Latest / Real Estate Investing with RealDealCrew / Manufactured Housing Investing w/ Nathan Jameson of Arx Capital

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Manufactured Housing Investing w/ Nathan Jameson of Arx Capital · Real Estate Investing with RealDealCrew

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a borrower with a 750 credit store can still get stuck paying a 9 or
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10% on their home loan, simply because that home is manufactured instead
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of site built. Today's guest thinks that's one of the biggest missed opportunities
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in housing right now. In this episode,
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you'll learn why affordable manufactured housing is one of the most underbuilt asset
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classes in the country. Why institutional buyers keep getting the
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fill the lot and sell playbook wrong and what it's actually takes to turn
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a run down mobile home park into a community residents are proud to call home.
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Nathan Jameson is the founder of ARX Capital,
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Where he and his team manage close to two hundred million dollars across
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manufactured housing, RV parks,
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and self-storage. If you want to build systems like this into your
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own real estate investing business,
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check out RealDealCrew dot com.
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Let's get started.
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Nathan Jameson joins me here today and you can learn what his team can help
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you with by heading over to arcsventures dot com.
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That's gonna be a clickable link in the show notes.
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~ that can be a couple
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Really appreciate your time here today,
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Nathan, as we talk about your niche.
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of interests to throw
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That's really interesting.
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no. Thanks for having me, Jack.
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I look forward to the conversation.
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Well to to start, how would you
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No.
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describe your role at ARCS Capital today and what parts of the business
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are you personally most focused on right now?
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Yeah, I I have moved into more of a strategy and visionary role.
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And I and I use those words carefully because our firm is is using
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the system some people know as EOS or the entrepreneurial operating system,
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where the CEO and the COO are affectionately called the visionary
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and the integrator. And that's not,
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you know, something I've been doing for,
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you know, fifteen years.
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for most of that time I was you know kind of chief operator
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and involved in everything day to day in the business.
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And while I'm still responsible for everything today,
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our outstanding team of experienced operating of finance and legal professionals
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are taking care of a lot of the day to day.
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And my job is to maintain culture and set strategy and make sure the buck stops with
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me.
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It's interesting. You're not the last person who has brought that
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up that you've adopted EOS. Can you talk a little bit about what happened when
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you made that decision to make that adoption and and that specific change
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to your to your landscape?
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Sure, sure. You know, quick for context,
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ARCS Capital is managing about 150 million,
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close to 200 million in assets under management.
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And those are largely real estate investments focused on manufactured housing,
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RV parks, self-storage, and land development and entitlement business.
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Like many businesses that are founder-led and had a growth spurt,
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you know, I had an awareness.
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maybe 18 to 24 months ago, that the risk to our team's growth and
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our ability to deliver for our for our partners was me being in the way.
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me micromanaging the decisions and the execution
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of very highly talented and experienced team members that we have.
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And so I went kind of looking for a way to think about the next stage
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of growth for the business. And there were a couple entrepreneurs that
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I really respected.
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who had had exits, and I reached out to them to to find out and what
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did they do that really helped them transition to that next phase.
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And each of them told me that they used the system called
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the entrepreneur operating system or EOS.
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And so we got engaged with a coach,
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the they call them an implementer,
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who was over the last year taking us through the process to more clearly define
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our mission and vision, our core values,
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and the accountability without throughout the organization.
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So that we're not stepping on each other's toes and yet we're also accountable
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to one another for the decisions we're making and the actual outcomes that
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we can produce.
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That's interesting. You know, most people start there by reading that
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the book Traction. You took it even a step further and found somebody
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to help you implement this. It kind of goes back to just real estate investing
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or just mindset and coaching all together.
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It's really great to make that investment.
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The the implementation is usually a lot softer and quicker than trying to
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go it on your own, isn't it?
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I think that's a fair point, Jack.
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I I'm an old coach, if you will.
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I coached college basketball for a time and and you know,
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coached my children and other other kids.
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And I was I played athletics myself,
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and you know, the value of a really good coach is hard to overstate.
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And so in our case, having an EOS coach has helped us be accountable.
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and that I wanted that. I wanted accountability.
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for the system. So I'd rather make the investment and feel like,
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you know what, we're making this investment.
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I want to make sure we get the most out of it,
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versus an approach that's like,
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well, we'll kinda we'll kinda get to it.
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And the truth is it's one of those not urgent but very important things.
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And those things tend to go to the back burner unless we make a commitment.
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And in this case we made a commitment to a coach who's really helped us.
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So you already mentioned that ARCS focuses on real estate sectors like mobile home
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parks, R V parks, and self storage.
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What originally led the firm to those asset classes instead of
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the more traditional real estate place?
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Well, what started it was I spent the first part of my career,
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about thirteen years, in kind of large production home building with
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a privately owned home builder.
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And the the time of you know to from when you invest in the property
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to when you kind of harvest the the profits in a in a home building development,
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you know, a large subdivision is extensive,
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right? I mean, could be seven to ten years.
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from the time you begin to entitle a property to the time you kind
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of close that warranty on the last home.
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And that does a couple things.
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Number one, it creates a a negative tax impact because of the how home building
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is taxed. Called phantom income.
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So I didn't like that. I was looking for a solution to that.
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And secondly, having come, you know,
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been with the home builder and had success through the Great Recession,
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I was looking for an asset class that I thought would be more durable through
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economic cycles. And so as I researched,
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I landed on manufactured housing for both the tax benefits and the kind
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of acyclical benefits of it when you look at it across the last fifty years.
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So when you look at those three verticals,
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what characteristics make them especially attractive from a risk adjusted adjusted
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return standpoint?
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Yes, so the first thing is it's housing.
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And as as a country and particularly on the coasts,
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we just don't produce enough housing.
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And when I think about risk adjusted returns,
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then we really want to go to places where supply and demand are out of balance.
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Ideally, there's not enough supply to meet the demand that's there.
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So housing as a category kind of exists in that paradigm at the moment.
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And then affordable housing, of which manufactured housing is
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the most affordable housing, it's not subsidized by the government in any way.
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So it's not Section 8 housing,
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it's not low low-income tax credit housing.
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And so we don't make enough of that.
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And so the supply-demand imbalance is even greater in
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the affordable housing category,
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which is what enables it to be fairly well uncorrelated to economic booms and busts.
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So you you mentioned being on maybe being on the coast.
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Is that your primary market or what markets are you currently operating in?
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So we are based outside Philadelphia in the western suburbs.
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And as a result, you know, when I started the business,
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I I wanted to make sure as the primary operator that I could get there within three
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hours. And so that was our focus.
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But living where we live near Philadelphia,
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that puts us in reach of major metros like the Baltimore markets,
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Delaware, New Jersey, and even the New York markets,
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although we haven't purchased anything in New York at this time.
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So we are focused primarily, at least initially,
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on those kind of four or five states in the Northeast and Mid-Atlantic.
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And today we're expanding now that we've we've proven the operation over
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the last decade and we've had a number of exits in our in our first
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and second funds. we're now also expanding into the Midwest as we continue
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to expand our portfolio of opportunity.
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Okay. Well, you know, it's kind of interesting.
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You're you're essentially on the east coast.
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A lot of people would typically kind of avoid those areas because
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it just becomes cost prohibitive,
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but that also makes it cost prohibitive to the end buyer,
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the to the like you said, there was a bit of a housing crisis.
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Can you talk a little bit about the product that you provide and the
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end result for for homeowners who may not have
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been
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able to achieve that type of ownership up till now?
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Yeah, absolutely. So when we think about you know the need for housing,
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you know, as I I look back even just five six,
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seven years ago, you know, much of the push to create new housing was
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to look at migration charts and say,
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well, let's go to Florida and let's go to Texas.
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And we have very intentionally stayed away from those markets for
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the primary reason that it's just it's simply too easy to construct housing
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in those markets.
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And we're actually seeing the fruit of that right now,
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where I think Texas rents and home values,
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as well as Florida, have declined meaningfully over the last twenty-four months,
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thirty-six months, because of the amount of supply that could be generated there.
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Whereas in the Northeast and the Mid Atlantic,
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entitlements, if you have zoning to allow you to do what you intend to do,
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entitlements might take you twenty four to to sixty months,
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frankly. Not just because of the local permitting.
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But because of all the environmental permitting at the state
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and even federal levels. And so what that means is when we
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buy existing manufactured home communities,
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we want to bring in new homes and we want to remove homes that
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are obsolete and provide high-quality,
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safe, very modern housing to residents who are really in need of it at
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a price point that's a fraction of what they would have to spend on
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a say a site-built home.
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So in the markets where we're operating right now,
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a traditional kind of median single family home might sell
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for $350,000 to $500,000.
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But a a single wide manufactured home,
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which is built to the highest specifications,
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and many people, you know, would would not recognize when they're inside
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the home that is in fact a manufactured home,
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those can be sold for $90,000 to $125,000 in a
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multi-section home that would almost double the square footage might
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be $125,000 to $150,000.
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with site rent, you know, monthly site rent in the,
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you know, five hundred and fifty to seven hundred and fifty dollar range.
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so that's meeting a significant price point for s a large amount
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of the population who who really need sustainable housing.
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Has ARCS then added additional lines of revenue associated with this?
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Are you you're are you a a a dealer for these houses?
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Are you it sounds like you are buying the land and renting out the land?
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Are you financing the housing?
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Like give us the whole life cycle here and what the value of that customer might
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be to you.
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So we're primarily buying existing mobile home parks where the seller is,
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we'll call them mom and pop in the you know in the most affectionate way.
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And the the nature of their business is they've relied on the property for income,
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and they haven't reinvested in the property in a way the residents deserve,
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in a way the investment really requires.
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And so we'll purchase the property.
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And we'll make the needed improvements so that the property can remain
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its existing use for the long term.
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That includes usually re repaving roads,
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fixing aging utility lines, again removing obsolete homes,
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bringing new homes in. But the property's probably,
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when we purchase it, somewhere between 75% and 90% occupied.
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And we're we're taking it the rest of the way to position it so that over
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the long term it can remain.
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a community that's sustainably affordable.
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And the big issue, Jack, with and this is a conversation nationally right now,
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is that if rents don't move in order to keep the property well maintained,
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then that property will have a higher and better use.
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So the the consequence of that in today's housing market is there
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are significantly more mobile home parks that get demolished every year
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for another use than get
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built you know brand new and so we're actually removing really critical housing from
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the the inventory available for people who need it because of
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the failure to maintain those properties well and frankly as
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the residents really deserve. So for us we actually we do have
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a dealer's license but I'll give you the life cycle we buy a property let's
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say it's 85% occupied it's got a leaky water system and maybe
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an outdated sewer system.
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No roads need repaving. So we buy the property,
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we put some financing on it typically.
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We will repave the roads, we'll fix the leaking water system,
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improving people's water pressure,
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hopefully bringing down the water expense for the property,
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and then address the sewer system.
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Then with our dealer's license,
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we'll bring in brand new homes,
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selling them and renting the land to improve the overall property and
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the pride that the residents can feel in living there.
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Yeah, I think there's like a a big misconception when it comes to mobile home parks
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and and and the like is the the concept that you you you acquire these things
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and people will bring in these these houses and fill in the lots
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and that's just frankly not what I've found is that you really end
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up having to bring in these things these houses yourself
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and establish that community.
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You're absolutely right. You know,
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th there may pr maybe there's five to ten percent of the communities that exist have
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vacant sites where there's demand enough that someone will bring their home there.
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But much more often it's the the property owner who's bringing that home in,
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setting it up properly, making sure it meets the standards for the community,
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and then marketing and and selling that.
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The biggest challenge for this buyer category is the down payment.
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And unfortunately, you know, we've got a a loan system in in America.
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And and this, by the way, is maybe going to be addressed as part
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of the current congressional housing bill.
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but if you if you have a site-built home,
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then the agencies, Fannie Mae,
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Freddie Mac, deem the loan made on your home to be to be better than someone
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who has a manufactured home. And as a result,
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and if you have a site-built home as I do.
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know we benefit from lower rates because the agencies sit behind the the lender,
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Wells Fargo or some other bank and they purchase that loan.
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And that brings the cost of funds down for those borrowers.
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Unfortunately, people who really need you know better financing lower rates don't
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get it even though the home they buy,
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a manufactured home, is almost ne I mean it's very unlikely that home
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is ever going to leave the site that it's initially placed on.
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And yet our high quality borrowers or our residents,
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you know, they might have seven hundred,
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seven fifty credit scores. They're forced to pay nine percent,
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ten percent interest rates on their home purchase,
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which to me is is is something that you know if we're gonna spend
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our time on anything in Congress,
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we should be addressing that issue.
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Just to remind everybody, we're talking to Nathan Jameson,
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Right, everybody we're talking to me.
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and you can learn
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more by heading to arcsaventures.com.
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I'm gonna have that as a clickable link in the show notes.
16:14
We have a
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If you found some value in what we're chatting about so far,
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Okay, well.
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do us a favor, share this with one of your friends.
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16:24
~
16:28
So Arx Ventures presents itself as a data driven,
16:30
Well aren't good.
16:31
performance
16:32
oriented firm. What does that actually look like inside your investment process when
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you're evaluating a deal?
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The deal first comes in. the first thing we're doing is,
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you know, we're evaluating do is it a place we want to be,
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the type of property we want to own.
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But then quickly after that, you know,
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we're digging into the the financials that are provided at the top level from could
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be could be directly from the seller.
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We love to deal directly with sellers,
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but maybe frequently it's from the the listing agent or the broker who's brought it,
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maybe without having an official listing.
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And we're really trying to understand and
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and right size the numbers based on our own experience.
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And we've now purchased you know $150 million of of real estate over
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the last decade and had a number of exits.
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And we have a good we have a very good handle on what things are really going
17:23
to cost. And and without, you know I I think often a broker,
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you know, they're doing their job and they're trying to sell the property
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for the highest possible price and maybe,
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maybe painting it in the best possible light.
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you know, I would say we're not overly pessimistic,
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but we're pretty realistic about what things are gonna actually cost.
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and then so we can size the price to ensure we get the right risk adjusted return.
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If the risk is lower, if there's less repair needed,
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less vacancy infill, well then that property is is worthy of a lower return.
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Conversely, if there's you know a high amount of operating expense
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of capital improvements needed,
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it's a heavier lift and there's there's more risk.
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And the returns for the investors who are taking the risk should be higher.
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So we're quickly trying to assess the operating expenses and deferred maintenance
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is a really big one, Jack, particularly as it relates to utility expenses.
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So I think there's a bit of a misnomer in the business.
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And you may have seen this where you know a sponsor like us will
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be out there saying, we're buying mobile home parks with public water
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and public sewer.
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And I just find that interesting because some of the worst properties I've seen
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are the ones with public utilities.
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And the reason is if you have leaks,
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say in the water system, that public utility is gonna make sure they
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get paid for their water that's running into the ground and not getting used.
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Whereas if if you have a well,
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which many communities do, you you're not paying for that,
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except maybe in the form of some additional chemicals.
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And you're gonna find that leak and you need to get it fixed.
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But you're not going hurt the property and the performance financially
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by paying for water that's not getting used in the community.
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So that's a little bit of a misnomer that we we really believe about the space.
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I mean, so we're we're eager to pursue properties with all types
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of utilities as long as we can properly assess the risk and make
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the necessary investments.
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So if if you're we're talking to investors right now that may not
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be as familiar with this asset class,
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especially when it comes to mobile home parks,
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what are some of the operational differences that separate
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a good mobile harm home park manager versus an average one?
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Well, you know, there's a statement out there that I I've seen here
19:44
and there that these things manage themselves.
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You know, they're they're mailbox money.
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And in my experience there's there's no real estate asset that manages itself.
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Unless of course your goal is to run it into the ground,
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which is not ours. So we really believe in extremely hands on management.
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you know there's I think because of the growth of syndicated capital,
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there have been people
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over the last five to eight years who've been very effective marketers
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and raising capital, but they don't have operational experience,
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which we have, you know, coming out the years,
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and they don't know how to pick sponsors if they're not actually operating
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or they're investing in other sponsors.
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And so we've seen I think we've seen some investors get burned in the space,
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frankly, by people that felt really good.
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But but when you got kind of a look under the hood,
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they didn't really understand what it took to manage the property well.
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And you know, to me, that's it's I mean I talk about a little bit
20:43
the the hands-on nature of being on the property,
20:47
seeing what's happening. It's kind of a classic,
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you know, Peter Drucker esque,
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I think maybe actually it's Peter Drucker who said it,
20:53
you inspect what you expect. And so,
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like for instance, under we were doing this even before EOS,
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but you know.
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We have weekly meetings every week at multiple levels of the organization
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to review the operational performance of the property.
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And that flows not from the top down,
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but from the bottom up, so that we really understand at a granular level what's
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happening at each property, what do collections look like,
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what is the quality of the property look like?
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Do we have violations? You know,
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do we have, you know, extra cars parked on or parks on block parked on blocks?
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I mean, those are no-nos. We we don't want to have that.
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Because you've heard of the broken windows theory where you know real estate
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is worth less in neighborhoods where there's broken windows that are allowed
21:38
to to remain. it's the same thing if we allow violations to persist
21:42
in the community, where the quality of the community is perceived to be less,
21:47
the value of our residents' home is perceived to be less if we don't do
21:51
a good job enforcing those rules.
21:53
And so all that, you know, just to say,
21:56
an operator who thinks they can kind of float around.
21:59
at the high level and and offer platitudes about you know the kind
22:03
of property they're buying and how well things are going.
22:05
it all falls apart if they can't really get under the hood and explain
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to you what's happening at each property.
22:12
Mm-hmm. I would imagine that after seeing as many properties as you have,
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have you seen any particular recurring trends of of issues that repeat themselves
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on a consistent basis?
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Absolutely. and it it depends on who owns the property.
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If it's a a mom and pop type owner,
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then you know, recurring trends would be mismanaged utilities.
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I think that's that's a frequent one.
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and then another one maybe what would be a little bit of a surprise is
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is the rent's too low. And you know,
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there may be someone listening to this who says,
22:46
well that's not right. He shouldn't be raising the rent the way they are.
22:48
But one of the challenges is
22:51
When a mom and pop owner gets too close relationally to the residents,
22:55
they find it hard to increase rents,
22:58
even with inflation, and then to take that money,
23:01
have proper reserves in their budget,
23:04
and reinvest it in the property.
23:05
And as a result, there's kind of a long,
23:08
slow bleed where the property becomes derelict or falls into disrepair.
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And you'd see that, I think, on the mom and pop category.
23:18
On the institutional category,
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I think the common thing that we've seen over the last few years
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is institutional operators and/or investors really didn't understand what
23:28
was needed to fill the site, to bring new homes in.
23:33
You know, they thought, well, this is affordable housing.
23:35
We'll just bring a home in and it will sell.
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and that's just not-I mean, I've talked personally to a number of these Wall Street
23:41
firms.
23:42
And they just didn't appreciate,
23:44
and they tell they tell you they didn't appreciate this the complexity,
23:48
the local rules, the cost of bringing new homes in and then selling them
23:52
to residents. And so what that means is they now have kind of a cycle on their fund,
23:57
a life cycle, and they're going to market with all these park-owned homes.
24:02
And either that or all these homes that are under what they'll call a lease to own.
24:06
and we, you know.
24:08
we we kind of raise our eyebrows at that because we think the Dodd Frank
24:11
Act actually makes lease to own makes you a lender and you're not actually
24:16
a lender and so if the government decided to put their eyes on you,
24:19
you might be in for for difficulty.
24:21
so I I think those are the two things we see on the institutional side
24:24
is cost of vacancy and then the high volume of park owned homes and lease
24:29
to own and then the kind of disrepair and neglected properties.
24:33
on the mom and pop with with rents that are too low.
24:37
Mm-hmm. It's kind of interesting when you talk about the mom and pops
24:40
and the rents being too low, it almost makes the case that we we have
24:45
an obligation to make sure we're char charging the proper rent in order
24:51
to maintain and provide a proper environment.
24:54
It it sounds like it it's almost self
24:56
Yes.
24:57
perpetuating where we're we we in the hopes that we're doing something
25:02
for our friends.
25:03
by offering them a low a low rent rate,
25:06
it it's like it it it prevents us from doing the updates and repairs that
25:11
are just frankly just a necessity these days.
25:14
A hundred percent, Jack. And you know,
25:16
when you consider that most homes in the community that we own and
25:21
and across the country that are mobile home parks are owned by the person
25:24
who lives there. The greatest predictor of that home's value is the quality
25:30
of the community in which it exists.
25:32
And a failure to maintain that community is is a failure to be a good steward
25:37
of that homeowner's equity. Maintaining the property in a way where
25:41
the equity in that home
25:42
Can remain and even grow. I think there's a number of stats out there that would
25:46
tell you that in a well maintained community,
25:49
the percentage increase in value of a mobile home has actually been more than
25:55
of a single family home over the last number of years.
25:57
Now, to be fair, it's off a much lower kind of starting number,
26:01
so the percentage growth maybe is easier to achieve.
26:04
but the predictor of success in terms of growing equity,
26:08
maintaining equity for residents is maintaining or creating equity.
26:11
quality community. And we think we can be good stewards of the homes
26:16
and the community for our residents and good fiduciaries for
26:18
our lenders and investors. Those two are not opposed to one another.
26:22
I'm sure you probably have some stories then,
26:24
whether successful or otherwise of of these homes and maybe something that
26:30
you turned around. Do you do you have any projects that you're truly like surprised
26:35
about yourself or e maybe even proud of?
26:38
extremely proud would be be one case.
26:41
I'm thinking of a property we purchased near Pittsburgh a few years
26:45
ago where there were about thirty-five abandoned homes in the property,
26:49
and there were another, say, thirty or so rent-paying residents who were there
26:53
who who weren't very happy with the condition of the community.
26:57
They had a wastewater treatment plant that was not operating in the
27:00
way it should operate, frequent failures.
27:03
affecting both the community and and downstream quality.
27:06
Roads where you know you could,
27:08
you know, if you had a small car,
27:10
you might lose your car in a pothole.
27:12
Well, over the course of the last three years,
27:14
we removed all the the abandoned homes.
27:16
We've replaced them with almost 40 brand new homes.
27:20
We've repaved the roads, fixed the wastewater treatment plant,
27:24
and we're really on pace to make it an institutional grade community.
27:29
So I'm extremely proud when I drive through that community and I
27:32
see residents who were there from the beginning and they express their appreciation
27:37
that they can feel proud about where they live.
27:39
We actually didn't change the name of the community.
27:41
Sometimes people will change the name when they're they're trying to
27:44
go through a big transition and create a new marketing brand on it.
27:47
We didn't change the name. And I'm maybe we should have,
27:50
but you know, where we are now,
27:52
it's become kind of the story.
27:54
Have you seen what happened with that property here around town?
27:57
and that that makes me really proud for what we've done for the residents
28:00
and it's gonna it's gonna be a good investment for our investors and we're gonna
28:04
pay our lender back. but I'm mostly proud of how the residents feel about living
28:08
in their community.
28:09
So
28:09
I I was gonna ask you, maybe you can bust
28:10
Yeah.
28:11
this myth for me. but in my neck of the woods,
28:14
it seems to be that the fancier the sounding of the name,
28:19
the the dumpier the the mobile home park.
28:22
Is that
28:23
Yeah.
28:23
is that the case in your world too?
28:27
Yeah, I don't know w who started that.
28:29
It was probably in the sixties
28:30
Mm.
28:31
or seventies, but you know, if it's estates or villas,
28:34
you know, I it's probably a mobile home park.
28:37
and you know, I can't speak as to whether it's been well maintained or not,
28:40
but I I think that's a very interesting observation,
28:42
Jack.
28:43
So well and then you can bust this for us too.
28:46
Have you met the trailer bark boys in any of these parks?
28:50
no, I I have not. we often have have commented,
28:53
you know, internally that you know if we really wanted to to hit it big,
28:58
we'd have a reality show about turning these these pro communities around.
29:02
but I frankly I I prefer to stay out of the public eye.
29:05
you know, we we like to do what we do humbly and you know with our nose
29:10
to the grindstone to to do a good job for everybody that we're serving.
29:14
so I you know, it's a it's a just a a joke we like to make.
29:17
'cause sometimes reality is stranger than fiction.
29:21
Well, talk a little bit about the what you have to do and the relationships
29:26
you have to build with the local community because let's face it,
29:30
when it comes to mobile home parks,
29:32
some of these are you know, they're not desirable.
29:36
In fact, they're it's hard to actually to establish new parks in
29:40
in different areas just because the people just that not in my backyard.
29:45
But I mean, based on what you're saying so far,
29:48
I would
29:49
think that it would be kind of a welcome change and people would in hopes that they
29:55
may even welcome you in.
29:56
Yeah, I think there are kind of I two two comments on that.
30:00
You know affordable housing is something everybody wants in concept.
30:04
But I would say very few people actually want it in their backyard.
30:09
Probably you know like no one wants it in their backyard,
30:11
and that that's unfortunate. And I don't think that places the highest
30:14
in the value on the the residence and affordable housing that is deserved.
30:18
but the second comment I'd have is
30:20
It it is almost impossible to build new manufactured housing in places people want
30:25
to live because the disp this disparity between the the value of
30:30
a new manufactured home with its site rent and a the value of a
30:34
new single family home traditionally site built is is too wide.
30:39
That's too big a gap. So if I can sell a a brand new manufactured home
30:43
for $120,000 with six hundred dollar lot rent,
30:46
but I can sell
30:48
a single family home for four hundred and fifty thousand dollars
30:52
or five hundred thousand dollars,
30:53
that means that the value of a a developed lot that somebody can build of
30:59
a half a million dollar home on is worth more than the manufactured home.
31:03
Just the lot. Because the cost of infrastructure is roughly the same between
31:10
a manufactured home community and a traditional single family subdivision.
31:14
And so we you know we really do have to get
31:16
At that issue as a country. and one of the biggest drivers of all those those costs,
31:21
frankly, is the permitting costs.
31:23
we've just, you know, permitting costs,
31:25
particularly in the Northeast,
31:26
I'm calling out Pennsylvania right now.
31:28
I mean, as a state, Pennsylvania is a disaster from a permitting perspective.
31:33
To the point where if you have zoned land,
31:35
it may take you five years to get the right to build on it.
31:38
And that five years, you know,
31:40
the engineering bills going.
31:42
The inspection bills from the DEP folks are are going,
31:45
the lawyer bills is going. and so you can't afford to build a brand
31:48
new mobile home park, which which we desperately need.
31:51
Well, I I c can't help but notice the pattern there.
31:54
Like usually it's those places that are are in the most dire need
32:00
of affordable housing. They have such bureaucracy that it makes
32:05
it next to impossible to get it done.
32:08
I mean it and unless something changes on a bigger scale,
32:12
it's it's gonna continue.
32:13
Yeah, I I don't see how it it stops.
32:16
And part of that is just kind of the nature of government.
32:19
you know, I I think Pennsylvania specifically,
32:21
where we have, you know, hundreds of of municipalities that all have their
32:25
own codes and own requirements,
32:27
and then we've got a a state that,
32:28
you know, doesn't really have the ability to to affect things at the local level,
32:32
but then they're adding regulation at the state level,
32:35
particularly through the Devi Department of Environmental Protection.
32:38
And sometimes you even have the federal regulations to deal with.
32:42
and so when you have all those costs,
32:44
whether it's housing or some other product that's highly regulated,
32:47
it becomes really hard to make something that is affordable for
32:52
the large majority of the population.
32:54
so we're not gonna stop beating that drum.
32:56
It's really important to me. I spent a large part of my career building those kind
33:00
of expensive, you know, high-end homes for for fifty-five and over customers.
33:05
and today we're you know, I'm really proud to be focused on serving
33:08
of a the large part of the bell curve that really needs attainable housing.
33:12
Well, as you look ahead, what do you see ARCs evolving into over the next few years?
33:17
Well we we all want to be an excellent steward of our investors' capital.
33:22
and that started with my own capital.
33:24
when I began ARCS, I was the sole investor,
33:27
effectively was the arm of our family office.
33:30
And as we built out a portfolio of manufactured housing and proved
33:34
to ourselves that we could we could find and improve these assets
33:39
and and harvest the value out for for our ourselves.
33:43
as well as improving the communities for our residents,
33:46
we decided to create a fund. And we're now we're now raising our third fund.
33:50
Our first fund has been tremendously successful,
33:52
as has our second, and that's necessitated the need for a third.
33:55
Where we are expanding our geography from the Northeast,
33:59
including the Northeast, but now also the Midwest.
34:02
We're also adding RV parks and self-storage.
34:05
Again, value add RV parks and self-storage.
34:08
to that. They they tend to have higher cash flow out of the gate,
34:12
although their values are not quite as high as manufactured housing.
34:15
And then we we will prove those properties and take them to the next step where
34:20
they're refinanceable. And then you know we want to continue to allow
34:24
our team opportunity to grow and develop as we as we welcome additional investors
34:29
who are joining us.
34:30
Well, Nathan, I really appreciate you giving me the time here tonight.
34:34
before we dive into the rapid fire and start closing out this episode,
34:39
is there anything else we should have tried to hit on?
34:41
No, I think you know my goal is to be an educational resource for other investors.
34:46
you know, we we are we're gonna be successful raising our funds
34:49
and we're we're proud to do that.
34:51
we don't wanna ever find ourselves in a situation as many have in
34:55
the past where they raise capital and they need to deploy it,
34:58
and so they buy some part of property,
35:00
some part deals because they're eager to deploy the capital.
35:02
I'd rather send the money back if we can't find quality deals.
35:05
And so we're gonna continue to grow carefully.
35:08
And that's that's an important part of how how we're doing things.
35:11
We don't having been having run a home building company through the Great Recession,
35:15
I'm keenly aware that there are many folks out there raising capital
35:19
and operating who don't know what the world light looks like when it's not
35:23
up and to the right. And we know what what that's like.
35:27
Maybe we'll miss some of the upside because we're being conservative,
35:30
but we're gonna make sure we make it through the next downturn.
35:33
Well, if you're ready, Nathan,
35:34
we'll jump into the rapid fire and close out this episode.
35:37
But before we do, again, it is arcsaventures.com.
35:41
That's gonna be a clickable link in the show notes.
35:44
But if you're ready, Nathan, let's close out this episode.
35:47
I'm a little nervous.
35:48
You should be. They're frightening.
35:50
All right, let's shoot.
35:53
What lie do real estate investors often tell themselves?
35:56
Affirmation bias is the biggest lie.
35:59
You know, they fall in love with an idea and then they go find evidence
36:04
to support their idea.
36:05
If you could go back in time and give your younger self one piece of advice,
36:09
what would it be?
36:10
Never sacrifice your integrity.
36:12
And by integrity I mean wholeness.
36:14
if you think about integrity in the root of the word,
36:17
the opposite of integration, which it shares a root with integrity,
36:21
is disintegration. And I think,
36:23
you know, as a as a as a people,
36:25
so many are disintegrated. We we act one way at church and one way at home
36:30
and one way at work. And I don't wanna yeah,
36:32
there were probably there's probably a time.
36:34
fifteen years ago, 20 years ago,
36:36
where it was tempting to be a different person in different environments.
36:39
And I would tell myself, it's not worth it.
36:42
Maintain your integration or I'm calling it integrity.
36:45
As you were scaling your business,
36:47
what was the first thing that broke?
36:49
Outsourced property management.
36:52
No one cares for a property the way you do.
36:55
And early on,
36:56
just from a scale perspective,
36:58
I felt like I needed to hire an outside property management company to begin
37:03
to grow the business. It was just more than I felt like I could handle on my own.
37:07
I didn't want to bring in the overhead responsible for collecting rents
37:12
and sending violations and doing evictions and maintaining the property.
37:15
And what what broke was that that management company was using our properties.
37:20
to cash float their properties.
37:23
And you know, as soon as we uncovered that,
37:25
we quickly transitioned to in-house management and and it was on the path
37:29
of as we were growing the business and could afford to do that.
37:32
And finally, what single tool or process have you implemented that
37:36
has had the biggest time saving impact?
37:38
I'm gonna give another shout out to our EOS system.
37:42
the the weekly level ten meeting that we implement with our leadership team
37:46
and and the levels below that.
37:48
while it takes the meaningful amount of time on a Monday afternoon for our team,
37:53
we think it saves us ten X that time in the course of a week or over the course
37:58
of a year. And and it also has the added benefit of keeping the team members
38:02
in the loop.
38:03
contextually so they know what's going on and they remain engaged
38:06
in driving the business forward.
38:07
Well, Nathan, I really appreciate your time here today.
38:11
again it is arcsventures dot com.
38:14
That's gonna be a clickable link in the show notes.
38:16
Really appreciate your time, Nathan.
38:18
I hope you'll consider coming back again.
38:20
It was great to meet ya.
38:21
Jack, it was a delight to be with you.
38:22
Thank you so much for all that you do to get information out to your audiences
38:26
and I'd love to join you again.