3: Jack Martin – The Secrets of Mobile Home Parks Investing

Show Notes

[00:00:30]
Jack’s website is www.52TEN.com
Jack’s LinkedIn profile: https://www.linkedin.com/in/jack-martin-52ten/

[00:02:16]
Jack’s email is Jack@52TEN.com
Free Facebook Community: www.EastWestVentures.CO/AIMS

[00:10:57]
A good strategy that a lot of flippers do is to use the profit from flipping 3 to 4 houses to buy 1 free and clear rental. That’s what Jack is talking about here.

[00:15:10]
Jack’s company website is: www.52TEN.com

[00:17:58]
Jack goes in-depth to explain different types of parks here.

[00:24:12]
Phoenix lot rent ranges from $500-$800 per month
Tucson lot rent ranges from $350-$450 per month.
Yuma is as low as $200 per month

Snowbirds, in this case, are typically retirees who wish to avoid the snow and cold temperatures of northern winter, but maintain ties with family and friends by staying there the rest of the year.

[00:25:19]
Fast way to underwrite MHP:
(Take # of lots in the park x $Current Lot Rent) – Expenses = NOI
Listen to Jack thoroughly in this section to understand how you can quickly underwrite MHP.

[00:27:02]
A cash-on-cash return is a rate of return often used in real estate transactions that calculates the cash income earned on the cash invested in a property.

[00:28:56]
52TEN’s motto for due diligence is: We Don’t Like Surprises!

[00:29:17]
Orangeburg pipe is a bituminized fiber pipe made from layers of wood pulp and pitch pressed together. It was used from the 1860s through the 1970s, when it was replaced by PVC pipes for water delivery and ABS pipe for drain-waste-vent applications.

[00:29:54]
Here Jack breaks down how he goes about due diligence.

[00:34:36]
MH University: https://bit.ly/2m3oo8L

[00:40:32]
Jack discusses why he thinks MHP is more stable than other asset classes.

[00:48:58]
Jack’s morning routine.

[00:56:14]
Jack’s website again is www.52TEN.com – Schedule a call with him, this guy is just so amazing!

Transcript

Jack Martin: [00:00:01] I believe that every single one of us here can be successful in our own little niche. The way, you know, taking advantage of the gifts that we’ve been given.

[00:00:11] Welcome to the show. You are listening to the real estate podcast. In this lab, we decode the stories, secrets and skills of the most brilliant minds in real estate investing then turn their wisdom into practical advice and knowledge that we can use to boost our income. Now let’s turn it over to our host, Vee.

Vee: [00:00:30] Hey there. Thank you for tuning into another episode of the Real Estate Lab Podcast. My name is Vee. Our special guest today is someone who specialized in an asset of real estate. Not many people were familiar with. He has over 20 years of experience. His businesses have been involved in more than 250 million in real estate projects, including land development, construction and acquisition, renovation and disposition of several thousand single-family and multifamily assets. He served in the U.S. Army and began his entrepreneurial journey as a general contractor specializing in land development and construction of custom homes. After the turn of the century, he co-founded a company called Bakerson a Phoenix-based capital management company, where he became extremely adept at sourcing off-market deals and fostering relationship with capital partners. Now, after 14 years at Bakerson, he saw his interest and join Nate Pattee at 52TEN. His website is 5 2 t e n dot com. He is known for his ability to consistently find great real estate opportunities. He’s a people person and understands what it takes to build a lasting relationship. Always strive to deliver the best experience in business outside of real estate. Our guest put his time to his family, the outdoors and teaching personal development. He lives in Phoenix when his wife and seven yes, seven children. Now, ladies and gentlemen, our guest today is Mr. Jack Martin. You can reach him.

Vee: [00:02:16] His email is Jack at 5 to t e n dot com. That’s Jack at number five. Number two, letter t e n dot com. Also, I would like to personally invite you to our free Facebook group where we share ideas and knowledge with each other. We have from time to time s.E.C. Attorney sharing their tips, top syndicators sharing their new rules, what they’re seeing in the market. You can head on over to www.EastWestVentures.co/AIMS to join.

Vee: [00:02:59] And now this is my conversation with the one and only Mr. Jack Martin.

Vee: [00:03:08] Hey, welcome to episode of the Real Estate Lab podcast. Our featured guest today is Mr. Jack Martin. It’s a pleasure to have you here, Jack. Hey, it’s a pleasure to be here Vee. Thanks for inviting me. Thank you, man. I really appreciate your time. So, Jack, let’s take a step back to your your childhood. Can you tell the audience a little bit how it was like growing up in your house?

Jack Martin: [00:03:33] You know, I probably have a little bit of a unique childhood. I grew up in a family with 17 children, so I was one of the older ones. So I was the fourth oldest in that net chain of children. So I moved out of the house before the younger ones were even born. And as you can imagine, the house that it didn’t have enough bedrooms and everybody sharing bedrooms. And, you know, large families kind of come with pluses and minuses. So, you know, the selfish side of a young boy wanted his own room and parents that had enough money to buy him new bikes and that kind of thing. You know, the you know, the experience growing up in a big family, there is always someone to play with or wrestle with or fight with. If you want to do that, play games with whatever. And there was a tremendous amount of social skills that that was developed. We just got to learn how to deal with it. All right. In addition to that, I think one of the greatest blessings that I didn’t appreciate at the time was that when you grew up in a family where there was a lot of mouths to feed and there’s no budget to accommodate for extras, you’re inspired to go get what you want on your own. So as a young boy, you know, I was doing paper outs and pulling weeds and doing whatever odd jobs around the neighborhood so I could buy that bike or so that I could buy shoes that were named brand instead of the ones from K-Mart. So, you know, I grew up with that work Midwestern work ethic and it’s served me well.

Vee: [00:05:04] Wow. So you hustle a lot at a young age.

Jack Martin: [00:05:08] Yeah, well, we kind of had you know, they joke around. If you don’t if you don’t hustle, then you don’t eat. You’re a skinny guy at the table. So it wasn’t that bad, but we were you know, we were certainly not wealthy enough.

Vee: [00:05:21] Right. So now you were hustling a lot and you were doing on side jobs. What were you like in high school? Did you have a strong mindset about you going to be an entrepreneur after this or what did you do in high school what were you like?

Jack Martin: [00:05:38] Interesting that you ask that question. So in high school, I think if we can all reflect and look at high school kids right now. Right now, I don’t know what I was doing. I had no clue what I wanted to do next. I was just kind of living in the moment. So I didn’t know if I wanted to go to college. I didn’t know what I wanted to do. But I was. I worked my way all through high school.

Jack Martin: [00:05:58] So, you know, I was working full time as soon as there was work available. So I went from paper outs to picking berries to working at a nursery to construction. And I was working one in full time construction when I’m 16 years old. So school was kind of a secondary thing, even though I almost got a straight A grade average. So I was a good student, but it just it really wasn’t compelling to me to continue that.

Vee: [00:06:27] That’s tremendous, man. So you almost had straight A’s grade. But then you still think that school is not your path?

Jack Martin: [00:06:33] Well, I didn’t know at that point that I had this entrepreneurial spirit within me that needed to be scratched. But that was probably the reason why I didn’t pursuit going to college. So after high school, I joined the military. I spent three years there. And that again, that was kind of, you know, something to do. Bunch of buddies that we’re gonna go join. They were friends of mine. And I jumped in with them. And we spent three years in the infantry, in the army. And when I got back, that’s when I kind of started that entrepreneurial thing.

Vee: [00:07:05] And what what do you did you get back?

Jack Martin: [00:07:07] I got out of the military in nineteen ninety-five and I moved to Phoenix so I already had a girl interest there. Every story includes a girl.

Vee: [00:07:17] Yes.

Jack Martin: [00:07:18] So she was young, she was not outta high school yet. So you know I needed to go to the military and kind of stay away.

Jack Martin: [00:07:26] I knew I was going to come back. Likely going to that that relationship was going to get more serious. And. And sure enough, I’ve been married to that girl for 23 years now.

Vee: [00:07:35] That’s awesome. You guys have seven kids.

Jack Martin: [00:07:38] We do. We’ve got seven kids. We can’t compete with my mother and father.

Jack Martin: [00:07:41] But, hey, we still got a we still got we’ve been blessed with a lot of children.

[00:07:45] That’s that’s fun, man. And also, thank you for your service for serving man. You’re welcome. I did it for fun.

[00:07:52] So do I. Yeah, it was a blast.

[00:07:57] Yeah. I’m sure you have fun, but you also learn a lot.

Vee: [00:08:00] I feel like a lot of the teenagers nowadays, they go to the military to find themselves. And maybe you were doing a little bit of that, too, at that time.

Jack Martin: [00:08:11] Yeah. There’s a lot of good that comes out of the military. I can see how some countries make it a mandatory thing and then it probably would improve the general outlook of Americans if they did. But course, that’s from the lens of somebody who’s already been down that path.

Vee: [00:08:27] Right, right. Right. So in ninety five, you came back, you moved to Phoenix and you had a construction business all the way to 2002, I believe. Right?

Jack Martin: [00:08:39] Yeah. I got into general contracting, you know. Ah my my main business was framing concrete and and building spec homes even though I did a bunch of other stuff, you know, ancillary to that. We had 30 to 50 employees kind of ranging when it was crazy and when it was not. It was a good experience. We made money, but that’s a glorified babysitting job. Fifty construction workers, if you know what I mean.

Vee: [00:09:06] Oh, yeah, definitely. You know, one of my business partners always tell me, when you work with contractors, it’s just like working with high school kids, no matter how old they are.

Jack Martin: [00:09:15] It kind of is. Yeah. Yeah.

Jack Martin: [00:09:18] So then you were doing this glorified babysitting job. And what makes you switch over to doing real estate?

Jack Martin: [00:09:26] Well, I think, you know, in life what I’ve discovered, I didn’t know this then it seems like relationships. You know, some of them are for a season. Some of them are for a lifetime. Some of them are just for an hour. I mean, there’s these relationships kind of come into your life exactly when you’re prepared for them. So for both me and the other gentleman, that was our first real business. The two of us. So I kind of feel like from a confidence perspective that we kind of needed partnership. He wanted he wanted to to run it the business by himself. And I was kind of tired of it. So it was good. You know, we parted very amicably. We’re still really, really good friends today. So he kept the framing in the concrete business. I finished up the spec. Homes that we had and it was time for me to go do something different. And right when one door closes, another one always opens. So literally within a month of me kind of closing the doors on that partnership, another opportunity showed up in my life, and that was the one with Bruce over there at Bakerson.

Vee: [00:10:31] And so with Bruce, you flip a few houses and ultimately switch over to wholesaling. You went on to become like, I believe, one of the top wholesaler in the Phoenix area, closing almost a deal a day at that time.

Jack Martin: [00:10:47] It started out kind of as a, hey, you want to build a rental portfolio? Sure. Kind of a fun thing to do. We didn’t even know if it was going to be a full time thing.

Jack Martin: [00:10:57] And, you know, we worked together really well. He was really, really good at finding deals that weren’t on the market that were you know, there’s a lot of upsides there. And I had that construction background. So our our goal was, hey, let’s fix up, you know, three or four homes and keep one and fix up three or four homes and keep one and just keep doing that at that rhythm. And at some point, we’ll have a rental portfolio that will build our retirement. So the problem is, Bruce is one of those guys that like to scale things. So pretty soon he was finding homes at a faster pace than I could do anything within a short period of time. I found myself building another glorified babysitting role. And that’s the thing I wanted to get away from. So we stopped fixing them up and we would still do that occasionally, just cherry-picked. But we started aggregating for other guys that were building portfolios or fixing flippers.

Jack Martin: [00:11:52] And yeah, at the end there, we did almost what we did. We did close twenty-five hundred transactions. So it was a lot.

[00:12:00] And at the end there twenty twenty-five hundred transactions over 14 years. Yeah.

Vee: [00:12:05] Yeah that’s crazy.

Jack Martin: [00:12:08] Yeah. In the beginning, I think our first year we probably did like 20, 30 deals and then we did 50 and then it just kept scaling from there. So that that last year was almost a deal a day.

Vee: [00:12:19] The last year was in twenty sixteen.

Jack Martin: [00:12:21] Now the last year that we did houses was probably like two thousand thirteen ish. Somewhere in there because we switched to apartments. Did you sell apartments as well? Not really. You know, I got bored of the houses. You know, Bruce is like, OK, well let’s find something else. So we started doing smaller apartments and that, you know, under 30 units space. Uh-Huh.

Jack Martin: [00:12:44] And then quickly, that became 50 units and 70 and 100. And that kind of became the value add apartments with a little bit slower paced business. It’s a less crazy transactional business. But there’s still, you know, anybody who’s really good at apartment syndications will understand that you can buy them completely, renovate them, raise the rent and put it back on the market. And twelve, 18 months, if you know what you’re doing right, you’re still a fairly quick cycle and in those. And then kind of a fast forward to the end of that trajectory in about two thousand. I don’t remember the exact year, but it was about seven years ago I accidentally bought a mobile home park. So and I fell in love. So I didn’t know it at the time that that was kind of the seed for what I’m doing today. But that, you know, like when you first meet that girl, you don’t know she’s the one.

[00:13:40] Uh-huh. Right. Right. So, yeah.

Jack Martin: [00:13:44] 2016, Bruce and I decided to stay friendly. He wanted to go one direction and build more of a family apartment business. I wanted to go another direction. So, you know, as as good friends should do. You know, we parted ways amicably and I would have started 52TEN with Nate Pattee.

Vee: [00:14:05] So is the common theme I see here with your career so far is you don’t know what you’re doing, but you’re taking action and you just dive in anyway.

Jack Martin: [00:14:14] Yeah. So one of the things that I found to be a common theme is I believe that I’ll be successful with that belief. I mean, I still think direction is critical. You need to know what you’re taking on. Otherwise, you’ll just wander around aimlessly. Right. Right. So but belief is a is a really powerful component to success. You know, somebody could be given an entire blueprint, everything that I’ve ever done. But they don’t believe they can be successful. They’re not going to be.

Vee: [00:14:44] Yeah. You believe you will lead to your success and then you do you get a little bit success than your belief gets bigger.

Jack Martin: [00:14:54] Yeah, that’s that’s pretty much how it’s been, you know. Yeah. You build on it, know you’re given the exact. You’re given the opportunities that you need for you to be successful. But you’re also given the lessons and the struggles that you need so that you can grow.

Vee: [00:15:10] Right. So now in twenty sixteen when you started 52TEN with Nate, you talk more about this company, what it does and your business model for this company.

Jack Martin: [00:15:20] So the business model at 52TEN is you know, from a 10000-foot view is to acquire a mobile home and RV parks in the state of Arizona specifically for recession-resistant cash flow. So, you know, there’s obviously going to be value in the assets if we chose to sell them or flip them or finance them or whatever. But the key metric for us is cash flow. So one of the lessons that we can all learn if we look back at the crash of two thousand six, seven eight was in some cases it was through 2010.

Jack Martin: [00:15:54] You know, even if you’ve built what you believe, a really strong portfolio and you’ve put conservative debt on it and you’re doing all the right things and you’re a good character person, the market can still wipe you out. I mean, I got many, many friends. And, you know, guys that are experienced in the business that I’m associated with that have a story that they can share. Echoing what I’ve just said, they thought they were doing all the right things and they were being relatively conservative and the market crashed and they still got wiped out. So to go build something that you’re going to put your life’s ambition in, you know, a decade of your career into, you really want to make sure that you choose an asset class or a strategy that’s going to survive a recession. So we don’t know when the next recession is coming. But I think we all know that history tends to repeat itself. So there’s one on its way and it’s a 52TEN is really built around knowing that’s coming in, building a portfolio that will not only survive that, but it will thrive through that.

Vee: [00:17:00] So from mobile home, you buying mobile home park and RV park? They’re different than trailer parks. Correct?

Jack Martin: [00:17:08] Trailer parks as well. They aren’t and they are. And then you could call them what you want. But trailer parks. You know, in most people’s descriptions are the parks that you see on an episode of cops. They’re kind of rundown, high density, tough areas of town or tough neighborhoods with drugs and crime and you name it. You know, those are what’s what’s looked at is a trailer park. You know, there’s you can call a mobile home park, a trailer park. You could call it a manufactured housing community. You can call it. There’s a whole bunch of names that you can call it. But ultimately, there’s really two kinds of parks. There’s RV parks. Well, that’s not fair. There’s three kinds of parks. There’s RV parks, which is like a motor home or a travel trailer, pulls in and spends the night or a weekend and then they leave. All right.

Vee: [00:17:56] So it’s more like vacation rental.

Jack Martin: [00:17:58] Yeah. So mostly. Yeah. So that’s what you’ll see on the side of the highway or up in the mountains or whatnot. Right. Right. Now there. And then there’s mobile home parks. And those are permanent homes that people live in full time. So, you know, there’s more to it than that. But then in the middle, there is kind of a hybrid where these little miniature mobile home parks that they call park models, and you’ll see those that like senior retirement communities that are more of a snowbird thing. So they’re they’re little miniature mobile homes, sits there all year round. And these are nice. I mean, these don’t have fewer people. People generally get the stereotype that mobile home parks is trash. That is not true. So those are only the ones that they’re exposed to because they see it on TV. Right. Right. And they hear about it. So trailer trash or that stereotype that’s accurate for certain types of parks? No, I don’t invest in those.

Jack Martin: [00:18:54] So there’s parks that you would be absolutely blown away. How nice they are. You know, there’s a a star rating of parks that goes from one star, which is that trailer trash all the way to five star, which is like a luxury gated senior resort community.

Jack Martin: [00:19:13] And you can’t even get in there unless you qualify. There were really high stringent qualifications to even be there. You get at a certain income that you make. You know, your home has to be a you can’t be more than 10 years old. They’re like a well managed gated residential community. So somewhere in the middle, there lies the opportunities that I focus on. You know, parks that used to be really nice and they’re a little bit rundown and you could turn around.

Jack Martin: [00:19:40] But there are in good neighborhoods or parks that are mismanaged or they’re being under served. I mean, there’s more there’s more purpose or there’s more more value that can come out of that property than what’s being delivered today. So, you know, we focus on opportunities where there’s a lot of upside. We’re not just buying coupon clippers. We’re buying parks. That there’s a lot of upside. And they can be a coupon clipper as well.

Vee: [00:20:08] So you more or less buying parts that you can add value and keep them long term. Correct.

Jack Martin: [00:20:14] Correct. Got it. Got it.

Vee: [00:20:17] So what’s the optimal size of part that you like to buy in the park business?

Jack Martin: [00:20:22] There’s a you know, the way that you manage parks is quite a bit different than the way that you’d manage any other kind of real estate asset. And one of the things that’s you know, the thing that that really separates parks from everything else is the fact that the tenants own the homes right now. So apartment complexes, your tenant can just come there and stay six months and leave. There’s nothing there. There’s no nothing to keep them there. Right. Right. Mobile Home parks, if you’re run correctly, the tenant has a vested interest in staying long term because they have a home there that they own. Right. So it’s not just size that we focus on. It’s also, you know, are we going to have permanent residents here? So like the RV park is more like a hotel. Right. Right. You had a mobile home park filled with with rental mobile homes. That’s kind of like an apartment. Nothing keeps them there. Right.

Vee: [00:21:15] So you don’t like park owned home?

Jack Martin: [00:21:17] Yeah. My I don’t mind them if we buy a park and it has them. But my goal is to convert those to I want all my residents to have an ownership interest or a vested interest in staying long term. So all my residents owned their homes and I own the park. And I you know it’s kind of like having a giant parking lot and people pay every month to park the car there. But in this case, it’s their home. It’s that kind of a of a business. We take care of landscaping, utility servicing, utilities and connections, common amenities like pools and laundry rooms and clubhouses and those kinds of things. You know, every park’s different. So some have them and some don’t. But as it relates to the size of park, the thing that separates kind of the smaller parks and the bigger parks, and it’s right around 40 to 50 spaces where that happens is really, really good on-site management and maintenance staff. So most parks, they’ll run really good if you have a full-time manager that’s in the office every single day with a lot of work to do at a park. People don’t appreciate this. Then you also because you’re a lot, you know, parks require maintenance and you want to stay on top of them and keep the tenants or the residents there excited that things are always going in the right direction. You’ve got to have a full time or a relatively full-time maintenance guy there. So they do capital improvements to the property as well as take care of things like things that go sideways, landscaping pipes that break, you know, valves that don’t work, whatever it is. Right.

Vee: [00:22:51] So you just maintain the common area stuff.

Jack Martin: [00:22:55] Yeah. So it’s it’s really roads, landscaping, trash or garbage enclosures and those kind of things. Trees here because there’s a lot of tenders, huge church trees to shade the office. The the pool, the laundry facility, the signage, all that kind of stuff. And then of course, down in the Granular level, like the valves that turn on and off sprinkler systems and water to the to the units and metering. You got to read meters. And, you know, a lot a lot of the utilities are metered. They’ll come in on one master meter, but then their sub-meter to all the individual units. So once again, every park is different. But the reason why we focus on parks that are larger than 40 50 spaces is because you can’t really afford to hire quality onsite staff and spread it over the number of units or spread that cost over the number of units that are there and still be profitable and have cash flow unless you have enough units. And that usually kind of starts in that 40 to 50 unit.

Vee: [00:24:08] So typically, what’s the lot rents in in the parks that you guys buy in?

Jack Martin: [00:24:12] Yeah, every market is going to be different. So like the Phoenix metro area, you’ll see lot rents in the five hundred to eight hundred dollars a month range. But Phoenix is a lot more expensive and there’s a primary market, right. Right. Tucson, which is a secondary market. You’ll see rents in the 350 to 450 range and maybe you’ll see it down as low as 300 for a lesser quality park. And then when you get to smaller markets like Yuma, it gets as low as two hundred a month. Oh, wow. So it just depends on the type of park, whether they’re full-time residents or whether it’s a, you know, like a seasonal snowbird thing. Huh. I mean, some parks they’ll charge once a year and you pay when you show up on October 1st and you pay for the whole year in advance. That’s more common in the seasonal snowbird parks. And some are just month to month. So it really depends.

Vee: [00:25:08] So the I understand a lot rent. I understand they give you a purchase price when you’re looking to buy this thing. But how do you underwrite a mobile home park?

Jack Martin: [00:25:19] Well, that’s a deep question because there’s a lot more to it. But it is simple to try to keep it simple for the purpose of your listeners. You know, a simple equation would be you take the number of lots in the park, you multiply that times, the amount of lot rent that’s you know, you could either do the current lot, read that the park is charging if you’re buying it that way. But also what? Where is the market? Right. So you could do a performer based on the current lot rent on the market. Right. Right. And then in general, depending on the park and the amount of amenities and how it’s run, you know, your expenses or run on the low side somewhere in the thirty five percent of gross range and on the high side they could be in the 50s. You know, if you had a fully amenitized senior RV park that’s got some, you know, weekly, daily, monthly traffic and it’s got pools and clubhouses and all these things that, you know, let’s say Scott fully landscaped lawns. And you gotta take care of this stuff, right? Right. Those could run closer to, you know, in the 50s. But kind of standard math for most people. Just kind of quick back of the napkin analysis of a property will be the number of spaces times the lot rent and take away 40 percent for expenses. That’s pretty quick math and they will give you your net operating income. And from that, you just multiply that by the current or you divide it by the current capital at the marketplace and there’s your value.

Vee: [00:26:56] So what’s the cap rate that your company like you buy in?

Jack Martin: [00:27:00] To us, the cap rate really doesn’t matter.

Vee: [00:27:02] You looking for cash on cash more?

Jack Martin: [00:27:04] I’m looking for cash flow. Right. So just to give you an example, one of the best properties that we ever bought the day we bought it based on how it was performing that day, we bought it at five point eight cap. So people will say, well, how could you do that? And still be able to produce the cash flow that you’re going to produce. Well, first of all, they hadn’t raised their rents in almost 10 years, so their rates were so far behind market course. Can’t just raise the rent in a year. Takes time to do that. Right. Right. But in addition to that, the way that they were, they had a third party property management that was run in the park. And they basically just gave them an open checkbook. So their expenses were running in the mid-60’s percent range. So, yes, crazy how much waste there was there or the lack of of, you know, moving lack of raising rent market. So the cap rate, people get so fixated on the cap rate. A cap rate is not as important as the day that you buy it as it is the day that you had it stabilized. So if you could run your proforma understand, while the market rate is market rents are really X. And if our rents were there and we could move our expenses where they should be, this would be a nine cap deal or a 10 cap deal. Then that’s something that you should pursue regardless of what the cap rate is in place when you’re walking into the deal. So I focus on what can I do to the park when that’s stabilized? How is it going to perform then and how much cash flow is it going to deliver then? That’s way more important to me than what’s the cap rate going in.

Vee: [00:28:44] Got it. And then can you talk a little bit about when you say you get a park in the contract, you do diligent work. What kind of things do you look for when you go to a park that you know this is a good fit for you?

Jack Martin: [00:28:56] Yes. Due diligence to us. There’s several hundred things that we’re looking at. So this is a really long list of things. I’m extremely anal about due diligence. So there’s four words over here at 52TEN that we say all the time. We don’t like surprises.

[00:29:14] Nobody wants. I want to uncover everything.

Jack Martin: [00:29:17] So back in the old days when I was buying houses, we would literally do a walk through. That would take us like 10 minutes. They were buying that property because it was cookie cutter is very simple. Right. You know, worst case scenario. OK. We missed a water heater. It didn’t look like it was going bad, but it turns out it went bad. What is that? Four hundred bucks. Right. Yeah. But in a mobile home park, if you miss something like it’s get Orangeburg piping, that’s a four hundred thousand bucks. Right.

[00:29:48] Yeah. You can’t miss that stuff. So we hadn’t heard one of those at my house too.

Jack Martin: [00:29:54] Yes. You know about this. So what? You know, our our due diligence kind of broke it into phases. So initially when we opened escrow, I’ll spend if there was a third party property manager that was running the property prior to our entry. We’ll spend our initial time working with them to kind of uncover all the skeletons that may be in the closet. So they’re going to know if there’s some underground issues, you’re going to be able to see it in there M&R column, which is maintenance and repairs for those people listening, but they’ll typically be candid with you I mean they’d like to keep the job or if they’re exiting, they’d like to make sure that they have a good name on their exit. And at the same time, you know what, we’re doing that research. I’m over at the county government level, either either a city, county, state making sure that our zoning is proper, that we have a proper zoning letter, that there is no outstanding permits or violations of any type. And this goes through the Neighborhood Services Department. We the sexual offender list and we kind of go through everything as it relates to all the government offices. So zoning, planning, development, neighborhood services, the sheriff’s office, the police office, the fire department want to make sure there’s no fire marshal, outstanding stuff. So we’d like to really get clarity as it relates to and if there’s a well or a septic system, we want to go talk to the Health Department, if that’s in Arizona.

Jack Martin: [00:31:25] It’s called the Arizona Department of Environmental Quality. But you want to make sure that you see that that everything is in compliance. Then you still want to look at business licenses and all the kind of stuff. If there’s a pool, there’s gonna be a pool license. I mean, there’s all these governments. So we check there’s a long laundry list of things that we’ll check off that if any of those things is exists. It could be a deal killer. Well, in advance of you spending money doing physical inspections of the property. So that’s the first kind of high-level thing that we look at. And then once we’re comfortable that there’s no major issues there. Well, then we go find qualified contractors that are either already familiar with the park or at least they work in that general area. Yeah. So I don’t go get a contractor to drive 300 miles to go do an inspection on a park unless it’s a specialty thing. So I do have like because you’ve been in the business long enough. I have a specialty like electrical contractors that are. That’s all they do is electrical underground electrical for mobile home parks. So if I run across something where I know there’s going to be something like that, I’ll give those guys a nice fee, a travel fee. You go down there and check it out. But that’s pretty rare that you run across something like that. So normally I go through electrical, underground plumbing. If there’s a well, a well guy for septic, I get septic

Jack Martin: [00:32:56] guy, you know, all the contractors that you’re going to need if there’s a home there, I’ll get a home inspection because sometimes there is an office or a single-family home used as an office. So we’ll just get a local building inspector to go three or four hundred bucks and they’ll go give you every little thing that could be wrong with that home. And especially if you’re syndicating assets, you want to make sure that there’s there’s a budget to allocate for everything. You don’t want to just be winging it. Alright. Right. So the first question that you want to ask new contractors is, are you familiar with mobile home parks? Because if they’re like now never done one that I could at next. You want to. I want you to find. Yeah. You want specialists that that’s they already are familiar with it. So there’s a bit of work. You know, sometimes I’ll spend. Two full days down on the phone, talking to contractors and half won’t call you back because, you know, it’s kind of a special thing niche, right? Right. So once you identify them, then you engage with an actual try to get a date or a window where they’ll meet me at the park and we’ll do all the inspections in one day. If we can coordinate it, we’ll do that. If not, then we do it in a series of days and we’ll just be down at the park at a hotel for that series of days. So we kind of break it up.

Vee: [00:34:17] So it seems like there are a lot of moving parts to this. When you and when it comes to due diligence and like you said, it’s a lot of things that you want to look at and you don’t want any surprises. So for someone who is new, who wants to get into the game, do you have a book or a course that you would recommend them check it out?

Jack Martin: [00:34:36] No, I don’t. There’s a there’s a group of guys that run a course called M.H. University. Right. Frank & Dave I don’t know if you have run across their stuff. Yes. Yes. You know their boot camp is pretty good. When I was young, I went to it just to see if I could learn something. And even if you think your experience, you always pick up that one thing, correct or couple things. So it was worth going. Kind of got validation for the things that I do. You know, they do a pretty good job of making a list of things that that you’d want to do. We just take it to the next level. So we get really, really granular and it’s because we don’t like surprises. Right. So, yeah. And what you’ll find out is if you do discover a surprise, it’s not the end of the world if it doesn’t kill the deal. You know, you can kind of collect all these surprises that you find and bring those back to the seller and sometimes they’ll remedy them for you. Sometimes it’s a simple remedy. Sometimes it’s not. Bought a park once that had collapsed and several collapsed septic systems. So we showed the report to them and they said, oh, well, we’ll fix those. So it was nice. We didn’t have to budget for that. Right. Yeah. So those where you’ll get them to say, I don’t want to do it, but I’ll just, you know, knock the price down and accommodate for it, then, you know, essentially that money is there then. Right. Right. Yeah.

Vee: [00:36:01] So what about if someone who is interested in the idea, but they don’t have the time to learn, or the desire, to learn, how can they invest into this asset?

Jack Martin: [00:36:12] Yes. There’s kind of two or three ways that people can invest. First of all, I think the most important thing for an investor, if they like mobile home parks and the like, that kind of asset class that you want to invest with somebody who’s an expert at it. You don’t want to find out that. Oh, yeah, some guy that was just excited and hard worker. And now I’m teaching him how to do mobile home parks. And I don’t even know how to do them myself. Right. Right. So I think the most critical thing is to if you’re going to partner and there’s couple different ways that partnerships work. But if you’re going to partner, you definitely want to work with somebody who’s got a track record of experience. So particularly that’s their specialty. So mobile home parks, you know, when I first got started in parks, I thought because I was an apartment guy. Right. Right. So I thought it can’t be no different than apartments. That just looks different. And nothing could be further from the truth. They aren’t even cousins. They’re so far apart. It’s unbelievable in their behavior. You know, the first thing that kind of jumps out is the tenant profile for an apartment complex is a temporary housing solution. Almost every apartment tenant thinks they’re just going to be there for a little bit of time. Right. Very few of them say I’m going to live in apartments for the rest of my life. So the mindset is this is temporary. And in a mobile home park permanent, they choose to live in a mobile home park or in a mobile home because they have ownership and they got a park. They can park right now, right.

Jack Martin: [00:37:49] Right next to their front door every day. They don’t have to walk up any flights of stairs. And there’s no other tenants on the other side of the wall, or above or below or in the community. Everybody knows each other. So, you know, if you’re in a apartment complex and you walk through as a stranger, nobody even bats an eye. You walk through a mobile home park where all the residents own their homes. You will not make it through that park before somebody says, who are you? What are you doing here? So way different culture. And it probably doesn’t get the kudos that it deserves because of the stereotype the trailer trash can stereotype.

Vee: [00:38:28] Right. At first, I I actually thought, you know, Mobile Home Park did to go visit one.

[00:38:32] You should pack heat when you go if you’re going to the wrong park. But yeah, the people.

Jack Martin: [00:38:43] Live in the parks that we have. These are like regular working class people or seniors or, you know, they’re just choosing to live in a mobile home park because it’s a lower, more affordable place to live. But they own their own home. They do just fine. And they you know, they’re either on some of the seniors are retired and on Social Security, but most of them have jobs. They go to work every day and they come home and this is their home. So they take care of their own little yard that plant their gardens. You know they got a little yard or the storage area and a covered porch. And it’s way different. The experience of living in a mobile home park is way different. So, you know, I thought it was the same as apartments, but it turns out it’s not.

Jack Martin: [00:39:24] So the type of tenant or the type of resident that is attracted to a mobile home park, the way that you manage them and the way that your relationship works with them, it’s kind of a partnership. And in some way, you know, you show them that you’re serious about creating an environment that’s going to be a good one for them. And they’re more than happy to accommodate you with your increase in rent. So but it’s if you treat it that way, that this is kind of a partnership you give first and then they give back. And this just kind of how how we approach it. That’s not what you’ll see on the news. People will buy a park and those raise the rent. They don’t do anything. They don’t fix anything. They don’t make any improvements. So the resident experience there is like, well, what just changed? New owner came in. He didn’t do anything. He didn’t address any of the things that are broken. He just raised the rent. I don’t like the new owner.

Vee: [00:40:18] Right. And it’s hard for them to move. Right. If you’re a new owner, you come in and you just raise rent, but you don’t do any improvement to the park. You know, these people it’s not like it’s easy for them to to just haul their mobile home out of there.

Jack Martin: [00:40:32] You know, as a one of the things that makes mobile home parks more stable than in my opinion, I’ve owned about six different asset classes of real estate. But what makes mobile home parks more stable than anything I’ve ever owned is the fact that the tenants own the home. And really, if they decide for whatever reason that they want to move, that could be that they have a family member that needs them to move back to the other side of the country or they get a new job in a different state or whatever it is. Right. Yeah. It could also be I’ve got a girlfriend and she lives on the other side of town. I mean, that happens to. Right. So if you’re think about this in terms of the apartment tenant, then just pack their stuff and then about twelve hours they’re gone. No, you didn’t get a notice. You have. No we just found out they just paid the rent. They are gone. And all they really leave there is their deposit. Yippee. But they also left behind a vacant unit that needs paint and carpet and whatever other damage repaired in the deposit. It’s not even enough to accommodate for that. And then you got a month with no income and then you’re marketing it. And that costs money. And you probably have to give away some kind of incentives or, you know, it depends on where we are in the market, of course. But that’s a really, really expensive event for an owner of a property. So in a mobile home park, they own their home. So if they say, well, you know what, I want to move, they really have three options.

Jack Martin: [00:42:04] One, they sell their home, they put on Craigslist or they come into the office and say, hey, I want to move. So it’s time for me to sell. And we look on our waiting list and say, OK, well, we got a couple people. Let us help you with that. Or they put it on Craig’s List and they answer the calls themselves for whatever happens and they get a new buyer. That buyer comes into the office and signs a new lease and qualifies. Right. Because we don’t just let any old buddy come into the park. And then they take the keys. They pay that guy and they get the title and they take the keys. That’s their home now. Right. But what just changed for me, nothing has done nothing. Just a different person paying my lot rent every month. The only thing that changed for me and I didn’t even miss a month of lot rent I do no repairs. Nothing changed for me. But that guy moved. His second option would be to move the home. It’s just not economically smart. So they rarely ever do that. Moving a home in Arizona. You’ve got to go get permit for it and you’ve got to get an ADOT. Or like a Department of Transportation contractor that’s qualified to move homes on the road. You’re going to pilot cars and all this stuff. Right. Plus between four and seven thousand bucks. So it’s just not economically smart. If somebody wants to move on the other side of town to a different park, they’d be better off selling their home and buying a home and the other park unless they’re really in love with their home.

Jack Martin: [00:43:32] Right. So that rarely ever happens. I mean, just only happened in the history of my experience one time. It does happen. You know, people are in love with their home and they move it out. So or, you know, a family member dies and and their kids have the right to the home and they decide they want to move it on their parcel of land. So it does happen, but it’s rare. I think the point of this is rare. And then the third option, they can abandon it, which that happens as well. We’ve had that happen. So people are like, I don’t want to deal with that. I want to sell it. I’m just out of here later. Well, as the owner of the park, we have the right it takes us about a hundred and twenty days to file for abandoned title. And we own that asset. So because they owe rent, right. Right. So it’s a. And in that scenario, you know, once we own it, we’ll do whatever necessary repairs are to it and we’ll sell it. And it will probably be a profitable event for us. You know, sell it for whatever it’s worth in the marketplace. So somebody is lazy this end out to be a a win to us. So but I think the message behind that, when you see the mechanics of how mobile home parks work, there’s just way less tenant turnover. So in our experience, in a general apartment, tenants or residents will move like every twelve to 15 months. And then the mobile home park space, they’ll move every twelve to fifteen years. It’s way different. So that’s what creates the stability of cashflow.

Vee: [00:45:06] It seems like this is a perfect solution because when someone moved in the apartment world it’s an expense to the owner, but a mobile home park, it’s an expense to the park resident.

Jack Martin: [00:45:18] Yeah. Yeah. And it’s not necessarily an expense. It’s just becomes an obligation or a process that that there it’s there. It’s less like having a car. If you had your car parked in a space and you are paying for the space you wouldn’t just leave it there. You’d sell it. Correct. So it’s got value. People don’t just walk away. It’s not it’s not common for people to walk away from something that’s that they paid for and it has value. So in those cases where they’ll come to us and say, hey, I’ve got to move, we’re going to move in in a rush. And I don’t want to sell it. But, you know, how about I just give it to you and you guys sell it and send me a check or I’ll just give you a deal and just pay me right now and maybe they give us a discount on the home. So that happens to you. So I think the message here is if you do your job right as a park operator and your management team on site has a relationship with all the tenants. You don’t get surprised in the middle of the night with somebody doing something that’s not congruent with your park. You know, the interests of the park they’ll approach you and say, hey, I got this little issue coming up, how can you help me solve it? And then we help them solve it. Sometimes that benefits us. Sometimes it doesn’t. But usually when it’s really urgent, they give us a discount or whatever.

Vee: [00:46:38] Wow. Jack, this is a relationship business and you don’t see it as happened in any other assets class at all.

Jack Martin: [00:46:46] Would you put your energy into building a strong relationship with a resident whose mindset is I’m leaving soon?

Vee: [00:46:56] Not really.

Jack Martin: [00:46:57] So think about it. Your apartments. Single-family home rentals condos all those rentals. That’s what that is. You know, there’s occasions and there’s plenty of stories out there where somebody has been a tenant for you for 20 years and that still happens. Right. Right. But if you’re looking at single property where where, you know, hundreds of people live on a single property, it’s uncommon to have somebody that lives there month to month stay for 20 years. It’s not uncommon in mobile home park. We’ve got one park. There was a tenant that lived there for 44 years. Oh wow 44 years. 44 years. Same. Well, it was the grandmother. And then, of course, she had kids. And the daughter was the one that was kind of running the house. But mom was still there and dad had passed away. She was 44 years they’ve been there. The mom was raised, born and raised in the park.

Vee: [00:47:56] Oh, wow. Oh, man. Lifetime resident, It’s great. So, Jack, now is the time for Rapid Fire Round where I asked our guests the same questions throughout. You ready?

Jack Martin: [00:48:11] Yeah. Fire away, my friend.

Vee: [00:48:15] Question number one, what is the one special ability that you wish you had?

Jack Martin: [00:48:20] I wish I can wave a magic wand. Well, I have this special ability, but I wish I could wave a magic wand and predict when the next great opportunity is going to show up so I could plan for it.

Vee: [00:48:32] That’s like the best thing ever.

Jack Martin: [00:48:36] You know, the secret sauce in any business is you make your money when you buy so you can buy great deals. And that’s all we do, but can’t predict the speed at which they come. So I’d love to have that magic wand.

Vee: [00:48:51] All right. Question number two, which single habit give you 80 percent of your results?

Jack Martin: [00:48:58] Well, I’ll answer that in two parts. So in business, the single habit is the thing that we call KPI. For those listening, we don’t know what that is. It’s key performance indicators. And these are the things that you do on a weekly basis that you when you track them, the more of it that you do, the more results you get. So for me, the number of relationships that I can create with owners of assets that I want to buy and the work that I do, phone calls or whatever it is that I do, that’s the key performance indicator that will make the most impact in my business. But on a personal level, what I do every morning before I start my day has more impact than anything else that I could do. So, you know, I have a morning routine that includes some quiet time or some silence. Some people call it meditation just to practice ignoring the noise that’s always around us because I don’t show up and it’ll distract you. I spend some time doing some exercise. I spend some time in prayer. I spend some time in affirmations and then I spend some time thinking of others, praying for others, so that right there kind of sets the tone for my day. So I know today is going to be amazing. Well, in advance of ever even experienced again. And I don’t get distracted by circumstance or other people or, you know, the actions or words of other people.

Vee: [00:50:30] So visualization of your day helps you have a better day.

Jack Martin: [00:50:34] You know, I like to want those. There’s there’s occasions where something is new. I don’t want to spend some time visually how I expect it to go. But visualization for me is a little bit zoomed out of the bigger picture that I practice. The experience of success and what I think it’s going to look like in a long term perspective and the feelings associated with already having achieved that. Well, it’s like what is it going to feel like when I ask this girl to marry me? And she says yes. You practice that feeling well in advance of even having the girl even have or have had the girlfriend. That’s what I’m talking about. It’s that kind of thing.

Vee: [00:51:16] Yeah. You gotta practice for success. You gonna see all too well.

Jack Martin: [00:51:20] People don’t really appreciate that practicing how it’s going to feel super, super important because we practice our feelings every day. But we practice what humans will naturally inclined to do is still practice the feelings of fear, worry, anxiety, concern, doubt, failure to practice all of that. I don’t know if I should do this. I’ll probably fail. And they’re practicing that feeling of failure, right? Well, to set your day right, practice success. What’s it going to feel like when I’m successful in blank? I practice that. So in during the day when there’s some kind of circumstance that shows up that would give me evidence of something contrary to that, I have something that I can remember up in practice in this. And I could just pivot right to that. Like, I don’t know why that circumstance shows up. And then just practice the success. Right. It seems a little woo-woo far fetched that that has had a tremendous impact on my life.

Vee: [00:52:27] That’s great, man. So what is another profession other than your own that you think you’ll be fun for you to attempt?

Jack Martin: [00:52:35] You know, when I’m done with real estate, I want to teach people how to live intentional lives. So not only do I think it would be fun to experience, it’s something that I intend to do. So I believe that every single one of us here can be successful in our own little niche. The way, you know, taking advantage of the gifts that we’ve been given, we get so sidetracked trying to live this Instagram life or try to copy the other guy that we failed to look within and see what’s in there. So I would really like to teach people how to do that.

Vee: [00:53:10] I look forward to that. Now I’ll go to your course. We’re sure you are. You are so amazing. I mean, some of the stuff you’re sharing today is just mind blowing. Well, thank you. So how has investing in real estate help you fulfill your dream or life goal? Interesting.

Jack Martin: [00:53:29] Well, certainly investing in real estate, especially if your goal is to create cash flow, eventually buys you freedom of time. So nothing ever really buys you true freedom, but you get your time back. And with that, you can go do what you want to do. All right. So I think that that’s the goal for me. And that’s the experience that I’ve had. You know, in the beginning, when we were flipping all those houses, there was large checks that would hit the table on a regular basis. And that was really fun. But the moment that we stopped flipping. You know, if you stop flipping houses in a couple of weeks, there’s no more to sale or no more to sell. Right. Right. Or if you start buying houses to flip. Right. So it’s kind of like the business, you know, where you have stock on the shelves as soon as you sell your last piece of stock. There is no more business. Right. The thing I really like about the cash flow business is that as long as you have really sound processes and if you do a good job of hiring the right people, you have systems in place that that cash flow can go on indefinitely. That’s powerful.

Vee: [00:54:43] Definitely. And then my last question for you is who do you think I should interview next on a future episode of the Real Estate Lab Podcast?

Jack Martin: [00:54:54] Wow interesting. So what’s the flavour of are you staying focused on on mobile home parks or are you guys kind of broad? What’s your spot here?

[00:55:06] So our audience are typically people who wanted to invest in real estate. They have also they have their day job, right. So there may be looking for another project to invest in so that they can quit their day job. So it could be mobile home park, which I think is an interesting investment vehicle. And they would definitely learn more about this asset class, but also maybe apartment and some other things that you have already invested in, like the first idea that comes to mind as my business partner because he’s so into the nuts and bolts, but he’s difficult to understand because he’s so into the nuts and bolts.

Jack Martin: [00:55:51] So he gets so granular. It’s the perfect partner to have. Because there is no I that doesn’t get dotted or t that doesn’t get crossed. But yeah, that’s the first one that comes to mind.

[00:56:01] That’s Nate. Right? That’s neat. Yeah. Awesome. Do you think you can make an introduction? Yeah, absolutely. Awesome. Now, Jack, if people wanted to follow up with you after this show, how did they get a hold of you?

Jack Martin: [00:56:14] You know, the best way to get a hold of me or to get on the calendar is to go to our Web site, and that’s 52TEN.com But that’s the number 50 to an intent is spelled out. So it’s five to g e and dot com. And then you can go to the contact page and you can even schedule an event to get right on my calendar.

Vee: [00:56:36] That’s all the time we have for today’s show. Jack, you have been incredible. I really appreciate your time. I learned a ton.

Vee: [00:56:44] I know you’re extremely busy. You’re awesome for sharing time with us and the knowledge with us.

Jack Martin: [00:56:51] Vee thanks for inviting me. You know, one of the things that I’ve discovered in my life is that when you give life gives back, but it rarely ever gets back from the same source through which you gave you. So it’s a really important lesson. We all have something to give. Sometimes it’s money. Sometimes it’s time. Sometimes it’s the experience. Sometimes it’s wisdom. So, you know, for all of your listeners out there, every one of you has something to give. And if you give. You’d be surprised how life will get back to you.

[00:57:22] That’s right, man. Yes. Awesome. I am excited to see what you and Nate do at 52TEN. And now what you guys are going to accomplish in your future. Thank you, Vee.

[00:57:34] You have a blessed day. And that was both. Get back to work.

[00:57:38] Like this episode of the real estate lab podcast? Share the show with your friends. Subscribe and give the show a five stars rating on iTunes. Until next time.

[00:57:48] Have an awesome work week.

Missed last week’s episode? Go back to listen to “Rajesh Tekchandani on Marketing Exec Turn Incredible Syndicator

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