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Itunes – www.TonyJavier.com/itunes
Guest Bio: Doug Ottersberg is a Business and Life Strategist consultant with growth-minded company Owners, Presidents, entrepreneurs, and professionals, their businesses and teams. His Life mission is to be a difference-maker for difference-makers, helping them make better decisions and achieve better results, bridging the gap from frustration to a better quality of life.
More about him – www.TonyJavier/dougottersberg
Welcome to today’s show. We have Doug Ottersberg out of New Mexico. We’re going to talk about mobile home parks today. So,Doug says he’s been unemployed since 1987. Now there’s the difference between unemployed and unemployable. I’m employable most entrepreneurs are, but let’s talk about mobile homes. So mobile homes, this topic is not super sexy, but everybody knows. I think that has looked into mobile homes that the money that comes in from mobile homes are super sexy. So let’s just start from the beginning. Tell us how you got started. You bought your first mobile home park looks like in 94. I think that’s before it really became kind of a little more mainstream. So tell us about that and how you’ve evolved into what you’re doing now.
So I, became unemployed when I quit my job at Hughes aircraft and started an electronic repair company with some guys I was deejaying with at the time. And it took about, Oh gosh, 4 or 5 years. And we had a business mentor, George Gonzales, and one day George came in and he said, you know, guys, this business is great. You’ve lasted five years and a lot of businesses don’t, but you know, this business will never make you rich. And it’ll be me a nice life, but you need to get something other than you working for you. What do you mean? He’s like, I took money out of my business and I bought rental houses. And so long story short, I started investigating, I found some books like by Charles, Jay givens and Robert Allen and started reading and got on some mail lists and ended up going to a real estate investor retreat, you know, come down to wherever it was, the Sheraton I don’t even remember and ended up walking out of that $5,000 lighter.
Got your money back then.
Yeah, it was. And came back for the seminar, which I am happy to report. I won the contest for getting the most credit line increase.
Nice before they sold you something else. Right.
I understand how that works, but in any case now it was all good. All good. Got me started and during this process, I met some other teachers and ended up going to some classes by a man named Jimmy Napier. Jimmy Napier was famous for a little book. He wrote called Invest In Debt. And it’s all about understanding cashflow and, you know, I’m glad you followed it up. The mobile home parks might not be sexy or mobile homes might not be sexy, but the cashflow sure is. Because that’s exactly my thought. One of the things that he taught us was two things. Great. Do a little bit of work today that will benefit you out in the future. And alsothis whole idea of that George has said too, it’s like, get something other than you working for you. And so when I saw how you could do an investment, like in this case a mobile home, well, it was accessible. It didn’t cost a whole lot of money. You did, you didn’t need transactional funding or hard money, or if, you know, for most people and Hey, I just got a bump in my credit card blind. So I had enough cash to buy one and we ended up doing that and it took several months to turn. We flipped it but it was great. We got some furniture and a TV that, you know, lasted us for 10 years that it got our feet wet.
And during one of the seminars, I went to one of the first ones, I went with a friend of mine and his mother, she had introduced me to Mr. Napier. And she went with my friend and I to the seminar and, Oh gosh, we were probably mid to late 20’s at that age at that time. And she’s like, okay, now boys, when you go in this room, keep your mouth shut and keep your ears open. And I want you to remember, you never know who you’re sitting next to. And that was really good advice because she’s like, you know, a lot of these people might look like they shop at Goodwill. I guarantee you, they could write a check for this hotel and probably several more. And I’m like, okay. It turned out that a lot of the people in that room actually owned mobile home parks and they were there because if you buy a mobile home and you rehab it and you sell it, you get a chunk of cash if you sell it for cash. But if you sell it on financing, well, you get a paycheck every month for however many years you finance it for. And so when I saw that, checked off that box, do some work today, get paid for years. Yeah. That makes sense.
Yeah. So let’s talk about those different ways to make money on mobile home parks. So there’s, I think three ways there may be more we’ll talk about. So there’s renting the lots. There’s renting the mobile homes. And then there’s also doing owner carry on the mobile homes. Right. Am I missing any other?
Yeah. one is to buy a real crappy mobile home park with a lot of challenges that you can fix. So like the right things wrong and it’s just like any like single-family house or even better yet, like multifamily. If you understand how net operating income works and how cap rates work. When you buy a mobile home park, now you’re talking multifamily and so you can make money by obviously raising income, lowering expenses cleaning the place up, making it more attractive for residents as well as other potential investors and then so like for example we were able to buy our second community because we did exactly that with our first community.
Right. You’ve basically flipped it like you would, some people would consider flipping a house.
So what we did, actually, we harvested, it would be that’s a better, so that is a keeper. We didn’t flip it. We typically don’t flip our parks when we get that thing it’s like planting a seed, a crop, right. And you gotta work it for a number of years. In this case, it was probably like 7. However, we were able then based on all the work we had done and, you know, raising income, growing expenses with that new net operating income, plus our track record that we had, we were able to refinance and pull out in cash more than we paid for the place in the first.
Wow. yeah, you can definitely do that with residential, but I could see how doing mobile homes. You can do that substantially more because if you have someone that’s not managing the property, that income is way down and that’s how they base the price is on the net operating income. So then you just, you know, able to get that income up and then the value increases dramatically and you get a cash out. That’s awesome. So, hat part of it, do you like the best? Do you like the acquisition and the turning around of the parks? Do you like the fact that you can take the mobile homes and finance them on high interest rates and probably get a pretty good price for those, for those mobile homes? Like, what do you think is the best part of, of what you do now?
For me, actually, the best part is doing well by doing good. And, you know, it’s, it’s affordable, it’s accessible housing for people that just work their butts off. And literally, they just want a place to come home to just like we all do. And I got to tell you Tony, the first community to be on. And I bought it was black market city. It’s like what you want, you know, it’s like what you got, you know, whatever it was crazy. We would park down the street. We would take turns and we would watch where the traffic would go and stay for several minutes and leave and we had our lives threatened. You name it. We had our fire bomb in the office, it was crazy. And anyway, long story short we improved the resident structure by expanding the housing opportunity for many of them helped them move and got in better homes, better residents. And there was a day when a guy came in and he was like in tears. He’s like, I just want you to know, I’m not ashamed to say I live here anymore. And I’m like, you know, that’s awesome. So, yes. So, but then the thing that I really like about the mobile home park has to be, it’s a long-term wealth generator, that it’s also the steady, predictable income that comes in month after month, and that’s gotta be it.
And it’s low income for the most part. Right. So, you know, when you’re in a tough market, higher income properties typically are the ones that do the worst because there’s not as many people buying or renting or whatever, but that bottom like low income, there’s always going to be people that don’t have money or have little money. They can only afford a mobile home. Right.
And that was literally when I very first was deciding to get into this, I was reading Sam Walton’s biography and, you know, Sam Walton went out into small towns and built his business in small towns. And I got the idea that, okay, that makes sense, you know, in business there’s basicallylike the house business is you do high margins, but you do low volume. Right. And then there’s the other side of the coin, which you just alluded to, you could do higher volume, but on a lower margin. And when I looked at that and small town, like, wow, gosh, I’m mobile home parks, kind of like a small town. In fact, they call the owners and managers, sometimes the mayor of that small town and yet at the same time, when I looked at that, I’m like, gosh, you know, they’ll always be just like you said, a lot more people that need and want affordable, accessible housing. And for the last 25 years we’ve never really noticed what’s going on in the economy. You know, it’s like, Oh, there’s a recession. Really. Again, this is one of the things we were taught when we go look at properties, especially these communities. I love to see pickups with tools in them. Why is that? Because those are people that’ll work. This year something happened that threw a loop for all of us, never in my wildest dreams. Did I ever include pandemic in any kind of SWAT analysis? So it’s like, they’ll work it, but is there work to do. Can they work? And I’m just happy to report that on, and I have kept our rents on the low end. We don’t push like some landlords do no judgment. However, we make more than enough, we’re covering our payments every month and one of the things that I, learned and can vouch for is when your residents have equity, they make really good residents. They tend to pay their bills and they want to stay.
And thats good stuff. So let me ask you, so it sounds so simple, right? It’s like go find a mobile home park. A lot of them probably run down, have a lot of vacancies, all that kind of stuff. Why don’t more people do it. So tell us about that. Like, how hard is it to get into how hard or easy is it to find mobile home parks and what would your, I guess what would you say to someone that’s trying to find one right now?
So I call it riding the speed bumps and they’re all around you, and you might, not notice like I never did until it was brought to my attention. It’s like when you buy a new red car pretty soon, what do you see everywhere you go red cars. Right and so first and foremost is realize they’re there and, you know, just, just do a Google search just, you know, I would say yellow pages, but that would date me. So just check and see, where are they located? And then just go ride around and see what you see. And I will say this at the time that we’re recording this over the last several years, there have been a lot more, there has been a lot more interested in the space, thanks to several people on other podcasts. I won’t then here. However, a lot more people became exposed and become, it became the hot new thing. So there was a lot of money and it’s not just happening in mobile home parks, you’re seeing it. And primarily any multi-family type assets we’re seeing cap rate compression. I just saw and an email the other day where a five-star 55 plus community sold in the Philadelphia area for 115, I think, a space. Wow.
What do you mean 115 is space
You know like in apartments they like, Oh, what’d you pay? Oh, I paid, you know, 50 grand a dollar.
Oh, okay. 115,000 per space. Oh my gosh.
3 percent cap Rate.
That’s insane. Is it because of the market they’re in or what.
Yeah. And so there’s,when you understand cap rates, investors will pay more for less headache. Right. So, you know, you call that the coupon clipper type property. Right. And someone like me, who’s actually going to do the work or wants to capture the upside. We have to have a higher rate of return, and we’ve got to have a potential, a deal. Like I just mentioned, somebody else has already sucked all that right out of it. These people, all, you know, the buyer, they’re just sitting on a ton of cash and 3% looks better than zero. So they bought it. So,the thing is,as you’re going through these communities just start noticing. So it’s kind of the same thing. When you learn the single family house business, you’re driving down the street.
Oh, there’s papers piled up on the driveway, the weeds aren’t cut. Maybe I should go check with the County assessor and see who owns that and send them a yellow letter baby, better yet. Should I go knock on the door and see if there’s anyone here? Same thing applies drive through the mobile home parks. And just one thing I would do was knock on the door, find the manager, just ask them about the community. And and if I ever got a chance to talk to an owner, I’m like, how long you’ve been doing this? And would you recommend, you know, would you recommend it for someone, you know, my age, just start now. Because they’re usually older. And what, what, what you’re looking for is something like, well, you know, I would, but yeah, I’ve been running this for X number of years and we’re getting tired and Oh, really?
So the parks have you you’ve bought, is that how you bought them, that you went and found them off market or were any of them actually on the market when you bought it?
So off market actually the first one was on market. I don’t know how heavy are off market or on market. I was telling you when we spoke earlier, I had gone to a real estate,investors training and had learned about mobile home parks and mobile homes and buying and selling. And I had stood up and I said, Hey, you know, my name’s Doug, I’m from LA. And I like these mobile home parks, but you know, I don’t really think that’ll work in LA. Well, what I meant to say was it won’t work for me because those parks, I, I remember telling my girlfriend, who’s now my wife,uthese park owners treat them like they’re private playgrounds and they won’t let me play. Right. I think I need to buy my own playground. And,so I stood up and I don’t think those a work and, you know, he told me, well, you’re not a tree you could move. And that stuck with me. And I thought about it. And,I went back to LA and, you know, continued life and at another one of his trainings later,uhe gave attendees students the ability to sign up, you could go stand in front of the group and say, Hey, my name’s Tony, I’m from here. And I’m looking for this, or I got this. Or, and, you know, then you’d get cards and do all that kind of stuff. So I stood up and I said, hi, my name is Doug. I’m from Los Angeles. I want to buy a mobile home park. I learned I’m not a tree. I’ll go wherever that deal is. And there happened to be an investor, ealtor in the room and his partner from Albuquerque went back to Albuquerque did some marketing, created a seller’s list of mobile home parks in the area and called me up. I flew over and got her a ride around New Mexico for a couple of days and, you know, ride the speed bumps, ho drive through a bunch of different parks and, mnded up leaving after making one offer on one park in Santa Fe. Umt turned out to be, you know, to me, it’s the hand of God. He’s like, Hey, you, h need you here.
Wow. That’s crazy. That’s crazy. So what is the next move for? I mean, you’re, it sounds like you’re doing good with mobile homes. Like a lot of the real estate investors I talked to, they get into something they get, I don’t know, bored, complacent, whatever it is. And then they see the shiny object or they start investing in other markets. You said you tried investing in mobile home parks and other markets, but you decided to stick to New Mexico. Yeah. So what’s kept you focused. I mean, do you just love it that much or interesting, you know, tell, tell us, yeah.
So it turns out thatwe bought a community. We, attempted to buy some other communities and other markets and didn’t happen. And then I ended up buying a community that was close to where I grew up because I thought I could, you know, Hey, I can go see mom and dad and write it off. Right. So but it turned out that the people that lived in that area, at least that were in that particular community were nothing like our current tenants back in residents back in New Mexico. It just wasn’t any fun.
So, it was more the type of tenants than anything.
So it was the, it was that. And then over the years we’ve managed to get by and I’ll just lay it out on the table, neither my wife and I consider our strong suite to be managers of other people about their things. I mean, we get it done eventually and it happens. But we were never of the mind, like we’re gonna build a business where, you know, like with E-Myth, you know, it’s like, you’ve gotta be working on your business, not in it. And it’s like, well, you know, we do good working in it and we’ve gotten help over the years. And we’re at a point this right now we’re empty nesters and so we’re just going back through all of our processes and actually looking for someone that we can find that will run our office and stick around for a long time and pay them well. And I make sure they’re happy. And so we just find that for our style and for our comfort. Yeah. If it’s within a couple hours of our home, we’re good.
So tell us about the financing on mobile home parks. So houses, you know, you find a good deal. You can typically find finance and you can find a hard money lender or private money lender, maybe gap funding, if you don’t have a down payment you know, that kind of thing. So how does it typically work with mobile home parks? Do you have cash like, like you did at one point in the beginning, or when you bought that in one park, you mentioned that’s easy, but what, where do people go for financing for those types of types of sensors?
There’s basically, there’s two avenues. Well, three one is you flip a crap ton of houses to get a huge down payment. And then you go to a commercial lender who’s going to require at least 30% down and they’re gonna want to see a track record and a good credit rating, and, and you’re gonna have all the inspections that you never wanted to deal with and so, yeah, commercial financing, if you’ve ever been through one on a property of that size,ou’ll understand the pain and so,that’s obviously one that, that, and then same method,perhaps you don’t quite have 30%. Let’s take a look at, you know, a recent deal I saw now if you buy a, a million dollar property, which is Oak, you know, with totally within reason on a small community, you’re gonna need $300,000.
Well, if you don’t have $3,000 and you got the deal tied up, you’re going to need to syndicate. All right. So now you’re going to need to raise, you know money, you know, 50 grand, a pop plus, whatever you expect to do in cap ex. And so now you got to learn a whole new skillset, which is syndicating or you could just continue on. And one thing I always love to ask is like, so even if I paid you cash, what do you could do with all that money? I mean I don’t want to be nosy and yet at the same time, are are you just going to put it in the bank? What are they gonna pay you? You have a specific need that you need, you know, you got bills to pay grandkids college to pay off whatever, you know because where I’m heading is owner.
Yeah. Have them carry back a second mortgage for the down payment.
And so on the first one we were dealing with a sophisticated owner. The property was a pain in his rear. He was really happy to get rid of it. In fact, after he sold it, he saw me outside work and he’s like, man, I shoulda hired you. You can’t afford me and then
It’s not much different than commercial real estate or even kind of residential. There’s just different creative ways to do it. Whether it’s your own money, borrowing the money syndicating deal pretty much the same deal. So what about the, what about the lenders, the commercial lenders. So for residential and traditional commercial, when I say traditional commercial multifamily, retail, that type of thing. I don’t know if I consider mobile home parks, traditional commercial, I guess is kind of what I’m saying. What most lenders lend on mobile home parks that would lend on all the other things.
I have to couch this in the right way. Yes, more lenders now will finance the communities they have learned the error of their previous ways because again, the same thing that attracted us and is steady predictable cash flow. And when you get right down to it, you know, maybe they might be screamish if you’re in a hurricane prone area. But if you’re in an area like here well I was gonna say, even in Kansas, our other community was in Kansas and yeah, we get tornadoes, but there’s insurance and that kind of thing. So it’s all local market. What I’ve found is for the size deals that we’re doing, for the most part, we’ve been able to finance with local or regional banks, we’ve done financing and I would recommend credit unions, local credit unions and then I’ve also worked with several brokers over the years and have gotten really good. Long-Term there’s a word for it. It’ll come to me but it’s basically wall street, money or life insurance company moneyreal estate backed loansthat come with a lot of strings.
Are you talking about like funds or REITs?
Basically. It’s when they take a bunch of loans and they package it together and they sell shares, there’s a term for it. It’ll come to me probably afternoon while I’m having my coffee seafal but.
A little coffee.
Oh, okay. I gotcha. I thought that was some kind of magical drink or something.
In fact well anyway,
Well, cool. Well, I appreciate your time mobile homes again, not super sexy, but sexy when you’ve got money coming in. I’m sure like you do we appreciate your time. Are there any last thoughts or last words you want to leave with our listeners?
One last thing I want to share with everybody to actually to two quick things, one over the years, if you’re in this game, you will come across deals. And my recommendation to you when you find them, don’t be like everybody else and sell it and have a quick temporary payday,do whatever it takes to get that thing free and clear and then go do it again and then do it again because the longer you’re in this visit, it’s not, if it’s when you’re going to come across smoking deals, all right, you will. And what on? And I have been able to do over the years is when we find those, we followed our teacher’s advice. We got those things free and clear, and then we put line of credit mortgages on them and then when a larger deal, like a mobile home park came up like this last one we were real estate rich that we didn’t have as much cash as we needed at the time. However, we were able to go to the smoking deal assets that we bought the single families and type rentals over the years and go to our private lenders and just refinance them. Uand we raised the capital that way. So remember that and then the last thing is when you’re interested in this business or any other business owner financing is by far the best tool for you, the easiest financing to get and your down payment can be many things. But most of all, it’s that owner getting to know you getting comfortable with you and that’s how you do it over the over time by building relationships. So,ust like you and I have a relationship, you know, it’s, we’ve met enough so that, okay, I’ll let him on my podcast. You know,
You snuck in here, Doug, you actually snuck in now I’m just getting bad anyway. Now. Good stuff, man. I appreciate you sharing. Hopefully.
Yeah. Anybody who’s thought about mobile homes has got some good nuggets and maybe motivated them a little bit more to look into that and absolutely. Yeah. Look forward to connecting again, Doug, and hopefully we’ll talk soon again.
Thanks Tony. Have a great one, everyone.
All right. Thanks bud.