Interview with Hansel Rodriguez from COARE Communities LLC
Updated: May 10
Listen on Apple Podcast here: https://podcasts.apple.com/us/podcast/interview-with-hansel-rodriguez-from-coare-communities/id1520681893?i=1000608184366
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 Hansel Rodriguez from COARE Communities LLC. Andrew and Hansel discuss why choosing the right team for your property management company is so important. They also discuss why finding the right mobile home park properties to buy can be the toughest hurdle when scaling as a mobile home park general partner, syndicator or operator. They touched on why increasing lot rent in mobile home communities without it being justified can have negative consequences and why the most recent population and migration changes are creating new opportunities within the MHP and land-lease community marketplace.
Hansel is the principal of investment strategy and acquisitions at COARE Communities. COARE communities focuses on acquiring manufactured housing communities across the U.S. Hansel began his real-estate career in multi-family and affordable housing development at Taft Development Group, a multi-family developer with 4,500+ multifamily units and 100,000 sq. ft. of commercial developments to date. Hansel also supported the advisory efforts of numerous transactions including Stanley Black & Decker's $1.9 Billion takeover of Newell Tools. In his free time Hansel likes to volunteer on the Friends of St. Judes fundraising committee for St. Jude Children's Research Hospital and serves as a Disaster Response Volunteer for the American Red Cross.
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 total 5-star reviews by the end of 2023, 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.
00:21 - Welcome to the Passive Mobile Home Park Investing Podcast
00:51 - Hansel Rodriguez introduction and journey into the mobile home park industry 06:40 - House flipping as a side hustle
08:30 - The toughest hurdle to overcome in mobile home park investing
12:46 - The evolution of Hansel's mobile home park strategy
19:00 - Mistakes we can learn from in MHP investing
20:30 - Hansel's property management style
23:50 - Most important thing passive investors should look out for when investing in mobile home parks
27:03 - Hansel's perfect mobile home park
28:50 - Go-to value add items
34:53 - The future of the Mobile Home Park market
39:37 - One last tip for investors
43:35 - How important is liquidity as an operator
46:10 - Getting a hold of Hansel Rodriguez and COARE Communities
47:00 - Conclusion
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Links & Mentions from This Episode:
Hansel's email: firstname.lastname@example.org
COARE website: https://www.coarecommunities.com/
Keel Team's official website: https://www.keelteam.com/
Andrew Keel's official website: https://www.andrewkeel.com/
Andrew Keel LinkedIn: https://www.linkedin.com/in/andrewkeel
Andrew Keel Facebook page: https://www.facebook.com/PassiveMHPinvestingPodcast
Andrew Keel Instagram page: https://www.instagram.com/passivemhpinvesting/ Twitter: @MHPinvestors
Andrew: Welcome to the Passive Mobile Home Park Investing Podcast. This is your host, Andrew Keel. Today, we have an amazing guest in Mr. Hansel Rodriguez of COARE Communities. 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. Thanks for making my day with that five-star review of the show. All right, let's dive in. Hansel is the Principal of Investment Strategy and Acquisitions at COARE Communities. COARE focuses on acquiring manufactured housing communities across the United States. Hansel began his real estate career in multifamily and affordable housing development at Taft Development Group, which is a multifamily developer with over 4500 multifamily units and 100,000 square feet of commercial developments to date. Hansel, welcome to the show.
Hansel: Thank you.
Andrew: I was just thinking earlier today, I've been wanting to connect with you. We haven't really bumped into each other at any conferences or anything. But I'm excited to get to know you a little bit better on this podcast.
Hansel: And likewise. I've heard a lot of great things about you, so it's about time we meet. I'll just say that this is my first podcast. I've listened to a lot of your podcasts historically, so I'm excited to see how it all works when you're actually on the interview.
Andrew: Awesome. Thanks so much again for coming on. Would you mind telling us about your story and how in the world you got into manufactured housing communities?
Hansel: My background is pretty interesting. I'm a first-generation kid to go to college and all of that. I really didn't know much about real estate investing or really business in general. I'd started with my dad's liquor store back when I was 12 years old. He would have me stock shelves and stuff like that. From there, I wanted to learn a little bit about business. I went to college and ran into this family office developer, the Taft family. For whatever reason, I asked. They were very nice to hire me as their first ever unpaid intern. I annoyingly kept asking them, hey, how do you put a model together? How do you do this or do that? Long story short, that's really where I started back as a sophomore in college. From there, I learned a little bit about real estate and jumped into a single family, built a little fix and flip business, and then went into finance for a couple of years. Four years, specifically, more on the M&A side of the world, essentially advising companies on how to buy companies. From there, I read a bunch about manufactured housing. I loved the strategy. I loved the fact that a lot of these owners are family oriented owners like my dad was when he started his career. Funny enough, I ran into a guy who you may also know, Corey Woodruff, to buy my first property. He had been a dealer and he'd touched a lot of different things, so we partnered up together and ended up being a great success. I bought that one with him, but two more. Then in November of 2019, I left my last job to do this full time. Since then and now, we've grown to 19 assets, roughly 1400 units, mostly in Florida and the Sun Belt states. It's been a very unique journey, not how I would have just been in my career coming out.
Andrew: That is fantastic. That is such a cool story. Let's go back to the liquor store. Your dad had a liquor store. Do you know Gary Vee? Gary Vaynerchuk?
Hansel: I've obviously heard it from the Internet and stuff. He's a complete hustler.
Andrew: There are some parallels there, though, because that's how he got into the wine box delivery?
Hansel: Distributor, yeah. For a lot of people, my dad came here in the 70s. For a lot of people, first generation, it was either convenience stores, gas stations, liquor stores. My dad got into supermarkets a little bit as well on the grocery side. It was completely an education for sure. He had me stocking shelves, learning how to even count cash and all that stuff. Very different from some of my buddies that were out playing baseball directly. You're right, now Gary Vee is crazy with that stuff. He's super popular.
Andrew: That's awesome. You have the entrepreneurial spirit from your parents early on, your dad. That's so cool. The unpaid internship, that is so brilliant. Your sophomore year in college with the Taft group, how did you get that? Was that through your university? How did you stumble upon that?
Hansel: I reached out. I was in a small town, Greenville, North Carolina. There weren't many. There weren't a ton of developers in town. Someone had told me, oh, you should look into real estate. I said, well, I don't know anything about that. I started talking to different folks and learned about Taft. They owned student housing developments in town. I ended up working at one of the leasing offices to learn a little bit, but really just I could pay my rent where I live, and they mentioned this family. Taft senior, Taft junior, were amazing people. I was shocked at the amount of time that they would spend. There are a couple of other good mentions. Dustin and Mike just would sit down with me. I said, initially, look, I don't need to make any money. I'd rather just learn. What is a multifamily deal? How do you do it? They did something very unique in the tax credit space I'd never even heard of. They would just sit me down. I'd listen to the calls and stuff, it was awesome. I was spending money on gas to get there. When you go to college and you don't really know what you're supposed to do, everything feels normal. That was the result of just reaching out directly. Lucky enough, they were nice enough to bring me in.
Andrew: Hansel, if I can teach anything to my kids how I wish I would have got started, is hey, go work for somebody for free. Just show up at their door and say, hey, I'm free labor, I'll do whatever you want me to do, and get in the door and just soak up as much as you can. That's really cool. Kudos to you for taking initiative and getting in the door there. After college, single family home, fix and flip. I did the same. I had a similar path in residential. You had the consulting thing and then you're flipping on the side. Is that how that worked out?
Hansel: Yeah. I will say, I wasn't trying to be a mogul back then. I was flipping contracts. I would find an owner at what I thought was an honest price and then try to sell to an investor that actually had the money. That was a different time. As a sophomore in college, it's very hard to try to convince people to give you money. That was just a funny way to pay bills. There was one deal in particular, where I made my first real profit, and that was life-changing. I ended up also hiring a bit of an intern at the time. We just started analyzing, putting as many offers as we could out in the market, and it worked out great. A guy named Anthony, he was just awesome like I was. We ended up doing 40 homes in that business, which is a huge number. Given that wasn't all in college, it progressed in my career in partnership with some folks. Everything in life just happened. It's a great place to start. A single family house, not too hard to understand in value. There's always somebody, you just have to understand the price. It was a great place to learn how the real estate process goes from soup to nuts.
Andrew: Totally. The construction management and all that, that's just invaluable experience. You've probably learned so much there that you couldn't learn in school, right?
Hansel: 100%. Construction is incredibly unpredictable. I always had a good partner there. We'd had deals where we thought we're going to make a great margin, and construction's delayed three months. Probably the most I've ever learned was it was them doing houses.
Andrew: That's so awesome. Nineteen assets, 1400 units all across the Sun Belt. That's a fantastic portfolio. What do you think is the toughest hurdle to overcome in mobile home park investing?
Hansel: A couple of things. Do you mean in the current environment or just in general because the world changes, too?
Andrew: The world has changed. I have another question down here. We'll talk about the future and where we're at right now with interest rates and everything. But right now, just for you, breaking into a portfolio of 1400 units, maybe you can just shed some light. What were the toughest hurdles you had to overcome?
Hansel: I think the biggest thing is speed. I selfishly wanted to grow very quickly. Even though we've been around for three years and some change, I really left my job in November of 2019. From there to now, growing at that pace was challenging. I'm always trying to identify who the right team was, who's a good operations person and accounting person. That's difficult. I think that's where a lot of people get it wrong. The second piece is definitely just acquisitions. As you saw as well, in the Sun Belt, it was so competitive at prices that if you didn't keep in mind the context, you could have easily gotten a little too excited and overpaid for certain things. To be disciplined in the last 12–24 months prior to this year was difficult, especially when you're eager to grow. That was difficult. There were a lot of good deals that I felt we could have made work, but we walked away with just that uneasiness about what could happen in the future. Those were the two biggest things. People don't give it enough credit. Scaling at a reasonable pace is something that requires basically more than your full time—your entire day, including weekends. When you grow, though, it sounds like you've been able to achieve very successfully, then it's really about the team. You could say all day you can handle all of it, which I have an obsession with. I need to get better about delegating. But I will say, the importance of knowing who to pick and put in those seats has been life-changing for me. I'm still learning that every day.
Andrew: Don't we all need help delegating? Similar to you, these are my babies. I don't want to just pass them on, and it's been tough. But yeah, building systems has helped tremendously. I want to go back to what you said about speed because a lot of people don't realize, at least for me, I self-managed my first five parks before I brought on anybody else. I always tell people, we manage our parks so much better now compared to when it was just me wearing all those hats managing those five. From me paying all the bills, opening all the mail, sending out the checks, doing the collections, managing everything, to now where we have people that we can actually have a good management company and silo off different divisions, has been huge. I agree with you speed and getting enough scale to be able to hire out certain roles is so important. Otherwise, you're literally running around like a chicken with your head cut off.
Hansel: For sure. I'm sure it's a question you get sometimes from investors like, oh, well, how can you continue the pace of growth and what you're doing? It's funny, it never changes. To get from 1000 to 10,000 is an instrumental step of a different approach. From 10,000 to 20,000, you never stop figuring that out. I think, personally from our company, when we hit about 500 sites, there was just a difference and we could finally afford things. When we hit 1000 sites, accounting became the most important function in the company. It was no longer you can just run around and manage it in-house. Again, we bought smaller communities, so the 19 communities are still a much smaller number of units. But still, to this day, it's all about the numbers. Who knows what the next 1000 will bring? It's an evolving art.
Andrew: It really is, but kudos for you for getting up to 1400 units. Getting over 1000, that's a tough number to get over and get the right people on board and everything. Fantastic. Let me learn about your investing strategy like your mobile home park strategy. Maybe that started out one way, then maybe you can tell us about that, and then tell us what it morphed into today and what your target park looks like.
Hansel: When I started, I would generally say I was basically just trying to find the right opportunity. We bought a little transaction in the Midwest, in Michigan. It was a good starter park, it was small, 57 sites. I think as we've grown and evolved, we've gained appreciation for a couple of things. It's no secret, the big change of not only employment, but also population. There are a lot of folks that post-Covid and the pandemic have really moved towards the southeast and southwestern markets. You've heard these things. Californians going to Arizona, New Yorkers going to Florida, whatever. And even folks from the Midwest wanting warmer weather, New Mexico, and places you would have never thought of 30 years ago. That has been a fundamental shift in not only where people want to live and where they want to work. There are some other pockets like Idaho and these markets. It just changed. Now you layer in the post-Covid world of less office. I was in a meeting last week, a New York office. Don't quote me on this, but 47% occupied. If you walk around Midtown in New York and you look at night at how many windows don't have a light on, it's terrifying. One out of every two if you take the statistics seriously. I think when you look at that and you see where people want to be, that before, 20 years ago, they didn't have that opportunity, we want to follow that trend. Selfishly, we own the most assets in Florida. We want to own in the Carolinas. We are very interested in the Southwestern markets and the South markets, where we have stayed away from, which I think is a little different from your strategy. I'm curious to hear what you think about the world. That has been the general general focus. What has changed and will be a challenge I think for us and guys in the southeast is the economy has changed. Everything about what we saw pre-Covid and even that little exciting time after Covid when things finally got back better, has changed. In places like Florida, specifically, insurance costs. Hurricanes are a real thing. We can do all the diligence in the world. But the biggest risk, when you think about Florida as a market and Texas on the coastal side as well, is you just cannot predict the severity of future weather events. We think about that in terms of diversification. We love the growth in Florida, and we want to be a part of it, but we're not going to put all of our eggs in one basket. We think a diversified fund is the format for us to do it successfully. That's something we'll need to really pay attention to. We're living it every day. There's no answer to that today. We're learning as the market gives us the variables.
Andrew: That's awesome. What about size in utility setup? Do you have any specifics there or will you just look at anything?
Hansel: I will say what has changed. When we first started, we went to smaller communities because pricing was crazy. There was a point in time where it's public knowledge now, but cap rates for MH were lower than multifamily, lower than some bonds to give you just a crazy example. It was like, hey, I can go buy a mobile home park and pay more than a good bond in the public markets. It's scary. We said we wanted to be a part of Florida, but we didn't want to be exposed that way. God forbid, interest rates change. What we did was we bought those smaller deals. I think now, what we're seeing is a lot of groups are on the sidelines waiting to figure out where the world will be. Some of them took some financing risks that we would not have taken. We put fixed rate debt with 5–10 years of term, so we know what our interest cost is for a long period of time. Other folks might have taken the risk of interest rates changing. Going forward, we have seven opportunities that we're working through right now for our 2023 fund. We're continuously offering. The average size now is well over 100 sites for those assets. It's a moving target. What fundamentally is the same is we want to continue to chase the theme of the Sun Belt and that Southeast, Southwest. We want to chase markets that are business friendly. We think that's going to be the Southeast and Southwest, and we want to continue to focus on it. On utilities. I will say I wish we were sharper about that. At the end of the day, I think if it's septic and well, we can quantify the risk there. We're willing to buy that. We're even willing to do a wastewater treatment plant. It just comes down to due diligence and figuring out costs there.
Andrew: Sure. That makes a lot of sense. Awesome. Thank you for sharing. My strategy has been Midwest-based.
Hansel: I want to hear about that. I've always been so curious about that.
Andrew: We've been targeting these secondary, tertiary markets that are not your explosive population growth markets, but they stay the same Midwest markets. Your Des Moines, Iowas; your Sioux Falls, South Dakotas; your Bismarck, North Dakotas; and those types of markets. We've just honestly found better deals compared to the deals in Florida that we've looked at. Hansel: No question. There's no question at all. You've probably gotten a way better price.
Andrew: I do think of the Sun Belt, obviously. The migration patterns, it's clear as day that people are moving to the coastline. I totally see the value in your strategy.
Hansel: No, I'm looking, and that's the thing. We talk sometimes to the same investors. I always say at the end of the day, one provides much better yields. We can never pay the kind of dividends that you're able to deliver. I think that's probably one of the best things I've seen or heard from your group. It's such good pricing. In our world, we're buying growth stocks. When you think about our world, well, you did, I think the world is changing. Historically, the dividends were lower, but you had so much more growth. It's a trade-off. Neither is better work.
Andrew: That's a really good point. What mistakes in mobile home park investing have you made that we can learn from?
Hansel: I am a person that's probably too obsessive about speed. I've been very blessed with the team that we have now, but there were times I did think that management is just like acquisitions. You find a deal, you got a checklist, you go through it. Management, it is so much about the people, the company, the brand, and the reputation. For me, that was a discovery and just figuring out who the right person is to manage people. Not to say I'm a bad manager; I hope my team wouldn’t say that. I'm just one of those folks that when I see something, I want to go. Managers, at least today, we have a great one—Jay Eben head of operations. He is a thoughtful guy, will sit through, and understand people's challenges, where they want to grow to, and where they want to be in a couple of years. It's not that I don't want that, but sometimes I get lost in what's going on today. Jay is able to say, Hansel, these are the things you need to think about. That to me has been a life-changing learning experience. I just can't imagine what will be just as impactful. I hope I'm getting better at that. It's that disconnect. I'm sure you live it too, between growth and acquisitions, and just thinking through the deal lens. And you also have a company that you need to pay attention to and think about strategically from people and where we're going as a direction.
Andrew: That's good. Management, maybe you can talk a little bit about that. Are you guys managing all your assets in-house? What does the management operations look like?
Hansel: From a management perspective—and I am curious to hear how you guys do it as well—I do believe that the best management is done in-house to the extent you can do it. We basically grow our management company linearly to the acquisitions that we do. If we buy in any market, we want to hire a good, talented manager down there. A lot of times, we actually keep some of the people that come with an acquisition. That said, as we get bigger in certain markets like Florida, we've grown regional managers and those sorts of things. We manage everything in-house, even our accounting. Again, that goes back to my core principle of I do like speed. When I get financials from our company internally—I get it every Friday—if we had to depend on an outside firm, it would be maybe every month. On the management side, when we have issues, I know about it that week, or at least we tried it to the extent we can control it. Whereas third-party managers, not to fault them at all, there's just not that same level of care as an owner would have. That said, there are markets where we still are learning how to best manage and find the right people. We haven't had to yet, but we've thought about leaning on a third-party manager, but we just haven't yet. We haven't had the need yet.
Andrew: Got you. Ours is similar. We built it out in-house. It's tough to build that. Like you're saying, you need the speed of acquisitions to be able to hire the right people. I told the story about this in another podcast. All the cash flow from my first five deals went into hiring employees to help build the management company to go to the next five. It was tight there for a while, but it was so worth it. Now that you have the scale and you can afford everybody, like I said, you're managing it way better. Do you guys have onsite managers, then regionals, and then a corporate office type of setup?
Hansel: Historically, yes. We've had onsite managers that report to regionals, and then we have a corporate office. Our corporate office is in Orlando. That fundamentally has been it. I will say, and you're probably experiencing it yourself, technology and software is changing in a way that I'm still learning every day how to best use it. These days, we're starting to lease remotely. We're, on some properties, 100% online pay, even in senior communities where you'd never would have imagined. I think there will be some efficiencies to come with time. We may start to consolidate the way we think about properties. Fundamentally, we do think having a presence at a property or at least regionally is critical. As you know, in our case in Florida, we've had hurricanes. You need someone on the ground to be there to help tenants through, even simple things like getting tarps for a roof or what have you. There's no better way to do that than having a person there. You can have all the cameras in the world, but it's not the same touch and care, so we think that's critically important. That said, as you get bigger, you start having overlapping people, and you want to think about how to best use them. In our case, we've moved them to different regions. Some of our best people, we give them growth opportunities to move, especially as we continue to grow with future transactions.
Andrew: Very cool. What are the most important things that passive investors—we're talking limited partners—need to look for when investing into mobile home parks in your eyes? If you were going to invest passively, what would you want to look at?
Hansel: Investing is a funny game. You can always read all the materials, all the details, and you'd always be shocked that when you call a couple of references, it'll tell you way more than any deck or model would. First things first, as you've done, you've got an incredible brand. You probably do one of the neatest things out there and that you provide such education. When I first started, I listened to a lot of your podcasts.
Andrew: Thank you.
Hansel: It means a lot. It's important for guys like us. You create a level of transparency that we don't even do. I think the first thing is those references, which you'd have plenty of good ones. That's first. I think the second is the track record. Everybody's right to point that out. You want to see how someone's done on a deal-by-deal or historical perspective. Just at a real estate level, everybody has different strategies. I think it's more so about understanding what you want out of an investment than it is, hey, this mobile home park is a good deal versus a bad deal. Like I said, look at our strategies and how different they are. Some of our same investors like us for very different reasons. Our strategy is more focused on exposure to the Sun Belt, exposure to Florida, exposure to these markets that are growing a lot. That's a different type of investment strategy than somebody who may invest in more traditional Western or Midwestern markets.
Andrew: Cash flow. Yeah, it's way different.
Hansel: Yeah, 10%–12% dividends, that's amazing. I've never been able to do that in Florida. It's just a different strategy. I think that's the biggest thing. With what we offer, luckily, we've been able to return capital through a refi very quickly, in some instances within three years. I think that's exciting for guys that want that growth. On the other side, there are opportunities like the Midwest where you get amazing current dividends. Like you said, you might grow 3%–4% after that, but you're making such good dividends. It's like, hey, why not? I think if I was to do it myself, those would be the most important things. What I find some people struggle with is they like the space, they like the operator and everything, but they don't themselves know, what do I want out of an investment? When you talk to them, you're prying it out of them to figure that out. It's a little bit of soul searching.
Andrew: That's good feedback because when's the return of capital timeline? What's the dividend going to look like? I think that's all important stuff to take into account. Like you're saying, you're having that rent growth opportunity in a very high population growth, Sun Belt. That's really cool. I think diversification is key, too, so a little of both would be nice. Hansel, what does the perfect mobile home park look like in your eyes and why?
Hansel: That's a good question. The perfect one. If we had a crystal ball, it would be a five-star waterfront, but not in Florida because of hurricanes. It would actually be somewhere in Michigan right on the lake. I love senior communities, I really do. It's a product type that's almost a little difficult to get your hands on sometimes. I just love everything about those types of communities. There's some vacancy so we can bring in homes. One of the things and you know that we always look for is, hey, here's a really good, well-located, good infrastructure, good site layout, but the owner has owned it for two decades and likes their dividends, so they don't want to spend half a million dollars on repaving roads, adding amenity houses, or cleaning up the signage. We love those opportunities. The stuff that your lender doesn't understand when you buy it, but they do when you go back to them over the years and say, hey, we've done it. That's the ideal. What we can never make up for is location. You always want to be in a location that you feel good about, that you always feel can live through these, even in a time like today that we're seeing in the marketplace. That would be ideal. There will be one day. We're more focused on the turnaround stuff. We're not doing stabilized, which I say stabilized. But essentially, there's really not much rent growth. You're just buying trophy stuff you want to brag about someday. We're very focused on the turnaround stuff, which I think both you and I do. We're always looking for opportunities like that.
Andrew: Tell me a little bit about that, if you don't mind, like the value-add. I think a lot of our listeners come from multifamily. They're used to seeing that value-add and the different strategies to increase NOI in apartments. But what would you say are the go-to value-add items that you guys employ in your portfolio?
Hansel: It's so varied and it's so market-specific. But fundamentally, it does come down to spending money. I think there are two classes of investors. There are those that feel good about spending substantial dollars to improve a community. There's the other group of investors that just love getting as many dividends as you can. I think to do a good job, you have to do both. The last thing anybody wants is to increase rents on somebody but have no justification for doing it. We all learn this by doing. It's not how I thought about it initially. We've been fortunate to learn from those mistakes. We're going in. Keep in mind, we buy land lease communities. Most of what we own, we're talking about a homeowner. They own the house, we own the ground. They are responsible for everything inside the house. We're making sure that if they have a bunch of used cars sitting outside their lot, we want to clean that up. We want it to be one to two per home. We want to make sure there are parking lots to the extent we're able to do it. We want to make sure that the roads are paved, signage, and little things you don't even think about, like a speed bump and a signage for watch for children. It's a monumental thing when you walk a property. You think it should be there, but as residents in our own communities, we don't think about those things. We also do believe in landscaping. Sometimes we even spend the money in the beginning to just clean up a homeowner's lot, fencing, and all that on our dime. The reason being, again, there's always some friction. People are used to certain things the way that they were. If we want to get it to a community we feel proud of, there are a lot of changes that have to happen. The biggest one you don't think about is fencing. You'll have chain link fences with a Rottweiler scaring everybody that walks by and something like that. You have to be careful how you do it, but you need to educate residents on why that's not a good way for our community. Almost always when you're done, they look back and say thank you, but it's a lot of work on the ground. Everything you can imagine from infrastructure, landscaping, signage. We love to repave roads. I think it's one of the best things you can do to a community to the extent that it's worth doing, and the numbers work out. Club houses, I have learned that you almost always want to renovate them because a lot of our communities are from the 50s and 60s. To the extent that we have the funds, we want to go out and do that, even if it's minor things like repainting interiors and stuff. The basic, I say basic, but the things that you and I live every day and just the functional stuff, the roof. If there are drainage issues, infrastructure issues, nobody even notices when you do it. But as an operator, you want to get ahead of those before they become a huge problem. Those we do as well, but those are not as exciting. The resident doesn't get to see that. Nor the investor, really.
Andrew: Very cool. That's interesting. When I think of value-add, my top priority stuff is I'm going to spend the money on stuff that's going to get more income, infill, rehabbing homes, submetering. Obviously, we install some storage facilities, sometimes storage units, and rent those out. Anything is going to generate income. The general cleanup, obviously, there are a lot of these parks that have deferred maintenance, so we do spend some money on that. But I would say, the majority of our budget goes to increase in the income. I'm curious if the properties you're buying in the Sun Belt have less of that meat on the bone, if you will, and more of the bigger opportunity is redoing the roads, the common areas, and things like that.
Hansel: No. It's a great distinction. We don't do it as a strategy. We really don't do much infill. When we buy something, it's almost 85% occupied or higher.
Andrew: Why is that?
Hansel: It's just the market. Think of Miami. What vacancy is there going to be in Miami? We bought an asset north of Miami, where the entire market was 99% occupied. When you think about a market like that, fundamentally, there isn't much to do on the infill. But what has not been done is the owner's historically been a little lazy on the cleanup work. We will go in, we'll spend the money on repositioning the property, and then recouping those costs with rent increases. It is shocking. Not to say that we've done it, but a place like South Florida, market-wide grew by 30% last year. When you think about that, it's crazy. It's just a different strategy. We'd love to do infill, but it's very hard to find in Florida. There are some. I won't say that there isn't, but we just haven't had to focus on it. Instead, we think about, hey, what's the nicest thing in town? And how can we get our property to that standard? You're exactly right, it's such a different strategy. We do all the basics of building back utilities and all that stuff, too, unbundling. But definitely, I like the occupancy. I sometimes wish we had more of that, honestly. They make life a lot easier.
Andrew: That's the stuff that was more of our bread and butter. It's interesting that the occupancy is so high.
Hansel: I've heard that, too. You guys do that very well. I don't think today we have the team to do that. It's something I want to strive for, but we just haven't built that out yet. It's a priority. I've heard your team does an incredible job at infill.
Andrew: Thank you a ton for the kind words. Let me ask you this. Obviously, it's a shaky time. What do you think the future of mobile home park investing looks like? How do you see mobile home parks fitting in with the economy and the direction it's going? Higher interest rates, possible recession. What are your thoughts on that? Hansel: When you asked about how or why I went into manufactured housing, one of the things that I fundamentally just was obsessed with was how defensive the industry is. When I got into it, it was a very strong performing year for manufactured housing. It was actually one of the only places where income group—everywhere else in real estate had declines in income. Covid was probably one of the scariest times of my personal life. I was actually living in New York at the time, and you could imagine how terrifying that is. Even then, when we had significant doubts about how things would hold up, it did incredibly well. Although we had delays in collections, we were helping tenants make sure that they can get through the things that were going on in their lives. Fundamentally, the business was unchanged, we held up well. What has been difficult to predict is the financing side. What I always say when we look forward is we know that customers are going to be there, we know affordable housing continues to be one of the biggest challenges in the country. Unfortunately, that's only getting harder and harder with interest rates going up home prices, the ability to buy a house is getting harder for the average person, and multifamily forget about it. We've seen in our markets, rents that are, I wouldn't say unsustainable because there is such a shortage of housing in some of the places we're in, but it is almost crazy to think how much rents have grown in the apartment space. We're 50% cheaper than that, and the same probably goes for you. When I think about us, we're so distanced from everything else, I think will hold up very well. The scary part for both of us, frankly, is just interest rates. You don't want to be the guy that buys a property, that is a very good investment, but you took your financing, you went to a bank, and got a loan that your interest rate could change daily. For the guys that have done that and had been successful, it's because they got out of that as quickly as possible. But for the ones that still hold on to that, it's a very scary time. You and I would both not be having this call had we done those things. For us, strategy-wise, we want to continue to focus on the areas we've been. We're super bull on manufactured housing. Nothing's changed there from a customer and demand perspective. What we're more cautious about is what cap rates we're buying at, what kind of returns are we delivering day one to investors? I think, fundamentally, investors want more return, which is very sincere given the options that are out there today. When we think about us, even for me, personally, if we're buying something, we want that to be fixed day one. If we can't do that with enough time to repay our debt, arguably 10 years if we can do it, but minimum 5 years, we will not participate. That's just our view.
Andrew: Mine is the same way. Even if the rate is higher, which it usually is, the fixed rate is just more moated. It's just a safer, more reliable outlook. That's what we do. We typically do 10-year balloons upon acquisition, which will be 5-year fixed with a regional lender. Then it adjusts at the 5-year mark, and then it's fixed for another 5, just so we have that 10-year time horizon. Like you, we're trying to refinance as quickly as possible. Within the first 5 years, we refinance it into an agency loan fixed for at least 10 years. It's our whole model. It's like, how can we get this property that's a mom-and-pop property, add value to it, fix it up, get it to qualify for agency debt, and then lock it in and refinance it into 60% of leverage every 10 years?
Hansel: That's exactly what we do. I think we're a little fortunate and how quickly we can do it sometimes, and that's so market-driven. We don't underwrite that. The market's just been helpful. You're exactly right, that is our MO. I'm curious what is scarier to you, a personal guarantee or a two-year balloon, where you got to pay the debt in two years?
Andrew: I would say the balloon in two years.
Hansel: Me too, yeah.
Andrew: I think right now, interest rates are going to stay higher for longer. I think everybody has this dream that things are going to peak and then they're going to start coming back down. I don't know. Nobody knows. I would rather not guess with something like that. It's pretty important. Thank you so much for all this valuable information and these gold nuggets. If you had one more tip to give a passive investor before we log off, what would that be? To someone looking to passively invest in mobile home parks, what would you throw their way?
Hansel: It's funny, and I do want to hear your take on this as well, sincerely. The only people I've ever seen or heard of who lose money aside from just paying ridiculous prices, I think anybody is susceptible to that and can make that mistake, is on the rental home side. Guys that have bought top quality properties, where we buy a mobile home community, you own the land, and you own the house, I've actually heard of people losing, I wouldn't say their whole investment but losing on their investment. Outside of that, I haven't heard that many horror stories. We stay away from that. If we do it, it's because it's a brand new community. I think there's a stark difference between a brand new house you put on and you're renting, and older homes that have been there for a long time and you're also renting, because the older homes have so much maintenance. The people that want to live in a rinky-dink, ugly, just beaten-down home, are not the best residents (unfortunately) sometimes. I'm curious. That to me would be the one thing to be cautious of. If someone's doing that on the rental side owning homes and the land, just be cautious, and know how good your maintenance team is, how big it is, where it's located. There's a lot more work there. If you're buying land lease stuff, I just feel like it's a simple business. The only thing you could do wrong is overpay, truthfully.
Andrew: From my consistent listeners to this podcast, I've had some heated debates with operators that have park-owned home models. I think for some, their strategy is, hey, we're going to buy a lot of parks in this really close area, I'm going to have a full time maintenance team, and then it maybe works right if you're in a high rental environment. I agree. I think where a lot of your risk lies is in these mobile homes. From flipping houses, you probably know this, but mobile homes are completely different to rehab. The drywall is a different size, the windows are a different size, the doors are a different size. You can’t just go to Home Depot and get all this stuff. You got to special order it. It's more expensive to get these things to where you need it. That's where I think you get in trouble. That's a really good point on the park-owned homes.
Hansel: Do you guys do it? I was always curious. So you guys stay clear of that? Andrew: We do. We'll do the rent-to-owns, selling them back to the tenants, and then we— Hansel: But taking it out of them as quickly as possible?
Andrew: Yeah. We're giving fire sale deals. We don’t put a post today. There's an owner that I know that charges 20% interest to the end-buyers for their homes. It's counter intuitive to the end goal, which is getting them to be tenant-owned homes, where literally, the turnover rate is 4%–5% per year. That has been true for us in our portfolio. We encourage homeownership and just try to get typically the money we have in the home out of it when we sell them.
Hansel: That's great. I agree with you. I think sometimes you buy a community and there's a good bit of them that you have to work through to sell to homeowners. We'll do those things as well. That's very consistent. It's crazy, the heated debates I've got to listen to.
Andrew: There's been a couple of them. You'd have a blast listening to some of those because there were some pretty passionate discussions. I'm thankful so much for you to come on. I think the park-owned comment is good or ways people lose in mobile home parks. I think that's a big reason. Obviously, I think the financing, people that have just made bad decisions. I've heard of ways people got in trouble outside of the asset class, and then they were forced to sell the mobile home park asset because of that. I think another big thing, and I'd love your feedback on this just before we log off, is liquidity as an operator and how important is that. To me, that's the leverage that we have. I've heard horror stories of loans called due by banks with the debt service coverage ratio is covered. Everything's fine, but the lender calls a loan due because they decided they don't want to have that on their balance sheet anymore. I think liquidity is pretty important, but I'm curious what your thoughts are.
Hansel: Oh, my God, Anybody that lived through Covid knows after that. Of course. And it is funny. I'm younger, I just turned 30 a couple of days ago. That's probably one of the biggest things people harp on when they invest in our funds. It's like, how much skin in the game are you putting? Naturally, we put a little less because it's all me. I think of my company almost as a family company in some senses. The reason for sure is, to your point, liquidity. How many times have you had where you're right at the refinancing mark, but you got to go spend $200,000 all of a sudden, just to be able to get the final thing that the bank wants done before you close? As an investor, you only hear about it when it's a complete problem. It's a capital call. That is everyone's nightmare. I've never had to do it. I hope I never have to do it. The reason I've been able to avoid it is because we have working capital. As a company, if you care about your company, you need to have excess cash. I've just been shocked at the times that it's come down to the wire, we're right there, but all of a sudden, we need this much cash. I've heard of horror stories, like you said, where someone would have to go back to their investors and they say, no. You're now in a situation where you could arguably be in default, lose the entire thing, I wouldn't say a couple of dollars, it's considerable sums. But if you had planned accordingly, you could have avoided, and the only way to solve that is cash. It's hard to say as a percentage, but when we actually buy something, part of our cap table, but when you look at our purchase price and everything we want to spend on the property, we actually factor in beginning cash. We do that on every single deal. As an owner, we keep excess cash even on top of that to make sure that if for whatever reason we plan incorrectly, we always have an in-home line that we can send to whatever property needs it. I just think anybody should be careful. Real estate, fundamentally, is a good business. I think it's a very stable business. You have to have enough time to pay your debt to have the flexibility to do it on your terms. You got to have cash. Everybody that gets hurt is because they didn't have cash.
Andrew: It's those two things. You're exactly right. Awesome, Hansel. Thank you so much for coming on the show. I really appreciate it. If listeners would like to get a hold of you, what's the best way for them to do that?
Hansel: Email me is the easiest. Email is email@example.com. We've got a website, coarecommunities.com. You can always check that out as well. Although it does need to get better, your website's way better than mine. I think we need to fix that too someday. Andrew: It's not about the website, it's about the returns.
Hansel: Yeah, for sure.
Andrew: Awesome. We'll put those in the show notes so all the listeners can get your email and the website address. Hansel, thanks again for coming on the show. I really appreciate it.
Hansel: For sure, Andrew. Thank you for having me, seriously.
Andrew: Awesome. That's it for today, folks. Thank you so much for tuning in.