different elements are still going to be confronted with the typical financing issues that we’ve always run into.

I would say, overall, what are the bigger companies that are looking to continue to expand, grow their portfolio, what’s their next step? Because obviously, the inventory for mobile home communities is limited. We’ve got 40,000+ mobile home communities across the U.S. If you look at the bottom of the eight of them, they’re all too small to really fall into that investment grade.

Then the rest, you have the top half, all the 500+ lot communities, maybe even called 250+ lot communities that are sought after by the public companies or the big dogs. What are they going to do? They’re eventually going to have to pivot. What is the next phase of how the investment’s going to take place from the top tier to the second-tier investors, portfolio owners, is probably going to be one of the hurdles themselves?

The other part—we’ve always had this and it’s been going on for years—is what is going to take place as these corporations, and it becomes widely known that these are investment-grade properties. They are cash flow positive, widely speaking. What are they doing to create better cash flow, to increase value, to increase returns? A lot of that is raising rents.

I had a conversation with some individuals over the weekend and they heard that I was in mobile home communities. One of the first things that they said, I’m not acting like everybody should know about it. They came to me and they said, well, I’ve read all these articles about they’re just pushing people out of their homes, and rents making it unaffordable. I sat down, smiled, and said, look don’t take this as something from the corporate atmosphere, let me just explain this in pure black and white.

I think that no matter what, I think this is always going to have a negative or a grey cloud over it. It’s always had a grey cloud because of the investment grade of the asset itself. Now, look at the switch flipping. Now, it’s like, oh we’ve got these big corporations pushing people out of their low-income housing, how dare you. I think you’re going to be confronted with that moving into the future. There are going to be coalitions within the community to become against the owners because maybe they have been bumping rents and the tenants don’t want to see them raised.

I think that’s going to constantly be an issue. I think taxation is going to be another. I think the governance, the municipalities are going to grow wiser. They’re going to start to say, okay, well how are we going to start assessing these things in a fashion that we can easily assess multifamily apartments. Because right now, it’s still just kind of glorified land leases. There’s no better way to explain it. I think taxation in property taxes is going to change too.

Andrew: Wow, you touched on several points there. The one that kind of stuck out to me was you mentioned that these large institutional buyers of mobile home parks will eventually start to go after smaller properties. I find that interesting.

I know you have some experience in multifamily. What happened in that sector? What happened in multifamily? Maybe like self storage. Did those larger private equity groups eventually start going after smaller properties? Or did they still have that ceiling where 100 lots or higher were the only properties that they would touch?

Brad: Again, none of us have a crystal ball, I wish we did because, obviously, we would be doing other things with greater and greater. We’d be our Warren Buffetts, I guess, so to speak. I think what’s going to happen, a pivot that’s going to take place is it’s going to move more from purchasing assets at cap rates and lower cap rates. I think it’s going to turn into an M&A.

I think that your bigger companies are going to start to pursue, purchase, and/or split, and buy majority shares in those mid-tier, second-tier companies that have portfolios. I think they’re going to capitalize and merge with those firms to grow their portfolio, instead of trying to find that next big asset or group of assets and portfolios themselves.

I think if those groups are going to work together, then eventually, you’re going to find your tier 3 that are going to start to assemble the lower lot cap communities. They’re going to assemble their portfolios. If you’re deep sea fishing, you pursue where you see the birds flying over, hovering, and diving down because they’re going after the big fish. You want to take your boat through that because that’s where the bigger fish are eating too. I think that’s where we’re transitioning. I think that’s the next pivot.

Andrew: That makes sense. What effect does a $15 an hour minimum wage and inflation have on the mobile home park asset class?

Brad: I think, overall, it’s employing your management staff in itself because you can’t just give your community manager peanuts. You have to, obviously, follow all the employment rules for the municipalities and for the federal government. I think that the wage range still fits within, and it helps people to find themselves actually pull the housing. If you look at what was taking place, with the quality of manufactured homes themselves, the quality is boosting. It’s actually giving people an opportunity at still a lower lot rent to have quality homes.

And I mean, still, today living in an apartment versus or […] in that phase, having a nice home with the yard to myself versus having to live in an apartment building with walls around me. It seems like the better route to go. The quality of homes that I saw, and especially with the transition that I sell over time with RV Horizons, I think it’s turning into the better option.

People are obviously downscaling too. They’re downsizing and looking at different ways to manage their expenses. Who knows when this pandemic—I mean, think about it. I’m thinking three years from now is when we actually see some light. People have a little bit shorter time scale. I mean, people are gonna start to save. They don’t want to keep going through these. Right now, it’s every 10 years if not shorter, that something happens. I think that the minimum wage is at a rate, at a point where it still makes this quality rental and it’s not blowing their financials out of the door.

Andrew: All right. I ask this question to everybody Brad. What does the perfect mobile home park look like in your eyes?

Brad: My eyes? Ideally, you have this one that’s an infill opportunity, that you have alternate exit strategies. You see it all the time here in Denver. You drive by and I point out all the time to people. If I have a passenger or something like that I say, that’s a mobile home park right there. They’re like, no way.

That’s my ideal is that infill, not overly packed. You have alternative exit strategies. You could still operate as it is. You have lot rent growth. You have decent quality homes, it’s not overly packed. Then obviously there’s going to be some sort of an apartment developer down the road that’s going to be well over what it’s worth because they can financially make it make sense to create density in terms of the high-rise or mid-rise apartments. That’s my ideal.

Andrew: Awesome. Thank you for sharing that with us.

Brad: Sure.

Andrew: Last question, what is the value proposition at Cloverleaf Capital Group? What makes you guys different?

Brad: Thank you for asking. I like to actually describe the difference. A lot of clients come to me via referrals. They’re saying, what are you bringing to the table? You’re just a mortgage broker. For me I always correct them because I’ve been in the mortgage origination, I’ve been just a mortgage broker. I think the difference is we’re not just there connecting people between where they are today, the debt source, and waving goodbye. We’re there, and Cloverleaf’s goal as soon as we finish all of our website, all those collateral, and all those materials because we are still new.

As soon as we finish that out, I want to be able to describe that this is the white-glove way of approaching the overall investment. We’re your investment partners in the field. We’re your interim CFOs. We’re going to help you understand how to separate community versus home financials, understand what is truly the value because you’re talking to somebody who’s seen thousands of communities, seen thousands of markets. Go in and say, okay, this is where I think value should be. This is where I think what you can do. This is how I would operate. This is how I would book your transaction.

Really, from start to finish, it’s really a partner in the deal more than it is just a broken collecting fee. As we extend our menu of services, I think we’ll be able to truly give that full range, that glorified mortgage broker investment consultant service.

Andrew: That’s great, that’s really good. I know that from experience, trying to get a loan under $1 million bucks, it’s like the wild west. You start with the regional banks, it’s somewhat inconsistent.

Brad: Yes, it all starts with the presentation too. Because if you go in and you just approach somebody that’s not familiar with the industry itself and say, here’s what I’m looking for a loan. They’re going to look at it and they’re like, no, this isn’t our space. If you show them, I understand this, this is how we do this. I know what you want to collateralize. Here’s what values are doing. This sponsor’s like this or this partner really knows their stuff together. They’re experienced. It’s all the presentation itself.

Many people say, well, do I want to spend 1%, 2% to have an originator or have Cloverleaf Capital Group? Of course […] lenders and then potentially have to pay an origination fee too. You find out after what you just stated—calling, smiling and dialing, sending the materials, getting turned down several times—that it’s so much work and value to spend that fee. Because you can focus on doing your due diligence on the asset itself and really refine that instead of having to deal with the headache that is financing.

Andrew: The certainty of closing, right?

Brad: Yes.

Andrew: With a lot of these smaller banks, you run into the issue of hey, we’re going to get to the closing table. The big boss comes out and just vetoes the whole thing. That’s good that you have lenders under $1 million. Brad, what’s your last tip for operators and investors out there that they need to know?

Brad: I would say I’m dealing with it up and down right now, up and down and it’s frustrating. My clients are frustrating me because I don’t have the time and the bandwidth to manage the lenders themselves, the title companies, and all components that I have to be placed. I would say, the number one tip is to be patient and tell your seller to be patient if you’re working on an acquisition.

Be patient yourself in a refinance. If you’re looking to take out and you have maturity coming up with your existing lender, it’s not going to take 45 days. I’m working on some deals right now and they still haven’t closed. I started in September of last year. Straightforward, nice transactions, great borrowers—still I’m not closed. They’re closing this week.

Andrew: That’s terrifying.

Brad: It is terrifying, it is. It is because you have a low-interest-rate environment, you have title companies that are swamp. A lot of lenders are still working on and off with the PPP and all these components of what the pandemic has caused. Remember, the traction and momentum still haven’t regained full speed. You still have the banks bringing back resources, they’re bringing back people into the office. We don’t have a full arsenal. Yet, all these financing institutions […].

My biggest advice is whatever time you anticipate that it would take the refinance, it’s going to take 60–90 days, if not more—probably more. I would say 90–120 unless you’re working with your internal banking relationships. For acquisitions themselves, be prepared. I’d say 120 days, if not, have a couple of extensions available of 30 days. The lenders aren’t overly inspired to close the deals. They know that they’re the only options, especially banks. Sellers need to be patient. I guess the word is patience. Having patience and still patience in the transaction.

Andrew: I have a big sign above my desk right here that says, time kills deals. I struggle with patience as well, and I am a big believer as well in pushing every envelope as quickly as possible to get deals done. Well, I really appreciate you coming on the show, Brad. How can listeners get a hold of you if they would choose to do so?

Brad: Sure. Right now the website will be launched here shortly. Cloverleaf is on LinkedIn. I would say the best way to contact me today is via the office phone, which is (303) 525 4850, and my email is brad@cloverleafcapitalgroup.com.

Andrew: Awesome. Thank you so much for coming to the show, Brad. It was a pleasure having you. That’s it for today, folks. Thank you so much for tuning in.

Brad: Yes. Thanks, Andrew. Bye.