Mobile Home Park Investment with Kevin Bupp | 599

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Mobile Home Park Investment

Meet Kevin Bupp, a real estate expert, and a CEO of  Sunrise Capital Investors. He is here to tell you more about a slightly different business, mobile home park investment! Learn what to look for when acquiring home parks, how the process of negotiating the purchase differs from buying a single-family house, and the 3 guiding principles for Kevin’s success.

Mobile Home Park Investment

What You Will Learn About Mobile Home Park Investment with Kevin Bupp:

  • How Kevin Bupp got involved in the mobile home park investment business
  • What to look for when acquiring a home park and how it compares with evaluating single-family residence
  • How to negotiate with the home park seller
  • Where to look for the deals
  • How many projects Kevin acquires per year
  • Why it is important to be consistent in real estate
  • Where your focus needs to be if you want to outshine the competition
  • Why you should buy more and sell less
  • How to prepare and deal with the recession
  • The 3 guiding principles for Kevin’s success
  • How to get in touch with Kevin Bupp
  • Where to find more about Sunrise Capital Investors

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Transcript:

Speaker 1: This is Theriault Media.

Kevin Bupp: My personal saying is that there’s always going to be … it’s all timing. So there’s always going to be a point in time in an owner’s life where they either need or want to sell. One of those two things is going to happen. There are many different reasons why each one might occur in an owner’s life, to where they become a seller. The goal is to get your message in front of them when that day comes.

Matt Theriault: Hey, rock stars. Matt Theriault here at Epic Real Estate. Welcome back to The Real Estate Investing Show, and if you’re into real estate investing, for cash flow most specifically, you’re going to love today’s episode, today’s episode of Thought Leader Thursday.

Okay, so today, it is my pleasure to welcome back to the show this real estate expert, serial entrepreneur, charitable humanitarian, adventure seeker, and passionate family man, so please help me welcome back to the show Mr. Kevin Bupp.

Matt: Kevin, welcome back.

Kevin: Matt, thanks for having me, buddy. I’m looking forward to catching up.

Matt: Yeah, we’ve been playing a little bit of podcast tag.

Kevin: Yeah, right.

Matt: And having a hard time nailing it down, but I’m glad we finally did. So you are cash flowing expert. This is your focus, and so it’s near and dear to my heart, but you do it with a slightly different asset class. Why don’t you just … I mean, maybe …

Kevin: We do.

Matt: … people might want to know what you do and how you do it.

Kevin: Yeah, we have a little twist. I mean, we’ve owned other types of real estate, we’ve owned lots of residential, lots of multifamily over the years, commercial, and just happened across mobile home parks. Now, it’s going on seven years and that is solely what we focus on today and we love the niche, man.

So, we’ve been buying parks for going on seven years now and own them, and now, today, as we do this recording, 11 states and soon to be 13 states here in the very near future. So own them as far north as New York and Michigan and as far west, right now, as Oklahoma, and then everywhere else in between.

Matt: Got it. Is that where you started? With mobile home parks?

Kevin: No, not at all. No. Many, many, many, many years ago, I cut my teeth in single family, buying, mostly doing like really rough rehabs in the inner city of Pennsylvania where I grew up, and then started doing buy and hold. I was always taught the buy and hold in generating cash. That was the kind of model that was put onto my shoulders way back when, and then kind of migrated into multifamily. This was all the way back before the crash, and then the crash hit me pretty hard and was just really looking to scale the business up again because I lost pretty much everything during the crash.

And at some point, in 2011, got introduced to mobile home parks, really wasn’t interested at that point, put a little bit more thought into it, little bit more education behind me, and saw something that seemed very intriguing and I wanted to it give a shot. And so bought my first park way back then up in Atlanta, and here we today, man. So I’ve done a little bit of everything, but this has been our sole focus for the past seven years.

Matt: That’s great. I have almost no experience with a mobile home park. I don’t even know if I’ve ever stepped foot on one.

Kevin: I had not ever stepped foot in one until we actually bought one.

Matt: Yeah, okay. Good. So we have a business over here where we help people build real estate investing businesses and we support them along the way and we build their systems and do all that, and through their marketing efforts, they come across all kinds of stuff, most of which I can help them with, but I did have client recently that came and says, “Man, I’ve got this mobile home park. What do I do with it?” And I said, “I don’t know. Let me get back to you.” So I hit you up and I connected you two and he said he’s pretty happy with the end result. What’s your version of the story?

Kevin: Yeah, no. So we have not bought the park yet. We’re actually in contract with that park, and he and I actually have a call, I think, tomorrow with the seller. We’ve uncovered a few potential hiccups in the infrastructure, and so, I mean, as of today, we’re doing a deal together. Thank you, Matt, appreciate the connection there.

Matt: You bet.

Kevin: And yeah, hopefully, it does go somewhere because it looks like a great opportunity and it’s up in Michigan. Again, we own something up in Michigan now. He’s actually based in Michigan, the person you connected me with, and we like Michigan as a marketplace. I don’t think I’d want to live there, little too cold, but it’s a great market to own mobile home parks in.

Matt: Right. So, when you go through the due diligence process, which you guys are going through right now, what are the big differences that you’re looking for compared to single family?

Kevin: Yeah. I mean, probably a lot of similarities, but there are a couple of additional caveats that exist in our space. Like to use the example of this park that we’re doing with one of your students, that one is on private utilities, so it’s got a private well system for the water supply. So it’s in a somewhat rural area. It’s close to Grand Rapids, but not close enough to where there are municipal utilities and that’s common with mobile home parks.

A lot of times when they’re built, whether it’s 15, 20, 30 years ago, they’re typically built on pieces of land that don’t have a higher and better use. Right? So it’s cheap land then, and then over time, cities or towns kind of get pushed outwards and you’ll find parks that might have been on private utilities 30 years ago, and then municipal sewer and water lines come close by, and you get connected.

But with this one, it’s still probably 15 years or so before the growth really gets that close to it. So it’s got a private well for the water, and then it’s got, basically, a master septic system. So just think of like a huge robust version of like what you might find on one single family home. Instead of like a 1,500 or 1,000-gallon tank, you’ve got like a 15,000-gallon tank and a huge leach field that might encompass like a quarter of an acre.

And so that’s what this system has, and so like one of the caveats with this park was we knew that they had multiple violations from the EPA for the sewage. The sewage system wasn’t working properly, and it happens with septic if you don’t maintain if you have tree roots growing into the lines, and so this one, we kind of knew there were a little bit of problems going in. We didn’t know how in depth or how drastic it was, but as we dug deeper, as we got engineers involved, we uncovered what the seller said was about a $50,000.00 repair was more like a $250,000.00 repair.

So, the infrastructure is very important, especially in situations where you’ve got private sewer. Some of the other things that you want to identify is, in a perfect world, Matt, like we don’t want to own any of the homes in that community. So we don’t want to own any of the trailers. We just want to rent the land to the folks that own the trailers. Right? So just basically thinking of it as a parking lot where they park their mobile homes that aren’t very mobile. It’s very hard and expensive to move them, and in that situation, we’re just basically providing the infrastructure, the water and sewer, and a place to park their home.

But there are a lot of instances where parks will come along with rental inventory, so where the park actually owns some of the units, and so, in that situation, just like if you buy a single family home, you’re going to want to go through and do walkthroughs, ensure that, number one, there’s someone living there. Number two, that it’s in good structural shape, and that deal that we’re talking about now, Michigan, I think it’s got about 11 or 14, I believe, a park owned homes and so we’ve got to do a thorough inspection on all those.

And then, the other similar things that you would do, you want to verify the rent roll, verify the financials. We always get experts involved when it comes to anything regarding the infrastructure. We’ll get engineers involved and water companies and sewer companies and things like that. We’ll also talk to the county, find out what kind of historic code violations the community might have had, try to get the general, I guess, the temperature reading from the county on how they feel about the community.

A lot of times we’re buying value add stuff where, if it’s a single-family home, the code enforcement officer might not be all that happy, but they get pretty pleased when they see someone coming in that’s going to clean it up. Mobile home parks have a negative stigma to start with and so they’re already starting a little bit behind, and what I found is that, a lot of times, we come in thinking that we’re the guys with the capes on. Most of the time, municipalities don’t really perceive us that way. All they think is that a mobile home park, no matter who takes it over, it’s going to be a problem.

And so, we spend a lot of time during due diligence just really getting a really good gut check as to how much friction we’re going to have with this city or this township if we buy this property if it’s a value-add place. Like the one I’m speaking of, Michigan, this thing has literally had sewage issues for like four years and they’ve been ignoring it and so they’ve had multiple violations. The city hates it. I mean, if it was up to them, they would just shut it down. So we got to gut check that. They truly want to work with whoever the next buyer is and they want to be flexible.

In other instances, we’ve had the complete opposite to where it’s like, “You know what? You’re wasting your money. You better not buy this thing. We’re going to continue working to shut you guys down.” So it’s always good to know that going in.

Matt: Right, good to know.

Kevin: And a multitude of other things as well, but those are some of the unique aspects of mobile home parks that might not exist in some other asset classes.

Matt: Mm-hmm (affirmative). So is this grounds for, like with single-family families, would you be going back to the seller and asking for an adjustment?

Kevin: Yeah, that’s what we’re going to do. That’s what we’re going to do. It’s a pretty big adjustment though. It’s not just an adjustment in price on this one, because the current condition of this infrastructure, a bank won’t touch it. Like they won’t touch it at all. I mean, it’s got an environmental issue, it’s got just a litany of health department violations, not just one. Like multiple, because the guy just kept ignoring these violations as they came in. And so it’s a situation to where we surely won’t want to sign our name on a recourse loan with this underlying issue in place. It’s a big one.

And so, we’re going to go back and do a price reduction, attempt to do a price reduction, but also get him to carry financing for a period of time, get him to take a small amount down, maybe about 10% is kind of our goal, and a price reduction as well. That’ll give us enough time to, number one, instead of putting all the money as a down payment, we’ll inject a significant amount of money into the infrastructure improvements and to the cosmetic improvements of the park itself, get some stabilized financials in place because he doesn’t have them. I mean, his books are horrific, and so what we’ll do that.

If he is in agreement, we’ll give him the hold for two to three years, get some good stabilized books in place, fix the infrastructure issue, and then take him out with some bank debt in a couple of years down the road once it’s ready to go that route.

So, we’ll see how it goes. I don’t know. I’m not sure I’m too optimistic at this point. He didn’t seem too receptive, but the interesting thing is, I think it’s a game of poker in these situations. He thinks he’s got this product that everybody wants, but for the most part, people are scared, scared to death, when it comes to, not just infrastructure issues, but when you’ve got like the EPA involved and the county’s involved and like there’s literally just health violations that are pages and pages long.

It’s a big deal. Like that’s a big deal to deal with, and it really is a lot of risks, and we’ve gone down that road before. We’re comfortable with it and we know that we can fix it. So we’ll probably play hardball with him, and I’m guessing we’ll probably have to walk away from the table, and hopefully, it comes back to us. That’s kind of my gut check of how I think it’s going to play out, and I’d like to buy it because it’s actually it’s a good opportunity, but I’m surely not going to overpay for it.

I think that, in today’s world, that’s an interesting thing, Matt. Maybe you’re seeing the something. There’s so much anxiety out there from buyers, this feeling like if they don’t buy it today, there’s not going to be any deals left. Right? And they’re very anxious to overpay or to overbid, and that is not us. So we’re slow and patient buyers.

Matt: That’s good, yeah. Was it Warren Buffet? “The best investing is boring investing.”

Kevin: Absolutely. Absolutely. I mean, we’re in it for the long run. We’re not in it to make a quick buck. Like that property there, again, I said, it’s just outside of the Grand Rapids MSA. Grand Rapids is a phenomenal market and the growth is heading that direction throughout the interstate, so it’s only a 40-minute drive to downtown Grand Rapids. So, I mean, it’s very much a commuter suburb of Grand Rapids, so it’s a phenomenal location. It’s only going to get better, but today, it’s a little rough.

Matt: Right. I can see how those exterior elements could get somebody really excited about purchasing the property, and then once you get in, there’s so much more to uncover. So thank you for helping and looking out for him, because as we say around here, “It’s better to miss out on a good one than it is to buy a bad one.”

Kevin: Absolutely.

Matt: We’ve bought a few bad ones and, boy, you remember those.

Kevin: Yeah.

Matt: You forget about the good ones you might have missed out on, but you remember the bad ones.

Kevin: Well, I mean, this one would sink somebody’s ship. Like this one would sink the unassuming buyer’s ship completely, especially if they went just on the advice of the seller. The seller like literally had some quotes from like a local septic company that was like $45,000.00. I mean, they were all BS. There was nothing real about it. We got a real engineer involved and it literally was five times the amount, but if someone would have just gone to it saying, “Hey, this is a great deal,” because what we’re paying for it, it is a great deal if the repairs were only $50,000.00, but now, it’s not a good deal whatsoever. It would truly eat someone’s lunch.

Matt: Right. So when you go back to the table to negotiate with the seller, kind of what does that conversation look like then?

Kevin: Yeah. I mean, it’s typically just laying out the facts. I mean, he told us X. Here are the Y and Z. Here are the real facts behind the matter, and ultimately, the facts are it’s a $250,000.00 infrastructure repair. It’s been piling up. He’s got litigation literally chipping at his heels. I can’t believe that the city hasn’t litigated yet. It’s crazy that they haven’t. It’s been like literally three and a half years of violations and he’s just been ignoring them.

So, I mean, he’s got the pressure from the city. He’s got just pressure from the … The park’s not producing. Like it’s only half full. The residents that are there know that there’s an issue. He’s got a lot of slow payers and delinquent tenants on his hands. It’s just, it’s a downward spiral, and so there might be another buyer out there, but surely, I can’t imagine at the price we have it under contract for.

And so, we just lay out the facts and say, “Here’s what it is. Any next buyer that comes in is going to discover the same thing we discovered. They’re not going to be able to get bank financing, they’re going to request you hold financing because here’s what has to happen. Like, literally, you have horrible financials. We’ve got to get it stabilized, we’ve got to fix this infrastructure issue. I’m not going to give $200,000.00 down to you as a normal down payment because I got to go dump another $

We’re 250 into this thing and that completely screws up my returns, you know? So it’s just, it’s just the facts. I don’t know how else to put it. Like we’re just transparent like …

Matt: No, that’s actually good.

Kevin: … Like here’s what it is, right? Here’s how it works, and if this doesn’t work for you, you know what, here’s my number, you know how to get, you know how to reach us, and once you spend another 60 or 90 days and another buyer that probably bails out, call me back.

Matt: That’s great.

Kevin: Not to be arrogant, but I mean …

Matt: No, it’s exactly how I’d do it.

Kevin: … Most of the time those types of deals come back around. And I think you just got to be willing to walk away and know that you’re, that you’re confident enough with your bids and your analysis that you know what a good deal of means, you know what a bad deal means. And if we’re buying it today at what we have in our contract for, it’s a bad deal. So it’s not worth the time or energy.

Matt: The additional thing that the, my approach at that point, especially when you’re, you know you’re probably going to walk away is, you know, this is a really nice property, it’s why we got in the contract with you in the first place. Why don’t you just go fix it up yourself and keep it? It’ll produce really well once all this stuff is fixed.

Kevin: So, the funny part about that is, one of the offers he made was that we could either pay, I think we have another contract for 560 or 580, somewhere around there. He was going to sell it to us unrepaired for 580 or he would repair it himself and sell it to us for, you know, 630. So like basically, he’d make back that entire amount, but I think that was his way of basically screwing that buyer, whoever was going to come, whatever he was going to do is going to be a band-aid repair and would’ve put the buyer in a really bad situation. And so he was willing to repair it, but it wasn’t the right repair. Right.

Matt: Sweet. Okay. So, seems like the negotiation and the buying process is relatively similar to a single family. The due diligence is much more extensive, that seems like there’s a lot more that can go wrong when you check with the city, and the EPA, and lawsuits, all kinds of stuff. When you’re actually looking for the deals, how was that different?

Kevin: Yeah. You know …

Matt: … Single family, compared to single family.

Kevin: I would say that one of the big differences and I was a single-family buyer, so I get that space really well. It’s a different type of buyer typically, as far as … We’ve very rarely ever run across what I consider to be like a motivated seller, someone that’s kind of in distress and needs to sell like fast, which is a very, it’s a very typical profile for a seller that’s going to sell at 65 or 70 cents on a dollar, a single family home. And so that’s one thing, just knowing that going in that you know, they’re selling a business. Most of the time if they’re doing anything right, it’s making money, it’s paying for its debt, it’s not all that big of a stress point for them. And so a lot of times it’s a little bit of a slower process, a little bit, it’s a little bit more sophisticated of a negotiation.

I mean, you’re really buying a business at that point in time so that’s where it differs a good bit. And it’s very similar to buying a multi-family apartment or another type of commercial real estate, it’s all income driven. But, the one interesting thing about this niche, Matt, that I don’t think a lot of people realize is, the sellers, the current owners, it’s got a very aging population of owners. Like it’s a very young niche when you think about it, compared to other types of real estate, like it’s really only been around since like the 40s and 50s where most the communities actually were built in like the 60s, 70s, and 80s. And so it’s not that old of industry and there’s still a lot of first generation owners out there and now they’re in their 80s, now they’re in their 90s.

I’ve literally, I’ve had a dialogue going with these two brothers up in Minnesota, they’re 93 years old each, they’re twins and that they built their park like 40 some odd years ago. And there’s a huge opportunity to, you have to buy from these owners that are truly aging out of these asset classes. And so like, that’s one of the unique things. A lot of times it’s more of a, it’s a personal connection, a lot of these folks aren’t really motivated to sell because they are in financial distress, a lot of times it’s more of a personal rapport relationship building with the sellers more than it is like the highest and best dollar amount. I mean the dollar amount has to be fair, but we’ve bought many parks over the years that we were not the highest bidder and I think we just happened to have a better in with the seller, right? Had a better relationship.

Matt: Right, no, like and trust plays a big role, right?

Kevin: Absolutely, absolutely.

Matt: So, for example, these two 93-year-old twins, I guess one 93-year-old twin, or two?

Kevin: Yeah, two 90 years… yeah, yeah, yeah, there we go.

Matt: There’s one set of twins …

Kevin: One set of twins, right.

Matt: Right.

Kevin: Not four. There’s not four of them.

Matt: How did you find them? How did you meet them?

Kevin: Yeah. So, we do a lot of direct owner marketing … [crosstalk 00:18:28] … That’s kind of … Yeah, we do a lot of direct mail. With them, I’m trying to think about how we initially got in contact with them. I think it was the direct mail. So we do a lot of cold calling, we have a full-time outbound cold caller in the house, we do a ton of direct mail, we do work with brokers as well, but 90% of our portfolio literally build ourselves by going direct to owner. And actually, that’s a funny story, now I’m recalling how our original connection happened. We sent them a direct mail piece and I’d never spoken with either one of these guys, the brothers.

They’re old school, as old school gets, they literally wrote me a handwritten letter back from the letter that I sent them. And we’ve literally been pen pals for like three years now. We’ve never spoken on the phone, they send me pictures of the, their mobile home park, it’s gorgeous. It’s actually, it’s on a stream, and they literally send me pictures of like, I don’t know what your kitchen, a stream, but whatever types of fish you catch in stream, in Minnesota, they’ll send me pictures like over the summer-time of what their grandson caught like off their deck on the mobile home, out of the mobile home. They actually live in the mobile home park. It’s crazy.

Matt: They know what they’re doing, they’re feeding the buyers emotions.

Kevin: Yeah. Yeah. No, no, no, it’s awesome.

Matt: Awesome.

Kevin: But they’re actually, they’re ex-attorneys. So I mean these guys are sharp guys. They had a law practice in town and retired and they both live in the community and just, it’s a great place for them to retire and they enjoy it, but they’re not ready to sell yet. I don’t know when that’s going to happen, and again they’re up there. But anyway, it’s a … So we do a lot, to answer your original question, we do a lot of direct owner marketing. Last year we bought nine communities and eight of those nine were our own efforts. Selling direct to the owner, only one came through a broker. So we like brokers, but what we have found is that at least in today, today’s market, once it gets in a broker’s hand, and I get this, it’s the broker’s job, it’s their fiduciary responsibility to get the highest and best dollar amount for their client, the seller.

So, once it gets to the broker’s hands, it goes out to the world, there’s always going to be someone that’s willing to pay more than you Matt, more than me. There’s always going to be a buyer that’s willing to pay a little more, take a little bit less of return. So we’d rather avoid that and create some upside for ourselves by going direct to owner. That’s our goal.

Matt: Alright. So, to build a relationship, that’s it, it takes time, right?

Kevin: Yeah.

Matt: So, with that said, how many projects do you acquire a year?

Kevin: As many that make sense. I mean, last year we bought nine … Yeah, I mean it really is the truth. I mean last year we bought nine, the year before that we only bought six. We’re shooting to, it’s not necessarily the number of communities, we’ve kind of had like an asset under management target. So we’d like to add like another hundred million dollars of assets under management this year. It’s off to a slow start. It’s funny, like literally up until like last week I was getting a little down, I’m head of our acquisitions team here and I was a little down, you know, those times where I’m like, literally nothing has been happening for the past month and a half. I feel like we’re spinning our wheels like things are falling off the board, nothing’s going back up. And then literally just a week ago, almost like the floodgates open, I literally had a couple of opportunities come in just out of nowhere, and our pipelines getting filled back up, and we’ve got some momentum going again and we’re excited so…

Matt: That’s good.

Kevin: Yeah.

Matt: Happens to the best of us, man. You can hit those slumps and just be like, oh my God, is the market shifting? I don’t know what happened and [crosstalk 00:21:32] …

Kevin: Yeah, I was down. I was kind of prepping my partners, I’m like, guys, you know, I know we have like 11 months left or 10 months left, but man, it’s looking rough, man. How’s it going today? I don’t think there’s any way that I’m going to be able to meet this goal, you know? And it’s kind of, plant the seed now so that I don’t get a bunch of crap in 10 months when I’ve completely failed.

Matt: I told you way back in January. So yeah, to push through those slumps. Let’s talk about that because I think there’s a lot of people experiencing that right now, thinking stuff like direct mail doesn’t work anymore and PPC is too competitive and expensive, and you know, Facebook is like now playing games with advertisers and you know, there’s a lot of chitter chatter negativity going on, but we all experience that, the best of us will experience those slumps.

Kevin: Yup.

Matt: And I don’t know, you tell me, but my whole philosophy is, just stay consistent with the activities that got you here in the first place.

Kevin: That’s it. That’s it.

Matt: So, what you’ll find is, that the money that we make today is a lot of times based off of activity that you did 60, 90 days ago. Right?

Kevin: Wow, yeah.

Matt: And I would imagine for mobile home parks, it’s probably stuff that you were doing a year ago, right?

Kevin: Our deal cycle is way longer than a year. I mean, we’ve had deals that were taken from the first point of contact, they were taken two years to close and sometimes more than that. So yeah, no, but the consistency is the key, it really is. I mean, you know, just being consistent with what works, don’t slow down in the direct mail, and make sure that you’re keeping the right data and analytics to really measure what’s happening so that you’re not just haphazardly spending your money on things that maybe truly aren’t working anymore, aren’t working as effective, you need to change it up a little bit. But consistency is the key. I mean, my personal saying is that there’s always going to be, it’s all timing. So there’s always going to be a point in time in an owner’s life where they either need or want to sell.

 One of those two things is going to happen, there are many different reasons why each one might occur in an owner’s life to where they become a seller, and the goal is to get your message in front of them when that day comes, right? It’s kind of like, the credit card or like the tire advertisements, like only once every four years if you’re a normal driver, if you drive 10,000 or 12,000 miles a year, do you need a new set of tires in your car. But yet I guarantee at least two times a week, probably sometimes more, there’s freaking tires plus and you know, tire mart and all those, like they’re literally sending advertisements knowing that one of those days, either you just hit like a nail on the way home and now you need a whole new set of tires or it didn’t pass inspection if you’re in one of those states and you need new tires, so their goal is to get the timing right.

If they would do the same thing worn, you know, the same week you got new tires, you wouldn’t have held onto the damn thing, you’d thrown it away and then you would have been scrambling to find a tire place when you actually need a new tire. Same thing with credit cards, right? I mean, they seem nonstop and very few times they ever get used, but hopefully, they’ll get you on the day that you need a credit line or you’re looking for maybe a new point system, you know, so [crosstalk 00:24:25] … Very, very similar, very similar.

Matt: Totally, 100% and only people that have been in the game for a little while actually recognize that people that. People are just getting into it and if they enter into a slump and get started, they’re like, oh, this real estate thing doesn’t work and they quit. Right? And I guess just the lesson there is that everybody goes through it and consistency is what prevails.

Kevin: Yeah. It’s kind of like when during the recession a lot … During down times, whether it’s a recession or just a down slump, a lot of people see something at work and so their immediate reaction is to pull back, is to slow down with whatever they’re doing. If it’s marketing, like right, it’s they lower their budget, their marketing budget, they stop doing as much direct mail. Whereas, you should be really doing the opposite at those points of time, which is, it’s kind of counterintuitive, you know, but you need to pump it out more because honestly if you’re feeling that way, I guarantee you it’s affecting your other competitors as well. They’re going through the same challenge. So do the opposite of what they’re doing, beef it up and I guarantee you’ll see some results from it.

Matt: You have my office bugged or something?

Kevin: What’s that?

Matt: I said, “Do you have my office bugged or something?” It’s like reporting from like …

Kevin: Ah, is this your gospel?

Matt: I think I just said that yesterday to my team. Great. So you’ve got a podcast, I think you and I, and maybe a handful of others, some of the longest running real estate podcasts and you talk a lot about real estate. What do you wish you could talk about more that you don’t get the opportunity to?

Kevin: Man, that’s a great question. You know what I enjoy? And one of the biggest things I’ve enjoyed on my show and I wish I could do more of it, and I’ll explain what the challenge is and why it doesn’t happen as often is, I’ve had some guys in my show, so I’ve got two shows, I’ve got a mobile home park investing show and then I’ve got a show called real estate investing for cash flow, which is where I interview guys that are commercial real estate investors and I’ve had guys on from all different types of asset classes, whether self-storage, or retail, or office, or car washes, or you know, I mean the list goes on and on.

I’ve had some old school guys in the show that literally, probably a handful of them, that one guy, he owned a couple of billion square feet of office in Chicago. He’s been around for like 70 years, the guy was like 88 years old. I mean, he started when he was like 16 and he didn’t even know what a podcast was. He had no idea how to have some people help him, like get on the show, and the amount of information and wisdom gathered from someone like that, that’s been through not just one downturn, not just two, but multiple downturns, multiple challenges, multiple capital markets, I wish I could do more of that. I wish there were more folks like that I could get on my show and have just candid conversation. It doesn’t even have to be about real estate, this candid conversation about life and experiences and see it through their eyes. I really enjoy that. So I wish I could do more of that. The challenge is they don’t know the technology that well and they surely don’t know what a podcast is.

Matt: Got it. You know, I ran across somebody like that once and I got probably, I think was probably the most valuable advice and the lesson that I’ve ever received since, and I’ll share it with you, but what was the biggest thing you took away from that one person, with that man?

Kevin: You know, with him, with that guy I’m speaking of, one of the interesting … There’s a couple of, there are two really interesting things. He really did follow the Warren Buffet Philosophy of just really having a long-term projection, investing projection. So that was one thing. He was an office guy, he knew office doesn’t always do good, but he knew he was in for a long haul, he wasn’t in just for the one upcycle, and then he’s going to try to get out the peak, he wasn’t going to try to time it. So he was

… he was very focused on keeping his leverage points really low. So he knew that he would go through ups and downs. He knew that there would be points and times when he had 60% or 40% vacancies in his office votings which could be catastrophic to the majority of folks, that key 70%, 80% leverage points in their properties. So he was very focused on low leverage, not over-promising to his investors. So his returns were effective, his cash on cash returns wasn’t as substantial as maybe some of his competitors but the longevity of his investment cycle and the stability that he offered his investors allowed him to continually outshine those competitors that came into space and came out of the space. Came in and came out, the guy he was still there 50, 60 years later and he’d seen people come and go, come and go.

You just play it safe, you play it safe and consistent. I mean, it’s a very simple, elementary lesson but we very much practice that in our business. Our LTV, our leverage point across our portfolio runs in the low 60 range. We surely could probably get much higher cash on cash returns by leveraging the properties much more. I know there’s probably … we’re leaving some equity on the table but we’re surely prepared for the downturn and I feel like we would thrive through it because of that. We wouldn’t have those concerns, we wouldn’t lose sleep at night about being over-leveraged if a catastrophic event occurred like 2008.

Matt: Right. Yeah, it’s one thing to read some advice like that on a meme on Instagram and it’s entirely different to hear it from somebody that’s been through it, right? I remember when … one of my very first real meetings I ever went to. It was an old guy, he’d made a fortune with a one bedroom, one bath apartments, which is the thing that everybody shies away from.

Kevin: Everyone’s… yeah they’re scared of it, yeah.

Matt: Right? It was really fascinating and it was just like, wow there’s a million ways to make a million bucks in this business if you do it right. They’d asked him … one of the questions was, “If you had to start all over again, what would you have done differently?” His answer totally set me off on a whole new journey, was, “I wish I would have bought more and sold less.”

Kevin: Yeah, I always hear that.

Matt: I was like, “Oh my God.” that’s his biggest regret sitting up there at 90 something years old and he just thinks of how much wealthier he would be if he just didn’t sell anything. That’s what I would [crosstalk 00:30:20].

Kevin: Yeah I go through that gut-wrenching decision all the time and we’re not really sellers. I’ll give you the flip side of that story. So we’re not sellers, we don’t consider ourself sellers, we did sell a couple of assets last year that if you’d asked us the prior year if you’d asked us ’17, “Would you consider selling this, that or the other property?” We’d be like, “No absolutely not. We perform incredibly well, our basis is really low in them.” Just no, it doesn’t make sense. They’re not making any more mobile home parks. No, we’re not selling.

Last year we had … towards the end of the year, we had some, what I felt to be ridiculous, unsolicited offers come in for a couple of our properties that … you never lose by taking money off the table. So I subscribe to them, don’t sell because ultimately it’s the way to build wealth. I mean think of it from the long-term horizon but also, there’s risk associated with that to a certain extent. There is no risk with taking money off the table. There’s never going to be the risk with truly X-ing out our property, realizing those capital gains. Sucks to pay Uncle Sam, hopefully, you’ve got another plan before you can 1031 or do something else with the money but in any event, you still don’t lose a net endeavor.

So, we’re surely not sellers but everything’s for sale at the right price and as long as you can truly leverage that and have a plan to leverage that into something bigger and better, I think it’s quite all right to do so.

Matt: Right, well it’s one thing to sell to improve your portfolio. It’s another thing to sell and go have fun.

Kevin: Right, right, absolutely.

Matt: That’s what [inaudible 00:31:57]. It was an audience full of fix and flippers so I think that’s who he was addressing but I agree with you 100% on that. What’s one commonly held truth that you disagree with?

Kevin: Generally speaking? I mean, just real estate generally speaking? Is that what you’re asking?

Matt: Yeah, sure. Just, I don’t know … Yeah, it could be general or specific.

Kevin: One commonly held truth that I don’t agree with?

Matt: Mm-hmm (affirmative).

Kevin: That’s a good one, you should have told me that this was coming. I don’t know if I can answer this just off the cuff. I mean, I’d have to put some [crosstalk 00:32:31]. That’s a deep question man, that actually takes a little bit of thought.

Matt: I’ll try and make it a bit easier for you. What is something that you hear in the real estate investing world that you hear over and over again that makes you cringe when you hear it?

Kevin: Not to get started today. I agree that we’ve been on an up-run for a long period of time and my personal opinion is the folks that basically say, “Oh I’m keeping my money on the sideline.” Or, “I’m not doing this, that or the other because there’s a recession coming.” They’re looking for an excuse not to do anything.

Matt: They want to sound smart without taking action.

Kevin: Absolutely, exactly. They want an excuse for not taking action. I do agree that it’s more challenging to find deals that … You and I kind of talked about that a little bit before the show. You got to work a little harder, you got to work a little smarter but that’s okay, right? That’s just all part of the business. There are ebbs and flows. Again, there’s always going to be a point in time when a seller needs or wants to sell. Your goal is just to be in front of them when that point in time comes.

I don’t care if it’s single-family or mobile home parks, multi-family, self-storage, whatever it might be. So don’t wait. There’s not a right or wrong time to get started as an investor and so do it today. Whatever your asset of choice is, whatever you decide you want to do, there are 1001 different ways to make money in real estate. You can do turnkey, you can do fix and flips, you can do buy and holds like you do. You can do mobile home parks, you can do everything else but just do it, take some action and have some intention behind it.

Matt: Your analogy of the tire shop and the credit cards I think is so perfect for real estate as people are looking for when is their market going to be up? When is it down? When should I get in? Just like you were saying. It doesn’t matter what the market is doing, it’s not a good or bad market, it’s an up or down and in every market there’s a relatively low price to buy at and a relatively high price to sell it and that’s always going to happen because life happens every single day. You get a flat tire every day. You run into a situation where you need a credit line, that happens to somebody every day and the same thing with sellers. Their motivation, something in life hits them, causes them to be a motivated seller, that happens every single day. That’s great advice.

Kevin: Yeah, the advice I give is to figure out how to get creative, right? Because it’s funny, I’ve got some friends that aren’t real estate, they really don’t know anything about real estate. They own a home and that’s about it. A couple of friends over the years that I’ve heard … over the last probably two years, they’re in their primary residence, they’ve gained a ton of equity in this thing over the last couple of years and they’re like, “We got half a million dollars equity here, we’re going to turn around … we want to buy another home in the neighborhood we really want to live,” and they start shopping, they’re like, “Holy crap, the prices are so high.” I’m like, “Right.” You’re getting a very high, inflated price for your home you’re selling it but that doesn’t … it’s like a linear exchange for something that’s also appreciated at the same rate, right?

Matt: Yeah.

Kevin: So, you just got to figure out how to get creative. There are still ways to make money in these types of markets, you just got to get a little bit more creative, be more creative than the next guy.

Matt: The few years I was a real estate agent, that happened all the time. You dealt with a seller that was demanding to get more for their house and then they’d go to buy a house like, “How could they ask that much for that?” I was like, “You’re asking that much for yours.” Funny. Kevin, if there were three guiding principles for your success, three guiding principles.

Kevin: For mine? Or advice to others?

Matt: For yours. For you and I’m asking the question a couple of times so you have a second to think about it. If there were three guiding principles for your success, what would they be?

Kevin: For the success that I’ve had?

Matt: Yes.

Kevin: Is that how you’re asking?

Matt: Your guiding principles for you.

Kevin: Yeah, one of the biggest ones, I don’t know where I’d be at today if it wasn’t for a mentor and this is someone that came into my life. I’m very lucky, I’m very blessed because it was surely by accident. I wasn’t really looking for him. I know most people go out looking for a mentor, he found me and so the universe kind of pulled us together and this was back when I was 19 years old and that’s when they introduced me to real estate and that’s really what set me on my path. So I know that I got lucky and that normally isn’t the case of how our paths crossed. We’re still great friends today and that was 19 years ago, yeah how many? 20 years ago, wow. I’m aging myself here.

Matt: [inaudible 00:36:54].

Kevin: Mentoring. Yeah absolutely, absolutely and don’t subscribe to this … I get on BiggerPockets once in a while and I see people posting about, “Don’t pay for it, you can learn everything you need to learn here.” That might be the truth but it’s kind of like saying you expect a four-year degree, a Bachelor’s degree without paying for it. I know there are online classes now and there are different things you can get that … there are different lectures from universities you can get on Spotify so you could probably get the knowledge there but it’s going to be puzzled together, bits and pieces here. If you really want to take action, you want to do it in a very direct, targeted manner, seek out a mentor that’s directly aligned with your investment philosophy and suck it up and spend the money and bring that person aboard and accelerate your results.

Matt: Yeah; I’ve got two. I spent $80,000 last year in coaches and had 10 times that return.

Kevin: Yeah, absolutely, no I feel you, buddy.

Matt: [inaudible 00:37:52] mindset of not paying for it.” But if you want to go fast, go for it. It’s an investment.

Kevin: Absolutely, absolutely. One of the other ones is enjoy what you do. Don’t subscribe just to looking at Facebook posts, seeing people hold checks up with how much money they’re making and thinking just because they’re flipping houses, they’re wholesaling houses, that that’s for you. Real estate investing might be a good fit but there’s again a million and one different ways to make money as a real estate investor. So find the one that … you might have to go through a few but pick one, find one that directly aligns with your … whatever, it’s your core values or maybe it’s the lifestyle choice you’re trying … or a lifestyle you’re trying to build. You can build this business around your lifestyle but find something that you enjoy doing.

I like the idea of a four-hour work week but I don’t know how realistic that is and it shouldn’t even be an end goal for you because if you truly enjoy what you’re doing, it shouldn’t seem like work anyway. So I love what we do here, I love the staff that we have, we’ve got some awesome people on our team and it’s fun, man. I know it’s goofy to say, but I enjoy mobile home parks. I like the people we serve, I like our resident base, I like knowing that we’re providing a clean, safe and quiet, affordable product in markets that aren’t affordable. That’s fulfilling for me and I like the art of the deal and I like hunting down deals and getting deals done. So I enjoy it. If I didn’t, I go do something else.

Matt: Sure. So seek a mentor, enjoy what you do. What would the third one be?

Kevin: Yeah, probably goes back to find something that you enjoy doing but the dedication of a certain amount of time. So you say, “Hey, I want to fix and flip properties.” Ignore all the other noise, ignore all the other shiny options, because we know there’s a ton of them out there and dedicate a certain period of time, whether it’s 12 months, 24 months, don’t think about anything else, don’t change your path, don’t listen to your buddies that just made X amount of money doing something else, completely different strategy and put the focus and put the time into it and dive both feet in and learn everything you can learn. Listen to every podcast, get that mentor. Go to boot camps, basically engulf yourself in that one strategy or that one niche and again, give yourself the time to become good at it. I see so many people that kind of dive in and they get burned out before they got started, you know?

Matt: Right.

Kevin: They didn’t set themselves up mentally for the amount of time that it truly takes to master any one thing.

Matt: Fantastic, I love it. Seek a mentor, enjoy what you do. I’d say, invest in becoming an expert at what it is you’re going after.

Kevin: There you go.

Matt: Or at least be good at it, right? Really good it. If you’re good at it and you enjoy it, there’s nobody that’s going to stop you.

Kevin: Boom.

Matt: Perfect. Kevin, let’s end on that. If someone wanted to get in touch with you, what’s the best way for them to do that?

Kevin: Yeah, two different ways. My personal website, kevinbupp.com. You can go to the Contact Us page there and then our company if you want to learn more about what we’re doing in the mobile home park space, it’s sunrisecapitalinvestors.com and again the Contact Us page, you’ll be able to track me down through that.

Matt: Cool, we’ll put all that in the show notes for you too. Awesome. All right, buddy, it’s been a pleasure.

Kevin: Thanks man, that was fun man.

Matt: I’ll see you again soon, we’ll do it again.

Kevin: Yeah, absolutely bud, you take care. Thanks for having me.

Matt: You bet. All righty, so that’s it for today’s episode of Thought Leader Thursday, I’ll see you right here next Thursday for another episode right on The Epic Real Estate Investing Show. Take care.