The Professionalist Real Estate Investing Podcast
Whether you’re a seasoned investor, budding entrepreneur, or simply curious about diving into the world of real estate, this podcast is your ultimate guide to building wealth and achieving financial freedom through smart investing.
Join host Tony Jacobs, a real estate professional , as he explores actionable strategies, emerging trends, and real-world stories from top investors and industry experts. Each episode delivers valuable insights to help you navigate challenges, capitalize on opportunities, and grow your real estate portfolio with confidence.
Tune in for expert interviews, market updates, and tips to elevate your investing game—because success in real estate starts with the right knowledge and mindset.
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The Professionalist Real Estate Investing Podcast
Why Mobile Homes Are the Future of Affordable Housing w/Frank Rizzo
Dive into an enlightening episode filled with insights from Frank Rizzo, a seasoned veteran in mobile home park investing. Discover how he went from a traditional real estate agent to a successful operator in the often-overlooked sector of mobile homes. We explore the unique challenges and misconceptions surrounding mobile home investments, shedding light on why this niche presents incredible opportunities for cash flow and stability in today's housing market.
Frank's journey reveals the substantial role mobile homes play in providing affordable housing options for the many families who struggle with skyrocketing real estate prices. He articulates the importance of a strong community feel and how effective management impacts tenant satisfaction and retention.
In this episode, we also discuss financial strategies for investing in mobile homes, including creative financing options such as seller financing. Frank provides actionable advice that will guide new investors in crafting their business plans and identifying lucrative opportunities.
With a focus on the cultural aspects of community living and effective management, we aim to empower listeners with the knowledge they need to navigate the mobile home investment landscape confidently. Don't miss out on this episode that combines expert interviews with practical insights to elevate your understanding of mobile home investments.
If you're intrigued by the prospect of mobile home investing, check out our YouTube channel, Trailer Park Turnaround, for a behind-the-scenes look at what it takes to turn around a mobile home park. Join us, subscribe, and start your journey into this fascinating sector today!
Podcast Intro
Hello world. I just want to get everybody to introduce you to the Professions Real Estate Investing Podcast. I'm with Frank Rizzo. How you doing, Frank.
Speaker 2:I'm doing very well today, Tony. Thank you very much for having me on.
Speaker 1:Yes, we got Frank Rizzo. He's a seasoned mobile home park investor with over 20 years of experience in the real estate industry, and he's the co-host of the MHP Exchange podcast. So, Frank, I just want to know how did you get into the sector of the mobile homes and real estate investing?
Speaker 2:You know the funny story about it, tony. I don't think many people wake up in the morning and say they want to become a mobile home park operator, right, unless you were born into it. But having had a real estate career which, where I started as an agent and eventually started it, moved into being a real estate broker, I was assisting one of my clients I mean real salt of the earth people first generation entrepreneur who had come to New York. First generation entrepreneur who had come to New York, started a bunch of small businesses and, like most business owners who do not have a 401k or do not have a retirement plan, did really the best thing possible, which was to buy and own a bunch of multifamily buildings to create rental income for himself. And when he started to phase out of the active management and he was having some operational challenges as things have gotten where he was just at a different stage of life, me and my office got involved to manage and kind of situate the properties correctly. And in the process of doing that they relocated down South because most people, as the old expression goes, nobody retires up North right. So they moved down South and as the family was happy with our services. They had asked me to work with them to find a suitable replacement for the income that they were going to be losing by selling their investment properties in the New York City area.
Speaker 2:So as I'm in the process of looking for high yield, cash flowing, predictable real estate investments for them, I came across the mobile home park industry and when I sat down with the family and made my recommendation that I think that you should exchange into a mobile home park, not having any background or experience in it, but for the reason of you know it is a very sticky and resilient asset class. And what do I mean by that? I mean, typically, when residents own their home inside the community. They own the home. Your responsibility is to maintain the grounds, keeping it clean, keeping it beautiful, keeping it safe, keeping the lights on, making sure the infrastructure is working.
Speaker 2:That is something that I felt that they could do remotely. That is something that I felt that they could do from a distance, and typically, when a resident owns their home, they'll stay in the park, on average, 17 and a half years, as long as the place, tony, is clean and safe. So I recommended them to get into the mobile home park space. And the father who said I will only do it, frank, if you stayed in the deal and you ran the deal for us. So, almost by a baptism by fire. I had to put my money where my mouth was. I had to operate and manage this community in Southeast Georgia while I was in New York and it proved to be a very worthwhile investment and a great learning opportunity and it really sparked my interest into the space and it's been probably, without a doubt, tony, the best investment decision I made in the over 20 years I've been in the real estate space was to get into manufactured housing.
Speaker 1:Wow, that's beautiful and I already caught already something to it, because up north, especially New York and California, it's the worst when it comes to taxes. But if you go down to like the southern states, you get more of an investment when it comes to those southern states.
Speaker 2:You know. That's a great point, tony. I mean you're in California, we're in New York, I think we have, you know, every city, every state. There's legislative hurdles. It just seems that we happen to be in some areas where there's a little bit more challenges. What I found is when you can operate in a location where you have some business clarity. It doesn't mean that you always get the answer that you want, but you can get the answer that you need and that can help you make better business decisions. Knowing that you know what I need to do to execute us a real clarity of purpose and clarity of being able to operate, and that's something that we really looked towards in one of the reasons why we really like the area and the markets that we're in, yes, so and then you talk about transferring from the multifamily into the mobile home part.
Speaker 2:What is the? What's some of the or the biggest misconception about investing in mobile homes? Well, I think the first big, big misconception in it is that these homes are mobile, right, so you have it just in the name mobile home or mobile home park. The assumption is that these homes could be readily moved and, quite frankly, these homes are very expensive to move or costly to move, can range anywhere from $12,000 to $17,000, depending on getting a licensed mover If the lot that it's moving to is prepped, has the connections to the sewer and electric readily available if you need to bring in an HVAC unit, so it could be very costly.
Speaker 2:So people who own these homes do not tend to move these homes unless, of course, they're moving it to a piece of land that they may have purchased. And so, for the most part, when they own someone owns their home they will keep it in a community and they will keep it. You know they they like that community living, they just want to own their home, like that community living, they just want to own their home and it's essentially multifamily housing that is horizontal rather than vertical.
Speaker 1:That's a great way of putting it. As soon as you said that, I was like, yes, you're right on point when it comes to that right there, because I know a lot of people that I'm around with in real estate. They don't do much with the sector of the mobile homes, but where should investors look to find mobile home deals at?
Speaker 2:You know it's. It's interesting. You say that I mean, I grew up in New York City, so we don't in New York City it's. It's not a hotbed of mobile home parks, it's not a hotbed of mobile home parks. And so when you leave outside of the city areas, you start to realize that 12% of the US population lives in manufactured housing, right, Wow. So it is a large portion of the US public that is living in some sort of manufactured home. Now, they're not in parks, but these mobile home parks are throughout the country, outside of, say, major metros. They're all in secondary, tertiary markets. In a lot of the major metros, a lot of times the mobile home parks, typically the cities are looking to do a higher and better use. They're looking to build, you know, multifamily housing or luxury housing. So they are dwindling in supply as crazy as that sounds which, in a country that's in an affordability crisis, makes this a very interesting investment at this point in time.
Speaker 1:I'm glad you brought that up. Yes, because the housing shortage here in the United States is between the $7 million to $9 million mark. What would it play for with the mobile homes, Say, if they got an abundance of mobile homes? How would that help out the economy and the sector of affordable housing? The sector of affordable housing.
Speaker 2:Tony, that is an excellent question because in the affordable housing conversation a lot of time what's missed is the fact that this is the most affordable housing solution available for people who are looking to become homeowners and create that pathway to homeownership.
Speaker 2:The facts are that a stick-built house is going to be two to two and a half times as costly as a manufactured home, for a number of reasons. I mean and I've been to a number of different factories from some of the larger manufacturers in this country it is an efficient assembly line of production where they're moving these homes out regardless of weather or exterior condition and they can build the demand. So, affordable housing you cannot have an affordable housing solution without looking at or considering manufactured housing as a way to step people into a home ownership situation. And, as you know, you know, home ownership is the number one pathway to generational wealth. It gets people out of the cycle of renting and puts in that pride of ownership and changes the mindset for people to start thinking about longer term investments for them. So manufactured housing is absolutely a part of the solution.
Speaker 1:I'm not saying it's 100% of it, but it definitely should be a bigger part of the solution that's being talked about right now. Yes, it was definitely a start of the conversation because, from the way you're explaining it, it would help out our economy so much better. With the housing solution, even with I mean, we just had the huge fires down in Southern California there's a lot of displacement going on. They don't know what they're going to do with all that land because that dirt is. So I tell people it's dirt. That dirt is expensive because of the location, like they don't know what to do with it. So even the idea of what you brought up about the mobile home, like there's areas where I have I had a friend I just did a podcast with and there was a fire in Paradise. Paradise was the way they built. It was backwards, it was one way in, one way out. It got to be a fire and he was able to buy a mobile home park. They cleared the land out and he's doing amazing with that investment.
Speaker 2:And he ran it back, put it back as a mobile home park.
Speaker 1:Yes, he did, yeah, yeah, it was. So it was very smart, intelligent on his side to do that. So, when it comes to that also, how do you, how would you determine if a mobile home or mobile home park would be a good investment? What, what, what, what is it that you would say? Your professional side of it?
Speaker 2:So so from us, from the vantage point of where we look at I mean, we're true value-add investors right. So we look at any potential acquisition from the lens of where can we go in there and create real value, right? Where can we create efficiencies in the management right? Where can we enhance the resident experience? And many times this is still a very fragmented industry where predominantly Tony, it is still owned by multi-generational mom and pop retail owners and a lot of times they're not, they don't look at themselves as somebody who operates in a mobile home park, it's somebody that's, you know, they might've inherited, you know and they're not geared towards really raising the standards of that community. Maybe a lot of deferred maintenance, maybe roads that need to be done, or infrastructure improvements that need to be done, or lots which are vacant, lots they need to be infilled, meaning brought in with new homes brought in there. Vacant lots that need to be infilled, meaning with new homes brought in there.
Speaker 2:So for us we tend to look at those types of communities as our target because we believe that our program adds the most value. There we can help beautify the surrounding areas, we can enhance the homes that are there on site. We could bring in the infrastructure improvements and then start to bring in new homes to get the community at large that affordable housing option where for us, tony, we can sell a new home on site for somewhere between like $60,000 and $80,000, which is significantly below national average and we can enhance the resident experience down on the ground. And that's for us where we look to add value. And then we look at where we can create some management efficiencies, where we can save money through better management, maybe utility reimbursements, making sure that there's not any waste happening down on the ground. So we take a two-pronged approach of where we can add the most value and that's what we look at when we look to acquire any new community.
Speaker 1:Well, that's a great blueprint right there how to go about it. Now, on the other flip side of that, what would be some common red flags investors should avoid before purchasing a mobile home In?
Speaker 2:the last, say, three or four years. You know, in the last, say, three or four years, mobile home park investing has become something of a buzz in the industry. I think people have started to look for more yield for investments with higher potential for cash flow, and a lot of people have come in with the thesis of when people own their homes they're kind of tethered to the land and I don't have to do much to make money. And I think that's some of the story. But I think that they're missing a big part of it, because what makes a community or a mobile home park a community is really that feel that the residents have with the ownership or the ownership group. And it's not just, you know, you know, fix it and forget it. It's.
Speaker 2:There is some, you know there is amount of touches that that goes into maintaining and operating the park.
Speaker 2:So you have to have a good business plan on how you're going to run and operate that park, especially if you're going to do it from a distance, right.
Speaker 2:You have to make sure you have a good team on the ground that's going to be able to facilitate that, and I think the community manager is so important. And then you have to make sure that you're able to instill a culture on the ground of what's acceptable and what's not, because in these communities or these types of communities, it is very easy for a community to get away from you if you're not actively managing it. If you allow people to not conform to a certain standard, everybody will. That pride of ownership which makes this such a compelling asset class will disappear if you just allow people to, you know, bring in junk cars and leave them on their lawn. Or to, you know, bring in a you know laundry machines and leave it on their front lawn, like, and that will have a negative impact on your community. So it's it's super important that you look to instill a culture of accountability for yourself and for the for your residents, and that makes a big difference in how you're going to your operations will be.
Speaker 1:That's exactly true. Especially have, like you said, having a great team and especially if you're a distance away, you have somebody on site that's taking care of the responsibilities, the culture, keeping everything clean. And you got to think the more you take care, I tell people the more you take care of something, and especially no matter what it is, and especially when it comes to real estate, the tenants are going to want to stay there. They're not going to want to leave. They're like I've been taking care of, like what I say, what I say what's broken, how fast the response is, and everything that all plays a key part of keeping great tenants.
Speaker 2:You hit the nail on the head, Tony, and especially because and here's the difference from multifamily, right If somebody wants to move their home and there's a $15,000 cost to move their home right From one site and connect it somewhere else, and if you're, they're only going to do it for a specific reason, If price is the same, then they wouldn't move right. They'll only move if you're not able to maintain that culture, if you're not able to create that community feel, or they feel, that the standards have been reduced to the point where it's dangerous, unsafe or affecting their values. So if you can do that and you can maintain that as being a focal point, you will have residents that are very happy to be there. And then we found people who they will be. Those residents will become your best referral source. They will bring in their friends, their neighbors, their cousins, their coworkers, because they're going to want to have a community of other people who they want to have, a community of other people who they want to share that community with.
Speaker 1:Yes, and word of mouth goes a long ways negative or positive, it goes a long ways and, like you said, their friends, their families, like you. You're what you're building. You're building a strong community where everybody is friendly, respectful respectful to each other, respectful to the property that's there. So it all goes together in one.
Speaker 2:Absolutely. I mean, that's a key component to all of this.
Speaker 1:Yes. Now, when it comes to like financial options, how can you go about financially like purchasing? What do you use financially to purchase mobile homes?
Speaker 2:So for the parks and I think for any investor. Right now, tony, the big challenge has been in the underwriting and in the financing, because because rates are significantly higher, that's why we've seen a reduction, I guess a slowdown, in the commercial real estate transactions. But we're one where, when the rates are higher, we happen to believe that this is an opportune time. We think that anything that we're able to acquire now in the next few months, we're probably very well positioned because we're at the higher end of the rate curve and should start to peel back and sellers at this point, if they're looking to sell, they'll be willing to be a little bit more creative with you. So we're a big proponent, especially going into a value add situation is try to create or craft creative ways to get us to the you know, the us and the seller to the same point.
Speaker 2:A lot of time. That involves some seller financing or a seller financing component. For instance, we just closed on a 271 unit community where we were able to craft that with a seller financing note and we were able to get the seller to defer some of those payments until the balloon period ends four years from now. So that gives us some time to execute the business plan. We knew that we were at a great value. We can reinvest the capital into the community to get us to where we need to be and it positions us where we felt, where it works for us and it worked for the seller as well. So I think, you know, we've got to look at each market's a little different, but we think in the current environment, with rates the way they are, you know, being able to use different tools of either seller financing or lease options become very advantageous to us in terms of where we look to do and acquiring properties right now.
Speaker 1:Yeah, and I was thinking that's when I asked that question to you and I was thinking I said you know what I'm going to use? Seller financing. And, like you said earlier in the podcast, a lot of them are moms and pops, so that actually helps with the seller financing. A whole lot says, hey, you don't have to deal with the bank, we can structure this out together and work together as one well.
Speaker 2:Well, you know, tony. You know, anytime you're buying real estate, you're buying three things right, you're buying the income, the expense and the financing. Right now, the financing is very expensive. Right for You're buying the income, the expense and the financing. Right now, the financing is very expensive. Right for anybody. And so the only way you can make that up is on the price.
Speaker 2:So, if you can work with this, if the seller wants to sell and they know that you're a sponsor or you know an operator who has a track record of performance and we've been involved in about 27 communities right now and we've been involved in about 27 communities right now We've been able to go full life cycle on 10 of them we're able to demonstrate. Here's our business plan. It's been tried, it's been true. We've had over a decade of success in this space and we can show you that you're going to be invested in this community anyway, with professional management and ownership that's going to be able to take it to the next step. You know, the funny thing is we've actually had some prior owners who've worked with us afterwards, which we've been very proud of and very happy to have that happen. And you know that gives us an added advantage where we have someone who really knows the property, who's who's boots on the ground. So, and one of the things that often gets overlooked, tony, you know we've seen this happen right.
Speaker 2:When you sell a property, everybody in town knows you sold the property right. Your cousins, your friends, you know. And they know if you sold the property right your cousins, your friends and they know if you've come into this big windfall. It's the reason why a third of lottery winners will declare bankruptcy inside of three years. Right, it's not because they don't know what to do with the money, it's because they don't know how to say no, right, everybody comes out. Can you help me? Can you do this?
Speaker 2:But if you take back a note, right, if you take back a seller financing note, they might know you sold the property, but, tony, I took back a note. They don't have to know when you get that note paid off. Right. And so for the seller, you know it gives them a little distance and not have the situation where, hey, I've got this big pool of money, what am I going to do with it? Oh well, this one needs a car and that one needs a little help, and I want to help this. It gives them some time to kind of absorb what's going to happen and kind of make their decisions in the time they need to make those decisions.
Speaker 1:Great, that's very true right there. I like that, my one. I have always one tax question, because I love taxes and real estate. You know people like they try to shun away from it and everything like this is the reason why the government gives us so many advantages when it comes to taxes and real estate investing. How does depreciation and tax strategy work with the mobile homes?
Speaker 2:and tax strategy work with the mobile homes? Well, that's another great question, because for mobile home park investing it's very favorable. We always like to do a cost segregation analysis and report prior to acquiring the property, which allows us to basically bifurcate the land from the personal property, from the land improvements and from the buildings, and we were allowed, or we're allowed, to take some accelerated depreciation on the land improvements in the personal property. Now, in the case of a mobile home park, what you're buying is land and mainly land improvements right, that's the value of that. And then you can get that accelerated depreciation which allows real estate investors to shield a lot of income that's coming in. Rightly, now that gets recaptured on a sale. But if you hold onto that property for an extended period of time, well, that gives you a long period of time to defer that right, and that's a huge advantage in not only investing in real estate but investing in mobile home parks specifically.
Speaker 1:Great, that's great.
Speaker 2:I didn't even I didn't know that this podcast made me want to get a mobile home now and venture with somebody else now I would tell you, Tony, it would be definitely be an advantage and a great way to shield your income as a real estate professional. That would be a fantastic way to do that.
Speaker 1:Oh yes, oh yes.
Speaker 2:So what's one piece of advice you would give someone looking to start investing in mobile homes today.
Speaker 2:So whenever I speak to somebody looking to invest, I always tell them that the first thing that you should do before you do anything is to write out your business plan. Because I'm sure you know, right, as a real estate agent, how many times have you gotten a call from somebody who says, tony, can you help me find the deal? Yeah, right, and if I had a dollar for every time somebody said that to me, I wouldn't have to buy any real estate, right? And then when you ask them like, well, define what a deal looks like. And then they don't know exactly what the deal looks like. I'll know it when I see it.
Speaker 2:Well, you're not defining success. So the first thing you should do is define success and then your expectation and what that looks like. What does it look like to own that community or park or investment? What kind of return are you looking to get out of that? What are you willing to commit to generate that return? How much work are you willing to do or able to do, like everybody says? I want to.
Speaker 2:You know, and again, from doing being in real estate for so long and I'm a transactional agent and broker to where I am now in that journey. You know everybody wants to find that home that's worth $300,000, that the seller wants $180,000 and needs work, but all it needs is painting right and quite frankly, that doesn't necessarily exist. So be realistic of the work I'm willing to do, the capital I'm willing to put in there, the timeline I'm willing to expect and the time I'm willing to commit to make this work. And then when you backtrack that you've really got a pretty well-defined buy box of what you're looking for and that makes you so much better of an investor because you'll know what not to look at and you'll know what to look for. So I always say the first step is having a good, clear plan and defining what success means for you and the dollars that you're willing to commit to it.
Speaker 1:That is great info. Great information right there. Frank, I appreciate everything that you said, like the sector of mobile home and the mobile home parks I had no knowledge about. Now, if anybody's everybody's listening to this podcast, you might need to re-listen and re-watch it over again, because Frank just put out some gems out there that I didn't even know about. That's the reason why this podcast so people can learn. That's the reason why so go ahead, frank.
Speaker 2:No, I mean listen, tony. That's great and you know we love sharing knowledge on that and I appreciate the opportunity to share with you and talk with you about the mobile home park space.
Speaker 1:Yes, this is Frank Rizzo. Like I said, he's been in this real estate game for over 20 plus years. He has his own podcast, the MHP Exchange Podcast. Y'all need to go out there and listen to that also, and I just want to say it's been an honor and a pleasure, frank, to have you on the podcast. I enjoyed spending this time with you today.
Speaker 2:Tony, I really appreciate you having me on. It's been a pleasure talking with you. I'd love to come out to California and see the markets that you're in and see what's going on.
Speaker 2:Oh yes, oh yes, yes, yes indeed, and I would say, if anybody out there is interested in seeing what it takes to turn around one of these mobile home parks, they can check out our YouTube channel, trailer Park Turnaround, where it's a video series where we'll show you what happens, from finding a deal to turning it from acquisition day, what it takes to turn those parks around and then what it looks like at the finish line. So you can check out Trailer Park Turnaround on YouTube.
Speaker 1:That's great. Yeah, just give me the information, I will put it there so everybody can watch it and subscribe to his channel and everything, and so on that note world. Thank you for listening and watching and, frank, I appreciate you so much and everything that you do.
Speaker 2:Thank you Everybody, have a blessed day.
Speaker 1:Thank you All right.