Passive Mobile Home Park Investing Through Syndications and Joint Ventures
Updated: Sep 20, 2020
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 about passively investing in mobile home parks through syndications and joint ventures. Andrew covers the goal of these legal structures, the pros and cons of each, and his top ten tips on how to meet mobile home park syndicators that may not be advertising their current investment offerings.
Andrew Keel is the owner of Keel Team, LLC, a Top 100 Owner of Manufactured Housing Communities with over 1,400 lots under management. His team currently manages over 20 manufactured housing communities across ten states – AR, GA, IA, IL, IN, MN, NE, OH, PA and TN. His expertise is in turning around under-managed manufactured housing communities by utilizing proven systems to maximize the occupancy while reducing operating costs. He specializes in bringing in homes to fill vacant lots, implementing utility bill back programs, and improving overall management and operating efficiencies, all of which significantly boost the asset value and net operating income of the communities.
Andrew has been featured on some of the Top Podcasts in the manufactured housing space, click here to listen to his most recent interviews: https://www.keelteam.com/podcast-links. In order to successfully implement his management strategy Andrew’s team usually moves on location during the first several months of ownership. Find out more about Andrew's story at AndrewKeel.com.
Would you like to see mobile home park value add projects in progress? If so, follow us on Instagram: @passivemhpinvesting for photos and awesome videos from our recent mobile home park acquisitions.
00:18 - Welcome to the Passive Mobile Home Park Investing Podcast
03:30 - 506(b) or 506(c) SEC filings and investments
04:33 - Ten tips on how to meet mobile home park syndicators
07:03 - Pros and Cons to Syndications and JV deals
08:15 - Conclusion
👇 SUBSCRIBE TO PASSIVE MOBILE HOME PARK INVESTING PODCAST YOUTUBE CHANNEL 👇
Links & Mentions from This Episode:
Bigger Pockets website: https://www.biggerpockets.com/
Mobile Home University website: https://www.mobilehomeuniversity.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...
Hello and welcome to this episode of The Passive Mobile Home Park Investing Podcast. This is your host, Andrew Keel. Today, we're going to talk about passively investing in mobile home parks through syndications and joint ventures. Simply put, a syndicator or general partner will form a legal entity, usually a limited liability company, and then the syndicator will allocate shares in that entity to individual investors based on the amount each is investing.
The goal of this legal structure is to shield investors from the potential liability created by ownership of the property. As an investor, you might be willing to take on the risk of losing your investment amount in a deal, but you want your risk to stop there. You don't want a freak accident at the property, or management screw up to result in a lawsuit costing you your entire net worth.
This is achieved by forming an LLC to own the real estate on behalf of the individual investors and to shield them from some liability there. Through syndications, multiple investors pool their money to acquire a single asset or multiple defined assets. There are typically at least two different classes in regard to ownership shares held by the members of the entity or LLC acquiring the property.
There is a syndicator or general partner shares, and there is a limited partner or LP shares. The LP shares are the passive investor shares that typically hold no voting power, but provide the economic benefits discussed in the offering documents. Joint venture investments are essentially a syndicated transaction, but with a single limited partner investor.
Because the single LP typically puts in between 80%-95% of the equity, they have much stronger control provisions in deals and they are able to negotiate better terms. For example, JV investors can usually time investment sales or exchanges, allowing them to coordinate transactions across their portfolio and avoiding forced liquidations at inopportune times by the GP or other investors.
The primary downside to JV deals is the large amount of equity required for each deal. Some syndication deals may offer different limited partner share classes based on the amount invested as higher initial investments may yield higher preferred returns or other benefits in exchange for the larger sum of capital upfront. The same is true when investing in funds, more capital upfront may get some preferred treatment.
In terms of liquidity with a syndication, JV, or closed-ended fund, you're typically locked in for the entire length of the investment term with no opportunity to voluntarily remove the capital you invested. Therefore, liquidity is considered low. From my experience, most of these syndication deals are set up as exemptions using 506(b) or 506(c) SEC filings.
In 506(b) filings, there are usually a limited number of non-accredited investors allowed. However, many operators will only allow accredited investors to participate, and this is done to shield themselves from any additional liability from the participation of less sophisticated investors.
Also, with 506(b) investments, there must be an established prior relationship between the operator and the limited partner investor. Marketing of the securities is not allowed and this can make it a little more difficult to find these types of investment opportunities. Currently, only the 506(c) offerings can advertise investments for fundraising purposes.
It is not quite as easy to find mobile home park syndication investments compared to other asset classes. Here are 10 tips on how to meet mobile home park syndicators that may not be advertising their current investment offerings.
Number one, you can get recommendations from other passive investors. This is the best way in my opinion. Investors that have already invested with the syndicator are going to be extremely helpful in your decision to invest with that operator or not.
Number two, you can attend family, office, and real estate investment conferences to network with other attendees and speakers. You can also ask these professionals for referrals if they can't help you themselves.
Number three, you can call asset class-specific real estate sales brokerages and ask around for who is currently closing deals. You can sometimes see who has bought via their brokerage website under the closed sales section and contact active syndicators via that method.
Number four, virtual or in-person real estate meetups that are mobile home parks-specific are a great way to meet operators.
Number five, large events like the MHI Congress & Expo and the state manufactured housing association meetings. Also, annual manufactured home shows like the Tunica and Louisville shows put on every year are great ways to meet active operators.
Number six, online mobile home park-specific forums like the ones found on biggerpockets.com and mobilehomeuniversity.com are great ways to find active syndicators.
Number seven is one of my favorite ways and that is through podcasts. Search for all shows related to mobile home park investing, real estate investing, cash flow, syndication, et cetera. I recommend you look for the interviews with mobile home park operators on different shows.
Number right is social media groups on mobile home park investing or masterminds related to the asset class.
Number nine is company websites. You can Google key terms like mobile home parks syndicator or mobile home park investing and find operators that way.
Number 10 is crowdfunding websites. Some portals provide access to direct operators. The popularity of this method has exploded over the last few years and this is a good option to find operators quickly.
In conclusion, here are some pros and cons of syndication and JV investments. The pros: (1) You know the exact property you're investing in, and you can see the strategy the syndicator plans on executing upfront. (2) The pass-through entity tax treatment is very favorable, in particular, the depreciation and interest expense. (3) You have access to large investments with professional management. (4) You have liability protection. And (5) these are very passive investments. Most of the work is done upfront in the vetting of the operator.
Here are a couple of cons to syndications and JV deals. (1) The lack of liquidity. (2) The lack of control. (3) Investors typically have to be ready for a long-term commitment in case the market isn't ideal for an exit at the planned exit time. (4) General partners sometimes focus on quantity over quality when it comes to deals. And (5) sometimes the fee structure isn't always easily understood.
Well, that does it for today. Make sure you tune in for our next episode, which is a great interview with the mobile home park fund manager and fellow podcast host, Kevin Bupp, in episode 18. Thank you all so much for tuning in.
Would you like to see mobile home park value add projects in progress? If so, follow us on Instagram @passivemhpinvesting for photos and awesome videos from our recent mobile home park acquisitions. Once again that's @passivemhpinvesting on Instagram. See you there.