Interview with Rudy Curtler of Sawgrass Capital Partners

Listen on Apple Podcast here: https://podcasts.apple.com/us/podcast/interview-with-rudy-curtler-of-sawgrass-capital-partners/id1520681893?i=1000566362100

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 Rudy Curtler from Sawgrass Capital Partners. Andrew and Rudy discuss the ideology of having a win-win situation with tenants, the formation of different partnerships and the end goal being profitable while still sustaining a win-win between your investors and tenants.

Rudy began investing in real estate in 2007 as a means to diversify his investments as he had been overweighted in growth stocks. Rudy and his brother in law bought their first mobile home park almost by accident as they continued to get shut out of multifamily investing. Rudy and his team at Sawgrass Capital Partners are taking a unique perspective on the mobile home park industry by exploring 3D printed housing. By vertically integrating the construction of 3D homes, they would be able to fill vacant lots inside of their portfolio of mobile home parks.

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

Andrew Keel is the owner of Keel Team, LLC, a Top 100 Owner of Manufactured Housing Communities with over 2,000 lots under management. His team currently manages over 30 manufactured housing communities across more than 10 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 http://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:

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

01:25 – Rudy’s background and journey

05:30 – Rudy’s first park

07:50 – Rudy’s current MHP and real estate portfolio

10:00 – Tenant-owned homes versus park-owned homes in trailer parks

12:00 – Learning about mobile home parks

13:25 – Infrastructure in Rudy’s current parks

14:30 – From salons to single-family homes

17:35 – Sawgrass Capital Partners

22:55 – How Rudy and his team handle manufactured housing community operations

24:15 – Mistakes to learn from

27:43 – Important things passive investors need to look for

30:25 – Rudy’s perfect mobile home park

31:58 – The future of the mobile home park industry, 3D housing, and tiny homes

37:35 – Getting a hold of Rudy and Sawgrass Capital Partners

38:17 – Conclusion

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

Links & Mentions from This Episode:

Sawgrass Capital Partners: https://www.sawgrasscapitalpartners.com/

Rudy Curtler, LinkedIn: https://www.linkedin.com/in/rudycurtler/

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

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TRANSCRIPT

Andrew: Welcome to the Passive Mobile Home Investing podcast. This is your host, Andrew Keel. Today, we have an amazing guest in Mr. Rudy Curtler from Sawgrass Capital Partners. Before we dive in, I want to ask a real quick favor. Would you mind taking an extra 30 seconds and heading over to iTunes to rate this podcast with five stars? That means the absolute world to me if you could leave a review of the show. Thank you guys so much for doing that.

All right, let’s dive in. Rudy began investing in real estate in 2007 as a means to diversify his investments as he had been overweighted in growth stocks. Rudy and his brother-in-law bought their first mobile home park almost by accident as they continue to get shut out of multifamily investing.

Currently, Rudy is exploring 3D printed housing so that they can vertically integrate the construction of the 3D homes and fill in the remaining gaps inside of their mobile home parks and outside. Rudy, we are excited to welcome you to the show. Thanks for being here.

Rudy: Andrew, thank you. I’m excited to be here as well.

Andrew: Awesome. Maybe you can start out by telling our listeners a little about your story and how you got into manufactured housing communities.

Rudy: Absolutely. As you mentioned, early in 2007, my brother-in-law and I had been looking at opportunities to invest together. I worked for Best Buy company back from 1995 until 2018. During that time, in the early 2000s, Best Buy company stock has done incredibly well and I’m looking for a way to diversify to limit some of my risks.

What we had done, my brother-in-law and I started talking about investing in single-family homes, trying to find multifamily, and whatever we can get our hands-on. We just began by buying a couple of single-family homes, converting them from two bedrooms into four bedrooms in the town that he lives in, which is a college community in Eastern South Dakota. That was an opportunity for me to be the money guy and him to be the sweat equity guy in our partnership.

We ultimately ended up buying a home a year. In the first six years, we bought six single-family homes. Every one of them had some form of conversion where we added bedrooms, added space, and made them more valuable from a rental standpoint.

Our excitement for multifamily certainly outpaced our ability to get our hands on some of the multifamilies in the town that we are in because he was going to be the sweat equity guy, I wanted to be buying something in town for him so it wouldn’t be too complicated, he didn’t have to travel, and those kinds of things.

As you mentioned also as part of the introduction, we were getting shut out. The town that we are in is relatively small, about 25,000 people. It’s got a Division I NCAA university there. They got about 15,000–17,000 students so it’s a very strong rental market as a whole.

Because it’s a smaller town, the majority of the multifamily properties and the lots that we zoned for multifamily were owned by most of the same people. There are about three families that probably own 90% plus multi family in that town. We had a hard time breaking in.

Then by accident, we found a small park five miles west of the town and another small town that was listed and hidden on the local real estate page because it was tucked away in the commercial listings. We were always looking at single-family houses weekly and we found it tucked in there. We thought this was interesting and we started asking questions. We called our broker, we got together, and actually overpaid for that park on purpose because I knew the upside would be so incredible.

A lot of people say you make your money on the buy, and there’s a lot of truth to that, but I think there’s also truth to the fact that you don’t make any money when you don’t buy. We wanted to make sure we got that property. I didn’t overpay by a lot, I overpaid by $5000. I think I gave them $5000 more than their ask price. I just want to make sure we have our hands on it because I can see the potential. It was 13 acres of land. It was only developed on about six acres and we still own that park today. It’s been a fun ride.

Andrew: Very cool. Are you talking about Brookings, South Dakota?

Rudy: I am, yeah.

Andrew: Okay, very cool. I’m not sure if you knew this or not, but I went to college in Sioux Falls.

Rudy: You’re kidding.

Andrew: I went to Augustana University. I played football in college up there. I love Eastern South Dakota. We also own a park in Vermillion where USD is located.

Rudy: Very nice.

Andrew: Much smaller town, but Brookings is a great market. I would love to own there. Tell us about that first park. How many lots was that?

Rudy: It’s a 21-lot park and when we bought it, it had eight RV sites and RV pads on it as well. It also has a commercial building that we rent out to a local builder. Just for fun, it has a billboard. We didn’t know that when we bought it. It wasn’t part of the listing, but there is a billboard in the corner so that brings us about $1200 a year. We didn’t know it was even going to happen.

As I mentioned, essentially, it was only taking up half of the available land, we have visions of expanding the park and/or the RV sites. What we did is we ended up ultimately expanding the RV sites and we took it from 8 sites to 16. We infilled the remaining two empty pads that were in the park with mobile homes.

It’s a small park, but I think it’s a perfect park for us to keep on and get experience and learn. We learned a lot about the RV site demand, which actually has been a really nice surprise that we were not expecting. My assumptions going in have always been the RV sites in a mobile home park on a relatively major highway are probably going to be people who are passing through, highway rentals, and it’s not going to amount to much.

While we were pleasantly surprised that there is a massive demand for long-term RV site rentals. In some areas, it’s fairly hit and miss. In that particular area, there were a lot of infrastructure projects that were happening. Just across the street, there’s an ethanol plant being built and that ethanol plant is going to take two years to build. There’s highway construction and other factories that are being built.

The construction workers would pull their RVs in and would live in them for up to two years while working on a project. We actually had one resident who was there for two years. We found a huge demand by accident on that as well. It’s because we dug in, asked some questions, and we learned about it.

Andrew: Tell us how many lots are you up to now with Sawgrass Capital?

Rudy: We have 12 total parks now and we have just under 500 total lots.

Andrew: Awesome. Where are those mainly located? Is it around the Dakotas?

Rudy: Yeah. Predominantly it’s in Eastern South Dakota. We have nine parks in Eastern South Dakota. We have three in Texas. We formed a partnership with two wonderful ladies down in Texas, got to meet them, some of their networks, and contacts and we bought three parks on a trip down there.

Andrew: Wow. How did that happen? How did you meet people in Texas from South Dakota?

Rudy: The wonders of the internet and social media. My business partner has been fairly active on Facebook and letting people know that we’re in the real estate world looking to buy parks. These ladies were in a position where they were looking for some operational experience or expertise, somebody to help guide them as well as some capital. We happen to be in a position where we just started a fund, we have some capital, and we have some operational expertise so it became a win-win.

We had a wonderful opportunity, a wonderful time meeting with the ladies and their network. One of the ladies, her father owns something north of 50 mobile home parks and RV parks down in Texas. He’s a really big player down there. I applaud him. He actually had said directly to me, listen, I want to help my daughter, but I’m going to give her a hand up. I’m not going to give her a handout.

The mindset is, hey, I’ll help her, I’ll guide her, but I’m not going to give it to her. She’s got to go earn it. She had to come and find us or whoever was going to partner with her and so that’s been a really, really great partnership. We’ve had a lot of fun and a lot of learning collectively.

Andrew: Very cool. That is fantastic. A couple of quick questions, tenant-owned homes versus park-owned homes, which do you guys prefer?

Rudy: We swing toward the tenant-owned side. We like the fact that when a tenant owns it, there are some intangible, kind of hard to measure, benefits when a tenant owns it and it’s theirs versus if it’s a rental mobile home. It’s kind of like a rental car.

Generally speaking, they take better care of their own cars than they take care of a rental car and that’s kind of what we found with the homes, especially when a home gets a bit older. We don’t mind owning a rental mobile home to get the season and get it to depreciate a little bit compared to when it’s brand new.

Once it gets to three to five years old, we really look to try to offload those, get them off our books, and get the tenant to buy them and really have ownership. That does a number of things. One, their pride of ownership can show up. We’re not really on the hook for the repairs and maintenance at that point. Obviously, anything above ground is up to the tenant or resident. Honestly, it’s simpler to manage.

Andrew: Totally agree. That’s ours as well. That’s our model, the tenant-owned home. I know our listeners from listening to previous episodes, I think they prefer that as well. There are some park-owned home operators out there so I always like to ask that. Let me ask you this, when did you buy that first park? Sorry, I forgot to ask that, the 21-lot one.

Rudy: We bought that first park in 2015.

Andrew: 2015, you guys have been cooking.

Rudy: Yeah. So we went for a number of years […] single families and then we finally stumbled into that park.

Andrew: That’s awesome. You guys have been cooking. I mean 12 parks just under 500 lots ever since then, that is fantastic. When you got into the business, how did you get educated on mobile home parks? Prior to buying that first park or maybe after that first park?

Rudy: Every day is an education. Let me say that first. We’re still learning every single day. There are so many nuances, but a couple of things. One, our realtor in Brookings owns three mobile home parks himself. Interestingly enough, he is one of those rare breeds where he believes in owning all the homes. He has one park where I think all but one house belongs to him and then that last one.

We learned a lot from him, just his approach, and his methodology. He’s one of these guys, he’s just very direct and blunt in terms of how he looks at life in general and how he looks at investments. He’s got a good point of view, which we learned from. We spent a bit of time listening to many podcasts. We spent a bit of time listening to a Mobile Home University podcast with Frank and Dave. I think there’s probably a lot of awareness of their names, I’m sure.

Andrew: Have you attended the boot camp?

Rudy: We did not attend a boot camp. I know, right. One of our partners did and he found out after he attended that boot camp.

Andrew: That’s interesting. Tell us about the parts you have. Do you have a preference on the utility infrastructure or do you have some with private utilities or some with the public? Maybe shed some light on that.

Rudy: Yeah, the preference is the public utilities. Anywhere where we can get away from having septic or having wells gives us more comfortability sleeping at night, but that doesn’t mean we don’t buy them. I would say our mix is probably 50-50.

As an example, the first park that we bought had well water and still has septic. We converted it to rural water service a couple of years ago. It cost us about $50,000 to convert that, to get the piping around over and hookups and whatnot. We felt it was worth it from a value of the park standpoint, convenience, and efficiency.

Generally speaking, we would like to see somebody else own that side of the park, running the park, I guess. We’re not experts at running or managing a well or managing septics.

Andrew: Sure, I agree. Public is always preferred. Okay, that’s awesome. Before you got into this, I know you did some stuff on the single-family side of things. I saw on LinkedIn about the salon business. Are you still in that? Previously, that was your W-2. Maybe you could shed a little bit of light on that because I think a lot of our listeners, just from various conversations I’ve had, people kind of get into mobile home parks in creative ways. They have backgrounds. I would love to hear a little bit about the salon business and where you’re at with that.

Rudy: Like I mentioned, I was with Best Buy company for quite a number of years. I was with them for 22 years. I live here in Minneapolis St. Paul, in the Twin Cities area. Best Buy corporation is based here in the Twin Cities. It’s an incredible company.

One of the challenges with that company is they restructured quite often based on customer demand, changing economics, and whatnot of the consumer electronics industry. That can create some turmoil internally in terms of what kind of jobs people end up in and where they are. With restructures, there is always shuffling.

I always tell people I worked out of a job seven times since I have been at Best Buy in 22 years. Part of corporate America, and that a lot of people maybe don’t know about if they’re not part of it, is that it is commonplace or it can be commonplace. By the time I had number seven, my number got called seven times. I was just getting kind of frankly, tired of it.

I started looking externally. I never looked externally in the previous 21 years. I just said, you know what, I’m ready for something else. Another company that was down the street from Best Buy that was headquartered in the Twin Cities as well was Regis Hair Salon. Regis was the largest private operator of hair salons in the world with about 11,000 hair salons and they needed a regional vice president so I interviewed with them.

It was a long process that took about nine months, but finally went over and became a regional vice president to them and ran quite a number of salons. I’m still in the salon industry. Interestingly enough, I was trying to leave Best Buy because they’re restructuring and then after about three years of being at Regis, surprise, surprise, they restructured as well.

They said we’re going to sell all of our corporate-owned salons and we’re going to franchise all of them. I had an opportunity to stay in the salon industry and became the chief operations officer for one of the largest franchisees that Regis has and I’m still with them today. Transparently, I’ve told them all about what we’re doing at Sawgrass Capital Partners and told them I’ve got the bandwidth and capacity, I believe, to do well with them and help them do what they want. They’ve been very very comfortable with it.

Andrew: Very cool. Maybe tell us about Sawgrass Capital Partners. I heard you mentioned you guys have a fund. Is that still open? Are you doing another one? Would love to hear about that.

Rudy: Yeah, for sure. When we started Sawgrass Capital Partners, one of my partners from Best Buy back in 2006 and 2007 when my brother-in-law and I were starting, I approached him and said, hey, would you be interested in joining us on buying some rental real estate? He and I had talked a number of times and he expressed some interest in doing something, he just wasn’t sure what. He passed and said no, I’m okay. I’m not going to jump in.

My brother-in-law and I started our first company which was not Sawgrass, it was a different company. Fast forward a number of years and he actually got into the franchise space. He’s a franchise consultant and he sells franchises to interested individuals. He had begun to ask me questions about hey, would you like to buy this franchise? Should we open up certain different options?

I couldn’t get my head wrapped around the franchise side as easily as I could get my head wrapped around the real estate side. I actually flipped the conversation on him and said, hey, why don’t we kind of expand? I’ve been thinking about how we pull investors and go a little bit bigger. Would you have an interest in that? I couldn’t get the words out of my mouth before he had already said yes and said I’m in. I messed up in 2007 and I’m in.

We formed Sawgrass Capital Partners. It was my brother-in-law, me, and our third partner, Mike. We formed that in December of 2019. Our first project was in Brookings that we had pulled together and syndicated. We knew nothing about syndication, we didn’t understand the process, we understood how much it was going to cost.

We got hooked up with a very intelligent attorney here in the Twin Cities, which if anybody is going to syndicate, I highly recommend you get yourself a qualified attorney because it’ll cover you in more ways than you could think. Ultimately, his style was very interesting because he didn’t tell us what to do. He said essentially, whatever you tell me to do, I’ll write it down into the operating agreement and the PPM.

As inexperienced syndicators, it cost us a lot to ask more questions and better questions because we tried something and it didn’t work, tried something else, and didn’t work. It became trial and error, but we learned a ton.

In that first investment, we were able to exceed our expectations and exceed the investors’ expectations. We were able to get them their capital back seven months after we had syndicated and bought the park with all the work that we did and we refinanced in seven months and got their capital back. We’re still paying them their quarterly cash flow distributions on that park so they are fans. They were pretty happy while we did that.

While we’re going down that path, we also said gosh, we’d like to go a little bit bigger and create a fund. We did a small fund, it was $3 million. We figured we’d buy a few parks maybe here and there. What happened was, that was right as the pandemic was really gaining steam in 2020, we learned a ton about that as well. Just because somebody verbally commits to some capital doesn’t mean that they’re going to be able to come in at the time when you need it and so having backup plans. There is just a ton of absolute ton of learning by going through the process.

Andrew: Definitely. What’s the long term plan for Sawgrass and for the funds? Are you guys looking to aggregate and sell off to a bigger owner? Are you looking to buy and hold these things? What are the long term plans for you guys?

Rudy: The long term plan is a little bit fluid. We said we’ve got about a four- to five-year whole plan on these parks in the fund and the first indication. What we’ve also learned is how you structured the preferred returns, the first syndication, and the fund makes it challenging if the market is hot because you can’t buy the parks at a low enough value. There’s not a meat on the bone to really generate that preferred return and so that became challenging for us. Another good lesson learned.

The long answer to your question is that we were fluid on that because we’ve got our parks running at a nice rate right now. Our collections are incredible, the infill rate has been great, and the operations have been solid, but we’re not going to turn a blind eye or a deaf ear to a good offer.

We’ve got a number of folks that have been approaching us and asking questions. There are people that are willing to come in and buy 400 lots at a time. If we can come to terms on the table, then we will. We’re also not necessarily pursuing sales on everything. We’ve got one park that we just listed. We’ve got a couple of others, two of the ones down in Texas, we listed them recently. That’s just to kind of see what the market will bear.

Andrew: How do you guys handle operations? What does your team look like from a property management standpoint?

Rudy: We do have park managers. Out of our dozen parks, we’ve got, I think, five managers. We’ve leveraged one of our park managers as kind of a district manager. Then Mike, who I mentioned earlier, is one of our equity partners and is a strong operator. His wheelhouse is actually helping bring concepts to life. Taking ideas and helping them become actionable. He manages the park managers and manages the district manager is the best way to explain it.

Allan, who’s my brother-in-law, is kind of our CapEx infill guy. He handles anything related to roads, trees, demolition of old homes, and removable old homes to bring in new homes. Primarily, he’s focused on South Dakota.

Our partner down in Texas handles a lot of their stuff locally. They have used a local contractor, general contractor, to help with the expansion of one part for a lot of the CapEx, but then they do have to park managers that they’ve managed through down there.

Andrew: Very nice. What mistakes in mobile home park investing have you made that we could learn from?

Rudy: How much time do you have? There’s been a ton, but I think there’s a school of thought of you learn by doing, you learn by asking, and you learn by talking to people. You get in, you skin your knee. You say, okay, that didn’t feel so good. Let’s not do that again or maybe it wasn’t the concept that was wrong, maybe it’s just how we executed it.

I think we always take a very cerebral approach to what we’re trying to do and we try to think through consequences and ask the what if questions. Mistakes we’ve made have included anywhere from not having a great lease process at the beginning. We didn’t have a great bookkeeping process at the beginning. We’re doing stuff on Excel spreadsheets and we thought that was good enough.

We made mistakes on one park that we bought and we’ve since sold with due diligence. Man, there’s so much learning in that park. I think they’re great learning because we applied all those learnings to the future parks that we bought. Things like finding out what the amperage is for the hookups and what requirements we have. It was an old park, it had old wiring, and we tried to bring in a brand new home or new homes and that ended up becoming very expensive.

A question we never thought to ask was, what’s underneath the dirt? Well, what’s underneath the dirt was bedrock and so that created quite the problem. We had to anchor that thing down and we had no expertise in doing it ourselves. We lost time and lost some dollars.

I think here’s a really interesting one that some of the operators would appreciate. I’m not sure how much investors would appreciate, but the operators would appreciate, is thinking differently about the problem and thinking differently about the solution. I’ll give you an example.

The park that I’m referencing where we got a lot of learnings with the bedrock underneath the dirt. It was an older park and so all the lots were very small, but adjacent still in the park, there was some vacant land. It was two long two-acre parcels. This adjacent lot really just had a single-family home in the front of a lot and the back of the lot was all vacant. We kept thinking about how to get these new homes into these small pads? We got to get these new homes in these small pads.

It took us a while and it was probably a year into that project and we finally actually said we got to ask the question differently or think of the answers differently. Instead of getting small homes into small lots, we said why can’t we just move to the road that went down the middle of that park into the middle of the two parcels? I could put whatever size home I want on either side of that road. It just finally dawned on us like we think about this problem all backward.

How you ask the questions really becomes important and we’ve used that principle, that learning that we had in that park five years ago. We’ve used it probably 10 or 15 times since where we’re stuck. We’re stuck on any answer. We say, okay, how do we move the road? That becomes our internal code of thinking differently about the problem and thinking differently about the potential solution.

Andrew: I love that. Always looking for different creative solutions. Let me ask you this, what are the most important things you think passive investors, limited partners here, need to look out for when investing in mobile home parks?

Rudy: Investing with anybody, I think the first thing is transparency. Transparency of are people forthcoming with the wins and the losses, right. It’s probably going to be pretty rare that any investor goes down and there are all wins. It’s just nothing but good news. That’s kind of unusual. It kind of goes back to the old adage of know, like, and trust the group that you want to invest with. Start there.

I think the other part is understanding what kind of product the investors are buying. Are the investors buying just a straight-up buy and hold, it’s already filled, let’s say a turnkey type property? That’s certainly one way to do it. What’s the strategy if it’s turnkey?

Is the general partner going in and all they’re going to do is raise lot rents and put pressure on people that are having a hard time the way it is, or are they finding a way to work with people and gradually bring the lot rents up?

Our strategy has been that we come in, we work with people, we convert them over to electronic payment systems, and we do take rents up, but we don’t take them up dramatically. We take them up maybe $25 in the first year, give them another year, and we just let them know ahead of time hey, you’re going to see an annualized rate increase. It’s going to probably go from $25, the first year, $15 a second, and $15 a third. Over time, we’re just gradually picking the lot rents up.

Let’s just say that’s a little more humane way to treat people versus you coming in, jack rents up, and you double their rents, or you take them up 50%. My brother sent me a tongue-in-cheek article the other day from the Wall Street Journal and he’s referenced a couple of investment groups that are taking rents up 50% on day one when they bought parks. That’s just inhumane.

He’s teasing me and said, hey, is this your strategy, too? I said no, of course not. Obviously, being my brother, you wanted to harass me a little bit. Certainly not, we were looking for win-wins. We’re looking for an opportunity to be humane and help people that are in a tough spot, but we also will not be a charity. We’re here to make a profit, we’re here to do it well, and we want to be in the game long term. We’re not interested in playing some of those other games that people play. Those would be things that I would call out.

Andrew: Yeah, definitely. What does the perfect mobile home park look like in your eyes and why?

Rudy: That’s a good question. I think the perfect mobile home park has good infrastructure. It’s got solid bones, there are good utilities, and good roads. I think it’s got infill opportunities. It’s got to be 50% or more full already, but there should be some upside in terms of the ability to bring in more homes.

I think it should probably be close to the market, but below market. The reason I say that is if it’s close to market, then that would imply that it’s probably an engaged owner that’s been paying attention and gradually increasing rents for people so they’re not too comfortable. It’s something that’s ridiculously below market.

In some parks that we’ve underwritten and we’ve seen not only are the rents below and they’re kind of ridiculous, but then the quality of the park actually correlates to the fact that it’s way below. Typically, what we have seen, at least what I’ve experienced has been, I would say it this way, if it’s a weird-looking part, it’s probably weird tenants. That might be the nicest way to say it.

If it’s a dirty-looking park, you can probably use the same word there, those kinds of tenants. We want to have a clean park, we want to have quality. We want to show responsibility and responsiveness to the tenants. Again, like I said, it’s a win-win proposition.

Andrew: Definitely. Rudy, what does the future of mobile home park investing look like? Let’s talk a little bit about this 3D housing and how you see that fitting in? Would love your opinion.

Rudy: Yeah, for sure. Thank you for that. We’ve been researching other home manufacturing options. Again, it’s kind of how do we move the road instead of the other way around. One of the obstacles we found recently has been the prices of mobile homes have skyrocketed just like anything else in the country with inflation. It seems as though the mobile homes and the construction industry have been hit particularly very hard with rising costs.

As an example, a home that I could have bought 2 1/2 years ago for $45,000–$50,000 is now $70,000–$72,000, somewhere in that range. Those are pretty incredible jumps and costs. That is really difficult. That’s a high hurdle for operators to get over.

We’ve been doing a bit of research about 3D printing because it takes a lot of expense out of the building process. It can also improve or reduce the depreciation of mobile homes. I think probably most of your listeners know that the mobile homes themselves will depreciate quite rapidly. It’s just like driving a new car off a lot. You drive a new car off a lot, in many cases, it depreciates a third or whatever the percentage is in the first year. Same thing with a mobile home.

With a 3D printed home, if we can do that with concrete for the walls and essentially the flooring, then we can finish the roof off and finish the interior off with traditional building materials. If we don’t come in under expense for the same size products or similar look and feel products, it will be on par with what it would cost us.

The good news is they’re not going to depreciate. We see there’s a lot of upside in this potential. You and I were talking before the podcast about some people seeing that as a threat to the mobile home industry. We actually think it probably dovetails in perfectly and there’s probably a tremendous opportunity for 3D printed homes and mobile home parks.

Andrew: That’s very cool.

Rudy: What I would love to do is actually buy the printer, do it, and vertically integrate. We’ll see. we’re not there yet, but that’s something we’re exploring.

Andrew: Tell us, what do you think is the timeframe before this becomes a reality?

Rudy: I’d say we’re probably a year out before it becomes reality for us. Most of that limitation at this point is going to be on city councils, planning boards, and zoning boards that probably aren’t ready for this technology because it’s so new. There are plenty of communities that are more progressive that are comfortable with 3D printed homes, technology, what it looks like, and how it works.

I think it’s a little bit of a shot in the dark in terms of whether some of the areas that we operate in are going to be ready for this kind of approach. That could be what slows us down, but we’re very interested in pursuing that 3D-printed housing. Not only selfishly so we can fill some of the vacant pads in our parks, but we see the vacant pads and other people’s parks right there. We could see this being a nice little niche that can last for a few years.

Andrew: The one hang-up I would consider, just because we looked at the tiny homes pretty aggressively a few years ago and the HUD licensing is a big deal. The local municipalities really want to make sure that HUD’s behind them just for safety and things like that. I’m curious because I’ve even looked at the 3D option, what does something like that cost? Fully built and ready to go. Is it truly affordable with the utility hookups and everything, or does it become like a single-family home?

Rudy: From what we’ve seen and the research that we’ve done, and of course these data can change by the day, so it depends on the cost of concrete. It depends on who you can find to actually do the work and all those kinds of things. Our research has shown that a comparably sized, if you think of a 14 x 60 or 16 x 80 type footprint of a standard mobile home, we believe that can be printed, manufactured, and livable probably in the mid-40s to mid-50s.

As mentioned, if we’re paying $72,000 for the box now, plus another $15,000 or $17,000 for setup on a home, we feel pretty good about those numbers and getting ourselves in a good place. We’re early in the process and the research, but I think we feel really good about the potential.

Andrew: Very cool. Thank you for sharing that. Rudy, thank you so much for coming to the show. I think you shared a ton. If our listeners would like to get a hold of you or Sawgrass Capital Partners, what is the best way for them to do that?

Rudy: I think there are two ways they can get a hold of us, one is on our website, sawgrasscapitalpartners.com. I’ll move out of the way if people are looking and watching the video. They can get us there or they can find me on LinkedIn at Rudy Curtler, on LinkedIn.

Andrew: Awesome. Rudy, thank you so much for coming on the show.

Rudy: Andrew, thanks for having me. It’s been a pleasure.

Andrew: That’s it for today, folks. Thank you so much for tuning in.