Generate Cash Flow Through Mobile Home Investing, with Adrian Smude
Nov 14, 2023Season 3Episode 93
Clark St Capital
Welcome To The Real Estate Underground Show #93!
Today, we have the pleasure of chatting with Adrian Smude, a mobile home investing expert. But here's a fun fact - Adrian started as a terrible tenant in his younger days, getting evicted multiple times. This led him to venture into real estate, starting with a typical ranch-style house where he learned the challenges of being a landlord. Despite some setbacks, Adrian persevered, buying more single-family homes and discovering the world of mobile home investing.
In this episode,
Adrian shares valuable insights into running a mobile home park and how he discovered the potential for growth in this niche.
He also dives into the two different types of mobile home financing.
Adrian shares the effective systems they use to manage their business and he talks about his goals for expanding his business.
But that's not all - Adrian will also shine a light on an overlooked aspect of mobile home investing. When you own an acre of land with a mobile home on it, you're not just renting out the home itself - you're also renting out the value of the land beneath it, which holds significant financial worth.
If you're interested in learning more about mobile home investing or connecting with Adrian, visit his website at adrians360.com. Don't miss out on the valuable knowledge he has to offer!
Today, we have the pleasure of chatting with Adrian Smude, a mobile home investing expert. But here's a fun fact - Adrian started as a terrible tenant in his younger days, getting evicted multiple times. This led him to venture into real estate, starting with a typical ranch-style house where he learned the challenges of being a landlord. Despite some setbacks, Adrian persevered, buying more single-family homes and discovering the world of mobile home investing.
In this episode,
Adrian shares valuable insights into running a mobile home park and how he discovered the potential for growth in this niche.
He also dives into the two different types of mobile home financing.
Adrian shares the effective systems they use to manage their business and he talks about his goals for expanding his business.
But that's not all - Adrian will also shine a light on an overlooked aspect of mobile home investing. When you own an acre of land with a mobile home on it, you're not just renting out the home itself - you're also renting out the value of the land beneath it, which holds significant financial worth.
If you're interested in learning more about mobile home investing or connecting with Adrian, visit his website at adrians360.com. Don't miss out on the valuable knowledge he has to offer!
Greetings and salutations. Real Estate Undergrounders. It is Ed Matthews, again with the Real Estate Underground podcast. Thank you so much for joining us today. I'm always looking at different asset classes and places that are thriving. Obviously, this is a rapidly changing world and a rapidly changing market. I'm a multi-family guy, but there are other asset classes out there and my friend, adrian Sleud, has been kind enough to join us to talk about his mobile home investing business. So, adrian, welcome to the show and thank you so much for your time today. Good to see you, ed. I appreciate you having me here. Yeah, man, good to see you. One of the things that I'm fascinated by in terms of your business model is you hear about all these folks that are buying a multi-family excuse me mobile home parks as fast as they can possibly find them. You're in the mobile home business, but that's not what you do. You want to tell everybody what you do.
Speaker 2:
Yeah, exactly, people think of I'll see you in different things than they think of mobile homes. One, the mobile home park, like you just mentioned, and that is a good business. It's got lots of zeroes that are real sexy, but it's gotten pretty competitive, just like the multi-family space. It's in the multi-family space. It's just a different structure. And to real quick talk about those, even though that's not the business I'm in, there's two main ways to run a mobile home park.
Speaker 2:
You can own everything, all the homes, the dirt, absolutely everything you own is flat apartment complex. Or you can own just the dirt. So you own a big parking lot and everyone pays you a monthly lot rate park their home there. The only thing that you can invest in mobile homes is owning just that home. You don't own any dirt at all. So now the park manager gets to make all the rules and I don't really do that anymore. Both of these are no longer in my vision of what I want my business to be. I have something in the middle. So I own a single unit, an individual mobile home with the dirt. So it is a real estate transaction. It's a homeland package, we call it, but I own the home and the dirt together and I get to make all the rules and all the cash flow that's really attractive.
Speaker 1:
So what drew you into this? This is a very specific niche, right, so I'm fascinated by the. I'm interested to learn more about how the heck you found out that this is the spot you wanted to plant your flag and grow your business.
Speaker 2:
Let me back up and tell you real quick my story, because that'll make a little bit more sense how I got here. I live in central Florida, in between Tampa, orlando and we are the winter strawberry capital of the world Plant City and we have hurricanes here. I started my investing career as a very bad tenant. We had spaghetti wrestling parties, mud wrestling parties pudding wrestling parties.
Speaker 1:
You're one of my dream residents. Thank you All right.
Speaker 2:
Yeah, you don't rent to 20 year old Adrian at all.
Speaker 2:
But that forced me to get addicted over and over to find something else. So I bought a house your typical ranch style house, moved all my friends in. I finally found out what the landlord has to deal with whenever we were the terrible tenants. Fast forward a little bit. I bought a second house, but that one was at the top of the market with the adjustable rate mortgage losing a little bit every month. I think everyone knows where that story is going. I end up giving it away a few years later as a short sale, dinged my ego. My credit brought back some childhood memories, but that is the key part. So let's just fast forward.
Speaker 2:
I bought some more single families years later and then that feeling came back. I couldn't make any money, the numbers weren't right, I didn't know all the right ways to run all the numbers and I thought we are at the top of the market over seven years ago Wow, but I've been extremely wrong right, there's not many people have been more wrong than me and the market direction. But that forced me to look for something different and I heard some of the old school investors guys and girls talking about this mobile home thing and I was like, no, we have hurricanes here and eventually I said you know what? I'm just going to buy one and check this thing out. The cash flow was so much better. I have since sold off all my site, built homes. Because I'm a cash flow investor. I can eat my cash flow. There's not as many people in this space. It's not competitive, sorry, and the cash flow is what I'm after. Cause again, I can just say it over and over I eat cash flow. I can't eat equity or it runs out.
Speaker 1:
Right on, I percent agree. And when we're looking at the potential for a recession here, we're already in a fairly light one, and if the economists that I pay attention to are to be listened to which I think they are we're in for a dip, and to be determined how big a dip, but it's a dip and it's a healthy cycle, right. But the cool part about cash flow is that's what saves your baking in a recession and it's why real estate is resistant to the ups and downs of the economic cycles. So tell me about the deal structure. I used to flip houses and back, a long ago actually, and you buy the house, you fix it up, you either sell it off or you read it and but the economics are different, because I'm buying a house that the price point is probably a multiple of what you're paying for your mobile homes. So I'm curious how that works, and I'm also curious when you turn around and rent them or flip them. How does that work in terms of returns and things like that?
Speaker 2:
So you can fix and flip mobile homes. I don't know how to that's my joke, because I've literally done one and it was a mistake. I'm not a fix and flip, but I got a good friend, mark Bracey, and he is a fantastic fix and flip in the mobile home space. Think about it, were they affordable housing space, not just for the rent but for the sell, you bet. So right now people are buying their payment and the interest rates went up. It's much more difficult for those. So now people that really work after a mobile home, they're like maybe I will, because I can't afford anything else.
Speaker 2:
The demand's gone up there. You would run a fix and flip the same way as any other house. Ok, there's some differences that you do need to understand, because the loans they look for a few different things. In the skirting and the tie-downs there are some different rules, but how you would run your numbers, as long as you know all the information, it's the same.
Speaker 1:
So at an entry point. I live in the Northeast, I live in Connecticut, when my area the average home is called 340 grand, which is expensive. What's the price point in central Florida for mobile homes? I'm curious.
Speaker 2:
I actually own some of their rentals that are close to the 300 range. Ok, so they can retell about what you're saying. Three simply Mark texted me the other day. I think it'll be finally sharing it. He's. I accidentally made 90 K net on a flip yeah, because he runs his numbers real concerning and the market kept going up because the demand has risen in them without. He didn't take that in, but yeah, it sold over 300 and he's in Jacksonville for it. Ok, so they can retell there. Yep, the one behind me for the people that are checking out the YouTube this one doesn't retail anywhere close to that. I hope that it's probably worth 40 grand. This.
Speaker 2:
OK but it's under market rent at seven hundred and forty dollars a month.
Speaker 1:
Yeah, so mobile homes read for similar price points to single family homes.
Speaker 2:
Yeah, the rule of thumb that a lot of people like to use is they take off about a hundred dollars for the competitive, the comparable type of home. Ok, just the class of homes. Yeah, in reality in today's market we know that there's not much housing. Also, the housing providers actually have the upper hand. So we do push rents a little bit. But I run my numbers conservative. So if I think I could probably really put it out out there and here in tip for eighteen hundred, I run my numbers at sixteen hundred.
Speaker 2:
Good, I always run a little conservative because I'm not going to repeat that cycle from the past of not being able to pay my bills Right on. But you're right, they can rent really close to the exact same price as a house, or sometimes more. And what I'd say more is because people don't realize when I have that acre of land and that mobile home on it, the three bedroom, two bath people are like how someone paying, and why would they pay $2,100 for that? Because they're renting the three bedroom, two bath house and the acre of land. Right, people value that and sure everyone that's in the big cities don't always realize that there's a lot of value to someone to live on their private land and they'll bring their utility trailer there and everything else. They have a workshop and they'll have neighbors or HOAs to worry about.
Speaker 1:
Yeah, we learned then COVID right, we had so many folks here in Connecticut, we had so many folks moving out of the big cities Boston and New York and moving here to the country and same thing and it really drove prices. It was ludicrous, fun, well-lasting, but okay. So tell me a little bit more about your business. Obviously, the more we're talking about this, the more it sounds like a traditional rental business. Right, it's almost a butter. Right, you're buying it, you're rehabbing it, you're making it clean and safe and beautiful and then renting it out to folks that are looking for this type of home. Right?
Speaker 2:
Yep, and you left off the last part because we don't usually refinance them. Financing is a tricky thing in the mobile home space. Let's just split mobile homes up into two categories. Let's look at the 1960s and the 1970s. They're not financing. No traditional banks are gonna finance it.
Speaker 2:
I always joke around about this one behind me that Bank of America is not going to finance this. 1960, that comes with most of its siting, most. But I am making payments on this. Okay, how's that work? Financing to me on the older ones is a very simple topic, but it's big, because I've never financed two properties the exact same way. This one I have owner financing on. Okay, owner financing has not been that difficult for me in the mobile home space because it's a very well-known. No bank will finance this. It's not a secret, there's nothing. I don't get that pushback. And then obviously private money would be the other avenue. Okay, and then that can be a little challenging to people that aren't very experienced with private money, because your private money lender not only has to be comfortable doing that, but then they have to be comfortable with this mobile home. There's two levels there.
Speaker 2:
Then let's look at about, we'll say, the 1990s and newer. Okay, those you can get bank financing Okay. So you have to look at the credit unions and community banks and then you can eventually get to the traditional bigger banks. Bank of America, I'd actually chase. I used to do tons of mobile homes. I'm not sure they currently are, yeah, but it is possible. And then the 80s is a mix. Most community banks will still do that for owner occupants. Okay, I like to split it up in those two categories.
Speaker 1:
Okay, so question about that. So the difference between the two types of mobile home financing, what is the difference Is? It is the assumption that the ones that were built in the 60s and 70s are just fully depreciated and there isn't much left. Or what is the bank? What is the bank? Why don't they finance something that's 50 years old? Cause I'm 53 and I'm still in pretty good shape, so I assume that the mobile homes that were built when I was born are probably doing okay too. Right You're?
Speaker 2:
right, we can rebuild any of these and take care of them. Depends on how well you take care of yourself and shape it then. But there's real one reason that's the biggest is there's a key date, june 15th, 1976. Okay, that is a year that HUD basically had to step in and say we gotta make a standard for these things. They usually made out toothpicks is what my joke and literally the walls and stuff were extremely thin and there wasn't actual law. The quality, so that year is the year so they had the aluminum wiring beforehand. They're not as safe and they're just was about West. Every state built them a little different as well. That makes sense. That is the biggest reason that the banks don't go further than that. Now you still gotta bring them all up to code, to a certain quality for that bank. Yeah, I don't know anyone that is able to fix and flip, say, a 1978 to a profitability, because it's gotta become up to the same standard.
Speaker 1:
And the amount of money you put in it no one really wants to buy it.
Speaker 2:
There's less comps cause there's less of that happening, so it is more challenging. And that doesn't mean you couldn't own or finance it to someone and as well, obviously, dodd Frank still is in the mobile home space. I don't know why people think it's not, but it's in the mobile home space as well. You gotta be a good boy.
Speaker 1:
Yeah, okay, all right, that's interesting. Yeah, that makes sense. Now I understand. So thank you for that. So I'm curious, I'll put.
Speaker 2:
Yeah, fire with. Oh, I'm sorry, I want to have more thinking. This is a benefit. Once we learn this stuff now, we can get a better price, because most people aren't gonna do everything we just talked about and learn how to negotiate, though under financing and actually that's not what you know let the seller know how it's beneficial to them.
Speaker 2:
And if we can do all that, we have an edge up on everyone else that doesn't wanna do that worth and spend time to build that rapport. So we get a cheaper price because also we don't have as many exit strategies. So the one reason the ROI is so much higher because we have less competition and we're able to serve the person better.
Speaker 1:
Yeah, interesting. Wow, that's an interesting play. So, in terms of managing the business, what do your systems look like? Do you use just a commercially available property management software? Do you have a team that manages your residence in terms of paying the rent and work orders and all that Like?
Speaker 2:
how does that work for you? Really, most of our residents take care of the properties. We set that expectation before going in, but obviously we still have to do some work. Yeah, it's not like move in and never call us again, that's not. But yeah.
Speaker 2:
We do look to attract and serve the community that are handyman and handywomen. Now I do have some site built homes that I master lease. I lease it from someone else but I manage everything the exact same way. But most of our residents are handyman so that's their job every single day. So they don't call me when they have a light switch that's out because they're electrician. Yeah, they just fix it. A lot of the small stuff they're just like I could fix it faster and call you, but then there's always things that we need to repair. I do have an office manager now. I'm very fortunate, as I decided to grow and really more than that, go on the road and teach everything to go lower. She takes care of that side of the business. I just naturally grew Software wise. We're using Trello right now, which is not good. She's switching us over to something. She's literally doing that research now what we're gonna switch to. But yeah, I started doing this with an Excel spreadsheet. It wasn't the best way.
Speaker 1:
It wasn't the best way.
Speaker 2:
I made money.
Speaker 1:
Yeah, the fact is that when we first started buying it up in Vermont right, we had a whole bunch of properties up there in Rutland and the gentleman that I met that was we would have not hired him, but not for this reason the gentleman I met when I asked him how do you manage your properties? And he pulled open a huge ledger he'd written in pencil and that's how we manage it.
Speaker 1:
I said okay, how does that work and he's been doing it this way for 40 years. So I was like all right, it obviously works because you're still doing it that way and the folks that worked with him spoke very well of him, so he was obviously good at his job. But I'm curious about the types of systems. Like, we use a tool called Hemlane, which I really, but we can talk about that offline. So, in terms of growing your business and scaling your business, what's the kind of? Where are you in? What's the ultimate grand plan? What's the empire look like?
Speaker 2:
I don't see myself ever stopping buying, cause there's always people that need help. I enjoy the business. I'm not the big grant cardone. I need to do 100 deals a year. I'm more like let me average out four really good deals a year. So last year I bought two. This year I should buy six my averages. What am I really doing now that I have most of the cash flow I want? I am focused on some cash flow so we can get some better systems Like we were just talking about. Yeah, cause those cost money and I wanna pay Joe, my office manager, more. That's one of my big goals. I asked her what are your personal goals in life? I can help fulfill them. And then, besides that, what does it look like? I don't want 100 units. What I wanna do is, as I get a better quality property and quality for me it's going to attract good resident that's gonna take care of the place and stay a very long time, and then the structure what most people think of quality I want both pieces.
Speaker 2:
I get one of those and then I sell off something like behind me. That is not a very good structure. It's not gonna attract the best person in the world. I'm just trading up as I go and I'm buying. Actually, when we go off this call, I'm going to throw a closing and it's not a very nice property to be assigned to it will be.
Speaker 2:
What I can do now where I'm at in the business is I can find a younger investor that has a few deals and he's done something he's hit. Emma Hur's shown me what they've done. I can now owner finance it to them. I had some mentors that did that for me and I can make good money helping them out. They don't have the money necessarily or can't get the financing it becomes a win.
Speaker 2:
And I actually got to do that with my second property ever bought. It came from one of my mentors. He gave me a fantastic deal. I made great money for years and now I've re-owner financed it out to someone else. But just continuing to help he's making good money on it. Someone's living there.
Speaker 1:
Everybody wins right, cause you pay it forward and you give someone who's a few years behind you the opportunity to cash flow and you get to take back capital that you've in terms of appreciation and flip it into something else. 100%, that's exactly it. I get it In terms of, like how we talked about your business now, so let's talk about you. So how do you take in information? I always say that leaders are readers, right, and but reading today is different, right? It's not just a book, right, it's not just the paper book, it's audio books, it's Kindles, it's YouTube videos and podcasts and a whole bunch of other things. So I'm curious how do you sharpen the saw? What do you? And I'm also really curious about who you paying attention to these days in terms of authors or creators.
Speaker 2:
The only one I don't do of your list is the Kindle version, so I'm not a very good electronic reader. I read a physical book in the morning and that's a mindset book. I listen to podcasts all the time. I am a very big Howl and Oron fan. I've listened to all 450 whenever episodes he has.
Speaker 1:
Yep.
Speaker 2:
And he's the miracle morning guy. Oh yeah, I listen to audio books. I am, this year, focused more on doing less content absorption, but more actually doing the stuff the book says to do Right.
Speaker 1:
The end of the chapter has something.
Speaker 2:
Yeah, we usually just listen to him and we're like, okay, that's nice. I have not gone on to the next chapter in some books which admittedly I'm a few months behind because I'm not allowing myself to go to the next chapter till I take action in what they said.
Speaker 1:
Yeah, man, but it's not a race, right? You do it. So you read the way I read, right it's? You read a chapter and you get a couple of really good ideas from the author or the podcast or whatever and all the stuff we're gonna implement that. We're gonna make it work. And then, okay, let's do the next thing, right, Cause I found that I have a pretty profound case of entrepreneurial ADD and that whole shiny object thing. I'll read this book. And I used to. The way I used to do it was I'd read a book and then I'd read another book, and then I'd read another book and then I'd read another book, and then I'd be like, all right, what did I just learn and how do I implement it? And it'll be like I don't remember. I've learned from just losing out on those opportunities to implement. Do exactly what you do, which is really smart in that it's you read something, you get a gold nugget, and then you turn around and use it and then proceed.
Speaker 2:
So there's two other ways, and I thought of it from what you just explained is mastermind groups. I'm into and I run one and then I go to actual seminars in person. I do the zoom world some but I like the in person, cause he energy and we can.
Speaker 1:
Yeah, there's really. You can only get so much out of a zoom call, right.
Speaker 2:
Yeah, something though I started last year and it's been working pretty well for me of where I'm at today is when I hear something I'm like that's one of my nuggets. I'm looking for two to four nuggets. Yep, same, I almost ignore everything going on for the next five or 10 minutes. I get into my CRM or whatever I'm gonna do, and I put it to work right. Then I sign it to a VA, or at least I sign it to myself, because if not, I leave and I start driving or traveling and I forget about it. And then I literally have some books right here from six months ago that I haven't taken everything out of it. But if I can do that with three or so things, at least it's in the works. And someone else on my team cause I give them permission to call me out. Sure, hey, you have a task that hasn't gotten done. So they're holding me accountable, but that's what I decided about. I'll just miss the next few minutes of whatever the speaker is. And it's been working for me so far. That's great.
Speaker 1:
Yeah, when it works. Rinse and repeat, man, okay. So if let me ask you this, having done this for as long as you've done it, if some guy in Connecticut waved to Magic Wand and said, okay, you're going back to the beginning. Right, you can take everything you've learned, but nothing else, what would you do differently if you had to start over? Is that? Do I have money? Nope, no money.
Speaker 2:
Okay, just a knowledge. Alright. So if I started over today with no money, I would do master leasing. So I would go to someone like you and say hey, aren't you really tired of managing all your stuff and you're tired of those late night calls? Let me professionally manage them. I'm going to sublet them out because you can get in for pretty much no money. You can control the property. I have a few of those. It works for those owners.
Speaker 2:
I would also probably look at the mobile homes inside the parks because they require a lot less dollars to get in. Now there's more time and you don't have that control and I've done really well. They were fantastic for my growth. And then I would slowly be building up because I have my network, my knowledge and network. I think I would grow really fast because I would say hey, I know you're in a multifamily, I'm not really good at that, but I just got this league. Can you help me out? I'll bring you in the deal somehow. I would use my network and leverage that bring anyone into the deal that I needed to bring in to get it done.
Speaker 1:
And that's how I would start over. I am so happy to hear that, and I'm sure our audience is as well, because one of the things when I talk with folks either with local meetups or whatever it's, one of the three things that they always get stuck on is I don't have any money. And my answer is always exactly what you just said you don't need money, you just need creativity and resourcefulness, and as long as you can put a deal together that pencils out, invariably you can find somebody or a group of somebodies who will help you get it done.
Speaker 2:
Yeah, so one of my big mentors, peter Fortunato. He talks about it. He's got this house. People should go and Google Peter Fortunato house and you'll see the little copy right at the bottom and it breaks up everything the real estate gives us, and his goal is to find out what do you need? You might need the cash flow and appreciation. He takes the rest and at this point he's not as picky as what you get, but you're growing. All you need is cash flow. You need someone that needs appreciation or needs a depreciation tax right off, being able to split it up like that. I actually have his house hanging up on my wall, but it's always in my mind what is the other person really needing? Yeah, and can I compliment them by my needs right now?
Speaker 1:
Absolutely. Yeah, it's. It reminds me of the old Zig Ziglar quote if you help enough people get where they want to go, they will, in turn, help you get where you want to go right. If you solve people's problems in a way that works for everybody involved, creating that win but makes it a lot easier to do deals, you sleep well and you actually make money doing it right. Couldn't agree more Cool. Hey, so I'm curious about I'm still curious about you in terms of how you operate. So when you're not slinging mobile homes and fix it, making them beautiful and renting them out and all that, what do you like to do outside of real estate?
Speaker 2:
What's fun. I do love real estate. One of my coaches actually today helped me realize that I probably spent a little too much time in the business because I love this, yeah, but what do I do outside? Nature? Nature is one of my recharges. I love going hiking. Actually, in about a month I will have cell phone reception. For about a week I'm going to the glacier, the Grand Tetons and Yellowstone. I love doing that. I love RIA's real estate groups. That's one reason one of my coaches helped push me towards the education. He just can't stop you from going there. Why don't you just start sharing there? I never thought of that. So I get recharged at the news traveling, so I fit everything within my vision. So that's where the education fits in. I get to travel. I pick the areas I want to go, but travel and deep conversations and nature are probably three of my top recharges, like what I just really love doing at Sillsline Bucket.
Speaker 1:
It gets you cooking. That's awesome. Yeah, adrian, I know you have a book and I admittedly haven't read it yet, but I will read it now that I know that you have one, and if folks are interested in learning about you or your business or picking up your book, what's the best way to make that happen? How do I get it all to you?
Speaker 2:
So the easiest way to find my book and all my information my book is how to buy mobile homes and you don't have to read it now. It's un-onable. It's not un-onable just yet I'm waiting for the approval but I read it. So you have to listen to this voice for over two hours. That's all right. You can go to adrans360.com. It's basically a landing page. It has links to my books there. It has links to all my social media. It has links to my websites, so my buying website as well, even though I only buy in my little area, but used as a resource to go on it Buying what you like. Recreate it and make it yours. That's how my website was created. I went to a bunch of other people's Absolutely, and everything I have is on that adrans360.com and connected with me through whatever channel you use, except for the phone. I don't answer the phone. It's my phone's been on do not disturb for a few years, yeah me too, because you could spend days returning phone calls.
Speaker 1:
Excellent, hey Adrian, thank you so much for your time today. It's really good to see my friend and continue success, and I'm looking forward to seeing where you take it next, and I also look forward to reading your book. Thanks, ed, appreciate you having me on here. Good to see you, buddy. All right, hey man, you're really good at this.