Investing In Affordable Housing, With Todd Sulzinger

The nationwide housing shortage is particularly notable in the affordable housing sector. This creates opportunities for investors who are interested in “doing well by doing good.”

Todd Sulzinger, CEO and Founder of Blue Elm Investments, joins the show to discuss strategies and considerations for investment in affordable housing, including mobile home parks.

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Episode Highlights

  • What “affordable housing” really means.
  • The bull case for investing in mobile home parks.
  • Most notable differences between mobile home parks and more traditional multifamily assets.
  • How to align the goals of affordable housing while delivering returns to investors.
  • How larger economic trends (including inflation) are impacting affordable multifamily housing.
  • What it will take to “solve” the housing crisis.

Featured On This Episode

Today’s Guest: Todd Sulzinger, Blue Elm Investments

About The Multifamily Investor Podcast

The Multifamily Investor Podcast covers trends and opportunities in the multifamily real estate universe. Host Scott Hawksworth discusses passive investment offerings in the space, including direct investments, DSTs, opportunity zones, REITs, and more.

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Show Transcript

Scott Hawksworth: Hello, and welcome to the Multifamily Investor Podcast, I’m your host Scott Hawksworth. Today we’re going to be talking all about affordable housing and joining me to offer his insights and perspective on affordable housing is Todd Sulzinger, who is the CEO and founder of Blue Elm Investments. Todd, welcome to the show.

Todd Sulzinger: Well, thanks for having me Scott, I’m happy to be here.

Scott Hawksworth: Well, thank you for being here. I mean affordable housing is such a crucial topic and we’re going to dive into a lot of the aspects of it. And really a whole theme of doing well, by doing good, I think I think that’s one thing that really sticks out for a lot of the folks I talked to in multifamily so we’re going to dive into that but to kick things off.

You know, looking at Blue Elm Investments website here, you guys describe yourselves, as you know you acquire and improve apartments and mobile home parks to provide affordable housing to families and communities across the US.

The first big question is how do you define affordable housing, because I think a lot of developers and sponsors they define it in different ways, so what’s your definition of affordable housing.

Todd Sulzinger: Well, when I first got into the business, specifically in mobile home parks, is my was my first entree into doing syndications and we looked at mobile home park communities where.

We would be able to rent the homes that we owned as park owners for between, say $450 and $650 a month for a two or three bedroom mobile home.

And that, in a similar market to that we might see apartments for 800 to $1,000 so that was kind of our first our first lens into affordability where.

You might have a family if you’ve got a husband and wife, with two kids perhaps nothing do I spend $600 on a three bedroom mobile home or $800 to $1,000 for a two bedroom apartment the three bedroom mobile home is an attractive option, because it’s more room also you just don’t have the you know the downside of having people on either side of you, and you can run straight up to your house so that that was kind of our our lens and affordability was trying to find parks and markets where somebody will be able to get a little bit bigger place to live for less than what they might pay for an apartment in in a community.

Scott Hawksworth: Yeah yeah that makes sense, but you know one thing when I talked to folks you kind of hear mobile home parks like sometimes that might have this idea of, you know, maybe, people are less interested and maybe they have an image of something that’s you know, not the the nicest place.

I think there’s a lot of attitudes around there about mobile home parks so i’m curious from your perspective, why are you bullish on mobile home parks, especially as an affordable housing solution.

Todd Sulzinger: Unfortunately, mobile home parks do have a bad reputation some of its because there’s been you know you see things on TV about trailer trash or you know trailer park trash.

Scott Hawksworth: Movies Hollywood has their show yeah.

Todd Sulzinger: You know tornado comes through a certain town and it wipes out an entire mobile home park when, in reality, those kind of you know those tornadoes so those events can have an equal amount of damage on.

single family homes or apartments or commercial buildings but it looks more dramatic when it’s a mobile home that gets flipped on its side.

So so there’s sort of that is definitely for reputation standpoint and then also there just historically hasn’t been the same kind of investment from a.

professional management standpoint or professional ownership standpoint that you’ve seen in apartment so that’s partly what’s caused the image of.

Mobile home parks to suffer, but can also be a place where you have opportunity where you might have a family that’s own the park for 20 or 30 years and.

You know just again might not manage it as professionally as a similar sized apartment complex.

But they say might have the park might be paid off they’re getting adequate income from it, but they also then don’t have the resources to.

turn the park around fix it up fix the Community, you know really run the park more professionally so it’s so it’s kind of fighting again it’s that reputation when when I first talked to my investors, initially, and they said, like mobile home parks like.

Who knows, and then, when you actually go to the parks it’s.

You know it’s just like a regular working class people that need a looking for a safe, clean affordable place to live.

Scott Hawksworth: Right so So yes, there is that reputation, but I guess what you’re saying is is a lot of it, too, is just about you know how is it managed, how is the approach.

You know of of looking at the mobile home park communities and and and really kind of breaking that reputation a bit and and it’s all comes down to how you approach it.

Todd Sulzinger: yeah I would say so and it’s you know, because if I think of a lot of the parks that i’ve looked at, or even acquired and then had to start the turnaround process if you have.

an apartment complex, you know people don’t have yards they might not accumulate things and it just stays looking the way it does mobile home park people have space around their homes and they might have a tendency to.

gather things and collect things unless you’ve got a park manager owner who’s kind of staying on top of the things to make the park look Nice.

It can slowly start to not look great and then, when potential new residents come to the park it doesn’t look good sort of feeds on itself so that’s one of the first things we do when we.

acquire a park is really try to go in clean the park if there’s you know again trash around the park that we clean that up or if there’s situations where people have things you know, there are things that they’ve acquired sitting around their house.

Worse, clean that up as well just to make the park look nicer for the people living there, and for potential new tenants.

Scott Hawksworth: Absolutely, and again, you know things in the yard that can that can happen in many kinds of communities as well, so you know that’s why he always existed.

Todd Sulzinger: A lot of places so literally.

Scott Hawksworth: So Okay, you know our our audience, they are focused on multifamily and you know mobile home parks are kind of.

Under that umbrella depending who you talk to they might be their own thing but they’re, certainly in the ballpark of multifamily how do mobile home parks really differ from more traditional multifamily assets.

Todd Sulzinger: um well I guess one difference is that in a mobile home park you’ve got a situation where you might have a resident that owns their own mobile home and they’re just paying for the lot rent so.

Right, it can kind of go, you know hundred percent one way or the tenants own all their homes.

Or how to present the other way, or some mix where the park might own the homes and rent them out like single family Rentals.

So, depending on the structure of the park, it can be managed to run a little bit differently, you know infill would be very different if you got a park where.

The spaces are all just rented out in the tents own their homes, then, if you have vacation spots you’re looking for Homeowners to fill those spots.

If it’s a situation where the park owns the home, then you’re looking for tenants to fill those in rent them out, or if there’s vacant lots than the park would want to acquire a new or used homes to fill those slots so that’s kind of one difference versus just a straight rental model.

In an apartment complex.

Scott Hawksworth: Right and do you find that there are significant differences when you’re looking at just maybe the finance side of things, how even you know.

rental rates are approached and rent rate increases and just other various you know, maybe regulatory aspects are there are there other differences there, there may be worth a passive investor kind of being aware of.

Todd Sulzinger: um well, I think one thing that is because some of the parks have been owned by mom and pop type owners versus an apartment complex that might be more professionally managed.

me one thing you often find is that market.

rents can be pretty far below market in the mobile home park space, you know when that happens because it’s an affordable housing play you might not be able to get rents to market.

You know, as fast as you might in an apartment complex where maybe people make a little bit more money and they’re maybe even potentially used to bigger increases, so now we have situations where.

I know the one of the first parks, I bought some of the lot rents, where people own their own home and they were renting the lot we’re paying about $100 a month and the market rent was probably 200 to 225.

Well we’re park owner you can’t go in and say hey you know.

Scott Hawksworth: How we just acquired this.

Todd Sulzinger: yeah we’re going to double your lot rent now, you might think okay it’s only $125 or.

A small difference dollar wise, but you know the optics can be bad to make that big of an increase, and then, because it is affordable housing, a lot of people might be on fixed income or there might be section eight tenants that.

You know, an increase more than 25 to $50 in a year can be pretty significant so when we go into a park and we’re kind of modeling a pro forma is if we.

know that there we kind of look at how far they’re below market and we just don’t assume that it’s going to jump right to that.

You know, maybe after the first year, or when the Middle East comes up that it’s possible the food, the existing tenants things are going to have a slower increase over time and then as we’re bringing in new tenants then we’ll get those closer to market.

Scott Hawksworth: Absolutely, as part of your you know portfolio, you have mobile home parks, but you also have you know more traditional apartments.

i’m curious if you could kind of speak to your strategy around you know just the traditional apartments, especially as it relates to the affordable housing side of it and how that kind of fits with your overall model.

Todd Sulzinger: yeah well I first put together a couple syndications and some joint ventures and the mobile home park space and then earlier this year, moved into raising money for apartments and that was more that was more market specific versus strictly affordable housing.

I was able to take part in a pretty large acquisition of a live in apartments in the.

North Carolina South Carolina and Oklahoma city Oklahoma and those are not in the same affordable housing bucket.

As mobile home parks, but in some of these markets where they’ve had pretty high increases in home prices, where people are not able to afford the big down payment and the higher cost to buy a home.

apartments can still afford them to have a nice place to live it’s still close to where they work and then have a higher quality living and where they came from.

Scott Hawksworth: sure whether it’s mobile home parks or apartments you know you acquire an asset and then you’re looking to maybe do renovations and prove it all of that.

You know, we have a lot of folks on this show that you know part of their strategy is okay we’re gonna we’re going to get a class C, you know multifamily building and then we’re going to bring it up to a class B or we’re going to make it.

Todd Sulzinger: Best in class, for whatever it might be.

Scott Hawksworth: i’m curious how you approach sort of the renovation aspect and balancing that with the affordability, because if you go in.

And of course you to say okay we’re going to do, new everything we’re going to bring this all the way up here, then you know that might price out.

You know, some attendance and potentially make it not affordable so i’m just kind of curious to know your I guess perspective there and your strategy.

There when it comes to improving these these properties.

Todd Sulzinger: yeah well, I mean it probably you know good example would be the first parks, that I bought in Georgia.

Where the park itself didn’t look great when you drove in the sign was kind of beat up an old of the mailbox cluster was at a bunch of doors ripped off it so that’s like one of the first things we did was kind of clean up a lot of the landscaping replace signs that at the parks.

replaced the mailbox clusters, so people weren’t having to drive down to the post office to actually pick up their mail.

And then just kind of slowly go through the park and in situations where the houses might be missing a sighting either get that repaired or replaced.

start to paint a day outside of some of the homes, just to make them login look nicer so.

As the any existing tenants drive into the park it looks nicer and kind of gives them a little bit more pride and where they live and for a new tenants as well, when they.

come into the park, to be able to look for a place to live, they can see that it’s that it’s taken care of so there’s things you can do there that don’t cost a lot of money, but just kind of give a nicer appeal and look to the park.

Scott Hawksworth: Sure sure so there’s still that value add but it’s not necessarily something where you’re going and you’re saying we are revamping everything, and you know we’re going to have to get some of these costs back right.

Todd Sulzinger: Right right right exactly and in the situations where we own the homes, and these are renting for between, say 450 and 600 $650 they’re typically single wide mobile homes.

Two bedroom three bedroom maybe 14 feet wide 14 to 16 feet wide by say 56 to 80 feet long, so you know they’re not kind of newer brand new maybe kind of class a type mobile homes they’re kind of more affordable housing type unit, so they have.

yeah I would say, when we go into one will put in potentially put in new countertops will typically put in new vinyl flooring mixture the ACS working.

Put in a little bit of upgrading the bathrooms so again there’s things that you can do, probably, similar to what you might do if you were redoing a classy apartment whereas you might go with formica countertops instead of for granted.

But it’s still a nice new and clean and works well.

Scott Hawksworth: Right and still again adds that value but doesn’t necessarily say well we’ve got the Granite countertops so now we’re going to have to price this in a way that would no longer make the asset, you know, affordable housing at all right.

Todd Sulzinger: You know I said right and that’s that’s a mistake that some people make I know we were.

When we had this this actually these first parks in Georgia actually just sold recently.

And one of the earlier offers we got a guy came in with this contractor and when, in some of the vacant homes and the contractor, who was used to dealing in.

A big class apartments to said oh my gosh like it’s going to cost us 2530 $40,000 to to fix all these homes up and we’re like no like you know we probably wouldn’t do it that way.

Scott Hawksworth: that’s not what we make it very nice, but then, if you do that, you all sudden can’t charge.

Todd Sulzinger: Eight or $900 rent for an apartment or sorry for a mobile home, you know, in a market that just doesn’t justify that so you do have to know your market and be careful what kind of investment you’re making to still make the numbers work.

Scott Hawksworth: Right yeah and to that point when you talk about affordable housing, can you I guess tease out how you sort of balance delivering returns for investors, but also, I guess you know.

Staying true to the affordable housing side of things, especially when you see you know market rents we’ve seen rapid rate increases.

Across across markets so far in 2022 here, sometimes incredibly so and balancing well the markets now saying this.

But I don’t necessarily want to raise rents that Mon sure I can, I guess, could you speak a bit to that, especially as it relates to your investors and folks you know wanting to get you know great returns, of course.

Todd Sulzinger: Sure sure well I think it’s always important like with any multifamily asset to buy the asset right.

mm hmm in terms of pricing from a pricing standpoint and how much potential CAP exit might need.

In the in the parks that i’ve owned and then I also work for a mobile home park consulting company that runs.

70 parks across the country, so a lot of exposure to what’s happening in the mobile home park space, and you know, still in those situations where.

rents, where we had parks, where rents were far below market and they’ve moved up a little bit closer to market but still below that still you know oftentimes 30 or 40% below what comparable apartments are going for that that seemed to typically track more towards charging market rents.

So we still find even as we’re increasing rents, to get a little bit closer to market or as people are.

coming in new tenants that are renting closer to market it’s still you know, by far, one of the least for at least least expensive places for people to live.

Scott Hawksworth: Right so so again staying true to what the the property what the asset is and not not trying to make it something it’s not and so it’s almost like you couldn’t just raise those rents well above market or or in such a huge way, but then you can still deliver those returns.

Todd Sulzinger: Right, yes, yes, because, even if I think of like sometimes the one of the ratios people think of if they can what’s their ability to to afford random might be.

You know, a third of what their income is or maybe even 25% so if somebody’s paying $600 a month rent if you David if it was 25% that would be $2,400 a month incomes over 12 months that’s.

that’s less than $30,000 a year so even at $600 a month we’d be looking for like a single person or even a couple making $30,000 a year or more.

And that’s that’s pretty affordable and that’s only around $15 an hour so it’s a minimum wage in some states is is higher than that a lot of.

blue collar working class jobs are at that level or above that so we still see that even in that $600 a month rental rate we’re charging it’s very affordable.

Scott Hawksworth: Right right, I guess you know Todd if if let’s say there’s someone listening right now and they’re looking at various deals and opportunities in multifamily.

And they see something that’s you know, maybe like a asset that you have a mobile home park that’s more affordable and then they’re looking at something that.

is maybe more class a or going from class to class a value add whatever it might be what I guess is your thesis your investment thesis over the strength of.

Targeting these these affordable housing, you know these types of assets, maybe versus another type where where is the investment benefit I guess.

Todd Sulzinger: yeah well I think it’s good to be exposed to both you know, the one thing I like about the affordable housing space is that there’s there’s always demand in those you know for other people that are on fixed income potentially.

On government assistance through section eight or just kind of doing you’re working in blue collar working class type jobs where.

that’s kind of where a lot of the growth in the economy, when they look at you know where jobs are growing, a lot of times it’s in service sector.

Type jobs and those people need places to live, so I feel like you know the kind of that combined with the lack of building in.

affordable housing type projects, whether it be mobile home parks that there’s hardly any developed in in a particular year.

And then on the apartment side, whereas there were in the 70s and 80s or might be B or C class type apartments built in neighborhoods back then.

Just because of the cost of construction, it makes it really difficult, so you might see a lot of new a class builds but not much in the affordable housing space, so I just feel like there’s still going to be over the next five to 10 years huge demand for this type of product.

Scott Hawksworth: I mean Todd I think that is such a fantastic point.

I sound like a broken record on the show but i’m always talking about the housing shortage that we face.

And it is very, very acute when you then start looking at the affordable housing shortage that we have and it’s just as you’ve said.

You know developers are out there, and there is new construction happening, but it’s new construction and they are building to class a because that’s what.

that’s what they need in order to get their returns and justify you know the expense of the development of all of that, and I think that that’s where there’s that gap.

And so you know to your point when you’re looking at affordable housing and those types of assets, there is a strong need for that and that really does sort of insulated a bit do you do agree with that.

Todd Sulzinger: I do, I do I get I think that the demand is huge and I think in the mobile home park space in particular.

You know I go to a lot of parks, where there’s you know a lot of vacant lots so might be 100 space park and then, for whatever reason, over the 40 or 50 years the parks been around maybe there’s 20 or 30% vacancy.

So they’re probably I would imagine there’s probably.

100,000 vacant mobile home locks across the country with infrastructure sewer water electric that would could house people and where that would be a park owner buying a house and renting it out or buying it and, potentially, putting it on like a rent to own type contract.

Right new tenant or somebody just wants to buy their home and move it into a park.

And to me It just seems like that’s because we already have the vacant lots out there across the country, right now, it seems like an ideal place to.

invest in you know kind of create that affordable housing versus doing a even a brand new B or C class apartment if somebody if somebody wanted to build it there’s already vacant lost lots across the country that are just waiting for homes waiting for people either by the momentum.

Scott Hawksworth: Right waiting for someone to come out there and push them over the finish line and and deliver much needed housing right.

Absolutely, you know when you look at the larger economic landscape we’re in right now we’ve got inflation we’ve got you know interest rate hikes looking to continue.

there’s a lot of economic uncertainty depending who you’re talking to or are either already in a recession or we’re going to be in one.

there’s a lot of concerns out there and.

You know, unfortunately, historically, when you do have economic recession and challenges, you know folks on the on the lower income levels are impacted often most significantly.

So, with that in mind i’m curious what impacts are you seeing or or do you expect to potentially see on affordable housing, as we continue on in this sort of economically uncertain and, potentially, you know downturn environment.

Todd Sulzinger: Well, I guess i’m still you know bullish on the fact that they’ll still be jobs at the at the lower wage scale.

That will that people in that in that wage bucket will be able to afford and if somebody might be in a.

cave might be paying 1000 or 1200 dollars in an apartment or maybe they’re renting a single family stick built home.

And they’re looking for someplace more affordable to live that’s kind of where the mobile home parks can come into play for people, similarly, because the price of blue stick built homes has gone up quite a bit people can still buy a new.

New mobile home, for you know kind of depending on how fancy you get but maybe between 50 and $90,000 if they choose to go that route and place it in a mobile home park then they’re.

starting to build equity, they have ownership and it’s a way they can actually do that without having to deal with the houses of going into the two and $300,000 range to buy something to stick built.

Scott Hawksworth: Right so so bottom line you think that you know they’re there is going to be this uncertainty, but.

When you look at the the assets themselves that demand still going to be there and there’s still a lot of job growth and and I guess good indicators, certainly in the markets that you operate in.

Todd Sulzinger: yeah I still see that and I also my parks are typically then in smaller tertiary markets and even in those smaller markets, sometimes it’s it can be a benefit because there’s.

Not a lot of options, instead of the smaller towns, the places where I bought my first mobile home parks, is a town called milledgeville Georgia it’s about an hour and a half outside of Atlanta.

And it’s not a 60,000 person metro so not a big city that people might typically think hey that’s the place where I want to.

You know, find out an asset to buy, but when you go to some smaller towns like this there’s a couple of universities there’s loads walmart had a couple of manufacturers so there’s kind of there’s a lot going on in the Community.

But there’s not a lot of housing options because it’s not a place that somebody would have come in, historically and built a 5200 unit apartment building so in those situations again people need place to live and often turn to the mobile home parks to find that place.

Scott Hawksworth: Right right and from that point, you know, have you found just across you know your tenants that you haven’t had too many struggles with Brent collections or anything like that, in spite of maybe larger economic you know turmoil.

Todd Sulzinger: Well, we did we have struggled with covert.

yeah you know in that situation, it was you know when they kind of talk about a normal recession that somebody might be recession across the country and people in a class apartments might go down to be and be down to see with covert it hit a lot of those service level jobs as.

Scott Hawksworth: People at.

Todd Sulzinger: restaurants, are in you know barbers kind of a lot of those personal services, so those people were affected.

And then we kind of also got it to with the fact that the eviction courts were closed so some of our residents were legitimately affected by by coven and the job losses, other tenants that decided like wow okay well you.

know the people.

In the state, so you know the courts were closed, so we did have to deal with.

The eviction moratorium and kind of working our way through that once the eviction courts opened up.

Scott Hawksworth: Of course, and have you seen that trend, of course, as things have been you know, opening up more you’ve seen that sort of reverse and kind of going back to where it was before.

Todd Sulzinger: I would say, so I mean it’s I think we, you know we find we’re fair with our tenants in terms of trying to make payment arrangements, if something some life event happens.

But when tenants know that if they don’t pay that they’re going to get evicted that generally causes better behavior that they know that.

If they don’t get to choose whether they’re trying to figure out what to do with their paycheck or their government assistance that if they know the priority is, they have to pay rent or they’re going to lose where they live, that they tend to make some make some day better.

Scott Hawksworth: Right right, and I think that’s that speaks to something that a lot of you know, investors i’ve spoken to and they’re really interested in, you know multifamily assets that are located in markets that are considered more landlord friendly where there are.

sort of options out there, because this is a good example of where you kind of have that challenge as a landlord, especially if you’re providing you know much needed affordable housing, but you know you still have to you just have to have rent that you can collect.

Todd Sulzinger: Nice yeah so that get this so this this recession was unusual because it did hit a lot of people at the lower.

Right i’m brackets, so I would say, with that would not be typical so you know heaven forbid something like this doesn’t happen again.

And you know even you know even at this recession that we’re I think we’re kind of you know just leading into now continues for a few years you still have that supply and demand issue and in what by creation and.

household formation.

That just says there’s going to be a lot of need for housing in general, over the next 10 to 15 years, particularly in the affordable housing space.

Scott Hawksworth: Right and speaking to that housing need you know we’ve talked about we’ve touched on a number of things, but.

What do you think maybe some of the keys are to solving this affordable housing crisis as we you know, take a step back and really look at the big picture.

across many different markets, I think it’s one of those things that isn’t really you know we aren’t moving as quickly as maybe would be optimal i’m just curious what what keys you think there might be to really, really tackling it.

Todd Sulzinger: Well, I think, from thinking about mobile home parks, in particular, I think, getting more favor ability and ease with respect to zoning to build new parks would be great.

it’s kind of interesting you often hear me disparities.

decrying the lack of affordable housing, but then, if somebody goes in and proposes to put a mobile home park in town, then sometimes there’s pushback from people that have that negative stereotype.

Scott Hawksworth: of little bit a little bit of nimbyism just a bit just.

Todd Sulzinger: So it’s kind of so that that’s that’s something that’s just going to take time to change that the you know the way people view mobile homes were nicer communities are build where If those are in a community.

they’re not looked at as negatively so to me that would be one area that would make.

That would help the help with affordable housing problem and then sometimes it kind of also going along with being able to finance mobile homes easier, historically, it has been challenging to.

Finance mobile homes much more difficult and costly or from an interest rate perspective and stick built homes.

You can it’s kind of like it doesn’t make sense to me as a park owner, you know people might say, well you know their personal property they’re not real property, they could be moved.

In the middle of the night and taken somewhere else but the reality is once a mobile home is actually placed and set up in it’s.

Very little homework.

Picking it up it’s likely going to stay there forever, you can move it but it’s it’s usually cost prohibitive so.

So I think having more financing options for.

park owners to actually acquire develop parks, but also for people that want to buy homes to live in parks and rent out a lot would also help.

Scott Hawksworth: Right right we talked a bit about markets and i’m curious if you could I guess tease out what are some markets you particularly like for affordable housing for mobile home parks, you talked about tertiary and what do you like about them.

Todd Sulzinger: Well, you know a lot of times in some of the bigger markets if you’re buying a mobile home park.

It may have been kind of out in the suburbs or way on the outskirts of town, when it was developed that the city is growing up around it so oftentimes in those situations you’re paying.

More for the land or for the development possibility versus buying you know the asset as a mobile home park.

And that’s because they would.

generally take up more space like you might have like the park that I bought last year in arkansas’s 55 spaces it’s all about 15 acres.

So 15 acres will hold a lot of multifamily so you’re in a you know market like Austin, for example, and there was a.

Mobile home park on the outskirts of town on 15 acres that land would be a lot more valuable to be redeveloped versus just running it as a mobile home park.

So when you get into little bit smaller markets are ones that are still on the outskirts of town, then you’re able to actually buy them really more for what the business is as a multi family asset versus some kind of you know kind of half business half land play.

Scott Hawksworth: Right right and you find that for you that that that tends to work really well, I mean, I guess, do you have more of a buy and hold strategy or do you kind of just go with with whatever the market might dictate how do you really approach that.

Todd Sulzinger: Now well we’re not you know when I put my syndications together we typically put together three to five year plans and some of that.

You know, really, I think it really that’s driven just a lot by what people are used to in investing in syndications and multifamily properties, you know it’s funny we’ve got some investors and might say wow like if we have this great asset like Why would we hold it forever.

Right yeah good point if it’s generating good cash flow, you know other people might want to take a you know.

we’ve had success, you know markets in our in our favor right now let’s go ahead and move forward so this the parks, that I just sold in Georgia, we had initially had a five year whole plan and we ended up selling it after about three and a half years.

Scott Hawksworth: like that.

Todd Sulzinger: that’s your charges yeah.

Scott Hawksworth: yeah go ahead.

Todd Sulzinger: No, I was gonna say you know you kind of put those performer projects together and sometimes they go longer sometimes they go shorter and you just have to kind of see what the what the markets, bringing to you, as you know, during the ownership period.

Scott Hawksworth: Again yeah roll with the market, I like it do you do you approach leverage differently, for the mobile home Park, as opposed to a more traditional multifamily asset, I guess i’m curious to know the I guess how does that vary really.

Todd Sulzinger: um well one thing it’s kind of interesting about the mobile home park space, I think you find more is more seller financing options.

And that’s kind of, for you know for a couple reasons that get a lot of times because these parks are not that professionally managed they might not have clean financials.

You know i’ve seen parks either i’ve been involved in the buying and selling or actually bought myself, where the landlord or owner was only taking cash, so you know the so he didn’t really have clean financials or is.

stated income was different that was showing up on his tax returns, or you know i’ve been in situations where the person, the owner had.

You know, five different parks or multiple multiple assets into one llc so it made it really hard to kind of get clean books or clean tax returns, you could take to a bank and get financing.

So what that causes sometimes is the only way to really allow the owner to sell the park is to have them carry back financing for it, so we did that, for the.

parks in Georgia, and then the one I got last year in Arkansas same thing.

The one in Georgia in particular, he did not want to do seller financing, but because of the occupancy when we bought the park and the fact that he was only taking cash it just was not going to be bank finance, so I.

Scott Hawksworth: was doing my ability to.

Be gay.

Todd Sulzinger: No yeah right right there just be you know would be telling them hey you know, he said he’s.

Bringing in $20,000 a month, but his bank statements only showing $10,000 have been deposited.

Like where’s the other 10,000 going.

Okay.

we’re not going to ask question.:

Todd Sulzinger: But a lot of skip get the park on good terms and we’re able to get a.

You know interest only five year loan from the seller, which made it easier for us to close the deal.

Scott Hawksworth: In your time working in multifamily of its mobile home parks or apartments what are, maybe one or two of the biggest challenges you faced and how did you navigate those when you were faced with them successfully.

Todd Sulzinger: um well, I think I was mentioning before about the issues we had with the covert restrictions that made.

Scott Hawksworth: Right.

Todd Sulzinger: yeah and really challenging so we had to really change our business plan is we kind of got six months into it and we realize, we know we just had some tenants, we were not going to be able to evict and they were.

You know staying at our park for in some cases, over a year without paying rent so we had to kind of change our plans in terms of.

What our CAP X plane was going to be it actually caused us to kind of look at some alternatives that had us.

What kind of what eventually ended up leading to us selling the park before our five year plan so.

That was a big challenge that because of that we just really feared Okay, you know what are we going to do now how long it’s going to take us to come out of this.

You know, do we need to kind of reallocate are we are going to you know spend our money in terms of either rehabbing vacant homes are bringing in new homes to go vacant lot so we just had to kind of change our strategy partway through the process as we were making our way through colton.

Scott Hawksworth: Right right and that just speaks to the power of being flexible and being creative as well right, I think a lot of.

folks that have success in multifamily they they do, they are open to adjusting and changing their business plan and really adapting to.

You know outside factors that can have, I mean coven unprecedented completely unprecedented and and the folks that have had success and successfully navigated that it’s because they were flexible.

Todd Sulzinger: yep yep exactly and I had another another examples at a park in Tennessee that was heads also that we bought it from an 84 year old woman who’s.

Who was partnering with somebody her partner passed away and we got the park at a great price and the city with incredibly happy is oh wow you know California investors are going to come in and pick the park up bring.

Scott Hawksworth: It up yeah.

Todd Sulzinger: yeah but as soon as we got in there, and so we had kind of had our CAP X plan in terms of how we were going to rehab some of the homes and fill in some vacant lots and.

Once we bought the park and started working with the city, they had a different mind kind of what we alluded to in the beginning of the conversation we were imagining taking these you know older, but still homes, with good bones and rehabbing them and renting them out.

They kind of had in their mind.

Like a like a 50 space tiny home thing that they must have seen on some home show or something.

So their idea of how the park was going to get turned around and rehab was different than ours, so that took some work with the city and it was a small town so is working.

conversation in the building inspector and try to say like Okay, how do we do this it’s going to.

You know, make this park look nice it’s going to help with the affordable housing project this this town has that is also going to make it viable for our investors, so that that’s also something that sometimes we do when you’re working with smaller towns and cities just kind of.

Keeping in tune with them and making sure that your vision their vision are aligned.

Scott Hawksworth: Do you find working with smaller towns and cities it’s at least easier, that you can get someone on the phone whether it’s the mayor, you know, Commissioner, of what have you.

Because I know, sometimes i’ll talk to you know developers and syndicators and they’ll say hey I work in the markets that I know best, because if I go to in a different market and I don’t.

I don’t have anybody I can call that makes it much, much more difficult, do you find that for the smaller towns, you can do that more easily.

Todd Sulzinger: um yes for sure, and sometimes it works for you sometimes work against you and.

it’s been great again just people to go down the coffee shop and the coffee shop owner says hey let me go let’s go down the mayor’s office I know him and again you kind of sit down you actually know the people, and you know you got the cell phone for the business building inspector.

The downside can be that sometimes those people are very I guess kind of like maybe bought in and really invest in their community, which is a good thing.

And situation in Tennessee where the electric company was actually owned by the city which was, which was good.

A downside was you know they didn’t have a lot of money to spend on like putting in do polls and maybe digging some underground trenches.

And my park in Arkansas the electricity is provided by energy, you know this gigantic publicly traded utility company, you know you call them to get a Pole replaced with something fixed and.

You know that you know they’re not really the guy that comes out in the technician comes out he doesn’t care, who it was do the work and.

build it back and go on his way, so in that situation, it was kind of Nice dealing with a big company, but there are definitely some situations where it’s nice build was pick up the phone and know that you’re talking to a particular person to try to get something done.

Scott Hawksworth: Right right he tell us a bit about your capital base your investors who are they what are their what are their goals and and what do, what do they really enjoy about you know, investing in you and your projects at blue.

Todd Sulzinger: um well you know I really do have a mix i’m based here in Silicon Valley so yeah the big investor base here, millions of people.

kind of the bigger challenges, when I first started was you know because it’s a technology kind of culture around here people mostly think about investing in the stock market and startups and I.

praise.:

Todd Sulzinger: So the some I got my early investors were those that that kind of came from that world but also had this interest in real estate but didn’t know how they really get there, or may have had a bad experience of.

You know, bad rental property that didn’t work out for them or story of a friend who bought a condo in Las Vegas and got burned so.

Scott Hawksworth: Our democracy and you’re kind of excited at work to to convince them like that was just a bad situation or about operate right.

Whatever it was right.

Todd Sulzinger: Exactly so to kind of get people It took some education get people over this over the hump of thinking that you know.

buying real estate, not in California and having a group this come together and buy this bigger asset.

It was even start to be intriguing for people to for them to figure out a way to passively invest in real estate without all the headaches.

And then from there, it was just kind of like colleagues, friends and then friends of friends and just kind of relationship building over time, sometimes from going to conferences speaking at conferences, sometimes from podcast appearances, where you know you can kind of build a relationship with people.

So it’s combination of people that didn’t know about passive investing or syndications who are kind of intrigued about finding a way to invest in real estate other people out there that have invested many syndications that are looking to work with different operators.

Scott Hawksworth: Right Todd I want to thank you so much for joining me on the show today really exploring mobile home parks multifamily the affordable housing.

You know challenges that we have and how affordable housing can be such a fantastic thing for passive investors to consider and if folks want to find out more they want to connect with you connect with blue elm investments, where can they do that, where, should they go.

Todd Sulzinger: You know so yeah it’s probably the easiest way is to email directly if you’d like to its Todd to dd at blue element investments, and if you go to our website, there is an investor club button, so I encourage people to click on that sign up for investor club, if you want to invest in some of the deals that i’ve put together some I’ve offered to both accredited and non accredited investors and yeah find a way to connect i’m happy to jump on a call and share with my experience and see if there’s some way we might be able to work together.

Scott Hawksworth: Fantastic and we will of course have links to all of that, on our show notes at multifamilyinvestor.com. Todd thanks again.