Ep. 57 | Interview with Scott Jolly – How To Save Money Short and Long Term on Cap Ex Road Work

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On this episode of The Mobile Home Park Lawyer, Ferd interviews Scott Jolly of Site Consulting Specialists. Scott gives his best asset-preserving advice as well as helping us understand asphalt and roadwork, and how to make the best choices for your MHP. Enjoy!

 

“Try to combine projects, especially if you have smaller parks, if they’re near each other. Even if you looking at your CapEx strategy, try to put those two, three years together, and find a year where you could do two or three projects at a time. You’ll save a lot of money.”

 

HIGHLIGHTS:

0:00 – Intro
1-18 – Scott gives us insight into his background
3:15 – Scott details his job roles/responsibilities
5:37 – Ferd asks Scott to explain the wide range of road types from rock gravel to concrete and how he evaluates them
10:58 – Ferd asks Scott what the minimum job site he tackles is and how that relates to MHPs in particular
15:46 – Scott talks about alligatored asphalt and recommends two-coat seals
21:00 – Scott gives his advice for overlaying, and grinding transitions
23:27 – Ferd and Scott discuss how your trash contracts could help you preserve your road
27:37 – Scott speaks about cheaper alternative materials/tasks to fix alligatored asphalt
28:32 – Scott gives his final money-saving tips

 

FIND | SCOTT JOLLY:

Website: SiteConsultingSpecialists.com
LinkedIn: https://www.linkedin.com/in/scottgjolly

 

FULL TRANSCRIPTION:

Ferd Niemann: Welcome back mobile home park nation. Ferd Niemann here again today with another episode. My guest today is a unique, unique guest for you guys. He’s going to help you do your due diligence. He is going to help you save money. He’s going to help you preserve your assets. He does asset classes like retail, office, industrial, but he also works on mobile home parks. He’s going to help us understand asphalt in particular roadwork. Please help me in welcoming our guests, Scott Jolly. Scot, thanks for coming on.

Scott Jolly: Yeah, I appreciate the opportunity. I love your podcast, have been listening to it since you started it. So I was like, I think I have something to add maybe, help out.

Ferd Niemann: Yeah. You’re definitely my first guest here talking about CapEx. So you’ve definitely got a unique niche. Tell us how you, tell us a little more about your background and, you know, kind of where are you operate and what’s your role is in the process.

Scott Jolly: Yeah, sure. I have a great short story and the industry that my grandfather was a bricklayer. Some of my first jobs in my life, my first job was mixing mud and carrying bricks and pouring concrete for my grandfather, like 12 years old. So poured my first house foundation, which is a post-imperial foundation, not too dissimilar from MHP sometimes, you know, and in Mississippi, actually down in the South. And so that was when I was 17. I started my first real estate investment company when I was 24 and I got my serious butt kicked in the 2008 recession. Went and decided I wanted to learn a little bit more, got into paving. Did paving and concrete work for a company in Southern California for six or so years, was pretty successful and kind of actually got asked by a lot of clients to be, we started traveling for my local clients around the country to do consulting for them. Like, Hey, we want someone in Denver and Seattle. And so I wasn’t a contractor, but I was a consultant. And then started go out on my own a few years ago, our business to be a full nationwide capital expenditure consulting firm. We do focus on, in the commercial real estate world you consider the big three, which is HVAC, roofing, paving. We are also, now clients are asking us, we’re doing an Amazon tenant improvement. We’re doing some other larger capital expenditures for this and like total property transformation. So that’s who we are. I’ve been doing this now full time, started coming about five years ago, but full-time for the last two and a half years.

Ferd Niemann: Great, great. So, you know, from talking to you previously, you’re more of an owner’s rep. So you represent the owner whether under due diligence or whether the actual owner of the property and you kind of like a construction manager, you’re overseeing the contractors, you’re vetting bids, you’re vetting vendors. You’re making sure the bids, apples and apples and all that kind of stuff, right?

Scott Jolly: Yeah. Well, we actually like to give owners a lot more control where we actually write the bid packages. So instead of collecting bids and making sure they’re apples for apples, we define the specifications. So that I think the process that I see a lot of owners or managers whether an asset property manager goes through is, let’s go talk to contractors and get bids and then see what fits our budget or see what we need versus we’re actually 100% backwards from that. We need to understand what the asset strategy is, what the budget is, what they could look at. And then we go to the property, evaluate what the needs are and say, okay, these are some recommendations. This will last this long, this will last this long. And so we actually write the bid packages. We’re not a general contractor, even though my business partner has his general engineering license. So he is allowed in the state of California. We’re working on getting that in other States right now, can build bridges and do utility work. And he’s very knowledgeable in that kind of work as well. So we write the specification for the owners and then go collect it. And then we find contractors and bet them out that fit that scope of work is one paving contractor to another might be very different depending on the equipment they have, what kind of work they do. So that’s what we do.

Ferd Niemann: Got it. So obviously I like that approach that your kind of driving the bus, if you will, making sure you’re getting what you need. And you talked about asset, kind of an asset management strategy. So tell me, I know, you know, I’ve paid asset, I’ve paid different vendors for concrete and serial coat and asphalt and gravel. I think I’ve done ship seal or some other slurry mixes. I’ve come close and once or twice. So I have a little bit of knowledge, but I’m not nearly as sharp as you on this. Can you tell us a little bit about those different types of products when they’re appropriate. I know it was a bit of a, we just bought a park in Northwest Nebraska where it’s always cold. Well, the roads are grappled, but it’s a different kind of gravel. It almost looks like asphalt. It’s packed as thick, it is the city street, right. Versus where I’m from and came from a Western Illinois and gravel is inch size, white rock gravel that, you know, you roll your ankle on. I mean, which parks I’ve seen parks like that. So can you explain that the wide range from rock gravel to concrete, which I think are the worst and the best, or I guess dirt, and concrete and how you guys evaluate those from a long-term asset management strategy?

Scott Jolly: Absolutely. First thing we like to do is look at the asset itself. Is it an, A, B, C asset, kind of identify what market it’s in, what price point are the lots at, you know, all these kind of financial considerations that I think most owners are looking at. What level asset is this, and then let’s build to that level, or are we trying to make it the next level, right? What’s the cash flow and what are we trying to do with that? So if you, depending on where you’re at, you’ve got gravel. It is probably treated gravel. There’s different treatments you can do, cement treatment, there’s sprays, just different things you can do as far, depending on where you’re at in the country. There’s different grapple treatments that you can put down that’ll hold it pretty well together. We, now, good questions about chip seal. We see a lot of roads. I would put those as comparable type products. The problem that we see with those in mobile home parks is they’re not really designed for residential streets and slow-moving, where you have lots of people turning in, turning out what happens, aggregate and those comes out and you get this really Rocky finish probably after like a month or two, because those are designed for roadways where cars are moving in 35 to 45 miles per hour or higher. And actually those, what’s really Rocky eventually gets worn in. And it’s part of that curing process and part of how that product operates. We don’t recommend it a lot unless you’re in a really cold area. It really helps with the snow and traction and ice and things like that, where you may have that. So there’s different products. One product I would love to actually share with the audience that I think more people can look into is what’s called a fiber-reinforced asphalt. It’s relatively new in the world in that it’s only been around for 15 years. There’s a company called fortify that makes a lot of concrete fibers. If you’re pouring concrete in colder areas, East Coast, you’re probably pouring, and I don’t know if you’re using rebar if you’re just doing fiber asphalt or fiber concrete. So it’s used for both concrete and asphalt, but that’s a product for overlays or for even just replacement. Cause we’re seeing a lot of most mobile home parks we see are really thin asphalt two, maybe three inches. We’ve seen some inch and three quarters. So you can go up and the fiber will actually help mitigate. So we probably heard maybe Petro mat, other paving help, the idea here is extending the existing life of the asphalt. How can I extend it? And overlays, is that what the problem is you get reflective cracking. So eventually those cracks reflect up through, that’s what the fabrics are for. Now fiber reinforced asphalt does a very similar thing and mitigates reflective cracking, but then it also has a higher resistance value. So there’s less deterioration from surface erosion and things like that. About the same price, sometimes a little bit more expensive, but it hasn’t really made its way into the public sector yet, into the private sector. I would say actually, where asset managers, you see a lot on highways, roadways, airports, things like that. But it really hasn’t made it into like mobile home parks and commercial or industrial. Walmart, I think it just did the first 40 properties last year. So it’s a newer product, but it can really extend the life of the asphalt like up to 50% more than a traditional overlay.

Ferd Niemann: Interesting. So, I mean, Walmart is probably a little, got a little better budget than the average mobile home park owner. Do I kind of assume that the fiber asphalt is more expensive than traditional asphalt?

Scott Jolly: It’s about a 10% to 15% off charge.

Ferd Niemann: They’re probably a good value, just more expensive, but a good value overall. And I know from experience of a big part of the cost is kind of the mobilization of getting going where, you know, if it’s a hundred units of asphalt, it’s a hundred dollars, but if it’s 200 units asphalt, it’s maybe 120, because there’s obviously overhead insurance sales, but also just the mobilization of the crew that in my world, I don’t, it’s not like I, I rarely decide to do I, am I going to do half one side of the street? But what I decided is, well, they’re already here. Do I want him to do the parking lanes? Do I want them to do driveways where like at gravel driveways we can get gravel driveway for about a hundred bucks. Concrete is about a thousand per stall. So most of our customers choose gravel and suddenly put gravel in for free. Well, we don’t ever put concrete in for free, maybe on new homes as part of the sales price. But sometimes when the asphalt guy’s there, they’ll say, Hey, how would I do 50 asphalt driveways and it’s a hundred, you know, it’s just cheaper as gravel and it’s messier, it’s harder to park, but tell us how that plays into the strategy from up there. There’s obviously quality where concrete is the best and there’s things like fiber asphalt that is news to me. This sounds really good. Those are more expensive, but they last longer. How do you on a mobile home park, and you’re obviously not going to get involved in a $4,000 road work job on a mobile home park. I guess what’s the minimum job site you guys tackle and how does it work on the mobile business in particular?

Scott Jolly: Remind me to come back and tell her about the mobilization key points there. But for us, you know, yeah, our average fee is like between $5,000 and $10,000. And that’s, if we’re traveling, you know, if we’re local, we have offices in Southern California, I’m in Northern Nevada. So me and my business partner, we’re kind of divide up, you know, North and South, he goes a lot to Denver, I think, because he likes to go hunting and stuff like that. So he takes out those projects.

Ferd Niemann: That means a big, for mobile home park, that means a pretty big job. That means you’re talking over a hundred-thousand-dollar job maybe. Which is generally going to be a repave, either a mill and overlay or overlay or repave as opposed to crack seal and seal.

Scott Jolly: Absolutely. And we always tell people like phone calls and emails are always free. But bringing that back to the mobilization and our fee is I think one of the most undervalued opportunities that I see in the market is trying to gain some economies of scale. Most of the owners that I see, especially in the mobile home park spaces, they usually have a territory I find. They have an area where they in a state or Metro area where they combine, they usually have multiple assets. And if you’re going to do asphalt work and you’re only going to do $20,000 or 30,000 at a time, you should really think about trying to coordinate two or three parts at a time. I don’t know a single contract, payment contract, especially that wouldn’t give you a price reduction to do even just two jobs. If they were at least somewhat near each other, you know, within half an hour, an hour, if you’re willing to sign that second contract and you can coordinate that with your management teams, we see 5% to 10% savings, just on two jobs. You start looking at 5, 10, you are seeing 20 to, depending on the size. Obviously, if you’re going to put five, you know, $500,000 jobs together, you’re not going to see, but if you put 5 or 10, 20 to 50 or a $100,000 jobs together and bid them out as a package, you’re going to see a huge savings. Yeah. So, and that’s where we can also help too. So that maybe it helps spread out our fee sometimes, here we can do 1500 or $2,500 per property to evaluate and write the bid packages and solicit the bids. We like to make it so that we’ll even get the, we want to make sure people get in their one-year warranty paperwork. And that you’re getting your release of lien after the job as well. Because really, if there’s any, if there’s any problem with the installation, you’re going to know within the first year. If something goes wrong, if it doesn’t get compacted right or something, the seal coat was too watered down, for example. Cause a lot of people don’t know that. It’s a concentrated product and then you water it. The contractor’s supposed to water it down 10% to 15% on average. But a lot of them, they try to make a few extra bucks in 20%, 30% water isn’t, and this won’t last, but you’ll know within that first six months to a year, once you get through the first few seal, for example, that first wet season, you’re going to know right away if it was watered down or not.

Ferd Niemann: Yeah, I’ve had that actually. I didn’t realize it was because of over-watering but I had, I paid it, I don’t remember, it was like $30,000 for the patching in certain spots. And then I got another 10 for seal coat and the seal coat didn’t last, I was just like, it went from jet black looked awesome. Six months later looked gray. I was like, what? And then tell me a little bit too. I know from a little bit experienced like allegations in your asphalt where you start to see cracks and starting to see the spider web or alligator skin, it really, is like the beginning of the end for that portion of the land. At what point, how soon should you remedy that? Should you do like crack sealants for something right away? Or should you cut out a patch and fix that. That’s what I feel like the more common work is in mobile home parks, especially smaller parks we got 30 lots. It’s like, you can’t really absorb a $50,000 asphalt job, you know and so you’ve got 400 pads and you spend a million dollars in asphalt. Well, but if you’ve got a 30-pad park, I mean, you know, you always want to use cold patch. You know, you got at Home Depot, but that doesn’t last. As you know, just kind of bids on crack seal.

Scott Jolly: So that’s a great question. The alligatoring, I think, and when I, I’ll say this, when I first got in the business, the guy that really trained me was presented alligatoring like cancer. You got to cut it out and get rid of it or it’s just going to grow. And in my experience, it’s actually not really true. It really depends on the age of the asphalt. There’s a lot of really good asphalt. It’s 20 or 30 years old. That’s really alligator, but it hasn’t moved. That’s what I look for. Has it moved? Is it moving? Do you want to crack field seal regularly? I do think it’s worth it. There’s a lot of studies out there that show that regular every three to five years seals are actually designed as a two-coat process. So that’s my, I think people, a lot of people sell the one coat because people will pay for, but it’s really designed as a two coat. If you’re going to do patches, the general rule is you got to go two feet past the last crack. Cause really what’s happening is the substrate. The subgrade is deteriorating. Asphalt is a wearing surface. Everything strength comes from the subgrade, what’s underneath the asphalt is really going to dictate the life of the asphalt. Like for example, I say, when I say asphalt is wearing surface, the city of San Francisco has concrete streets. They overlay them with two inches of asphalt to provide a smooth wearing surface. Asphalt isn’t the end all be all. If it’s cracked an alligator, you got to look at the park and think, is it sinking? Am I getting a pothole? Those are things that I’m willing to say, let’s remove them a place. And I would try to find out the thickness of your asphalt. Like I mentioned that two inches is what we are commonly seeing, and a mill and inlay two inches is the same as the removal and placement. So when you’re looking at bids, look at that thickness, is that a common thickness for your area? Because I’ll tell you, we see a lot of up to four inches, check the language in the up to four inches. They’re not four inches.

Ferd Niemann: I actually called it out on that, he was onsite and is four inches. And I chose this guy who had a little more expensive than the other guy, because he says two inches. I am going to pay 5% more for twice as much asphalt. And I went over, and I saw him, and he was, and I said, I just looked at that. I can tell, I said, that’s not four inches. Because that spot must not be level. I said let’s go look somewhere else. And he pointed at it and he just looks at me. He’s like, how about we just cut today’s work in half. I mean, he was just like, it was too late. You’d already been doing his work. He’s like, I can’t go do everything four inches now. I’m sure he gets away with that all the time.

Scott Jolly: All the time. And if you’re not there. So one thing we educate our clients is know how to, it’s a simple calculation, square-foot times thickness times 0.006. It doesn’t work everywhere in the country, but you should be within 5% to 10% of how many tons. Asphalt is purchased differently than concrete. You buy concrete by the square yard. You buy asphalt by the ton. So you should be able to calculate your tonnage and know what your, with that equation get pretty close and know exactly how much tons. So if you’re on a job, ask the glass guy at the end of the day for his weight ticket, they calculate the weight throughout the day. So they’ll know how many tons on the weight ticket are in that load. And how many tons have been delivered to that site for the day. That’s one of the things we see all the time. We try to educate owners on like, you’re probably not getting the thickness that you’re paying for.

Ferd Niemann: No, I was just, I saw it myself. I was like, that’s not four inches. And then the guy caved, I mean, he caved on the spot. This was the older company.

Scott Jolly: Some guys will tell you, you’ve got alligatoring. And they’ll say, here’s what another common misconception I get a lot from contractors, you can’t mill and inlay that, it’ll pulverize. They’ll say you’ll pulverize the asphalt and breakthrough. We’ve done a lot of jobs where we’ve milled two inches and new areas where only two, two and a half inches thick. And so we broke through. The way they make these grinders now, as long as that substrate is strong, I’ve never had one breakthrough and cause a huge problem, never. They try to tell you that that’s going to happen, but it usually doesn’t. The way these, they make these grinders and milling machines out, they can break through the asphalt, get to the subgrade and actually cut it right on and not cause a huge problem. And they can pave right over that. It won’t be able to tack it, because they want to use it to tack it, cause it’s dirt, right? But two inches of asphalt is pretty standard. I think most people, unless you have a lot of overlays, you know, the minimum overlay you should get is an inch, that is kind of construction standard. You really don’t want to get fabric. The minimum engineer is inch and a half for those fabric overlays Petro mat. And that’s the two inches ideal on the overlay. So if you’re doing overlay, you’re probably doubling your thickness, be careful about grinding transitions. We looked at this one in Idaho actually recently and you could tell they just around the edges and then overlay the middle. So you kind of create a hump, which is some games good for water to drain. But what happens is you have a storm drain and they don’t grind down properly. Then you’re going to, what they do is they tape it off from two to zero. And every, that first couple of feet where it gets really thin, it’s just going to break up really quick. Look at the process that they’re using as well. Make sure they mill it. The full depth thickness all the way to the end. Patches, I feel like we kind of got distracted from the original question. Patches are kind of like as needed potholes, things like that. Those are the only thing, I don’t necessarily look at alligatoring as a problem. I want to see that that should play out over maybe 5 years, 10 years, kind of monitor it. See if it gets worse over the next few years. If you see sinking potholes, those isolated areas, I would focus on patches.

Ferd Niemann: Got it. Good information. I had a couple of things, tips I want to share too, that I know from what you just said. I had a park actually sold the park, but as part of, it had a conduit, CMBS loans as part of the property condition assessment they sent out somebody like yourself to inspect the property and they required a two-inch overlay as the minimum on some of the road work. So that I know from agency loans too. It’s like, you got to have, you can’t have gravel roads on those loans. So sometimes if you’ve got it, you think about not just your asset management from a capital expenditure and from a kind of a maintenance requirement fee, what’s my exit strategy for the property. If It’s a cash out refinance and agency loan, having better road conditions is going to be more important and then to preserve the roads, a practical step that we always employ, we’re closing on a deal next Friday and there’s a parking lot. There’s a duplex. And then between the duplex and mobile home park, it’s like the entry to mobile home park is a huge parking lot for some reason. It is absolutely destroyed because they have big dumpsters right there. So the trash trucks, the regular weekly trash trucks to pick up poly cart. I don’t remember the number, but they weigh like 6,000 pounds. Not too much. They don’t do that much damage. The trash truck that picks up the big 10 by 10 dumpster weighs 30,000 pounds and turns. And we had one in a park and it just crushed that road and it just crushed it and we couldn’t get it out of there fast enough. So that’s one way to, I think to preserve your road is your trash contract and how you work it.

Scott Jolly: Yeah, I mean, gosh, trash trucks keep us in business. They really do. And that’s a good point. I’ve seen the owners that replace and didn’t replace it thick enough or didn’t address the substrate issue. And so five years, 10 years later, they’re replacing it again because of trash truck just hammers it. One more suggestion that we make, see if you can pulverize your existing asphalt. If you have a thinner section or you have good elevation, you don’t necessarily have to remove and replace it. You could just pulverize it, mix that asphalt in with the top three or four inches or whatever your substrate is. That, it’ll bind together usually really well and create a new, stronger substrate. And then you can pave on top of that. So that’s another solution that we’ve seen work really well in that particular situation with the trash trucks, they do make, they cause a lot of damage.

Ferd Niemann: Yeah. Another thing when you’re talking about the elevation there that made the extra substrate, it made me think of from the legal side, make sure you don’t have too big a drop-offs on the side. I’ve seen where people get six, it seems like six inches, there’s the cliff, but it’s not a curve, where people say just like in cliff, hidden in the grass. So that’s not good. But at one thing that I think is good is if you get kind of like talking about mobilization, the asphalt guys, if they’re out there, they can do speed bumps pretty immediately, pretty easily versus having these speed bumps. I think it’s like, if you do speed bump, all you got to do is 10 speed-bumps going on 1500 bucks a pop. But if you do 10 speed-bumps while you’re doing your road, he’s like, how about a hundred bucks? It’s not that much work. And I’ve had them cut, I had to create gaps in the middle of them so that water can flow on a very flat park. But leave a little space there, and leave a gap in your speed bump, not wide enough that you can roll an ankle, but narrow enough that lets water through. Got one park in particular where it’s just perfectly flat everywhere. Well then, the water accumulates at the speed bumps.

Scott Jolly: So yeah, versus one solid speed bump, you’ve got two. Sometimes they’re angled. We noticed instead of being flat, sometimes they’ll be angled a little bit, so that water will flow through them. You do have to worry about the elevations. A good contractor will either like mill or grade those areas so that even if you just have to move things around. So there is a nice, smooth transition. That’s one thing we’re pretty, we’re working on one in Washington and they have the speed bumps currently, but we’re going to pulverize the whole thing. And so what we’re going to do is kind of change the elevation a little bit. And it’s old, I was in there. I was in there for three days doing the evaluation, doing some testing. And I noticed a lot of people in you know mobile vehicles, not vehicles.

Ferd Niemann: Golf carts?

Scott Jolly: Golf carts, things like that. We looked at, we were going to offset and provide a five-foot path on one side. So the people with strollers or have medical disabilities that use carts or golf carts, they can get around a little bit more smoothly and water can flow as well. So we’ll to kind of combine those two options together. Thinking about the comfort of the tenants I think too, especially when scheduling, like how can we make it as easy as possible for both the tenant and get the work done? It’s usually never a fun process.

Ferd Niemann: Oh, I know it’s the worst.

Scott Jolly: So, but if you have a good plan, I think most people are usually pretty excited at the end of the work because it does kind of rejuvenate the park.

Ferd Niemann: it’s just huge. I mean, it’s just not inexpensive. Painting program is a great way to change the culture, bringing new homes will change the culture, putting rose is a great way to change the culture. Probably the most expensive way to do it, but it definitely is an overnight change.

Scott Jolly: I would encourage folks to keep costs down. Look at even patches mill and inlay, unless it’s really sinking or have huge structural deficiencies just because you see alligatoring doesn’t mean you have to remove and replace. That is not true. And there are some cheaper options with mil. Like I said, we do a lot of mill and inlay. That’s what Walmart is doing. That’s what target is doing. These other large asset owners. They’re going, they’re not doing patches anymore. Even on smaller, they’re not doing the whole parking lot, but they’ll, they understand that the thickness isn’t what the contract usually says it is. And that a two-inch, might be actually the same as removal and replacement at the end of the day.

Ferd Niemann: Great, stuff, Scott. I appreciate your insights. Any more tips before we let you go and if not, where can people find you?

Scott Jolly: Tips. I’ll go back to try to combine projects, especially if you have smaller parks, if they’re near each other, even if you looking at your CapEx strategy, try to put those two, three years together, a find a year where you could do two or three at a time. You’ll save a lot of money, a little bit more coordination time, but I think you’ll save, you’ll get a much bigger bang for your buck. You can find me in LinkedIn. That’s where I hang out most days, because I can’t really deal with any of the other social media sites currently in our state of the union. So I stick to LinkedIn, Scott Jolly, I think Scott G Jolly, I don’t know, off the top of my head. Site Consulting Specialist is the name of our company. We’re launching a new series building cap experts, and it’s kind of a pun on the actual building and building up people, just educating people on different products and resources out there. Really another tip I would say is check out that fiber reinforced asphalt, it could save a lot of money and not both now and in the future. Yeah, that’s probably it. Siteconsultingspecialists.com is our website, and we are the cap experts.

Ferd Niemann: All right, Scott. Appreciate it. Thank you.

Scott Jolly: Thank you Ferd.

Ferd Niemann: All right, bye now.

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