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Jake Marchini: Brad, if you could start the next slide, please.


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Jake Marchini: Before we get started, I do just need to give a brief


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Jake Marchini: Disclaimer that the Entrust Group does not provide investment advice or endorse any specific products, and any and all information and materials presented today are for educational purposes only. All parties are encouraged to consult with their attorneys, accountants, and financial advisors before entering into any type of investment.


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Jake Marchini: Here is a…


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Jake Marchini: short bullet list of what we'll be covering today, and at the end of the presentation, there will be a Q&A session, so you'll be able to answer… to enter in questions during the presentation about content that you believe is interesting, or you'd like more detail about, and we will cover that at the end of today's presentation.


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Jake Marchini: As a brief introduction for myself, my name is Jacob Marchini. I've been with the Entrust Group for just shy of 10 years, and I have my Bankers Association of America CISP certification, that is Certified IRA Services Professional.


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Jake Marchini: Some information about the Entrust Group, for those of you who are joining us for the first time today. We are self-directed IRA custodians and administrators. We keep records of your IRA accounts, and allow you to make investments in what we call alternative assets, like mobile homes.


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Jake Marchini: Many of our staff are knowledgeable with CISP certifications, the same ones that I have, and we host monthly educational webinars for the benefit of our clients so they can get the most out of their IRA accounts with us.


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Jake Marchini: Some stats here. We have about $5 billion of assets under administration across 24,000 active clients. We have a long history in the business.


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Jake Marchini: Since 1980, 40-plus years of service in this space, and we pride ourselves on our single point of contact model for providing client service.


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Jake Marchini: Right? And so, without further ado, I'd like to turn things over to our presenters, Mr. Ian Fisher and Brad Johnson.


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Jake Marchini: Thanks, Jake, really appreciate it, and thank you all for attending. We're gonna talk about mobile home parks today.


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Brad Johnson: And why it might be a good idea for you to invest in this asset class in your IRA.


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Brad Johnson: And the subtitle here is just some context of our experience in the space. I've been investing for 12 years now, and we've done over $100 million into the asset class, and so we've seen a few things. We'd like to share some of those lessons with you today.


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Brad Johnson: All right, for some more context, here's just a little bit of a broader


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Brad Johnson: Viewpoint on our portfolio and our track record, 4,000 pads invested in.


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Brad Johnson: And as you can see on the right here, we have some of those deals, including the refinance date or sale year, and I always like to focus on


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Brad Johnson: the fact that, you know, most of these deals we intend to hold for the very long term, and that is an extremely valuable thing, I think, in the private markets, where most investment asset classes


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Brad Johnson: It seems like have a 2-5 year type of hold period, and then you're left with the drag of the paying the taxes, and then going out and finding another deal, whereas vintage is really set up for the long term.


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Brad Johnson: As you can see, we've done a fair amount of refinancing of these assets, and once we have our capital back, we continue to collect the cash flow, and that's one of the things we love about this asset class, is the ability


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Brad Johnson: To do that and hold these investments long-term.


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Brad Johnson: Some further context on Vintage, our leadership team.


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Brad Johnson: You have Brad, and Ian is listening in, in case we have a connection problem, but my background kind of touched on 12 years investing in mobile home parks.


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Brad Johnson: Alright.


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Brad Johnson: We have focused on that niche. It's our primary asset class at Vintage, but we also do other things within the private markets. We look for, generally, investments that we think have an interesting risk-reward


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Brad Johnson: set up to them, and certainly we're going to get in that today with mobile home parks. Prior to investing in this asset class, I worked in real estate investment banking.


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Brad Johnson: On… and also worked in private equity, doing direct deals in just about every asset class.


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Brad Johnson: Office, apartments, self-storage.


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Brad Johnson: And, and really decided that, hey, once I wanted to go out on my own, I was looking for an asset class that I thought had unique, risk-reward


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Brad Johnson: formula to it, and that's why we chose mobile home parks.


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Brad Johnson: All right, so for some context before we get into the actual details of investing in this space, I'd like to start with, hey, what is investing in a mobile home park? Because most of the time, when people hear it, they think trailer park, right? They think…


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Brad Johnson: The, kind of the worst case scenario of what a mobile home park could be.


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Brad Johnson: we tend to not invest in those types of properties, right? We are investing on the higher end.


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Brad Johnson: of this scale, from 2 to 5 here. The spectrum is really 1 to 5. 1 is completely scary, you wouldn't want to be driving through at night. Level 2 here is a lot of deferred maintenance. It… it looks like, you know, a bit of a trailer park. Older homes.


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Brad Johnson: rough around the edges, rough tenant base, maybe in a very subpar market. And so, the idea here is that we are trying to


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Brad Johnson: If we do invest in a two and a half or a three-star park, the idea is to gently and methodically move it up in class, because then we're getting a higher multiple when we go to refinance it, or if we do decide to exit, which


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Brad Johnson: You know, it's not… it's not our preference. But if we do, you want to be able to move it up in asset class because you get better pricing, and you get better loan terms, and you increase the number of lenders that will also lend on that asset. So you're increasing the liquidity, so to speak, of that… of that product, of that… of that real estate property.


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Brad Johnson: And so, you can see, kind of, level 3, you know, perfectly nice-looking community.


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Brad Johnson: Affordable housing, family-oriented, space for somebody to park their car, they can have their little yard. They may or may not have a driveway.


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Brad Johnson: And then all the way at the upper end is a level 5, which starts to look like a subdivision. This can be…


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Brad Johnson: a retirement community in Miami that looks like…


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Brad Johnson: you know, a beautiful property on the water, right? That is a level 5. We tend to not invest in too many of those, just because they don't generate very high returns. Those are… those are more like 9% return type of profile deals, because they're lower risk, and there's just a lot of institutional players that want to own those.


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Brad Johnson: those asset classes. Therefore, we tend to specialize in Level 3 and sometimes 4, and then occasionally we'll see a Level 2 that you can upgrade with a lot of capital to improve the property, to increase the housing stock.


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Brad Johnson: To provide affordable, safe housing to all the tenants there, and you get paid for doing all that work.


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Brad Johnson: So that hopefully gives you some context of what we're talking about when we're… when we're investing in mobile home parks.


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Brad Johnson: And here's one of our investments that we've made. This is in Montana, as you can see, extremely nice-looking community.


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Brad Johnson: You know, almost looks like a subdivision. It's just there's manufactured homes in them, as opposed to stick-built.


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Brad Johnson: Here's a 3-star park in North Carolina that we've invested in. Once again, perfectly safe, nice-looking community, not as nice as the Montana deal, but this is kind of a bread-and-butter type of investment that can generate great returns with, we feel, lower risk, and provide safe, affordable housing to the tenants.


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Brad Johnson: Okay, so why does this opportunity in this asset class for great returns and lower risk, as we've suggested here many times already, why does this exist? It's the affordability gap. We have a crisis in the country in housing, I think most of you on the call probably are aware of that.


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Brad Johnson: And it's, especially…


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Brad Johnson: painful for the lower end of the market when they're trying to just make all their bill payments and make ends meet when housing is 50% of their monthly budget. And so.


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Brad Johnson: The ability to offer a safe, clean, and extremely affordable product


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Brad Johnson: For a giant percentage of the country is a great opportunity, and it's the main reason why this opportunity exists.


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Brad Johnson: So 57% of Americans say they live paycheck to paycheck. Obviously, that's a problem. If that's your situation, it almost feels overwhelming each week just trying to get by.


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Brad Johnson: And a very looming problem is the fact that most Americans have little to no retirement savings, and…


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Brad Johnson: Americans are likely going to be living longer with the advent of technology, as AI improves medicine, and so we have… we're going to have more and more people retiring.


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Brad Johnson: And they're going to be earning fewer and fewer dollars, and they have just about no savings, and are 100% reliant on social security and social programs.


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Brad Johnson: So that's not a great recipe. And then on top of that, we have maybe 3 to 5 million homes shortage, a housing shortage in this country, depending on whose stats you believe. And so that problem keeps compounding, and interest rates aren't helping.


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Brad Johnson: So.


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Brad Johnson: What does mobile home parks do? It helps on the bottom end of that housing spectrum, where we can come in with the lowest cost provider and see almost unlimited demand when you have so many people looking for an affordable solution.


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Brad Johnson: Here's just the breakdown of the cost of a new mobile home relative to a stick-built home. These are new homes, once again. So, a brand new mobile home might cost $120,000.


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Brad Johnson: And so here we have somebody paying in cash in the first column for a mobile home.


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Brad Johnson: And their monthly cost to maintain that home and pay for lot rent might be $850 on average, whereas the stick-built home in the second column


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Brad Johnson: Average new home is $500,000, and so it costs


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Brad Johnson: $100,000 just for 20% down. So you've almost spent the entire amount to buy the mobile home outright in just your 20% down payment, and then, of course, your monthly cost to service that


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Brad Johnson: that loan are quite high. And so the delta there is almost 70% on a monthly, ongoing basis. And so that's really the main reason there's so much demand. And so we don't need to worry about demand in our industry, it's really worrying about the infrastructure and the


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Brad Johnson: and the markets that you're going into. Any market you go into to invest in a mobile home park is almost guaranteed that demand is going to be through the roof. And so we really focus on trying to make sure that the… that market


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Brad Johnson: Has sufficient incomes, and the population is stable, because we know the demand is going to be there.


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Brad Johnson: Because, you know, this industry was really founded on this principle of… of being able to


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Brad Johnson: Extend your retirement by… by buying… by selling, rather, your stick-built home, and then going into a mobile home park community and buying a home outright in cash, and therefore reducing your monthly


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Brad Johnson: your monthly allowance to housing, so to speak, your monthly expenditures to housing. So that's how this industry started. It got away from that for a long time, but still plenty of people view


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Brad Johnson: transitioning into a mobile home park as a retirement strategy, because they don't have enough saved up to live for 30 years without any income other than Social Security. And so, this is what we focus on, you know, affordable, respectable, and professional communities that


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Brad Johnson: that we want to provide a great product to the tenants, and they will take care of us. We take care of the property, they take care of us, everybody wins.


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Brad Johnson: Last slide on this affordability gap is just thinking about the construction. What are we dealing with? We're dealing with a manufactured home that… that is much more affordable because it is created in a factory with controlled… a controlled environment.


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Brad Johnson: We don't have to deal with weather delays, right? They can… the manufacturers can crank these out.


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Brad Johnson: and can buy materials in bulk, and they don't have as many labor problems. They don't have to deal with going back to the hardware store to go grab some tool they forgot, or material they ran out of. Everything is very controlled, and so you can deliver a home at about a dollar a foot versus two dollars a foot.


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Brad Johnson: In the comparable rental option here, and that translates to even more size, so it's… you're… the tenant's in a bigger home, and yet they're at a cheaper price. And, you know, most of the… the people that


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Brad Johnson: or on this… this call today are lucky enough to not have to think about these things, but if you… if you have the ability to, or you have the options of, hey, I can't spend more than $1,400 a month all in on all of my housing costs.


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Brad Johnson: And, you're probably going to have to go to an apartment. You're going to have people above and on all sides of you, whereas a lot of families in this country do not want that. They do not want to be in a Class B apartment building.


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Brad Johnson: They want space for their children, they want space for their…


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Brad Johnson: For their animals, their pets, they…


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Brad Johnson: they… maybe they, you know, spent most of their life in a stick-built home and love driving up to their own garage and, you know, having a controlled parking spot, and they don't want to transition then and downsize into an apartment. So, while you, you know, the people on this call are probably lucky enough to not have to consider a mobile home park.


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Brad Johnson: The vast majority of the country views it… views it as a great, valuable product where they can extend their retirement.


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Brad Johnson: Alright, now let's talk about… we've talked about demand.


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Brad Johnson: So let's talk about the structural advantages of this asset class.


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Brad Johnson: So… Unlimited demand.


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Brad Johnson: Coupled with constraint supply. What do I mean by that?


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Brad Johnson: Well, it's difficult to get these things built. It's extremely difficult to get a new mobile home park entitled and through construction and infill, which is actually bringing in the homes and selling them outright to the tenants, right? Because the tenants own the home, for the most part, 80%, 85%,


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Brad Johnson: of the deals that we look at. The tenant is owning the home.


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Brad Johnson: Right? We own the infrastructure and the land.


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Brad Johnson: So we're going to get into supply in a second, but that's the first point on the structural advantages of this asset class. Number two, we talked about. Number three, recession resistant.


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Brad Johnson: Right? This asset class has performed incredibly well through not only the great financial crisis, but also through COVID, and even the 2022-2023, the pullback we saw in apartment buildings and office and real estate in general did not hit manufactured housing like it did those other asset classes. And the last point here is on the capital


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Brad Johnson: structure of this.


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Brad Johnson: Of this asset class. And that just means, hey, we own the land. Land doesn't need a lot of ongoing capital needs once we've come in and improved things.


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Brad Johnson: And so the ongoing capital requirements are far less in this asset class than they might be in something like office, or even in multifamily, where there's just a structure that you have to maintain. Once again, we own the land, the tenant owns the home, so we're not getting in the fixing toilets and appliances.


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Brad Johnson: Or even changing out carpet business.


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Brad Johnson: All right.


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Brad Johnson: So, talking about… The supply-demand structural advantage here, the…


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Brad Johnson: The reason why it's so stable is because, once again, high demand and no new supply.


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Brad Johnson: And because there's no new supply, the tenants tend to not leave, right? Because they own the home versus a renter.


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Brad Johnson: in an apartment building, which can leave after a year, right? But if you own the home, and it costs quite a bit of money to move that home, you… you're committed to the property. You're invested in that community. You don't view it as some temporary thing. That is your home. You're going to be there a long time.


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Brad Johnson: And oftentimes, even if the tenant decides


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Brad Johnson: they want to move. It's rare that they pick up the home and leave it and move it out of the park. Usually what happens is they sell it to a friend, a cousin, somebody in the community, another neighbor.


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Brad Johnson: In that city, and you just get… you start receiving new checks from a different name.


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Brad Johnson: So, the turnover is quite low, right? Apartment buildings, often 50% every year of your rent roll is swapping out, whereas mobile home parks, it's… it's minuscule. It's less than 3% each year, according to all the major operators in this space, of those homes are actually leaving any year, so…


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Brad Johnson: The stability of your rent roll and your income stream is quite high because of that.


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Brad Johnson: That creates this pricing power dynamic that… that… the key here is not taking advantage of that, the key is being able to increase lot rents methodically over time, which is what makes this such a long-duration, long-term, great asset class, suitable for


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Brad Johnson: a IRA is because we can consistently increase lot rents without having to gouge anybody. We consistently increase lot rents over time once they get to market.


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Brad Johnson: Which generates a lot of great income, year in and year out.


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Brad Johnson: And I don't know of any other asset class within real estate where you can say that. With apartment buildings, like, look at… look at Austin right now. Austin, which was the sweetheart of the real estate world 3 years ago, has gone the last 2 years of negative rent growth.


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Brad Johnson: really negative rent growth. That is a function, not of demand, that's a function of all the new supply that came into that market.


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Brad Johnson: Which, look, I'm a big, you know, I'm a big proponent of, we need to be building more housing in this country. I wish they would approve, some more, you know, mobile home parks that are… that are newer and nicer, that we can increase the housing stock in this country, but it just doesn't happen. Cities, counties, don't want to do it.


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Brad Johnson: And so, therefore, we have this ability to consistently raise lot rents. 5% is pretty standard across all the large players, year in and year out, which creates a great predictable income stream, almost like a dividend growth stock.


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Brad Johnson: Because a lot of our expenses are fixed, right? They're not growing as high as that 5% lot rate increase. And then we get to put on attractive leverage on top of that, which boosts that cash flow yield even further.


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Brad Johnson: And then, so in the bottom graph here is the CAPEX, that's the capital expenditures that you have to spend in this asset class relative to some other ones. And as you can see, it's lower. This is data from Green Street and the two major publicly traded REITs in this space.


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Brad Johnson: So once again, we're… we're investing in the, the, the…


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Brad Johnson: the land… or the land infrastructure, the pipes, the roads, the driveways, but there's no… there's no structure. We're not having to redo the boiler room. We're not having to redo the lobby of the office building, or the roofs of all the apartment buildings. And so, just to maintain the buildings, it's a lower percentage of our…


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Brad Johnson: of our rent and our revenue each year. That's not to say that the first year, we don't spend a fair amount of capital to improve the properties. That's one of our favorite things to do, is to come in and do a splash type of


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Brad Johnson: A big spend on capital to improve the roads, to…


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Brad Johnson: To help increase the appearance of some of the homes, maybe add an amenity or two. Spend some real capital to show that we're investing in that community, and we want the tenants to stay there long-term.


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Brad Johnson: Recession resistance. This graph shows every other real estate asset class and its sensitivity to changes in the economy, right? A 1% change in GDP, how does the…


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Brad Johnson: the, the revenue change, the operating leverage change in each of these asset classes. Intuitively, it makes sense. Hotels on the left-hand side of this graph, right, you have a downturn, you have a big recession, hotels crater in revenue, because business travel just falls off a cliff. Mobile home parks on the exact opposite of that spectrum.


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Brad Johnson: Everybody needs housing, everybody really needs affordable housing, and it just is not that impacted by changes in


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Brad Johnson: in the economy. That's because we are offering the lowest cost


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Brad Johnson: housing option, right? It's the last stop on the affordable housing train.


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Brad Johnson: So therefore, everybody has to live, the…


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Brad Johnson: The home rent, the lot rent, is not that high relative to a lot of these other asset classes as the component of


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Brad Johnson: Of the tenant's overall budget, and therefore, they continue to pay the lot rent month in and month out.


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Brad Johnson: This is a lot of numbers, but this is just the… some of the data to back up what we just showed you in concept on the last slide. This is showing the historical


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Brad Johnson: NOI, net operating income growth, of each of these asset classes, and it's highlighting here in pink, mobile home parks relative to all the other ones, and you can see the two…


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Brad Johnson: Most recent downturns.


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Brad Johnson: We had the great financial crisis in 08-09, right? Mobile home parks were still generating positive net operating income.


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Brad Johnson: Positive growth, which is quite remarkable, considering just about everything else


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Brad Johnson: was negative over those two years, and the same… we saw the same thing during COVID, right? This is the stability of this asset class that… that we want to hammer this point home, which is why it's so appropriate, I think.


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Brad Johnson: For somebody who's thinking in 20, 30-year increments, the ability to put some money to work and just let that cash flow keep coming in, let the returns keep compounding, because it has such a reliable income stream relative to other options in the marketplace.


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Brad Johnson: Oh, we went backwards.


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Brad Johnson: All right, so let's talk about a couple just example deals, just to give you more context on what this asset class is like, how we think about deals, and maybe you can apply that to your own investment research when… if you decide to invest in the space on your own, or with us, or another operator.


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Brad Johnson: So this deal is… is just outside of Raleigh, it's in the Raleigh MSA, it's a portfolio of deals.


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Brad Johnson: The… the park… its 5-park portfolio, 237 lots. This is the… the picture on the bottom right is the largest of the five parks. As you can see, it's just a country type of environment. It's… it really suits somebody that… that doesn't want to live in an apartment in the middle of the city. They want some space, they want room for parking.


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Brad Johnson: They want that country lifestyle.


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Brad Johnson: And, you know, this deal…


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Brad Johnson: is actually one of our hairier deals from just a business model, or business plan standpoint. That park-owned home number here, 107, this is one of the rare deals where a large percentage of the homes in this portfolio are actually owned by the park.


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Brad Johnson: Now, that isn't a strategy, and it's particularly effective in the Southeast, where you can come in as an operator, you get a discount on a property like this because


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Brad Johnson: most buyers of parks don't want to be in the home space because of all the things we talked about. So, the business plan here is to get those 107 homes off of the balance sheet, right? We purchased, or we invested in this deal with our partner there in Raleigh about, I want to say.


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Brad Johnson: 7 months ago, and they're already 40 homes through that process, so we're down to more like 70.


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Brad Johnson: Homes that are park-owned, and hopefully, in the next couple years, we'll be down to zero, which, once again, increases the…


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Brad Johnson: the amount of buyers that will look at this, that will purchase and will pay a higher multiple, increases the type of lenders that will lend on this deal, including Fannie and Freddie, which are the largest lenders in multifamily and in


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Brad Johnson: manufactured housing, and those lenders love this space because of all the things that we've talked about. It's lower risk than what they're typically investing in.


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Brad Johnson: And so, great debt still, though, at a 4.5 interest only. We want to conserve capital because we want to reinvest back into the turnaround of this portfolio. We don't want to pay principal for the first 5 years on this one. And you can see the loan-to-value of less than 50%.


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Brad Johnson: a lot of people are comfortable investing at 70%, 75% in real estate. This is a lower-risk deal from just a leverage standpoint, which we tend to like and think is a great opportunity right now. It's harder to finance just about any deal.


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Brad Johnson: Which makes, these type of properties prime candidates for coming in Implementing the business plan.


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Brad Johnson: Gradually increasing lot rents, and then going ahead with a refinance in 3 years, as we kind of showed you our track record of how many refinancings we've done, where you pull out all of your capital.


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Brad Johnson: And you go and you make that a new investment, right? And so you can keep generating some cash flow for that prior investment, keep benefiting from the appreciation long-term, but then compound your capital by going out and buying more assets.


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Brad Johnson: And now you've decreased the overall risk profile of your portfolio by doing that. And the last point on this one is just kind of showing you the… how under-market lot rent this… this portfolio was relative to the other housing options in this market.


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Brad Johnson: Right? Most people who are looking to try to get a three-bedroom home or a 2-bedroom apartment are spending a lot, lot more than the current tenants of this mobile home park in just paying lot rent.


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Brad Johnson: And so the key here is to… is to gently increase that, you know, over time. We don't try to do it the first year, right? We try… these people have been getting an outstanding deal by living in this community with that low of lot rent, but that's just not keeping up with inflation.


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Brad Johnson: And that's not keeping up with the marketplace. So, gradually, we gotta get it up to market over time, but that shows you the amount of margin of error that we have, and the amount of growth, runway to go ahead and keep increasing cash flows.


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Brad Johnson: And here's just some more pictures of this property, just to give you a better feel of what it looks like.


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Brad Johnson: Second deal, this is the park in Helena. We showed you a picture at the beginning of this presentation, but this is one of the nicest


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Brad Johnson: parks we've ever invested in, just to kind of show you the upper end of the spectrum of… of what's out there. These are… these are hard to find, but they are… they are out there, and they are oftentimes are owned by a mom-and-pop operator that maybe their dad developed


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Brad Johnson: the deal. The parents developed the property 30, 50 years ago, and it's been passed to them.


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Brad Johnson: And they are like, wait, I got a mobile home park, I don't really know what I want to do with this, I'm a doctor, lawyer, whatever, I've moved on, started my own career.


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Brad Johnson: So I'm open to selling it now. So we see mom-and-pop sellers quite often in this space.


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Brad Johnson: It's a real opportunity to come in with institutional capital, professional property management.


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Brad Johnson: increase the housing stock, swap out older homes that are dilapidated with new homes, and a lot of mom-and-pop operators don't have that capital to do all those things. They don't have a professional


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Brad Johnson: real estate team that can run the property and do all of these things. They've just been benefiting from the dynamics that we've talked about in this space for so long, and it's been their only source of income, so they don't reinvest back into the properties. And that's a real opportunity in the sector as it becomes more consolidated, in other words, more professional owners start buying.


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Brad Johnson: mobile home parks, and… and implement


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Brad Johnson: Professional standards and property management systems.


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Brad Johnson: So this one has no park-owned… well, sorry, one park-owned home. It's got city utilities, with a well on one…


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Brad Johnson: section of the main property, but it's got a backup connection to the city. We focus a lot on utilities in this space, which I certainly encourage you to as well, if you're looking at a new deal, because


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Brad Johnson: Because we're offering infrastructure. That's what we are providing to these tenants, so that they can put their home on the property and connect to the utilities. So you have… you almost have to think of yourself as a utility provider, right? We're providing access, a concrete pad.


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Brad Johnson: connections to water sewer, connections to electric, right? And so you want to make sure that the infrastructure is in good shape, and that you're not taking outsized risk by going with some hairier private utilities that we can talk about. Some private utilities are fine, others not so much.


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Brad Johnson: Here's a case study of a full cycle investment.


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Brad Johnson: Just to give you a sense of what it can look like when the business land has fully been executed and you decide to leave the deal. This one was in Wisconsin.


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Brad Johnson: Right next to a Walmart, actually, you can see in the upper left-hand picture, which is… which ended up being a great amenity for the tenants at this… at this park. They could just walk to go do their grocery shopping, which is huge for moms in this park, at least it was.


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Brad Johnson: And this deal… This was,


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Brad Johnson: Sorry, one last point on this deal. This one had a lot of RVs that were in the park that we were able to get a discount on the purchase of this asset class because RVs can leave in the middle of the night, right? They can…


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Brad Johnson: They can unhook from the utilities and just drive out of the park, so obviously you don't want to pay as high a price for a park that has a ton of RVs in it. And so part of the business plan here, which was one of our favorite strategies, is over time, gradually replacing RVs


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Brad Johnson: with either small mobile homes or regular full mobile homes, because you're going to be able to sell that property, or just generate a lot more reliable cash flow over time. And so that was the big value add of this asset.


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Brad Johnson: Okay, so what about red flags? So, I've broken it out here into red flags at the property level and red flags at the sponsor level. So, the sponsor is the operator, somebody you might be entrusting your capital with. I think both of these are equally important, and arguably, the sponsors could be more important.


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Brad Johnson: The… at the property level, your risks are really thinking about, as we talked about, the infrastructure.


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Brad Johnson: There are… there's… just like the quality of the mobile home parks, there's a spectrum with… when it comes to infrastructure. City water and city sewer, you're connected to the city utilities, that is the preference. Direct build connections, where the city is actually billing the tenants directly for their usage


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Brad Johnson: of water, and direct bill electric. That is the dream. Because as you can imagine, if you're not having to deal with that


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Brad Johnson: that billing, you're not dealing with any losses from people not paying for their water bill. So that's the dream, that's one end of the spectrum. The other end of the spectrum is extremely gnarly private utilities, and we're talking, like, things that you wouldn't want to, you know, walk by, like a lagoon, a packaging plant.


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Brad Johnson: Septic's okay, I mean, generally, if you have space, right, septics is pretty common in the Southeast and Midwest.


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Brad Johnson: And as long as you have space, it's a large acreage for that project, that's fine. But that's… and well. Well water's obviously private water. So that's the other end of the spectrum. You gotta be very careful with… with doing deals.


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Brad Johnson: with operators that don't have a lot of experience with those private utilities. It's not to say never do those, but packaging plant and well, or lagoon and well, would be…


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Brad Johnson: probably no-goes for your first deal. I certainly wouldn't recommend it, whether or not you're purchasing one or investing in one. You might want… that's the advanced level type of investing. We… we…


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Brad Johnson: almost always pass on those types of deals. We kind of like the middle spectrum area of some private utilities, like a… like septic, maybe well, but certainly prefer city water, city sewer.


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Brad Johnson: Alright, number two, fuzzy accounting. So, when you're buying from mom and pop.


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Brad Johnson: oftentimes the financials and, you know, are not going to be super sophisticated. You're not going to get a war room in Dropbox of perfectly organized due diligence files. You're going to get a, sometimes, literally a shoebox of receipts and invoices and documentation.


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Brad Johnson: That, you're gonna have to sit through. So, fuzzy accounting can be tough here, because


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Brad Johnson: sometimes owners will try to, you know, goose the books. They're gonna try to cook the books by…


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Brad Johnson: You know, they know they're selling it, so they're going to try to artificially boost cash flow the year prior to them selling it.


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Brad Johnson: And so, you just kind of, you know, find these red flags by… by getting in the weeds, you know, giving somebody who has a forensic accounting type of approach to actually go through all these statements and then tie that to the profit and loss and balance sheet.


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Brad Johnson: And so this is just something to be aware of, and something to be asking sponsors that you might want to invest with, is how they do this due diligence, and make sure that the revenue stream that they are paying for, because you're paying a multiple of the revenue stream, to make sure that that is actually real cash flow.


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Brad Johnson: Nonconforming zoning issues.


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Brad Johnson: grandfathered in is fine, as long as the city's not going to actively fight you if you try to replace a home or move in a new home into a vacant pad. Sometimes those vacant pads will just sit


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Brad Johnson: vacant for a while, if you as the park owner, are not actively going out, purchase a home, bring it in, and then sell it to an interested tenant. That's a much more common way, and a much faster way, to fill that vacant lot.


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Brad Johnson: And, than just waiting for somebody to move a home in, right?


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Brad Johnson: So, you want to make sure that you can do that, and that's through going through the due diligence process with a consultant that is checking zoning issues.


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Brad Johnson: And then the last one here on the property level would be the… a high percentage of park-owned homes in a soft market.


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Brad Johnson: Now, we showed you a deal that had a high percentage of park-owned homes, right, in the Raleigh MSA, but that's a very strong market, right? Raleigh is booming. What you wouldn't want to do is do a property like that in a declining


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Brad Johnson: Rust Belt, the factory, the major employer, you know, left 5 years ago, and the population is steadily declining, and incomes aren't there. You would… you would want to avoid a type of park like that, like the plague, because the cash flow and the… the returns probably look pretty compelling.


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Brad Johnson: Right? On paper. But what you don't realize is that one's going to slowly bleed cash, and you're going to circle the drain on a property like that, most likely because the park-owned homes, if there's not a lot of demand for… there's not a lot of income to support the higher cost of park-owned homes, and the higher maintenance requirements, you're constantly going to be


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Brad Johnson: injecting new capital into that park just to kind of maintain status quo, maintain occupancy, and it's going to feel like pouring water into a bucket with a hole in it, right? So that's a big one for red flags at the property level.


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Brad Johnson: A lot of park homes in a soft market. Strong market? It's actually an opportunity, because you can methodically go through, and as we talked about, if you have a big team, if you have a home sales team, you have maintenance crews, rehab… rehab crews.


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Brad Johnson: If you're vertically integrated, an operator can actually go into a park like that and get those homes off the balance sheet, increase the liquidity, increase the return profile of that asset.


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Brad Johnson: All right, at the sponsor level, what are some red flags? Well, we have a very small team trying to do this from 3,000 miles away. Now, I sympathize with new operators in this space who are just getting in, because 12 years ago, I was that person. I was two guys and a pitch deck.


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Brad Johnson: And some dreams. And, you know, I certainly sympathize that, but your first…


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Brad Johnson: mobile home park investment with retirement money is probably not the type of capital you want to take experiments and let somebody experiment and learn on your dime. So, we certainly recommend going with established sponsors that have at least a regional presence. Maybe they have 3, 5,


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Brad Johnson: parks in one particular market if their operations and team is not nearby. What you don't want is just somebody who's telling you, hey, I live in California, and we're buying this deal in Indiana or upstate New York, and I'm gonna be there every month. I'm going to be there overseeing


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Brad Johnson: all the improvements we need to make, because they're… it's just not going to happen unless they're just a freak of nature and don't have family that they want to spend a lot of time with. It's hard to fly out to these… these assets


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Brad Johnson: Quite frequently, and I know, because I've done it, right? So, you want to have a team or a focus regionally where you have a lot of staff that can get out to the properties, oversee.


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Brad Johnson: Things at least check in on the asset once a month.


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Brad Johnson: Have structured calls with the on-site team, the maintenance people, the property manager, and just have the resources to be able to oversee an asset properly.


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Brad Johnson: Because this is kind of like the broken window theory in New York, right? Once you start letting little things slide at a property because you're not paying attention to it.


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Brad Johnson: Then, all of a sudden, the tenants start letting their rent slide. Yeah, it's like, these guys are asleep at the wheel, we're going to maybe, like, leave that trash out, leave the car…


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Brad Johnson: you know, that's not working on the driveway, or, you know, whatever. Like, we're not gonna paint our home this year, because these guys don't care about the roads. So you just have to make sure that there's resources, both in terms of a manpower.


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Brad Johnson: Systems, and also capital to properly maintain these things.


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Brad Johnson: Alright, no limited track record.


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Brad Johnson: kind of ties in with the first point, but the track record, you know, part is just, once again, you want to be able to see that this… this team has… has seen things in this industry. It's not… it's not a mailbox money type of industry if you're the operator.


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Brad Johnson: Certainly can be as an LP, right? That's the whole point of being a limited partner, is that you don't do the hard work, you collect the checks, you've taken the risk in letting your precious capital


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Brad Johnson: be invested with a sponsor, and so you get to the benefit of the passive income. The operators got… that's the active. They gotta be boots on the ground, and you want to ideally work with a team that has seen a large


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Brad Johnson: a large spectrum of variables in this industry, because there's a bunch of surprises. There's a ton of things, countless things that came up


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Brad Johnson: In that, in that 12 years that I didn't know, right, going into this asset class.


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Brad Johnson: Limited property management systems… yeah, you can… you can get at these red flags when you're just kind of asking basic questions on how they're running.


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Brad Johnson: the… their portfolio, how their management… their property management team is assembled, how do they process evictions, what kind of software are they using? Like, you can… you can fill this out pretty quickly and figure it out if they're just kind of, you know, doing this thing part-time on an Excel spreadsheet.


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Brad Johnson: Or if they actually have put a real operating platform in place to manage these assets, because they're, you know, they do require a lot of hand-holding.


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Brad Johnson: And so you want somebody on the team that you're investing with to have an engineering mindset, a property management mindset, where they want to dial these systems, and they want to do things in a repeatable fashion month in and month out with their team and their systems, because then it becomes way more predictable, which is what we want in this space. We don't invest in this space.


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Brad Johnson: to get 10x in 5 years. We invest in this space to get repeatable, recurring income.


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Brad Johnson: All right, aggressive underwriting assumptions. This is the last, red flag, and we're winding down here on… on the… on the speech portion of our presentation, but this is the last red flag for sponsor… the sponsor level.


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Brad Johnson: Which is aggressive modeling, right? The Excel spreadsheet, you can make the numbers say whatever you want, right? So, if you start seeing things like.


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Brad Johnson: Less than 35% operating expenses, right? The load, the expense load, the percentage of expenses relative to the revenue, if that is sub-35%,


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Brad Johnson: doesn't mean that it's a deal killer, it just means, oh, you should ask some questions about that, because maybe… maybe the water, the utilities are direct billed, and therefore that… that property could… could support that low expenses relative to the… the purchase price. But maybe the… the sponsor's just being aggressive with not…


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Brad Johnson: Not estimating the property tax reassessment correctly. Maybe they're being just too…


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Brad Johnson: cheap with the amount of the people that they want to hire, because you can't run a $10 million asset, even a $5 million asset, with somebody that you're paying $15,000 a year who lives at the property. You need to pay for professional management.


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Brad Johnson: In order to take care of these things. So those are just an operating red flag.


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Brad Johnson: Fast infill rate, home sales.


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Brad Johnson: If they have a track record of doing this, of working on hairier deals that have a high percentage of park-owned homes, or


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Brad Johnson: or even worse, have a high percentage of vacancy, like 50% vacancy, that's a very difficult deal. You can make a lot of money on those deals, but they require a ton of capital, and like we talked about, a vertically integrated team.


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Brad Johnson: home infill, home maintenance, home sales, so you need to have a lot of resources and capital and talent to pull that off. And so, if you see somebody that doesn't have a track record in doing those types of deals, and yet they're assuming they're going to bring in 20 homes a month, I would question that.


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Brad Johnson: It actually is quite difficult to sell homes quickly. A lot of paperwork involved, it's just like selling a stick-built home, you know, but slightly easier. But there's still a ton of work that needs to be done to get somebody to buy a mobile home, just like there is to get somebody to buy a stick-built home.


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Brad Johnson: All right, and then the last point here is a zero capex capital improvement budget, or capital reserves.


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Brad Johnson: So we mentioned that the CapEx is lower in this space relative to just about every other real estate asset class, but not that first year. If you're improving the park, if part of your business plan is to improve the quality of the park in order to help justify some of the lot rent increases.


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Brad Johnson: Or just to, you know, ongoing capital reserves to deal with surprises as they come up. Pipes break. Pipes burst.


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Brad Johnson: Roads degrade if they're asphalt, right? If they're concrete, probably not, but if they're asphalt or something less, right, you're going to be spending money on pothole repairs. And so the groups that try to do this on a shoestring budget.


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Brad Johnson: anybody who says, cash cow, right, when talking about mobile home parks, that's a red flag. That worked maybe 10 years ago, when you can buy these things for, you know, 8% cap rates.


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Brad Johnson: huge discounts, and you had a giant margin of error to not be very good at operations, and not have to reinvest in the property, and still support your loan. Now, this is… this is big boy. This is like the pro market.


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Brad Johnson: Where you have to have, like, real systems, teams, capital in place to run these things, and you can't do it on, you know, a shoestring. And so the groups that…


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Brad Johnson: that try to treat these things as… as cash machines and not reinvest back into the property are doing the property a disservice, they're doing an investor's


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Brad Johnson: their investors a disservice, and the industry as whole. Like, we… this industry needs to continue to advance, become more professional, and that requires, you know, capital, especially that first year, if you are improving the quality of the operation.


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Brad Johnson: All right, and final point before questions here is, you know, why now? Why is this interesting for somebody in their retirement account, or just to invest in the space?


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Brad Johnson: Well, I think that the asset class has been proven, right? We're battle-tested. We've been through a number of pullbacks, and yet it just keeps on trucking, right? So the asset class is… has proven it's recession-resistant.


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Brad Johnson: Right? We have no idea what the next 30 years are going to look back… look like, if it's going to replicate exactly what's happened the last 30 years, but that's the best indicator we have to make that prediction, and the last 30 years in this space has been unbelievably good.


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Brad Johnson: And so, we think it's a great time to be putting money to work now, because we've kind of removed a lot of the question marks in this asset class.


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Brad Johnson: And we, we now are investing at a difficult time to be buying these deals. It's not… you can't just get an 80% loan and raise


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Brad Johnson: you know, $500 million on a whim to put money to work in this space. It is harder to get deals done today than it was in 2019, 2021, which means that


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Brad Johnson: That's usually a better time to be putting money to work.


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Brad Johnson: Those deals that we're buying at 50% leverage.


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Brad Johnson: Where you're having to do a fair amount of structure, and you're having to put more capital up, that's actually decreasing your risk going in, and it's setting up this great opportunity


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Brad Johnson: To pull out capital within a few years, maybe 5, via refinance on a higher net operating income basis, and then redeploy that… those assets into new productive investments.


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Brad Johnson: And so I, you know, it's… sometimes it's hard to be putting new money to work after an industry like real estate has had some trouble, but


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Brad Johnson: You know, mobile home parks didn't have that trouble, like office, like… like apartment buildings, and yet we're coming in at the right part of the cycle that you want to be deploying capital when it's not super easy, there's not…


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Brad Johnson: you know, animal spirits where people are just doing whatever crazy deal at competitive prices that, you know, just because they can raise unlimited capital and get unlimited debt. So anyways, that's my speech. Hopefully that was a good overview of the asset class, why it's compelling.


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Brad Johnson: And perhaps we should get into some questions, or… and we'll let Jake take over. I've talked enough.


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Jake Marchini: Thank you very much for the presentation, Brad. So, before we proceed direct to the Q&A answer session here, we do just have a very brief wrap-up, for the


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Jake Marchini: for the presentation, Move on to the next slide there.


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Jake Marchini: Okay, so for those of you, again, who are just starting with us here at the Entrust Group, or have not got an account yet, if you are interested in using your retirement funds to invest in something like a mobile home or other types of alternative assets, getting started in that with the Entrust Group is done in 3 major steps.


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Jake Marchini: First is to fill out an application to open an account with us here at the Entrust Group.


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Jake Marchini: Then the next step is to put money into that account from wherever it is currently. So most of you will probably have IRAs, 401Ks, or other retirement accounts at other firms, like Fidelity, Schwab,


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Jake Marchini: Morgan Stanley, etc.


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Jake Marchini: And those typically will transfer or roll over easily to your interest group account if you want to exit those types of investments to put money towards real estate, mobile homes, or other types of alternative assets.


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Jake Marchini: So once the money is here, we move on to the third step, where you direct us to put money from your IRA into a proposition like what Brad has described here today, or any other type of investment.


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Jake Marchini: That's 3 steps to investing with your Entrust Group IRA.


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Jake Marchini: What's next? Now that we've concluded the presentation, at the end of this, we will be sending you a replay for viewing on your own time with additional resources.


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Jake Marchini: The follow-up email will include the video, slides, all of that sort of thing for reviewing all this information at your leisure, and we would love it if you would also sign, take the opportunity to sign up for our next webinar.


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Jake Marchini: Or, avoiding investing mistakes in 2026, going into the new year.


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Jake Marchini: And as always, if you have any more other questions, you can follow up with myself for IRAs or with Brad. Our personal contact information will be available on screen during the Q&A session.


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Jake Marchini: And without further ado, we can go ahead and proceed to Q&A. So if you folks have any questions about the material presented today, please feel free to type that into the chat, and I will read them off, and either answer them myself or turn things over to Brad so that he can provide further information.


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Jake Marchini: I want to move forward. One more slide there, Brad, so that your information and mine appears on screen. There we go.


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Jake Marchini: Got the Q&A. Okay, so here we go.


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Jake Marchini: So the first comes from Gene Rosen. If you are… if you as a company are not in any hurry to exit an investment in many of these properties, how would I exit an investment if I were to invest with your company? Seems like for… for you, Brad.


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Brad Johnson: Yeah, so we actually do two strategies. One is a… our longer-term funds that are 10-year holds that we will have the ability to liquidate people that don't want to continue the party, right? That don't want to roll into more time and more… more deals.


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Brad Johnson: And so we have always offered those options in the past to investors, so we get a market view, a broker view of what the assets are worth, and then we can value your shares at that time. We also do singular deals, right, where we have a particular mobile home park investment.


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Brad Johnson: That we will offer to our investors that like to do one-off deals. And those tend to have…


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Brad Johnson: Anywhere from 5 to 10 year type of holds, where that's in the structure, that's in the terms, that's in the agreement with the operator.


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Brad Johnson: And so those are for people that do want to cycle out.


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Brad Johnson: And, you know, even with those, we'll often find a way to


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Brad Johnson: either 1031 or roll it into a different investment for the people that do want to hold long-term. So, it's a case-by-case situation. I do recommend people that are thinking about this asset class, right, that we try to think about, because the upside


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Brad Johnson: is fairly compelling, right? We try not to focus on that. We try to focus on how do we, you know, lose money in this deal or in this style of investing? And generally, the way we try to think about that is by doing a lot of deals, right, and diversifying.


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Brad Johnson: It's much more…


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Brad Johnson: comment, if somebody's going to invest in one singular real estate property, then you're adding more risk into the scenario, versus 10, 20,


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Brad Johnson: type of properties. It's very hard to completely blow up a fund that's diversified as long as it's not over-leveraged, whereas one deal, you just bring in more variables into the equation. So we tend to recommend people who


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Brad Johnson: don't want to be evaluating individual deals, maybe don't have a ton of experience within investment real estate. To invest in a fund style where you're diversified.


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Brad Johnson: Right? And then there's… there's other fund investors that, if you need liquidity, right, they can purchase your shares. The fund


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Brad Johnson: sponsors, we can purchase your shares. There's more options in a fund versus a one-off deal might be only 5 to 15 people, depending on the size of the deal. So there tends to be a little less liquidity, but the one-off deals, maybe they're only going to be held for 5 to 7 years.


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Brad Johnson: versus maybe the fund is going to be a longer-term investment. So, there's not a, you know, here's the exact


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Brad Johnson: path on every single deal. It kind of depends on if you're a longer-term investor, or if something comes up, you raise your hand, and we try to help you with exit liquidity.


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Jake Marchini: Then a follow-up by the same person, do you pay regular dividends?


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Brad Johnson: Yeah, so the… in the fund format.


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Brad Johnson: We pay monthly dividends, monthly distributions, rather.


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Brad Johnson: And, in any fund we've ever done, we've never missed a distribution payment. So…


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Brad Johnson: we… like I said, when you're investing in a portfolio of properties, it's just easier to manage that, and because we might have some that are value-add deals, where we're injecting some capital up front, and we might have some other deals in the fund that are more…


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Brad Johnson: Stabilized, where they're 100% occupied, they're generating a lot of cash flow, and then we're able to use that combination to make the distribution payments.


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Brad Johnson: Whereas sometimes, if you're investing in one particular property, maybe it's 2-3 years of that… of that renovation, or that value-add plan where the sponsors are not making distributions, because they're… they're focused on turning around the asset.


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Brad Johnson: But our funds are not like that. Our funds have a spectrum of deal flow, including stabilized assets that generate cash flow, and so we make monthly distributions.


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Jake Marchini: Okay, next is a… looks like a multi-part question here.


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Jake Marchini: asked about, what is the investor business structure with vintage, i.e, limited partnership, DST, TIC, or other? The depreciation and bonus depreciation for investor, question mark. How long is the hold and exit strategy?


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Brad Johnson: Yeah, so that's a lot. Let's try to take those one by one. The structure is LLC, so it's a… there's a fund entity, right, that buys the individual assets, so each individual property has its own LLC.


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Brad Johnson: You would be, you know, the fund investors invest at the mothership, right?


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Brad Johnson: And so that's not a tenant in common or a DST. A DST is for a 1031, right, when you're exchanging property into like-kind real estate, a DST achieves that. That's not what we're doing, right? This is not for 1031s, this is for new investments, new capital.


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Brad Johnson: The, the depreciation side of this business is quite attractive.


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Brad Johnson: Because land infrastructure is most of the value, and that's 15-year property. 15-year property, thanks to the new,


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Brad Johnson: tax bill, you can bonus 100% in year one. And so, yeah, that can be quite compelling. It's less applicable for retirees, of course. If it's in your retirement account, that bonus depreciation is not that meaningful to you.


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Brad Johnson: So.


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Jake Marchini: He is correct on that, by the way. The sort of things for, you know, depreciation, oftentimes do not come into play with retirement accounts because the tax benefits of your retirement account


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Jake Marchini: Come into play first, and, you know, sort of render the… the other things moot, because it's not affecting your personal… your personal tax return.


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Brad Johnson: Yeah. I…


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Brad Johnson: I think the reason you put this in a retirement account is just something to add a ton of diversification to your overall portfolio, because this income stream, this return stream, does not respond to dips in the stock market, right? It's not… it's unlike just about any other investment asset class from a correlation standpoint. So when some things are zigging, right, our mobile home parks just are doing kind of steady, doing their thing.


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Brad Johnson: generating methodical growth, at least that's been the historical track record. Obviously, future performance, you know?


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Jake Marchini: We'll see, but highly likely given the track record.


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Brad Johnson: I would argue. And so, yeah, retirement accounts, I think this asset class is useful just because, you know, I kind of think about it as some of the investments we made. I hope I'm gifting those to my grandchildren at a stepped-up basis.


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Brad Johnson: Because they just are great assets that generate a lot of cash flow, so why would I sell that?


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Brad Johnson: Right? Then I… if I sell that, yeah, it's great, you get a big outcome, but you gotta pay the taxes, and then you gotta go find a new one, you gotta find a new place to deploy that capital, versus it's just something that's generate… generating cash flow. Oftentimes, we've refinanced it, so we've pulled out our at-risk capital, and so that way, it's… it's pretty good for…


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Brad Johnson: An account that you just kind of want to put to bed from an investment standpoint, at least in my view.


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Jake Marchini: And number 3, the third part of that, how long is the hold, and four, the exit strategy?


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Jake Marchini: for vintage.


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Brad Johnson: Yeah, so the funds, as I mentioned, are 7 to 10 years. The, we have options to roll that.


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Brad Johnson: Into a new… the new fund, if investors want to continue


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Brad Johnson: going, because they like the cash flow that we've been generating, they like the strategy, but if people do want to exit, we can do that. We can do that by selling some assets, we can do that by valuing the total portfolio from broker opinions of value, or getting appraisals, and then exiting people at that time if they want liquidity.


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Brad Johnson: So yeah, it's 7 to 10 years for a fund investment. If… if you are a professional investor and you want, like.


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Brad Johnson: putting a lot of, you know, $100,000 checks, $50,000 checks into individual deals, and creating your own portfolio, we do have that ability to do deal by deal, and those tend to be more structured, as in, like, it's either a 5-year hold, or we're telling you up front that we would love to own this asset


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Brad Johnson: indefinitely. And that's all in the deck materials, offering materials for each individual asset.


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Jake Marchini: Next question. Will you give the info to invest with your company? Does your company fund loans on multifamily units, including RV mobile homes? So…


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Brad Johnson: Well, yeah, our info is right here on the page, and you can get our track record. That's probably the most useful piece of information on our website.


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Brad Johnson: Advantage-funds.com.


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Brad Johnson: The, the question on… on financing home, I guess mobile homes or trailers, the… yeah, so I, I mentioned that if you have a vacant pad at a park.


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Brad Johnson: you want to fill that because you want the lot rent, right? You want that lot to become productive. Instead of just waiting for your phone to ring and somebody to move in a mobile home, which does happen in great markets, but you… oftentimes you'd want to make it happen sooner. So we will…


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Brad Johnson: We will front the Capitol, To pay for the home, which is anywhere from


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Brad Johnson: Anywhere from 70 to 150,000 is the range of a new home, single-wide, double-wide.


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Brad Johnson: And then we have that productive asset once we sell it. You can rent it if you want to immediately to fill up that day that you move it in. There's unlimited demand for rentals of new homes.


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Brad Johnson: Because they're… they're beautiful. The homes look like stick-built homes. Inside. You should take a look at these… these homes from Clayton as an example.


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Brad Johnson: Clayton Homes, they're beautiful. They're gorgeous homes you wouldn't mind, you know, putting grandma in, in plenty parts of this country. So, yeah, we will front capital to increase the value of the property to increase occupancy selectively.


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Brad Johnson: Trailers or RVs, we tend not to do that because, once again, the RV can leave in the middle of the night. That's more like a… a 100% RV park is more like a hotel, if you think about it, right, where your rent roll every night.


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Brad Johnson: is moving. At least it can. So we don't like to put a big multiple on that revenue stream, because we can't predict the future of what it's going to look like.


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Brad Johnson: So anyways, that's how we think about RVs versus homes and paying for them.


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Jake Marchini: The next question, or the next…


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Jake Marchini: entry from that same person has their contact information, so Iris, if you, would like to be contacted by, Brad or myself, please feel free to forward us your information or any questions you would like after the presentation. Again, our, personal contact information here for that sort of thing is on the screen, so we will be happy to answer more questions if you have more questions after the pro… after the,


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Jake Marchini: Q&A session.


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Jake Marchini: Moving on, though, so on the topic of utilities, do the mobile home owners pay for those as a homeowner, or…


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Jake Marchini: Do they pay you, the land owner? Is that a component of the land rent and annual increases?


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Brad Johnson: Yeah, so we almost always… there's three kind of options, really. There's… there's direct build, where the tenant has a relationship with the city or the utility provider directly. We don't get involved at all. We literally are just giving them a piece of concrete pad for… to put their home on.


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Brad Johnson: That's the dream, right? We love those parks.


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Brad Johnson: The in-the-middle option is when there is a master meter utility, you know, a meter at the front of the park, and we are getting billed by the city, and we then are looking and reading ourselves, just like a utility provider, going around looking at everybody's usage for water.


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Brad Johnson: electrical, gas, we almost always avoid those deals, right? We want those to be direct bills. We don't want to get in the electricity game and the gas game.


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Brad Johnson: Right? But water, sewer, you know, oftentimes you have to be a part of that process if there is a master meter that the city bills off of.


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Brad Johnson: And then, you know, you have to factor that into your math, because you're not going to collect 100%. There's always going to be some sort of leakage, right? Literally, leakage from water in the pipes, and leakage from just a tenant not paying on time their water bill.


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Brad Johnson: Or a misread of the meter, right? Which does happen.


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Brad Johnson: And then on the… the, the third option, which


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Brad Johnson: We usually avoid these deals, too.


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Brad Johnson: Is when there is just a master meter, and there's no individual meters at the homes, and you just divide the bills by the current homeowners in the park.


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Brad Johnson: That's a kind of a recipe for disaster. You get some weird outcomes there, because people are incentivized to just, you know, willy-nilly, you know, take 3-hour showers, and


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Brad Johnson: you know, fill up giant swimming pools in their backyard, because they are not paying. They're sharing that cost among all their other neighbors, which is weird, the weird incentive. So you want to get the incentives right. So in those parks, we will come in and we will install submeters into each individual home, which is not cheap.


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Brad Johnson: But it's completely worth it. So those are the three different options on… on metering utilities.


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Jake Marchini: Next question is about the demographics on the properties. How about the demographic mix on these properties, the Raleigh one in particular? Can you give us an idea of retired versus working, and AGI of those working? Credit scores, aggregate level data is all that's needed. Trying to get an idea of the clientele.


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Brad Johnson: Yeah, so BestPlaces.com is actually a great resource for these, the demographics on each individual city, but…


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Brad Johnson: you know, it's a spectrum. Like, the Raleigh Park, it's a… it's an all-age park, and so an all-age means it's family-orientated, versus a retirement community. We tend to not invest in a lot of retirement communities, which are 55+.


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Brad Johnson: We tend to prefer the family parks because they have more income that's coming in, that's growing, whereas somebody who is a retiree is obviously more in the fixed income part of their life.


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Brad Johnson: And so they… they can't sustain methodical rent increases unless their Social Security, you know, payments are going up, or they're… they're doing a great job managing their retirement portfolios.


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Brad Johnson: So, we tend to prefer all age, and so those parks are a spectrum. Yes, you will have 10 to 25% that might be retirees, maybe they have part-time jobs, but oftentimes it's


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Brad Johnson: It's a younger family, it's a… it's a middle-income family with 2 to 3 kids.


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Brad Johnson: one to two jobs in that household, and a lot of times, you know, the range… you want to… you want to have a diverse employer base, because you don't want that park to be tied to any one industry, ideally, which is why we tend to avoid


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Brad Johnson: You know, a city where it's literally, like, an oil company maybe employs the whole town, or the military base employs the whole town.


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Brad Johnson: you typically want to spread that out. A lot of healthcare, some tech.


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Brad Johnson: Right? A lot of, you know, government employees is great. Like, Kansas City is a randomly great market, because the IRS is there. It's like, there's a lot of stable jobs in a town like that. So, we want to see a lot of universities, ideally. Those job bases are pretty secure, at least for now.


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Brad Johnson: So, yeah, diverse employee base. It's hard to know exactly what each individual part, because we're not interviewing each tenant, but you get a feel for it when you're driving around doing your due diligence on what the makeup, the tenant, you know, composition is of each particular asset.


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Jake Marchini: Next structure, next question is, can the structure accommodate 1031 funds? I'd actually like to speak on this from a retirement account point of view, and just say that 1031 exchanges typically don't come into


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Jake Marchini: play with retirement accounts, because the purpose of a 1031 exchange is to


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Jake Marchini: Avoid taxation on the gains from the sale of a property, so that you, you know, take the gains that you make from selling a property.


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Jake Marchini: And,


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Jake Marchini: put that gain into another property, and so it prevents you from having to pay taxes on the profit from your… for sale of that property. And…


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Jake Marchini: because of… if you are investing in a property, using your retirement account, using a traditional or Roth IRA, the


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Jake Marchini: tax benefits of, you know, the money in a traditional IRA is already tax-deferred, so you're not… you're not using taxable money to


385
01:08:02.763 --> 01:08:12.143
Jake Marchini: make that purchase, and then the gains are already tax-deferred without having to do a 1031 exchange. So if you invest in


386
01:08:12.143 --> 01:08:28.083
Jake Marchini: vintage, or if you invest in another property or a mobile home, and then you sell that property, the gains come back to your IRA and are not taxable as long as you keep them in the IRA and don't take a distribution of those funds.


387
01:08:28.233 --> 01:08:39.923
Jake Marchini: So from a… from a… from a standpoint of using your IRA to invest, a 1031 exchange is not really applicable, and if you have proceeds from a


388
01:08:40.263 --> 01:08:57.692
Jake Marchini: from a 1031 exchange that you've already done, you're not putting that… those 1031 proceeds into your IRA unless it's only partially as a contribution for the current tax year. So, not… not really applicable from a retirement account point of view.


389
01:08:58.213 --> 01:09:02.153
Jake Marchini: If you have any further questions… any further information to add there, Brad.


390
01:09:02.153 --> 01:09:16.672
Brad Johnson: Yeah, I would just say, you know, if it's a 7-figure 1031, we have accommodated and helped people out with those size of deals. It's difficult to pull off, right? Each one's custom. It's not like we can say, hey, come into the fund.


391
01:09:16.783 --> 01:09:23.942
Brad Johnson: With your 1031. So it's case-by-case, but it has been done, we have done it a fair amount of times on an individual basis.


392
01:09:26.033 --> 01:09:34.043
Jake Marchini: Next question. I have heard that the first thing to look for in mobile home park investments is water infrastructure. Thoughts?


393
01:09:35.273 --> 01:09:52.113
Brad Johnson: Yes, that's a big one, right? So… well, the nice thing, I like to take risk on infrastructure. I would rather take risk on infrastructure in older park, aging infrastructure that we budget for the likelihood of replacing it, versus taking demand risk.


394
01:09:52.133 --> 01:10:05.093
Brad Johnson: I think a lot of people are too comfortable with demand risk in this space, not from just, like, hey, I… you know, I… lots of cities in the… most of the cities in the country, there's going to be overwhelming demand. The question is, can they pay for it?


395
01:10:05.093 --> 01:10:12.303
Brad Johnson: So I don't want to take a lot of market risk on incomes, I want to take, oh, this is an aging water system with


396
01:10:12.493 --> 01:10:16.162
Brad Johnson: Old copper pipes that probably have pinhole leaks.


397
01:10:16.303 --> 01:10:22.062
Brad Johnson: So we're gonna be maybe not super efficient on water collection. We're gonna have to watch that.


398
01:10:22.343 --> 01:10:27.553
Brad Johnson: Right? I can quantify that risk, usually. You're not gonna, you know, you're not gonna be dramatically off.


399
01:10:27.673 --> 01:10:35.412
Brad Johnson: On your waterline replacement budget, if you're being thoughtful about underwriting that, versus missing on


400
01:10:35.623 --> 01:10:40.243
Brad Johnson: incomes, right? Missing on demand, on the ability for the tenants to


401
01:10:40.723 --> 01:10:51.183
Brad Johnson: to pay for a lot rent increase. I don't want to take that kind of risk. I want to take defined risk, and that tends to be infrastructure risk. So yeah, water's important.


402
01:10:51.443 --> 01:10:54.313
Brad Johnson: I… we have done well. I don't love it.


403
01:10:54.763 --> 01:11:13.552
Brad Johnson: Just because, you know, it's like, what happens if the well runs dry? Unlikely, there's wells in, you know, most of the country, but you ideally want to have a backup, some way, shape, or form, to be able to deliver water to that property. Ideally, there's a city connection somewhat close by.


404
01:11:13.703 --> 01:11:30.752
Brad Johnson: It's… occasionally, we will take that risk if we… we just… if we feel like we're getting paid for it, and it's not completely remote in the middle of nowhere, right? If it's somewhere in a… in a developed market, there's a… there's a city water line, you know, close by. So, I… we tend to…


405
01:11:31.053 --> 01:11:34.863
Brad Johnson: You know, want to get city water on most of the deals.


406
01:11:35.203 --> 01:11:40.372
Brad Johnson: But yeah, those are kind of the things we think about when it comes to water infrastructure risk.


407
01:11:42.763 --> 01:11:46.462
Jake Marchini: Next question. Do you avoid areas with severe weather risk?


408
01:11:48.283 --> 01:11:52.603
Brad Johnson: Yes and no. So, we don't like to do single asset deals.


409
01:11:53.373 --> 01:12:01.353
Brad Johnson: in a market that's, like, right on the water in Miami, right? Which is too bad, because there's beautiful properties.


410
01:12:01.483 --> 01:12:04.862
Brad Johnson: in Miami that are extremely valuable, but you are facing


411
01:12:05.153 --> 01:12:12.173
Brad Johnson: catastrophic risk of loss. Now, you can make the argument that if something's that well located, that's right on the water.


412
01:12:12.173 --> 01:12:26.632
Brad Johnson: and you get a giant hurricane that damages half the homes, well, guess what? That place is so valuable, that property's so valuable, that over time, there's new tenants that will come in, buy new homes on their own dime, and you'll have a full park again.


413
01:12:26.633 --> 01:12:31.692
Brad Johnson: But life's too short, right? That's a lot of stress. So we tend to, selectively


414
01:12:31.693 --> 01:12:48.552
Brad Johnson: we'll layer in a deal, like we're doing a portfolio in South Carolina and North Carolina with some of our joint venture partners in that market, that if it was one deal, my preference would probably be to pass. But it's a portfolio of deals.


415
01:12:48.573 --> 01:12:57.733
Brad Johnson: So, okay, we get extremely unlucky, and despite the fact that nothing weather-related has happened to that park in 40, 50 years.


416
01:12:57.913 --> 01:13:01.373
Brad Johnson: We, unfortunately, the day after we purchased it, one of the


417
01:13:01.433 --> 01:13:13.542
Brad Johnson: of the four parks is blown away. At least you feel like it's not a complete loss. You have other asset classes to support it. So, you know, we try to think about this industry once again. How do we


418
01:13:13.543 --> 01:13:26.313
Brad Johnson: mitigate our loss potential, right? How do we focus on not losing money? And that's one of the few ways, you know, you can lose money in this space, is getting extremely unlucky on weather.


419
01:13:26.353 --> 01:13:34.173
Brad Johnson: Or over-leveraging, you know, or making a due diligence mistake. That's kind of where you see people get hurt in the space, is…


420
01:13:34.543 --> 01:13:42.232
Brad Johnson: It's kind of not taking care of some of the basic due diligence, or taking a little bit too much risk on an individual deal versus a portfolio.


421
01:13:44.873 --> 01:13:54.403
Jake Marchini: Moving on. In your mobile home parks, do you allow for outside investors to buy homes, act as landlord, and rent those out to a tenant, effectively a sublease?


422
01:13:55.163 --> 01:14:12.192
Brad Johnson: Yes, to an extent. So, there are constraints on the loan documents, usually, that… that will cap that, because they… if you just think about it, if you let… that's called a Lonnie dealer. It's a weird little name for… for that business model in the space. If you let a Lonnie dealer


423
01:14:12.703 --> 01:14:28.623
Brad Johnson: take up 5, 10, 15… I've seen… I've seen parks where it's… one person owns 50% of the homes, and the seller will try to tell you that, oh no, there's a 100% tenant-owned park, we don't own any of the homes. Well, yeah, but one person


424
01:14:28.733 --> 01:14:44.332
Brad Johnson: that I have zero control of has 50% control of the homes and the property, and, you know, can make life really painful for us. They can stop paying you, they can move homes out, they can, you know.


425
01:14:44.833 --> 01:14:47.922
Brad Johnson: They can create problems with your tenant base by…


426
01:14:48.063 --> 01:15:05.222
Brad Johnson: just telling them, the tenants, not to stop paying lot rent because they're trying to get XYZ out of the ownership. So, yeah, you want to… you want to selectively allow this, because they… they're great at kind of filling one or two, you know, maybe even five lots, right, efficiently.


427
01:15:05.483 --> 01:15:11.843
Brad Johnson: If you don't have a big capital budget. But, like, once you progress in this industry, if you continue to buy parks.


428
01:15:12.073 --> 01:15:20.352
Brad Johnson: Normally, you get to the point where you kind of just don't want to deal with it at all. You kind of want your team to control every aspect


429
01:15:20.593 --> 01:15:28.992
Brad Johnson: of operations. So, selectively, yes, it is allowed, but not in a meaningful way, and the lenders got smart to that.


430
01:15:29.043 --> 01:15:41.222
Brad Johnson: Why? Because, you know, 15 years ago, 20 years ago, they got burnt on one deal where it was a situation where somebody owned half of the homes and pulled them out of the park. So, yeah, selectively you can do that.


431
01:15:43.613 --> 01:15:57.633
Jake Marchini: Next question, I believe this was covered a bit earlier, but would we be investing in a fund or in a specific deal in a specific location? I believe, Brad, you mentioned that the way that vintage is structured is that you have sort of a master


432
01:15:57.633 --> 01:16:04.203
Jake Marchini: fund and sub, LPs or LLCs for specific projects, correct?


433
01:16:04.203 --> 01:16:21.193
Brad Johnson: Yes, and once again, I recommend, unless you have a lot of money that's getting allocated to a bunch of deals over time, and you feel like you have the expertise and the skill and the willingness to do the analysis, to invest in a bunch of individual deals.


434
01:16:21.273 --> 01:16:27.143
Brad Johnson: I always recommend funds, whether or not this is mobile home parks, or apartments, or self-storage, or industrial.


435
01:16:27.403 --> 01:16:30.862
Brad Johnson: Because it's… I think most people will…


436
01:16:30.963 --> 01:16:38.112
Brad Johnson: got in trouble during the last cycle when they said, okay, I have $250,000 that I want to allocate to real estate.


437
01:16:38.113 --> 01:16:51.223
Brad Johnson: and they put it into one single… one deal. That, to me, is not proper portfolio diversification. You want your real estate allocation to be spread out, ideally over a couple different strategies.


438
01:16:51.223 --> 01:16:54.333
Brad Johnson: And certainly, a lot of properties.


439
01:16:54.513 --> 01:17:01.683
Brad Johnson: So anyways, that's just kind of how I think about the risk-reward, you know, on funds versus individual deals for…


440
01:17:01.973 --> 01:17:03.862
Brad Johnson: For, for investors.


441
01:17:05.563 --> 01:17:18.042
Jake Marchini: When increasing the mobile home park lot rents, do you use market rents for traditional apartments as guides, and if so, what percentage is the lot rent typically in comparison to apartment rents?


442
01:17:19.103 --> 01:17:31.312
Brad Johnson: Yeah, there's no hard and fast rule. Everybody, you know, it would be great if this industry was a formula, but look, if you… if you, you know, just need a rough sense of looking at a deal and feeling out if


443
01:17:31.463 --> 01:17:38.563
Brad Johnson: If there's some potential there, 50% of a 3-bedroom apartment rent is a pretty good…


444
01:17:38.593 --> 01:17:54.453
Brad Johnson: hey, we can definitely go to there. You oftentimes can go higher, but that's a decent metric as just a back-of-the-envelope analysis. Obviously, you'd want to go visit the market and figure out exactly what each property and competitive


445
01:17:54.703 --> 01:17:59.483
Brad Johnson: Option is for your prospective tenants, but that's a decent metric.


446
01:17:59.663 --> 01:18:07.442
Brad Johnson: And, yes, we do look at heavily apartments and single-family home rents.


447
01:18:08.063 --> 01:18:09.353
Brad Johnson: The…


448
01:18:09.533 --> 01:18:28.882
Brad Johnson: The total all-in cost if you were to buy a home outright, and what your mortgage payment and maintenance and property taxes would be for a stick-built home versus a mobile home. Because the reality is, is that your competition in most of the markets that we like to invest in is not other mobile home parks.


449
01:18:29.153 --> 01:18:35.672
Brad Johnson: Because most of the time, those other mobile home parks are pretty full. They're 95% plus occupied.


450
01:18:35.833 --> 01:18:40.683
Brad Johnson: So, oftentimes, you're really competing with other housing options.


451
01:18:40.943 --> 01:18:53.363
Brad Johnson: apartment buildings, or, you know, let's… I mean, let's be honest, like, given the choice, if the two pricing… if a stick-built home was the same cost as a mobile home all-in, the stick-built home is going to win.


452
01:18:53.363 --> 01:19:06.572
Brad Johnson: So we need to make sure that that has an ample margin, right? A big cushion relative to us. And so that's kind of how we think about competition, is sizing it to the other housing options in that market.


453
01:19:06.693 --> 01:19:10.442
Brad Johnson: You know, we certainly look at other mobile home parks and see what their lot rent is.


454
01:19:10.663 --> 01:19:20.553
Brad Johnson: As just a, you know, a comparison. But the real game is played at 3-bedroom apartment rents and stick-built home all-in.


455
01:19:20.713 --> 01:19:22.452
Brad Johnson: Housing costs, in my view.


456
01:19:26.163 --> 01:19:32.863
Jake Marchini: Next question. What is the likelihood of requiring an additional investment beyond the initial investment?


457
01:19:33.873 --> 01:19:37.762
Brad Johnson: In our funds, we have never called capital.


458
01:19:38.323 --> 01:19:43.562
Brad Johnson: It's not to say we will never, ever call capital in the future, I have no idea what's going to happen in the future.


459
01:19:43.893 --> 01:19:50.613
Brad Johnson: But I've been doing this 12 years, and any fund that I've ever been a part of in this space has never made a capital call.


460
01:19:50.863 --> 01:19:52.973
Brad Johnson: And has never missed a distribution payment.


461
01:19:53.373 --> 01:20:02.413
Brad Johnson: So, I think that's a function of… I'd like to think there's a decent amount of skill in there, but it's also heavily just, we picked the right asset class, I think.


462
01:20:02.973 --> 01:20:20.162
Brad Johnson: We… we diversified sufficiently across markets, across strategy, so not all of the deals are complete, hairy value adds, right? We sprinkle in some hairier deals, like the Raleigh deal, and we do a fair amount of stabilized deals that are already generating cash flow year one.


463
01:20:20.873 --> 01:20:27.063
Brad Johnson: It also has to do with the fact that, going back to just picking the right asset class, picking the right game.


464
01:20:27.663 --> 01:20:38.643
Brad Johnson: These things don't require, you know, giant capital surprises, right? The… the facade of the building doesn't fall apart, the… there's no boiler room, there's no lobby remodel, there's no roof repair.


465
01:20:38.723 --> 01:20:49.313
Brad Johnson: So, if you do get a surprise, it tends to be range-bound on the capital side. Like, okay, if you're going to redo the roads, it's a couple hundred thousand dollars. It's never gonna be $5 million.


466
01:20:49.473 --> 01:20:53.262
Brad Johnson: Which I've… I've seen those capital bills pop up.


467
01:20:53.373 --> 01:20:58.412
Brad Johnson: In other asset classes due to something that you unforeseen, you didn't have in your underwriting.


468
01:20:59.223 --> 01:21:05.972
Brad Johnson: What else can I say about that? Yeah, I just, I think it's also not using floating rate debt.


469
01:21:06.263 --> 01:21:17.932
Brad Johnson: You know, we… we just didn't get into that game, and I was kicking myself at times, you know, watching people, you know, generate these insane returns in, you know, 2016,


470
01:21:18.033 --> 01:21:19.413
Brad Johnson: through 21.


471
01:21:19.793 --> 01:21:34.843
Brad Johnson: But I wanted to sleep at night. I just kind of came from a background of institutional real estate where, you know, you tended… you tended… you didn't really do that that much in… in asset classes that you thought were, you know, were… where you wanted to generate a lot of cash flow.


472
01:21:35.563 --> 01:21:39.333
Brad Johnson: You'd rather just, hey, take away that interest rate risk.


473
01:21:39.793 --> 01:21:51.512
Brad Johnson: And that's what we did, and so we didn't take on a lot of floating rate debt, and so we didn't have to have capital calls for… for loan caps, or for refinances, and so that was part of it. And that's still the case today.


474
01:21:51.633 --> 01:22:03.592
Brad Johnson: the portfolio for a current fund, you know, doesn't have any floating debt. So we certainly prefer to do fixed-rate debt, and that's what we almost always do.


475
01:22:03.873 --> 01:22:07.103
Brad Johnson: But we will do…


476
01:22:07.333 --> 01:22:27.263
Brad Johnson: We will do interest-only, which I think is really compelling for most real estate deals, is to do an interest-only deal where you have a clear path to value-add. There's not real much point in paying principal out of a loan payment when you can use that capital more productively to compound capital versus just paying down your loan.


477
01:22:27.543 --> 01:22:30.353
Brad Johnson: So we do do that, but then we go to refinance.


478
01:22:30.473 --> 01:22:34.832
Brad Johnson: And then once the deal is stabilized, then… then we oftentimes will put it into a full…


479
01:22:35.153 --> 01:22:40.643
Brad Johnson: You know, amortized loan, because hopefully someday those loans are just completely gone.


480
01:22:40.903 --> 01:22:43.523
Brad Johnson: If we've already refinanced a few times out of it.


481
01:22:43.973 --> 01:22:47.073
Brad Johnson: So anyways, that's… that's my thought on… on capital calls.


482
01:22:48.153 --> 01:23:07.602
Jake Marchini: All right, so moving on from there, the next question is about the realistic approximate return on investment. For that type of discussion, I would ask that you actually go ahead and just email… send a quick email to Brad after the Q&A session to talk about that sort of thing. We will need to move on from that.


483
01:23:07.683 --> 01:23:19.542
Jake Marchini: The question after that, again, talks about requiring capital calls beyond the initial investment. I think Brad has addressed that pretty thoroughly in his previous answer just now.


484
01:23:20.143 --> 01:23:26.753
Jake Marchini: then, the next question that is asked, what are your current deal size, and where are they?


485
01:23:28.393 --> 01:23:41.963
Brad Johnson: They're pretty spread out. You know, I'm a big believer, as we talked about, I think I'm beating a dead horse here, but diversification, right? I don't want to be tied to one market 100%, or one city, right?


486
01:23:42.143 --> 01:23:44.833
Brad Johnson: So we're spread out, but we tend to like…


487
01:23:45.103 --> 01:23:47.003
Brad Johnson: We tend to prefer red states.


488
01:23:47.103 --> 01:23:49.382
Brad Johnson: And that is a function of regulation.


489
01:23:49.863 --> 01:23:55.423
Brad Johnson: I will never own or invest in anything, real estate related in New York.


490
01:23:55.833 --> 01:24:06.983
Brad Johnson: That… that market is extremely difficult to be a landlord, as I think everybody's kind of aware of from the headlines. And it's not even a political statement, it's just fact. It's just very difficult.


491
01:24:07.093 --> 01:24:11.103
Brad Johnson: They're not very, friendly to the real estate business.


492
01:24:11.593 --> 01:24:29.873
Brad Johnson: So, we tend to focus on states that are higher growth, and have a friendly regulatory environment. It's not to say that we won't do deals in the Pacific Northwest. I frankly think that's a pretty good opportunity there, because pricing has reset a little bit, because there has been


493
01:24:29.873 --> 01:24:34.173
Brad Johnson: New regulation, new regulations on rent control, and so…


494
01:24:34.213 --> 01:24:41.193
Brad Johnson: The… it's removed a little bit of the doubt about what's going to happen, so now we can actually underwrite it, and so the returns are still compelling.


495
01:24:41.633 --> 01:24:53.642
Brad Johnson: And you've basically just guaranteed that we're going to be able to raise, you know, lot rents up into the max that the regulations will allow every year, because there will never be a new development. The math will not work.


496
01:24:53.993 --> 01:24:59.423
Brad Johnson: Under those regulations. Just flat out, you know, doesn't tie. The math doesn't math.


497
01:24:59.893 --> 01:25:14.743
Brad Johnson: And so, yeah, we prefer, you know, I would say, kind of the big smile, right? It's like, we will go up to Montana, like, we love those… the deals we can find in the Montana Mountain States. They are fewer and far between, because there's just fewer parks there.


498
01:25:14.893 --> 01:25:19.163
Brad Johnson: We… we don't do as many deals in the Midwest.


499
01:25:19.513 --> 01:25:29.023
Brad Johnson: If… it's not to say that we won't, it's just that there's fewer deals that are in, in compelling population-growing markets that come across our desk.


500
01:25:29.693 --> 01:25:39.932
Brad Johnson: part of that's just network, I'm sure, but yeah. In the Midwest, you just gotta be careful about making sure that, you know, you're still getting increase… increasing population, job growth.


501
01:25:40.073 --> 01:25:44.632
Brad Johnson: And then we tend to, if we do go to the Midwest, we tend to go for higher quality infrastructure.


502
01:25:45.063 --> 01:25:55.982
Brad Johnson: You want to be the… we want to be, like, the best park, or at least top 3 in those cities, because you don't get bailed out by, you know, population growth if you do happen to make


503
01:25:56.113 --> 01:25:58.642
Brad Johnson: Some sort of due diligence mistake.


504
01:25:59.263 --> 01:26:01.783
Brad Johnson: So, that's how we think about, location.


505
01:26:03.683 --> 01:26:14.703
Jake Marchini: The next question, not really a question, harking back to other questions that were asked, I realize 401K IRA doesn't get depreciation, referring to non-qualified monies. I believe we…


506
01:26:14.883 --> 01:26:31.102
Jake Marchini: covered that, about other folks using, you know, 1031 funds, to invest in Brad's, in vintage or in other things like this, and Brad, I believe, had mentioned that that doesn't typically pan out, but can.


507
01:26:32.443 --> 01:26:36.082
Brad Johnson: Sorry, Jake, what's that question again? What… at 1031?


508
01:26:36.123 --> 01:26:43.012
Jake Marchini: So, they were asking… they were… it was a statement saying that, they, you know.


509
01:26:43.223 --> 01:26:52.972
Jake Marchini: realized that depreciation doesn't apply to tax-deferred retirement account monies. They were asking about non-qualified, you know, personal funds.


510
01:26:52.973 --> 01:26:54.803
Brad Johnson: Oh, yeah. Sort of thing.


511
01:26:54.803 --> 01:27:13.013
Brad Johnson: Yeah, personal funds, it's great. It becomes the lazy 1031, in that you can, instead of having to go through a full exchange if you're selling something, you can often just make an investment into a property type that has bonus depreciation, like manufactured housing, where oftentimes it's


512
01:27:13.163 --> 01:27:26.473
Brad Johnson: $1 in and $1 in losses the first year. So, you make a $100,000 investment, oftentimes you get a $100,000 loss, sometimes even higher in some of our deals, based on, kind of, what the land value is in that market.


513
01:27:26.563 --> 01:27:34.642
Brad Johnson: And that goes back to, once again, we are owning infrastructure. Infrastructure is 15-year property. 15-year property, you can accelerate to the first year.


514
01:27:34.793 --> 01:27:42.422
Brad Johnson: Whereas, an apartment building is 27 and a half, a commercial property is 39 years. You can't… you can't bonus depreciate that.


515
01:27:42.633 --> 01:27:51.352
Brad Johnson: So yeah, it tends to be fairly compelling from a tax standpoint if that's a motivator. And you can use the losses. Not everybody can use the losses.


516
01:27:51.453 --> 01:28:07.813
Brad Johnson: Right? If they're a W-2, you know, and that's the only type of income, ordinary income they have, you can't use bonus depreciation losses to offset W-2 income. But you can if it's a real estate, you know, income, other passive income that you have that you're offsetting with this passive investment.


517
01:28:10.433 --> 01:28:23.202
Jake Marchini: So here's… here's an interesting one. This may be more of a question for Entrust itself, but what if after 2 years I want to leave this fund, how do I exit? That actually mostly will be determined by…


518
01:28:23.243 --> 01:28:42.482
Jake Marchini: Brad will give the relevant information on that. From the Entrust Group's standpoint, exiting an investment involves you, the client, speaking with the party that you've invested with, and working out return of funds to your IRA account. Under what circumstances those funds are returned by the investment party to your IRA.


519
01:28:42.483 --> 01:28:50.172
Jake Marchini: Is not really ours to… to comment on. That's a discussion between you, the client, and the party that you're investing with.


520
01:28:50.173 --> 01:29:07.783
Jake Marchini: And as far as the interest group is concerned, that's simply a matter of filling out some pretty basic paperwork for us so that we can accept that money back into your IRA. But I believe Brad has given a little bit more information, if you'd just like to refresh us on that about the exit from vintage.


521
01:29:09.403 --> 01:29:27.492
Brad Johnson: Yeah, so I want to be clear that we have done this with a ton of investors over the years. However, these are not liquid investments, right? The money comes in, and it gets deployed into real estate. And so I think that there's some sponsors, especially, you know, larger Wall Street firms, that market these semi… they call them semi-liquid.


522
01:29:27.493 --> 01:29:31.913
Brad Johnson: vehicles. They're not semi-liquid. They're very illiquid.


523
01:29:31.913 --> 01:29:45.602
Brad Johnson: It's just they have created a mechanism to try to allow for these exceptions when they can. And that's how every fund or every investment in real estate works. There might be some sponsors that tell you, oh yeah, sure, we'll send your money right back, right?


524
01:29:45.603 --> 01:30:05.192
Brad Johnson: No, unless they have cash sitting in the bank account, they can't just sell all of their properties immediately. You have to be able to take care of the existing investors, right? Take care of current needs of the properties, and then you keep a little bit of a liquidity sleeve in cash or treasuries in order to make those kind of


525
01:30:05.213 --> 01:30:19.202
Brad Johnson: payoffs for people that just have something that pops up, pops up. But obviously, if there was a run on the bank, you can't honor everybody unless you fire-sell the whole portfolio. So I… I always just like to be very clear with people, like, this… this goes into your bucket


526
01:30:19.213 --> 01:30:31.562
Brad Johnson: of, you know, your illiquid part of your portfolio, which means you should have cash, you should have treasuries, you should have stocks in the other part of your portfolio, right? And the reason why you would do this


527
01:30:31.843 --> 01:30:37.593
Brad Johnson: Is because you want… you want better return streams that are non-correlated to the stock market.


528
01:30:37.993 --> 01:30:45.562
Brad Johnson: Otherwise, if you're… if you're very concerned with liquidity, like, I highly suggest keep it in treasuries, keep it in public liquid.


529
01:30:45.753 --> 01:30:58.573
Brad Johnson: Trade that day, securities. So this is adding an element to our portfolio, which is generally what, you know, we all want with our retirement accounts. We want to reduce the overall volatility and diversify the return streams.


530
01:30:58.673 --> 01:31:09.592
Brad Johnson: But this is going to be… you're part of your illiquid bucket. We try to honor just about, you know, every request that comes in, we make a concerted effort to try to get that person liquidity.


531
01:31:09.823 --> 01:31:26.713
Brad Johnson: But once again, run on the bank, it's not possible. So I just want… I just want to be very upfront with that, to make sure that people know that about when they're investing in private markets, because I think there's some, you know, sales oil, snake oil salesmen that will tell you, oh yeah, sure. But that's the reality of what's happening.


532
01:31:26.713 --> 01:31:38.852
Brad Johnson: is that these deals are going money into the ground, into private assets. You know, try to sell your house in a day. It doesn't happen. You have to kind of do it over time. And so then, if, for whatever reason, if we had


533
01:31:39.183 --> 01:31:42.343
Brad Johnson: Half of the fun come to us at one given time, because there were some


534
01:31:42.453 --> 01:31:59.943
Brad Johnson: you know, crisis, the stock market, you know, went down 80%, and everybody's panicking, then there would be a queue, right? And so then we would have to start methodically selling and refinancing assets in order to pay people over time, which is just how every other private fund would have to do it in the same manner.


535
01:32:03.003 --> 01:32:17.062
Jake Marchini: Excellent response, Brad. So, now, moving on, there's a few, items here. Thanks, Entrust, for hosting. You're very welcome, glad to have you here. Thank you. Appreciate all of you expressing appreciation. Glad to give information to our clients.


536
01:32:18.873 --> 01:32:38.152
Jake Marchini: We have a few questions here. Minimum investment and returns for MHP, again, for, returns, please feel free to reach out to Brad, after the Q&A session, just on a private basis, to talk about returns on investments for his fund, or possible returns for other funds.


537
01:32:39.023 --> 01:32:46.862
Jake Marchini: And for information about minimum and maximum investments for vintage, please feel free to reach out to Brad directly about that.


538
01:32:48.973 --> 01:32:58.933
Jake Marchini: Here's some terminology that I'm not quite familiar with, Brad. It says, somebody asked, will you be doing cost seg? S-E-G. Does that mean anything to you?


539
01:32:58.933 --> 01:33:03.702
Brad Johnson: Yeah, so that's a cost segregation study, and that is tied to depreciation.


540
01:33:03.803 --> 01:33:20.862
Brad Johnson: So, in order to get this bonus depreciation in that first year, you pay an engineer, a professional firm that does an accounting, that does a report on the asset class, and they give you an itemized schedule, a report on the valuation of each component of your real estate property, right?


541
01:33:21.033 --> 01:33:31.203
Brad Johnson: You've got this much a 15-year property, this much a 5-year property, which is personal… personal property, and this much of every other type of depreciation bucket.


542
01:33:31.323 --> 01:33:41.773
Brad Johnson: And that then allows you to give that to your CPA. They're able to do the math on how much of that investment can be depreciated that first year, and accelerated.


543
01:33:41.963 --> 01:33:44.042
Brad Johnson: And if you just think about


544
01:33:44.293 --> 01:33:58.682
Brad Johnson: you know, what is the IRS trying to accomplish here? Why does the government even allow this? Well, it's an incentive, right? They are trying to boost investment. So we can make new personal property investments, and we can make new infrastructure improvements.


545
01:33:58.863 --> 01:34:16.063
Brad Johnson: productive investments that increase… either expand a park, improve the existing asset that allows more tenants to come in. So we're… we're creating more assets that are… that are generating other tax revenue, right, by making these investments, and as a bonus, the IRS allows us to then


546
01:34:16.133 --> 01:34:20.443
Brad Johnson: Take that… that loss that first year, so benefit from the time value of money.


547
01:34:20.923 --> 01:34:29.672
Brad Johnson: And then if you're keeping these things indefinitely, right, then you really get to benefit from the time value of money in that depreciation.


548
01:34:29.783 --> 01:34:35.423
Brad Johnson: benefit, versus the people that will flip a park, which I never… it makes…


549
01:34:35.643 --> 01:34:46.233
Brad Johnson: I don't really understand why you would want to flip something that is so finite in nature. There's only maybe 10,000 of these things that you might want to own. There's probably 48,000 total.


550
01:34:46.633 --> 01:35:02.093
Brad Johnson: So there… it's… it's harder to buy these things than it is, say, an apartment building. So when you… when you get one, that's a good deal. Oftentimes, it can take 5 years to try to convince the seller to actually sell the deal to you. So you don't want to sell it in 2 years, and get just a great IRR, and…


551
01:35:02.123 --> 01:35:19.033
Brad Johnson: and a great return, but, you know, you've lost out on decades of possible cash flow and compounding. So we dramatically prefer to hold it long-term, and therefore, you're not having to pay that depreciation recapture. So if you bonus depreciate that first year, and sell in year three.


552
01:35:19.203 --> 01:35:33.342
Brad Johnson: you still pay for that… that… that money back to the IRS, it's just, you know, you got a 3-year time value of money on that… on that deduction, whereas if you hold it for 10 plus years, then the time value of money on that deduction is quite high.


553
01:35:36.273 --> 01:35:48.352
Jake Marchini: We have more questions, minimum or maximum levels of investment Vintage has for this type of investment. Another question to be asked to Brad directly. You can see his contact information there on screen.


554
01:35:48.693 --> 01:35:58.043
Jake Marchini: What is the average ratio of mobile home with acreage of land? So, like, the home-to-lot ratio is what they're asking there, Brad.


555
01:35:58.043 --> 01:36:06.983
Brad Johnson: Yeah, so I would… if I had to guess, we haven't done this math in a long time, but if I had to guess, it's probably 6 and a half…


556
01:36:07.913 --> 01:36:09.472
Brad Johnson: Between 6 and 7.


557
01:36:09.643 --> 01:36:11.213
Brad Johnson: Homes per acre.


558
01:36:11.723 --> 01:36:12.673
Brad Johnson: the…


559
01:36:12.963 --> 01:36:26.063
Brad Johnson: The really dense parks, 10 homes per acre, they're… they're stacked on top of each other. There's no space in between the homes. You see this in info locations, right? In the middle of…


560
01:36:26.433 --> 01:36:45.543
Brad Johnson: of a fairly big city, you will see this. Just because the land value is so disproportionately high, you can't have those things spaced out, because the parks that were really spa… you know, had a lot of space in an amazing location like that were long ago sold off


561
01:36:45.593 --> 01:37:00.533
Brad Johnson: to a housing developer, to somebody that went vertical with an apartment, to a shopping developer, because it just didn't make sense to have that few homes, mobile homes, take up that much land space. So the only ones that are existing in info locations are, like, on top of each other.


562
01:37:00.533 --> 01:37:08.932
Brad Johnson: Whereas we, you know, it's harder to find those deals. We're not buying a lot of deals in Orange County, California, right? Where I'm at today.


563
01:37:09.083 --> 01:37:20.953
Brad Johnson: They don't sell that often, and, you know, they're extremely expensive, they don't generate a ton of cash flow, and they almost never… they never trade, because the sellers, the owners, know what an amazing asset they have.


564
01:37:21.073 --> 01:37:32.753
Brad Johnson: So we're buying, oftentimes in a place like Raleigh, where you saw a picture of those homes, they're quite spread out. Even the Montana deal, those homes, you know, there's quite a bit of space in between them.


565
01:37:33.093 --> 01:37:41.003
Brad Johnson: So when they are really tight, like 10 to 1, you just gotta be extra careful about regulations, extra careful about


566
01:37:41.133 --> 01:37:49.822
Brad Johnson: infrastructure repairs, because, you know, there's just not a lot of room to operate. You don't want to do any septic deals in a market like that, because what happens if one fails?


567
01:37:50.083 --> 01:38:04.402
Brad Johnson: You know, the leech field, you can't replace a new one, you can't put a new one in, and all of a sudden you have a major problem. So, yeah, we tend to discourage people from going to infill locations unless they really know what they're doing, because you're going to have to pay a pretty…


568
01:38:04.403 --> 01:38:11.172
Brad Johnson: high price to even get into that game. So you just want to make sure that you're a seasoned vet at that point.


569
01:38:13.583 --> 01:38:14.183
Jake Marchini: Hmm.


570
01:38:14.633 --> 01:38:27.092
Jake Marchini: Okay, so it looks like a couple of these coming up are the same sort of things, asking about investment levels. We're gonna skip through those. One thing I will touch on here, somebody asked about,


571
01:38:27.523 --> 01:38:36.172
Jake Marchini: do investors with vintage have to be accredited investors? Is that something that is relevant to your model there, Brad?


572
01:38:36.173 --> 01:38:53.783
Brad Johnson: Yes, it is. That's the regulation that we and the overwhelming majority of everybody in our space, you know, it focuses on. It's kind of an unfortunate thing. I do think the SEC is making moves to reduce the restrictions on private assets, and


573
01:38:54.063 --> 01:39:00.543
Brad Johnson: And I think next year we'll actually see a few asset classes that will, will be enabled to go non-accredited, but we're not there yet.


574
01:39:03.623 --> 01:39:21.083
Jake Marchini: So moving on then, is this a limited partnership structure? Is it an allowable investment vehicle for a self-directed IRA? And to speak on that last bit, yes, limited partnerships as well as LLCs, joint ventures, and other private equity structures are very much allowed in


575
01:39:21.083 --> 01:39:32.872
Jake Marchini: as assets you can purchase using a self-directed IRA. Limited partnerships, certainly. Many of our clients make that… make investments in that sort of private equity structure.


576
01:39:32.883 --> 01:39:41.753
Jake Marchini: I don't bel… I believe you've answered this question already, though, Brad. This is not a limited partnership, though, it's an LLC, typically, is how you structure your funds?


577
01:39:41.993 --> 01:39:55.763
Brad Johnson: Yeah, it's an LLC, because that way the investors are capped… their liabilities capped to their… the amount invested. They're not a, you know, they're not a partner, and with unlimited liability, which you see a lot of oil and gas funds will be structured that way.


578
01:39:56.143 --> 01:39:57.742
Brad Johnson: But yeah, it's an LLC.


579
01:39:59.523 --> 01:40:22.002
Jake Marchini: Okay, a multi-part question here, so let's break this down. In parks with lots of park-owned homes, how do you value these fully depreciated homes? If occupied, what percentage of the sales are to the existing renters? If not, are you waiting for the tenant to vacate before trying to sell it? Lastly, in general terms, how are you valuing the price of a single pad?


580
01:40:24.343 --> 01:40:25.143
Brad Johnson: So…


581
01:40:25.293 --> 01:40:33.012
Brad Johnson: That was a very detailed question. That was a… somebody knows their stuff. So, the first part of that question is, how do you value the homes?


582
01:40:33.493 --> 01:40:47.132
Brad Johnson: The danger is to just put a cap rate or a multiple on the income stream from the rental, because you have your lot rent payment, right, that could be $500, and then you would have a home rent payment. You want those to be two checks, ideally.


583
01:40:47.963 --> 01:40:52.622
Brad Johnson: So you can spread out, you know, you can split out the revenue and account for things appropriately.


584
01:40:53.143 --> 01:41:00.392
Brad Johnson: So the home rent, you generally don't want to put the same multiple or cap rate on the home rent as you do on the lot rent.


585
01:41:00.793 --> 01:41:10.053
Brad Johnson: Because this thing is extremely valuable, this stream of income is not that valuable, right? Because there's a lot of maintenance and hassles in the home business that we don't want to be in, ultimately.


586
01:41:10.433 --> 01:41:14.902
Brad Johnson: But it's a tool. It's a means to an end to fill a park.


587
01:41:15.083 --> 01:41:22.062
Brad Johnson: Or to buy a park that we can come in with our team and value-add business plan to generate great returns.


588
01:41:22.543 --> 01:41:31.513
Brad Johnson: So, the… what you want to do is try to figure out, if I tried to sell that home on the open market by itself, what would it be worth?


589
01:41:32.113 --> 01:41:39.733
Brad Johnson: Right? Because then you can get a true value of what that asset is that you're paying for, and not put an elevated multiple


590
01:41:39.953 --> 01:41:49.343
Brad Johnson: on the income stream from that home. Because then you oftentimes, if you do that, right, because the home rent payment oftentimes is not that variable with the quality of the home.


591
01:41:49.453 --> 01:42:03.822
Brad Johnson: Right? If you're doing a rental, you're gonna get a $500 home payment on a 1990 single-wide, and the… maybe the double-wide, brand new, is… is only a couple hundred dollars more, right? So it's not dramatically different.


592
01:42:03.823 --> 01:42:09.673
Brad Johnson: And yet that… that double-wide is… is extremely valuable if it's new.


593
01:42:09.743 --> 01:42:15.653
Brad Johnson: And that extremely old single wide might be worthless, right? That might actually be a negative


594
01:42:16.003 --> 01:42:24.053
Brad Johnson: Asset on your balance sheet if you decide that you need to demo it and get it off the property to put it in a brand, nice, new-looking home.


595
01:42:24.503 --> 01:42:29.673
Brad Johnson: There is a weird quirk in some markets where the homes are actually appreciating.


596
01:42:29.963 --> 01:42:31.573
Brad Johnson: And you can think of that


597
01:42:31.703 --> 01:42:35.202
Brad Johnson: As a… the extreme example of that is Malibu.


598
01:42:35.383 --> 01:42:41.543
Brad Johnson: Right? So, Gorgeous Malibu has a couple of parks. Tragically, obviously, you know, one of them.


599
01:42:42.053 --> 01:42:47.012
Brad Johnson: Burned down, with the last fires, which is… which is horrible.


600
01:42:47.243 --> 01:42:54.572
Brad Johnson: But the ones that did not, that are still there, oftentimes you see these homes, the mobile home.


601
01:42:54.723 --> 01:42:57.682
Brad Johnson: A… a… basically, a fixed-up


602
01:42:57.783 --> 01:43:08.802
Brad Johnson: you know, 1985 single one, or double, is worth $3 million, because it's in Malibu, and it has the right to be there, and it's got a gorgeous view of the ocean.


603
01:43:08.953 --> 01:43:18.013
Brad Johnson: And why is that? Well, the value is accruing disproportionately to the homeowner versus the landowner, because


604
01:43:18.113 --> 01:43:21.293
Brad Johnson: Rents are capped, so you can't… there's rent control.


605
01:43:21.553 --> 01:43:28.122
Brad Johnson: And so, in markets that are fully caught up to… in lot rent, where kind of everybody's around market.


606
01:43:28.133 --> 01:43:42.953
Brad Johnson: and… or… and or there's some regulation capping the upside, then you start to see the homes appreciate in value, which is actually a great thing. That's… we want that long-term in most of our markets, because that's more skin in the game


607
01:43:42.953 --> 01:43:48.422
Brad Johnson: That the tenants have, the more that they are invested in that community, the better they're going to take care of their home.


608
01:43:48.423 --> 01:43:56.522
Brad Johnson: The more they're gonna, you know, invest in the community and friendships and relationships, because they see themselves being there long-term, the more they're gonna…


609
01:43:56.533 --> 01:44:03.472
Brad Johnson: You know, just make sure they don't, you know, miss a monthly lot rent payment, because they have this amazing asset that keeps appreciating.


610
01:44:03.703 --> 01:44:07.123
Brad Johnson: So that was a long-winded answer to your first question.


611
01:44:07.233 --> 01:44:12.553
Brad Johnson: The, the point on when we… like the Raleigh Park, where there's 100 park-owned homes.


612
01:44:13.023 --> 01:44:27.283
Brad Johnson: that we want off the balance sheet. At least 80% of those we would like off the balance sheet, right? 20%, we can still get just as many options to finance those, with Fannie Mae, but Fannie Mae tends to not want more than 25-30%.


613
01:44:27.473 --> 01:44:30.272
Brad Johnson: So we have a little bit of margin in error if we get to 20.


614
01:44:30.883 --> 01:44:40.812
Brad Johnson: So the… the idea… the idea there is, yes, you go to the existing renter, and you give them a deal of a lifetime, right? You make them not put anything down.


615
01:44:40.903 --> 01:44:57.613
Brad Johnson: or just a little bit down for a down payment, and you actually put the title in their name, but now they have to take over the maintenance of it, right? And they have to, you know, you make a deal with them that they're not missing lot rent payments, right, because you just gave them this asset.


616
01:44:57.713 --> 01:45:13.353
Brad Johnson: And so, oftentimes, we will try to not pay too much on the purchase price, or not assign a lot of value to the homes, because we want to fire sell them, or at least give a big discount on them when we try to go ahead and sell them to a new or existing tenant.


617
01:45:13.723 --> 01:45:18.343
Brad Johnson: I think that was the bulk of his questions, but correct me if I'm wrong.


618
01:45:19.193 --> 01:45:35.263
Jake Marchini: I believe we've touched on all of the major assets there, but Mr. Fawn, if you have further questions that you'd like addressed, please feel free to reach out to Brad or myself afterwards for further detail. Thank you for your very, detailed and well-thought-out question.


619
01:45:35.373 --> 01:45:42.762
Jake Marchini: A simpler one. Are your property managers in each location vintage staff, or do you subcontract that work out?


620
01:45:43.643 --> 01:45:50.922
Brad Johnson: Yeah, so we typically partner with groups regionally that are dealing with the property management teams.


621
01:45:51.073 --> 01:45:55.912
Brad Johnson: And that's because we want to spread out. We want to be as diversified as possible. We want local teams


622
01:45:56.113 --> 01:45:58.663
Brad Johnson: And we want to see a lot of deal flow.


623
01:45:58.883 --> 01:46:05.233
Brad Johnson: Because I… I think the… the hard part about this… this business is that you can't just…


624
01:46:05.333 --> 01:46:19.473
Brad Johnson: put $500 million to work, reliably, or even $100 million to work, or even 20, right? Real quickly, because there's just not that many of these opportunities. There's a lot fewer parks, as we mentioned.


625
01:46:19.743 --> 01:46:32.553
Brad Johnson: So, we want to see a lot of deal flow from our partners, and not just, have our own team out there finding these deals. And so, oftentimes, some of our partners will only see one or two deals a year. Well, we want to see


626
01:46:32.643 --> 01:46:39.962
Brad Johnson: 20, 30 deals a year. So, we like to have, regional partnerships


627
01:46:40.173 --> 01:46:54.903
Brad Johnson: In order to have direct oversight. Because, you know, the team just can't be flying all over the country and see these assets enough as we'd like. So, we use… we want to have boots on the ground in each of the regional markets.


628
01:46:55.333 --> 01:47:01.423
Brad Johnson: As far as the… The… who is the… the property management is not third-party, though.


629
01:47:02.003 --> 01:47:03.712
Brad Johnson: That is tougher in this world.


630
01:47:04.093 --> 01:47:14.772
Brad Johnson: you generally don't get the ability to just hire a third-party manager and pay them as a vendor in this space like you can in other asset classes. Like, apartment buildings.


631
01:47:15.313 --> 01:47:26.413
Brad Johnson: generally speaking, you can go to any major market, and there's 20 different options for a property management team that you could hire. That's not the case in this world. There's a handful


632
01:47:26.433 --> 01:47:46.092
Brad Johnson: And, they're nationwide, so they don't… it's not like they have a presence in every market, and so if you have a deal and they're not in that market, that would be a first asset for them in that market, and they're generally good at babysitting deals. They're not as good as value-add deals, because if you can imagine it, it's like.


633
01:47:46.093 --> 01:47:56.413
Brad Johnson: Their business is… is, you know, their profit margins are much thinner, and so they can't just fly out a ton of team members there, and they're not incentivized. They're not part of the team, the ownership team.


634
01:47:57.053 --> 01:48:07.793
Brad Johnson: So, we have to have third-party property… sorry, first-party property management infrastructure in place in all of our deals that's controlled by the ownership group.


635
01:48:09.513 --> 01:48:10.213
Jake Marchini: Hmm.


636
01:48:10.583 --> 01:48:17.313
Jake Marchini: Do the states you invest in have a provision for residents to form co-ops and pre-empty your offer?


637
01:48:18.193 --> 01:48:21.512
Brad Johnson: Preempt… preempt our offer? No.


638
01:48:21.873 --> 01:48:26.583
Brad Johnson: Now, there might be one state that's… that I'm missing?


639
01:48:27.143 --> 01:48:35.093
Brad Johnson: But the vast majority of them, we're not in those states. Those are, the, the states, the blue states on the… in the Northeast.


640
01:48:35.093 --> 01:48:49.462
Brad Johnson: it's fairly common for them to be… it's called a right of first refusal. So if you go to sell your park, you have to notify the tenant base. They can form a co-op to match that offer and buy the park themselves.


641
01:48:50.073 --> 01:48:52.942
Brad Johnson: That is very common in the Northeast.


642
01:48:53.063 --> 01:48:56.672
Brad Johnson: Which is not where we own anything currently.


643
01:48:57.093 --> 01:48:59.113
Brad Johnson: Because of what we've already talked about.


644
01:48:59.713 --> 01:49:08.823
Brad Johnson: Now, it's not a bad thing, though I, you know, it's the… it's nice when the tenants, can… can purchase their own property if they have, you know, they can pull together


645
01:49:09.083 --> 01:49:11.823
Brad Johnson: Those resources and get organized.


646
01:49:12.193 --> 01:49:22.032
Brad Johnson: It… it's kind of funny, though, because oftentimes they end up having to… it's like they would… they might have complained about prior lot rent increases.


647
01:49:22.033 --> 01:49:36.822
Brad Johnson: But when they actually become the ownership groups, it's like they realize, well, in order to keep maintaining the park, we're going to have to implement lot rent increases on ourselves, otherwise we don't have any reserves to fix the property. So, generally speaking, I think it's… I think it's a great thing when that does happen.


648
01:49:37.163 --> 01:49:39.162
Brad Johnson: But yeah, it does…


649
01:49:39.373 --> 01:49:50.422
Brad Johnson: It does create a slight constraint if you are the owner of that property in that state that has that requirement, because you can't then just sell when you want to, right?


650
01:49:50.713 --> 01:50:06.892
Brad Johnson: quickly to the group that has made the highest offer. You have to go through a process, and sometimes it's quite a lengthy process. You gotta give the tenant group maybe 90 days to match that offer. And, you know, there's a saying in real estate, time kills deals.


651
01:50:07.063 --> 01:50:23.503
Brad Johnson: So once you get, you know, a process, you have a marketed, brokered process, you get a bunch of bids, you pick a winner, you want to start that due diligence and closing process. You don't want to just sit and pause for 90 days, because deals can get stale, interest rates can fluctuate, things can happen.


652
01:50:25.993 --> 01:50:46.273
Jake Marchini: Okay, then we have a few more… few more questions of a type that we've had to skip over. What has been the average ROI for the last 5 years? 10. What is the minimum hold period when you, intend to refinance? Those sorts of things. Again, please reach out directly to Brad for specifics on return or investment,


653
01:50:46.733 --> 01:50:49.483
Jake Marchini: You know, terms and things of that nature.


654
01:50:49.783 --> 01:51:01.133
Jake Marchini: after the, after the Q&A session, you can reach out to him directly. Again, our… his information and mine, if you have, more logistical concerns or questions about IRA specifically.


655
01:51:01.133 --> 01:51:11.603
Jake Marchini: are on the screen. Brad, how often… how are your team members vetted? What types of background investigations? And how often? asks one of our viewers.


656
01:51:13.273 --> 01:51:27.212
Brad Johnson: Yeah, so it's a case-by-case basis. It's the, because we're working with partners in each of these markets, and, you know, we are relying on them to do a lot of the vetting of the staff… on-site staff.


657
01:51:27.793 --> 01:51:44.893
Brad Johnson: So, yeah, the background checks are just kind of at, you know, when you hire an employee, you run a background check, and we're not doing it on an ongoing basis. Now, it's been a long time, but, yeah, 6 years ago, I think we had an employee issue at one of the properties with some theft.


658
01:51:45.173 --> 01:51:53.983
Brad Johnson: And because, as you can imagine, back then, it was actually even harder to collect everything digital. Now, there's all kinds of systems in place that don't allow cash


659
01:51:54.343 --> 01:52:05.193
Brad Johnson: Deposits. But back then, when, you know, it was quite tempting for, you know, somebody that might be living in a mobile home park to be collecting tens of thousands of dollars in cash.


660
01:52:05.433 --> 01:52:09.162
Brad Johnson: And if something pops up in their life, you know, that was a risk.


661
01:52:09.293 --> 01:52:11.503
Brad Johnson: But we quickly moved towards


662
01:52:11.673 --> 01:52:15.002
Brad Johnson: You know, all digital payments, and that's… that's the,


663
01:52:15.343 --> 01:52:18.833
Brad Johnson: That's true for all the assets at this point.


664
01:52:18.973 --> 01:52:21.653
Brad Johnson: So yeah, I think every company deals with


665
01:52:21.953 --> 01:52:41.313
Brad Johnson: You know, with… you know, you can't be running background checks on your staff every 3 months, right? So you do, you do it at the beginning, you try to make your best estimate on who you're hiring. You fire fast if there's a problem, you hire slow, and you try to align incentives and pay people well.


666
01:52:41.683 --> 01:52:45.383
Brad Johnson: And so good things happen when you get those incentives in place.


667
01:52:46.923 --> 01:52:58.292
Jake Marchini: Here's one for me to tackle. How does Entrust handle monthly income to their account? To an account, is there a charge? And the answer to that is that it depends. The


668
01:52:58.343 --> 01:53:10.753
Jake Marchini: If there are any sort of fees associated with a deposit of income from an asset, like a mobile home park fund or anything else, the Entrust Group charges a fee


669
01:53:10.753 --> 01:53:25.203
Jake Marchini: based on how the money is deposited into your account, because of how we receive that money through our bank. So if you have a check sent to the interest group, or an ACH deposit, there is no fee for depositing money into your account.


670
01:53:25.213 --> 01:53:43.032
Jake Marchini: from your investments. It's just income deposits from your investments. There's no fee involved with an ACH deposit or a check being sent to us for deposit. There is a fee for a wire deposit, so if you have, you know, payments coming into your interest group IRA from


671
01:53:43.033 --> 01:53:49.473
Jake Marchini: As a wire deposit, there is a $30 fee that is charged to us by our bank, because the bank


672
01:53:49.743 --> 01:53:53.563
Jake Marchini: It costs money to receive a wire transfer at a bank.


673
01:53:53.663 --> 01:54:05.383
Jake Marchini: we get charged by the bank, and that cost is passed on to our clients. So there's a $30 charge for a wire deposit of income from your investment, if you have that sent by wire, no fee otherwise.


674
01:54:07.373 --> 01:54:17.023
Jake Marchini: Then, Brad, what's your take on these investments with the possible reorganization of Fannie and Freddie for demand of these types of mobile home properties going forward?


675
01:54:18.033 --> 01:54:28.622
Brad Johnson: If Fannie and Freddie love these asset classes, I don't have a hot take on what the future is for Fannie and Freddie, given the government involvement or not. I mean, they're de facto government agencies.


676
01:54:28.793 --> 01:54:30.503
Brad Johnson: I have been for a long time.


677
01:54:30.743 --> 01:54:37.083
Brad Johnson: The reality is that the housing market is subsidized by the government, right? They're in a open market.


678
01:54:37.213 --> 01:54:47.183
Brad Johnson: we would not have interest rates for a 30-year loan at the current rate that they are. Who is buying that product? Who is investing at those loan rates when anybody can refinance at any time?


679
01:54:47.473 --> 01:54:50.963
Brad Johnson: So, Fannie and Freddie are subsidized, right? It's just a fact.


680
01:54:51.303 --> 01:55:06.063
Brad Johnson: They love this asset class because of all the things we talked about on the stability, right? They don't want to see any defaults, they don't want to deal with real estate owned on their books, which happens when a lender, you know, stops paying.


681
01:55:06.423 --> 01:55:12.503
Brad Johnson: So… and you can imagine, you know, it's not… it's a fraction of the size of the apartment market.


682
01:55:12.813 --> 01:55:21.563
Brad Johnson: So, they have a mandate to push more and more into affordable housing, and manufactured housing is a big part of that component for them, and so it's part of their mandate.


683
01:55:21.803 --> 01:55:26.332
Brad Johnson: They're supposed to be allocating more and more of their funds to this sector.


684
01:55:26.823 --> 01:55:29.213
Brad Johnson: They love it from a risk standpoint.


685
01:55:29.623 --> 01:55:36.683
Brad Johnson: And, are the largest lender in the space, and we're excited about them adding more liquidity to the asset class.


686
01:55:37.683 --> 01:55:42.463
Jake Marchini: Sorry, Jake, just a note, I gotta… I gotta bounce in 4 minutes here, so maybe.


687
01:55:42.523 --> 01:55:50.993
Brad Johnson: One more question. Okay, so there… so that was… I was gonna bring that up at 1 o'clock, so thank you for… for flagging that, Brad. Yeah, no problem. We do have…


688
01:55:51.163 --> 01:55:59.852
Jake Marchini: A little about 15 more questions here, so we probably won't be able to return to… get to all of those. Thank you all for your very,


689
01:56:00.263 --> 01:56:13.332
Jake Marchini: compelling engagement on this topic. We thank you for, helping us to get so much engagement here. We have enjoyed talking about this topic, but, one thing that I'd like to just go ahead and answer while we still have time.


690
01:56:13.333 --> 01:56:32.802
Jake Marchini: Somebody asked, does a distribution from the fund equate to a distribution from the IOA and is taxed as OI? So that, I would like to clarify that no. Income from an investment that you've made through your interest group IRA that comes back to your interest group IRA is not, you know, that's


691
01:56:33.283 --> 01:56:57.173
Jake Marchini: That's not a distribution in the way that is relevant for retirement accounts. A distribution, as in a deposit of income from your investment to your IRA, is not a distribution as in a removal of funds or value from your IRA, and thus a removal of funds or value from the tax-sheltered. The protection, the tax protections of an IRA


692
01:56:57.173 --> 01:56:59.503
Jake Marchini: Which means that your money becomes taxable.


693
01:56:59.503 --> 01:57:03.873
Jake Marchini: So, no, money that is deposited back into your IRA from


694
01:57:04.183 --> 01:57:23.493
Jake Marchini: vintage or any other investment as a distribution or income deposit, to make things clear, is not a taxable distribution from your IRA. And to tackle perhaps one more thing for you, Brad, are your investments structured to avoid UDFI and the associated tax?


695
01:57:24.773 --> 01:57:29.723
Brad Johnson: No, we do not create a blocker company to do that.


696
01:57:30.233 --> 01:57:38.263
Brad Johnson: I know that is, you know, that is one of the bummer parts about investing through an IRA, is that the financing component


697
01:57:38.433 --> 01:57:47.952
Brad Johnson: it does generate, not UBIT, but UDFI, I think is the terms. So yeah, that is a component. The nice thing is that part of the…


698
01:57:48.373 --> 01:58:00.463
Brad Johnson: The other variables are the accounting and the depreciation, even though you're not getting the benefit of the depreciation, my understanding is that you get some of that benefit in terms of offsetting some of that UDFI.


699
01:58:00.563 --> 01:58:04.262
Brad Johnson: But I would talk to your accountant. It… it… we've had a ton of…


700
01:58:04.453 --> 01:58:12.033
Brad Johnson: of retirement account investors over the years, and I think most of them would… would… would agree that the…


701
01:58:12.393 --> 01:58:19.993
Brad Johnson: the, the benefits have outweighed kind of the small impact that there's been… there has been on the UDFI front.


702
01:58:22.243 --> 01:58:35.372
Jake Marchini: All right, so thank you very much, Brad and Ian, for your information today. This has been a very… just an incredibly engaged discussion that we've had, and I hope that you who have attended have gotten


703
01:58:35.673 --> 01:58:48.842
Jake Marchini: have found this as helpful and enlightening as we can make it. For those of you, the, you know, dozen or so of you whose questions were not answered, very sorry to have to cut this short, but please feel free to send either Brad or myself


704
01:58:48.843 --> 01:59:01.512
Jake Marchini: direct follow-ups if you have further questions that you would like answered on this topic, we are glad to provide further information. So, Brad, I will let you go. Thank you for having, for lending your expertise to our discussion today.


705
01:59:01.773 --> 01:59:13.312
Brad Johnson: Yeah, no, thank you, Jake, and certainly thank you to the Entrust Group. We've had a fair amount of investors over the years that have used you guys as a custodian, and have always said great things.


706
01:59:13.433 --> 01:59:29.163
Brad Johnson: And so, yeah, I just wanted to thank you guys for the time today, both you, Jake, your team, and the people, of course, listening at home and at work. All right, well, thanks, everybody, and feel free to reach out. I think, yeah, our website, vintage-funds.com.


707
01:59:29.173 --> 01:59:37.583
Brad Johnson: And click on the track record to… to get that info. It's probably the most applicable to evaluating, I think, any operator. So, thanks for the time.


708
01:59:38.703 --> 01:59:40.122
Jake Marchini: Have a good day, folks.