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Interview with Chris Rood- Wholesaler turned Mobile Home Park Investor




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 Chris Rood, the number one real estate wholesaling coach in the US (and Canada). He is also the principal at Rood Real Estate and ChrisRood.com. Chris is a full time real estate investor, coach, mentor, sales professional and entrepreneur. Today Andrew and Chris talk about Chris' experience in the trailer park industry as well as his real estate investing background. They also discuss why Chris Rood loves the mobile home park business, what his biggest struggles have been and his desired end game. Chris also discusses what he looks for in partnerships with passive investors for mobile home park acquisitions. Chris shares his wisdom on everything from his "Make Trailer Parks Great Again" hats and apparel to his opinion on window AC units in this great interview on the Passive Mobile Home Park Investing Podcast!


Andrew Keel is the owner of Keel Team, LLC, a Top 100 Owner of Manufactured Housing Communities with over 1,400 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.


Would you like to see mobile home park projects in progress? If so, follow us on Instagram: @passivemhpinvesting for photos and awesome videos from our recent mobile home park acquisitions.



Talking Points:

00:18 - Welcome to the Passive Mobile Home Park Investing Podcast

01:01 - Chris' background and what he loves about the business

10:43 - Collections during COVID

13:11 - 21st Mortgage cash program

14:14 - Chris' biggest struggle so far

17:20 - Flood zones

19:00 - Chris' end game

20:52 - Window Units

22:52 - Things to look out for with an investor

28:44 - Getting a hold of Chris

30:10 - Conclusion


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Links & Mentions from This Episode:

Chris Rood Coaching Website: https://coaching.chrisrood.com/new-home/

Chris Rood LinkedIn: https://www.linkedin.com/in/chris-rood-72a76276/

Chris Rood Instagram: https://www.instagram.com/realestaterood/?hl=en

Chris Rood YouTube: https://www.youtube.com/channel/UCPg2GbV7ZanrL7xhw-h0W5g

Chris Rood Facebook: https://www.facebook.com/chrisroodentrepreneur/

21st Mortgage: https://www.21stmortgage.com/web/21stSite.nsf/index.html

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


TRANSCRIPT


Andrew: Welcome to the Passive Mobile Home Park Investing Podcast. This is your host, Andrew Keel. Today, we have an absolutely amazing guest in Mr. Chris Rood. Chris is the number one real estate wholesaling coach in the US and Canada. Chris is also the principal at Rood’s Real Estate and chrisrood.com. Chris is a full-time real estate investor, coach, mentor, sales professional, and entrepreneur. Chris is a father of five and has been interviewed by the likes of Grant Cardone and others. Chris loves mobile home parks and I'm excited to learn more about his experience in the space.

Chris, welcome to the show.


Chris: Thank you. Looking forward to it.


Andrew: Awesome. Can you please start out by telling our listeners a little bit about your background and how you got into manufactured housing?


Chris: I've always been an entrepreneur my whole life. I started a lot of businesses—some did good, some did bad. I did real estate wholesaling, flipping for a while, did really good with that, did single-family homes. I had a bad experience with single-family homes. It was just hard to scale. Things were expensive to fix—the roof, AC. We were buying nice, single-family homes and they would just trash them.

I was looking for a better passive play than what I was currently doing and started doing research about four years ago. I noticed that Warren Buffett had bought out Clayton Mobile Homes and he had bought another big manufacturing company. I forgot what it was. I read an article he wrote—it was about 4–5 years ago—about manufactured homes and how the economy basically was becoming unaffordable for rentals, and that mobile homes and mobile home parks were the last vestiges of affordable housing.

When I read that, that made a lot of sense to me. During that time when I read that, all the shifts in the economy and things getting just boom-bust, and things always getting to where you can never predict what's going to happen. I did more research and I noticed during the 2008 crash that mobile homes stocks (and all that) actually soared. That always stayed in my mind. When I read that, too, I was like, if Warren Buffett is going to go and buy out all these manufacturers and then, he bought out a bunch of huge mobile home parks from what I'm understanding—


Andrew: He was involved in the financing of it, too.


Chris: Yeah, so he's got his hands all in it. He's not stupid and I realize I'm not that bright. I'm smart enough to know that I don't know, and if I just watch people that are smarter than me and I do a fraction of what they're doing, I could probably win. With that said, I was like, that makes so much sense. Affordable housing, rents keep going up, you got long-term appreciation just killing that rental market where people just can't find an affordable place to live.

I started doing research on it. I wanted to invest in a mobile home park, so putting out feelers. I found my first park from a realtor. It was an off-market deal and he brought it to me before anybody else hit the market. It was a small, 24-unit park, picked it up for $405,000. Now, if you know anything about apartments and all that, you can't find that 24-unit apartment complex for $405,000. The amount of debt that you got to put on this asset class is a fraction of the debt you got to put on (say) multi-family apartments. That's the first thing I could tell you that's a lot better than (say) apartments. I can use a lot more debt to leverage a lot more.

What I've noticed when I bought the park and when I started rehabbing, I was like, I could have a destroyed trailer and I can make it look brand new again for sometimes $6000–$8000, and that's brand new, brand new floors, brand new kitchen. It's just a box. For the roof, if it's an older trailer I can put Kool Seal, especially if it's an old park. I had bought an older park, they had the 80s and 90s model trailers. The tin trailers didn't have the shingles.


Andrew: It did have asphalt. It was just a metal roof.


Chris: Yes. We put that Quick Kool Seal. I was like, man, I had a brand new roof for $300 and it lasted for seven years before you got to do it again. I was like, dude, this is cheap. I noticed on top of that, the rents were not that far off from a single-family home that I could buy, that would cost me 3–4 times that amount to buy. I just started adding all up. Now, granted it doesn't look as pretty, it's got the stigma of trailer park trash, it's got this and it's got that, but the money is still green and it comes in a lot faster and a lot greener. It doesn't go out the door as fast as (say) single-family homes and apartments.

As I got in the asset class and started rehabbing my first, I was just like, wow, this is amazing. I bought it for $405,000, I rehabbed about maybe seven or eight of them in there. I hauled another four or five newer ones that I found through my wholesaling business going direct to the seller. I bought them for super cheap like I was buying bread.

This is another added advantage for you, listeners. I have a professional wholesaling business. We wholesale over the South and I get a lot of leads that come in for mobile homes. Before I had a mobile home park business, I would just throw those leads away, I wouldn’t do anything with a mobile home.

Case in point: I'm buying a 2018 Clayton Mobile Home from a lady out of Baton Rouge right now that I'm about to haul into a park I bought. She paid $55,000 for it. She just wants to get rid of it, and it's hard for her to find somebody to buy because most finance companies don't want to refinance them or sell them.

I'm buying that trailer for $16,000. It's going to cost me about $2200 to move it and it cost me about another $3500 to put the pad down, replumb it, I'll be all-in probably (say) $21,000–$22,000, but I'll get $1000–$1100 for that on a $22,000 investment. What does that?


Andrew: Nothing else, right?


Chris: Nothing does that. I've tried it. That's another pertinent point that you guys have to pay attention to is the cost per unit is so much cheaper.


Andrew: You own all of your mobile homes in your communities?


Chris: Just about, yeah. I got a couple of parks out of my portfolio that has a few here and there, that were lot-rent. They're still there, but eventually, I'd rather own the trailers. Now, this is another pertinent fact that you have to understand. I'm not saying that owning the trailers is the best thing to do. I just know for me, I'm a full-time investor, I have a team of six people that go around fixing stuff. I'm paying $15–$16 an hour, and then we have a park manager, we give them free rent. It just makes sense for me to do that.

If you're (say) a chiropractor, doctor, attorney, you got a couple of million dollars you want to invest, you don't have a team set up, it may not be the best idea to buy an older value-add mobile home park to fix because you're going to have to manage that. You may want to just take the lot rent. It depends on your situation. It just made sense for me. I noticed, I'd rather get $800 a month in rent than $200 in lot rent and I got my maintenance guy living there for free. He goes and fixes a plumbing issue that costs me $15 for his one hour labor and a $10 part. It should cost me $25 versus having a plumber that would have charged me $250.

There's always a guy in the park that knows how to do maintenance that'll do it for cheap if you give him free rent and you can pay him $12–$15 an hour. It just works out and makes sense, and that's how I've been able to scale and keep it profitable. That's another added bonus.

All I can say is that cash flow is the best for me out of all that stuff I've done. I’ve owned apartments. I’ve owned short-term vacation rentals. I do like short-term vacation rentals, but by far, mobile home parks are my favorite because I do see the writing on the wall, economically speaking with COVID. America is going to get poorer, not richer, especially with everything now they say there’s supposedly a round two of COVID coming. Whether you believe that or not that's a whole another podcast, but whether if it's here.

How is COVID affected in my parks? It has exponentially helped my parks. Why am I saying that? Because people are losing their jobs, they're getting out of their single-family homes and they're downsizing into something more affordable. When COVID hit back in February and March, we ran about—depending on which location, which states the parks at—I'd say an average 7%–10% vacancy rate. When COVID hit, within the next 30 days after that, it was full and I had never been full like that before. I’ve always run a vacancy.

It depends on the park. Florida parks, they were always full. But some of the ones in Louisiana, I'd run about 8%–10% rate. Even the ones that I have in less desirable areas are full. I don't have any vacancies to this day. COVID has absolutely helped my business on the affordable mobile home park side.


Andrew: How’ve collections been? Occupancy is set as being good as collections remained high?


Chris: Luckily, I have not had a whole lot of problems. I've maybe had a handful of people not paid. I was really scared about it. I was like, dude, I'm screwed. Nobody's going to pay rent. But I've been fortunate. I've only had maybe out of all my parks (and we have 350 units), 7–8 people not paid because saying they couldn't pay, I was shocked. That's a good number for everything that's going on with COVID.

We did just buy a 30-unit a couple of weeks ago or a month ago that half the park wasn’t paying, but we just put eviction and we got them all evicted. We're hauling in all brand new trailers. The first park I bought—I wanted to be conservative—I bought a D+, C- park. All the parks we’re buying now are B, A-. I shouldn't be saying that. To be correct in the mobile home park, they use a scale of 1-5. In an apartment, they do A, B, C, D. I don't know why they do that. I rather just use A, B, C, D. But anyway, we’re buying more higher-end mobile home parks.


Andrew: Newer homes, right?


Chris: Yeah, 2010, 10 years or younger. This is what we're doing or newer. We found that's the sweet spot. It's a better quality tenant. We're getting about $800-$1100 a month in rent for that style. Now, we are pulling in brand new trailers to the park. I just thought we literally put in all brand new trailers. I can probably get $1200 for these brand new trailers and I'm getting them from Clayton. I'm buying a bunch. As a matter of fact, I ordered seven new ones yesterday.

They were $38,900 but the line, in fact, there's so much demand right now that the prices went up. We're buying 43–44 brand new installed with central AC, but I can get $1100. It’s still a good return. I won't have any maintenance for 5–7 years. That's my play.


Andrew: Are you using the 21st Mortgage CASH Program for those? Or are you just paying cash for those new homes?


Chris: I am paying cash and I'm going through small community banks, but I'd like to know more about what you just said if they got a program or something. But no, I'm not using those guys.


Andrew: Warren Buffett owns 21st Mortgage and they have a program where they will finance the transport, install, and the cost of the home entirely, and then you have 12 months to sell the home while it sits on your lot, to sell the manufactured home. You need programs, it’s called the CASH Program. You should chat with him about it.


Chris: Is it an investor program?


Andrew: Yeah. It's specifically for community owners to fill their vacant lots with these brand new homes. It's a good program.


Chris: I'm definitely going to check into that, but that’s where we're at and we're scaling now. I'm going heavy and hard with marketing. We're trying to buy a park every month or every other month. I bought two yesterday and we're going hard and heavy because I do think that this is where it's at.


Andrew: What's been your biggest headache or your biggest struggle so far? I got 1500 units and we follow the tenant-owned home model because I don't want the headaches of maintenance and things like that. Same with you, I'm trying to scale the business. Obviously, you sound like you have all your parks in a cluster. You have your own maintenance crew that can go around and fix issues with the park-owned homes. What's your biggest headache? Is that the headache? Or the maintenance is taking it away?


Chris: It's the rehab side of it. When you buy the value-add parks, rehabbing is by far the biggest headache. But then you're forcing so much depreciation. When it's all said and done, we're into these parks for $0.50 on the dollar. I got a park, paid $210,000 for a 24-unit from a super motivated, so I actually stole it. I hauled in seven brand new trailers and rehabbed probably another six.

The biggest headache was definitely the rehab. I brought it back to the bank we were all in at $465,000. It appraised for $1,050,000. We were getting $16,000–$17,000 a month for it. But I paid for it, a lot of headache with rehab. There's always going to be a trade-off. There's nothing easy. You could be into a park and have a fantastic equity position and buy these value-add parks, but you're going to pay for it. The bigger the problem, the bigger the payout.


Andrew: It's not an annuity. It's an active business. People getting into it need to know that.


Chris: That's exactly right. To answer your question about how we're doing it, our main office is based in South Central Louisiana in Lafayette, and we're buying parks. The first four parks were in Lafayette. We built a team and then from there, we started buying more parks in Baton Rouge, which is an hour away. Now, we’re looking at buying parks close to New Orleans, we're looking at some in Lake Charles.

We just keep going further and further out using the central base of Lafayette with the team, the systems, the three girls in the office, and we got six maintenance guys. They just go around when needed to. We got one that does light maintenance, and we got four of them that are doing the rehab, then we have another one that's doing a little bit heavier maintenance.


Andrew: Is that similar to what you did in your wholesaling business? You started small, you built a team, and you just bolted onto that, and then that enabled you to grow, right?


Chris: That's exactly right. From the inside out, you master your backyard, you build your team in your backyard, and you just go a little bit further out, a little bit further out, and you just keep pushing out. I don't think I can go any further than Louisiana. I do have a park in Florida, we have a good manager over there and a partner. We want to buy as many parks in Louisiana that are good deals. Maybe I can get up to 750–1000 units just in Louisiana. Let me tell you something. There's not a whole lot of people that want to mess with park-owned homes.


Andrew: Do you buy in flood zones?


Chris: I do have a couple in flood zones. But if I can't steal it, I don't buy it. The one I paid $210,000 for, that's how I was able to steal it because it was in a flood zone. If it's not an absolute steal, I’m not going to buy in a flood zone.


Andrew: How do you get comfortable with that risk? Is that what you do specifically?


Chris: We put flood insurance, and we make sure we cover our debt, and as long as I'm covered. I have the people that can fix it even if it does flood. Let me back up. When we put them in a flood zone, we blocked them so high they're not going to flood. They’re literally 3½ feet off the ground. We just put in extra blocks.

That's the first hedge we do, and then we get what's called an elevation certificate. If you're not familiar with what an elevation certificate is, we just make sure we raise the AC unit just as high as the unit. We might only pay $250 a year for that trailer. Then we just ensure to make sure we cover the debt.

There's always going to be a risk in any flood zone that you put them in, but if you put them high enough, you should be good. On top of that, if it does flood, I have the people that I'm paying $12–$15 an hour. I would probably get more money in insurance than I would that would cost to fix, to be honest.


Andrew: That's a good point. What's your endgame goal? Are you going full mobile homes and stepping away from your other businesses? Where are you going to be in 10 years?


Chris: I'm always going to wholesale and flip properties. It's a cash cow for me. We roll all that capital into the mobile home parks, but I'm going to scale the mobile home parks. We are in the process of starting a fund; we're probably six weeks out from launching it.

I’m going to start raising private capital. We're going to go to different markets and buy these park-owned homes that none of the big-money guys want to mess with because there's a big vacuum there. We found that as long as we buy no older than 10–15 years, it's not such a headache that we can't handle the rehab or the value-add to it.

Now, if you buy an 80s model, yes, it's going to be done. We’ve done a couple of those, it was tough. We forced a lot of depreciation, but it's not worth our time. We've got a model down where we get a team set up in that market. We get a partner boost on the ground, and we build a team of three or four maintenance guys that we can pay $15 an hour. We go in and we do basic stuff.

We throw a metal roof on there, a tin roof, we can put in and install for $1500. We put the vinyl planks that are there for a lifetime. You put that, you're done. You spend on things that are a little bit more than putting a cheap carpet or the cheap laminate wood, you're done. You could spill milk, food, water, or whatever. It does that work, it's lifetime, you're done. We just go in there and put some Home Depot cabinets and stuff from Micah, and paint it, and we're done. It will harden enough to where you probably wouldn't have to mess with it for any hard maintenance for probably 8–10 years.

Window units, that’s another point. Let me talk about this. Window units. We've been putting window units in these nice trailers and we still get the same amount of rent. You guys put in central ACs, now when we buy brand new, we get a free central AC. When they break, 12–15 years are done. We're not putting back the central. We put 2–3 window units as an AC and heat. You can get them from Home Depot for $450. We put those in the trailers and they’re $450. I can get a brand new AC system for basically $1400 and I'm good for another 5–7 years.


Andrew: The tenants aren’t yelling at you when their electric bills are going off the charts?


Chris: No. We haven't had any complaints. They're getting more and more efficient with the technology with these window units and we haven't had anybody complain. They don't last as long as a central. They'll probably break in 4–5 years, but even with the central air unit, pay $6000–$7000 for a brand new central air, and after about 3 or 4 years, they have maintenance on it. It's $300–$600 every time you get called, so I could buy a brand new window unit every time I get a service call, so it just made sense. First, they go that route, and we've been doing that for 3½ years now, and it's worked out thus far. The only issue is you get an upset tenant, you kick them out, they still want to use the AC.


Andrew: They’re taking it with them. But the one thing I like about the business—affordable housing and just mobile home parks in general—is there are a lot of ways to make money. There are a lot of different models from the tenant-owned home model to the park-owned home model, to selling the mobile homes themselves, and being in that business of investing in just the mobile homes, so it's pretty cool.

If you were going to passively invest, Chris, into this asset class, what would be your top three things—maybe there are fewer, maybe there's a little bit more—you would look out for?


Chris: If I would just put my money with an investor and not being actively involved, I would look for a track record of the operator, how many of these parks has he rehabbed. I don't want somebody that tells me how good he is at it. I want somebody who has made a lot of mistakes because that's where wisdom is at. You don't learn anything when all you do is win. If you hear somebody saying that all they do is win, then run. You want to hire the right guy that has lost probably 30%–40% of the time because that guy is going to have massive wisdom on what not to do. That’s the first thing I'm looking for.

The second thing I'm looking for is obviously location. I really like port cities—New Orleans, Baton Rouge, Mobile Alabama, Panama City Beach. Port cities—from an economic standpoint—are always going to have money being circulated around, no matter what the economy does.

We own five parks in Baton Rouge, they freaking kick ass. We don't have a problem with filling them up at all. I like port cities in the south. I'm not saying I won't buy. I live in the Gulf so there's a lot of port cities. You may live somewhere in the north so that may not apply. I'm looking for economic infrastructure that can support rents—factory jobs. You got to look for jobs, first and foremost.

As far as location, I'm looking for a better location than I am looking for a better, nicer park because I can change the units or rehab the units, but I can't change the real estate. I've seen parks for sale out in the country and out far away that are newer, nicer trailers and they're selling, and it's a good deal. There's a reason why they're selling. You got to get around jobs. The rental market is only as good as the job market.

There’s another thing. I look for school districts. I go with my gut, too. I go walk the parks like what's the overall feel? What does it feel like when you walk around? What kind of vehicles are the tenants driving?


Andrew: Those are great pieces of advice right there. We spend a lot of time looking at the markets because, as you said, if there are no jobs, it doesn't matter how nice your mobile homes are. You're not going to be able to fill them. That's a big thing. Do you look for anything specific in regards to the utility infrastructure, Chris?


Chris: Yes. We preferably like city sewer, city water. We're definitely looking for that. But I do have parks where we have oxidation ponds and all that, but we do a lot of research on that before we buy. What's the overhead on that, make sure it makes sense.

Another key point that you guys got to pay attention to is if you're going to buy one of these parks, you need to call the city before you buy to make sure you're grandfathered in, and that if you want to replace an older trailer that you actually can do that, and what year, make, and model. They may want a brand new one or they may want no older than a 2015. I did that when I first got started. I bought a park and they changed some of the covenants and some of the rules, and that now, I can't even change out the trailers. If I pull the trailers out, I can't put a new one.

Basically, I didn’t think as much for smaller parks. It is still a baby park I bought when I first started an 8-unit but I can't put any brand new trailer. I can't put any trailers. We're going to have to rehab these older units, which is fine. The good thing about trailers, it's just a frame sitting on wood. There are trailers out there that look really nice from the 70s and 60s I've seen, that are totally rehabbed, and you could get them to the studs, and make them look brand new.

Everything about it is cheaper. You get almost the same amount of rent as (say) a single-family home. Not as much, but the rent-to-maintenance ratio is way better. Your overhead is going to be a lot lower.

Here's another kicker that most people don't realize. I've studied this; I looked at all the graphs. People that live in mobile home parks stay there. The average is five years. Do you know what the average is for an apartment? Fourteen months, that's the average turn-around. It made sense because buyers in these parks have been there for 15 years, 10 years. I got one lady for 22 years. For some reason, America likes mobile home parks. I just made some shirts and ads, ‘make mobile home parks great again’ because I really do. In my heart, I believe it's needed and wanted.

Not everybody can afford a $1500–$2000 single-family home now. America's going to keep getting poorer and poorer, and a lot of mandates are going to come, a lot of legislation when they come down the pipeline here as the economy gets worse and worse. They're going to probably start incentivizing investors to put parks. Whereas, for the past 15–20 years, they've been disincentivizing, trying to push them out, trying to get rid of them. Why? Because there was no tax money. They can't make any money on the property taxes. But now, they’ve got a problem where there's nowhere to live that's affordable.


Andrew: Yeah, it's one of the big deals, and as you said, the zoning is not so easy right now to get approved because of a couple of factors. Not in my backyard. No one wants to live right behind the mobile home park. And then, as you said, the tax incentives for the municipalities aren't that great.

Chris, it was great having you on the show. Thank you so much for adding value to all of our listeners. How can listeners get a hold of you if they'd like to?


Chris: If you're interested in coaching, I have a coaching program on the wholesaling, flipping side, and in the mobile home park investing. Go to chrisrood.com and book a call with me and my team. If you want to follow me on Instagram, @realestaterood.

I share my whole life. Me and my wife ride around all day looking at parks, flipping houses, we do land development, we own short-term vacation rentals on the beach. We’re true real estate investors. Our whole living is made off of real estate, and we don't just flip houses. I do a lot of different things in this space. You can follow me there.

I do a lot of Facebook Live, just giving free content every week at Chris Rood Entrepreneur on Facebook. Me and my wife do Facebook Live, trying to help people get started in the business. Follow me there and if you're interested in coaching, hit me up.


Andrew: Awesome, Chris. Thank you all so much for tuning in. If you like the show, please hit the subscribe button so you're set up to receive all of our future interviews with rock stars in the mobile home park space. That's it for today. Thank you all so much for tuning in.


Want to see mobile home park value-add projects in progress? If so, follow us on Instagram @passivemhpinvesting for photos and awesome videos from our recent mobile home park acquisitions. Once again, that's @passivemhpinvesting on Instagram. See you there.

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