Latest / Carson's Corner: Entrepreneurship & Investing / Mobile Home Parks, Self-Storage & Sale-Leasebacks: Why Mark Khuri Passes on 98% of Deals

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Mobile Home Parks, Self-Storage & Sale-Leasebacks: Why Mark Khuri Passes on 98% of Deals · Carson's Corner: Entrepreneurship & Investing

• 0:00
  SPEAKER_03: We want to make sure we're investing in a property in a location where we believe there's going to be more buyers in five years or so when we go to sell it.
• 0:07
  SPEAKER_00: Today's guest is Mark Curry, a seasoned real estate investor with over 20 years of experience, more than 130 properties and 1.5 billion dollars in transactions.
• 0:17
  SPEAKER_00: We're pretty spread out.
• 0:18
  SPEAKER_03: We do focus a lot on diversification.
• 0:20
  SPEAKER_03: There's pros and cons to every state.
• 0:22
  SPEAKER_03: It all depends on what and where, but generally speaking, you want to go where supply is low and demand is high.
• 0:29
  SPEAKER_01: Right now, are you mainly focused on like uh tertiary markets, or are you going like straight into like you know big metros?
• 0:36
  SPEAKER_01: Or what are you guys looking at?
• 0:38
  SPEAKER_03: We do focus on cash flow, and so we want to make sure you know 90-95% of what we're investing in has year one cash flow to our investors, usually three to seven percent.
• 0:49
  SPEAKER_03: Some of those primary markets, it's a lot harder to get cash flow today.
• 0:53
  SPEAKER_03: Interest rates are high, cap rates are still low.
• 0:56
  SPEAKER_03: There's not a lot of positive leverage there, and so we've been focusing for 15 plus years on secondary and tertiary markets.
• 1:03
  SPEAKER_01: What are you looking for?
• 1:04
  SPEAKER_01: Like 100 mobile home park units or 30 or so, yeah, again, depending on sector.
• 1:09
  SPEAKER_03: But for mobile home parks, we're usually north of 50 lots per community.
• 1:14
  SPEAKER_03: You know, 100 is a is a good metric, too, if you can get above that.
• 1:17
  SPEAKER_03: You know, usually great financing options.
• 1:20
  SPEAKER_03: But uh, once you get too big, you're competing usually with the larger reads and public companies and large investment firms that are uh buying to essentially grow portfolio and stabilized assets.
• 1:32
  SPEAKER_03: It's hard to compete with them.
• 1:33
  SPEAKER_03: They tend to pay a lot and are looking for high quality and you know, just steady eddy, low cash flow.
• 1:38
  SPEAKER_01: What is uh like probably the biggest mistake y'all ever made in your early uh investing lives?
• 1:43
  SPEAKER_01: You know, I remember, gosh, this is probably as far as investors, do y'all need investors, or what do you what do y'all do?
• 1:49
  SPEAKER_01: How do you how do you raise most of your capital?
• 1:51
  SPEAKER_01: Yeah, I mean, we work with I wanted to uh talk to you a little bit about storage.
• 1:56
  SPEAKER_01: How is like the AI and all that?
• 1:58
  SPEAKER_01: Are you able to remotely operate storage?
• 2:01
  SPEAKER_01: It'll never be fully remote because it's a physical location, but how does that look now versus you know 10 years ago?
• 2:08
  SPEAKER_01: I think.
• 2:10
  SPEAKER_03: Welcome to the Carson's Quarter.
• 2:14
  SPEAKER_01: All right, all right, all right.
• 2:15
  SPEAKER_01: I'm sitting here with Mr.
• 2:17
  SPEAKER_01: Mark Curry.
• 2:18
  SPEAKER_01: He is joining us from Oregon.
• 2:21
  SPEAKER_01: He is private equity, does mobile home parks, self-storage, industrial, and uh is pretty well diversified um across multiple asset classes.
• 2:32
  SPEAKER_01: And this should be an interesting uh conversation on what they're looking for, what markets are going into and all that.
• 2:39
  SPEAKER_01: And um, we'll take it from there.
• 2:41
  SPEAKER_01: Mark, how you doing, man?
• 2:42
  SPEAKER_01: I'm good.
• 2:43
  SPEAKER_01: Carson, yeah, thanks for having me on.
• 2:45
  SPEAKER_01: Absolutely.
• 2:46
  SPEAKER_01: So um out of those asset classes, what is your favorite right now?
• 2:50
  SPEAKER_01: Is it mobile home parks mainly, or are you uh which uh uh well, that's probably a dumb question.
• 2:56
  SPEAKER_01: You're probably like, well, the one where the deal pencils, right?
• 3:00
  SPEAKER_03: Yeah, I mean, uh we we've invested in a lot of asset classes over the years, Carson.
• 3:05
  SPEAKER_03: Uh been in business full-time, 16 years, real estate investor for 21 plus years.
• 3:11
  SPEAKER_03: And so we've tried a lot of things and narrowed it down to where we think there's uh kind of a sweet spot of risk and returns.
• 3:19
  SPEAKER_03: I I consider myself more of a risk manager, always trying to um, you know, find find those deals that we think have a very high likelihood of meeting or beating the projected returns, and that we think and weather a storm, right?
• 3:34
  SPEAKER_03: Economic downturn, a shift in the economy, like you know, we don't want to be too correlated to that or stock market.
• 3:42
  SPEAKER_03: And so we uh we invest in a a number of different asset classes today, but uh I would say mobile home parks is definitely at the top, if not the first, uh as far as preference goes.
• 3:55
  SPEAKER_03: Yeah.
• 3:56
  SPEAKER_01: I love it, man.
• 3:57
  SPEAKER_01: Um, you know, it's kind of interesting you talk about that because I look at different stuff and I'm like, okay, I hate class A apartments because they're so expensive, but class A during like the 2008 financial crisis still remained about a six cap or six and a half.
• 4:12
  SPEAKER_01: It didn't go into that nine or eleven territory.
• 4:15
  SPEAKER_01: So, you know, there's when you're looking at downside and all that, you know, that's that's an important part.
• 4:21
  SPEAKER_01: Right now, are you mainly focused on like uh tertiary markets or are you going like straight into like you know big metros or what are you guys looking at?
• 4:31
  SPEAKER_03: Yeah, we're pretty much in secondary and tertiary markets, Carson.
• 4:35
  SPEAKER_03: We do focus on cash flow, and so we want to make sure, you know, 90, 95% of what we're investing in has year one cash flow to our investors, usually three to seven percent.
• 4:48
  SPEAKER_03: So right out the gate, we want to make sure the investments are you know producing positive cash flow.
• 4:55
  SPEAKER_03: And so some of those primary markets, it's a lot harder to get cash flow today.
• 5:00
  SPEAKER_03: Interest rates are high, cap rates are still low, there's not a lot of pro positive leverage there.
• 5:07
  SPEAKER_03: And so um we we've been focusing for you know 15 plus years on secondary and tertiary markets.
• 5:14
  SPEAKER_01: I love it, man.
• 5:15
  SPEAKER_01: You're like my perfect guest, dude.
• 5:17
  SPEAKER_01: I keep telling people, you know, I'm in the Nashville area and everybody wants like class A and Nashville, and it's like it's so competitive.
• 5:24
  SPEAKER_01: I'm like, okay, there's a reason why no transactions have happened because they want a five cap.
• 5:29
  SPEAKER_01: And secondly, you know, it's like it's oversupplied.
• 5:33
  SPEAKER_01: You have us you have supply issues in the major metros, and I've talked about it a lot, even in some of my listings, about how these smaller outside markets, you don't want them so small that it's gonna take you five years to sell it.
• 5:47
  SPEAKER_01: But when when you are in these smaller markets, you're like not gonna get these huge institutions coming and dropping like half a billion dollars, starting new developments, and it's like, you know, mobile home parks and all this stuff popping up left and right to where like the housing supply is just way overdone.
• 6:04
  SPEAKER_01: So, you know, I like that aspect.
• 6:06
  SPEAKER_01: Or what what uh regions are you guys looking at?
• 6:09
  SPEAKER_03: Yeah, I mean, we love the Midwest.
• 6:11
  SPEAKER_03: Um we also invest in the South, Southeast, a little bit in the mountain states.
• 6:17
  SPEAKER_03: We're currently allocated in about 32 states.
• 6:20
  SPEAKER_03: Carson, we've got some capital, different asset classes, different, you know, different operating partners that we partner with.
• 6:28
  SPEAKER_03: And so I I don't want to say we're market agnostic.
• 6:31
  SPEAKER_03: We don't do a lot on the coasts in general.
• 6:34
  SPEAKER_03: Um, we tend to stay away from some areas of the south, like Mississippi and Louisiana and some of these other areas.
• 6:42
  SPEAKER_01: And so uh Is your reason let me ask you your reasoning, and this is supposed to be educational on the coast part, is it the hurricane and the insurance that you're trying to avoid?
• 6:51
  SPEAKER_01: Is that why you avoid it?
• 6:53
  SPEAKER_03: That's always a risk, of course.
• 6:55
  SPEAKER_03: Um, but if you think about rent-to-price ratio, right?
• 6:59
  SPEAKER_03: Like it's just it's expensive to buy typically on the coasts.
• 7:03
  SPEAKER_03: Yeah, you're not gonna see that cash flow.
• 7:05
  SPEAKER_03: Uh California also has, you know, a little bit of an increased regulatory concern where laws can change quickly and probably not in your favor as a landlord.
• 7:15
  SPEAKER_03: Um, at the same time, it doesn't mean we don't do anything there, but uh generally speaking, most of our deals are you know more in the Midwest, South, Southeast.
• 7:24
  SPEAKER_03: And then you know, Louisiana, Mississippi, some of those other states, um i the cost of housing is already very low.
• 7:32
  SPEAKER_03: And so you're competing, but we love to invest in affordable housing, but we want to uh essentially see a delta between what it costs to live at our properties versus the next closest thing.
• 7:44
  SPEAKER_03: We want to be that low-cost provider.
• 7:46
  SPEAKER_03: And if there's a lot of competition out there, it just makes demand for your property a little bit lower.
• 7:51
  SPEAKER_01: So so what he's kind of referring to, Mark, is like if you go to Mississippi and like an entry-level house is$150,000, that mobile home park or whatever is just the gap between those doesn't make you like the cost effective one.
• 8:08
  SPEAKER_01: So, you know, some of these communities, you get into a big metro where the cost of living is like up here, and you're down here.
• 8:15
  SPEAKER_01: I mean, it just makes them so much easier to rent out.
• 8:18
  SPEAKER_01: You know, your occupancy is probably a lot higher and stuff like that.
• 8:23
  SPEAKER_03: Yeah, they they tend to do better.
• 8:25
  SPEAKER_03: You just have more consistent demand, uh less turnover, very sticky tenants that don't move, you know, that kind of stuff.
• 8:32
  SPEAKER_03: And that's where you can see, you know, consistent performance from a return on investment standpoint, which is always the goal, right?
• 8:39
  SPEAKER_01: Awesome, man.
• 8:40
  SPEAKER_01: Yeah.
• 8:41
  SPEAKER_01: That's uh something a lot of people don't account for.
• 8:43
  SPEAKER_01: You know, that sometimes you see a lot of these RV parks and other stuff like that popping up in these really rural areas, and I'm like, eh, I don't know, you know.
• 8:54
  SPEAKER_01: Yeah, you can probably buy a house for 50 grand out there, you know.
• 8:59
  SPEAKER_01: So you kind of scratch your head a little bit.
• 9:01
  SPEAKER_01: So definitely.
• 9:02
  SPEAKER_03: Yeah, I mean, on the mobile home park side, we like to compare, you know, what's the closest um two-bedroom apartment or three-bedroom apartment renting for?
• 9:12
  SPEAKER_03: And we want to be, you know, less than that, right?
• 9:15
  SPEAKER_03: And so that's kind of how we look at it, you know, 20, 30 percent less.
• 9:19
  SPEAKER_03: Otherwise, someone could just go rent an apartment.
• 9:21
  SPEAKER_03: And so that's one quick check.
• 9:24
  SPEAKER_03: Um and then of course, single family homes, Carson, what are they selling for, right?
• 9:28
  SPEAKER_03: If it's yeah, hundred, hundred K or less, you know, why why would you go into a mobile home for roughly the same price or or even 50-60K?
• 9:36
  SPEAKER_03: Like it's just yeah, go get a regular house.
• 9:39
  SPEAKER_03: And so you you want to watch uh watch that when you're looking at these kinds of investments as to what else is available out there and how does it compare to what we're looking at to invest in.
• 9:49
  SPEAKER_01: I like that.
• 9:50
  SPEAKER_01: Do y'all uh own a lot in uh Oregon?
• 9:52
  SPEAKER_03: Not a lot, but a little bit.
• 9:54
  SPEAKER_03: Um I live here, it's just a great place to call home and raise a family, and so yeah, that's what I do here, but uh not a ton of investing here for some of the same reasons as you know, California, and we're we're not quite as regulatory, but um it's uh it's harder to make sense here.
• 10:13
  SPEAKER_03: Yeah.
• 10:14
  SPEAKER_01: Yeah, I have an uncle that lives up in Seattle, and it's like he's telling me about the code, and he's you know, doing all this stuff, you know, with his church, trying to get property, and he's like it's impossible to build new.
• 10:25
  SPEAKER_01: He said it's not impossible, it just takes forever because the code's like you know, this tall.
• 10:30
  SPEAKER_01: So you know you're always trying to hurdle around.
• 10:34
  SPEAKER_01: Um awesome.
• 10:35
  SPEAKER_01: What what uh kind of units are you looking for?
• 10:37
  SPEAKER_01: Are you looking, you know, what what's the like I think too big, you don't want like 800 units, you know.
• 10:45
  SPEAKER_01: You what are you looking for?
• 10:46
  SPEAKER_03: Like a hundred mobile home park units or thirty or so yeah, again, depending on sector, but for mobile home parks, we're usually north of 50 lots per community.
• 10:56
  SPEAKER_03: Um better financing, more buyers down the road when you go to try and sell, you know, 100 is a is a good metric too, if you can get above that.
• 11:06
  SPEAKER_03: You know, usually great financing options.
• 11:10
  SPEAKER_03: Uh it's hard to find larger communities, you know, 300.
• 11:14
  SPEAKER_03: We're we're invested in them, don't get me wrong.
• 11:15
  SPEAKER_03: We're invested in anywhere from 50 to 300 lot communities, uh, some even slightly larger.
• 11:24
  SPEAKER_03: But uh once you get too big, you're competing usually with the larger REITs and public companies and large, large investment firms that are uh buying to essentially just grow portfolio and stabilized assets.
• 11:40
  SPEAKER_03: And it's hard to compete with them.
• 11:41
  SPEAKER_03: They tend to pay a lot and are looking for high quality and you know, just steady eddy low cash flow.
• 11:48
  SPEAKER_01: Yeah, you kind of want to stay away from the um institutional great assets and be be below that to an extent.
• 11:56
  SPEAKER_01: Plus, like you said, the disput disposition I think a lot of people don't think about.
• 12:00
  SPEAKER_01: They're like, oh, we can get in here and scale, it'll be better.
• 12:03
  SPEAKER_01: And you're like, I don't know, man.
• 12:06
  SPEAKER_01: When you get a sell, you know, it's your buying pool's lower.
• 12:10
  SPEAKER_03: So that's a big part for us too, Carson.
• 12:13
  SPEAKER_03: We want to make sure we're investing in a property in a location where we believe there's gonna be more buyers in five years or so when we go to sell it.
• 12:21
  SPEAKER_03: And so we stay away from a lot of stuff that doesn't check that box itself, like office, for example.
• 12:27
  SPEAKER_03: I can't say confidently there's gonna be more buyers for office space in five years, right?
• 12:31
  SPEAKER_03: I don't know that many people can.
• 12:33
  SPEAKER_01: Yeah.
• 12:34
  SPEAKER_01: I I think like it's very hard if anybody that's listening that's been in multifamily and office, whether you're an investor or a broker, it's one of those where I used to do multifamily, and it's almost impossible to specialize in multifamily just because there's not enough deals, even on a nationwide basis.
• 12:53
  SPEAKER_01: There was only like 38 deals in the entire state of Tennessee in the last six months or so far this year, what are we in August?
• 13:02
  SPEAKER_01: And you got to figure, okay, how many syndicators are in Tennessee?
• 13:06
  SPEAKER_01: How many of those deals were less than three or four million dollars?
• 13:09
  SPEAKER_01: You know, how many of them went to the big shops?
• 13:12
  SPEAKER_01: And then that that leaves like a hundred brokers and a thousand investors chasing like five deals.
• 13:19
  SPEAKER_01: So, you know, and that's that's in Tennessee.
• 13:22
  SPEAKER_01: So it's like you have to branch out into other asset classes.
• 13:26
  SPEAKER_01: I wanted to uh talk to you a little bit about storage.
• 13:29
  SPEAKER_01: It's kind of interesting, you know, and you might not have all the answers, and it's probably moving pretty fast, like it changes every week or day, and you know, how is like the AI and all that?
• 13:42
  SPEAKER_01: Are you able to remotely operate storage?
• 13:45
  SPEAKER_01: It'll never be fully remote, but because it's a physical location, but how does that look now versus you know 10 years ago?
• 13:54
  SPEAKER_03: Yeah, I mean look, AI AI is impacting the whole industry, I think, for the most part, positively, much more efficiently, you know, speed to response.
• 14:04
  SPEAKER_03: There's lots of AI software out there that can chat with a prospective tenant or resident, whether it's apartments or storage.
• 14:13
  SPEAKER_03: Um, and then on the leasing front, you know, there are, I would say, pretty much fully automated facilities out there now, Carson.
• 14:22
  SPEAKER_03: Usually in I call it tight urban infill areas where you know there's a gate and a code, and you go in and you can access your storage and you can get in and out pretty easily.
• 14:33
  SPEAKER_01: So could you like go up and like pay on your phone and then like key in?
• 14:37
  SPEAKER_03: Yeah, you can do uh sign leases on your phone, you can have auto pay set up.
• 14:42
  SPEAKER_03: I mean, the simpler you make it for the prospective tenant or existing tenants to renew, to pay, sign paperwork, you know, the there's less disruption and potential of them just not doing it.
• 14:56
  SPEAKER_03: And so you're seeing a lot of that in different real estate sectors.
• 15:00
  SPEAKER_03: Storage is definitely one.
• 15:01
  SPEAKER_03: Another big one on storage is more I would call it uh, you know, the dynamic pricing model that like airlines and hotels use where you go online and picking up a flight or hotel, and it will change the price every day based on supply and demand in your local area.
• 15:18
  SPEAKER_03: Self-storage is run on many facilities the same way.
• 15:23
  SPEAKER_03: So there's a lot of sophistication that goes on there.
• 15:26
  SPEAKER_03: It'll also look at, I mean, apartments do this too, Carson.
• 15:30
  SPEAKER_03: It looks at your occupancy, what units do you have left, what size, you know, are there some weird outliers like a five by ten unit in self-storage, might be too small, maybe not a lot of demand, and it it will know that because it'll look at your total unit mix and say, gosh, if you had these these five units that are small that are sitting vacant for 37 days while the rest of the bigger ones are gone in seven days, let's drop the price.
• 15:58
  SPEAKER_03: And it does this automatically.
• 16:00
  SPEAKER_01: I love that, maybe it's pretty incredible.
• 16:03
  SPEAKER_01: I would I can't remember who I was talking to recently.
• 16:06
  SPEAKER_01: Uh, they were doing uh coworking, and he said, Really, we're a technology company.
• 16:11
  SPEAKER_01: Because he was talking about kind of what you're talking about, like the pricing and online, and it's all lead generation, is what it is.
• 16:19
  SPEAKER_01: He said, We're an AI technology company, and then coworking's our second.
• 16:23
  SPEAKER_01: And he said we had all these leasing tenants that we were getting, and then we just started putting them in here.
• 16:28
  SPEAKER_01: Yeah, I don't know.
• 16:29
  SPEAKER_01: It's just kind of crazy, you know, the pricing model and how fast things move.
• 16:34
  SPEAKER_01: So that's it.
• 16:36
  SPEAKER_01: I have a friend that has a listing here in Tennessee, and he was telling me it was like built in 2023, and he he just put it on the he's actually got a couple storage units.
• 16:45
  SPEAKER_01: One was 2021, but and he was telling me how it was like fully automated.
• 16:50
  SPEAKER_01: And I never drilled down with him because we were in an event and we we were just talking about other stuff, you know.
• 16:55
  SPEAKER_01: So I was like, hey, I mean, I got this guy here, he probably knows exactly how they're you know as an operations guy.
• 17:01
  SPEAKER_03: So that's I mean, there's some some storage facilities out there, like they're fully automated.
• 17:08
  SPEAKER_03: Most of the stuff we invest in, Carson, we tend to have one or two employees for call it 700 to 1,000 units.
• 17:15
  SPEAKER_03: And so you don't need a lot of staff in the first place.
• 17:18
  SPEAKER_03: But where that can be helpful is if you've got folks that you know aren't tech savvy and don't want to deal with the AI and the software.
• 17:25
  SPEAKER_03: They're maybe they're in the office and they need to buy some tape and some boxes, and you know, they don't want to do the self-checkout kind of thing.
• 17:31
  SPEAKER_03: And so they'd rather deal with a person, and uh, we tend to find that that that's still really cost effective because you have one or two people for that many units is not a big burden on the expense part.
• 17:44
  SPEAKER_01: I I think what you're getting at is very critical because I was just having this same conversation, and it's like real estate's changing so fast that you feel like cold calling's dead, but it's not.
• 17:55
  SPEAKER_01: I said, Okay, how are you gonna get a hold of my dad?
• 17:58
  SPEAKER_01: My dad's not on LinkedIn, he's not on Facebook.
• 18:02
  SPEAKER_01: The only way to get a hold of my dad is to call him, you know.
• 18:05
  SPEAKER_01: So there's certain people, if my dad goes and gets a storage facility or like, hey, they got too much stuff at their house, he's gonna walk in and want to talk to somebody.
• 18:14
  SPEAKER_01: You know, I mean it's one of those where it's changing, but it'll never be dead.
• 18:18
  SPEAKER_01: You know, the old school way of doing things.
• 18:20
  SPEAKER_01: So I think your model of doing both is a critical, like, hey, you know, you do need somebody with boots on the ground in certain situations.
• 18:30
  SPEAKER_01: Um, 700 units sounds like a ton, but you know, for a storage facility, how many acres is that on?
• 18:36
  SPEAKER_01: I mean, a few.
• 18:38
  SPEAKER_03: Yeah.
• 18:38
  SPEAKER_03: I mean, it also depends, right?
• 18:40
  SPEAKER_03: If you're going vertical and you've got multiple stories and elevator access, then you know shrink that further.
• 18:47
  SPEAKER_03: Most of the stuff we're investing in has drive up, and so it's got a little bit larger acreage and it's more of a secondary market.
• 18:53
  SPEAKER_03: But um to add to your point about like Colin and your father, I think that's a really important Carson, because we um so we look at I mean we look at two to three different investment opportunities every single day.
• 19:05
  SPEAKER_03: So around six to seven hundred a year, and we'll invest in about five to ten.
• 19:10
  SPEAKER_03: Um so roughly 98, 99% of the deals we see, we pass on, and we're just looking for that one to two percent.
• 19:18
  SPEAKER_03: And what what I'm finding and have found for a few years now is that some of the best deals from an investment standpoint are coming from that direct to seller contact, which you're talking about, like, hey, the only way to get a hold of my father is by the by the phone, right?
• 19:34
  SPEAKER_03: And so we've got um in mobile home parks and self-storage and some industrial, you've got these legacy owners.
• 19:42
  SPEAKER_03: They've the families own the property for 20, 30, 40 years, Carson.
• 19:46
  SPEAKER_03: Yeah, Patriarch is is either past or getting old and tired, they don't want to deal with it anymore.
• 19:53
  SPEAKER_03: And so we uh recently invested into a portfolio of um these three assets, and one of the properties in there, the uh my operators had been calling on the family for 20 years, literally.
• 20:09
  SPEAKER_03: Right?
• 20:09
  SPEAKER_03: Every every quarter or two, he connects with them on the phone.
• 20:12
  SPEAKER_03: How's it going?
• 20:13
  SPEAKER_03: This, that he's met them in person twice, and guess what?
• 20:16
  SPEAKER_03: When they're finally ready to sell, they make one call.
• 20:19
  SPEAKER_03: They're not listing it with an agent, they've already got their buyer, and they call it a uh you know, 28% discount to appraised value right off the bat.
• 20:27
  SPEAKER_03: So those kinds of deals are out there.
• 20:29
  SPEAKER_01: You just gotta be hungry and I don't know what's more impressive the 28% discount or your partner following up with him for 20 years.
• 20:39
  SPEAKER_01: That's gotta be like a Guinness book of world's record.
• 20:42
  SPEAKER_03: You know, he's one of the best cold callers in the mobile home park space, has been for decades.
• 20:47
  SPEAKER_01: So yeah, how he built his business.
• 20:50
  SPEAKER_01: I I don't cold call really at all.
• 20:54
  SPEAKER_01: So what I'll do is I'll call and I'll invite him to lunch.
• 20:57
  SPEAKER_01: You know, I don't really I don't want it to feel like a harassment campaign.
• 21:01
  SPEAKER_01: Like I had a guy down the street and I was like, hey man, just uh wanted to touch base with you.
• 21:05
  SPEAKER_01: You know, there's that uh cafe right by you.
• 21:08
  SPEAKER_01: You want to go grab a burger, you know, something like that.
• 21:11
  SPEAKER_01: Because they're not gonna buy from you unless they get to know you.
• 21:14
  SPEAKER_01: So for sure.
• 21:16
  SPEAKER_01: But yeah, I I do a little bit of that.
• 21:18
  SPEAKER_01: I actually do more letters because that same kind of thing you're talking about, like those letters will stack, and as soon as they're ready to sell, you know, it could be like a year, two, three years later, and they're like they they pick up their phone and they call you.
• 21:30
  SPEAKER_01: So anyway.
• 21:32
  SPEAKER_01: I'm very I'm very impressed.
• 21:34
  SPEAKER_01: Uh so you guys do uh industrial as well, right?
• 21:37
  SPEAKER_03: We do, yeah.
• 21:38
  SPEAKER_03: We've been investing industrial for a number of years now.
• 21:41
  SPEAKER_03: We um we like it for a few different reasons, Carson, but essentially, you know, if it's triple net where the tenants are responsible for all the expenses, including taxes and insurance and maintenance, yeah.
• 21:53
  SPEAKER_03: Then you have this, you know, inflation proof investment where you might have again, depends on the the The lease, but um, if it's a small bay industrial, for example, property, you might have a three to five year lease.
• 22:06
  SPEAKER_03: And each year you usually have rent escalation.
• 22:10
  SPEAKER_03: So the rent goes up, it's built into the lease already.
• 22:13
  SPEAKER_01: Yeah.
• 22:14
  SPEAKER_03: Triple net, the tenants pay the expenses, you have increasing revenue and net operating income, and it's predictable and consistent, and you get nice cash flow out of it starting from day one.
• 22:26
  SPEAKER_03: On the um the sale lease back process, which is another niche within the niche, you have a company that they own the real estate that they operate out of.
• 22:37
  SPEAKER_03: Think about a manufacturing business.
• 22:39
  SPEAKER_03: Um, we recently invested in a in a property, for example.
• 22:42
  SPEAKER_03: The tenant was uh is a uh hardcourt sports court manufacturer, they make basketball courts for the NBA.
• 22:51
  SPEAKER_03: They've been in business since 1895, and not that's not right.
• 22:56
  SPEAKER_03: And so they recently got acquired by a private equity shop in 2024, and then they wanted to sell the real estate that they operate out of, which is six properties in three states, by the way, yeah, to get an injection of revenue back into the company and grow it.
• 23:13
  SPEAKER_03: And so they're not in the real estate business, they just want to grow the operating business.
• 23:18
  SPEAKER_03: And so the seller becomes your tenant, and in those kinds of deals, you're often seeing 20 to 25-year leases that are escalating rents every year.
• 23:28
  SPEAKER_03: Wow.
• 23:29
  SPEAKER_01: So that's stable, too.
• 23:31
  SPEAKER_01: Say again, very stable.
• 23:34
  SPEAKER_03: Stable, consistent income.
• 23:36
  SPEAKER_03: Of course, you have you know single tenant lease risk, and so what what we like to do to offset that is we'll look for portfolios where there's 20, 30 of these types of uh triple net industrial sale lease back tenants all in one portfolio, that really reduces the risk if one or two of the tenants happen to go out of business or leave, doesn't affect your overall return much.
• 23:59
  SPEAKER_01: I I think if you are the one when the business that started in the 1800s goes out of business, that's really bad luck, man.
• 24:08
  SPEAKER_01: Yeah, I don't know that was going anywhere.
• 24:10
  SPEAKER_01: Right when we got in business with them, they went out of business.
• 24:13
  SPEAKER_03: Right?
• 24:13
  SPEAKER_03: Yeah, it doesn't happen very often.
• 24:15
  SPEAKER_01: Yeah.
• 24:16
  SPEAKER_01: Um, I have an industrial sponsor that builds out for kind of similar to what y'all are doing, but then they lease it to them, then they allow them to buy them out at the end, you know, kind of a just a different, like the backwards version of what you're doing, but you know, kind of similar.
• 24:31
  SPEAKER_01: So anyway.
• 24:32
  SPEAKER_01: Um, so you if if I had somebody that had industrial and it had a bunch of uh single tenants in there, you'd be interested in maybe a portfolio of them, maybe.
• 24:43
  SPEAKER_03: Yeah, I mean, look, we look at a ton of deals, Carson.
• 24:45
  SPEAKER_03: So uh if there's a prospective opportunity that, you know, we got a lot of boxes to check, to be honest with you, but I'm happy to take a look.
• 24:54
  SPEAKER_03: Yeah, we we underrate a lot of deals.
• 24:56
  SPEAKER_01: Yeah, that's the first question.
• 24:58
  SPEAKER_01: You know, can you can you make it work out of the gate?
• 25:00
  SPEAKER_01: You know, am I gonna throw this in the trash or you know, really look at it?
• 25:04
  SPEAKER_01: So you know I think yeah, it it it depends on a lot.
• 25:09
  SPEAKER_01: So that's that's pretty awesome, man.
• 25:11
  SPEAKER_01: You're involved in a lot of stuff.
• 25:13
  SPEAKER_01: What is your favorite state to buy in and favorite market right now?
• 25:17
  SPEAKER_03: I don't have a favorite, to be honest with you, Carson.
• 25:20
  SPEAKER_03: Um, again, we're pretty spread out.
• 25:22
  SPEAKER_03: We do focus a lot on diversification.
• 25:25
  SPEAKER_03: There's pros and cons to every state.
• 25:28
  SPEAKER_03: I'll mention a couple just as examples.
• 25:30
  SPEAKER_03: Like, you know, Texas has been growing and growing and growing for decades now.
• 25:36
  SPEAKER_03: It's still on the top of the list of most data.
• 25:40
  SPEAKER_03: You know, you look up one of the fastest growing states, it's it's Texas is always up there, right?
• 25:44
  SPEAKER_01: You've got you're up, yeah.
• 25:46
  SPEAKER_03: It's always migration and population growth.
• 25:50
  SPEAKER_03: There's companies moving there all the time, which is great as a tailwind.
• 25:55
  SPEAKER_03: But in these types of markets, over the last few years, for apartments specifically, we've seen a significant amount of new construction getting built, new supply coming online.
• 26:05
  SPEAKER_03: Yeah, kind of causes a bit of a stress on the market for sure.
• 26:10
  SPEAKER_03: And so Texas multifamily right now, we are being very cautious about because of some of the new supply that's come online.
• 26:17
  SPEAKER_03: We're seeing you know, flat rent growth, or some markets are still declining.
• 26:22
  SPEAKER_03: We're seeing occupancy going down a little bit.
• 26:24
  SPEAKER_03: All of this is short term, it will change.
• 26:27
  SPEAKER_03: You just don't know exactly when.
• 26:29
  SPEAKER_03: Probably in the next year or so, based on the fact that a lot of this new supply has worked through the system.
• 26:36
  SPEAKER_03: But I bring that up because there is no one perfect market.
• 26:39
  SPEAKER_03: If I see a great deal in Dallas, now it could be a great time to get in.
• 26:43
  SPEAKER_03: But you've got to remember the first couple years are gonna be a little bit bumpy because we're still running through this.
• 26:49
  SPEAKER_03: But you might be able to get a nice discount on the asset because of that, right?
• 26:52
  SPEAKER_03: If you wait another year or two, some of that pricing discount might be gone.
• 26:57
  SPEAKER_03: And so you've got to weigh that out.
• 26:59
  SPEAKER_03: And then we look at like a Kansas City, which has been great for apartments.
• 27:02
  SPEAKER_03: We've got a property there that we continue to renovate, continue to raise rents, occupancy is 97%, and it's just keeps going right.
• 27:12
  SPEAKER_03: And so it's a very local specific area, and then you know, mobile home parks, completely different story.
• 27:18
  SPEAKER_03: We tend to stay more in uh secondary markets uh in the Midwest.
• 27:23
  SPEAKER_03: Um we are investing in industrial and in a few different markets, and we just put some money into a really nice property in South Carolina, and so it all depends on what and where, but generally speaking, you want to go where supply is low and demand is high.
• 27:42
  SPEAKER_01: Yeah, I I agree with you on the Midwest, you know, even up into Ohio would be another one that had kind of a similar feel to uh Kansas City, you know, it didn't get just way overbuilt like Houston and Dallas and Nashville.
• 27:58
  SPEAKER_01: I live in Nashville, I'm not trying to talk bad about it.
• 28:00
  SPEAKER_01: It's a great market.
• 28:02
  SPEAKER_01: I love the city, but they overbuilt, they got sure they drunk got drunk on COVID growth and overbuilt.
• 28:08
  SPEAKER_01: And it's it's correcting itself out.
• 28:09
  SPEAKER_01: It's starting to become a better market, but I I totally understand what you're saying.
• 28:14
  SPEAKER_01: It's it's really hard to specialize because it's like, okay, if I'm only buying apartments in Dallas or a certain place, it's got to be a really good market for you to specialize.
• 28:25
  SPEAKER_01: You know, as soon as the market turns, if you're not looking in other places, it's like you're you're basically pigeonholing yourself into like either bad deals.
• 28:34
  SPEAKER_01: The problem with that is if you're only looking in a certain market, you'll pigeonhole yourself and then you'll get frustrated and you'll make a dumb decision and buy the wrong complex.
• 28:42
  SPEAKER_01: Versus having like a spread, you're like it allows you to be a little more selective because you have more deals coming at you.
• 28:50
  SPEAKER_01: You know, I I I think your business model is a good one.
• 28:53
  SPEAKER_01: And you're not, it's not like you're getting into stuff you don't know.
• 28:58
  SPEAKER_01: You have a lot of experience, but it's like three key areas, you know.
• 29:02
  SPEAKER_01: Hey, we'll step into multifamily.
• 29:04
  SPEAKER_01: We know what we're doing there, but we're gonna focus here for right now until this looks a little better.
• 29:09
  SPEAKER_01: I kind of like the approach on that, you know.
• 29:11
  SPEAKER_01: It's something uh it's not it's it's it's refreshing to see, let me put it that way.
• 29:16
  SPEAKER_03: So yeah, I appreciate that, Carson.
• 29:18
  SPEAKER_03: I mean, look, it's it's timing, right?
• 29:20
  SPEAKER_03: You can't time the market perfectly, but you can see trends.
• 29:23
  SPEAKER_03: You can see when something might be overpriced and when it might be underpriced.
• 29:27
  SPEAKER_03: And so that's where you want to focus on is now a good time to be getting in whether it's the top or not.
• 29:32
  SPEAKER_03: You don't know the bottom or not.
• 29:34
  SPEAKER_03: You don't know, should we sell, should we buy, but you want to be looking at that to try and make as much of an informed decision based on the math as you can.
• 29:43
  SPEAKER_01: I think like uh that that's like what you're saying is what I believe too.
• 29:47
  SPEAKER_01: It's like we don't really time the market, but we listen to it.
• 29:50
  SPEAKER_01: You know, it's like it's telling us not to go here.
• 29:55
  SPEAKER_01: So or or this is this is changing, is what it's telling us.
• 29:59
  SPEAKER_01: So, you know, you have to keep an eye on it.
• 30:01
  SPEAKER_01: I think the one blind spot for most investors is supply.
• 30:06
  SPEAKER_01: And you kind of make a good point, like you have your eye on it, you're like, okay, and most investors are just totally blind to it.
• 30:13
  SPEAKER_01: They start looking at cap rate, and it's like, okay, you know, you could go in and say this is cash flowing, great, but if there's, you know, 10,000 units under construction, and uh so you you and I'm not trying to talk bad about Nashville again, but in Nashville, industrial is a great asset class.
• 30:30
  SPEAKER_01: I love it.
• 30:31
  SPEAKER_01: You know, the triple net, all the reasons, higher credit tenants, like you were talking about, but there is 10 million square feet of industrial under construction in the Nashville area.
• 30:42
  SPEAKER_01: And I'm like, oh so that's fine.
• 30:46
  SPEAKER_01: I mean that's I told a friend, I said, yeah, it's a couple.
• 30:50
  SPEAKER_01: I said, you know, sometimes they know more than we do.
• 30:53
  SPEAKER_01: And like, you know, a month later, somebody uh came in and took out a million square feet.
• 30:58
  SPEAKER_01: Like they know the institutions, they know people are trying to get through state approvals and stuff like that, and they're kind of building ahead of it, you know.
• 31:06
  SPEAKER_01: I don't know, but anyway, you you can see some numbers where your jaw drops.
• 31:11
  SPEAKER_01: So, but you know, like Kansas City is a great market for industrial.
• 31:15
  SPEAKER_01: Some of those Midwest are great.
• 31:17
  SPEAKER_01: So I think it's like know your markets, know what's going on in them, you know, and don't go places you know, but also at the same time, don't specialize.
• 31:25
  SPEAKER_01: So it's kind of complicated, but it's not.
• 31:28
  SPEAKER_01: So anyway.
• 31:30
  SPEAKER_01: Um, what is uh like probably the biggest mistake y'all ever made in your early uh investing lives?
• 31:37
  SPEAKER_03: You know, I remember, gosh, this is probably 15 years ago.
• 31:40
  SPEAKER_03: We were looking at rent to price ratios on smaller multifamily properties.
• 31:47
  SPEAKER_03: So I think 12 units or less.
• 31:51
  SPEAKER_03: And I was looking almost nationwide.
• 31:54
  SPEAKER_03: I'm trying to find you know, where's the highest cash flow I can get, right?
• 31:57
  SPEAKER_03: And where'd that take us to?
• 31:59
  SPEAKER_03: It took us to parts of Ohio, Cleveland, Ohio, where you can get a hundred thousand dollar fourplex that's bringing in, you know, on paper, twenty four hundred bucks a month in rent.
• 32:12
  SPEAKER_03: And so think about a 2.4, you know,$2,400 divided by$100,000 rent-to-price ratio.
• 32:20
  SPEAKER_03: You you think that thing's just printing money.
• 32:23
  SPEAKER_03: But the reality of that is it was in a war zone.
• 32:26
  SPEAKER_03: We bought it, by the way.
• 32:27
  SPEAKER_03: My father and I bought it.
• 32:28
  SPEAKER_03: We didn't put any investment capital into it, but we bought it ourselves.
• 32:32
  SPEAKER_03: And uh, oh my gosh, what a headache that thing was, Carson.
• 32:36
  SPEAKER_03: Just I I worked through four different property management companies because I don't live there, and so you have to hire someone to oversee it, and they all work on pennies on margin, right?
• 32:46
  SPEAKER_03: And so they're not trying that hard.
• 32:48
  SPEAKER_03: Tenants don't pay, there's crime, there's break-ins, there's leaks, there's you know, the list of headaches.
• 32:54
  SPEAKER_03: It didn't make any money, and we ended up selling it for$55,000 just to get the heck out of it.
• 32:59
  SPEAKER_01: Wow.
• 33:00
  SPEAKER_01: So it's like, you know, if the cash flow is too high, it's almost a red flag.
• 33:04
  SPEAKER_03: Yeah.
• 33:05
  SPEAKER_03: You know, after that, you learn quickly there's a reason why there's not 20 people bidding on it.
• 33:10
  SPEAKER_03: It's because it's it's not uh you're not likely to actually receive the revenue, and your expenses are likely to be much higher than you predict, and the amount of time it takes to manage it is just not worth it.
• 33:24
  SPEAKER_01: Not worth it, yeah.
• 33:26
  SPEAKER_03: I'll tell you a story.
• 33:26
  SPEAKER_03: One of the tenants didn't pay rent, we went through the eviction process, you know, the police show up at her door, she had to actually get vacated out.
• 33:34
  SPEAKER_03: Wow.
• 33:34
  SPEAKER_03: And um we found out and they left the door and we come back two days later.
• 33:39
  SPEAKER_03: She had actually left the gas on in the oven with the oven door open, trying to basically blow the place up.
• 33:47
  SPEAKER_03: Holy hoping it would ignite and blow.
• 33:50
  SPEAKER_03: So you don't want to deal with stuff like that, Carson.
• 33:53
  SPEAKER_03: But we you know, yeah, there's lessons learned 15 years ago, and we just don't touch things like that.
• 33:57
  SPEAKER_01: You come out with one eyebrow.
• 33:59
  SPEAKER_01: Oh, I escape.
• 34:01
  SPEAKER_03: There you go.
• 34:01
  SPEAKER_03: We'd be lucky just to lose an eyebrow.
• 34:04
  SPEAKER_01: Yeah, that's pretty funny, man.
• 34:07
  SPEAKER_01: No, it's kind of crazy, like the things you learn early on investing, you know, whether it's your first rental house, everybody's got some sort of war story where like they're like, I'll never do this again.
• 34:17
  SPEAKER_01: But I think it's like critical what you're saying is like know your markets and stuff like that.
• 34:21
  SPEAKER_01: And then, you know, talking to people, you know, we talk about buying businesses, and like when we go in, it's okay, if you're gonna buy this business, we need to talk to people in the local community and like figure out what the reputation is of the seller.
• 34:35
  SPEAKER_01: And it's just little things like that.
• 34:37
  SPEAKER_01: It's like on your first one, everybody always gets burned, but you never get burned again.
• 34:42
  SPEAKER_01: So, you know, it's uh after you deal with a situation.
• 34:47
  SPEAKER_01: Oh, yeah, your experience.
• 34:48
  SPEAKER_01: So, you know, anyway.
• 34:50
  SPEAKER_01: Um, so like are you guys um as far as investors, do y'all need investors, or what do you what do y'all do?
• 34:58
  SPEAKER_01: How do you how do you raise most of your capital?
• 35:00
  SPEAKER_03: Yeah, I mean, we work with um a good number of investors, Carson.
• 35:04
  SPEAKER_03: We have been for a lot of years, but we do raise capital.
• 35:07
  SPEAKER_03: We um most of our deals are require folks to be accredited, so they have to have net worth of a million dollars or more, um uh or income of 200k plus per year.
• 35:19
  SPEAKER_03: So there's that guideline, but other than that, you know, most of our investors are looking for a trusted partner to be able to invest passively in private real estate.
• 35:30
  SPEAKER_03: And that's what they tell us for, right?
• 35:32
  SPEAKER_03: They don't necessarily have the time, the skill, the experience, the interest in looking at hundreds of deals to find one.
• 35:40
  SPEAKER_03: And so that's what they're relying on us for.
• 35:41
  SPEAKER_03: And then they want passive income, they want both, and they want you know, tax savings as well through passive losses and all done through one trusted partner.
• 35:51
  SPEAKER_01: Yeah.
• 35:51
  SPEAKER_01: I I really like this industrial.
• 35:54
  SPEAKER_01: I the storage sounds pretty cool with the automation, you know.
• 35:58
  SPEAKER_01: Um, all all of it's pretty fascinating.
• 36:01
  SPEAKER_01: Um, the mobile home parks, I think, are a great um asset class to be in.
• 36:06
  SPEAKER_01: I like how you're very, very selective on your markets and it all makes sense.
• 36:11
  SPEAKER_01: Like, you know, staying away from the beaches because insurance and too low a cost, just various different reasons.
• 36:17
  SPEAKER_01: Uh overpaying on the beaches.
• 36:19
  SPEAKER_01: So, you know.
• 36:20
  SPEAKER_01: Yeah, totally.
• 36:21
  SPEAKER_01: That's that's for your personal residence, too.
• 36:23
  SPEAKER_01: I don't have a house in San Diego, but I want one, but you know, I'll just rent one for a weekend.
• 36:29
  SPEAKER_01: How about that?
• 36:29
  SPEAKER_01: You know, you go something like that.
• 36:32
  SPEAKER_01: I'll rent a Lamborghini, not buy one.
• 36:34
  SPEAKER_01: How about that?
• 36:35
  SPEAKER_01: Something like that.
• 36:36
  SPEAKER_01: I won't rent a Lamborghini, I'm kidding.
• 36:39
  SPEAKER_01: Uh um well, awesome, man.
• 36:43
  SPEAKER_01: What so if uh people listening, you know, want to get involved and you know, like, you know, want to just connect with you and network or whatever, you know, um, either investors or brokers or potential partners on deals, you know.
• 36:58
  SPEAKER_01: Um what's what's the best way to find you?
• 37:00
  SPEAKER_01: You're on LinkedIn, aren't you?
• 37:01
  SPEAKER_01: I think you're connected to me.
• 37:03
  SPEAKER_01: Actually, you are.
• 37:03
  SPEAKER_03: I'm on um also you know, usually easier to find us is uh just at our website, smkcap.com.
• 37:12
  SPEAKER_03: Our company is SMK Capital Management and SMKcap.com.
• 37:18
  SPEAKER_01: Yeah, C A P.
• 37:20
  SPEAKER_03: Exactly.
• 37:21
  SPEAKER_03: Um, for people that want to learn more, uh just you can sign up and join our investor network.
• 37:27
  SPEAKER_03: Uh there's no requirement to invest, but you can learn, you can see what we're doing, why, how we think, the type of investments we're making.
• 37:34
  SPEAKER_03: We also tell you a lot about the ones we don't make and why.
• 37:37
  SPEAKER_03: And so a lot of education there.
• 37:40
  SPEAKER_03: But a great resource uh uh is the website to sign up to learn about the passive investments that we're we're focusing on.
• 37:46
  SPEAKER_01: So um I'm doing uh live events now because we're like past COVID.
• 37:51
  SPEAKER_01: I tell people it's like we're five years, no, six or seven past COVID, and I'm doing an event in um Knoxville, and it's you know, bringing property owners out, you know, we're looking for property and business owners to connect with, you know, just for partners.
• 38:06
  SPEAKER_01: We're not hard selling anybody.
• 38:08
  SPEAKER_01: That's one of our themes of our networking is no hard sales pitches and just uh getting to know people, you know, um for assets to buy, and we're educating them on like uh cost segregation, opportunity zones, you know, 1031s, just different uh tax um things they can do to make it kind of educational, but we're not doing it like a seminar style where there's people talking the whole time.
• 38:34
  SPEAKER_01: You know, we just have our guys stand up for you know, like our sponsors talk for like two to five minutes.
• 38:40
  SPEAKER_01: I said they don't you're gonna make everybody fall asleep if you stand here, and then the rest is just cocktails and hanging out.
• 38:46
  SPEAKER_03: So that's good.
• 38:47
  SPEAKER_01: You know, it's kind of a different style to it.
• 38:49
  SPEAKER_01: It's there's no real panel or anything.
• 38:51
  SPEAKER_01: So it's hard to get sponsors because they're like, what?
• 38:54
  SPEAKER_01: I don't get to talk for an hour, you know, and you're like, no, get to know people, man.
• 38:58
  SPEAKER_01: You know, come hang out.
• 38:59
  SPEAKER_01: So anyway, but yeah, everybody hit his site is SMK Cap.
• 39:03
  SPEAKER_01: I love the simple website so people can find you.
• 39:06
  SPEAKER_01: You know, uh connect with Mark, he's on LinkedIn and all that.
• 39:09
  SPEAKER_01: And uh great guy, got a great uh setup and great method for finding his investments and all that.
• 39:14
  SPEAKER_01: So anyway, I appreciate you coming on, man.
• 39:16
  SPEAKER_01: Thank you, sir.
• 39:17
  SPEAKER_01: My pleasure.
• 39:18
  SPEAKER_03: Thanks, Carson.
• 39:19
  SPEAKER_01: Yeah, absolutely.