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  • Andrew Keel

Interview with Gabe Petersen of Kaizen Properties

Updated: Dec 23, 2021




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 Gabe Petersen of Kaizen Properties. Gabe brings his unique perspective on manufactured housing, being that he has just acquired his second mobile home park. Today he shares his story of how he left corporate America so he could pursue financial freedom through real estate investing (mobile home parks and self storage facilities specifically). Now with two mobile home parks under his belt, he discusses the importance of property management, what he has learned from being a passive investor, and his company Kaizen Properties.


Gabe has had quite the transition in his professional life, he went from pursuing a philosophy degree at the University of Washington to dreams of law school and landing his first job in consulting. He went on to become a project manager and business analyst, then finally fell into wholesaling and flipping real estate in the Pacific Northwest. After that, everything fell into place for him as he settled into mobile home park and self storage facility investing, where he feels he fits best currently. Gabe also hosts the top ranked 'Real Estate Investing Club’ Podcast where he focuses on helping real estate investors take their businesses to the next level.


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


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


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



Talking Points:

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

01:22 - Gabe’s story and journey into the real estate investing world

03:40 - Gabe’s mobile home parks and how he puts deals together

07:20 - Gabe’s plan for his first trailer park

09:10 - Gabe’s second trailer park in Moses Lake, Washington

11:33 - Gabe’s management strategy

12:40 - Toughest hurdle

14:41 - The most important thing Limited Partners need to look out for

17:00 - The plan for Gabe’s company

18:19 - The perfect mobile home park

21:00 - Andrew’s advice for Gabe

23:13 - Mistakes Gabe has made

25:22 - The value proposition at Kaizen Properties and what makes them different 28:06 - Getting a hold of Gabe and Kaizen Properties

28:36 - Conclusion



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Links & Mentions from This Episode:

Kaizen Properties: https://kaizenpropertiesusa.com/

Gabe’s Podcast: https://therealestateinvestingclub.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

 

TRANSCRIPT


Andrew: Welcome to the Passive Mobile Home Park Investing podcast. This is your host, Andrew Keel. Today, we have an amazing guest in Mr. Gabe Petersen of Kaizen Properties. Before we dive in, I want to ask you a real quick favor. Would you mind please 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. Thanks for making my day with that review of the show. All right, let's dive in.

Gabe is a mobile home park and self storage investor, and the host of the podcast, The Real Estate Investing Club. After working corporate and dabbling in real estate for the better part of a decade, Gabe decided to take the leap full-time into real estate in 2019. Since then, he has purchased two mobile home/RV parks and four self storage facilities across three states. Gabe is based out of Seattle Washington and we're excited to have him. Gabe, welcome to the show.


Gabe: Awesome. Thanks for having me. I'm excited.


Andrew: Let's start off by just hearing a little bit about your story and what got you interested in manufactured housing.


Gabe: For sure. I like to tell my story just because I know other people out there also got started in the corporate world, and they are looking for a way out. That's exactly where I was more than a decade ago. I graduated UDaB with a degree in Philosophy. You can't do anything with Philosophy. I planned on going to law school, but I followed some lawyers and I was like, this isn't the job for me.

Got into consulting. I was a project manager and a business analyst for about 7–8 years. The job was fun, I just didn't like being in corporate. I didn't like having to drive an hour-and-a-half everyday to get to work. I didn't really like the lack of freedom and the lack of self-direction that I could have in the job.

Probably about five years in, I started looking for a way out. What can I do? I wanted to start my own business. I tried an ecommerce store; that didn't work. Or actually it did work; I just didn't like the job. I tried marketing for other people because I got good at marketing in ecommerce. But again, I was just kind of sitting behind the computer and I didn't really like that.

I actually read Rich Dad Poor Dad, which is the start of so many people's stories out there. I love it, and I decided to get into real estate. That's when I started wholesaling, doing some flips, and that kind of led me down the path of real estate. About eight years into the corporate world, I decided to take the full leap, get out of corporate, and dive headfirst into real estate.

It took me a while. It took me about 6–8 months, but I bought my first mobile home park out in George Washington with some partners, bought the second one shortly thereafter, and then I got into self storage. I bought four self storage. That's kind of condensing the story down, but here we are today.


Andrew: That's fantastic. Congratulations on your success because that's not your typical ramp up going from just dabbling all the way into commercial. That's super awesome.

Tell me a little bit more about your parks—how you put those deals together, the size of them. Give me the lowdown.


Gabe: I always start with how we found the parks because I feel that, especially when you're just getting started, that's one of the most difficult things to do is find a good deal. I mentioned before, I had a little bit of a background in marketing. I joined some partners and we started marketing for properties, off-market marketing. We did some mailers, we didn't have a ton of success with mailers, but we did RVM (ringless voicemail), and text marketing. We had a lot of success with that.

We got the first one in George through an RVM, I believe. It's just a voicemail drop that goes into their inbox and it just said, hey, we're local investors. We'd love to make you an offer. If you're interested, we got a call back. They said yes, we'd love to.

One of my favorite things about real estate is talking to sellers because they all have crazy stories. This guy owned this park, obviously, but his main business was potatoes. He's like the potato king of Washington State.

What people don't know about Washington is we’re one of the biggest producers of potatoes; we rival Idaho. This guy was just dominating over potatoes and he wanted to create kind of a themed city in George. He bought tons of land, tried to go down this path, and realized my strengths are potatoes. I can't do this.

He started selling off. He tried to sell everything that he owned in the city. George is a really tiny thing, but he had to start parceling it out. We call them about this park. He's like, sure, whatever, let's sell it. I don't want this. I got to get back to my potatoes.

We got a good deal on it. It's not a great park. It was kind of rundown, but that's where the best deals are. We bought it for $450,000 and we got seller financing on it. It's a 10-year note and we got really good interest. I can't remember. I think it was 3.5%. I don't remember the numbers. I think it was 10% or 15% down, so really low.


Andrew: How many lots is it?


Gabe: Twenty-seven lots and we're adding 4. It also has a duplex on it, but the duplex is completely rundown. We're more leaning to the side of demolishing it than rehabbing it. Each site right now rents for $350, but the market rent is around $400–$425, so we're slowly increasing it to that. It's on city water, city sewer. Unfortunately, they're not submetered, so the water bill’s included in the price.

So far it's been a great deal. It's all migrant workers. We own this other park and they are not migrant workers. I really like owning property that services the migrant workers because they're always on time with their payments. It's just a very, very good demographic to be providing housing to.


Andrew: Awesome. What's your plan? You said it's not submetered, the one that's 31 lots (or 27 plus the four). Are you going to submeter it. Have you guys thought of doing that? It seems like a no brainer.


Gabe: We thought of doing it. We went down that path and I don't remember why we decided it wasn't a good point right now. I wasn't the one that got the bid, but I think it was something to do with the actual connection. When you get the submeter, it was like Water Metron or something like that.


Andrew: Metron Farnier? That's what we use with the radio reads. It's first class. It's not that expensive, unless maybe the city wouldn't allow you to submeter or something like that, which we ran into before, but a lot of times they're on your side because they're conserving the total amount of water. I highly recommend it. If I was you after this podcast, I would get on the phone with Bill Beard, I think is his name, with Metron and you should seriously consider submetering that park ASAP. That's the easiest value-add you can do.

What we found when we submeter a park, the tenants instantly start using 30% less water than they were the month before. It's a no brainer. You guys, obviously with the seller financing, everything got a really great deal, but I would definitely juice it. Unless you want to sell it to me and leave it unsubmetered, then I'll come in and submeter it.

Gabe: No, it is a good idea and it's something we need to do. We've been focusing on other things prior to that, but it is something that we probably should do. There was something to do with the actual connection of the meter to the water.


Andrew: Main meter to the water lines?


Gabe: Yeah. There's some other work that had to be done and it cost like $20,000. We're like, no, we don't want to do that right now. I can't remember what it was, but there was something there.


Andrew: Got you. That was 27 lots. Tell me about the other one. You have another one in Washington as well?


Gabe: Yup. That one's in Moses Lake, which is probably about 30-ish minutes away from the original one. Again, that one we got through RVMs. Again, we got seller financing on it, and it’s just an absurd deal. He gave us 2.6% interest. We got it for $650,000 and there are 47 units there. Nine of them are mobile homes and the remainder are long-term RVs.

Luckily, both of the parks are 100% full. The Moses Lake one is renting at $450 per unit. It originally was a KOA or something like that. I don't know if it’s specifically KOA, but that's how it kind of functioned. The very front of the park has this big structure on it. It used to be like a community space.

The top has an apartment and that's where our property manager who manages both of the parks. She lives there, she has the bottom to herself, she has her office, and then there's communal bathrooms. This one is on well and septic, so it's different than the George one, which is interesting because it saves a lot of money.

I was always against well and septic when we were learning. We were taught don't ever buy well and septic. It's a problem. I like it. It saves a ton of money. We had to replace one septic system. It was actually pretty expensive. It was like $30,000.


Andrew: How long have you owned this property, the Moses Lake one?


Gabe: That one, we bought in March of 2020.


Andrew: There's still time.


Gabe: For things to go wrong.


Andrew: There's still plenty of time for things to go wrong. Just from experience of owning and operating private utilities, it seems like it's not that bad. Not that it can't be right. It's all how it's maintained. If it's maintained well, it can last. But you definitely have to find a good manager that's going to make sure to keep it maintained, keep the lines clear, and all of that kind of stuff. That's awesome that you already got those two. How do you manage them? Do you just manage them in-house?


Gabe: We hired the property manager and we got really lucky. She is amazing. Property managers in my opinion can make or break a deal, and when you get a good one, it's night and day. She's great and we love having her. She manages both the George property and the Moses Lake property.


Andrew: That's great. I'll never forget the very first park that I bought. It was a husband and wife management team. Her husband was very handy, the wife was very diligent and tech-savvy, so it was the perfect match. She's still with us to this day and it just was like, if this is what mobile home park management ownership is like, I want to buy a ton of these. This is great. Then we've run into other hurdles where not every management team is as good as that one, but yeah, that's wonderful.

Tell me, what has been the toughest hurdle for you in the business, Gabe? In the mobile home park business? I know you have other stuff going on.


Gabe: The toughest hurdle. Let me think about that one for a second.


Andrew: Is it management? Is it acquisitions? Is it financing? What would you say? It's obviously not the financing with the seller financing you're getting.


Andrew: We got lucky. I've talked to a ton of other sellers and not many of them want seller financing. I'm sure you've seen the same experience, but we got really lucky with those and we're happy with that. In terms of the most difficult thing, it's been really good. I'm knocking on wood right now because it's been really good with those two properties. Probably management if I just had to choose something just because tenants can have things come up and break things.

Management is probably number one, and also the Moses Lake property, that structure that I was talking to you about, that one had a lot of issues. We had to tear out a bathroom. We had to do quite a bit of stuff to that to make it livable for Katrina, the property manager.

It's not that big of a deal. I don't want to complain because it's just a mini flip. It's probably the hardest thing in terms of what we had to deal with.


Andrew: You had to deal with thus far, right?


Gabe: Yeah.


Andrew: Okay. You bought both of those properties, 2019–2020?


Gabe: I made the leap 2019, but it took 6–8 months to even buy one. The first property was bought in 2020, wait was that 2019?


Andrew: Either way, they're fairly recent. They're going well and you're just kind of getting your feet wet. That's great.

Let me ask you this just from your perspective. What would you say are the most important things passive investors (like LPs) need to look out for when investing into mobile home parks? Obviously, they don't need to know if homes have shut-offs underneath the homes and things like that. They're looking more at the bigger picture. What tips would you give them just knowing what you know now?


Gabe: As an LP, the first thing you need to look for is the track record of the general partner. That's number one, if they've done it before. It's really hard because when you're a new investor and you're trying to get people to invest with you, you don't have that track record, it's really difficult to get the investors to jump on board.

As the LP that's really something you got to look for. Has this person successfully executed a deal before? Have they taken a park that was in bad condition, fixed it up, brought it up to market, increased the value of the property? And can they actually deliver on their promises? Probably just the track record of the GP is number one.

I think that's the most important because if you trust your GP, then you don't really need to know too much more about the the actual operations or underwriting of a mobile home park, but if you're interested in that, I think it's really important to understand what makes a good deal and why there's going to be a good return on a property.

Understanding the metro, understanding market rates, doing your own research, looking into a metro scene, maybe even call a few mobile home parks in the area to verify that the investor, the GP that you're going with, has done his homework, is actually getting into a good deal. Stuff like that is probably the easiest thing that an LP can do to verify that it's a good investment.


Andrew: Definitely. Tell me, Gabe, what's your plan for the future? You have these two parks, things are going pretty well with them. Are you going to continue to grow the mobile home park space? It looks like you're also into self storage and that's going well. What's the plan for your company?


Gabe: I was lucky up until the last deal I did. I was able to do it with my own money. I just did my first deal where I brought on outside investors to take down the self storage facility. That's the goal. I kind of got the taste.

I really like making other people money. I like the process of investing itself. Just finding something that needs a little love, giving it that love, and then seeing the end result. I've gotten the bug for bringing other people along and really helping them out in terms of return on their investment. That's the goal going forward.

I like both mobile home parks and self storage. They're two different things, but I really like both of them. I've also looked at retail commercial, kind of like strip centers. I think that's something that I might do in the future, but right now it’s just self storage and mobile home parks. I'm going to keep going down that route.


Andrew: Very cool. Both of those are good. We recently got into some storage as well and it's a good complement to parks. Parks are still our main bread and butter.

Let me ask you this, Gabe. What is the perfect mobile home park look like in your eyes, and why?


Gabe: Perfect mobile home park. Oh, that's a good one. I think there are two different types of perfect mobile home parks. There is the flip perfect mobile home park and then there is the ‘just walk into it, buy it, and you're done’ perfect mobile home park. I'll start with the second one.

It would be ideal if there's a mobile home park that is on city water, city sewer, it's all sub-metered. It's got a really good property manager in there. It's got paved roads, maybe a little bit of skirting. All the homes are really nice, gating, there's a sign, a really clean mobile home park, and if you got it for an eight cap. If it's a perfect mobile home park, it's in great condition, all the homes are relatively new, and you got it for an eight cap, that would be great.

On the other side, a flip, and perfect in that sense, you just got to love them as they are. If you're doing value add, you can't look for perfection. You got to take them as they are and run with it, but it really just comes down to can you increase the value? Are rents under market? Is there a good opportunity for you to really bring the value of the property up in terms of cleaning it up, repairing maybe broken lines, anything like that? Is there a good opportunity to improve value? Is it in a good metro? For value-added property, you got to love it as it is.

Andrew: I think that's the thing. You got to be prepared for the project, right? In storage, it's a little bit different. You kind of can do that market research, and a lot of your value-add can be just raising rents because a lot of the mom and pops haven't.

The value-add in mobile home parks is a whole different ball game. It's a lot more labor-intensive and bringing in homes, especially, is a big undertaking. Have you done any of that yet in any of your parks?


Gabe: I mentioned we bought it 27 units and we're adding 4, so we just added 2 of them. One of them, somebody came in, they wanted to bring the RV, so we allowed that. The other one, it's our first site that we're actually bringing in a home. We found the home, it needs some love, but it's almost like $6000, so it's really cheap. We're going to bring it in and this will be our first experience.

What advice can you give us?


Andrew: Oh, man. What advice? I would say, number one, make sure your foundation is good. I'm not sure if you require concrete footers or piers, or anything like that, but make sure you have the the inspector come out beforehand, before the home gets there, and make sure that the foundation is good, because some states require a certain concrete, footers or piers, and then they'll also require a mounting so that water doesn't sit under the home. Just make sure the foundation is good.

Then also before you get the home on the lot, make sure your utility connections are there and clear. A lot of times with vacant sewer lines, vacant lots, for example, kids will come in, take off the top, and put rocks down the sewer line. Then you get the home on top and now it's twice as much to snake that line. I should have done it before the home was there. I know that from experience once or twice.

I've done that a couple of times, unfortunately. The water lines, making sure that you have a new fresh shut-off on there while there's not a home on top, because it's way harder to do once there's a home on top, so some of that kind of stuff.

I know your parks are up north. When you bring that home in, I would spend the extra money and do insulated skirting or metal skirting. Insulate your water lines and things like that under the home so that you prevent water leaks because those lines will freeze and that's no fun.


Gabe: I just learned that there are heated hoses so you don't have to put heat tape on it. It's just a hose that is heated. This blew my mind. That's genius.


Andrew: Over top of the water line? You just put the hoses over top of it? Or is it the actual lines that go from where it's coming out of the ground into the home?


Gabe: No, I guess that the water line itself is itself, but I'm talking about just the hose that you'd connect. We're thinking of RVs here, but the hose that connects to the RV, they have heated hoses, which is great.


Andrew: Wow, that's very cool. Gabe, what are some mistakes that you made with these two mobile home parks?


Gabe: The biggest one that jumps out to my mind is onboarding a property. The first park we did, it was just a [...] show. Sorry for swearing on your podcast, but it was just crazy. We were not organized enough, nobody was on a lease. We had to get everybody onto our lease, and we did that. We threw a barbecue.

Most people in the park spoke Spanish. I was the only one who spoke Spanish in the partnership, so we were just trying to corral everybody. There was no real organization to how we're getting everybody signed on a lease and explaining to them what the new ownership is, et cetera. That was probably the biggest mistake we did because we left there. We just had a pile of papers and we didn't even know if we had everybody signed. It was just like, oh, God. I didn't know what just happened.


Andrew: I've been there. We have a park that primarily, they speak Spanish. It's really tough if you don't have someone that's fluent to communicate with, so we ended up, our onsite manager was bilingual and she actually translated the whole lease into Spanish. That was huge because then they understood the rules, and they understood the things that were in there. You're fluent in Spanish?


Gabe: No, that's the other problem. I'm not fluent. I'm decent.


Andrew: Decent. Oh, my goodness.

Gabe: If someone who doesn't speak Spanish hears me, they'll think I'm fluent, but I'm definitely, definitely not fluent. It was a challenge, but we got through it.


Andrew: It was a challenge, but you learned, and that's what's most important.

Let me ask you this, Gabe. What is the value proposition at Kaizen Properties? What makes you guys different? What would make an investor want to invest with you guys?


Gabe: Value proposition, I guess there's multiple ways to look at that from whose perspective you're looking through. In terms of the customers at our self storage facilities, we're always improving our facilities. When we buy them, we really have high standards for having a quality facility that has all the amenities that you would expect in a grade A facility, even if it's not in an A-class structure. We're looking to do the A-class service, even if it's not a double-storey climate-controlled kind of thing.

From the investor side, an LP coming in to invest with us, the value proposition is really the experience. I'm sure you've done, I don't know how many deals. I've seen you on social media, you guys are crushing it, you're doing a really good job out there.

You have a ton of experience, but I'm getting up there. We're going to deal number six years, something like that, so we have a lot of track records or a track record of excellence. All of our deals have done very, very well. That's kind of the value-add.

I don't go into deals that are not absolutely out of the park rate. When you invest with us, then you know that you're going to have a good return.


Andrew: That's great. I would say that I learned probably 80% of what I know in the first five parks that we bought. The first five was this drastic learning curve of taking everything in. Since then, there's been little tweaks here and there, but those first five were the most important.


Gabe: Drinking from the firehose.


Andrew: Yes, definitely.


Gabe: If you don't mind I ask you a question, how many parks do you guys have in your portfolio?


Andrew: We have 33 parks in our portfolio. We've been blessed and things are consistently growing. We purchased 10 this year, so it's been a really good year for us. We're really blessed. Some of them are pretty big value-add projects. We're facing supply shortages, tough getting contractors and things like that, which I'm sure you and other investors are facing the same struggles, but I'm really proud of our team. I couldn't do it if it was just me. The team is what helped what has helped us get there.


Gabe: Absolutely.


Andrew: Awesome, Gabe. How can our listeners get a hold of you if they would like to do so?


Gabe: The best way, Kaizen's website is kaizenpropertiesusa.com, or you can go to the podcast and that's therealestateinvestingclub.com.


Andrew: Awesome. Thank you so much, Gabe, for coming onto the show and adding value to our listeners. That is it for today, folks. Thank you so much for tuning in.


Gabe: All right. Thanks, Andrew.


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