Robert Leonard (02:08):

What drew you to real estate? I feel like a lot of children of parents who are in any career, not even just real estate, but anything, sometimes they want to go into the same thing their parents do, sometimes they want nothing to do with whatever their parents are doing. So what caused you to actually kind of get drawn towards real estate?

Jonathan Tuttle (02:23):

Yeah. Good question. So yeah, that’s kind of what happened. I grew up with it, then I did retail sales in the twenties, did really well with that. And then, later on, I’m like, “Okay, now what? Do I want to get into real estate?” I think just the financial freedom and the ability to create your own destiny and create your own wealth and it’s in your hands, not other people’s, so that’s why I really… I think [that] drew me into it.

Robert Leonard (02:40):

You have a digital marketing agency, also your real estate business, which one came first? Were you making so much profit from your digital marketing agency, you needed a place to park that money? You got it in real estate or did it kind of come about differently?

Jonathan Tuttle (02:53):

Well, first real estate. So I got into real estate in 2010. Digital marketing I started really getting a passion for about the same time, so it just kind of feeds off each other. So one of the things for… which we’ll get into later about my fund and then my info course, both of those are marketing online, so my agency basically does all the digital marketing.

Jonathan Tuttle (03:10):

I got into digital marketing really, really, really into it, 2012, ’13. That was before even Facebook ads were even relevant back then. So, I mean, they just came out. I got really into the digital marketing side, really deep dive into the agency model 2017, ’18, is when I really deep-dived into it, so.

Jonathan Tuttle (03:26):

But yeah, it fuels each other’s business. So basically digital marketing…everything’s online now.  Even this, what we’re doing, is online so just having that and those resources and that knowledge. It also fuels everything else. I really like both because everything… it’s such a digital age, everything’s digital so it just kind of provides for both. And on the real estate side, obviously, that’s always going to be there.

Robert Leonard (03:45):

In the real estate world, why did you choose the mobile home park niche?

Jonathan Tuttle (03:49):

Yeah, it’s because in the last downturn we got our first park and that was literally when every other real estate had really everything. In 2008, ‘9 was just down and crashing, our mobile home parks doubled, tripled in value, so we just… The one we had, we kept raising rents and we had people begging to come in. So when I saw that I was like, “Right, there’s a supply and demand that needs to be solved,” and we have… consider there are only about 43,000 change parks officially, so when you have the only affordable housing option, it just made sense that this real estate has something unique attributes to it.

Jonathan Tuttle (04:20):

And I used to tell my friends, [and] they would be like, “Mobile home parks, what is this?” Now it’s becoming more mainstream. It’s on a lot of podcasts and stuff like that. But at that time, we told people [about] mobile home parks, they just looked at you weird. But I just saw the returns grow, [inaudible 00:04:34] too with my dad. I saw him do all different types of real estate and this was the one that was the strongest performing during the worst times, and that was just the light bulb moment.

Robert Leonard (04:41):

The majority of real estate has done very well during this pandemic, and I think this pandemic is a bit different than what we experienced during the recession of ’07, ’08, ’09, but how have mobile home parks performed during what we’ve now experienced during this pandemic?

Jonathan Tuttle (04:58):

Yeah, they were the… According to Green Sheet… Great question, they were the top-performing real estate last year. The Green Sheet Data is the aggregate of all commercial real estate. I mean, some of them got crushed, obviously, like malls got crushed, hotels got crushed, anything that had something to do with the pandemic and being shut down. Well, we were the only ones that really thrived. I think it was a 12% increase in value last year. And the next closest was like nine or ten and it was industrial.

Jonathan Tuttle (05:22):

So obviously everyone’s doing E-commerce stores and online like Shopify stores that obviously fuels that, but they just did it extremely well. And then there was another data I forgot who put it out, but they were saying that some parks even had an appreciation of like 20%. It was in a Wall Street Journal article so it just did really well.

Jonathan Tuttle (05:39):

What happened was there was Wells Fargo, they finance pretty much every asset class and they’re the biggest financier of mobile home parks, and they were seeing collection rates like 94, 95%, even during the pandemic. So we didn’t have issues with people not paying, like some of the other asset classes had the rent moratoriums, we didn’t really have issues with that because where else can you live for a couple hundred bucks a month? And people realized that and most of the people that own are Mom-and-Pop owners and we have a relationship with the tenants, so all that kind of factored into just making it just really resilient during the kind of chaos that happened last year.

Robert Leonard (06:13):

Are you finding that a lot of tenants are compressing the classes of properties that they’re renting? So if you’re in an A-class you might come down to B, if you’re in B-class, you might come down to C, C to D, and so on and so forth. So there’s a lot of people falling into your mobile homes parks that might not have otherwise lived there, and that’s potentially why they’re doing so well during these times of economic uncertainty, whether it’s this pandemic or it was the last one, or maybe any before that?

Jonathan Tuttle (06:37):

Yeah, we’ve had tenants before that have… people that make 70, 80 grand a year, you wouldn’t think it but they just live in mobile homes because it’s so much cheaper and they have such low overhead bills, it gives them the ability to travel. And that’s one reason, people want to have affordable housing, even they make 15 bucks an hour. The average income in America’s about 33,000, so that’s about the average tenant in a mobile home park.

Jonathan Tuttle (06:57):

And regards to investor wise, investors have been coming into our niche because they’re chasing yields. You’re seeing cap rates across the country and with multifamily-like fives for B, C classes. And so we’re seeing that people coming in from other asset classes chasing yields because we were always 2 or 300 basis points higher than other asset classes.

Jonathan Tuttle (07:16):

And now certain coastal stops, we’re seeing a home park [inaudible 00:07:19] with threes and fours now [inaudible 00:07:22]. Is it more institutional money comes into our space, we’re going to see more cap rate compression, but we were always historically known as that’s the class that had just crazy cash and cash returns and crazy… the best tax benefits because you could depreciate the land at 65 to 70% of it, 15-year improvements when you acquire a park.

Jonathan Tuttle (07:38):

So multifamily [homes] have a 27.5. We have 27.5 if you own the homes in the park. But so we have the best tax benefits of all real estate, so even if we don’t have the crazy… A couple years ago, 10-cap was the norm. Now, it’s lucky to get a six and a half, seven, but you still have all the tax benefits.

Jonathan Tuttle (07:54):

So we’re seeing people come in from other asset classes and then from tenants wise, we’re seeing people that just want affordable housing, and half the tenant are seniors. And so baby boomers, there’s a thing called the silver tsunami, which is going to be happening, you can Google these articles, but a majority of Mom-and-Pops, the senior citizens, are going to be selling off their homes, [inaudible 00:08:11] a huge influx of single-family homes. And they’re going to basically flood the market with new homes and they’re going to be going to classy apartments and mobile home parks, which is only going to fuel the demand more and people are living longer now too so it’s only going to fuel the demand for the next foreseeable future.

Robert Leonard (08:25):

For those listening, who may not have heard of investing in mobile home parks or even what a mobile home park is, give us an overview of what they are and what the strategy is.

Jonathan Tuttle (08:33):

Yes, it is kind of getting more commonplace than it was a few years ago. We’ve gotten a lot of media in the last few years, but it’s basically an apartment building, but you don’t own the units preferably. So you’re basically owning land that has apartment units on it. It’s probably the best analogy, but they’re actually little mobile homes and the strategy behind it is; one, you’ve a lot less overhead comparatively or expenses like traditional apartment building are 55, 60% expenses, when the AC breaks or the roofing, you replace all that.

Jonathan Tuttle (09:03):

But in a mobile home park where you mostly own just the land and don’t actually own the homes, the tenant replaces that. So it’s less, you don’t have to have all those extra bills. Additionally, it’s mostly just land improvements, so your biggest cost and to keep the park [inaudible 00:09:17] is going to be your sewer and water lines below it and that’s what you want to see.

Jonathan Tuttle (09:20):

I’ve seen some people post online like, “Oh, you don’t have to do due diligence, buy your park unseen”. I’ve seen people post this on Instagram. I’m like, “This is the only [inaudible 00:09:29] question. You do not want to do that.” Because literally, the biggest nightmare could be… Yeah, the park looks great on Google or Zoom, but if you don’t know what your basic expense is… The water lines, if they’re broken or cracked below you and you have a $400,000 replacement bill and you just didn’t buy it sight-unseen and you do the proper due diligence.

Jonathan Tuttle (09:42):

So the biggest overhead for the industry, what we have to look for is just the water, sewage lines below the park, get a little water… You get the little [inaudible 00:09:50] guys with the cameras, they go through there and they look at the pipes. The trees and then that’s… And then just your grounds. And so since you have such less overhead, it just gives you a lot higher cap rate and that’s what’s really been the driving force behind it. So what the basic strategy is, you’re basically just being a landowner and renting out spaces on it. And so when you have a lot less headaches, a lot less bills, it just makes more sense than most real estate classes.

Robert Leonard (10:14):

What is the difference between investing in the mobile homes themselves? I know some people do that, versus investing in mobile home parks?

Jonathan Tuttle (10:21):

Well, the strategy behind mobile homes is, you could… It’s like arbitrage. I think it’s the best way to look at it because people don’t look at it correctly. It’s the same thing. My analogy would be like a Shopify store where you buy something, job ship it and you mark it up and you market it better. It’s the same premise. The MLS, the brokers, don’t like to take on a listing because most cities and most areas, they’re not worth that much. They’re not going to sit there and do showings for a $15,000 mobile home when they could be selling a $300,000 house and making way more money. So brokers really don’t put it in there. If they do list it, they don’t know how to price it, so.

Jonathan Tuttle (10:55):

And there’s not any aggregate data so nobody’s really keeping track of what the home should go for. So it’s kind of like the arbitrage way of doing business. And so you’re basically finding homes that you could spruce some up or they just need to be marketed better. Remember 50% of them are senior citizens. Well then, if you know how to use Facebook and Marketplace and you know how to put some better ads up online, you’re going to get a lot more demand, you can charge more. So it’s kind of like arbitrage and there are very little repairs you have to really do, typically.

Jonathan Tuttle (11:19):

I mean it depends on the age of the home. It’s Pre-HUD, which is 1976, but anything after that, they have higher standards. And most of the time it’s unlike… Single-family [inaudible 00:11:27], there’s so many… need 700 credit score, you have to put so much money down. This is a way for anybody to get started for a couple grand. And so that’s what I like about it. It’s for people… If you understand the arbitrage and also being able to do some minor repairs and how to market online, that’s how you make your profit.

Jonathan Tuttle (11:42):

So it’s a lot less capital and to get a small park, you spend a million dollars plus, but to get a small mobile home, first mobile home, you spend a couple grand. So it’s kind of where they’re at financially or if they don’t have investors, the easiest way to get started would be flipping mobile homes.

Robert Leonard (11:56):

Are mobile home parks themselves accessible by new investors or people have to wait until they have a bit more experience in capital and relationships with investors?

Jonathan Tuttle (12:05):

Yeah, that’s a good question. There is some challenge and nuance behind it because it is different. Right now because there is a finite amount of inventory and there’s a lot of new investors coming in the space, so it is hard to get a deal flow if you’re just somebody literally just starting out and say, “Hey, I want my first park.” Most brokers aren’t going to return your call because they have a hundred people that will close on it instantly and have the financing and they know the due diligence, but you come in like, “Hey, I’m going to buy my first park,” they’re probably not going to show it to you unless it’s something that’s way overpriced, that everybody’s turned down or just a park that has a lot of [inaudible 00:12:34], a lot of hidden problems.

Jonathan Tuttle (12:36):

So the biggest thing, like I said, going back to the due diligence, you want to do the correct due diligence, is the most important thing about acquiring a park. So you want to make sure like the zonings, it could still be operating as a park when you transfer over because sometimes city municipalities in certain markets don’t like it because A, it’s the lowest taxation for them and they could usually get more for any other real estate asset class in terms of taxes.

Jonathan Tuttle (12:56):

B, the average tenant for the mobile homes are paying 10, 20, 30 bucks a month, if that, in the real estate taxes. When they could have a house there, they’re collecting five grand. So the city doesn’t want it because they’re losing so much revenue and they have the same [inaudible 00:13:09]. And so going back to your question, yes, so there’s some nuances and things you got to learn, probably better to get some information before you get your first park, get some knowledge behind you because if you get the wrong asset class, you don’t do the proper due diligence, you could have a big problem on your hands.

Robert Leonard (13:24):

We’ve alluded to this already in the conversation, but there’s a difference between a mobile home park, having park-owned homes, and tenant-owned homes. Talk to us about this difference, and what your goal is in your parks.

Jonathan Tuttle (13:35):

Yeah, well the ideal model, which most people kind of follow, is basically where you just own the land and the tenant owns the homes. And even for Fannie Freddie financing, which they’re now because of the Duty to Serve Act, the government has to allocate 37% of affordable housing and it’s usually mobile home parks and land or farmland. So we get a huge influx of new financing from the government. And their stipulation is that you have to have a certain, like less than 25 park-owned homes and they also want to have a contingency plan on how to get those off your hands, basically. What are you going to do to market it, obviously just do Facebook marketplace, have a website, it’s all you really need to do. So ideally, you don’t want to have all these extra homes, because then it’s just more management and more labor.

Jonathan Tuttle (14:19):

You can make it part of your business cycle, when you transfer new owners and mark them up like 5 or 10 grand every time you flip them and put in some new paint, power-wash the outside. So there is an income stream from that, but the value to the most mobile home park owners is kind of the opposite of what apartments are. So you’re not sort of maintaining all that stuff, you’re just basically maintaining the land, and so that’s the true value [inaudible 00:14:43] most, where the park doesn’t own the homes and that’s what you typically want.

Robert Leonard (14:47):

What is rent-to-own financing and how can someone use that to eliminate maintenance and repair costs, motivate tenants to take better care of the property and allow people to get started without a lot of money?

Jonathan Tuttle (14:58):

Yeah, it provides a solution to people. Do they need it? So we just recently did one. We were trying to sell for cash, but tenants, they want to buy it, and we just did a basically rent-to-own, and every American appreciates having something they want to own as well too. So you basically use it as a way to help the people that need it the most. And you could have, let’s say the lot rent’s 350, and then you add another 350 towards the payment for two or three years, depending on how expensive the home is, and even if they make 15 bucks an hour, it’s still a one-fourth of their income, so it’s just an avenue for people to… They’re going to appreciate it because it’s something they probably haven’t owned before, too. It’s something they could own and [inaudible 00:15:33] and sell it themselves, so they… Typically, most people really appreciate it.

Jonathan Tuttle (15:37):

And three, worst-case scenario, if you have any issues with the tenants, typically do this, you just say, “Hey, I’ll give you a 1000, 1500 bucks to get out.” And then you just put it back in the market and you mark it up and make that profit again. So you don’t really have those issues compared to… People aren’t going to trash it typically, like an apartment unit and somebody goes on and just smash the walls. You’re usually like, “All right, we’ll give you 1000 dollars. And if you want to move in with your friend or whatever.” And then we just put it back in the market, mark-up 5, 10 grand, and then we put it back in the market again. So it just really solves that, just have affordable housing, that’s really what it does.

Robert Leonard (16:12):

How are you choosing the markets you’re interested in purchasing? What specific data points or metrics are you looking for, and then tactically, how are you actually finding cities that meet those criteria?

Jonathan Tuttle (16:22):

Sure, yeah, it’s getting harder and harder because a lot of people are coming into the States now. We focus on the Midwest because the cap rates are significantly higher than most… Yeah, especially coastal cities where there are things like I alluded to before, threes and fours and even… I’ve heard Arizona is getting to prices that low too as well. But in Midwest, we’re seeing cap rates below six and seven, seven and a half, maybe eight, depending on the assets. So we focus on that just because the returns make sense and the demand’s there.

Jonathan Tuttle (16:49):

In terms of trying to find deals, it’s a lot of relationship-driven industry so the longer you’ve been into it, and the more people know you, the deals will kind of come to you if you have those relationships. So then you still got to be boots to the ground and talking to people. Yeah, we just look for 75 to 250 units, mostly tenant-owned homes and just make sure the infrastructure and the due diligence… doing the due diligence process is good. So it’s a pretty turnkey industry once you’ve been in for a while. There aren’t too many curve balls beside the due diligence component.

Robert Leonard (17:22):

As part of your fund for raising money for your mobile home park deals, you’ve limited your investor pool to not only accredited investors but specifically accredited investors who are able to invest a minimum of $450,000. First, where did you come up with that amount? And second, why have you chosen this as your strategy for raising capital?

Jonathan Tuttle (17:40):

Yeah, you get two different types of clientele. With the really big people that write the cheques for a couple million or 5, 10 million, like the family offices and the foundations, they typically don’t want to be in funds or partners with people that put out a lot less. So the big cheque writers and the people of institutional money, you could either go for that, or you could go for just the everyday.

Jonathan Tuttle (17:59):

The everyday person is still kind of stuck on multifamily and it’s still a learning curve. The institutional guys get it, so I just kind of… Going forward we’re focusing on a bigger amount because we get a more serious person. We get a more sophisticated investor typically. The guys that can write a couple million dollar cheques, what we’ve seen is they get it, and then the people we get from… just coming in from online, a lot of times they’re like, “Oh, I’ve heard about them, but then I want to get into the space in three or four years.”

Jonathan Tuttle (18:27):

So they’re not action-takers, from what we’ve seen. We have a five-year run, there are only five or seven years between everything goes from 80% Mom-and-Pop to 10, 20% Mom-and-Pop, basically to how self-storage is. So it’s just basically getting a better clientele. And the people that have the 450, the money doesn’t matter to them. The people that have a lot of money, they don’t… it’s crazy, they’ll be like, “Oh, you want half a million? You want a million?”

Jonathan Tuttle (18:53):

So for accredited-wise, you get to market it online. I saw what happened with… Grant Cardone got sued by one of his investors. And accredited you just deal with somebody that does not… The reason why the SEC has the accreditation is for people to… They feel if something bad happens or if they don’t… They have more money than a typical person.

Jonathan Tuttle (19:13):

So the SEC wants people that have more money to… If it goes bad, it’s not going to be a big deal, but somebody that’s not accredited and if the deal went bad, then it’s a lot more of an impact on their lives. So it’s just a lot more with the SEC, basically, they have so many laws and marketing online, it’s basically a gray area and there’s a chance of you getting sued and it’s also a chance for you to have issues, and things I don’t want to deal with basically.

Robert Leonard (19:40):

What are the downsides to limiting the people that you’re raising capital from? Does it make it more difficult because you’re giving yourself a smaller pool of investors to work with?

Jonathan Tuttle (19:49):

Yes or no. So, I mean, if you look at… And I talked to other funds, most of their… And now we’re seeing that too, Grant usually does 250 to 450. A lot of the other funds that I’ve seen, once they already have established a pool of investors they usually go to 4- to 500,000. It just comes down to what we… the feedback we got from a lot of the institutional cheque writers. So what they really want is a bigger fund size. So our next fund’s probably going to be 50 million. There’s a lot of institutional money that will only write cheques if the fund’s 50 million and above, it’s just their requirement. And so it’s just a lot less work if you only have to have 40 investors or 30 investors instead of 400.

Robert Leonard (20:37):

In the next part of the show, we’re going to get into a segment that’s called the action plan. Which habit or principle do you follow in your life that has had a big impact on your success? and you don’t think enough people do, but should?

Jonathan Tuttle (20:49):

Yeah, I think one habit… The most basic stuff is probably the most effective, just really having goals for the day, what are you going to do? Wake up with a purpose, make sure you’re hitting your goals. I always have, when I wake up too, I always have podcasts or audiobooks on [inaudible 00:21:04]. Basically getting my day’s sweat, start it correctly, do a little bit of workout too, just so I keep healthy because I’m usually on a computer for 14 hours a day.

Jonathan Tuttle (21:13):

So just all those basic stuff actually makes the most, biggest impact because if you come down to the basic principles, it all comes down to that. And for me those two key things always make the biggest difference. Because if I didn’t have a plan, if I just kind of woke up whenever I didn’t fill my brain with what I needed to get basically motivated for the day, it’s just a lot harder. So I try to keep it to simple things, basically.

Robert Leonard (21:39):

What has been the most influential book in your life?

Jonathan Tuttle (21:43):

That’s a tough question. I recommend Scribd, it’s an app, it’s like eight bucks a month. They’ll throttle you after, because I do a lot of audio, like I said, audiobooks and I would usually get six to eight a month. So by [inaudible 00:21:54], it’s literally I paid a buck for a book. So when I’m working on the treadmill I have it in the background, but that’s such a tough question. I have like 20 or 30 of my favorites. I would say for the real estate office or audience, probably the Sam Zell, Am I Being Too Subtle?, because he gives a lot of his mentality and what he was thinking when he was buying this property or selling this property and it’s an incredible story. I don’t know if people are familiar with Sam Zell, he’s the second richest person in Illinois.

Jonathan Tuttle (22:19):

He’s also the biggest owner of mobile home parks, also the biggest owner of apartment buildings, and also the biggest owner of office buildings. But the one thing that, kind of a key takeaway too, you want to follow smart people. He’s sold off half his apartment buildings in the last couple of years and half his office and he’s still the biggest owner, but last I knew, but he’s kept all of his mobile home parks and he is adding more. So it kind of shows you, you’re following billionaires and what they’re doing, they’re always kind of seeing how the trends [go]. But that book really kind of outlines how his philosophy is and what he looks for when he is trying to take down a deal, basically.

Robert Leonard (22:49):

When this episode is over, before the listener quickly jumps to the next podcast or audiobook that they have queued up, what is one action they should take that can help improve their life, career, or business?

Jonathan Tuttle (22:59):

I would say [inaudible 00:23:00], it kind of goes back to the goal-setting. I think if you don’t have… And if you really, I mean goal setting with a purpose, I think a lot of people don’t take action. I hire different people, different companies, and even if they’re good with their jobs, sometimes people get lazy or they just don’t take action. And I think just taking action, even if you fail, learn something, but just keep taking action. Don’t be afraid to fail. Don’t be afraid to test.

Jonathan Tuttle (23:22):

Being an entrepreneur, that’s one of the main things you want to do is you want to just go out there and test, test, test, because it might work for someone else might not work for you, but you’ll learn some things, you’re going to pivot, you going to restrategize and you’re going to grow from that. So just be relentless and take action, as simple as that sounds, most people don’t. So if you do that, you’re one step ahead of them.

Robert Leonard (23:40):

Before we give a handoff to where people can find you, I’d like to wrap up the show by turning the tables and letting the guest ask me a question. So what question do you have for me?

Jonathan Tuttle (23:50):

Sure. Because I’m about to start my own podcast, so what are a few steps you recommend when you’re first starting out a podcast?

Robert Leonard (23:56):

I think the hardest thing is being consistent. So I think that’s the first thing I would mention is just be consistent and make sure that you’re committing to it for a year, two years, if not more. There are so many podcasts out there that only have… that don’t make it past 3, 4, 5 episodes, let alone 10 or 12. So I really, for anybody that’s getting started, understand you can’t just do a couple episodes and it takes off, you really are going to have to commit to this.

Robert Leonard (24:20):

And whatever your frequency is, it could be daily, it could be weekly, it could be biweekly, whatever that is, just commit to that for the long term, make sure that you’re really going to do it for at least a year or two before you really even start to evaluate. And then you can go from there and decide, “Okay, is this something I want to continue to do?” But it takes a while.

Jonathan Tuttle (24:35):

Yeah. It’s kind of like YouTube where I see people start a YouTube channel and they think it’s going to take off right away. It’s got to put out content and content until it starts picking up, moving traction, get some eyeballs on it. It’s the same premise, same principle.

Robert Leonard (24:47):

Yeah. Any content creation is like that, whether it’s YouTube, podcast, social media, it doesn’t matter what it is. You have to do it consistently for a long time before you’re going to get any traction. Jonathan, for anybody that’s interested in learning more about mobile home parks, anything else that you have going on, where’s the best place to connect with you?

Jonathan Tuttle (25:04):

The Mobile Home Wealth Academy, and then the fund is called Midwest Park Capital.

Robert Leonard (25:09):

I’ll be sure to put a link to those different resources and other ways people can connect with you in the show notes for anybody that’s interested in checking it out. Jonathan, thanks so much for joining me.

Jonathan Tuttle (25:18):

Yeah. Thanks for having me on.

Outro (25:19):

Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday, we teach you about Bitcoin, and every Saturday, we study billionaires and the financial markets. To access our show notes, transcripts, or courses go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.