On this episode of The Mobile Home Park Lawyer, Ferd sits down with Patrick Hagens to discuss the pros and cons of MHP and storage investing. Patrick gives intelligent tips and advice throughout, enjoy!
“I don’t want to buy anything in Alaska because I don’t want to be tempted to go work. I moved to Alaska to play in the mountains and hunt and fish and don’t want to be tempted with it. So, it’s a great barrier.”
0:00 – Intro and background on Patrick Hagens
1:45 – Patrick Hagens speaks about how he got into MHP
2:56 – Patrick talks about how there is no competition in owning MHP.
3:36 – Ferd asks about the differences in MHP and storage.
3:47 – Patrick describes the pros and cons of storage.
4:59- Patrick explains how he bought storage units to fill a large space in his MHP, rented some out to the tenants and kept a couple for personal use.
6:28 – Ferd questions how Patricks management works as his doesn’t reside near any of his MHP.
8:07- Patrick explains he has on-site managers at every MHP and regional managers for storage and apartments.
8:18 – Patricks mentions that not all his managers live in the parks, but he thinks it’s better when they do.
9;02- Patrick describes how he is on the phone with his MHP managers a lot, and how he is probably spending more money this way, than he would be if he was there.
11:18- Ferd asks Patrick if he has any horror stories we could benefit from.
11:26- Patrick talks about a MHP in Ohio that he was so confident in that he didn’t do a test-ad for it, as he felt he was getting a great deal, which turned out to be incorrect.
15:30- Ferd poses the question how do you look for deals to avoid overpaying?
18:07- Patricks says he thinks cold calling has a higher success rate than brochures.
19:04- Patrick states the importance of persistence.
19:49- Patrick talks about state associations and states they are good to join as they’re cheap and they watch law changes for you.
FIND | PATRICK HAGENS:
YouTube: Patrick Hagens MHP Investing
Ferd Niemann: Welcome back mobile home park nation. Ferd Niemann, mobile home park lawyer, here again today is another episode. Got a great guest again today. Our guest is a mobile home park owner, operator. He also is just a real estate investor. He’s done single family, apartment, self-storage. He does it from afar, he lives in Alaska. So, we’ll hear some more about that, but please help me in welcoming Patrick Hagens to our show. Patrick, thanks for coming on.
Patrick Hagens: Thanks for having me Ferd. I appreciate it.
Ferd Niemann: You got it, man. We’ll tell us a little bit more about your story. I know you a little bit, but our guests may or may not. So, tell us a little bit about your background and how you got into MHP.
Patrick Hagens: Yeah, so I started in the nineties as a helper with my dad. He dragged me around whether I really wanted to, or not. Helping with anything, changing hot water heaters. I was the guy that did all the snow pushing and yard mowing. And anyway, he kind of got me going in it, 1999 built up duplex right out of high school. And so, I always kind of had the bug and just took a while. You know, I just kind of stumbled along in real estate and it took me a bit to kind of figure out my way. Did some apartments you know, back in 2012, the cap rate compression kind of constricted that a little bit to where I couldn’t find any more deals. Did a storage facility, bought one and just finally ended up at just frustrated with not being able to get a return and found mobile home parks. Frank and Dave got that bootcamp and I started reading up with all of their writings and went to that bootcamp and I was just blown away. And yeah, just hard to beat, you know, no competition basically compared to everything else. You know, like my storage facility, somebody could build a storage facility right next to me and put me out of business if they really want to.
Ferd Niemann: What is your address? I’m looking for some storage. I do want to hear more about storage zone in particular because that’s definitely, you know, people see as a similar asset and in some respects that is lower operating expenses. You don’t have the same, you don’t have the toilets, you don’t have as much management intensive. So, can you give us a little bit of differences in the two. I know you’ve got some storage, it’s also associated to MHP, and I’ve got a little bit of that too. And I feel like it’s like, do you have any exceptions for me, but you like storage, right? I’m like, well, I got storages there, I’m not building storage, maybe I should, right? So, what are the pros and cons of having them together versus separate?
Patrick Hagens: So, I like storage, it is my second favorite. It’s concrete and steel, you know, it’s pretty simple. The expense ratios low. I do, I like it. I don’t like the competition. I don’t like the 39-year depreciation schedule. And it is a little bit more management intensive. You’ve got to have the right manager, because it’s a lot of in and out. The smaller the unit, the more in and out it is. The bigger the unit, the less in and out of turnover, but you don’t make as much for square foot. So, you know, the cost per square foot is higher. Return is lower. So, yeah, I don’t know. I like it. I stumbled across a great deal. Couldn’t pass it up. Storage facility was half empty and I bought it and filled it and raised the rents to market. And it’s just, it was a slam dunk, but the competition and the depreciation is probably what, you know, the two downsides of it.
Ferd Niemann: The storage in your mobile home parks, was that already like that or did you build that as kind of an amenity for your residents or is it not even for your residents, it’s for others in the community or some combination?
Patrick Hagens: I had. Yeah, so I had the first park I bought I had a big green space in the front and I was to the point where I was going to have to buy a shed or someplace to store some of my materials for, you know, rehabbing homes and the mower for the park. And when I looked at it, I was like 4,000 bucks for a garden shed. You know, there’s a maintenance nightmare after a few years, I was like, why don’t we just throw up 10 units, 11 units. And I’ll keep one for myself. A lot less maintenance to keep up with steel building. So, I built one and rented them out to the tenants of the park. And I used a couple of myself.
Ferd Niemann: Okay, got it. How do you, how does the rent compare to the others in the community? Like, so I’ve got storage near my mobile home park, and I feel like I have to be lower priced than everyone else now to stay occupied because of the stigma of being next to the trailer park. Is that what you’re experiencing?
Patrick Hagens: Yeah, I’m not getting a premium price by any means. I actually lowered the price a little bit to get it filled up. It took a little while to fill up. It’s not, it’s definitely not a, you know, a huge moneymaker or like a great opportunity. I don’t know if I’ll build more. We are full now, but it’s taken, it’s taken a little while to get there. There’s definitely a discount on the prices for being in a mobile home park.
Ferd Niemann: Now I want to hear more about your management strategy. Cause you told me, you told me previously, you live in Alaska and my knowledge there, maybe there’s a few mobile home parks in Alaska. I don’t know anybody that owns one up there, but none of your parks are in Alaska, right? Your parks are in continental US. So clearly, you’re not seeing those on a weekly, monthly, maybe even quarterly, annually basis. So, what’s your management structure. And then what are you looking for also in future deals? Are you only buying stabilized because of rebuy and value add and how do you vet your deals? I mean, I’m just really curious how that works from so far away. I get nervous going halfway across the country. You’re past Canada, you know, so you’re clearly doing it. So, I’m eager to know how.
Patrick Hagens: Right. Yeah, no, we’re several thousand miles away from our investments. Yeah, so just reviewing a lot of deals you know, you can get familiar with what the expense ratios are supposed to look like. Www.bestplaces.net is a great place to look at the town and in the Metro and see what’s going on economics wise, test ads. But I was doing it from Wyoming. I grew up in Iowa and then I was living in Wyoming. So, Iowa and Wyoming, I know better because I’ve been there. So, when I see something that comes up or I mail a letter, somebody calls. I feel like I kind of know the area because I’ve driven it a little bit, so that helps get, helps me get comfortable with it, but I’ll jump on an airplane and get down there and go look at it. Management wise, we’ve got manager, onsite managers at every park and then the storage and in the apartments, those are all regional managers, I guess I’ll call, not all my managers live in the park. I find it’s best if they do, but not all parks come with a good candidate that lives in the park. For instance, you know, one of the deals we did in Iowa was just a nightmare. They hadn’t had a manager for over a year. It is an out-of-state owner and had a lot of park owned homes and rentals, and people had, tenants had moved out. Left the windows open, the furnace on, running all winter, water was spraying everywhere. We show up, I take pictures, send it to the owner and they’re just like, Holy cow. But yeah, we’re doing turnaround. It’s a full-time deal. We’re on the phone with a manager a lot. And I mean, it works, I probably spend a little bit more than I would if I was there, but on the flip side of that, if I was there, I’d be trying to do some of the stuff myself and I wouldn’t be at home in my office doing mailers and trying to get another one bought. So, it’s okay I think to spend a little bit more, higher the contractors and just have it done right that way.
Ferd Niemann: When you said spending more? You mean hiring the professional laborers as opposed to the handyman or more the management?
Patrick Hagens: And I do both there. One of my parks, I can’t get anybody to do anything and I have to hire contractors and then another park, there’s just, there’s a dozen people in the park that can do almost anything. So, I go back and forth on that one, but like, like I’ll miss stuff, you know, like the other day we had a, a water riser that was leaking. The manager thought that it was the whole riser was bad. So, had to hurry up, get a plumber out of the bigger city, go over there. And it was just a fitting, you know, and stuff like that. If I was there, you know, I could look at it. I might’ve saved myself a little bit, but yeah, it’s just a different style. And I prefer it. I don’t want to be there. Like, I don’t want to buy anything in Alaska because I don’t want to be tempted to go work. I moved to Alaska to play in the mountains and hunt and fish and don’t want to be tempted with it. So, it’s a great barrier.
Ferd Niemann: It’s like, this is a good way of looking at it. I hear you. It’s like, if you’re close by and you know, you want to micromanage it more like you’re the best at something is like, you know what I mean, I don’t mind working on spreadsheets and I’ve got a financial background, but I’m sitting here. I’m like, I don’t need to be spending time on the spreadsheet. I got somebody else that can do that just as well as me and I can go work on something else, but it’s like, you know, if it’s there and I’m in the middle of, it’s like, I’m in the middle of it. And it’s like, man, it’s not as efficient. So definitely the temptations. That’s why I totally, I get it. So, what other strategies can you share with us. Obviously, you got a unique management strategy from afar that you’re implementing. What other strategies do you use that you think our listeners will, you know, would have benefit from? Or do you have even, you know, horror stories where, you know hey, this is, I messed up on this, don’t do this, you know, then we can all benefit from.
Patrick Hagens: Right. Well, the one I touched on a little bit of that one park in Iowa I bought, didn’t have a manager. I missed the mark a little bit on my due diligence there. One thing that I saw, like I put a lot of, I guess I really look at that median home price and this had a higher median home price and it took me by surprise once I got the park bought. I was so confident that median home price was high enough. I think it was, I think it was a 180, 160, 180 median home prices. And what ended up happening in that market was there was a lot of really high-end homes. A lot of rich farmers had nice homes, and then there was kind of the more the norm and that, those high-end homes skewed that number. Really, it should have been more like a 100,000 median home price. That took me by surprise. So, it’s taken a little bit longer to get that park turned around. It came with like 12 park owned, actually 16 park owned homes, 12 of them were vacant. And we’re getting them turned around, we’ve got a manager, we’ve got some better tenants in there. We’ve had to turn the tenant base over. But yeah, I bought that park for $187,000 yeah, a lot. I paid more than that because I bought all the inventory. But yeah, so that was a big turnaround. But yeah, doing a test ad was big. I was so confident I didn’t do a test ad. I was like, this is such a good deal. I’m going to buy it anyway. But it might’ve helped me not be so surprised when I got the park bought.
Ferd Niemann: That’s a good lesson learned because you had a test. It is really something that I try to harp on all the time with people is just, you know, get it on Facebook, get on Craigslist, get to the newspaper. And if the phone doesn’t ring, that’s going to be, there’s a big telltale sign. You could have problem here. And I’m looking at a Parkway which we’re closing on Monday and it’s in Northwest Nebraska and small town. And I was like, is this thing going to sell houses? And it got like 20 vacancies. We can bring in some new homes. And there’s some big operators in the market, for 200-unit parks bringing in new home. So, I was like, they’re doing it. We can do it right, test that out. And what do you know, people were calling. It was like, okay, it looks like it’s going to work, but we haven’t bought it yet. We’re closing soon, but I was not convinced. And then test as said, it actually was pretty good. So, you know, you’d be surprised sometimes. And then I’ve had other parks, you know, in 200,000 metros near a state capitol and it can’t sell a new home. Like nobody wants to buy. And that’s where I think the median home price and just the competition, you know, really comes into play where if there’s B apartments for $700 a month, it’s going to be hard to sell mobile, sell brand new mobile homes. But if the B apartments for a $1,000 a month, I can sell a brand-new mobile home for $800, including lot rent all day.
Patrick Hagens: Right. Right. Yeah. I think, I mean, there’s a lot of people looking for parks right now, and there’s a lot of parks and a lot of towns that I just am not interested in after buying a few and seeing, you know, what mediocre market, how tough it is to bring in homes and get people to afford them. There’s a lot of markets there that I don’t envy some of these guys that are just scooping these things up by the, you know, just everything they can get, operations wise and trying to infill, you know, I cringe a little bit when I see some of these guys paying six caps for some of these really tougher markets.
Ferd Niemann: Yeah. I feel like the asset classes is becoming so popular every day. Guys like me and you are probably part of the problem telling everybody how great it is. But it is really bringing a lot of people into the space and some of those folks are paying, yeah, I think I’ve seen pricing is made it harder to find deals. How are you looking for deals now to avoid overpaying, but also, you know, keep them busy in the next one?
Patrick Hagens: Right. So, we built a spread or a database ourself. I hired my now fiancé to come on full time and be my assistant and between her and I, and a virtual system over in the Philippines, we built our own database, 26 states and we mail, I got a brochure here. We mail these brochures out. And just every once in a while, we’ll do a brochure whenever we get, you know, a little bit of time, we’ll send one out. And then I also do cold calling. And we’re just, I’m just really picky. You know, it’s just got to be the right deal. I don’t get caught up in this, you know, this frothy market, I just, you know, like to deal directly with the owner. Now I’ve had a, you know, up my, what I’ll pay for a park of course because the market has come up. But yeah, I just get to call on and get the mailing and, you know, calls come in randomly, you know, from letters that I sent out years ago. And it took me a long time to get my first. One started in 2015 and I didn’t buy my first park until July of 2018. So really took a while. But that, yeah, once I got the traction, now it seems like it’s way easier, but it took a while.
Ferd Niemann: What kind of response rate you get on your postcards? Because those, I know that it’s, you know, historically that’s like a 1% success rate, but you know, it only takes one deal right to make a deal, but you doing better than that. Or you just send thousands upon thousands?
Patrick Hagens: Well, we’re sending thousands of brochures out. It’s I believe we’re right now at like 3.5%, maybe 3% right in there, you know, as the time goes, you know, people call and that percentage comes up, but, well, I mailed, I’ve got like what I call a hot call list. And I mailed out to that, it’s a smaller list, and I got nothing, you know, so over time it’s maybe up to 3%, 3.5%, but, you know, initially it’s, yeah, it’s 1% and that I’m seeing that come down, you know everybody’s getting these letters. I mean, I’ve got two right here that people mail me. And you know, so, I mean, everybody’s doing it. I think cold calling is definitely, you know, works better, but of course you can only call so much and nobody likes to sit and make one phone call after another, and you get shut down. And it’s not that much fun, but it’s definitely a lot higher success rate with cold calling now than it was. And then doing these brochures.
Ferd Niemann: That’s great. Yeah. And I think this is what it takes is years and years doing it and people I’ve got, I’ve got a client they actually do mostly single family flips, but I don’t even know their budget, their budgets, I’ve seen marketing budget and it works. They’ll send the same person, the letter, like once a month for five years or something. And eventually they get the call and then they’re just flipping a crazy number of houses because everybody knows who they are and they’re on commercials and stuff. They’re only going to get some, get some great free press now, too. But yeah, it’s just the persistence in action.
Patrick Hagens: Yeah. Persistence is the biggest thing, that’s the one thing that you just can’t beat it. I mean, if you just never give up, I mean, sooner or later you’ll, you know, it’ll happen, but if you give up it’s over.
Ferd Niemann: Hey, that’s right, man. Well, what other tips? What other tips, you got anything for us. I don’t want to cut you off, but if you’ve got more great stuff to share, let’s hear it.
Patrick Hagens: Yeah. I’d say a really big one is that first right of Refusal in the lease agreement keeps homes in the park, I’ve only lost one home and it was right at transition, but man, that’s a tough one. I mean, bringing homes is expensive and time consuming. If you put that first right of refusal in there that helps a ton. And then the state associations, you know, I think you’re in Iowa as well. Joe Kelly there in the Iowa association is good. And maybe, you know, I’ve tried to reach out to the Iowa or to the Wyoming state association. And I’ve gotten no response. So, I am not a member of that one. Nobody knows how to get ahold of him. I’d like to get ahold of them, but the Iowa one is great.
Ferd Niemann: Yeah. It’s definitely a state by state thing. I’ve joined, I don’t know, a dozen or so of these associations. And at sometimes you pick up the phone and the executive director answered it. I mean, like there’s no secretary, there’s no receptionist, there’s no computers like, like Illinois is really good, Frank Bowman’s, I called him probably five, six times and stuff and he answered the phone and it’s like, that’s great. I mean, he knows what he’s talking about. I called some states in the South East. I’m not going to, I’m not going to bad mouth them on here too, but I left six, seven voicemails. I get a call back from the secretary telling me, then I go to the vice president. Then I go to the president and I have one question on what I know people in the state were doing on water sewer bill back. Because the utility provider law was a little ambiguous. And I was like, I don’t feel like researching all the case law here this just has to come up all the time. And he’s like, I’ll have to outsource it to one of my staff members. And they got like six or seven or eight staff members. And they ended up hiring an outside lawyer to go look at this for them to answer my questions. So that was good, they gave me the information, but I needed it like now. And it took like two weeks. I’d already had done work on it myself. Cause it was just like, whatever, but it’s weird. At some States they don’t call you back. Some states there’s almost no rules. You know, some states don’t even have mobile home park specific laws. It’s just like basic landlord-tenant, which is, you know, not the same as you know. So yeah, that’s definitely a good tip to at least reach out to your associations and see if they’re one of the good ones. And then if they are, join, they’re not that expensive. And then you get free content. I get tired of all the emails, but they’re watching the law for me. You know, I think there’s a new legislation coming. I can’t watch the legislation in every state, but I can, if I’m on the email list and I pay them whatever it is, $50 a year or $200 a year to pay in a state.
Patrick Hagens: Right. Yeah. Joe, Kelly’s awesome of the Iowa. I mean, I’ve reached out to him several times, totally worth it. Helped me out a ton. So, if you’re in Iowa and you’re not a member definitely should join.
Ferd Niemann: All right. Well, good stuff Patrick. Where can people find you? How can they reach you and get ahold of you?
Patrick Hagens: Yeah. So, I’m on LinkedIn a little bit. Message me on there or I do have a YouTube channel that I just started, Patrick Hagens MHP investing. And then you can email me, Patrick.email@example.com. Send me an email or hit me up on LinkedIn and yeah, let’s chat.
Ferd Niemann: All right. Sounds great. Thanks again, Patrick. Appreciate it.
Patrick Hagens: You bet. Thanks for having me. I appreciate it.