Ep. 64 | Interview with MHP Owner Miles Noland – Navigating Master Lease MHP Deals

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On this episode of The Mobile Home Park Lawyer, Ferd talks to Miles Noland about how he found his way to MHP and what he did to break into the industry. Miles shares his tips and tricks on how to improve your MHP. Enjoy!

 

“It took me a couple of years to study, feel comfortable, and really get going in the MHP space. And then, about a year and a half ago, I had a little bit more time and I was able to dive in, and really start cold calling, and doing some more marketing, and then things started to actually progress.”

 

HIGHLIGHTS:

0:00 – Intro and background on Miles Noland
2:38 – Miles talks about how he managed to get his way into the MHP business and how he found deals while just starting out
7:08 – Ferd asks about Miles’ master lease deal and what he did differently
13:30 – Miles discusses how a lot of people are looking for a cap rate on the front end but there’s so much more to a good deal than that
15:01 – Sometimes people treat something that they are buying like a lease and they make the mistake of skipping on due diligence
17:46 – Miles shares some tips and tricks that we can learn from
23:52 – Miles is now hyper-focused rather than aiming with a much broader net
25:40 – Ferd asks for tips from the operational side of MHP

 

FIND | MILES NOLAND:

Company Website: treesidecommunities.com
LinkedIn: Treeside Communities

 

FULL TRANSCRIPTION:

Ferd Niemann: Welcome back mobile home park nation. Ferd Niemann here again today, another exciting gift for you. This guy is in the Cincinnati area just started out about less than a year ago. He’s already got three parks, he’s got two more on the way, father of three little kids. Please help me welcome my guest Miles Noland. Miles, thanks for being here.

Miles Noland: Oh, great. I’m good. Thanks for having me on.

Ferd Niemann: Great man. Well, tell us a little bit about yourself, your background and how you got in MHP, so we can get to know you a little bit and we’ll dive into some specifics on your experiences and your lessons learned.

Miles Noland: Sure, I had a small fitness business also, did some online stuff, it kind of went under, you know, it was hard. I got into medical sales. And I was basically just studying for about a year and couldn’t figure it out. I knew I liked real estate, but I couldn’t, nothing really felt right. And listen to a bunch of podcasts and honestly, I started building a list, had a VA in the Philippines. And but I didn’t put a ton of time into it because I was working so hard. So it really took me a couple years to kind of really study feel comfortable, and really get going in the MHP space. And then, about a year and a half ago, I had a little bit more time and I was able to, you know, dive in, and really start cold calling, doing some more marketing. And then things started to actually progress and get me closer to doing my first deal.

Ferd Niemann: All right, great, man. So tell us in that first deal, how you got in and then you found it to be a cold call sounds like I know you’ve also done a deal that’s a master, master lease, I want to talk about that deal as well. I don’t think it was your first deal. Because that’s a more complicated structure. In some respects. I’m just curious how that deal in particularly in general, how you found your deals. And essentially, for our audience, there’s a lot of guys out there that want to do what you’re doing. You got a job, I’ve got a young family, I want to do something for myself, entrepreneurial, passive income. Obviously, MHP is a strong asset class, and you have found a way to get in and get in and now you’re going pretty quick. So tell us how, for the rest of our guys, how do you pull it off? And how can we learn from it?

Miles Noland: Yeah, and I tell everybody first off, it’s going to be way harder than you think it is. Like if I have known it was going to be this hard, I might have still done it. But it was probably 10 times, it took 10 times longer than I thought it would. So I think a lot of people give up too soon when it gets really hard. But yeah, I made a ton of calls. And what I said wasn’t perfect, but I just tried to be really consistent. You know, I’d call two to four hours a week over, I think I just did about nine months. And I tried to target four hours or less from where I live. This deal, I know a lot of people don’t like West Virginia, but my family’s from there. And my aunt and uncle live in this, this town in West Virginia and kind of near Morgantown, up north. So I knew it, and I’ve been there, and I found this guy who thought about selling and had good conversations. He’s like, yeah, just come up and meet me, you know, I’ll sign the contract. So I drove five hours, meet the guy, he gets weird. And he doesn’t want to sign, and I’m totally frustrated. I’m like, I just took all this time a couple of days. But he said, you know, I got a friend, he wants to sell and like this park was nowhere on my list. It wasn’t on Google. So I call this guy, smaller park, 21 spaces, 15 occupied, all tenant owned, city water, city sewer. And he’s like, well, you know, it’s not that nice, but I mean, it’s, you know, on a decent area right off the highway. Hey, I’ll give it to you for what I bought it for 17 years ago, $180,000, $20,000 down, you know, seller financing, like, that’s, you know, I know, it’s small, and it’s not right next to my house. But that’s, you know, too good to pass up. And the funny story about that is, it took me like three months to get him to sign the contract, he finally signed it, it was like a two-page contract. But if I send this guy a 20-pager, he’s, you know, mom and pop, he’s going to get overwhelmed and never sign it. We got it done. And I’ve been going around and around for about 14 months with the other guy and just got his park, you know, which is 45 spaces. I’m only five minutes down the road from this one under contract about six weeks ago. So that was where I was like a miracle, you know. So now we’re going through DD on that one.

Ferd Niemann: That’s great, man. Well, yeah, lesson learned there. I mean, persistence, obviously. And then you mentioned ma and pa.  I think that’s, you are right, and you got to spend some time with ma and pa sometimes. They don’t always care about the highest price. In this case the guy didn’t even make any money. I mean, and he’s going to finance it for you. Most likely, he did that because you build a bond with him. He liked you, for one reason or another. And that’s great. You can get a better deal than me or the next, I love that, those stories. That’s how people, the new guy, little guy competes is you’re nimble, you’re relatable. I tell my managers, we have a big park here in Kansas City, that we were going to sell, but we’re going to keep it, but it’s basically a major infill. And we’re competing within a mile against strive communities, some communities in RHP, within about three miles. Three of the five biggest players were from the old Frank and Dave portfolio. And we’re just kicking their butt. Actually, why are we kicking their butt? One we are working all the damn time, which is not the best idea perhaps, but two, this guy said, you are one phone call away from every single decision. Those guys have to go to the committee, district manager, regional manager, regional vice president to do something different, like hey, can we move this home two feet to squeeze another home? Hey, can we fast-track the permit? Hey, can we sell this home like this? Can I do a discount on this, this person must put two decks on the other side of the deck. There’s one-off questions and there’s more complicated ones in that, this person approved, they got this, and the bureaucracy slows down the deal. So we get the lead, we get them close, boom, boom, boom. And we’ve had several people that are down the street at a superior park, frankly, I guess recently sold it actually. But they come to us because we can get them in faster, we can move things faster, and so on. So it just is another example of your little guy, you know, competing against the big guys, for some of us are great. That’s awesome. So tell me about that. Tell me about the master lease deal. I am interested in what you guys did differently from a negotiation standpoint, as well as a due diligence standpoint?

Miles Noland: Yeah, no, you’re right. The nimble and the small can be an advantage. A lot of people don’t really think about that. But there is definitely like an advantage in speed. So I totally agree. Yeah, and the master lease, this park was actually 10 minutes from where I grew up just about an hour and a half from where I live now. And my mom actually lives near there. So I was able to, you know, bond with the seller over the area. He knew I kind of spoke the language, I knew where everything was. It was a follow-up process. First, it was COVID. Second, his accountant went to, you know, Latin American for three months, it was always something so, but finally, he was ready to do it. And he had, he’s a pretty sophisticated guy. He’s actually he’s actually an attorney, but he had was really worried about his tax burden. And so, and he told us, like, Look, I have not done a good job paying attention to this thing. I’m supposed to be managing it for the last three years. I don’t even think I’ve been there. I’m not, it’s bad. You know, and he told us that, um, but in the area, a half-mile away, there’s it’s just absolutely booming, it’s, uh, you know, Class A apartments, assisted livings, retail, new $300,000 home, $400,000 You know, there’s stuffs been built like crazy. So we really believed in the location. And, honestly, I mean, I thought the price would be around 15, 16. But he, you know, he was stuck on 19. But in this situation, it helped him because he was really worried about his tax burden. He was even offered a better deal on seller finance, but he knew that this thing was rough. And he, I talked to him so many times email that he kind of trusted me and my partners experienced to come in there and like spend a lot of time on it, clean it up, make it better, you know, do some evictions because the tenant base was breaking rules, really rough and kind of get into shape. And this helped him with his taxes. So we made sure we got an attorney in the state where the park was located who had some real estate experience to draw up you know, an ironclad you know, an agreement that really, you know, fit the state laws so that we knew that was really important. And then we only had to put a percent down so 150 grand down so that was a benefit to us to get into the deal with a lot less money down. That was credited, will be credited to the purchase price upon refinance or sale. But unfortunately, the monthly payments are not. So that’s you know, there’s pros and cons for the seller and for us because we don’t technically own it yet. But we do have the first right to sell it. It’s a three-year term, we can sell it after year one or refinance after year one, we don’t have to wait three years. So there’s some benefits there for us. It gets us in the deal with lower money down. And a great location, it’s also city water city sewer, only a couple park owned homes out of 64 homes. It’s 79 pads and a great location. Granted, the tenant base is rough. It’s one of the and it’s a direct bill. So all those things are like the bones of it are good. But you know that, but you know, there’s pros and cons on both sides.

Ferd Niemann: Sure. No, I think that’s good. I mean, one thing that I want to cover that you just mentioned is, in this case, you admit, I’m paying more than I wanted, but I’m willing to do so because of a different term. And the seller in many instances prefers a cash price. This guy sounds like he didn’t for his tax situation, but prefers a set cash price, but will agree to finance it for more money and for recourse for some other certainty. So it’s a good idea. And I recently, we had a deal. We have 11 homes, to bring into this new park. And I was evaluating I wanted to use homes or new homes, it’s kind of on the fence of being a new home community. It’s a good market, it’s just the community’s a little tired. And in my proforma, it made more economic sense to do all new homes. Even if I sell them at a $5,000 loss apiece, I got a $55,000 eat for my 11 homes in my budget. But that’s cash on cash for my investors for syndication. I only needed 55 cash to have 11 new homes, 11 new homes, versus 11 used homes are going to decrease my cap rate, give me a higher quality tenant, make the park look better, have more staying power. There’s some ancillary, indirect benefit. But if I’d have done 11 used homes at 20 grand apiece, that’s 220k. So the 220k on the initial cash outlay was going to drag down my yield so much and impact that cap rate and ancillary factors that actually made more sense to me to spend more money on more expensive houses, not to mention, it’s a lot easier to find new houses, order them than to find used houses to fit the right sizes and all that. So again, that was me agreeing to have a negative one term, in this case, loose $5,000 per sale, which is gratifying to do in this market, and the sizes lots, versus, you know, get new homes that have, used homes, excuse me, they’re cheaper, but then impact the cash yield. So that’s awesome that you guys are weighing those pros and cons and obviously ideally, the best of both worlds. But sometimes you get a stretch, you are going to stretch, or pay more, shorter DD, worse reps and warranties, more hair on the dog for the same price. You got to have something that’s the opposite. In this case, the market is great particular, bones are great. So that’s cool.

Miles Noland: Yeah, yeah, you’re right. I mean, I think a lot of people are just looking for a cap rate on the front end. And I think maybe more inexperienced people do that. And that’s the way I was for a while. But there’s just so many more factors that go into play in terms of location, of terms, things like that. And there’s so much competition now that you can’t just say, Oh, I want a nine cap like day one, or you know, you’re probably not going to get a lot of deals. So I mean, just some of that creativity. And we had honestly another master lease under contract in Indiana and we dropped it and DD, it was so rough, the park. But you know, we’ve spoken to some apartment investors that have done that, commonly. And help us get a little bit higher level of comfort as long as you have an agreement in that state, you know, that is done by a good lawyer. And it can just, you know, just  different creative ways to kind of help the seller out. But also getting a deal with lower money down. Can kind of puts you ahead of you know, maybe somebody else bidding on that deal.

Ferd Niemann: Sure. Talking about mass release, and you don’t need that, I’m not going to ask you and work on your deal. But I’ll tell you, here’s some mistakes that I think people sometimes might make on a mass release is they treat it like a lease. Instead of like a property they’re going to buy, and they cut corners on due diligence. Particular on things like phase one environmental and on title work, you can’t get a title policy because you don’t own it. You might be able to, actually I don’t know, I never asked a title company that. But you can certainly run a preliminary job and see if there any problems because a doomsday scenario would be, you’re making all these payments, put the down payment down and you get ready to go buy it and the guy has bad title. And he can’t sell to you. Or then you figure out, you got a phase one environmental, it is a nightmare and don’t want to buy it. And you just wasted all the time and energy. So I see people, I lost an auction one time. And it was the same thing. I was the only guy, and 25 bidders get to phase one. I think a second auction, the other one didn’t do it. In the way that terms this auction where you had to put up your money, and you had to close, there is no due diligence, it was like you commit to buy immediately after the auction. And even in, if I am good buyer, I want to make sure I’m not buying a lemon. And there’s only one phase one engineer in this trade area. And I hired him. I said, anybody else hire you for this. He said, Nope. The other 20 guys didn’t do it right. And so far, I got away with-it kind of so to speak. But anyway, that’s, that would be a moment of caution for our listeners that treat the master lease with the same land you treat to purchase.

Miles Noland: Yeah, yeah. Just talking to you, I hope I’m saying the right things because I’m not an attorney, but yeah correct me. But, and that’s exactly what we did. I mean, we did a phase one, we did the title work, we just treated it like we were buying it because that’s the plan down the road. So we were able to do all that. And we didn’t uncover anything, but it gives you that peace of mind.

Ferd Niemann: I mean, that’s the point is like, you know, I’ve got life insurance. I didn’t die yesterday. So did I waste the money? Or was I protected, just in case, right? And phase one, you hope you don’t find anything. But you still have to, I’ve had failed phase ones. I’ve had filled phase twos, I’ve had to dig up tanks, I had to do geothermal imaging, ground penetrating radar. And none of those things are fun. And none of those things are inexpensive. But to some degree, that’s the cost of doing business, as opposed to buying a lemon. So anyway, that’s good. But what other tips and tricks do you have? And you got other deals and other experiences? What are you doing now in the marketplace to find new deals? Bread and butter, cold calling, building your list, build your database, and the other secret sauce you’re want to share?

Miles Noland: Yeah, yeah, the list is gold. So I mean, it is an investment to build a list, I was busy. So I paid somebody to do it, a virtual assistant. But you can’t go wrong with that list, whether it’s you or somebody else making the calls. I’ve tried for a bit to have somebody else make the calls. But it really just, it’s gotten tougher, because a lot more people are doing it. And so I mean, some of the states I’m in, you know, perhaps aren’t as sexy as a lot of states. But that kind of helps. But also, you know, I think taking more of an indirect approach can really reap some benefits if you’re looking at this thing long term. So I mean, it’s not easy when you don’t have a part. But just being relentless. Showing up, being willing to meet sellers in person is a huge thing. Like they trust you so much more if you can meet them in person, and just playing off. You know, I called a lady yesterday, hey, I own a couple parks. She interrupts me. I don’t want to sell. And I’m like, that’s good. Because that’s not why I was calling. Who did you use to bring in homes because I’m looking at bringing in a couple homes. And she told me and 10 minutes later, she’s like, Okay, I’m going to save your cell phone, like Call me if you need anything, if you need any advice, it totally changed the conversation like she doesn’t want to sell. But someday, if she does, I feel like I left a more favorable impression than saying, hey, do you want to sell? And then there’s no way she’s not going to want to follow up with me. And so I’ll keep that conversation going. But being able to, now being able to really hyper focus on areas where I already have a park and say, Hey, I own this down the road, what would you do with this? And then by the end of the conversation, I’ll work it around, say, hey, have you thought about selling. But the feeling of the call is where I’m actually like getting their advice or providing value, and everybody wants to give good advice. So that seems to have been and for a long time, I’m just like, hey, do you want to sell? But I think the more and more people call, that’s kind of getting a little tougher, so I just try to leverage like anything I know in that area, hey, my aunt lives there. I have a friend that owns a park there. I just try to find some sort of common ground to be a little bit different than the other people calling and as you go more and more you kind of get some more leads like via networking, by broker relationships, from other sellers. Or maybe you buy a park, and the seller owns six parks and now he’s like, hey, do you want to buy these two others that are you know, so the more you can dig in and  just, I really feel like just getting that first park is such a huge lift for the confidence level, the knowledge of like getting the whole, you know, process done. And just the sales thing is just being relentless, honestly, and just and following up and trying to add some value and it’s not very fun. You know, it’s really not. But I mean, it’s important, you know, you think about, like, if I wouldn’t have done that none of this would have never happened. And every call, I’m like, god it sucks. I’d rather be doing anything else, you know, right now. So I think just, you know, it’s not easy, but there’s nothing really more valuable.

Ferd Niemann: No, that’s great. I mean, you’re differentiating yourself, you know, you’re building rapport. You’re not just another guy calling, I get some of those calls is, you know, we sell and then you gen some that are disingenuous, I think it’s good that you find something that you can actually, you know, build relations with them. Hey, I own the park down the street. Did you see that the college is adding a new football program or something that’s real, you can build rapport. I get them sometimes when people say, oh hey, one of my clients, one of my investors, I just drove through your park. I say oh, really? What did you think about it, I love it. What do you think about my new playground? Oh, loved it. I don’t have a playground. Oh, you know, you weren’t just driving through my park. You got a California phone number. You know, you didn’t you know, or Philippine accent. You didn’t drive through my park, you’re not building rapport.  So you’re doing the opposite, which is great. And you know, some, you’re definitely right, there are certain things that aren’t fun, but those are the things that set us apart. Dave Ramsey has would basically do things now that no one else will do. So you can do things later that no one else can do. You know, from a financial standpoint, particular.

Miles Noland: Yeah, I love that.

Ferd Niemann: It’s a mortification, if you will, or we live in an immediate gratification society. And, you know, for example, I got out of college, had a good job, I could have lived downtown and nice apartment, you know, went out to bars, and you know, have fun and all that, like some of my buddies did. Instead, I said, I’m going to buy an investment house. And I built a room in the basement, I put another room upstairs. And pretty soon I lived with five guys. But you know what? I live for free. And I made $500 a month. And had a good job, saved 100% of my salary, I bought the house down the street, did another one, did another one. Pretty soon I have five houses on the block. And my kids, or my friends are still concerned if they grad school. They had no money, but they were chasing every night. I would delay that gratification and I saw the foods financially. So that’s great. You’re going through the pain, if you will, of cold calls, which I don’t know, I don’t know anybody that likes cold calls, frankly. But it’s a necessary beast. If you’re going to find deals, when you can’t compete on price, you can’t compete on resume. You’re not a private equity group, you’re not a REIT, you don’t have a team full of guys, you need to compete on you, on the poor. And on being nimble. And that’s awesome to success stories like yourself. It is Great.

Miles Noland: Yeah, no, I appreciate that. Yeah, and opens it up just kind of the focus, too, I was targeting, you know, probably 10 states and I just couldn’t do the follow up good enough, and I couldn’t and so now I’m just hyper focused on the couple areas where I have parks. And it also allows, I mean, we just got a like a 19 pad, you know, has a single-family house and little duplex on it. But that deal doesn’t work, like if it’s just by itself, but we already own two parks, you know, within 30 minutes. And so that can work because of the scale of management. So it really opens you up to, you know, more deals and it was easy for me to build, and then I met the owner of the park that backs up to it, it’s another 15 spaces. You know, I taught his daughter in high school when I was a high school teacher 13 years ago. So it’s just like, when you’re in your area, it’s a lot easier to find common ground and then like all of a sudden that little 19 space turns into a 35 space. Because you know the guy is going to sell me in a couple, it’ll be a couple years but he’s going to sell it to me in a couple of years. It’s right next door. So just little things like that just focusing on you know, a couple areas allows you to really you know, I think have more opportunities, find common ground and scale and ultimately like if you ever want to exit that’s what people want. They don’t want one random 30 space Park six hours away and then you know, they want you know, all right there. So if you ever want to sell it.

Ferd Niemann: Sure, economies of scale, it’s great. What other, I know you only had you know, a year or so of operational experience but give me the tips, you’ve given us a lot of tips on the acquisition side and find deals, give me tips from either tips or lessons that are operations or otherwise you want to share before we depart.

Miles Noland: I mean, obviously, that’s kind of more my role is acquisition part of it. But honestly, the money is not as important as a lot of people think it is. Say, for example, you partner with somebody that’s mostly bringing money, but people don’t realize how tough the operations can be. And so if you have somebody doing that for you, that’s great, they’re worth their weight in gold. And just know, it’s not a passive, it’s not a passive, it’s not an office building, it’s not it’s not a passive investment. So you’re going to have to, you know, either if you’re doing it yourself, you’re going to have to put a significant amount of time towards like communicating with your manager, just learning following up and doing things that aren’t honestly that glamorous, but just know, it’s a very important part. And that that really makes or breaks, especially once you get a few more parks, you have to have some systems in place, and a good manager in place, because you got to, you got to take care of the park, you got to fix things, obviously. Number one, you have to collect the rent, and just putting some systems in place where they can, it’s more than just handing you cash is so important to really the success of your investment. So I mean that people need to know that that’s really important. It’s not just buy it and forget it. So that I mean, and I know I didn’t give you a ton of like, perfect details. But I just think just knowing that that part is really important. And it’s more difficult than people think it is, especially on these turnaround deals. Just know that going in?

Ferd Niemann: No, I think that’s definitely wise. I was hiring a regional property manager right now. And I was telling my assistant who posted the job. We’re not in the real estate business. I used to be in the real estate business. We’re in the operations business. Mobile home parks are very management intensive, very operational if you get a stable deal, and maybe, you know, 88 pads and 87-fold. Nope, no partners, okay, maybe that’s just possibility. But I used to have triple net leases. CDs was a tenant. That was that was passive. They sent a check every once in a while, something that there was a roof leak or something, for the most part, is very low maintenance. That wasn’t as lucrative because there’s competitive, right? So there’s lower yields, you know, those deals are cheaper or lower cap rates, but the mobile home farm is angry with us. That’s that is a good advice. Look. Don’t get overextended because it’s going to be managed intensively if you’re not willing to do it or capable doing it. Somebody on your team or a partner or employee needs to be competent in that and like for my regional manager position, we put in their minimum three years level of our experience. The last two days I got 50 applications to budget hotel guys, bunch of office guys, like do not read the description. I don’t care if you have a lot of hotel management, I’m sure it’s a great skill. But it’s not outside right now four-degree weather under a trailer with a salamander heater, defroster pipes, okay, and I got guys out there right now doing that, and I was out there on Monday, you know, with two pairs long underwear. All right. Didn’t does isn’t the hotel business, which has basically asked me it’s not a real business, but it’s not the business. It’s an operations business in my opinion.

Miles Noland: Yeah, I totally agree. That’s the reality of it. And that’s part of the reason I think that returns can be a little bit better too, because not as many people want to do that.

Ferd Niemann: All right, Miles, this is great. Any other things you want to share before we go? Where can people find you also, before I forget?

Miles Noland: My website isn’t quite done, but it’s called Treeside Communities, and it’s close. And then same thing on LinkedIn, Treeside Communities. So yeah, just trying to grow that and, you know, I think if you know, if you have a will to like really progress in the business, you’ll figure out a way whether you have a bunch of small kids or you have a full-time job or just find a way to do the things that matter most and be consistent, even if it’s only a few hours a week, and I think if you don’t quit, you’ll get one eventually.

Ferd Niemann: Sounds good. Thanks, Miles appreciate it.

Miles Noland: Alright, thanks Ferd, take care.

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