RG 296 – Mobile Home Parks: Why It’s One of The Most Profitable Asset Classes Today with Christopher Nelson

Today, we have a very special episode for you guys. Recorded live at Intelligent Investor Real Estate Convention in sunny California, join us in our thought-provoking talk with none other than Christopher Nelson of Wealthward Capital.

Christopher Nelson is a real estate investor, author, speaker, and the Principal and Co-Founder of Wealthward Capital, a private equity real estate firm that helps busy technology professionals build their real estate portfolios. As a Technology Executive, Christopher has helped teams deliver high-value technology innovations within growth-driven startups and SaaS companies. And in the real estate branch of his career, Christopher manages a firm that has over $300 million in investments within Central Texas.

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Our interview with Christopher is quite fast-paced, but we get to cover some very interesting topics. Among the things we talk about include the mobile home industry, with a focus on how Christopher and his team managed to scale their operations quickly and efficiently. Plus, Christopher talks about his game plan for 2022 amidst the global health crisis; something that we can all learn from as investors!

If you’re looking for a new, profitable asset class to invest in, dive into this episode now!

Key Takeaways

• Whenever you start with a new asset class, look at the macros first.

• Cap rate is also a measure of risk.

• You’re not getting into this business to get rich quick; it’s a get rich slow game.

LINKS
www.wealthward.com
www.linkedin.com/in/christophercnelson/
www.thrivecommunity.fund/

Be Bold, Be Brave and Go Give Life a Crack!

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Reed Goossens (00:00):

Good day. Good day guys. Now, before we dive into today’s show, I want you to let you know that some of you may be aware that over the past eight years, I have built a substantial multifamily real estate portfolio here in the US worth over half a billion dollars. And in that time, my passive investors have received fantastic double digit returns. And now you too can invest directly into my deals for as little as $50,000. So if you’re an interested investor, head over to Reedgoossens.com to find out more that’s Reedgoossens.com. Now back into the show,

Christopher Nelson (00:40):

What we found in mobile home parts is that a lot of people really want the same thing. The hundred pads are above, but when you look at that a hundred pads or less, nobody’s playing there and the operate that the inefficiency still exists. And so what, what we started, we found a partner that their strategy was really how do we actually find small parks that are, are geographically dense, that are located very close to each other, that then we could take down and operate as a single unit. And what we found there is we found what we found, very high cap rates. We found eight, nine, 10% cap rates that we could go in and purchase. We going today as well today. That’s what I’m saying.

Speaker 3 (01:35):

Welcome to investing in the US, a podcast for real estate investors, business owners, and aspiring entrepreneurs. The looking to break into the US market, join Reed as he interviews go-geters risk takers and the best in the business about their journey towards financial freedom and the sheer joy of creating something from nothing

Reed Goossens (01:55):

Good day. Good day ladies and gentlemen, and welcome to another cracking edition of investing in the us podcast from Los Angeles. I’m your host reed goossens good as is always happy with us on the show. Now I’m glad that you’ve all tuned to learn from my incredible guests and each and every one of them are the cream of the crop here in the United States. When it comes to real estate, investing, business, investing and entrepreneurship, each show, I try and tease out their incredible stories of how they have successfully created their businesses here in the, how they’ve created financial freedom, massive amounts of cash, and ultimately created extraordinary lives for themselves and their families. Life by design. As I like to say, hopefully these guests will inspire all of my cracking listeners, which are you guys to get off the couch and go and take massive amounts of action. If these guys can do it. So can you now, as you know, I’m all about sharing the knowledge with my loyal listeners, which is you guys, and there’s absolutely no BS on this show, just straight into the nuts and bolts. Now, if you do like this show, the easiest way to give back is to give us a review on iTunes. And

Reed Goossens (02:58):

You can follow me on Facebook and Twitter by searching at Reed goossens. You can find the show, every you podcast on iTunes, SoundCloud, Stitcher, and Google play, but you can also find these episodes up on my YouTube channel. So head over to reedgoossens.com click on the video link, and it’ll take you to the video recordings of these podcasts, where you can see my ugly mug, but the beautiful faces of my guest each and every week. All right, enough outta me, let’s get cracking and into today’s show. Welcome to investing in the US. I am your host reed goossens, and we’re coming to you live from IIREC the intelligent investor real estate conference here in sunny, California. And I’ve got with me here today. Christopher Nelson, a good friend of mine, uh, used to be a California resident, but not in that’s. Right. He’s now living in the lovely state of Texas. That’s right in an awesome town, little town you might know of it called Austin, Texas. Yes, but Christopher, welcome to the show. And you much, mate,

Christopher Nelson (03:57):

I have been very well. I think I just told you that. Yes, we had a pipe burst over the weekend was not related to any weather that just sucks in general. But other than that, been doing very well in Texas.

Reed Goossens (04:07):

That’s awesome. That’s awesome. Well, today we wanna talk a little bit about what you’ve been up to cause you and I have been, we’ve been friends for a long period of time. Yeah. You’ve gone through a lot of transitions coming outta the tech world, uh, Silicon valley startups into real estate. And now what you’re focus on. So for those people who don’t know who you are, what you do give us maybe the two to three minute elevator pitch on your background to bring us up to what you’re doing today. Okay,

Christopher Nelson (04:28):

Great. So my name is Christopher Nelson. I am the co-founder and principle of Wealthward capital. But before that I spent 20 plus years in the technology industry. So helping people, me and you factor software, and then also helping companies go from private to public, through IPO events. And it was actually in one of those IPOs that my family went through a sudden wealth event. What does that mean? It’s that event that we all dream about? We want that says we literally had nothing. And then overnight we had, you know, multiple seven figures in the bank and they in, there was this moment of,

Christopher Nelson (05:03):

Oh, what, what do we do with this? I’m very stressed out. And so this took us on a journey of passive investing of also DIY investing, because we did not wanna turn our money over to somebody else and trust them with our financial future. We wanted to take that in our own hands. And so, as you know, because you’ve been part of my learning as, you know, learning how to passively invest, you know, tracking off the people who have experience in the real estate industry of where to place our money in multifamily and have been doing that with you for multiple years. And then this year we really started diversifying into more asset classes. And so one of those that we are really, really fond of right now is mobile home park.

Reed Goossens (05:42):

And you’ve been up until the point of leaving the tech world. Your focus was, you know, I guess tell, talk about the, the time that you thought I need. I need to change. I need to get into out of the tech and into, you know, raising money and, and investing in real estate because there’s a, there’s a mental shift there that a lot of people go through, basically people at this event, even today and over the weekend. So maybe just touch a little bit on that and then we’ll dive into, you know, what you’re investing in now and how that’s shifted over the last couple of years,

Christopher Nelson (06:09):

My journey actually started off with, we wanted to deploy our own capital. We just wanted to be great, uh, limited partners. We want, wanted to be great passive investors. And as we started passive investing, as we started learning how to do due diligence, how to vet operators, how to, how to actually then start tracking our results. We had a lot of people raising their hands saying we needed help. And so we actually did not, you know, my wife and I did not get into, uh, becoming GPS or general partners in, in helping syndicate deals because we actually thought that was a way to, to get into financial independence, but we saw it actually as a way to help others. And then as we, we started picking up more and more momentum, we realized, Hey, this is really an opportunity for us to, uh, not just help other people, but this is a for us to make a living for our family. That was really how it happened for us.

Reed Goossens (07:00):

And I think a lot of people go through that sense of dread, right? You’re in the you’re in the workforce, you’re in, you’re hooked up to a W2 and particularly coming outta tech, you’re hook up to probably a very good W2, all the benefits, all the bells and whistles, they they’ve locked you in. So having that, uh, impetus that drive that burning desire to go out and do more, I think is kudos to you and your family. So, so well done and talk about what you’ve built today. Cause I know you’ve got Wealthward capital for those people who, who, who are listening in it’s Wealthward capital and you have were primarily involved in, in my deals, in, in Wildhorn deals. Yep. Um, up not until recently, you still are, but you’re now made a bit of a shift outta multi into mobile home parks. That’s right. Talk about you, what that shift and how that came about for your investors and how you’re backing into return and what they like to see.

Christopher Nelson (07:44):

Well, I think as, as we both know, right, as, as we have been continuing to invest in multifamily inside of central Texas, we started having to make a choice. Right. Of, okay, do I want cashflow shares that I’m not participating in the equity upside or do I participate in the equity upside and then start compressing my cashflow, which, you know, for us that are leveraging our cashflow to supplement, you know, a lack of w two, that cashflow is really important and guess what we want the equity upside. So I wanted to continue to have the equity upside and that’s where we’re, you know, what my family and I, and our deals like we’re investing in the equity upside, but we wanted to find more cashflow. So that was really what led us to start looking around at other asset classes and saying, okay, we understand with compressed cap rates, investing in places like San Antonio and Austin, we’re not gonna get the cashflow that we want.

Christopher Nelson (08:34):

Where else is that? And so we started looking at mobile homes and mobile homes, commun, you know, as you know, from, from Bryce and others, right, is that it’s not a mature market as you’ll find in multifamily, there’s not as many educators. Number one, there’s not as many people who really want to go and participate. And the number one reason is the fact that there are not property management companies that you can go outsource to that are gonna take care of your mobile home park. If you want that done, you have to either build the team or you have to find a set of people who really want to do that.

Reed Goossens (09:07):

And are you partnering up with other people like you did with, you know, with us at Wildhorn or with other cause I know you partner with up with, with other people. Yeah. And, and is it be, you mentioned cashflow and a lot of people at this conference this weekend, we’re sitting here in January 20, 22 are talking about inflation, right? And over the last 12 months, it’ll even longer cap rates, a compress, not only a multifamily, which we’ve seen a massive compression, which, and for those people listening, you know, compression caprates means let cash. But you’ve also seen that in, in, in the mobile home park space was the shift away from multi to mobile home park in pursuit of yield because multifamily was going was, was getting so thin. That’s

Christopher Nelson (09:47):

Right. So it was in the pursuit of yield. And then, you know, when, whenever I start any type of pursuit of an asset class, I wanna start great. I wanna look at the broader asset class and say, okay, what what’s going on here? And what we found is that the again, in mobile home parks, when you, well, let me go back to multifamily. When you look at multifamily, you see that there are people who are playing in, um, very large multifamily. Like we do. We want, you know, a hundred units and above that’s what we play then you’ll but you also find and tier operators that are buying a hundred units and below that are saying, oh, Hey, there’s a lot of inefficiencies there. We can go operate there. What we found in mobile home parks is that a lot of people really want the same thing.

Christopher Nelson (10:27):

The hundred pads are above. But when you look at that, a hundred pads are less nobody’s playing there and the operate that the in see still exist. And so what, what we started, we found a partner that their strategy was really, how do we actually find small parks that are, are geographically dense, that are located very close to each other, that then we could take down and operate as a single unit. And what we found there is we found what we found, very high cap rates. We found eight, nine, 10% cap rates that we could go in and purchase with park.

Reed Goossens (11:04):

Owners today as well

Christopher Nelson (11:05):

Today. Geez, that’s what I’m saying, because the reality is, is nobody wants these parks. That’s the reality because this in multifamily, you have, uh, people that have gone to the Brad, some rocks that have gone to a lot of these educations and say, okay, I’m gonna go run these mid tier. That’s not happening in mobile home parks. Everybody wants the hundred pads and above. So we saw this inefficiency, we’re operating in Fayetteville, North Carolina, where in that MSA 400 mobile home parks, it’s a decent number. It’s a lot, 100 of those parks are a hundred pads in a, a above. Okay? So that means there are 300 parts that fit our criteria. And 90% of them are owned by mom and pops that have built the place that are running at it, 80%, 70% occupancy. Why? Because they can, we hear a lot. I don’t wanna deal with people. I’m not bringing in in people because I just don’t wanna deal with them. And they’re running it as a cash business, collect 10 deposit eight. So what we’re finding is that these places won’t appraise, there’s a lot of room to negotiate, cause more than anything these operators want out.

Reed Goossens (12:11):

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Reed Goossens (12:46):

It’s interesting when you, when I hear of the nine to 10% cap rate and for those people who are, who are, who are listening in, watching in and listening to the podcast, you’ve heard pro we heard me talk a lot about cap rate is also a measure of risk. Yes. Right. And I can imagine in my head something less than a hundred pads outta nine or 10, it sounds good on paper that’s right. But the risk is higher. Yeah. That you’re gonna not be as polished. And I remember going back to, and when I said polished, meaning it’s not gonna be the, and scale comes with onsite management and onsite oversight and that’s right. And, and payroll and all those things that you can afford when you get to scale. That’s right. I remember when I first bought my, my first property for 38,000 bucks in upstate New York and it was section housing, right. The Capra looked great, but it was one property. That’s right. And I had a property manager who didn’t really give it a lot of a 10 and because it’s just one asset and I was like, why don’t you gimme all this attention now where I’m like buying two, 300 units, you have a whole team. So is there some sort of, are you getting the inefficiencies there under the hundred pads because they just, people don’t wanna manage them. And, and, and thus, the cap rates are higher.

Christopher Nelson (13:52):

That’s correct. That’s exactly it. No, you put your finger on it. It’s cause you’ll we found that a lot of these owners have these smaller parks, they’re running them very inefficiently. What we did is we went and raised the capital to get our first 120 pads under management, create our team. So that now, as we’re adding these smaller parks, we’re just pulling them into the umbrella and.

Reed Goossens (14:13):

We’re, and I assume you said, fight bill you’ll you are, you’re being very specific on a market. So you can go and scale, right. You can go get 500 pads, but there might be across seven properties.

Christopher Nelson (14:24):

That’s correct. Or, or even more. And so what we’re looking to do is, is that’s exactly right. Is go hyperlocal, hyper focused on the block. Got it. And that, and that’s actually one of the things that people, you know, again, what are some of the big guys missing is there’s the opportunity we literally, uh, over the course of three months purchased, uh, 120 units that are within one block of each.

Reed Goossens (14:46):

Other. That’s fantastic. That’s, that’s, that’s incredible. And it, you know, real estate is a local game. And I think that’s so important that you find a niche and then UN you know, pull the thread until you have owned the entire block, or you have scaled because I do see a lot of people who are, oh, I’m gonna buy a deal in Fayetteville. I’m gonna buy a deal in Dallas. I’m gonna buy a deal in Louisiana. And then not hyper focused and hyper focused comes to help lead to scale, to help bring more efficiencies in the business. So,

Christopher Nelson (15:11):

Well, and let me bring this back is because, I mean, quite honestly is a lot of what I saw in this group was, was operating off the model that you and angel put together, hyperlocal hyperlocal. And I remember when you guys were getting charted, it was like, well, wait, but there’s more in Dallas, no hyperlocal, it’s Austin and San Antonio. And that has been tremendously successful. And so again, sometimes I think in real estate, people want to get fan or they, they do covet other places, other locations when it’s like, no, just Rente and repeat. And somebody, I think today at the conference mentioned, you know, uh, it’s a guaranteed, you know, what is it? Go slow and get rich. Yeah, yeah,

Reed Goossens (15:49):

Yeah, yeah, yeah. It’s not a guaranteed, uh, it, you’re not getting in this business to get rich quick, it’s get rich slow. And if, if you’re trying to, you know, trying to get in here and make, you know, a hundred million and sit in front of a Lamborghini in 90 days, it’s not the, this is not crypto guys. So yeah. If you wanna get in crypto, there’s a whole nother space for that. We’re not in that space. So get rich, slow. Yeah. Youre. Right. So again, I’m gonna come back to inflation, we’re come back to what’s happening in 2022, we’re sitting here in January, what’s your prediction in your sphere? And what do you think for your inve as you communicate that out to investors as you navigate this, this new year?

Christopher Nelson (16:22):

Well, so number one is inflation is here. And, and I think, you know, and I I’ve heard a lot of people speak today and I haven’t really sat down and thought through like, am I making any changes to my thesis? But I do know that there is consumer inflation and there is asset inflation. And so I think that what I am communicating to my investors is now is a time to invest, to make sure that we are a part in invested in assets that are appreciating because we do wanna make sure that our capital basis is continuing to well with the asset. Number one. And then number two is let’s just make sure that we are either partnering or we’re in control of how do we throtle capital improvements and things that are going to be capital intensive. I putting that into transactions because there’s also gonna be inflation there too. And we don’t want to make sure that we have, you know, know a growing expense line while we’re trying to preserve inbound capital.

Reed Goossens (17:18):

The biggest thing we’re all investing in real estate for is the protection of cap of capital, right? So, you know, number, I’d probably be number one, one would be, you know, don’t lose people’s money, right. And you’re investing in, in physical assets. So I, I think, you know, we, I’m gonna talk a lot here today at the conference in and around different experts like yourself. And I think the whole theme of this conference that I’ve gotta lead aboard over here. What asset class is the most frothy right now? Yeah. I think multifamily would have to be up there, but we’re seeing compression across the nation. True in a lot of asset classes. And it’s gonna be great throughout the next two days, talking to people like yourself, understanding where you’re investing your hyper localism, what you’re thinking the future is and how do you protect people’s money and how do you still get a yield?

Reed Goossens (17:57):

Because I think the big thing here is coming as an international people invest in US real estate for the yield. I think commercial real estate in the us is by far the best yielding in the west. Some world in my experience and partnering with operators like myself, like you and getting knowledge about what’s happening in this country is really, really important. So I want to thank you for jumping on the show. It’s only a short little, little, uh, 20 minute episode, but where can people reach you? They want to continue the conversation. They wanna reach out to you. Where do they go? Well,

Christopher Nelson (18:25):

Right now, go to thrive community.fund. They can learn more about what we are doing inside of mobile home parks. And then if they wanna reach me, they can go to Wealthward.com, that’s wealth and ward all one word moving you towards wealth and step.

Reed Goossens (18:41):

At a time. Awesome. My friend, look, I wanna thank you so much for jumping on the show today. Enjoy the conference. What do you got planned for while you’re here in sunny, California?

Christopher Nelson (18:48):

Uh, well, try to get some sun one outside and then, uh, just continuing trying to learn and network. I, I just love these events so much because we get to, you know, hear new ideas, see what other people are doing and meet new people. It’s always.

Reed Goossens (19:00):

Fun. That’s awesome, man. Thank you so much again, jumping on the show. We’re gonna keep doing this. We’ve got four or five other more episodes coming to you. Wanna thank you all for taking some time and tuning to, to increase your, your financial IQ. Cause that’s what we’re all about here on this show. If you do like this show, give the show a five star review on iTunes and we’re gonna do it all again next week. So remember be bold, be brave and go give life a.