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Alternative Wealth is a podcast focused on advanced tax planning & wealth preservation for business owners, entrepreneurs, and high income earners hosted by Ryan Kolden. Weekly guest interviews, plus shorter deep-dive episodes about business planning, tax mitigation strategies, alternative investments, personal finance, and retirement strategies. Covering everything from private equity, venture capital, hedge funds, private credit, & real estate to tax-efficient exits & captive insurance corporations, privatized banking, and different retirement strategies.
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Frank Rizzo:
It's proven historically to be very recession resistant. If you look during COVID, and you look, there's three publicly traded companies in the manufactured housing space, Sun Communities, Equity Lifestyle, UMH. If you look at their collection rates during COVID, they were over 95%.
Ryan Kolden: Welcome to Alternative Wealth, where we explore traditional and alternative investing, retirement, and personal finance concepts. I'm your host, Ryan Colden. Join us as we talk about the strategies and tactics that can help you make better financial decisions.
Disclaimer & Disclosure: Ryan Colden is an investment advisor representative of RPG Family Wealth Advisory. Colden Wealth is a DBA of RPG Family Wealth Advisory. The opinions expressed by the host and or guests in this podcast do not necessarily reflect the opinions of Colden Wealth or RPG Family Wealth Advisory. No information on this podcast should be construed as as investment, legal, tax, or financial advice.
Ryan Kolden: All right. Today on the show, we have Frank Rizzo. Frank is the co-founder of Stone Capital Investors, a vertically integrated real estate investment company specializing in the acquisition, management, and development of manufacturer housing communities, also known as mobile home parks, throughout America's Southeast and Sunbelt states. He has over 20 years of experience in real estate as a broker, owner, and syndicator. For the past 12 years, he's been active in the mobile home space and during that time, he's acquired and repositioned over 20 communities and 1,567 lots. Frank has also co-launched the MHP Exchange, a platform to provide insights to the market and industry. Through this, he aims to use his passion for the mobile home space and affordable housing to provide better housing alternatives in communities. Frank, glad to have you on the show and welcome.
Frank Rizzo: Ryan, it's a real honor to be here and I thank you for having me on.
Ryan Kolden: Yeah, not a problem. I'm excited to talk to you today. So let's just jump right into it. How did you get into mobile home investing?
Frank Rizzo: know, quite by accident, Ryan, I was working with a family in Brooklyn, New York, who was relocating down south. But during the process of them relocating, the father, who was a first-generation immigrant, came to this country like an American success story, was an entrepreneur, and took his money and invested in multifamily buildings in Brooklyn. And by the time he was ready to retire, he had six or seven buildings that were 100% occupied and about 45% of those people were not paying. So we came in managing the properties and kind of worked a way to divest some of the non-performing assets. And when we got to the last building, he was doing a 1031 exchange because they needed the income replacement as they were moving down south and he asked me to find him an opportunity to replace that income. The opportunities that I saw that were the highest yielding were these mobile home parks, which growing up in Brooklyn, New York, Ryan, we don't have a big experience or exposure to that space. So as I was looking at the investment thesis of why someone should invest in a mobile home park, I made that recommendation to the father. And he said to me, succinctly, if this is what you recommend, you stay in the deal, you run it for us. And if you believe in it, And i did i took him up on that challenge and it worked very very well and what i found brian was not was not only could mobile home parks be economically profitable, what did when you run one of these communities you can really have an impact. to the people you're serving, your residents. And there's something more than just an economic benefit. There is this other benefit that you get by improving the communities and impacting people's lives. So it checked all the boxes. And my partner and I then kind of pivoted our, slowly but surely pivoted our business in New York. And we focused solely on mobile home parks right now.
Ryan Kolden: Okay. And if I was an investor and I was interested in real estate, why not partake or invest in something like multifamily industrial or self-storage? Why mobile home parks?
Frank Rizzo: That's a fantastic question. Because the mobile home park, it's really two two separate securities you're buying when you buy a mobile home park. There's the land, and then there's the homes, which you may or may not get as part of that acquisition. But the homes themselves, when the resident owns the home, we have found statistically that they will be the stickiest resident of any of the real estate asset classes. So on average in a well run community, a community that's safe, a community that's clean, a community that adds value for that resident, they will stay on average 17 and a half years, which by far and away is the stickiest of any of the real estate asset classes. So if you run a really well-run community, you can have a predictability of income stream, number one. Number two, when you don't own the homes and the resident owns the homes, you can eliminate a lot of those variable expenses, Ryan, that you might incur in multifamily, right? Because when there's a leak in the home, it's the residence responsibility, our responsibility is to maintain the grounds, maintain the roads, maintain the infrastructure, which is the same regardless of where that community may be. So it does give you the opportunity to scale and to touch different markets without necessarily having to be there on the ground repairing every interior problem that may happen, which could happen in multifamily or in another asset class.
Ryan Kolden: Right. I don't know if you know this statistic. The last time I looked, I believe apartment buildings, on average, people stay somewhere between like 12 and 48 months on average. Do you happen to know it off the top of your head?
Frank Rizzo: So I know right now people are staying a little bit longer in apartments. But historically speaking, apartment lifestyle was transitory. I mean, you lived in an apartment because you were waiting for that step to become a homeowner. In the manufactured housing space right now, it takes a couple of months. When the resident owns the home, they are that homeowner. They already own that home and you're essentially just leasing the land. But the second thing, Ryan, that's an important item to hit and for your audience to be aware of, we have an affordability, affordable housing crisis in this country right now. I mean, by far and away, that is probably the number one pocketbook issue that's facing individuals across this country. And there's nothing more affordable than a manufactured home. You cannot build a traditional stick-built home for the same price that a brand new manufactured home can be delivered. So you're offering the opportunity for home ownership at a more affordable price point, and you're giving somebody community living at that same price point.
Ryan Kolden: Okay. Now, one of the things that I've noticed you've said Kind of interchangeably is mobile home and manufactured housing. Is there a difference between the 2, the 2 terms and. When you run a park, does the tenant provide their own. Home, or do you lease, you know, at least 1 to them or how does that kind of work?
Frank Rizzo: So that's a great question because there's different models in the mobile home park business. And I know that mobile home and manufactured home kind of gets bandied about back and forth. People know it historically as a mobile home park, right? We look at them as manufactured housing, which is essentially the same thing. And we look to run them as communities not as a park even though people have that you know stigma in their head that it's a trailer park or mobile home park we look to take those. Parks and run them as a community in the community has a look in a feel that slightly different than say a mobile home park. Our model is that we like residents to own their homes in our communities. We find that a couple of things happen. There's that pride of ownership that the resident will have because they do own that home. There's the less transitory nature of it. Like I mentioned before, the average resident who owns their home will stay in a community on average about 17 and a half years because it's very challenging to move a home. Like these homes are called mobile, they're not very mobile. To move them you need a licensed mover, you need to get them set, you need to get them re-skirted. And by set I mean put on a foundation of blocks, they've got to be re-skirted, connected to electric and plumbing. I mean the cost could be anywhere between $12,000 and $15,000 to $16,000. And in the markets that we operate in the affordable housing market, that's a cost that someone usually doesn't bear or want to bear unless they have to. So if you run that community well, Ryan, those residents typically tend to stay.
Ryan Kolden: Okay. And you mentioned that you can effectively do good by providing this service. And one of the things that we were kind of talking about before the show was just affordability crisis in America with just in general right now with inflation going on, but also to just with housing specifically, how do manufactured homes help address the affordability issue in the United States?
Frank Rizzo: The big issue is that it is nearly impossible for a traditional builder to put out a base model home at the same price you can get a brand new manufactured home for. And I'll give you a perfect example. If you look at D.R. Horton, and they do a great job, probably one of the most prolific builders in the entire country. We're familiar with D.R. Horton. Their base model is $259,000. That's their bottom line model of home, about 1,500 square foot, without all the bells and whistles, but a good entry level home in certain markets. In certain markets, depending on the land, it could be high, but that's the lowest I'll go. You can have a brand new manufactured home delivered for about $70,000, $60,000 to $70,000. That's a huge difference. That's a huge difference, right? And that opens up avenues of opportunities for people to become homeowners and to now have that pride of ownership to know that the home is theirs. And they can get essentially the same amount of square footage, right? And it gets their foot in the door, right, to owning a home and to breaking that cycle of renting. So that's a huge advantage. And they could do that because these homes are built in factories. They can be delivered one a day, quite frankly. Well-run factories can build. I've been to factories that are producing 12 to 15 homes a day, which is quite amazing. And they can deliver a quality product because they have different quality controls that you'd be surprised if you're not familiar with the space about how amazing some of these homes can be.
Ryan Kolden: And what are the different ways that someone can get involved with mobile home investing? Obviously, they can do it themselves. You talked about buying an entire community. You mentioned you could also buy the actual mobile home itself and then lease it back to, or I guess do like a buy a rent to own type of feature. How can someone get started with mobile home investing?
Frank Rizzo: It's funny, we were having this conversation recently on a podcast that we do. There's a couple of different ways that someone could get involved in mobile home investing if they're not involved. I mean, the number one way is you could just jump right in and you could buy a park. I will tell you being an operator myself, this isn't for the faint of heart. If you're jumping in, you've got eyes wide open, do your due diligence, make sure you're aware of what you need to be aware of because it's a passive investment, but there's a touch and feel that you need to have with it. That's one. Second way is that, yes, you can go in and you can buy a home and you can either rent it out or you can put a contract for deed, contract for title for one of these homes out there, which is a great way to get an entry, a low cost way for someone to get some exposure into that space. in that this market is called a Lonnie dealer, right? Where you can buy a home, maybe refurbish it, you rent it out to someone who needs a place to live and you can provide a housing option. If it's on a park, you'll pay the lot rent and you'll capture the difference. That's a phenomenal way to do it. Or the third way you can do that is that you find a sponsor that you can co-invest with, you know, somebody who is either running a fund or syndicating a deal. and you can participate with them and get all the benefits of being an investor in the space without necessarily having all the the managerial the management. operational headaches that don't just occur with anything you're going to do. Right. So, so what we do is we, we handle that section or a portion of it. You know, we have a staff that we've built out in our hubs that we operate where we have an on the ground team and we have a back office admin team that supports them in their roles to make sure that we can provide the residents with the same type of touch and feel that they were used to with like the local mom and pop operator. Because I think that's something that gets lost in translation sometimes with some of these people who've come into the space recently. It looks great on a spreadsheet, but they lose the heart. And I think that's a real important thing in doing what we do.
Ryan Kolden: You know, one thing I want to touch on that I find super interesting that you talk about is people need to be careful before they just jump headfirst into this. Because I'm sure you've been in the real estate space of probably in your 20 years of running into this, but myself dealing with clients. And then I also used to own several different properties. And I definitely… People have this idea that real estate is the panacea and it's going to be like the investment that changes their life and what they end up getting into it. And they realize, oh, wow, buying The property is just one piece of the deal. Operating it is the hard part. And most people treat it, in my experience, treat it like a hobby. And when you're dealing with assets, the financial world, you're dealing with like the Olympics. Like this, everyone is out to like, this is where, you know, the big boys are playing. And if you don't watch out and you're not fully committed to it, you're going to get eaten up. So I just thought that was interesting. It's like, I don't know. Do you have any thoughts about that?
Frank Rizzo: I taught and I would do CE classes for real estate and I've done some teaching outside of being a realtor and did some teaching in a local college out here on real estate investing. And one thing that, and you hit the nail on the head, people want to be an investor in real estate because they've watched a TV show, but they don't put the time together to put a plan for their investment because you're not buying a piece of real estate, you're buying a business. You're really buying a money machine and the question you have to ask yourself is how much money does that money machine make? How fast will it make it? And what do I need to do to upkeep that machine, you know, operationally? What type of work am I willing to do or have to do? And those are great points, Ryan, that, you know, just like if you were buying a pizzeria or a restaurant, you should have a business plan in place to know what you're going to do when things happen because surprises will always happen.
Ryan Kolden: Now, if I wanted to buy maybe let's say an apartment building of the same value of a mobile home, what's kind of the competition like between funding for a deal for like a mobile home community versus an apartment building of like equivalent value?
Frank Rizzo: So the interesting thing about the mobile home park space, if you look at every subsector of the real estate market, it is predominantly owned or kind of managed or monopolized by private equity, big family offices. I mean, that big money dominates that space. In the mobile home park space, it is very fractured. It is still predominantly mom and pop owned. So to your point, you could find better value in the mobile home park space for a comparable unit. I'll give you a perfect example. We're in Jacksonville, North Carolina, which is along the I-95 East Coast Corridor. And that whole corridor between New York and Florida has gotten very We visited, there's been a lot of migration to that area. North Carolina is one of those states that has been great for business, has seen a lot big, huge population growth. We just acquired an 87 unit mobile home park for $1.3 million. Now, had I looked at an 87 unit garden style apartment complex, I probably would have paid four, maybe five times as much, right? So my rents are going to be a bit smaller because it's a mobile home park rather than an apartment. However, my cost is five times less than buying something that's traditionally built because I'm not buying the bricks and the sticks. I'm buying the land and the infrastructure, which is a savings, number one. And it gives me the opportunity to kind of scale the numbers without having that same without having that same cost. So I think that's a great question. But there is a definite, your dollar definitely goes further in the manufactured housing space.
Ryan Kolden: And in terms of like deal structure, are you still using like the traditional financing process for one of these parks? Are you still using like a 70% loan to value? Is it high or low? Are you buying it all cash? What does that kind of look like?
Frank Rizzo: So our typical acquisition is we kind of specialize, Ryan, in buying like the one star, underserved, undercapitalized, you know, really the ugly house on the block. I mean, we buy the things that are tough and then we do a major turnaround to it. So typically when we're going in, we're buying unlevered. And then as we're stabilizing the asset and creating, making some improvements, being able to bring in some new residents and having that turn, then we start putting debt on it. And then we're looking at 65 to 75, 70%. However, at that point, the asset is stabilized at a new valuation with rents that are guiding up. rather than buying something that we know that there's going to be a transitional period of maybe getting out some residents that aren't going to be part of the solution moving forward, making those improvements to the infrastructure, to the roads, to the asset as a whole, and kind of cleaning up and homogenizing the look and the feel of that community. So we typically use debt after we've gone through a stabilization period, not on acquisition, just because we know that we're probably going to see a turn for a period of time and we want the asset to be stabilized.
Ryan Kolden: Okay. And so I'm assuming if you're going back to refinance the community, you're holding on to these for the long-term and cashflow and So is that kind of your strategy? It's, you know, long term hold these things cash flow and then you don't really even have, do you have an exit strategy or is the whole play cash flow in the property for as long as possible?
Frank Rizzo: So, you know, we had the distinct advantage of getting into the space prior to like, Post COVID, I think a lot of people started revisiting the mobile home park space. And you saw a lot of new entrants come into the market in 2021, late 2020, 2021, 2022. And asset prices across the board, I mean, not just here, but across the board of asset prices with low interest rates went through the roof. But we had entered the space prior to that. In some of the assets that we had, we went full cycle because we saw valuations that we thought we went past our business plan and where we thought the fundamentals would be. And so the fiduciary responsibility for us was, well, we had a business plan. It might've been six or seven years. We did it in three. It's time to exit because we got what we believe was full value. But our plan, right, our business plan is to be long-term holders in the assets that we have as long as it continues to show, to demonstrate the return that we expect. Because you know, Ryan, any investment you have, it's not static, it's dynamic. As soon as that rate of return that you expect on the equity that you have invested isn't hitting your numbers, then you have to pivot into something else, exchange into something else. So we always analyze where we are. If it hits, if it dips below, if we believe that equity could be placed somewhere else with a better rate of return, then we make an exchange for that. But our intent is always to be long-term stakeholders in the community.
Ryan Kolden: Okay. And you did talk about finding tenants for your properties. Is it hard to find tenants and what's the demand like to live in a mobile community?
Frank Rizzo: So, again, this goes back to the affordable housing issue that we're having across the country. So in the markets that we're in, we strive to be the best value for our residents in those markets. And we can typically put out a product that's comparable to a traditional apartment. Add a better price point so again in the jacksonville market where you could see a three bedroom rent go anywhere from twelve hundred to thirteen fifty or more we can deliver a brand new three bedroom two bath home with all. all their charges in there for less than a thousand dollars a month. That's value. So when you can offer that type of competitive value, especially at a time such as now where inflation is high and cost of everything has gone through the roof, you'll find a very strong, steady demand.
Disclaimer & Disclosure: So we've been very efficient and resistant.
Frank Rizzo: If you look in that regard, we have strong demand for native companies in the manufactured housing space. And I don't see that letting up based on some equity lifestyles that we see just happening across the country. If you look at their collection rates during COVID, they were over 95%, which is amazing because you saw every other asset class got pinged really hard. We can tell you that we were at 98% during COVID because when your lot rent is $300 a month and if you fall behind one month, you can make up that payment.
Ryan Kolden: Is that correct?
Frank Rizzo: But if you're in a market like New York or Miami where your rent might be $5,000 a month, and you get one or two months behind, it is tough for someone to come up with. If you look, there's 53 publicly traded companies.
Disclaimer & Disclosure: Someone can make up $300.
Frank Rizzo: You can figure out a payment plan for communities, equity lifestyle.
Disclaimer & Disclosure: Those higher numbers, it becomes more of a challenge. If you look at their collection rates during COVID, they would be over 95%.
Frank Rizzo: But it's proven to be very resilient when you have a good operator in place. And by that, I mean, you have to have your finger on the pulse of what's going on inside your community and be conscious and aware of that.
Ryan Kolden: Right. And I know we just talked a little bit about how mobile homes, like the property itself, are appreciated a lot during COVID. But generally speaking, compared to like an apartment building, mobile homes are more so about cash flow, correct, rather than the appreciation portion of it?
Frank Rizzo: Well, the communities themselves can appreciate because as you increase cash flow, you'll create more value for those communities. The homes, which are something separate, Those homes, the value of those homes, not only do they have a book value, almost like a used car, but those values will also be based on the communities that they're placed in. So if you go to, give you Myrtle Beach as a perfect example, you can find some homes there that'll trade in a very well-run community in that beach town for $150,000 to $200,000 because people want to be in that location. You know, at the end of the day, Ryan, that still becomes down to location, location, location, and how that location is operating. But you can create value. But we, and to your point, we look at this as a cash flow investment because we know that there's a predictability to that income stream. And if we do our job correctly, we know where we can guide rents at some point. We know where the infill, which means new residents can come on board, then paying market rent. and how that can impact our underwriting. So when you have that kind of clarity, it puts me as an operator and a fiduciary for people who invest with it. It gives me a good sense of being able to say, here's where we anticipate this to trend over the next 12 or 24 months.
Ryan Kolden: One of the things that I'm actually very interested in and I'm hoping that you know, I'm assuming you do, but I've always hope I do. Yeah, I hope you did too. I've always, I don't know, I have this like preconceived notion in my head that people who live in mobile homes tend to be older. Do you have an idea of like what the demographics are age wise of people who own and live in mobile homes?
Frank Rizzo: So I don't have, you know, exact age of everybody who lives in a mobile home. However, I do know that Roughly 10% of the population in the United States lives in a mobile home, right? There's over 11 million mobile homes in the country, right? So that's a sizable amount of homes that are there. But here's an interesting fact, Brian. There's a little over 43,000 mobile home parks So here's, you know, we have an affordability crisis in this country. The most affordable, affordable housing stock is a mobile home, right? Manufactured by far and away can be delivered to a person at the best price point. And every year, we probably build about 10 mobile home parks. Right? Because nobody wants them in their backyard. They've got a stigma of bad operators and we're just not building enough. So you have a dwindling supply and an ever increasing demand, which makes them very valuable as an asset class. And it means that you're going to have, to your point earlier, you're going to have a pretty healthy stream of residents if you're running and operating your communities the way you should.
Ryan Kolden: Right. Well, very cool. Frank, this has been a blast. I've learned so much talking with you. Is there anything that you want to tell people about mobile homes before I can tell them what your contact info is and where they can find you? Is there any last words you want to say about mobile home, mobile home investing, anything I didn't touch on that you want to let people know?
Frank Rizzo: You know, the one thing that I would really want people to realize is when you're investing in a mobile home park and you're investing in a community, you're having that impact where yes, everybody's investing and wants to see a return on their capital. That's why you do it because you want to create that legacy for yourself or for your family of that cashflow investment that creates the type of lifestyle that you want. but it's also the impact that you're having on the people that you serve. And if you're somebody who is investing because you want to have that family legacy, right, or you want to have that impact, you know, that impact capitalism, then you have to – you'd be doing yourself a disservice by not investigating the mobile home park space because it does check all those boxes. When I really looked into that, it was the best decision I ever made pivoting into the space and doing what we do here now.
Ryan Kolden: Fantastic. Well, Frank, it's been great having you on the show. For anyone who wants to connect with Frank, I'm going to go ahead and put his website and his information in the description. Frank, where can people find you? How can they get in touch with you?
Frank Rizzo: Uh, you could check us out at the mhpexchange.com where you can also get some more information about mobile home park investing. If that's what you're interested in finding opportunities, news, education, entertainment. Uh, we have a podcast, which you can hear some more information on and a, uh, a YouTube show called trailer park turnaround. So if you have any more, uh, if you're interested in that, you can take a look at that as well.
Ryan Kolden: Well, thanks again, Frank. It's been great having you on the show and that's a wrap for today. Take care.
Frank Rizzo: Ryan, thank you very much.
Ryan Kolden: The opinions and views expressed here are for informational purposes only and is not tax, legal, financial, investment, or accounting advice. This material is educational in nature and should not be deemed as solicitation of any specific product or service. All investments involve risk and a potential for a loss of principle. Should you need such advice, please consult with a licensed financial, tax, or legal professional. Neither host nor guest can be held responsible for any direct or incidental loss incurred by applying any of the information offered.