Ep. 14 | Broker Mini-Series: Interview with Jared Bosch

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On this episode of The Mobile Home Park Lawyer Podcast, Ferd chats with broker Jared Bosch of NorthMarq Manufactured Housing Group. Jared discusses the differences between RV parks and mobile home parks and gives some tips for first-time buyers. Enjoy!

 

“There are a ton of people in this space looking for the exact same asset. So, find a way to differentiate yourself. That will get us excited to work with you and represent you.”

 

HIGHLIGHTS:

0:00 – Intro
1:05 – Jared gives his background
2:33 – Jared discusses his thoughts on the current MHP market
4:46 – Ferd asks Jared how he gets listings
7:31 – Jared discusses differences between RV parks and MHPs
11:41 – Jared’s favorite part of the job is the deal-making process
13:40 – Jared gives some tips to first-time buyers
16:26 – Finding good deals is one of the key components of this business
17:59 – The MHP market is more competitive than it was some years ago
18:53 – Jared explains his mistakes and what he has learned from them
23:26 – Jared reveals to us some of the listings he has right now and goes into detail on a few

 

FULL TRANSCRIPTION:

Ferd Niemann: Welcome back mobile home park nation. Here again today with another episode of The Mobile Home Park Lawyer podcast. My guest today is a mobile home park broker, he’s out of the Phoenix office but he practices nationwide. He actually recently represented me on the sale of the mobile home park in Illinois, a deal that got a little dicey due to COVID, but we got it closed and I’m looking forward to the next one. My guest today, thanks for being on here, Jared Bosch.

Jared Bosch: Thanks, Ferd. I really appreciate it. Thanks for having me and representing the NorthMarq team today.

Ferd Niemann: You got it, appreciate it. Well, Jared, tell us a little bit about your background, kind of how’d you get into the mobile home park space. How did you get started? So, our viewers and get to know you a little better.

Jared Bosch: Sure. A little background on myself, I grew up in Illinois, went to school there, and through that, I actually met my partner, Don Berdine out here in Arizona. We both attended the University of Illinois. Don kind of started up our manufactured housing group here at NorthMarq previously with another brokerage. We kind of spawned off one of the large national multi-family groups and created our team here. So, we kind of knew each other before we both have a background in sales, and it was a really good opportunity. I came from a kind of a different background, not from real estate, but I was in sales as was Don and we both wanted to pursue some real estate ventures together. He got in first, kind of talked to myself, and I met with the team here and see that they had a really good platform to be a resource in the industry. So, he brought me over since then we’ve added another partner of ours, Chris Michael. So, there are three of us here that run the manufactured housing division of NorthMarq.

Ferd Niemann: Got it. Yeah, definitely a good time to get into the business. I want to hear your thoughts on the current market. I mean the last four years have gotten hot and I think with the COVID era that we’re in, it’s only going to get hotter. What are you seeing out there in the marketplace?

Jared Bosch: Yeah, we’re seeing a really strong market, you know, there was a probably a month or so lul in the market during COVID. A lot of deals that were on the market or people were thinking about marketing kind of got held off. I mean, for good reason, a lot of owners were worried about, you know, their tenants, you know, collecting the rent, making sure things were still operating smoothly. And, you know, we saw an extremely resilient market in the manufactured housing space through COVID. We talked to tons of owners during that time. Just try to be a resource of information as best we could. And we really saw a strong performance for most communities across the country top to bottom. And with that performing so well, we saw a lot of new buyers, a lot of new capital enter the space. So, we had a lot of conversations, just high level with folks that were looking to come into manufactured housing and the RV space, through COVID.  And then as we got into July and August, some of that inventory started coming back to the market and what we saw then, we saw extremely strong demand. We saw pricing increased to pre-COVID levels. Even some cap rate compression further beyond what was previously. A lot of deals getting in escrow very quickly. And I think we’re going to continue to see that the rest of the year going into next year, strong demand for this asset class, that debt market is extremely competitive, still with very low rates and a lot of players that are willing to lend on this product type. So, we see as a group and I think the industry as a whole is that manufacturing housing will continue to be strong if not stronger in the rest of the year into 2021.

Ferd Niemann: Oh, it sounds like, it sounds like, you know, your stuff, that’s a lot to unpack, but I would agree with everything you said about kind of macro-economic trends and the debt markets so that the cap rate compression has made it harder for people to find deals at good prices in my opinion, but you know, it’s good for the sellers for sure. It makes off-market deals perhaps, you know, more lucrative, but at the same time for you guys as brokers, it probably makes it easier for you to get listings I would say, are you able to now produce comps that you can show, you know, mom and pa sellers and then all of a sudden it makes your business better. Is that accurate? And how do you go about getting listings? I’m curious on your tax. I know you landed me on one, but I want to know what you do for other folks.

Jared Bosch: Sure. So just a little bit of background on NorthMarq. You know, we’re a national group representing sellers, so we don’t do a lot of off-market deals. We typically are hired by the sellers in transactions to facilitate the process for them, generate offers and, you know, get them to the highest and best terms possible. But yeah, we do a lot of calling to different markets that we’re in. Obviously, we have a deal listed, our opportunity listed. We’re talking with various buyers around the country, you know, are they looking to dispose of any assets in the future? But you know, we hit the phones pretty hard. We’re calling all over the country and obviously, inventory typically leads to more inventory. So I think just being an extremely active group with a very professional process and kind of the marketing reach that we have we’re also NorthMarq is also the largest direct lender that is private to Fannie Mae and Freddie Mac.

So we have the lending capability in-house, so all of our opportunities when we list a community for sale, it’s going to our proprietary database of mobile home park buyers, but also over 40 offices and 400 loan professionals within NorthMarq that also have clients that may be in an exchange, someone that may be looking to get into manufactured housing from multi-family or retail or hospitality, some of those other asset classes that may have been hit a little harder from COVID. So, we try to get a very broad reach out there and really, you know, put these opportunities out to the whole country in all sorts of asset classes. And that usually generates a lot of interest in the assets that we’re selling.

Ferd Niemann: Good points. Now you mentioned other asset classes and I’ve got a background in retail, and I kind of glad that I got out of that before COVID and really been focusing on MHP spaces for the last several years, but you also mentioned RV interest. I know that that’s kind of the stepsister, if you will, of MHP, what are you seeing in the RV space? I’m actually going this afternoon to look at a site that’s a combination of MHP and RV, it’s being pitched MHP, but there’s obviously an RV component and I’m a little more cautious person with RV. I think that when I’m looking at cap rates, I want it to be at least 200 basis points higher for RV, maybe 400 basis points. Is that do you agree with that analysis and this preliminary analysis and what are you seeing in the marketplace, especially from a lender perspective. I know that’s another challenge is getting the debt in place.

Jared Bosch: Yeah. Great questions all around. So, we do have several RV communities we’re selling right now. A couple that are straight RV more of the investor institutional grade, and some that are a mixture. And yeah, I do agree with your assessment. There is a little bit of a basis point adder typically on like a straight RV park is pretty high quality, maybe 150 basis points, but I don’t think 200 is too far off on what someone’s maybe looking to get. Obviously, there are some operational pieces that are added on an expense side for an RV park, a little bit more management intensive. So, you’re going to see those expense ratios kind of creep up above 45%, 50% typically in an RV community. So, people are looking for a little bit more safety net, especially in a transient market where you might have people coming and going quite often and frequently. The one thing we have seen is there are different buyers for, you know exclusive RV resort compared to a mixed-use where it’s mobile home and RV. Some people kind of just want to stick down the line of one or the other. Having people come from the manufactured housing space, you know, they like the community, but it has that RV aspect that they may not be as familiar with. They’re not as comfortable going into that, doesn’t mean that there aren’t buyers for it. There definitely are. So, there’s kind of those two roads you can pass of all RV, all manufactured housing in the mixed-use. From a lender perspective, Yeah, there are going to be a little bit more challenges. Some of the lenders you know, may not be as favorable to RV, but doesn’t mean there aren’t lenders available for those, but they are probably going to be underwritten a little bit more critically and especially on what your management expenses are and make sure those are in line with industry standards, which we all know are a little bit higher than manufactured housing, but it doesn’t mean the lenders aren’t available, all the deals that we’ve put out in the RV space. We’re still finding securing debt for those and it can get done, but you might not get the pricing that you would get for a strictly manufactured housing community.

Ferd Niemann: I know one of the operating expense differences in RVs is definitely going to be utilities because it’s more common for them to plug into your electric, right? They’re not, people are there for a week or a month. I mean, they may not put the utilities in their name and there’s probably some more management expenses because of the turnover nature. I would imagine there are collection and bad rent issues at a higher ratio in that. But what other expenses are there? I mean, you mentioned it’s going to push the expense ratio from, you know, MHP is typically between what, 30% and 40%, depending on who’s paying water, sewer, and then obviously the size and if there are any economies of scale, things like that, but what are the other, you said kind of 45, is that the normal expense ratio for an RV product?

Jared Bosch: Yeah, I’d say we typically would expect to see something in the 45% to 50% range at a minimum. When it gets below that we have seen some instances of lower expense ratios and those are more of your long-term RV resorts. So if you look at some of the, you know, the winter resorts in Texas, Florida, Arizona, for instance, those folks may be coming for six months minimum, and then maybe leaving their RV there year around. So, they may have an annual pass or annual lease for that RV space and only be using six months a year. In those cases, some of them are paying their own utilities. So, if they’re there for more a longer period of time, some of the utilities will be put in their name and that will come down. But generally, to see that Delta between 30% up to 45% is typically wrapped up in the management and ownership costs. And then also the utilities, those are the two main areas that we see the higher expenses for RV.

Ferd Niemann: Okay. Got it. Good insights there. So obviously I can tell, you like to pound the pavement and get after the calls and basically reach out to folks and try to do business with them. Is that the best part of your job? What would you consider is like the best part of your job and the worst part of your job?

Jared Bosch: Yeah, I would say, you know, the best part is just the deal-making process. You know, we’re all sales guys at heart here. We enjoy making deals. And I think you know, being a national group, doing the zoom calls, getting in front of you, the conferences, the people. The manufactured housing industry is a pretty small group compared to maybe multifamily. So, you know, getting into the conferences and doing the networking with some of the groups you’ve worked with. But I think the best part is, you know, getting a deal done. It’s a, win-win-win for the buyer, the seller everyone involved. There are obviously some complications that always come up on every deal. Not everyone is the smoothest one out there, but I think kind of being that advisor to both groups during the escrow and closing process and keeping everyone’s best interest in mind and making everyone happy and closing a deal is by far the best thing that, you know, the seller’s happy, they’re able to dispose of the asset and take that capital and put it to work somewhere else, or could be a longtime owner that’s looking to retire and enjoy their retirement. And then also the buyer that’s coming in and adding to their portfolio, generating some passive income prospectively, or just you know, adding to their portfolio. So, I think those are some of the best things. And in that process, some of the more difficult pieces come out as far as you know, retreating and some of the hiccups that come up in the due diligence process is probably one of the more difficult things, but it’s also most, one of the most rewarding things when you can get them done.

Ferd Niemann: No, it’s good stuff. I’m curious too, you know, I talk to a lot of first-time buyers and I know that as a broker it’s, you’re probably desiring a 2nd, 3rd, 10th time buyer because, you know, the ability to close is higher. How can, what advice can you give a first-time buyer to get on your radar, get 10 minutes of your time, and be taken seriously.

Jared Bosch: Yeah. We talk to a lot of first-time buyers and I have no problem communicating with those folks. We do a lot of calls with groups that are trying to get into this space and happy to share our insights on the market in general. I would say just, you know, do your homework on the deal. I think if you get an opportunity sent you from a broker or you have an off-market listing you’re looking at, do your homework. You know, dig into the material a little bit, look at the due diligence items that are provided maybe before making a call because, you know, if you just call and say hey, I just saw this email, can you break it down for me? And, you know, it takes 30 seconds. They’re going to give you the elevator pitch on a specific deal that we emailed you and you haven’t even looked at it. It’s kind of frustrating because there’s a lot of very basic things that you’re looking at. And of course, we get a lot of people that come through and, you know, they all want the same thing. They want to a hundred thousand dollar or a hundred thousand person MSA, median home price over a hundred thousand city utilities. You know what? Everybody wants those deals. So, don’t think you’re the only person looking for that. There’s a ton of people in this space looking for the exact same asset. So, find a way to differentiate yourself, know the market a little bit, you know, why are you pursuing this deal? And why is it attractive to you? Obviously, that will get us excited to work with you and represent you and present your offer in the best light to the seller.

Ferd Niemann: I think this is good advice. And from a legal side, I’ve represented clients a lot of times in their first deal. And I’ve got some clients that have really done their own work and it’s like, man, you could pass it off that you’ve done 10 deals. And then I’ve got guys it’s like, have you ever been to a mobile home park? If you’ve ever don’t tell them that, you know, my scope of work ends up growing a lot of times on those and that’s not okay for me, but it’s just like, you got to do your homework. You got to get up to speed because it’s a super-competitive marketplace. And you’re talking about like, you know, unrealistic deal criteria. I’m in this Facebook group on the MHP stuff. And somebody other day posted something like looking for a hundred plus pads, MSA of at least a hundred thousand private utilities, nine cap or higher. And I’m just like, you know, I almost like followed it and said like good luck so that I could, if anybody threw a lead out there, I could jump on it. But I’m like, no one could throw it. It was like, Oh 2% finder’s fee or something. If somebody found a deal like that in this market, they could probably make a lot more than 2%. They could probably make 10%, you know, or just take it into the joint venture. I just entered a joint venture last Friday with the guy who brought two deals, a first-time deal. But he brought two deals, so I was going to be his lawyer. Well, it turns out now I’m going to be his partner. So, it’s like, he’s going to get paid to hang on more than 2% finder’s fee. Cause he found the deal. Find the deal is one of the key criteria for being successful in this business.

Jared Bosch: Yeah. And I totally agree with you. And I think a lot of people that, you know, say, Hey, that deal might not be a fit. Let me tell you my deal criteria. And they list the similar items you said, you know, it’s our kind of standard answer here is, it’s more jokingly, but it’s just kind of give them perspective is hey, if you find me those deals, let me know, I’ll buy it. Because they just don’t exist. And if it does exist, then you should buy it. And you’re probably not going to see it marketed from a broker.

Ferd Niemann: Right. If it does exist, I think they exist. There’s really hard to find. They’re not on somebody’s email blast. They are pocket listings, probably direct to seller.  And they’re probably still got some hair on them. I know like I lived here in the Kansas City, Metro. I have looked at it every single park in the Metro and it’s probably eighty if not wide enough. And I looked at, you know, written them letters, called them, driven there. And they were almost any of them of substance are almost all institutional round at this point, because it’s such a good market. That’s just not realistic for me. At least in this market, I had two that I was close on. One was like 80 and one was 374, I think. And I thought I was close and they both went under contract with some big private equity group. And I don’t know if they paid, but it was had to be a low cap rate, I think. And because it was a tough market to be in right now on the buyer side, but there’s still plenty of deals out there. It’s just, it’s just a lot harder than it was two, three, four years ago.

Jared Bosch: Absolutely. It is. The competitive nature of the buy-side is, has gotten increased only in the last few years. And I think even through COVID, it’s increased even more. Some of the stuff that makes the news, Carlisle, Blackstone’s and the large buys they’re doing has probably brought some more attention to this space, just because it is making some of the larger financial news sectors and getting some other private equity groups interested in the space you know. Smaller deals, there’s still an opportunity for private investors, for sure. You just got to be diligent and find the right deal for you.

Ferd Niemann: Yeah, no, totally agree. Well, let me ask you, do you have any lessons or tails kind of from the school of hard knocks or from one of your own missteps or ideally from somebody else? I like to learn from my mistakes whenever they can. Is there any, if you have a kind of a horror story or anything, you can share that others can learn from.

Jared Bosch: Yeah. I mean, there’s always, I don’t know if we have any horror stories from our perspective. I know, one thing I would say is really to do your homework and your due diligence upfront, and that’s from a buyer, that’s for a broker that’s for you representing folks on contracts. You know, one of the biggest issues and we’d probably see and run into on these transactions are kind of the unknowns, right? What are that? Something that comes up and due diligence or the paperwork, but if you can really dig deep on the front end, we try to get all of our due diligence materials soon as the listing contract is signed and provide that information to all of our buyers on our website prior to listing it. And one of the big reasons we do that is, you know, we don’t want to have these big unknowns going into the due diligence period. You know, always disclose everything we know about the property upfront because the last thing anybody wants from a buyer or seller is, you know, a hiccup to come into play during due diligence. And we’ve also, we’ve obviously run into our fair share of those and I’ve found a way to navigate a solution and that works for both sides. So, you have to know the deals inside of now, really do your homework really understand everything about the deal before we take it to the market. And I think that goes for buyers too. Before you have an LOI, really make sure to talk to the broker, the selling party, and make sure you understand every single thing about the deal, all the hair that could be on the deal, and make sure you’re comfortable with it going in. And have some sort of bandwidth, you know, plus or minus you know, before it closes that, you know, something does arise, how are you going to address it? Are you going to just drop things completely? Are you going to try to make it work? Because I think everyone’s best interest to find a solution to make it work. And that’s definitely what we always push for.

Ferd Niemann: That’s good. I think one thing you said that I liked is that, is to get all your stuff, your due diligence stuff ready, you know, as the seller side. I know I look at deals every day from brokers and you know, the good brokers all do that. Or you look at, you get a huge deal room of past stuff or package stuff you have to deal, you have to look at. Some guys have, you see like the teaser sheet and then he’s like no, that’s the whole offering. And they kind of hide the ball and they’re really doing their client a disservice because when I’m underwriting the deal, well, if I find it, I don’t find it they may get away with it, but the most likely I’m going to find it during the diligence. And then I’m going to say, this is different than you represented. And it’s basically giving me justification to re-trade on price and terms, and that’s not fair to the client. And it’s like, they think I’m going to get away with it. But as opposed to, if everything’s already out there, well, we saw that you know, I saw one, you know, it was, I think it was like an environmental issue. Like there is an environmental issue, we got to phase two, we got to, we took care of the tanks or whatever. So, it was disclosed, and it was solved as opposed to someone trying to find it later. I don’t know. There used to be a gas tank near that. That means I got to hire a lawyer to look at five more things and now you retrade. It just seems like common sense, but there are some serious fly-by-night brokers out there. And there’s one guy, in particular, that is not licensed in maybe any state. And I called him out on it one time because he tried to, you know, screw me out of a deal. And I was like hey, are you licensed here? And he was like, he just like disappeared. But I still see him, I’m still on his email list, he just disappeared from me. But it’s like that guy is out there pitching deals on one piece of proforma paper. I’m like, this is, and he must be working to some degree because he’s in the business and been in the business for several years. But it’s just, he’s not with a big national outfit. You guys are not, you know high quality, but anyway, I don’t look, I’m not going to name them. I don’t want a bag on the guy too much, but when it’s…

Jared Bosch: That we see a lot of that, a lot of proforma-based offering memorandums and, you know, our philosophy is we always ride on the current financials trailing as well and base our price off that and obviously adjust the cap rate in accordance to each deal criteria. So definitely see a lot of that going on and you hope no one will see that from us.

Ferd Niemann: No, I think that’s the best way to do business. Speaking of your listings, do you have a list? I know you’ve got several listings right now. Is there one in particular that you’d like to give us a teaser on, a new one or the ones you can’t get rid of, that you’re looking to get rid of? Or the one that I need to buy?

Jared Bosch: Yeah, I think I just looked, we have, I think 17 active deals right now. Five of them are in escrow. I think it totals about a hundred million dollars of product right now. Some of the newer ones you just listed are some interesting plays that we, we just listed a pretty interesting property in Baton Rouge, Louisiana. That is a brand-new construction mobile home community that was done as a build to rent, which I find really interesting. We’ve sold some build to rent single-family rental communities on the multi-family side, but this will be the first asset we’ve done on the manufactured housing side.

Ferd Niemann: How many, lots, how many lots, I am going to interrupt you. And what cap rate you asked on that? Because so many people don’t like the parking home model, but I have heard and seen more and more of those coming down the pike.

Jared Bosch: Yeah. So, it’s a 77-site community in Baton Rouge, a gated community, all brand-new homes targeting about six cap, which is about a hundred basis points higher than the apartment market in the area. But you know, we see a need for affordable housing. They’re seeing it, they have, it’s a hundred percent full. They have a waitlist. There’s a lot of people that are moving out of apartments, seeking this type of arrangement. We’re just seeing people with, even with COVID moving out of apartments, trying to get more space. And I think the rental aspect of manufactured housing has a lot to play, especially in some of the newer high-quality homes. Your price per square foot to rent one of these homes is less than an apartment could be, and you’re going to get a nicer home on some of these newly built homes. So, I think that’s a really interesting deal. We just listed a three-part portfolio in North Dakota. That’s kind of a unique 410 sites, a huge opportunity to come into a market with scale, which is obviously something that a lot of buyers are looking for. Everybody’s looking for kind of that one-off deal, but then they say, what else is available in the area? And that one’s interesting, it’s a kind of a higher lot rent market. Kind of association with some of the energy companies basis there in North Dakota, but coming into a new area that you may not be involved in and get three parks and 410 sites is extremely appealing to a lot of folks.

Ferd Niemann: Yeah, that’s definitely scale. I’ve had a couple of people reach out to me on LinkedIn and just say stuff like hey, can you put together $50 million or a $100 million portfolio right now.  That’s what the big players want. They don’t want to buy a bunch of one and two and three deals. And it’s just, it’s hard. I don’t know have a hundred-million-dollar portfolio laying around to shell. Not a lot of people do. And the guys that do are buying the others. So, it’s, there’s definitely a new, massive appetite from big players. And I’ve had people contact me like, oh, I’ve got an in with Blackstone group, or I’ve got a, you know, my friend works at Carlo. What can you put together? And then it’s just, it’s like unrealistic expectations too, but I want the yield that you put together on a million-dollar deal. So, it’s hard to buy a portfolio.  You can buy a one-off deal at eight or nine, but the portfolio is, you’re probably looking in the four or five, six range, probably four or five.

Jared Bosch: Yeah, the portfolio, there’s obviously a little bit of a lower cap rate just because of the economies of scale. You know, everybody wants more, lots, you know, a $10 rent raise goes a lot further on 500 lots than it does on 50. So, there’s obviously a premium on the portfolios and it’s definitely enticing. And you’re going to see a lot of people interested in those portfolios, but it doesn’t mean that you know, they’re not as common as the one-off deals are from our perspective. We sell a lot of single parks, but we also do a lot of portfolios too.

Ferd Niemann: Got it. Great. Well, Jared, this has been good, really appreciate the time today. Where can people get ahold of you? How can they find you?

Jared Bosch: Yeah, absolutely. My email’s probably the best, it’s jbosch@northmarq.com and that’s NorthMarq like the direction, NorthMarq. And you can all see all of our active listings. Like I said, we’re listing a group. All of our available listings are on our website. You know at listings.northmarq.com. You can go and see everything we have available. You can also find us at NorthMarq Manufactured Housing Group on LinkedIn. We post all of our market reports on there that we put out every month we put a sales report out of what’s transacted the previous month. And we also have a really good research group here that puts out a quarterly research report on the manufactured housing industry as a whole. It talks about home shipments, cap rates, rents across the country. So, we try to be a great resource for people nationwide, share a lot of information. If anybody wants to get added to our distribution lists or listings over those market reports, please reach out again, email is jbosch@northmarq.com. And my number is (602) 952-4049.

Ferd Niemann: All right, thanks, Jared. Appreciate it.

Jared Bosch: Appreciate it. Thanks, Ferd.

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