Street Smart Success

One asset class that has stood the test of time is Mobile Home Parks. As the housing shortage in this country persists, and the price of single-family homes continues to rise, mobile homes remain the most affordable housing option for many people. Additionally, the number of Mobile Home communities is not only not growing but is actually shrinking in many markets. Derek Vickers, Owner of Vicktory Real Estate Group, has acquired 38 Mobile Home communities since 2021. Derek is buying value-add properties and creating value by fixing them up and attracting more desirable tenants. He has also transitioned several of communities from park-owned homes to tenant-owned homes, which makes them easier and more profitable to manage.

Although gateway and other primary markets are difficult to find compelling value in, secondary, under the radar markets exist where you can still find great value, especially in smaller, non-institutional Flex Industrial properties. Many of these properties are still owned by ma-and-pa operators with significantly below market rents and prices up to 50% below replacement costs. Because of supply constraints, these properties can also be in the high 90%’s, or even 100% occupied. Grant Reaves, Managing Director and Co-founder of Stoic Equity Partners in Alabama, has created a fund to acquire value-add Flex Industrial properties in secondary markets in the Southeast.

As loan maturities come to fruition over the next couple years, great deals will emerge for experienced operators who can raise capital and secure financing. One asset class where there will be an inordinate amount of distress will be Class C Multifamily where inexperienced operators took on too much debt and overpaid for properties. Steven Gesis, COO at Smartland in Cleveland, specializes in Class C, and is poised to capitalize on this opportunity. Smartland has innovated the approach to adding value in this class of properties including the installation of wireless packages, EV charging stations, and creating a Smartland app where tenants can schedule maintenance requests. Smartland has even opened on-property convenience stores, Subway sandwich shops, and more.

We may be near the bottom of the market on Commercial Real Estate. As the Fed continues to tame inflation, interest rate reductions may result that creates cap rates compression and escalating prices. This may be a once in a generation buying opportunity. Nathan Clayberg, Vice President of MLG Capital, is responsible for raising capital for MLG funds and sourcing JV opportunities with other multifamily operators in the Midwest. MLG Capital specializes in acquiring multifamily properties built in the early 2000’s and adds the same amenities found in newer properties but rent for $300-$400 per month less. This strategy, combined with low leverage and fixed rate debt, targets achievable annual investor returns of 11%-15%. 

Making a lot of money in Real Estate doesn’t require actively operating or directly investing into assets. Top-performing brokers can make a lot of money without any of the risk or brain damage of dealing with operations. As a highly productive broker, the sky is the limit in terms of how much you can earn. Many successful brokers make over a $1 million per year, and the uber elite can make several millions. The key is to identify the right niches and effectively market yourself. Dan Lewkowicz, Director of Investment Sales at Encore RE Investment Services, specializes in brokering shopping centers, medical office buildings, industrial fulfillment centers, and NNN fast food restaurants.

Maintaining properties efficiently and managing expenses can make the difference between making or losing money. Many operators of multifamily properties spend way too much on supplies and labor and don’t have effective processes to manage their assets. On larger properties, this can cost hundreds of thousands of dollars or even more in profitability over just a few years, thereby adversely impacting overall returns. Strong operational efficiency reduces expenses and also lessens tenant turnover. Andy McQuade, Managing Principal of the ARM companies, helps operators reduce overhead, increase operation efficiency, and add value to their properties. Andy provides strategy, management, and operations consulting to the multifamily industry.

The best Real Estate in the world has historically appreciated through good times and bad. With the right properties, demand has always exceeded supply and values have increased over time. These properties rarely come on the market, however, because sellers know the value of what they own, and don’t need or want to sell them. Larry Taylor, Founder and President of Christina Development Corporation, operates in the five cities that make up West L.A, which comprises some of the most expensive Real Estate in the world. Larry pursues unique buying opportunities that result from partnership dissolutions, family disputes, or other event-driven scenarios.

Class C value-add projects are a rite of passage for most new multifamily investors. These assets generally have a lower barrier to entry than newer properties and promise higher returns. What most operators learn, however, is that these properties cost a lot more to operate than anticipated, and rent increases are harder to achieve than initially projected. That’s why many operators advance to newer properties. Newer properties can be more profitable to run and can appreciate more because more buyers acquire newer assets. Geoff Kudlacz, Managing Partner of Pacific Sands Funds, owns over 700 C Class units across Kansas City, Texas, and California. With distress appearing in the market, Geoff and his partners are pursuing properties built in the early 2000’s and newer. 

Once you turn a property into a profitable, cash flowing asset, it makes sense to keep it indefinitely. If it’s built enough value, you can refi out and redeploy the capital into another asset and continue to benefit from the cash flow and appreciation on both assets. This is a repeatable process that builds multigenerational wealth. After years of trial and error, and investing in several valuable mentorship programs, Gino Barbero has built an impressive, long-term multifamily portfolio with his partner Jake Stenziano in Eastern Tennessee. Gino also co-hosts the well-known Jake and Gino Real Estate podcast.

One of the challenges to properties in tough neighborhoods is that while expenses continue climb, rents don’t. Buying older properties can make sense, but mostly in better neighborhoods. What’s important is being able to add value that translates into higher rents and a higher sales price for the asset, where most of the returns are. Ken Gee, President and Founder of the KRI Group of Companies, started out with multifamily properties in Cleveland before entering the Florida market in 2015. Ken has always treated his tenants the way he likes to be treated and prospered as a result. Ken is meticulous in underwriting and managing his properties and has never lost investor capital.