Mobile home parks often get a bit of a bad rap from investors. But make no mistake: With the right strategies and mindset, they can be a very profitable investment. In this episode, Sam Wilson discusses the real estate of mobile homes with the CEO of Cook Properties NY, Jeffrey Cook. Jeffrey discusses how he got into real estate, his pivot into mobile home parks, and where he sees the space going in the future. Curious about investing in mobile home parks? Then tune in and learn more.
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Jeffrey Cook: Leading The Charge Into Mobile Home Parks
Jeff Cook from Cook Properties in New York, welcome to the show.
Thank you. I appreciate you having me on.
I’m so excited to have you here. Can you give our readers an intro as to who it is that they are reading about?
My name is Jeff Cook. I’m the CEO of Cook Properties. We are a real estate development and management company located here in Rochester, New York. We are pretty much focused on mobile home park ownership and development.
There are three questions I ask every guest who comes on the show. Can you tell us where did you start? Where are you now? How did you get there?
I started in apartments in the city of Rochester, quickly graduated into more commercial retail and office and eventually went into the mobile home park space. It’s hard work and persistence. Never give up.
What was it initially that got you into real estate? Was it always something you were involved in out of the gate?
I fell into real estate by mistake. I was working for a market research company and I bought a single-family home to live in myself. I had a couple of roommates. They were going to help pay the rent. They decided after a few months that they didn’t like doing what they were doing. They moved out and I was left with a big house by myself. I decided that I wanted to rent it. I moved home and started renting it. It started from there. It went very well and I started buying more apartments. That’s how it started.
If the internet hadn’t exploded the way that it has, coupled with COVID, office retail would still be in vogue right now.
At what point in time did you say, “I’m onto something. Let me keep doing this.”
It was about 2 or 3 years after that point. I had 50 rentals or so where I decided, “I’m going to hang up my [9:00] to [5:00] job and focus on the apartments.”
If you’re self-managing, that’s a lot of moving pieces, tenants and phone calls. Let’s talk then about what you are doing and we can translate some of that into the lessons you have learned along the way. You are invested in mobile home parks, retail, office and also in self-storage. Two of those three asset classes are hot asset classes, which are self-storage and mobile home parks. Let’s start there. Why are you invested in so many different asset classes?
After I sold my apartments, I wanted to go more commercial and do retail and office. That was around 2008 and 2009. It’s because I thought it would be easier. I had a background in inner-city apartments, which were very management-intensive. I was expecting much less management from the office and retail, which is generally the case. I bought my first mobile home park right around the same time in 2008 and 2009 and storage around the same time also.
We have owned all four of those asset classes for years. Storage and mobile home parks are our favorite ones. They have been the ones that have provided us with the best returns and growth. We like mobile home parks better than storage. We’re more confident in mobile home parks. We like them better and are able to grow them better. Storage is not our expertise so we’re trying to stay in the mobile home park lane.
2008 and 2009 would have been an interesting time as is retail and office now to be involved in that space. What made it a compelling asset in ‘09 to get involved in?
It was more about the management. To me, it seemed like it would be much easier to manage fewer tenants. I expected them to take better care of things. To be honest with you, if the internet hadn’t exploded the way that it has, coupled with COVID, office and retail would still be en vogue. Things change.
How have things changed for you in such a way that now you’re looking to divest those assets and become single asset-focused?
As with a lot of other people, we’re seeing great migration. A lot of people are not working in the office anymore. They’re more working at home. As you know, Amazon has taken over the retail sector. The need for brick-and-mortar space has certainly lessened a little bit. The biggest reason that we are moving out of those spaces is we like the consistency and cashflow that mobile home parks provide.
We own several assets that are office and retail in nature and they generally have bigger spaces. When we get a vacancy, it could be several months before that vacancy is filled. Also, we’re not getting any rent for that vacant space. Whereas with a mobile home park, the vacancies are few and far between. Even if there is a vacancy, the dollar amount is fairly small in comparison to the entire park.
One of the things I have heard about mobile home parks many times is that the tenants are sticky. It’s tough to relocate their long-term tenants, typically speaking. I’m excited to jump into the mobile home park space and pick your brain on that. I’ve got a counter-argument to the retail and office space I would like you to poke holes in, which is that when things go on sale, that’s typically what I have heard is the time to buy.
We’re seeing some of that in the office space and certainly sector where people are going, “We’re ready to get out of this and move on to something else.” Is now a time to buy or is this more like the typewriter being replaced by the computer where you go, “Even if it’s on sale, it doesn’t mean it’s a good investment.”
We are seeing a lot of offices being converted to residential and a lot of retail being converted to self-storage. I’m not a super-smart guy. I like to stay in my lane and stick with the mobile home parks. I know that there’s always going to be a need for affordable housing. To be honest with you, I don’t know where office and retail are going to go in the next several years.
If you do subscribe to that philosophy, which a lot of people do, Warren Buffett says, “Buy when people are selling.” For us, we do want to sell some of our assets in the retail and office sector and stick with our mobile home parks. We’re super confident in how those are going to play out in the future. Sam, what’s your take on it?
I don’t know either. You are in the storage space. We’re seeing some of that and these giant department stores being converted. I have friends who are doing it and converting storage facilities. At the same time, what you’re telling us is that you have developed a niche and expertise in mobile home parks. It doesn’t matter what the variables are in retail, office or even storage, for that matter. You know what you’re doing with mobile home parks and you have a predictable runway in that asset class. Why go somewhere else? Is that fair?
You hit the nail right on the head.
There’s always going to be a need for affordable housing, but we don’t know where office and retail are going to go in the next ten years.
Remove risk and uncertainty, go to what you know and run that play. Let’s jump into the mobile home park space. Why do you find it compelling? What are some challenges you have in that space?
One of the reasons that we like mobile home parks is the residents are sticky. They generally do not move. Even if the residents do move, the homes do not because it is so expensive to move a home and site it into another park or on private land. There’s a national statistic that 98% of mobile homes that are sited in a mobile home park never move. I have been in the business since ‘08 and I had half a dozen homes leave our parks. It’s not many at all. We have demoed more homes that have been moved out to another park.
My next question was in part of that because people just leave it and then you have to demo it.
It does happen sometimes.
What are some headwinds in the mobile home park space?
We’re doing okay on the supply of homes but we’re not getting as many homes as we would like. In 2020, we ordered 200 homes for our park and we got about 170 so far. We will have about 30 travel into 2022. In 2022, we have 350 homes on order. I’m not sure exactly how many we’re going to get. I would be happy if we got somewhere in the low 200s because of the supply constraints. We have some labor constraints also. A lot of the challenges that we’re having are not unique to our industry. They’re there throughout the United States. It’s more, hopefully, short-term challenges.
Without asking a softball question, what effect does that have on your business when you can’t get the homes delivered on time? What are some down downstream effects of that?
It slows our performance and what we want to deliver to investors. We can’t hit our targets as soon as we would like to.
Where do people go? You are having people that move into these homes and become paying tenants or owners. Where do they go instead?
I don’t know where they’re going outside. We’re in New York exclusively so we don’t have a lot of population growth. We’re primarily taking them from other housing sources whether they’re downsizing from a single-family home or moving out of an inferior apartment complex. They’re staying where they are.
You are bringing a new supply online. When you bring those online, are you doing owner finance to the buyer? Are you holding those in-house as park-owned homes? What does that look like?
We do a combination. We have been pushing sales. We use a lot of third-party finance companies. We don’t do any in-house financing ourselves and we also rent a portion of the homes.
I don’t own anything in the mobile home park space. I have heard that having park-owned homes presents its own unique challenges.
It does. We don’t mind it. It’s rental but it’s primarily newer homes that we rent. There are not a lot of maintenance issues. The ultimate goal of being a mobile home park owner is to own the dirt and manage the dirt.
Be a true just the landlord. How many pads do you own?
We have 4,200 pads across 42 parks. We have another 2,300 pads under the contract that we will be closing on in the January or end of February 2022 timeframe.
The ultimate goal of being a mobile home park owner is to own the dirt and manage the dirt.
You’ve got 4,200 pads. You are going to 1.5-times size your portfolio in one single transaction. I would love to use the rest of this show to talk about that transaction, how you came across it and the down and dirty of the deal because that’s a big acquisition.
We’re super excited about it. It’s often one seller who’s relatively local to us. It’s someone that I have known for many years. We bought a couple of his parks as part of our fund that closed in October 2021. We bought two of the parks back in April 2021 and then the fund closed in October 2021. We already knew him. As soon as we closed on those two parks in spring, we approached him and offered to buy the rest of his portfolio.
We were able to go under contract from August to September 2021 and we have been working through due diligence. We’re excited. Most of the parks are within our footprint of what we already own so we should be able to get a lot of good management efficiencies and scale. There are 2,300 pads and we’re hoping to close in the January to February 2022 timeframe.
What is some due diligence? Where do you even begin on due diligence with 2,300 pads? Across how many parks is that?
It’s 55 parks, which is a little bit overstated because some of the parks are smaller. It’s more about 40 parks because some parks are right across the street from each other and are very close to each other. It’s 55 separate parcels.
Where do you start with due diligence on that? Can you give us the introduction? An August contract time to a February at the sixth-month contract to close is a long time for most sellers.
Originally, it was supposed to be a 60/30 but we couldn’t get there with that many parks. There are a lot of titles, surveys, Phase 1’s and appraisals.
You got a lot of moving parts there. Can you talk to us about due diligence? How do you go about doing that much due diligence on that many parks?
We did it all in-house and treated it the same way we would as a single park. We look at utility bills and financials and do our physical site inspections. If they’re on private utilities, we will do a well and septic inspection like we would if it was a single park. We just have to do it 55 times.
Are there any surprises or things that you went, “That’s unique. We’ve got to work our way through that.”
Surprisingly, there hasn’t been. The seller is very transparent. He has been great on information that we have needed so there haven’t been any surprises.
I wouldn’t have expected that. I would think that across 55 parks, you would have found something and went, “We’re going to have to work our way through a hiccup.” As you look back through mobile home parks, retail, office, self-storage and even back in the apartment days, what are some things that you feel have attributed to your success that you think other people should emulate?
Persistence is important. Don’t take no for an answer. Consistent hard work and due diligence are very important. There’s a right price for every piece of property out there. It’s a matter of getting to that right price and making sure you know what you’re getting yourself into. The two biggest things are hard work and persistence for me.
There are no replacements certainly for those things. Before we jump into the final four questions, let’s talk quickly about your team. This is a team sport. You own 4,200 pads, you’re adding another 2,100 pads to it and you got your hands in a lot of other things. Talk to us about your team and how you have successfully built a team.
We have 55 employees. We’re going to be taking another 50 approximately with the acquisition. Me and my brother, Brian, who’s our president, have been doing this together for years. I have been in business for years. It’s the same thing about hard work and persistence. I have that go all the way down throughout the organization and try to have a good culture of, “We’re all going to make mistakes. We all have the same goal in mind.” It’s a team effort and an open door policy. Get the job done. Let’s have some fun along the way. We always want to do the right thing. We don’t want to go back again. Fix it right the first time and move on to the next thing.
In acquiring 50 employees, is there any apprehension with that? I have bought businesses in the past and I’m on the fence as to whether or not I’ll ever buy a business included with employees again. It’s like, “This is risky.” What are your thoughts there?
Always invest in yourself first.
We have some apprehensions but with the acquisition, there’s a lot of expertise and knowledge that we’re gaining. We are hoping and planning that all the employees come along with the purchase and give us an opportunity to roll them into our organization.
I have certainly enjoyed our conversation and learned a lot from you, especially as it pertains to why you are staying in the lane you’re in and what you have done. You are rocking and rolling. I certainly learned a lot from you. Thank you for that. Let’s jump here into the final four questions. What is one tool or resource you find you can’t live without?
It’s my team.
I haven’t had that answer yet so kudos to you. Here’s the next question for you. If you could help our readers avoid one mistake in real estate, what would it be? How would you avoid it?
Do due diligence.
When it comes to investing in the world, what’s one thing you’re doing to make the world a better place?
Always invest in yourself first.
If our readers want to get in touch with you or your company, what is the best way to do that?
They can reach me at either our website CookPropertiesNY.com or my email, JeffCook@CookPropertiesNY.com.
Jeff, thank you so much. I do appreciate it.
Thanks, Sam.
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Thanks for reading How to Scale Commercial Real Estate. If you could do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts or whatever platform it is that you use. If you could do that for us, that would be a fantastic help to the show. It helps us attract new audiences as well as rank higher on those directories. I appreciate you reading. Thanks so much. I hope to catch you on the next episode.
Important Links:
- Cook Properties
- JeffCook@CookPropertiesNY.com
- Apple Podcasts – How to Scale Commercial Real Estate
- Spotify – How to Scale Commercial Real Estate
- Google Podcasts – How to Scale Commercial Real Estate
- https://www.LinkedIn.com/in/jeffrey-cook-8b004474/
About Jeffrey Cook
Jeff Cook lives and breathes commercial real estate and can usually be found at the office. Jeff finds great fulfillment in the transformation of poorly performing properties, resulting in a very attractive product. Jeff graduated with high honors from Binghamton University with a Masters Degree in Public Administration. He started his career as a project manager for a market research company. He began purchasing multi family properties in the City of Rochester in 1997. He purchased his first mobile home park in 2009.
