Jack Martin got his start in real estate by working in land development and building houses in his early 20s. He then transitioned to the apartment space, which he thought would be his long-term retirement vehicle until he discovered mobile home parks.
Today, Jack is the co-founder and managing partner at 52TEN, a vertically integrated firm that focuses on acquiring and improving underperforming manufactured housing communities. In this episode, he discusses the four main ways mobile home parks are excellent, recession-resistant investment options.
1. Affordability
When times get tough, mobile home parks are an affordable option for those who can no longer afford high rent payments. “The reason why most people are attracted to moving to a manufactured housing community is because it’s the most affordable living solution in America,” Jack says. “Anytime you get the most affordable option, you’re going to have a higher degree of recession resistance than anything else.”
2. Low Tenant Turnover
The average length of stay in manufactured housing communities is 15 years, Jack says, versus a 12- to 18-month average for apartment communities. This provides stability and consistent cash flow for property owners in the event of a recession.
3. Tenants Own Their Homes
All of the tenants in Jack’s manufactured housing communities own their homes. That means that if they are hit hard in a recession, they are able to sell their home and extract enough money to get them back on their feet. If those same tenants lived in an apartment, they wouldn’t have anything of their own to sell in times of economic difficulty.
4. Extra Incentive to Pay Rent
Because Jack’s tenants own their own homes, there is a major incentive to stay current on their lot rent payments. In the rare occasion that a tenant decides to default, the penalty is the forfeiture of their home. “Let’s say you own a home that’s work $50K,” Jack explains. “It doesn’t make any economic sense at all to skip a $500 monthly lot rent payment to potentially risk your $50K home.”
Jack Martin | Real Estate Background
- Co-founder and managing partner at 52TEN, a vertically integrated firm that focuses on acquiring and improving underperforming manufactured housing communities.
- Portfolio:
- GP and LP of 1,000 sites across seven properties
- Based in: Scottsdale, AZ
- Say hi to him at:
- Best Ever Book: The Secret Life of Real Estate and Banking by Phillip J. Anderson
- Greatest Lesson: The importance of a long-term vision, and always doing the right thing.
Click here to know more about our sponsors:
TRANSCRIPT
Slocomb Reed: Best Ever listeners, welcome to the best real estate investing advice ever show. I'm Slocomb Reed, and I'm here with Jack Martin. Jack is joining us from Scottsdale, Arizona. He is a co-founder and managing partner of 5210, a vertically integrated firm that focuses on manufactured housing communities. He's a GP and also LP of 1,000 sites across seven properties. Jack, can you start off with a little bit more about your background, and then tell us what you're currently focused on?
Jack Martin: Absolutely. Well, I'll stay focused on the real estate. I grew up in Minnesota. That's the only personal background that I'll share here. But I got into real estate when I was in my early 20s. Land development, got into that whole building houses and that kind of thing. Then I started working with a friend of mine and building a small rental portfolio, and that slowly grew to wholesaling about 2,000 single-family homes. So we did that over a period of about 10 years. Then I transitioned into the apartment space, because I thought that that was going to be my long-term retirement vehicle... Until I tripped over this thing called mobile home parks. And it was like love at first sight, even though you wouldn't think that that would be the case.
I would never look back when I was a kid and say "You know what - when I grew up, I want to own mobile home parks." But once you understand the intrinsics and how they perform, I just fell in love with them. So I parted ways with the business and the group that I was working with, started my own shop with one other guy, and that's how 5210 was born, and we've been doing that since 2016.
Slocomb Reed: Nice. So seven properties that you guys have now, since - you said 2016?
Jack Martin: Yes.
Slocomb Reed: And these are mobile home parks.
Jack Martin: That's right. They're anywhere from the small side 50 spaces, on the large side 250 spaces. So they're like little subdivisions. But instead of having single-family site build homes on them, they've got mobile homes parked on every site.
Slocomb Reed: Jack, with over 2,900 episodes in this podcast by the time this airs, we've had a handful of mobile home park investors on the show. Let me make some assumptions about what attracted you to mobile home parks, being that you are already an apartment investor, and then you can correct my assumptions where I'm wrong. You're a vertically integrated company. That makes me assume that you all self-manage; you're probably not on site at all seven locations all the time. We haven't gotten into where those are yet, but you have a member of your team who's doing the day to day operations of those sites.
My understanding is that what attracts a lot of people to mobile home parks is that what they own is the land someone else is putting a park on, and that is what they are collecting rent for. There's very little improvement to that land that is owned by the investor, and that makes it very simple to rent, sometimes simple to bring rents up to market if you acquire a property below market... And in 2016, mobile home parks were not nearly as trendy as they were in 2020, 2021, so there were some really good deals, higher cap rates to be found in mobile home parks than you could find even in apartment buildings. Am I filling all the gaps here, or is there something that I'm missing?
Jack Martin: You're probably spot on. I think the simplest way to characterize mobile home parks is you can imagine a giant parking lot, but instead of paying to park your car there, you pay a monthly fee to park your home there. And all the common amenities, like the pool, and the clubhouse, and those kinds of things that are owned by the park - you get to share those common amenities. You don't take care of your streets, you don't take care of the lighting in the park and that kind of thing, but you take care of your home. So that's the simplest way to explain it.
Slocomb Reed: Totally. You guys don't own any of the homes on those thousand sites?
Jack Martin: There's occasions when we buy a park, so when we're buying, we're specifically looking for parks that are underperforming in some fashion. Usually there's vacancy, it'll usually come with a handful of vacant homes that need to be renovated, sometimes a lot of them, but in most cases, in a short period of time, in the first year or two, we want to renovate those homes and sell them, so that 100% of the homes are owned by the tenants. That's what creates the consistent cash flow that you can count on. It's the recession-resistant quality of a mobile home park that everybody talks about, that understands them.
So for example, in 2020, the COVID year, where most landlords were down 20%, 30%, 40% on their rent collections, we collected 99% of our rent for the year, because the tenants own the homes, and they know that if they don't pay, eventually they'll have to forfeit their home to the park, and it just doesn't make any economic sense for them to do that.
Slocomb Reed: Jack, speaking of recession resistance, we're recording this at the beginning of August 2022, and there are a couple of questions I want to ask you. I have a feeling I know where your answers are going, because you've partially answered one of the questions already, but I still want to have this conversation. I'm an apartment owner-operator in Cincinnati, Ohio, so vertically integrated, I am the management company, very similar in that regard. And I have workforce housing apartments that from an economic perspective are probably very similar demographically to mobile home parks, while Cincinnati, Ohio and Scottsdale, Arizona are very different markets. Where are your properties?
Jack Martin: We've got properties all over the state.
Slocomb Reed: All over Arizona?
Jack Martin: Yeah, all over Arizona. And we're in the process of adding properties in Texas and Florida as well.
Slocomb Reed: Nice.
Jack Martin: We've got markets as small as maybe 100,000 people. So imagine whatever small town you know in Ohio, that could be similar. But then of course, we've got assets in Phoenix, which - fifth largest city in the nation.
Slocomb Reed: So let me ask my first question here, Jack... Recession resistance - while it is much easier for one of my tenants to get up and leave from their affordable one-bedroom apartment, while that's easier than it is for one of your tenants to get up and leave from their home that they've put thousands of dollars into owning, there are other macro-economic factors outside of the individual circumstances that an individual tenant is experiencing that impact a tenant's ability to pay rent in a recession. What else about your mobile home parks are you seeing as recession-resistant?
Jack Martin: I would say that although it's easy for you to compare, or for anyone to compare the tenant behavior in an apartment - I used to be an apartment guy, so I'm familiar with that - to the same tenant's potential behavior in a mobile home park, what we've found is typically, even though some people would in a recession leave a $1,000 a month apartment to go to a $500 a month lot rent payment, so some people might do that, what we've discovered is mobile home parks are kind of quasi home ownership. So even though you don't own the land, you still own the home. So it's just like the behavior or the culture of the type of person that would be attracted to a mobile home park - they want to own their home; they want a permanent solution. They don't want the uncertainty of moving from apartment to apartment, or whatever that is. Whereas an apartment tenant likes the flexibility of "I want to be in this place for 6 to 12 months, and then if I get a new job, I can move to that place for 6 to 12 months", and they liked that flexibility. So I think their natural behavior is different. I wouldn't necessarily say that an apartment tenant would be a good fit for a mobile home park, or vice versa. I think that they're seeking a different solution. It's not the same thing.
Slocomb Reed: I'm not trying to say that apartments and mobile home parks are the same. I'm not trying to draw the similarities, as much as I'm trying to hear from you about what makes mobile home parks more recession-resistant. You're calling it a form of modified or partial homeownership. You own the property on the land, but not the land. In almost every circumstance that I'm aware of, what attracts someone to living in a mobile home park is the affordability.
Jack Martin: Sure.
Slocomb Reed: Let me put it this way - this is a little bit anecdotal, and it's kind of specific to the Cincinnati market, but when Amazon and Kroger both announced every employee was going to make at least $15 an hour, that piqued my attention. It was in that kind of early 2020, once an essential business, a lot of people deciding not to go to work, a lot of warehouse-style companies or companies with warehouse-style operations, like Amazon and big box grocery stores were hungry, starving for employees... That perked my ears, because when you make $15 an hour, a person or a household that makes $15 an hour with one full-time 40 hour a week job, $750 a month is 30% of that their gross income, meaning that if you make $15 an hour, 40 hours a week, you can afford a $750 a month apartment. And I had a property with workforce housing and Amazon moving into the neighborhood where my one-bedrooms were at $650 a month. And that's why it perked my interest.
The reason I say this is I just had another partner on another property ask me about the recession that we're going into and how resistant our apartment building was, and I used the same anecdote. And I said, the affordability of our apartments will remain for as long as people can go get a $15 an hour job anywhere basically off the street. And I don't see that going anywhere in this recession, given the way that the labor market and unemployment metrics have been playing out in 2022. So I believe my C-class apartments are very recession-resistant, especially in this recession. So what's your argument for the recession resistance, Jack, of your mobile home parks?
Jack Martin: I totally agree. So anytime you get to the most affordable option, you're going to have a higher degree of recession resistance than anything else. I mean, it's just - logic would say that when things start to get a little difficult, somebody that lives in the $1,200 apartment is going to go look for a more affordable solution. And if they're seeking that flexibility of signing a 12-month lease, they're going to end up on your doorstep. So that totally makes sense.
I think that what separates - and having owned both of them, what separates the investment performance between my experience with mobile home parks and my experience with apartments, primarily is turnover.
Slocomb Reed: That makes sense.
Jack Martin: So you'll see that the average length of stay, at least in my experience in my apartments, was somewhere in that 12-18 month range; even though you'll see some people stay 15 years, you'll see most of the people stay 6 to 12 months. Whereas in the manufactured housing community space across the United States, that average is about 15 years, their average length of stay. Shoot, we've got some people in some of our parks that have been there for over 40 years. Grandma bought the home, and then she handed it down to mom and dad, and now grandma is in a different place, and mom and dad own it; and they're raising their kids there. So that's where that homeownership piece comes in.
So from a recession-resistant perspective, yes, the reason why most people are attracted to move into a manufactured housing community is because it's the most affordable living solution in America.
Some people also would piggyback onto that, that they like the idea that they own the home, and they can resell it. So in some respects, whatever investment dollars they put into keeping their home looking nice and renovating it, they're going to get that back when they go to sell. In the same way that you if you took really good care of your car and upgraded it, you get to sell it; there's something there. But I think that the real intrinsic quality that makes mobile home parks unique is the fact that if the tenant decides to default - which is rare, but if they do, the penalty is the forfeiture of their home. So say if you own a home that's worth $50,000, it doesn't make any economic sense at all to skip a $500 monthly lot rent payment to potentially risk your $50,000 home. So if for whatever reason a manufactured housing tenant was to get into some kind of economic difficulty, they could sell their home, and they can extract $50,000 right there, which can help them get back on their feet and move in whatever direction they've got to move. Whereas if they were just in an apartment, there's nothing that they can sell that they own. They're just going to have to leave or figure out a solution to bring in some other source of income to help make that monthly rent payment.
Slocomb Reed: That makes a lot of sense, for sure.
Break: [00:13:52.10] to [00:15:50.05]
Slocomb Reed: My other question, Jack - when was the last time you purchased a mobile home park?
Jack Martin: We bought one about nine months ago. So it was the tail end of 2021.
Slocomb Reed: Gotcha. I hope you've secured some pretty sweet debt on that. It was your last chance...
Jack Martin: Things have changed dramatically since then, we know that.
Slocomb Reed: I want to talk about that change, Jack. Have you been actively pursuing another manufactured housing deal in 2022, but also knowing that you are currently in Arizona, also looking to expand into Texas and Florida, what are you seeing as an investor from manufactured housing deals in 2022, now that we're dealing with rampant inflation, interest rates that have increased by at least two full percentage points in six months... What's happening to the deals you're seeing now?
Jack Martin: I think the same thing that we see in the manufactured housing space, you see across every asset class, which is owners of properties that would have an interest in selling, in most cases are still tethered to last year's interest rate environment, right? So when they could have gotten a four cap purchase price for their asset back then, they still think they can get a four cap today. But it doesn't work very well when the interest rates were around 3% back then, and now they're 5% for manufactured housing communities. So I think you'll see that same environment exist across all asset classes. It's not specific to manufactured housing.
Slocomb Reed: So you're saying it's basically been the similar. Well, let me ask - there's been a lot of capital sitting on the sidelines, looking to get into apartment deals and apartments indications. Are you seeing the same sort of pressure on the manufactured housing market now that we're seeing increasing interest rates, and I would imagine increasing cap rates?
Jack Martin: Yeah, on both ends of the spectrum. So from a buyer's perspective - call me the buyer - there's plenty of other guys out there that I know that are still in the same spot as I am, they're seeking to acquire more properties... But they're either being patient, waiting for sellers expectations to start to mirror what's the reality in the marketplace, or maybe they're making offers congruent with where the market really is, and they're going to get one at some point. Some of them are sitting on the sidelines just waiting to see what happens. Are we going to see interest rates continue to go north and experience stagflation? Or is this going to be a temporary thing, and then once inflation gets under control, will we see interest rates start to trend back downward?
So everybody's looking at it from a different perspective, but from a capital allocation perspective, when we're looking at investors that are seeking to get exposed to this asset class, I have more demand today than I've ever had. So I have three, four investors a week that are seeking to allocate to this space, and I've got a nice little waiting list. People get comfortable with what we're doing, and they get in line, but we don't have a place for their capital until we find a deal that makes sense.
Slocomb Reed: It sounds like you're comfortable waiting for seller expectations to meet the market of the moment then.
Jack Martin: In this business, as you know - you're a syndicator yourself, so you know - if you don't buy the deal right, you're already behind. And the goal is to meet the yield expectation that you're trying to achieve. So I would rather not buy something, than buy a deal that I don't want to be married to for 10 years.
Slocomb Reed: That makes sense. Well, Jack, are you ready for our best ever lightning round?
Jack Martin: Let's rock it, man.
Slocomb Reed: Awesome. What is the best ever book you've recently read?
Jack Martin: This is great, perfect timing here. I read this book actually several years ago... There's a book called The Secret Life of Real Estate and Banking. It's written by a guy named Philip J. Anderson, and I think it's the best book that's ever been written around real estate market cycles. So it takes a really deep dive into the relationship between banking, government, real estate investment capital, and how this country was expanded from the East Coast a couple centuries, so back 200 years ago when this country first started to expand. It's fascinating. His latest view version of the book only goes through the last real estate crisis, but it's just really interesting to see that the same behavior that you saw before, is happening again. And it really lets you peek under the hood of what's likely to happen this time, because it's happened in every real estate cycle in the past. So it's a great book. Anybody who's in real estate investing and they want to read about real estate market cycles, I think that's the best book ever written.
Slocomb Reed: Nice. Jack, what is your best way to give back?
Jack Martin: Two places that have kind of shown up in my life. I don't know if it was a choice; maybe things show up for you for a reason. So I'm sure you're familiar with Bigger Pockets.
Slocomb Reed: Of course.
Jack Martin: Some of these guys have been like "Hey, Jack, you know a lot, you have a wealth of experience and knowledge around mobile home parks. Get on there and help those people that are kind of getting started, make good decisions. Help people understand what it takes to raise capital, and how to do it right. How to make sure that your investors are your biggest fans", and all those kinds of things. So I spend a meaningful amount of time, not just answering with yes/no questions, but really giving attention to the questions that are asked there. So I spent a lot of time there.
And then I believe that probably the best way that any of us can give back is through education. So I've had an opportunity to teach people outside of real estate, particularly when it comes to relationships. So it's my view that the most important skill set - this is true in real estate as well... The most important skill set that you can develop in your life is the ability to create and nurtured really good quality relationships. So you know how powerful that is in your business.
Slocomb Reed: Of course.
Jack Martin: It's also powerful as a parent, it's powerful as a husband or wife... So I've been able to get back on that front a lot as well.
Slocomb Reed: Nice. Jack, thus far, specific to your manufactured housing investing career, what is the biggest mistake you've made, and the best ever lesson that resulted from it?
Jack Martin: So the biggest mistake that I've made in manufactured housing is I should have gotten more aggressive buying properties in 2016 than I did. Little did I know that this was going to become the competitive space that has become. It's still great, we've built a nice portfolio, we have an extremely healthy business; we don't have to buy parks, we just love the business so we'd like to continue to build it... But boy, do I wish I could roll back the clock and start this sooner.
Slocomb Reed: I think we all do. And it's good to be in a position now where you don't have to buy. What about operationally, within the operation of your parks, the execution of your business plans - what's the biggest mistake that you've made?
Jack Martin: Ooh, that's a great question. Probably not starting our own internal management sooner. So initially, when we started buying parks, because we were coming out of the apartment space, we thought we could bolt on third party property management and it's going to work just fine; at least to get things rolling. Boy, were we wrong.
Mobile home park management is kind of a narrow niche to start with. If you're collecting a similar percentage of gross rents, the rents are lower, so the income is way lower... So there's just not as many options to choose from. And then there's so many different things that you have to do in manufactured housing that you don't have to do in other real estate asset classes... Like, there's a vacant space - you've got to find a home, move it in, set it up, and you have to have a dealer's license, because now you have home sales involved. You're not just leasing a space. There's all these extra things that are required to do there, that it's really, really difficult for a third party property management firm to execute, at least to the degree where they're meeting our expectations and they're moving at the speed we'd want to move. But yeah, that's what pushed us to start our own vertically-integrated construction management/property management in-house, and it would have been nice to start that sooner as well.
Slocomb Reed: On that note, Jack, what is your best ever advice?
Jack Martin: My best ever advice? Oh, this is an easy one. You will make more progress in relationships that are meaningful in your life with your ears than you'll ever make with your mouth. Listening is a skill, it's not something that we're taught in high school, it's not something you're born with... Listening is an active pursuit of understanding what the other person is experiencing.
So if you'll take the time to not answer, not try to respond, not try to fix - especially in a marriage, think about that... We're always trying to fix stuff, right? But take the time to truly understand where they're at, and help them appreciate that you do understand it... Your relationships will grow tenfold.
Slocomb Reed: Jack, where can people get in touch with you?
Jack Martin: It's easy, go to my website, 52ten.com, and you can read all about what we're up to. You can contact me on the contact page. You can even schedule right on my calendar.
Slocomb Reed: Awesome. And that link is in the show notes. Jack, thank you. Best Ever listeners, thank you as well for tuning in. If you've gained value from this episode, please do subscribe to our show. Leave us a five-star review and share this episode with a friend who's an investor, who you know that we can add value to through the conversation that Jack and I have had today. Thank you, and have a best ever day.
Jack Martin: Thanks, Slocomb. Have a blessed day, my friend.
Website disclaimer
This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.
The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.
No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.
Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.
Oral Disclaimer
The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.
