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Interview with Sydney Barker of Open Door Capital LLC



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 Sydney Barker of Open Door Capital LLC. Sydney’s hard work and background in finance has helped her become the Vice President of Finance at Washington Street Properties. Sydney also is in the asset management division at Open Door Capital LLC, a mobile home park investment fund co-founded by it’s CEO Brandon Turner, who is also the host of the BiggerPockets real estate investing podcast. Sydney is also an active real estate investor and owner of SOHO Properties LLC.


Today, Sydney and Andrew talk about everything mobile home park investing. Including what her perfect mobile home park looks like, her toughest hurdles in the business and her thoughts on a $15 per hour minimum wage affecting the MH space. She talks about her experience with her first mobile home park acquisition, and gives some advice to new investors getting into the trailer park business. Sydney talks about impulse versus experience, and goes over the changes she’s seen in her first community since she started working on it two years ago. Sydney shares her vast knowledge on the manufactured housing space during this VALUE PACKED episode you won’t want to miss.


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. It would mean the absolute world to me if you could help contribute to our reviews. Thanks ahead of time for making my day with your five-star review of the show!


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

01:42 - Sydney’s story and journey to manufactured housing

02:47 - What interested Sydney in mobile home parks

03:32 - The biggest hurdle in the industry for her

05:42 - Sydney’s first mobile home park acquisition

08:58 - Where Sydney is today

10:53 - Handling the management and operation side of mobile home parks

13:14 - Finding and sourcing new deals and mobile home parks

14:21 - Sydney’s perfect mobile home park looks like this

15:27 - Common mistakes manufactured housing community operators make

16:20 - Insights on underwriting and conservative measures in pro forma’s

18:39 - The most important things passive investors need to look out for when investing in mobile home parks

22:04 - How a $15 per hour minimum wage would affect the mobile home park industry

23:23 - Open Door Capital LLC mobile home park investment funds

24:36 - Advice for new mobile home park investors

27:15 - Getting a hold of Sydney

27:47 - Conclusion


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Links & Mentions from This Episode:

Sydney Barker, LinkedIn: https://www.linkedin.com/in/sydney-barker-3531097a/

Sydney Barker, email: sydney@odcfund.com

Open Door Capital LLC: https://odcfund.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, and today we have an amazing guest in Sydney Barker of Open Door Capital. Before we dive in, I want to ask you a real quick favor. Would you mind taking an extra 30 seconds and heading over to iTunes to rate this podcast with five stars? This helps us get more listeners and it means the absolute world to me. Thank you for making my day with that review of the show.

All right, let's dive in. Sydney is in the Asset Management Division at Open Door Capital, a mobile home park fund run by Brandon Turner of BiggerPockets. She is also the VP of Finance at Washington Street properties. Prior to joining Open Door Capital, Sydney served as the corporate controller for a $250 million IT company, as well as a senior financial analyst for a large public insurance company.

Her experience includes various mergers and acquisitions with private equity firms, ERP implementations, SEC reporting, cash management, and strategy. Sydney also invests in and syndicates multifamily properties with a focus specifically on the mobile home park asset class. I also saw that Sydney is an avid polo player, so excited to learn more about that. Sydney, welcome to the show.


Sydney: Thank you for having me, Andrew.


Andrew: Awesome. Maybe you can start out by just telling us your story and how you got into manufactured housing.


Sydney: This has happened a few times in my life where I woke up one day and I think I want to buy a mobile home park. It was just random. I had googled multifamily real estate podcasts and I came across Rod Khlief and plugged into his community. I attended one of his live events and everyone was excited about apartments, duplexes, and quads. I was thinking, where is everyone not interested in?

I was like, wow, mobile home parks are really not sexy. Nobody was interested. I just decided that day, I was just going to do it. I didn't know how to do it, where to start, but I just made a decision to do it. Two years later, now mobile home parks are probably the sexiest girl at the party. It's definitely changed in the two years that I've gone into it.


Andrew: Wow, that is fantastic. Was there something specific that you heard about or a certain metric that was like, all right, mobile home parks are good? Or was it just everybody looking right, go left?


Sydney: It was a little bit of that, but then everyone talks about the baby boomer avalanche, that generation not being good at saving for retirement. It just made sense to me that affordable housing is something needed now and it's going to be even more so in the future. Now that we've got the situation of hyperinflation setting in, it's become an even more attractive option to offer people.


Andrew: That's a good segue into the next question. What hurdles do you think the manufactured housing industry will face moving forward? Inflation is a big one; a lot of people are worried about that. How do you think the industry will fare given the next five years or so?


Sydney: I think the biggest challenge is the supply. You've got mobile home parks being torn down, and very few being built. It's a dying breed. You've got a lot of municipalities that don't want them, even though the community really needs them. A lot of the manufacturers for the houses themselves are just, as you know, getting crushed right now with orders. We've been trying to put in orders and what not. Some of them we may not get until the second quarter next year. It's really wild. The supply, to me, is the biggest hurdle for the industry.


Andrew: I agree. We just placed an order and the same thing. We're looking at halfway through next year, so it's crazy. Luckily, wood prices are going down. When we place the order, they're like, hey, this is the price today, but it may go up once your home's hit the assembly line, and we're like, oh, my goodness, what do you mean?


Sydney: It's wild. When do you think the supply will settle down?


Andrew: I really don't know. That's a really good question. I hope in the near future, but I think with wood prices going down, I know that there's more with the Covid shutdown. My neighbor is a new home builder, and he was saying it's not just lumber that's experiencing extreme shortages, but resin is also in extreme demand. I think in the next 12–24 months, we should be back to normal. Who knows at this point? What do you think?


Sydney: I think the same as well, probably 1½–2 years.


Andrew: Yeah. Sydney, how did you come around to own your first mobile home park?


Sydney: I decided to buy one and I decided I'm not going to start small. I think everyone starts small, like I'm going to buy a single family house or just one. Something had inspired me. I was like, I'm just going to buy a big one. That's my step one, I'm just going to buy a big one. I ended up teaming up with some people. I had no money to invest and I had no experience at all.

My only experience, the only thing I can really bring to the table was the fact that I'm a numbers nerd and my brain excelled, basically. I knew that I could underwrite deals and analyze them. That's the value that I brought and I just teamed up with some people that I knew could help me get the money. I teamed up with a really great guy, Todd Murphy, who's my partner right now, who's just operationally does such a great job.

My first deal was a broker deal. It just had everything that you're looking for in a good deal. It just felt right. The lot rents were low, they were empty pads, the units were not sub-metered. It was just the perfect deal.


Andrew: Yeah, lots of value added there.


Sydney: It was 71 pads in Indiana and it's been a wonderful property. We've done some improvements, infrastructure. We've brought in some homes. We've renovated homes and sold them. I've heard people talk about, oh, pride of ownership, you go in and fix stuff up, and everyone starts doing the same.

I actually saw that happening. When we first took it, it was very neglected by the previous owner. With our team going in there and just really trying to clean it up and make it nice, a lot of the other homeowners started improving their yard and fixing up their homes. It was really cool to see that. I have it today and it's been a wonderful property.


Andrew: That's fantastic. I love that you still own it today. Do you plan on selling it?


Sydney: Not sure yet. There's still stuff to do that we can do. It's still a good deal for us.


Andrew: That's awesome. That's very cool. What was your toughest hurdle with that park?


Sydney: Basically, just doing everything and not knowing what I'm doing. You figure it out, but it was just scary not knowing, like is this a good deal that I run the numbers properly? You always second guess yourself. The last minute funding of money is always, I think I lost a few years of my life, that week of closing. There was hundreds of thousands of dollars in a wire that was missing and I was cussing out the people at Chase Bank. It was just wild.


Andrew: Yup. Oh, yeah. Pre-closing can be stressful. I've been there. Tell us about where you are today, all the way from your first park, now with Open Door Capital. If you could just shed some light on that, that'd be awesome.


Sydney: This is to me, a great story. It was a mastermind that I was in and one of the guys was always encouraging like, put out there what you're doing and who you are, what you want. That's exactly what I did. I had no idea what I was doing, but I just was putting my story out there and I've got a lot of friends.

Brian Murray, who wrote the book, Crushing It, is with Washington Street Properties and Open Door Capital. He heard me on a podcast and my first podcast. I literally had no idea what I was saying, but he heard me, and ended up in a meeting. One day he was like, hey, we're going to start this project—which would later be the mobile home park funds—and he said, I might need your help one day. I said, okay, just let me know when you're ready.

Him and his wife ended up moving to my town. I'm in Alpharetta, Georgia. They said, hey, we're ready. We're growing so rapidly and this is so successful. We would love for you to come join us. It's been an incredible experience working with this group. This team is the definition of what a team should be. Everybody's in their own lane, doing their thing working together. It's been an incredible experience. We just closed our fourth fund.


Andrew: That is so awesome. I've seen it from a 30,000-foot-view of what you guys have been doing, and that has to be fantastic and a lot of fun. Every acquisition, but I mean already for, it seems like when it just started, what was it? 2019 when you guys started your first fund?


Sydney: Yeah, so two years.

Andrew: That's a lot of growth. That has to be a lot of fun.


Sydney: Definitely.


Andrew: Very cool. How do you all handle the management of your parks? A lot of people have said that that's the biggest hurdle for them, the operation side of things. How’d you all handled that?


Sydney: It's in-house. We don't use third-parties. We've got our own property management team here. We've got some different situations depending on the park. I would say most of our parks have on site management. It was a legacy setup. Those parks are mostly infill or project parks, so they need that person there to manage things.

It's been a great experience. We've got a couple of parks that are regionally in the same area. We're able to use an off-site park manager that can go between the three parks, and that's worked out really well as well.


Andrew: That's awesome. Having good onsite or nearby management, I feel is the biggest secret. If you have a good manager, a bad park that has a lot of issues can be very quiet. It's just very dependent upon setting those expectations. That's awesome that you guys are [...].


Sydney: All of our park managers are so interesting. They really love the park and the tenants. They really take ownership and we have not lost one park manager since all of our acquisitions. I think that's pretty impressive.

Andrew: That's impressive. Yeah, that's very impressive. I drove through one of the Open Door Capital Parks in Grand Forks, North Dakota. I have two parks in Crookston, Minnesota, which is up 20–30 minutes east of Grand Forks. We went through one, I'm not sure the name of it, but it's underneath a big water tower.

Because you guys had just purchased it, there were probably 20–30 demos going on at the same time. I was just like, wow, this is a lot. They are just twisted metal. You hit the ground running. I'll give you that. That's awesome.


Sydney: We have an incredible guy on our team named Tristan Thomas, who runs our infill. That's all he does and he does an incredible job. That's all.


Andrew: That's wonderful. How do you all find your deals and source new parks to buy?


Sydney: Here at Open Door, we have our own acquisitions team. A lot of it is broken relationships. We also have to bring brains in a deal that's out there, that people can take advantage of. We've done that a few times, where someone's brought us a deal and they get a nice little finder's fee for that. It helps us, so it's a win-win.


Andrew: That's awesome. What is your deal criteria in case somebody has a deal out there?


Sydney: It's got to be 100+ pads, city sewer or city utilities is what we're after. We do the mostly tenant-owned home model. If there are park-owned homes, our process is we convert them to tenant-owned homes through lease-to-own contracts. I would say mostly tenant-owned homes, 70%–75% occupied.


Andrew: Nice. That's great. Sydney, if you were going to describe the perfect mobile home park, the one that is the legacy asset that you want to hold forever, what would the perfect mobile home park look like in your eyes?


Sydney: It would be maybe 15–20 minutes outside a major city, lot rents really low, all tenant-owned homes, city utilities, paved roads, brand new underground infrastructure. The hardest part is the infrastructure of a lot of these parks is just terrible. A lot of repairs have to be done. How about a brand new infrastructure, brand new roads—


Andrew: All plastic, all PVC. All PVC, all lines, sewer lines.


Sydney: Yeah, and a warmer climate.


Andrew: There you go. Yeah, no more busted submeters in the winter.


Sydney: Exactly.


Andrew: That's awesome. Sydney, what common mistakes did new operators make?


Sydney: I think the most obvious one is they underwrite everything going correct 100% of the time. That's just not reality. I think people will look at a deal and they'll say, oh, I can manage it better, I can run it better, I won't have those expenses. I would just encourage people to not be so optimistic because I think a lot of people try to make the numbers. They try to rationalize the numbers, like, oh, I can run this at a 30% expense ratio. Maybe you can, but be realistic. I think that, to me, the biggest mistake is people getting too excited in trying to make the numbers work when they don't.


Andrew: I agree with that. Yeah, I think that's a good point. You being the numbers nerd, the underwriting queen, maybe give us some insights as to your underwriting and some of the conservative measures that you make sure to include in your performance.


Sydney: I don't do underwriting for Open Door Capital. Our acquisitions team does, but I can do underwriting and I have done it. I think the biggest thing is just making sure that your numbers are realistic and planning for people moving. One of the things that we do here that I really like is our team has a feedback loop. We have this acquisitions team, and then I'm on the asset management side.

The other day, I was talking with one of the guys and I was like we need to bump up our legal fee underwriting expectation because they've been a lot higher with Covid, people not wanting to pay, and us having to try to pursue. Our legal fees have been higher than previously expected. That's one of the things that I've noticed, but I would just be conservative with expense ratios and not assume you can immediately reduce expenses. Keep them the same.

I think the biggest thing is focusing on the top line. Revenue is the driver of all businesses. You can spend time trying to nickel and dime your expenses, but the biggest impact you're going to have is when you affect revenue.


Andrew: I love that. I think that is a very good point because in some of our parks, we're running a little bit high on the expense ratios, and they're parks that we recently purchased, so maybe 60%–70% occupied. A lot of our expenses are fixed; they're not going to change. Insurance, property taxes, they're about the same every year. Obviously, they go up a little bit, but whether you're full occupancy or you're 60% occupied, your taxes are going to be the same. When you are more occupied, you're going to run a tighter ship. It just makes a lot of sense.

This is the most important question of this interview. What would you say, Sydney, are the most important things that passive investors—we're talking about limited partners here—need to look out for when investing into mobile home parks?


Sydney: I think the biggest thing is you have to make sure you're investing with an operator that knows what they're doing. There's a lot of people, not just in the mobile home park world, but in and around our industry, multifamily, and single family, that there's a lot of hype. There's a lot of hype. People talk in big games because they listen to podcasts, read a book, and go to a conference.

I would bet any operator that you choose to invest your money with, look at their portfolios, look at what they've done, and really understand who you're investing with because it's a business. It's not a stock that you just buy, make money, and send you dividends or whatever. It's a business and an operator needs to know how to run the business. I would say that's the biggest thing.


Andrew: Maybe you could shed some light, like how would someone be able to tell if an operator is running the business well or not?


Sydney: I would say show me what your portfolio looks like, show me maybe some financial reports like some P&Ls.


Andrew: What would be the first thing on the P&L that you would look for?


Sydney: I would look for an expense ratio. I would see, do they have a bunch of different revenue items, if they're charging laundry, pet fees, and all these other miscellaneous items. That to me is a cool indicator that they really know that this is a business. They're not just charging a [...]. Let's see, what else? Are they running it at an efficient expense ratio?


Andrew: What's like a ballpark expense ratio that you feel is conservative, that would be good to see on a P&L?


Sydney: I think I would want to see 45 or under, obviously, under being more attractive. But it just depends on the lifecycle. Like you said, you all just bought some parks and they're higher right now. We've gone through that too. When you first buy it, you take what you have.

I think what is cool is when you look at a P&L, I would look at month over month P&L, like a trailing 12 months of TTM P&L. Is the revenue going up or are the expenses going down? What are the changes? As an LP, I would make it an interview, tell me what you're doing. When you talk to someone, you can start figuring out, are they all-talk or have they actually done something?


Andrew: That's a very good point. A little bit of gut instinct as well as checking what you can with the facts that are presented.


Sydney: Actually, if you ask for reports or something, the people that don't have anything won't have anything to give to you.


Andrew: That's a good point as well.


Sydney: Ask for some paper and see what you get.


Andrew: We're going to put that in the quotes in the show notes, ask for the paper and see what you get. I like that. I love that. Sydney, how do you think a $15 an hour minimum wage would affect the mobile home park business?


Sydney: I think that's such a much broader question. It would affect the entire economy to me in a negative way. I don't support that at all. I think there's just a lot of trickle down effects in that. I haven't quite thought about it or analyzed how it would affect mobile home parks, specifically. In all fairness, it could be good. You've got people that do make less than $15 an hour as your tenants, so perhaps it could be good.

Overall, I don't think it would be good for the economy. I don't believe in doing something that's shortsighted. It's good for me. I think it's more important to do something that makes sense overall.


Andrew: Yeah, it's been interesting. I've asked that question to a couple different operators and we've had mixed results. Some say that it would be bad because it would incline businesses to start more artificial intelligence, self-checkout lines and things like that. Some are for it and some are against it, so I appreciate your insights there.

Sydney, what is the value proposition at Open Door Capital and what makes you all different from other operators out there?


Sydney: The fact that we have funds. In our funds, we're able to diversify. We can have a park that is pristine, cash-flowing, consistent, and we compare it with a park that needs work. Maybe it's 60% occupied, we got to do a bunch of infill, we may not see that cash flow for a little bit.

We've had instances where some of our parks carried the other parks’ expectation for distribution. It's just a great way to diversify your investment and not put all your chips in one deal going perfectly, because it never does go perfect.


Andrew: Yeah, there's always something. There's always something that comes up and that's why it's so important to have that miscellaneous item in your capital raise because, like you said earlier, these assets, these mobile home parks, a lot of them are 50+ years old. The water lines, the sewer lines have been deferred maintenance on for a long time. It's good to just just have those reserves.

Sydney, last question. If someone's just considering the mobile home park asset class, what's one piece of advice you would give them that's tangible that they can use in their passive investing?


Sydney: Just someone that wants to get started in mobile home park investing?


Andrew: Exactly. Someone that's just dabbling, is trying to get educated, and would like to dive in. What's one of the most important things that they should know, or that they should maybe get educated on, or attend or something like that?


Sydney: You got to know this asset class. You definitely got to do some research, listen to some podcasts. I started off listening to Frank and Dave, which was very helpful. It's very old school. Disclaimer to anyone out there that goes and listens to that, it's very old school. Honestly, since that education has been out there, a lot has changed. I would say, some of that is not necessarily relevant information anymore.

I would say you've got to be educated. I know that, in our industry, especially multifamily, there's like this, rah-rah, just get out there, just do it. Don't even think about it, just do it, do it with your eyes closed. While I appreciate the sentiment behind that, I also think I also value education.

I'm a little bit of a different story. I did go to college. I went to university, finance and accounting. My degree I actually capitalized on. I feel like nobody says that. I feel like everyone wants to go in there and bash education institutions. My mind really did pay off, so I think education is important. Whatever it is you want to do, become an expert in it and decide you're an expert even before you know everything, because honestly, you'll probably never know everything.


Andrew: Yeah, always learning. There's always something else. I love just digging in and still listening to other podcasts myself. I love Frank's podcast, the Mobile Home Park Mastery, Ferd's podcast, and the Mobile Home Park Lawyer podcast is amazing. There's a ton of information that's free at your fingertips that you can get just by dabbling into your podcast app. I love it. I hope this podcast is included in that list as well.


Sydney: I hope so, yeah.


Andrew: Definitely. Sydney, how can listeners get a hold of you if they'd like to do so?


Sydney: I'm on LinkedIn, I'm on Facebook. I can get my email address out. If anyone wants to get in touch with me, it's sydney@odcfund.com. Reach out to me. If anyone has any questions, needs any help, I'd love to talk about mobile home parks all day.


Andrew: That's awesome. Sydney, it was an absolute pleasure having you. A wealth of information. Really thankful you came on the show. That's it for today, folks. Thank you all so much for tuning in.


Sydney: Thank you.

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