Mobile Home Investing with Charlotte Dunford

eorge grombacher 0:00
Come on live with this George G and the time is right welcome today’s guest strong and powerful Charlotte Dunford. Charlotte, are you ready to do this?

Unknown Speaker 0:18
Yes, I am.

george grombacher 0:20
Alright, let’s go. Charlotte is the managing partner of Johns Creek capital, they are a mobile home park syndicator excited to have you on Charlotte, tell us a little bit about your personal life some more about your work and why you do what you do.

Unknown Speaker 0:35
Right. So thanks for having me on. So my name is Charlotte. I’m the partner at Johns Creek capital. So what I do is we focus on small to medium level mobile home parks, focusing on this niche and put pretty much committed to investors generate generating good returns through mobile home park investments.

george grombacher 1:06
And how did you did you just wake up one day and say, You know what sounds good. I want to do mobile home park syndicating? How does that? How does that evolve?

Unknown Speaker 1:15
Right? So when I graduated college, initially, I pretty much just took a job. And I was always interested in real estate. Since coming from China, it was really impossible to own real estate, you could only lease it from the government. So that was always attractive to me. So I pretty much started buying real estate immediately using my salary to qualify for deals. And after two deals, one is single family, the other one is multifamily star duplex, it was nowhere near enough to qualify anymore using the small salary I got, as you know, out of college, just out of college business analyst in those a great college and a great job, the still two deals, the maximum I could get. So and, and the other time, I just decided to take a jump and take as kind of a, you know, a calculated risk for me to, to to start my own company. And that’s when I started in 2020. And grow to what we have today in 2020 to 26 mobile home parks. So the reason I chose mobile home parks was because it was really just a bluish Blue Ocean Strategy play. It was not I was not able to it was extremely difficult to get into a space such as multifamily. Because the big boys or the experienced people have been at it for decades. If a mobile home park it’s been a pretty long, ignored sector. So I was able to get in and they’re still big enough of a pie and enough room left in the pie to have a share.

george grombacher 3:11
I respect and appreciate that so much that you come to the United States. And you say, oh my goodness, you know, this is amazing. You can buy real estate here and you just immediately start doing it. I think that that’s, that’s such a wonderful lesson for anybody to take. Is that just part of your DNA or just seeing an opportunity and taking action? Because then everybody can do that?

Unknown Speaker 3:35
Right? So Well, first of all, I came here when I was 16. And, you know, so I still you know, I was a kid and my parents never came with me. So I came by myself pretty much just hopped on a plane to go to a high school here in America, and live with the host family and got to college and everything, you had to learn English. So I think what it could definitely be part of DNA just to be more adventurous. But at the same time, it was really a lot of it had to do with the background. You know, coming from a place where it was really quite, quite dark and there were really no opportunities and everything was felt really, really oppressive and, and then all of a sudden, you’re you’re presented with this land of opportunity. So it was very natural for me to want to just really use everything that I could to, to to to move forward to improve myself and to make the best out of life.

george grombacher 4:46
Amen. I think that’s awesome. And congratulations. So 26 parks in a little over two years. That’s That’s very impressive. So like that’s, that’s great. What are in its blue ocean, they’re still operating It’s still a massive market, even though people are starting to pay a lot closer attention to it. What is so attractive to you about mobile home park investing?

Unknown Speaker 5:09
First of all, I think it’s as simple as affordable. Sorry, is it affordable housing business. So first of all, and second is a parking lot business. So it’s attractive, because first of all, it’s in the market space is still blue ocean. Secondly, the supply and demand is there. So there is the ever growing demand for affordable housing. And supply is limited, because there are zoning regulations. That is extremely difficult to build new mobile home parks. So the supply is extremely limited. Actually, a lot of legislatures and local city county. It rarely goes to the state level. But local city county, definitely they don’t want mobile home parks exist in their city, because of stigma. But some cities are see as a way to solve their affordable housing prices. And it is, but because of the zoning regulations is almost impossible, and extremely difficult if you could do at all to build new mobile home parks. So then supplies limited, and demand is ever growing. And the blue ocean strategy ensures that you have still have room to seek this opportunity. And that’s why is attractive and that you were able to get the return. And going in into a deal with a cap rate higher than a lot of a lot of other asset classes. We actually just sold a park just exited a park last week, so we were pretty it was a less than two years or 20 to 22 months holding period. We bought it in June 2023 25,000. We sold it just last week at 499 2500. So that’s the kind of you know, capital and then we’ve been making distributions all along the way. So overall, investors are looking at a, you know, annualized return over 20%. So that’s, that’s the return level that you can, you can look at in mobile home parks.

george grombacher 7:23
And certainly people are interested in that. And as the stock market is doing whatever it’s going to be doing. And for the foreseeable future, it’s just a lot of uncertainty, looking for different opportunities to invest in that are correlated, I think is certainly an attractive thing. So I appreciate you sharing that, and what a great two year investment that that you made on that one, and hopefully they all go just as well. When when you make a when you’re decided on an acquisition, and you’re looking at the park, how are you then looking? Are you interested in also also improving it? How is how is that possible? If, if, if at all?

Unknown Speaker 8:07
Yeah, so there are certain value as that we can do. First of all, we have to buy this as right. So acquisition is extremely important process that we have 15 major parameters that consist of, you know, including some of the most important ones are, you know, the spread between meaning this percentage difference between the cap rate you’re purchasing the Parkette and the interest rate? And secondly, is the utility structure, how are the tenants paying for their utilities. And third one is that the ratio between tenant own homes and Parkland home, you want to make sure that you have majority turned on homes, or the parks. So those are the top three, there are 15 major parameters that we utilize in our internal algorithm that’s kind of a proprietary algorithm that we use to qualify our deals. So you have to buy rice, they say that, you know, there’s a saying very cliche, but it’s true, is you make the money when you buy. So it’s extremely true in this case, as well. So once you buy wrong, everything’s too late. So you buy right, first of all, and then after acquisition, the first thing we do is we’re pretty much raise rents by anywhere from 25 to $50. Upon acquisition, we gave the tenants proper notice, depending on the state regulations are usually 30 days, sometimes they go to 60 days. So because there is already a lot of meat on the bones, and lot rents are incredibly low to start with. For example, here in the southeast, lot rents are anywhere from $150 to $200. If not lower, and in the Midwest, you’re looking at $300 or so in some areas four but mostly three. So Nope, there are incredibly low to start with comparing with other housing products in the same market, such as apartment buildings and single family rentals and housing mortgages and you know, what the tenant would have to pay for. So they’re low to start with, so there’s room to increase rent. And it’s hard, it’s easier for the tenant to stomach than, you know, a $500 increase as it would happen in an apartment building. So that’s usually the first thing and you can push back utility. So you have to do whatever it takes to increase your noi, the net operating income, which directly correlates to your value of the park. And then number three, the general conditions of the park is extremely important to if there are, you know, debt trees on the lot, which, you know, I really wouldn’t want anybody to buy anything with it that tree on on the other mobile home park, but if there is, there are there is any trash, there’s anything that you can remove to increase the security and the safety of the neighborhood, then that’s definitely evaluate as well. So a lot of cosmetic upgrades, adding new fencing, adding a new sign, and adding new banners, all of those could be a part of the value add play.

george grombacher 11:22
That makes sense. And so going back to what you said, sort of initially was that you’re interested in more of a parking lot. And that’s related to you would rather have all tenant owned homes versus a lot of park owned homes. Because if it’s all Park owned homes, you’re essentially buying an apartment.

Unknown Speaker 11:45
You are and you’re buying a worse in your apartment because park park on homes mobile homes, you know, they’re they’re old that they have a lot of problems and new homes, they’re titled as cars, you know, just think about you’re getting a bunch of used cars with that that are breaking down that it’s really not functioning so that’s really not the business you want to be in you want to be in business of the land business. And that’s what we’re the word the attractiveness is.

george grombacher 12:17
Got it? That certainly makes sense. And I imagine that not that many people know that or maybe or maybe everybody knows that, but okay. So interesting. So rents in the south are lower than they are in the Midwest. Yes, I wouldn’t have guessed that.

Unknown Speaker 12:35
Yes, it is it is a slightly lower things are catching up. But because of because it’s just a housing differences right. So in the Midwest, if you’re looking at single family I’m talking about averages so a single family home right so this is in the market in the south but but again the South is is a huge, huge area and depending on the state and market sub market MSA the generally speaking single family homes are lower price than in the Midwest, on average, so that’s why the on average their their lot rents are lower.

george grombacher 13:14
Got it? Are you seeing trends of on Instagram and social media I see people retrofitting vans and traveling around around the country and really enjoying that kind of a lifestyle. And there is a need for affordable housing. Are you seeing trends of or demographic shifts in the folks who are living in mobile home parks?

Unknown Speaker 13:40
I think the demographics at the mobile home parks stay similar. There are two types of people who want to go into mobile home parks one is is the ones that kind of seek a lifestyle of mostly on the West Coast just to seek that affordability but at the same time is they think it’s a cool idea to live in a mobile home and just kind of kind of camp out and I would say you know if they work for a big company out west and just really save money but that’s the vast majority let me sorry, minority of this subclass. The majority are people who actually work at you know, I think restaurants and you know, lower paying slightly lower paying jobs. Yeah, looking for that affordability and less expensive housing option. That will be the majority of the customers that we we face. Got it.

george grombacher 14:45
Well, I appreciate you clearing that up for me. So what does the future hold for you and Johns Creek capital?

Unknown Speaker 14:53
Right so right now we have 26 parks and we are looking to acquire pretty rapidly, the second half of 2022, and certainly into the future. And in the future, near future, we are looking to once everybody becomes more comfortable. And when the opportunity strikes, we are looking to establish a kind of a fund, a Core Plus fund to acquire Valley light value add properties, just like the one that we kind of, we recently sold to continue delivering that return and skill at a more rapid speed. But we’re we’re already going pretty fast. But that would just make everything even faster. What help us scale and would also benefit our investors from a diversification perspective.

george grombacher 15:51
Love it. Well, Charlotte, the people are ready for that difference making tip, what do you have for them?

Unknown Speaker 15:56
Well, I think the most important thing is to take action. And in the beginning, sorry. In the beginning, doing something is always better than not doing anything. So you will figure it out from the experiences that happens along with doing something. So if you want to start a company, you want to start on a journey, the most important thing is to take action, and see where the journey leads you. And eventually, you will develop a system and the processes that you would need to do things on a more systematic level. But what you need to do right now, if you have a startup is to start taking action.

george grombacher 16:37
Well, I think that that is great stuff definitely gets come up. So well said it’s gotta get started. Charlotte, thank you so much for coming on. Where can people learn more about you? How can they engage with you and Johns Creek capital?

Unknown Speaker 16:51
The was the best way to reach me is to go to Johns Creek capital.com Our website and yep, go ahead and fill out that contact form I usually reach out pretty quickly afterwards.

george grombacher 17:02
Excellent. Well, if you enjoyed as much as I did Charlotte, your appreciation and share today share with a friend who also appreciates good ideas go to Johns Creek capital.com and fill out the contact form and get in touch with Charlotte and see if this is a good opportunity for you. Thanks again, Charlotte. Thank you so much for having me. And until next time, keep fighting the good fight. We’re all in this together.

Transcribed by https://otter.ai