Secrets to Wealth Through Mobile Home Parks, Parking Lots, and Mentorship with Kevin Bupp

[0:00] Welcome to the REI Agent, a holistic approach to life through real estate. I’m Matthias, an agent and investor. And I’m Erica, a licensed therapist. Join us as we interview guests that also strive to live bold and fulfilled lives through business and real estate investing. Tune in every week for interviews with real estate agents and investors. Ready to level up? Let’s do it.

[0:24] Welcome back to the REI Agent. Today I had the great fortune of talking to Kevin Bupp. Kevin is a commercial investor. He is focused primarily on mobile home parks and parking. So parking lots or parking buildings in cities. And it was really interesting to hear about those asset classes, the advantages of them and similarities of them and differences. It was really interesting also to hear about Kevin’s story and how he kind of got into real estate investing. And he said he had a mentor starting at age 19. So he’s been doing it ever since. And I wanted to talk a little bit about how I saw in him one of the key factors to being successful in my mind. And that is basically an openness or an excitement in other success.

[1:16] So I think there’s often people that feel maybe inadequate or self-conscious around other successful people. And that kind of makes them either avoid conversations and avoid getting to know them or maybe even being a little bit negative towards them in some fashion or not. And I think that if I’m somebody that could teach somebody something, and I think a lot of people that get into real estate investing and real estate sales want to pass on the torch. They want to mentor other people and help them at a certain stage. And that happens all the time. And if I am interacting with somebody who, through their self-consciousness, is kind of being kind of mean to me or kind of treating me like a competition or whatever it is, versus somebody who is very excited about, like, tell me more, asking questions, getting engaged, and wanting to do things for free.

[2:13] Kevin was working for free for this mentor at 19 while he was going to community college and bartending. And I think that is something that a lot of people would not do. They would want to be paid. They would want to, who’s this rich guy not paying me money for helping him? He’s got tons of money. Why can’t he pay me? He should be paying me more. But Kevin understood that it was the connections he had, the knowledge that he could gain that was worth. I mean, he could have, we talked about it in the podcast, he could have paid this mentor for his time, and it would have been worth it. And I think that’s something that’s just so pivotal to somebody’s success. If you want to become successful in real estate sales, real estate investing, you should surround yourself with other people that are successful and learn as much as you can about why they do the things they do, how they do it, learn from their mistakes, ask advice, anything you can do to kind of get into their inner circle, honestly.

[3:16] And, you know, that is going to make you fast track past a lot of the other, you know, problems and heartache and the school of hard knocks that maybe other people have to go through. Books are another great way to learn that information. But I think if you can really have an in-person mentor as well, that’s going to be just so vital. So Kevin learned from this guy in a smaller area, then he moved to a bigger area. He found another guy that was even bigger that fast-tracked him into a bigger scale. And then he met somebody else that turned him on to this mobile home park asset class, and he kind of went all in from there. But it’s just, you know, that openness to learning and to growing and to not being threatened by other success, being happy for other success.

[4:01] I’ve probably said this before, but I think that is probably one of the key factors of if somebody is going to be to make it, if they’re going to make it in business or life or have some sort of level of success on your own, like being an entrepreneur, is really that openness to learn from somebody, to be excited for them when they win. I think it’s that fundamentally, it’s that abundance mindset, right? If you have the scarcity mindset that they are your competition, that they are better than you, that you are inferior to them and all that kind of stuff, you’re not going to learn. You’re not going to have the opportunity to get further with their advice, with their help. So that would be my advice.

[4:41] If anybody is out there kind of starting out and really excited about the possibilities of real estate, I would say look into finding a mentor. Find somebody who’s successful in your area. Do what you can to, you know, don’t be annoying. Don’t, don’t pester them too much, but see what you can do to kind of get in their good graces. Like, you know, like what Kevin did, he, he worked for free. And, and that’s something that, you know, not many people would do, but it’s gotten him very far. So without further ado, let’s let Kevin tell his story and tell you about the wonderful world of parking mobile things in different capacities. Kevin Buck. Welcome back to the REI agent. I am here with Kevin Bupp.

[5:30] Kevin, thanks so much for joining us today. Yeah. Appreciate you having me. Excited to be here. You, you look a little more sun-kissed than me. I’m coming out of, uh, I’m in Virginia and we recently have had the snow disappear. Um, but we, it’s still cold. It’s, it’s still, it’s the time of year where I’m, I’m kind of over it. I’m ready for some spring and some, some new life. Yep. In many different ways, the market, everything. So, yeah. No, we, we’ve had, we’ve had a pretty cold winter down here in Florida, which is, uh, you know, a lot of people giggle when we say cold in Florida, but like it’s, uh, it’s, it’s been six weeks of, uh, you know, high in the maybe fifties lows in the high thirties at night where we’re at, you know, we’re in South Florida.

[6:09] So, but it’s cold, that’s cold here. I mean, like the humidity is pretty high. So like we’re turning the heat on, you know what I mean? At certain points. And, um, so it’s all sunshine and rainbows the past winter. Yeah. Are people prepared for that? Like do they have heat? You turn your heat off for the first time. It’s got that burn smell. You know what I mean? Like, it’s just, you wonder what the hell’s happening. But, uh, yeah, I’d say half hour, half hour. I’m from up North originally. I was born and raised in Pennsylvania. So I, you know, I’m used to cold, uh, you know, we ski and things like that. So I just, I’ve got the right weather or the right, the right gear for the weather, uh, when it comes.

[6:44] Yeah. No, Kevin, I’m actually going on my, I’m trying to do one ski trip every year now, uh, since I got busy with life, kids and work. So, uh, I’m doing that tomorrow. I’m excited. Oh, that’s awesome. We’ll wait till you can actually get your kids involved as well. If they’re, if they’re not already, that gets even more exciting. So we’re at that point. Oh, that’s fun. Yeah. No, I’m looking forward to it. My wife doesn’t really do it much. So we’re not sure we got it. We got to just take the plunge and, and, and get them all out there. Cause they can all right. Yep. Absolutely. I agree. I agree. But anyway, Kevin, uh, you, um, have you, you briefed me a little bit on what you do and it’s, it sounds like it’s a little more nuanced than, um, I’m familiar with.

[7:21] So I’m eager to break that down a little bit more, but why don’t we start with, um, kind of your journey into the real estate world? Yeah, that was a sure thing. You know, I, I’ve, um, I’ve been at this. I think I’d mentioned to you, I’ve been at this my entire adult life. I, um, got really lucky. You know, real estate kind of found me at a, at a young age. I was 19, but my first house when I was 20 or, you know, first real estate investment when I was 20, which happened to be a single family home. And, um, really that, that was at a point in my life where I was going to community college, not really knowing what I wanted to do when I grew up. I was always entrepreneurial as a, as a kid, you know, I had a paper out when I was 12.

[7:53] I, you know, learned how to install car stereos and amplifiers and, and, uh, my brother’s friends, cars utilize my parents garage. I’d go mow grass or shovel snow to make money. I just was always trying to find ways to make money so that I could, you know, my parent, I never went without, it was very blue collar upbringing. Um, but we didn’t have a lot of excess. And so, you know, if I wanted something, you know, I figured out how to go get on my own. And so that’s ultimately where the, uh, the entrepreneur drive came from was just, you’ll be able to buy the coolest bike or, you know, sports gear, whatever it was at dirt bike at that point in my life. So, um, you know, fast forward at the age of 20, uh, or at the age of 19, I met a gentleman that, um, happened to become my mentor.

[8:29] He was a local real estate investor in Pennsylvania where I grew up. And, um, that, that was really, you know, the, the kickoff, you know, I, I got to know him as an individual through my girlfriend at the time. She was, uh, her mother was dating him and that it was really odd acquaintance, but like ultimately we became good friends and, um, and I ended up going to work for him for free for, for a little over a year. So in between tending bar in the evenings and, um, and, uh, going to, to, to classes during the day, I would be at his home office. I’d be on the field. I would do anything he needed me to do. Literally. He was like a, he’s a solopreneur. He didn’t have an assist or anything. And he had done really well.

[9:01] He’d been doing this for 20 plus years. He was like 25 years older than I, and, um, and I just, I found a way to bring value to him. And that was basically being whatever he needed, right. To take some slack off his plate, returning calls, you know, calling people, putting out signs. And, uh, and I did that for over a year and, and learned for free. I did it for free. Yeah, I did it for free. Um, I mean, for me, like for, for me, I, I thought it was a huge win. Him even like, uh, extending that. I mean, I kind of pitched him on the offer and him saying, yes, I was like, hell yeah, I’ll do this for free. I mean, cause of my mind, I’m like, I get to literally listen to him. Talk, you know, talk to talk, walk to walk.

[9:34] Like what do you, what’s he, what’s he saying? Why is he saying it? How’s he saying it? Um, and I got to, you know, get to meet his network as well. He had a number of private lenders that had been lending money for him for many, many years. I literally just got to plug myself in immediately to his ecosystem, which I thought was a huge benefit. And so for me, like, you know, I still had to jive. So I was still making money in the evenings. I would work to be like Thursday, Friday, Saturday night, tending barn. I made really good money. And, you know, taking your 12 credits of classes during the week didn’t take up a lot of time. And so I had a good bit of free time and, uh, and so I didn’t, it wasn’t that much of a sacrifice.

[10:08] It was kind of just filling in some blank spots on my calendar at the age of 19, which there’s a lot of it, right? Yeah. And actually doing something useful with it. So, yeah. But Kevin, how many, how many 19 year olds would do that? That’s, that’s, I agree with you. It’s an amazing opportunity and it is, it’s worth more than getting paid. I mean, honestly, you could pay him probably and it would be worth it. But, but that is definitely not something a lot of people would take advantage of. So that’s, that’s awesome. Yeah. Yeah. A lot of my friends did make fun of me. They’re like, why are you hanging out with this old guy, David, all the time? You know? So, but, but I don’t know where I’d be at today if it wasn’t for me.

[10:44] I mean, he literally, that was, that was the moment in my life where I learned about real estate. It’s the first thing I’d gotten excited about as far as like, what the hell am I going to do with all this energy and excitement I have for life? But like, I don’t know where to apply it. And it’s, I wasn’t very academically driven in high school. And so I was kind of even, you know, college, I was just going through the motions. Cause I’m like, damn, nothing excites me. Like none of this, I don’t know where this is applicable in real life. And so I was, I was looking for something. I just didn’t know what it was and real estate it became. So. That’s awesome. So, okay. That, that answers one of the questions I had is how you kind of skipped maybe the, the, the course a lot of people would have taken when they wanted to get into real estate.

[11:19] But so he, he kind of maybe accelerated your growth really far. And so you bought that first single family home, where, where’d you go from there? Yeah. Yeah. Good question. So his, his model was, you know, I’m one of those folks that like, if it isn’t, if it isn’t broken, don’t fix it. Right. Like just kind of, if it’s tried and true just this role with it. And so he had a very much a buy and hold model. It was a single family and small multifamily. However, what I realized after I bought that first property was that he was, you know, many decades ahead of me, you know, so he had, he has a different, you know, financial position that he was in and just lots of things were different. And, you know, it wasn’t a mirror image of me just getting started.

[12:00] Um, so I bought that first property with the intent. I was going to just buy rental properties like David and fill up this nest egg and have passive income from these rentals. Um, and I had 7,000 bucks from tenant, you know, from, from bar money. And I use that as a down payment, use one of his private lenders to help finance the deal and got it, got it rehabbed. Um, got it occupied and it was, you’re making barely like 300 bucks a month, positive cash flow. And I very quickly realized that it was going to be a very long time until I could buy the next property. Right. And so, so I didn’t, I didn’t have a lot of credit at that point. I couldn’t really rely upon that. And now I had literally no money.

[12:33] Um, I didn’t have any skin to put into the next deal. And so it just, it would have taken some time for it to do, you know, to do a refinance. And so I realized very quickly, I had to make a slight adjustment to the model. So I had marketed to find that deal. And so I had a little bit of momentum going, I had other leads coming in. And so I just quickly realized that I would have to sell some of these other properties. I ended up selling the rental. Um, I sold that one. Then I would just basically wholesale a few and then I’d try to keep one. And originally it was like wholesale three or four, keep one. And then I got to where I could wholesale two or three, keep one. And then after I was able to do it for a couple of years, I had enough of a reputation, had enough capital of my own.

[13:07] I had connections, had private lenders, my own, uh, had a track record and was able to start keeping many, many more units. So, but that’s how it started. Um, and ultimately that, that morphed into a, a buy and keep for the most part. We weren’t very much fixing flippers. We’d fix properties, but do it with the intent of, uh, of getting them occupied with renters. Yeah, no, totally. So as that scaled, um, you were still kind of sticking with the single family and small multifamily or did you get more complex then? Yeah. Yeah. You know, in my, in my early mid twenties, I know I moved down to Florida, um, a short two years, uh, after I got into the business up in Pennsylvania and, and it opened up my eyes to just a much bigger market.

[13:47] I met a gentleman down here, uh, shortly after I moved here, still a great friend today. And he literally had a portfolio of like 800 single family homes. And so it was just this massive scale that I could never, ever envision. He ultimately became a really close friend, a second mentor of mine. And, and it allowed me to literally just hit the gas and, and, and, and have an infrastructure and just have a, uh, you know, uh, a, a better plan in place than just buying, you know, one or two every once in a while and slowly building this portfolio. So I hit the gas when I moved down here, I was 22. And by, by the age of about 26, I had acquired about 120 single family homes that had in the portfolio.

[14:20] And that also had started buying multifamily, a lot of smaller stuff, like, you know, 10 unit properties, 12 unit properties, the biggest one we had that I was in a partnership with was like 72, but like, it was mostly smaller, smaller multifamily, but it happened fast and happened quickly. And, um, and, and most of that was a direct result of this, this kind of secondary mentor that just thought in a much bigger scale, had a much bigger vision than I ever had. So that’s ultimately what it was. Um, aside from, uh, you know, during that period leading up to 08, it was mostly single family, some, some smaller multifamily and other little bits and pieces of commercial. So I had bought like an office building.

[14:55] I bought like a, um, uh, like a little retail strip center, but it was just kind of like, they were like steals that I couldn’t pass up. They just seemed to be, you know, deals I couldn’t, I couldn’t say no to. Um, but I didn’t really start dabbling into commercial real estate. Um, really until after the crash, the, you know, the crash occurred, I lost a lot of the single family stuff, the residential stuff. It just was, it was really tough down here in Florida. Um, lots of, uh, excess homes and rooftops that had been built for populations that weren’t here yet. So you just had an oversupply, uh, in all the major markets, Tampa Bay being one of them. Um, and, and ultimately look to kind of reinvent myself after, after that crash and just try to do things in a more efficient way.

[15:33] And that’s really where I wouldn’t say commercial came into play, but much a larger scale, kind of like saying, Hey, like, I think that there’s for me to rebuild and to do it more efficiently and to do it at a bigger scale, the faster you can get the scale, the faster you can start hiring, you know, quality teammates to join the team, right? Like you got more revenue coming in and I, and I didn’t want to go out of the loan again from the, from the get go. And so from that point it was kind of a focus on commercial. I thought it was gonna be multifamily, um, to rebuild like bigger multifamily. And that’s when I ran across mobile home parks. Um, I really had a lunch with a guy that, you know, that owned mobile home parks.

[16:04] I had never thought about that asset class before, had never considered it. And I had a lunch meeting and as those things typically go, uh, after two hours, he excited me so much about the, uh, the asset class. And I was like, I’m gonna go buy one and I’m gonna go figure this out and go buy, buy one of these properties. So, and I did. And here we are now. Um, that was, that was basically in 2012 and bought the first one. And, uh, 13 years later and we’re still buying them. So, yeah, that’s the asset class that, uh, like when you’re, when you’re getting started in real estate and it’s this like romanticized, like, you know, you know, the thing in your head, you’re not thinking mobile home parks usually like that’s, it’s not the sexy asset class, uh, but it is a very good asset class to get into it, uh, into investing.

[16:49] I mean, I, I, like I mentioned off air and I’ve mentioned on this podcast before have invested in, uh, syndications into, um, yeah, into mobile home parks. And I understand, but can you, can you give us like a elevator pitch as to why that’s a great asset class to be in? Yeah. I mean, I mean, first and foremost, you know, I think we all have heard it many times that we’ve got a huge need for affordable housing in this country. And so first and foremost, like a mobile home parks, any market that you go into across the country, it is by far probably the most affordable housing option, non-subsidized housing option that exists. Um, on top of that, there’s a lack of new supply. So it’s got this weird supply demand imbalance and that, you know, it’s in high need, high demand, but they’re not making them anymore.

[17:30] There’s a litany of reasons why, but it’s more and more folks want to, at least investors want to buy into these parks. Um, residents that, that need affordable housing need them. However, there’s not this new supply coming in the marketplace. So there’s a couple of the big ones. Um, you know, but on, on top of that, you know, the, the, the idea that there’s a barrier to entry and that new ones aren’t being built for us. That was something that really stood out to me, um, amongst many other things. But like, that was huge knowing that like we could buy a great asset, the great market, one that’s in high demand. We could, you know, serve the needs of the residents that need affordable, non-subsidized housing and know that another one literally couldn’t be built down the road.

[18:09] Um, that’s, that’s unique. That doesn’t really exist, uh, in any other asset class really, uh, actually, actually outside of parking, parking is really one of the other ones that, you know, we buy parking and, and very few markets allow new parking to be built. So, um, it’s kind of got this, uh, this barrier of entry in place that, you know, shields us from, um, you know, from new competition coming to the marketplace. And then, you know, a litany of other factors as well. Like a lot of our residents own their own homes in our communities, meaning that they own the mobile home. Right. And they simply pay us lot rent. You know, we own the, we own the, the, the roads, the common areas, we own the entire community itself, infrastructure.

[18:42] And then they pay us for the, you know, the monthly, uh, rights to have their home set on that piece of land, have their own yard. Um, and so along with that comes a lot lower turnover, um, lower, you know, maintenance expense from an owner perspective, meaning owner, meaning us, uh, and that like if their roof leaks, if their plumbing breaks, if their AC breaks or anything like that, they’re calling a vendor directly. They’re not calling us. Whereas, you know, an apartment unit or a rental home landlord’s going to be responsible to fix all those items. So those are a couple of the big items that really jumped out to me that got me intrigued enough to kind of dig a little deeper into the space.

[19:16] And then ultimately, like I said, I went and bought one kind of saying, Hey, I need to test this theory of, uh, whether or not this is a good asset class or not. And that was back in 2011 going into 12. And, um, now we’ve bought and sold 50 plus of them. I’m not sure the exact number. We’ve got about 3,500 lots in our port portfolio at present time. Oh, nice. That’s awesome. And so you do sell some occasionally as, you know, we, I would say that our, the best way to answer that question is yes. However, um, you know, our models just evolved just like anything else. It just tends to evolve over time. Um, whereas in beginning, you know, we would, we would buy assets, lots of big, heavy turnarounds, mobile home parks that just need a lot of work.

[19:57] And, um, and we would hold them for a period of time. We’d either do a cash or refinance someone we would sell, but we really, at that point we were, we were in a position where we need in order to continue building the business, we need to be able to get some really big pops and like cash or refinance finances help you get there, but they don’t necessarily give you as big of a pop as if you’re just going to divested the asset. And so, you know, I think it was fairly critical for us to, to really think along those lines more than just a buy and hold, uh, earlier on. However, I would say again, looking back, um, over, over probably the last even just five years, there’s some regretful sales that we had.

[20:28] I wish we wouldn’t have sold a couple of properties, right? Like while we did really well with them, um, it’s nearly impossible for us to replace those. So every time we sell one, it becomes inherently more difficult for us to find another replacement property that’s equally as good that we know as well. Cause you know, I mean, if you’ve owned it for years, you know, the skeletons, right? You know, all the good, the bad, the ugly, uh, whereas any new property, no matter how great it looks for me outside going in, there’s always something right. That pops up. There’s variables that you’re not, you’re not familiar with this just yet. So, but, but you know, to answer your question now, like our business, it’s definitely more geared towards buying and holding for the longterm.

[21:04] We’ve even changed our, our, our front structure quite a bit over the years to where we want to make sure that we’re also aligned with the right investors, right? Like there’s different buckets of investors and what their needs are. And there’s definitely a lot of investors that wouldn’t be a good fit for our model today, where it’s more of a, Hey, buy within 10 of holding for seven, 10 plus years, right? Quite a longterm. Um, like our investor base that we, that we work with mostly are folks that are, you know, they’re not trying to hit her runs. They’re not trying to take outsized risks. You know, they don’t need to recycle their capital every three to five years. Um, cause they’re, you know, our, ours are more in the wealth preservation stage, like they’ve made it, they want to invest in great assets.

[21:39] They don’t want to tax liability every, every, you know, three to four or five years. When, when we sell a property, you got to deal with your capital gains, recapture, and then they have to go through the motions of finding something else to put it in. Right. And so we’ve really honed in on the bucket that are just looking for wealth preservation, want great assets, and they want steady mailbox money, um, on a reoccurring basis. And they don’t want to necessarily think about every couple of years, figure out what to do with the, you know, big pop of money that comes back their way, but also the tax consequences along with it. So, um, you know, we’re more long-term now, like anything we look at, we say, Hey, we ask ourselves a question, would we be okay owning this for 10 years?

[22:14] If the answer is no, then we, even if it could be a great deal, meaning that like, Hey, we could, in order to make the numbers work, we got to get in, fix it up. But this one wouldn’t be really be a whole, just based on how much capital we had to put into it. Like this wouldn’t be a great fix and hold strategy, but we do quite well. As far as your returns, if we, if we exit out in like three years, we tend to say, we were able to say no to those and just focus on the ones that are better long-term holds. Okay. Yeah. Let me, let me, uh, try to break that down for an investor a little bit, kind of what you’re talking about. If I can, and you can correct me if I’m wrong here, but if there’s a, you know, people that aren’t as familiar with this space listening, uh, you know, let’s say you are wanting to invest in this kind of property and this kind of deal.

[22:55] Um, there could be something like an apartment syndication, for example, where the, the intent is originally to sell it and maybe two to five or three to five years or something to that extent. Uh, the idea is basically a flip, uh, but it’s on an apartment level scale, right? So essentially make the, make the budget, uh, make the income higher. So that either like with taking away expenses or reducing expenses, making things more efficient, raising rent and proving the property, there’s all sorts of different ways to do it. Um, but basically make the property a lot more value by making the income higher, uh, and then sell it. And so some of those models would be, you know, I’m going to invest money now, and then I’m going to be projected to get double or, you know, have it.

[23:40] Yeah. I don’t know if those are existing anymore, to be honest, it’s been a little bit since I’ve looked at that model, but yeah. Yeah. I think you’re, you’re along the right lines. I mean, a lot, a lot of the stuff, if we want to use, um, the apartment model, at least what, what it has historically looked like, um, it’s, it’s probably a good one to use in that. And meaning that like the reason why we don’t buy these, you know, certain maybe fix or flip and we’ll buy something that’s fixed up. But like, if we have to flip it in order to make the numbers work and a good example is like what a part, what apartment deals look like over the past five years prior to rates going up. Uh, a lot of them, they were negative cashflow.

[24:12] Like you weren’t getting distributions. If it was a three to five year projected hold, you were not getting distributions as an LP, like all the projections and all the cat, even if they, you know, um, advertise, you know, annualized cash on cash returns, that was after the, you know, exiting the property. It’s not during, you know, so you had, they had to sell the property. Most of the time they were buying it at a, at a negative, a negative leverage. Um, they had to get, you know, uh, high LTV bridge type loans in place that are incredibly expensive to carry over a couple of years. But the deal only made sense with them getting high leverage on the front end, having variable rate debt, no distributions during, um, the business model, you know, increasing rents, improving units, putting a lot of money back in doing better operations.

[24:53] But really the value came at the back end during an exit. And a lot of times there wasn’t enough. If they were just going to do a cash out refinance, there wouldn’t be enough to make their investors whole at the time that they went to recap the property. And so for that reason, most of the time they’d have to sell completely outright. And the numbers look great. Um, at least back then before rates went up, but ultimately there was no, it’s, it’s almost, it’s almost akin to that of a, to a certain degree, um, not in the same level, but like the risk of a development deal, right? Like time is the risk in a development deal. You know, there’s no cashflow, there’s no income coming in and there’s, it could be a few years before that development is, is, is, you know, vertical.

[25:30] And so in between those, that period of time is a risky era. And so I think like that multifamily model of years past where it didn’t really cashflow negative leverage and it was just get in, fix up, you know, assume that rates are going to be low on the exit. And, uh, and in fact, a period of time there were like, there was this compression happening the whole time, right? Rates were going down. And so you could be a really crappy operator back then, literally, and still look like a genius and make money. And so for us, it’s a, it’s got to make money going in. Uh, it’s got to have, uh, we got to be able to actually start making distributions to our investors, like on the front end. And, and, you know, that might not be, you know, 8% out of the gate.

[26:06] They might be only 4%, but ultimately we know that as we implement our, our, our, our fixed strategy that we’ll be able to increase revenues, you know, lower expense, whatever the business model is for that particular property and steadily increase those distributions over time. But like, we won’t go in with, you know, the idea that it’s got to be a, a buy fix and then flip strategy in order to make it work. I mean, that’s probably the best way to describe it. It’s like, it’s like buy and hold versus flipping. Right. I mean, it’s like, it’s just on a much larger commercial scale. So that’s what the apartment kind of model was and, and, and, you know, still, still is happening for sure. But like, yeah.

[26:42] So you, you would project, you know, getting maybe whatever X amount after it sells. And then you, like you said, you’d have to pay capital gains tax and things like that. You have to worry about what to do with it. Um, and, and your model is more like buy and hold essentially. Yeah. That’s actually, that’s a good, that’s a good comparison. A lot of folks, if they know single family, then, you know, like you might flip a, it might be a $400,000 acquisition. You put 200 into it and then you sell for 800, right? There’s a $200,000 potential profit there. However, that deal, if you’re like, well, I’m just going to buy that one or, you know, I’m going to fix it and rent it. And you know, when the 1% rule, right, you’d have to be able to rent that thing for $6,000 a month, uh, and it’ll refer to make sense where a lot of times a $600,000, um, house, you know, or an 800,000, however you want to look at it probably wouldn’t rent in a lot of markets for that price.

[27:28] Right. It might be 4,000 or 3,000. So for that reason, it’s like, I’m not going to get hardly any return. It’s going to be a crappy return. I can do better buying treasuries or whatever else, um, than keeping this as a rental. However, if I flip it and to keep, you know, rolling those profits and other things, that would be the better use. Yeah. No, that makes a lot of sense. Um, so what, what size properties are you looking at typically? I mean, is there like a minimum lot number that you guys look for? Yeah. I mean, for the most part, you know, the bigger, the better, uh, is the best way. So there’s really no max size, um, uh, on the, on the, on the, on the, I guess, you know, what, what the floor looks like.

[28:05] If it’s in an area where we don’t own anything else, um, you know, we’re not just like maybe tacking on a smaller property, like 80 to a hundred units is kind of the, you know, the minimum. Um, you know, however, we’re literally buying it. It’s, it’s probably the smallest property we’ve bought in a long time. It happens to be five minutes away from two other very large properties we own. And so it’s pretty easy just to kind of tack it onto our existing management. We’re buying a 33, 30, I think it’s 33 or 36 space property. Um, but you know, that, that’s kind of an anomaly. Um, you know, at the end of last year in December, we closed on fairly large property, 503 sites. Um, and then the year prior to that, the biggest property we’ve ever bought, that was one single mobile home park is 738 sites.

[28:43] So it’s the size of like a small city. Yeah. Yeah. Yeah. Uh, okay. So, so now, now give me the elevator pitch on parking. This is a territory I don’t know as much about. Yeah, no, it’s, it, you know, it’s, it’s very similar to that in mobile home parks. There’s this, you know, unique supply demand and balance in that, um, you know, litany effect. But one of the big ones is that the majority of, and these are, we only really look at like core markets. Um, these aren’t like, you know, secondary rural areas or anything like that. These are like downtown CBDs, you know, near the courthouse, near, um, you know, near, uh, um, entertainment venues, you know, whether it be, you know, sports stadiums and music, music venues, what have you.

[29:23] Like there’s gotta be a lot going on. And typically that means it’s somewhere in the core CBD of a, of a city of a larger city. Um, and so, you know, something unique that happened in the past decade or so is that a lot of, um, all these major cities across the country, there’s a hundred plus of them that, that basically have done the same thing. They’ve, they’ve eliminated parking minimum requirements from new developments that are taking place. And so what that means is that historically, if a developer came in and said, I want to build a, whatever, a multifamily high rise structure in the middle of downtown Charlotte, um, it’s going to have some retail as well, this, that, and the other, they’d be like, fine.

[29:57] Um, all good. We agree with that. However, for every thousand square feet of, of, of a residential that you have, we, we’re going to make you put in whether you think you need it. I want to make you put in 1.45 parking spaces for every thousand square feet. They had most municipalities had a formula like that. They require you to put in a certain amount of parking, whether you believed you needed it or not. And, and they’ve, what they realize is over, over the years, over the decades and decades, a lot of cities had excess parking. They had parking. It wasn’t getting used. And, and, and parking that wasn’t, it wasn’t as tax efficient, right? So if you’ve got a condo tower, multifamily tower and, and a portion of its parking, um, that the tax basis on that parking portion is not nearly as high as what it is on the residential portion.

[30:36] And so, and on top of that, the developers, you know, given the choice, they would have built more apartment units, not parking. That’s not being needed. So anyway, um, a lot of those parking requirement minimums have been eliminated. And so what you’re finding is now there’s a shrinking supply of parking and all these major markets. Cause new developers are like, well, I’m going to build as much as I think I need, which, you know, I want to make more money. I’m going to make more of a return on the, on the multifamily or the condos, whatever it might be they’re building above. And so there are a lot of times they’re putting in a very minimal amount of, of parking. And so, and, and they probably built their high rise on a, what may, might’ve been a surface lot before, right?

[31:12] That could have been parking as well for that area. And so you’ve got this parking that’s ultimately going away and going away and shrinking and all these major downtown areas across the country. So like, that’s the one piece of that, like, that’s amazing is that there’s an inelastic demand. I mean, if you’re in the right location in a downtown area, if you’ve got multiple demand drivers of folks that are using your, your garage, your parking lot in that, like, there’s only a shrinking supply of additional parking competition in the area. So like, again, most municipalities will not let new parking be built. It’s definitely not as a standalone. And again, you know, if it’s developer building some type of mixed use property, they’re going to put in only the amount they need for their people.

[31:49] They don’t give a shit about, they don’t care about transient parkers or anything like that. They only want to serve the needs of the people that are in their tower. Right. Right. So that, that’s, that’s, that’s a really big piece. So, but the last piece of the puzzle that for us is incredibly attractive is that for us, it’s irreplaceable real estate. I’ll give you an example. We just closed on a property a month and a half ago and I used downtown Charlotte cause we just, that was, that was fresh in my mind. But it’s, it’s right across, it’s a parking garage. It’s 800 stalls. It was a distressed deal, not the garage, but it happened to be tied. It’s a standalone garage, but it’s kind of shares a wall with an office building.

[32:26] And the largest lessee of that office building left and they occupied 80% of the space. Right. So through that whole deal and the special servicing, we got creative and split the two out and, you know, gave the office to somebody else that really wanted to do a conversion with it. And we kept the garage and we got that really good basis. But long story short is that garage is directly, when I say directly, it’s like a stone’s throw cross from, from the spectrum center. And that’s where the NBA Hornets call their home stadium. They just put like a $250 million renovation to the stadium. So they’re not going anywhere anytime soon. It’s where all the big music venues happen when they’re in Charlotte.

[33:00] It has 24 seven traffic meaning that there’s office buildings. The bank of America headquarters is literally connected to our garage. They use about 20% of the parking there. And that’s literally their headquarters for the U S and, and, and Charlotte’s a 24 seven city meaning that there’s a ton of restaurants. That ultimately in nightlife where people come after 5 PM to utilize it. So we get a lot of transient traffic in the garage outside of events. And so anyway, so it’s, but like for us, it’s like, we look as let’s say in 15 years, cars are flying 20 years, whatever it might be, whatever that timeframe is where one could argue that there might be not as much of a need for physical parking.

[33:33] Right. Well, guess what we have? We have an acre and a half of land in literally the most densely populated portion of a city. Right. And so inevitably there will be a higher and better use at some point in time. We don’t underwrite that, but it’s got to make sense as parking today. And we have to have, you know, at least a 10 plus year outlook and we feel very confident and its ability to support subs parking for the future. But knowing that whenever the time comes, either we could take down the parking entirely and build something new or build on top. A lot of these parking structures have the ability for something to actually go on top of them. You know, additional units to go on top of them.

[34:06] So for us, it’s kind of a, it’s a cashflow and covered land play. And some of the most desirable cities in the country. I was just in Philadelphia last week. We’re buying literally one. I shouldn’t say that we’re buying it. We’ve got an offer accepted. We’re going through the process. So anything could happen, but it’s literally, it’s a block away from the Liberty Bell. It’s two blocks away from Independence Hall. It’s an old town, Philadelphia, where literally parking is at an all-time high shortage and there’s no new parking being built. And so again, irreplaceable real estate is, it’s kind of the name of the game, but cash flowing while we hold onto it. Yeah, that makes a lot of sense. That’s not an angle that I, a lot of people would think about really, but it makes a ton of sense why it’s appealing.

[34:51] And I would imagine the same regard, there’s less maintenance involved than like an apartment building would be. I’m actually curious what kind of maintenance you’re looking at for running one of those. Yeah. Like a garage. I mean, it’s a concrete structure. So a lot of it depends on the environment that it’s in. You give you three extreme examples. We don’t want to downtown Phoenix. It was literally built in the, the late fifties, but it’s so dry out there. They get very little precipitation that that thing literally looks more pristine than the garage of Philadelphia that was built like 1988. Right. Like, and so, but in Philadelphia, you’ve got extreme colds, you’ve got extreme hots in the summer, you’ve got salt and all that crap that’s on people’s tires, right?

[35:29] You get a lot of precipitation in the springtime. So a lot of different elements have to deal with. And then Charlotte kind of falls in between Charlotte, you know, it doesn’t, they don’t get snow in Charlotte doesn’t get, doesn’t get extreme temperature variance there. So it definitely holds up a lot better in Philadelphia. And so a little bit less requirements as far as ongoing maintenance. And so like the one in Philly, every, every seven, eight years, we’re going to have to like re-waterproof all the concrete, probably do some concrete repairs every couple of years as well. Delamination that happens, you get salt that kind of gets into the cracks and, you know, cause the concrete to break up.

[36:02] And so it’s just ongoing maintenance more than anything else. You know, probably at the most, the most extreme, probably about 4% of, of top line revenue on an annual basis would, would be set aside as reserve future reserves. And on the low end, it could be, you know, one or 2%. So just really, and it also depends on like what, how long, how well was it kept before we came into the equation, right? We’ve actually backed away from deals because they had such deferred maintenance that, you know, the, the, the, the bigger risk was in what we couldn’t see that was beneath the concrete, you know, from the years and years of neglect and, you know, salt working its way in moisture, working its way in.

[36:41] And, and for those, I couldn’t give you a number of like what that’s going to cost us ongoing to keep it in good condition. Cause I just, you can’t see what you can’t see. And so in that instance, we walk away. Okay. Yeah. No, that makes a lot of sense. That’s a, it’s an appealing model for sure. I could see. Yeah. Why those are kind of similar. They’re, they’re both, you know, technically parking for mobile things. That’s right. That’s right. Absolutely. And, and, and, and, and very few new ones are being built. So again, it’s like this is again, the supply demand and balance, you know, parking lots are being taken down on a, on a regular basis. We own a parking garage in Colorado beach, which is in our backyard here.

[37:21] And, you know, tourist destination. And I was just down there the other day and we have the last standalone parking garage that was, that will ever be built in the Island. The city actually built it like eight years ago. We bought from the city. They were doing a horrific job running it as, as cities typically do. Right. They’re not good business people, but we bought it from them and there’s a moratorium on parking. You can’t build new parking. Now it’s a standalone. And, and so in a lot of the beach area, at least our competition were surface lots. Like maybe they were an old motel that over the years, you know, it became defunct. And now Clearwater is going through this evolutionary stage in the last 20 years where a lot of like higher end hotels and stuff are being built on the beaches.

[38:02] And a lot of these older single or, or, or two story motels that were, you know, from, from the fifties, fifties or sixties there are being torn down. And so a lot of those turned into surface slots, the surface parking lots for beachgoers, because that made more money for people than to have them as motels. But now, now that, but those plots of land have been snapped up by developers. And literally I just found the other day, like 400 and 450 parking spaces that were available last summer are no longer available. They’re, they’re, they’re literally, they’re going to go vertical in the next couple of months. So they’re not being used for parking anymore. And so that’s, supply shrinking, right?

[38:38] Which is just going to push more, more cars to us. Yeah. That makes a ton of sense. And obviously with that, the value will go up as well. Right. I mean, that’s right. That’s why it makes it, yeah, it makes a ton of sense. That’s a really cool model. So, so tell me a little bit about if, if somebody is interested in investing in this kind of model with you, what that looks like you had off air, talk to me a little bit about not being necessarily a syndication. So I’m curious more about how, how that’s structured. Yeah. I mean, it depends how someone, how someone defines a syndication. I mean, you know, you could argue that we very much are right. Like we raise our, our capital comes in from high net worth of credit investors that we’ve got roughly 700 or so different, you know, capital partners that are, you know, throughout our various funds, but we don’t do standalone investments.

[39:23] So we don’t just buy one property and bring partners in for that one. We operate in a, in a fund structure. And so currently in our, in our fourth fund at present, there are, I think there’s seven, seven or eight assets in that fund. We’ll probably end up with somewhere around 12 and there’ll be a mixture of both parking and mobile home parks and, you know, and, and they’re diversified across a number of different markets. And so, you know, while it, it lives and breathes as, as it probably have someone’s experience with investing into one syndication, the difference is you’ve got a diversity of asset classes, got diversity of markets. And so for us, you know, from, from, from our perspective, it’s de-risked to a certain degree, because, you know, there’s always, no matter how well you underwrite something, what the one promise that can always make you is that how it actually performs will never directly align up with how you’ve underwritten it, no matter how much experience you have, right.

[40:12] It’s either going to perform better or it’s going to perform worse. Right. And so having a number of assets inside of one respective fund allows us to find a little bit more of a balance than the, the unknowns with just one deal. Right. Cause again, there’s always the variables that pop out once you get into a property. Now that, that totally cleared it up. Sorry. I don’t know why I didn’t pick up that nuance when you were talking about it earlier. Um, but no, that makes a ton of sense. So, so when, if, if I were, you know, like let’s say I was asking you, talking to you about it, uh, tell me a little bit about the questions I should be asking you, uh, a, cause I mean, it’s really going to be all about your operations at this point.

[40:50] Right. Because I mean, it’s asked classes that you’re interested in and then it’s also your operations because it’s not deal specific. Um, and as there just kind of, uh, you know, we, we, we expect this type of return over the years. Uh, what, how does that look like what was the offer to me? Yeah, that’s, it’s a great question. So, I mean, just generally speaking, you know, we’ve got three different classes in our, and this is our current fund. It’s eight, nine or 10 pref. And that’s all dependent on how much capital is invested, you know, initial go around, um, outside of that, our projected returns. And we always, you know, while we’re long-term holders, we still like to give some type of window projection.

[41:24] And so, uh, basically we look to return all original capital within now it’s a little bit longer than what it was historically, but you know, uh, seven years is kind of the target of projection of return, all the initial capital to our investors in this existing fund. And then we look at the underring over a 10 year hold period. Again, that’s not saying that we’re going to exit out at the end of 10 years, but we have to give some type of, uh, uh, horizon as to, you know, what these economics might look like, but basically somewhere between a 16 to 18% IRR over a 10 year hold. Okay. Um, and then tax benefits, uh, we, we had mentioned a little bit off air about, you know, being real estate professionals, giving you a little bit more ability to write off, uh, depreciation.

[42:05] Uh, so I would imagine, especially the mobile home parks, I understand that a little bit better than I do the parking, that there’s going to be some, usually some accelerated depreciation, uh, happening. Uh, I would imagine there’s something similar in a, in depending on the deal with the park, uh, parking. Is that, is that accurate or what? Yeah. I mean, I mean, we get cost segregation studies done on every, every property we buy. However, um, uh, you know, mobile home parks and parking are different ends of the spectrum just based on, um, you know, tax laws and what could be depreciated in a 15 year or less schedule. And so mobile home parks are probably the most tax efficient investment that I know of.

[42:40] And I’m not just saying that because we own them, but car washes is about the only other thing that, that comes even remotely close to, to mobile home parks, because really, you know, everything that’s, uh, underground, all the, the roads and the infrastructure, water lines, sewer lines, the electrical pedestals, all that will fall into a 15 year or less, um, uh, classification. So it can be, uh, we can accelerate to depreciation on it. It typically the land basis is fairly low. Cause a lot of times these aren’t in like, you’re not in the middle of a city, you know, they’re out in the rural area. And so if you look at just the raw land basis, it’s not all that significant. And so a lot of what we have found is historically about 70%, um, 70 to 75%, sometimes it’s been higher, um, uh, of the purchase price we can expect as depreciation.

[43:25] Obviously the, the, the bonus depreciation, what you could take immediately has been scaling down over the years. And so that ultimately has an impact on it, but, um, but they’re incredibly tax efficient. Um, parking garages on the other hand, not as much. Um, I mean, they’re, you know, it’s, it’s concrete. I mean, literally it’s, uh, most of it falls within a schedule above the 15 year classification. Um, and so they’re probably about 30, 30 cents on the dollar as far as what could be expected, uh, for depreciation. But again, it’s kind of one of the reasons why it’s, it’s nice for us to blend things. Most of our, most of our portfolio, uh, it consists of manufactured housing. So it’s like, for example, like in our, um, in our, uh, uh, in, in our current fund, there is only one parking asset at present time.

[44:06] There’ll probably be two. Um, in our last fund, we only had two parking assets. There was 11 mobile home parks, two parking assets, right? And so it really does balance it out quite a bit. Um, maybe not as much as what it would be if it was strictly mobile home parks, but still it’s, uh, it’s a, uh, a very healthy tax benefit. Um, nonetheless. Yeah, no, it totally makes sense too, though. Cause I mean, you can mix in that, you know, the, the, the prime location of in the city center, which were the mobile home parks are not right. So you have that long-term play as well. That makes a ton of sense. I like it. Um, and, and if, if people are a bit confused about all that, that jargon with, with depreciation and all that kind of stuff, it just basically, if you’re a real estate professional, you can, you can claim a little bit more than non-real estate professionals off of your, your income.

[44:51] Um, right. So if you’re, if you’re like a real estate salesperson, you could write off a lot more than somebody else could that is in a, um, and, and that amount is decreasing, but maybe that will change here. Um, I hope so. Um, but, but also, uh, so, so, so, so if you were to buy, if you’re gonna invest a hundred thousand dollars into a single family house and just do a regular, you know, 27 year depreciation schedule, which probably most people are, are, are familiar with, it would be a lot significantly less than if you were to invest into like a mobile home park that he’s talking about, uh, and, and take that accelerated depreciation where they’re basically itemizing all the things in there.

[45:29] Like you were talking about the pedestals and the sewer and all that kind of stuff that if you itemize all those things and depreciate them on a different schedule than the 27 years that we’re all used to, um, they, they might, I don’t know what they are, but like, you could be like a HVAC would have a different, uh, schedule than a, um, a roof or, or whatever. And so that just kind of makes it faster that you get to depreciate more at the beginning. Um, so that’s right. And then, yeah, in a parking garage, it’s like a 39, most of it’s under a 39 year schedule. I mean, it’s literally concrete. There’s not many AC systems or might be elevators and things like that. Right. And some lighting, but like most of, Oh, most of the structure is concrete and steel rebar, which I mean, it’s nice too, right?

[46:10] Yeah. Yeah. Yeah. Less. I’m sure less maintenance overall because of that. Like you said that the 4% max, um, is a pretty good number too for, yeah. Yeah. Repairs. Um, yeah, that’s, that’s fascinating. I mean, really, really cool, deep stuff. Kevin, it’s been really fun chatting with you. Cause, uh, I’m, I’m, I’m feeling like you, I’m feeling hyped. See if I go buy a mobile home park or see a city about their, uh, their park. Parking lots. I’d love to help you. You let me know. But, um, Kevin, if, if you had to pick a, uh, favorite book that, or a fundamental book or something that you’re currently reading that you think, uh, you would recommend other people to read, what would that be? Yeah.

[46:51] I’m going to give one that it’s just, we just handed out a bunch of them to, we had a annual meeting with our entire staff. Um, and we, we handed it out and it’s probably the book I’ve handed out more than anything else. Um, or maybe the thinking grow rich. I probably have handed out the most over my, over my lifetime. That’s definitely a favorite. I try to read that, you know, at least every couple of years. Um, I’d like to say every year, but I don’t, but I think that’s a phenomenal foundational book. Yeah. But the, the one that I’m referencing is called the go giver. It’s a short book. Um, and I always forget the darn name of the author, but in any event, it’s a short read and just really about making a positive impact, uh, in, in everything you do in your life, whether it’s personal or professional and just, um, anyway, just I’ll leave it at that.

[47:28] It’s a phenomenal book, short read, but very impactful. Yeah. Those are both really good. Uh, and that’s a good reminder. And I should probably go back and read both of them a little bit. Yeah. Um, yeah, that’s, that’s great. And then you’ve written a book. I see it in the background there. Uh, tell it, tell us about that. Yeah. I mean, yeah. So you can see behind me here, the cashflow investor, um, you know, really what all me that, that book is it’s a, it’s, it’s, it’s, it’s twofold. Um, you know, I’ve, I’ve been hosting my, my podcast now, my real estate investing for cashflow podcast for, um, gosh, it’s 11 years, a little over 11 years. And, uh, and I’ve interviewed some incredible people over time.

[48:05] And like, I always try to, if I, if I can truly find a golden nugget in there and, you know, I’ve, I’ve really specific about implementing into our own business, right. Taking ideas from others and just leveraging it and helping grow our business, do things better, do things more efficiently. Um, and so there’s lots of lessons that I’ve kind of taken out, um, over those 11 years of interviewing just some brilliant folks. And so there’s, I’ve kind of integrated those lessons into that book along with my own journey. Um, just 20 years of different types of real estate investments, what ultimately, you know, case studies of deals that we’ve done, right. Case studies of some deals that, that went not entirely right, uh, or incredibly wrong.

[48:40] Right. And, uh, and just lessons learned from those. So it’s, it’s, um, it’s a little bit of me, the little bit of, uh, hundreds of others that I’ve interviewed over the years. And then, you know, I go into depth about kind of some of our favorite asset classes. So Sunrise Capital only invests in two. We stay our lane, you know, we focus, um, mobile home parks and parking and literally up until six years ago, it was just mobile home parks. Like I don’t like to, um, dilute my focus on other areas, but I do a lot. I like a lot of other asset classes. And so in addition to, to those two, I go into depth about ALF, um, you know, assisted living facilities. I love that asset class. I love medical office.

[49:14] Um, I love multifamily. I’ve got a lot of personal capital and different multifamily projects. And so anyway, just it’s, it’s kind of through my lenses as well as a few hundred others that I’ve, I’ve, I’ve gotten to know over the years that I feel like I’ve grown incredible businesses and are brilliant people. So I feel like you can learn quite a bit from the book. Yeah. And then is there anywhere else people could reach out or, or just follow you, a social media website? Yeah. And if you want to grab a, I forgot, we’ve got a link that we just put up, um, put up last week and I almost failed to mention it. Um, as far as a free copy of the book, like you can go on Amazon if you want to grab it.

[49:47] Um, but you know, for those that are tuning in, if you want to grab a free, a free physical copy of, it’s not just a PDF, it’s a physical copy. I think you just have to pay like six 50, you know, shipping and handling. Um, you can go to kevinbup.com forward slash free book, kevinbup.com forward slash free book. And then as far as your question about social, I’m pretty active on LinkedIn. I’m pretty active on Instagram as well as Facebook. And you know, my last name is unique enough, B-U-P-P. Um, you’d type in Kevin Bopp. You should, I’m probably the first one that pops up there. So I shouldn’t be too hard to track down. It’s the benefit of a unique name, right? That’s right. It’s easier to pronounce.

[50:21] Yeah. Yeah. Yeah. Kevin, thank you so much for being on. Uh, it’s been a pleasure. Yeah. Appreciate you having me. It’s been a lot of fun. Thanks for listening to the REI agent. If you enjoyed this episode, hit subscribe to catch new shows every week. Visit REIAgent.com for more content. Until next time, keep building the life you want. All content in the show is not investment advice or mental health therapy. It is intended for entertainment purposes only.