JF2551: Mobile Home Millionaire with Mike Anderson

After stumbling into real estate at age 25, Mike Anderson realized how quickly he could scale his business. Since then he’s worked on apartments and new builds, with a current focus on land developments and mobile home parks. Today, Mike tells us how he reached 98% occupancy within a year of opening, how the mobile home market is changing, and why he would choose mobile homes over tiny homes. 

 

Mike Anderson Real Estate Background:

  • Founded Reliance Mortgage Company, Inc.
  • Received Century 21 Top Listing Sales Person in a three-state region from 1971–1981
  • Named 1995 Entrepreneur of the Year by Inc. Magazine & listed in the Who’s Who American Businessmen of 2000
  • Portfolio consists of numerous multimillion-dollar build jobs, RV park owner, over 2000 acres of land, and affordable housing
  • Based in Dallas, TX
  • Say hi to him at: https://www.reliancemortgage.com/

 

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TRANSCRIPTION

Ash Patel: Hello, Best Ever listeners, welcome to the Best Real Estate Investing Advice Ever Show. I’m Ash Patel, and I’m with today’s guest, Mike Anderson. Mike is joining us from Dallas, Texas. He’s the founder of Reliance Mortgage Company and received Century 21’s Top Listing Salesperson from 1971 through 1981. He was also named 1995’s Entrepreneur of the Year by Inc. magazine. His portfolio consists of multimillion-dollar build jobs. He owns an RV park in over 2000 acres of land.

Mike, before we get started, how are you today?

Mike Anderson: I’m doing good.

Ash Patel: Wonderful.

Mike Anderson: I hope everybody else is doing good, too.

Ash Patel: I hope everyone’s doing great. Can you tell us a little bit more about your background and what you’re focused on now?

Mike Anderson: Well, I got in the real estate business when I was about 25 years old. I started buying and selling houses. I actually kind of stumbled into it. I bought a rental house around the corner from where my dad’s office was, and I needed some money because I was building my first home with my first wife. And we went about $10,000 over budget. So I decided to sell the house. I bought it maybe 6-8 months before. So I called a friend of mine in the mortgage business and I said, “What can I get for this house?” His name was [Name [02:00] I’ll never forget him. He said, “You can get $10,000″, and I paid $2,500. But now we’re talking about 60 years ago.

So I sold the house and I thought, “Well, I made more on that alone, I made $7,000 on that house in six months’ time.” So I figured I’d do it again. So I started doing it again. So after maybe six months of buying and selling houses, I told my dad I was resigning from the company, which is a fairly big company, but I didn’t want to do that kind of business. So that’s when I started buying and selling houses. I got up to maybe buying and selling about 200 homes a month.

But back then it was a lot easier. So I don’t want the audience out there thinking they can go out today and buy 200 homes. That would be almost impossible. But back then, I was buying homes from FHA, and they had about 10,000-12,000 foreclosures a month in Dallas. So they were selling them off in packages. So I was buying 10-15 at a time, it was quite a bit easier. All I had to do to prepare those houses was basically paint them, clean them up, put screens on them—and FHA was big about putting screens on a house back then. So I started this role in that way. And then I bought a Century 21 franchise, because I thought it’d help me in marketing. So that’s how I got started in the business.

Then that morphed into apartments and developments and building houses and all that sort of thing. Currently, today though, I’m specializing in land developments. Well, my mortgage business is my main business; I’ve closed about $18 billion worth of mortgages over the last 25 years. We’ve got a [unintelligible [00:03:18].27] in Dallas, but the mortgage business is no fun anymore. There are so many government regulations on it and so much paperwork involved in it… It used to be fun, but it’s not fun anymore. So I’m concentrating more on building houses. I’m building currently about 145 affordable homes in Dallas. And I say in Dallas – that’s not true, it’s in the Metroplex. Most of these are in small towns, within 30 minutes drive to downtown Dallas or downtown Fort Worth. And they’re priced in the $250,000 to $325,000 range. What we call value homes are affordable homes. And like I said, we’re currently building over 130 or 140, and all of the 140 of them are sold. So that’s going real well.

Then I’ve also build big custom homes in [unintelligible [00:03:59].05] Park, which is a nice sector of Dallas; those homes range anywhere from, on the low side of $3 million up to a high side of $5 million, and I’m building four or five of those right now. All of those are sold, incidentally.

The market in Dallas in Texas as a whole is on fire, and it’s that way in a lot of the nation. But anybody that’s buying and selling real estate, if you’re not making money, you need to get out of business, because [unintelligible [00:04:21].12] can make money in this business. And trust me, I’m not all that smart, I’m just lucky at times.

Ash Patel: I don’t know where to start. Okay, the mortgage business is no fun. What made it fun back in the day?

Mike Anderson: Well, it was common sense lending. If somebody were buying a house and putting 30% down, they had good credit, they got enough equity in the house where underwriters would just say, okay—it made sense to do. And then they started doing all these crazy things in 2007, 2008, 2009 and 2010, where they would lend people with bad credit, 100% down loans on [unintelligible [00:04:49].12] to buy houses and that’s when the mortgage crunch hit, back in 2008, 2009 and 2010. So the government, as usual, overreacted and they’ve got all these new restrictions, like the ability to repay, which is fine with me. I don’t have a problem with that. But the paperwork involved in this stuff, and particularly with Coronavirus, I’ve actually had people tell me, “Mike, I think I can join the CIA, the FBI or NASA, with all these credit checks and everything else they’ve made me jump through to get a mortgage on a house.”

Ash Patel: Yeah.

Mike Anderson: It’s not as easy as it used to be. It used to be a lot of fun, but now people just feel like they’ve been dragged through the mud, and it really is. It’s ridiculous what the government’s done.

Ash Patel: Yeah, I agree. So you started out buying and selling houses, and then you went on to developing and building houses? How was that transition?

Mike Anderson: Well, that was a long time thereafter. When I was buying the houses back then, we were talking about a 1500-1600 square foot home, three-bedroom, two-bath brick, typically a two-car garage, all over the Metroplex… They were retailing for about $17,000 to $18,000, and I was buying them for about $10,000, put a couple of thousand dollars in.

And let me say this, I did not make a lot of money per home. I was in the volume home business. So if I made $3,000 after closing costs, commission and everything else, I was happy. But if you’re doing a lot of homes, it adds up. If you’re buying a home today and you can’t make $10,000 or $15,000, and I’m talking about net, I’m talking about after holding costs, carrying costs, taxes, insurance, all stuff, then you don’t need be buying. If you can’t make that kind of money… And I wouldn’t buy a home today and remodel it and try to sell it if I couldn’t make $20,000 a home. I wouldn’t, there’s no way in hell I would do it.

Ash Patel: So are you not buying flips anymore, you’re just developing?

Mike Anderson: No. No, I quit doing that. It’s too time-intensive for my time.

Ash Patel: Yeah, there’s a lot of competition out there as well for that.

Mike Anderson: It’s not—I don’t mind the competition, I always liked competition. It is just that there’s such a shortage of homes in Dallas. And I’m sure it’s a lot all over the country, from what I’m reading everywhere. The market is just on fire. But there’s a lot of competition. And a lot of these wholesale companies that are selling them, particularly with the novice investors out there, if this is the first time you do it, in Dallas – I can’t talk about the rest of the county, but in Dallas, there are companies that specialize in buying foreclosures, turn them around and sell them, and they’ll give you a market value of the property, they’ll tell you what they think it’s going to repair to fix it… And in almost all cases, the value of the house they give you is probably on the higher side. It is on the higher side. They’ll say a house is worth, say, 350k, when it’s actually worth maybe 329-339. They’re actually going from the higher side. I’m not saying they’re all this way, but I’m telling of the ones that I’ve dealt with in the past are. And then the repair estimate they gave us is generally about 20-25 percent short of what it costs.

So you need to do your homework. And I can tell you this, that buying and selling houses is a job, it’s not just something to do part-time. And if you’re not willing to hustle and get out there and get your hands dirty, and that’s maybe driving down the street looking for homes that are in bad shape or vacant, and criss-crossing them or finding out [unintelligible [00:07:41].29] on them and calling them yourself… It’s hard work. There’s nothing free in this world. And these people who write these books, How to Make $1 Million in two Weeks’ Time Buying and Selling Houses are just bullshit. None of it is true.

Ash Patel: Everybody’s selling a program.

Mike Anderson: They are.

Ash Patel: Selling a course.

Mike Anderson: And I don’t blame them for that. Everybody’s out to make some money. But I’ve found that investors that work harder and are dedicated to it, and even if you have another job and you’re buying something to retire on, four or five, six rental houses or 10, or whatever the number is, it takes a lot of hard work and there’s no easy way to get around it.

Ash Patel: Well, you make it sound like development is easy. I’m assuming that’s a job as well.

Mike Anderson: No, there isn’t anything—there isn’t anything in the real estate business that’s easy. But there’s some of it that’s more profitable than other things. And to be a player in the development business, you’ve got to have some fairly deep pockets and fairly good financial statements. So I’m not suggesting to anybody go out and get into the development business, I’m just saying that – you asked me what I did for a living. But the developer side, they’re generally $6 million to $10 million. This RV park I just opened up, that was about a $3 million project. It’s fully occupied; I’m probably going to keep that for rental income. But all over the country, RV parks are good, mobile home parks are good, building affordable houses is good if you can find a property. The problem is finding the property, and everything’s going up in Dallas.

Let me just say this – on building on those affordable houses I was telling you about that are 225 to 275, 280, all the way up to 325, the cost of building those has probably gone up at least $30,000. There’s the lumber increases, [unintelligible [00:09:12].24] increases. There ain’t one product you can get in Dallas; we’re out of paint, we’re out of air conditioning… We’re actually out of paint; we can’t buy enough paint right now. We’re out of air conditioning units, windows are in short supply, brick is in short supply… Everything is in short supply, and they say it’s the result of the Corona, but the factories are getting back to work.

But leverage has doubled in the last year. So where we were paying say $30,000 for lumber to build one of these houses a year ago, we’re now paying $50,000 for it. And guess who ends up paying for that? We expect it right on the consumer.

Ash Patel: Right.

Mike Anderson: And we raised price on these houses we’re building, $10,000 a month for the last four months and have had no slowdown in business.

Ash Patel: Mike, how did you get into development?

Mike Anderson: Well, that’s another story. I had a builder about three years ago call me on the phone and wanted me to buy some lots and inventory them for him. And since I hadn’t dabbled in that market, I said, “I don’t think I want to do that.” So he said, “Mike, just come out and look at these lots.” The lots were, at that time, $42,000 apiece. So I went out and looked at them, they were in a suburb in Fort Worth called White Settlement.

And so I went out there and looked at these lots with him. This was probably three or four years ago. And these lots were about blocking half of Lockheed Martin. Lockheed Martin is one of the largest manufacturers employee-wise in [unintelligible [00:10:28].05] County. It employs 60,000 people today; they build helicopters and jet planes and that sort of thing.

So I drove the area 10 blocks in every direction, there wasn’t one house for sale. So I bought these lots for $44,000 apiece and sold them to him for $54,000. And I put 25% down on that; there was 38 of them when I bought them so I put maybe $200,000 in it. And then the end result was, I made, from selling these lots,  $380,000 and it was just—

Ash Patel: Did you have to develop them—

Mike Anderson: They [unintelligible [00:10:54].08] when I bought them. So I just had the money, he didn’t.

Break: [10:58] to [12:58]

Ash Patel: Did you have to put utilities in?

Mike Anderson: No, actually there were lots being developed. What happened was, these lots being developed, he had to put up $100,000 with a developer, to buy the lots. So I put that $100,000 up, and for some reason, it took them a year longer to develop them. I don’t know why it took them so long, but it did. And by the time I closed, a year later, I probably had gotten 2-3 more subdivisions of houses. And these were all complete lots, these [unintelligible [00:13:22].21] developing. And I found out how easy it was to make money. When I say easy, it wasn’t easy; you had to be in the right position, at the right time and have the financial strength to do it.

So it sounds easy to do, but there’s a lot of things that go into it. So I don’t want to mislead people, I’m just telling you, it’s a different ballgame than buying and selling little houses or apartments and that sort of thing.

Then I started developing land, because again – and I suspect this is all across the country, from everything I’m reading, the houses are in short supply everywhere, prices are going up everywhere, materials are going up everywhere… It’s just a nightmare in the building businesss right now, from materials and everything else.

I can tell you that – here’s the big difference. A year ago, when we were building these affordable homes, it took us about four months to build one after we started building it. Now it’s taking nine months. When you add 4-5 months to the building process, the interest goes up, the taxes go up; if they go up, you have to pay for them all. So you’ve got all those carries in the cost of the product. So it’s not a quick method anymore, but it’s a good business for me. It’s a real good business. And since then, I’ve developed in 324 lots in Granbury, Texas, which about an hour and a half outside of downtown Dallas; and I’ve built some lots in Greensborough. In Greensborough we’re actually doing a fairly good size mobile home park, 428 units. And in Athens, that’s another suburb. I say suburb, but it’s about an hour and a half from Dallas.

Ash Patel: Let’s dive into a couple things. One, why is it taking nine months to build a house, versus four? Is it labor shortage?

Mike Anderson: Labor shortage and material shortage. Let me give an example – about three months ago, my partner and I in the building business, we were out of windows, for 60 homes, we had completed; they were sold. So we called everyone at manufacturing, he and I spent half a day over at my office one day, calling everyone of them, everyone of them would say, “We don’t want any more business. We’ve got more demand than we’ve got supply of windows.” So that took 60 days to get the windows. But you’ve got a choice of concrete; everything slowed down. And I don’t care what you’re trying to do. Right now, it’s hard to get appliances; particularly on the high-value homes we’re building, it’s taking six months to get appliances [unintelligibile [00:15:21].29] and all the rest of them we’re getting from. That’s how far they’re behind.

Let me give an example. We put a house in Highland Park on the market, and we started bidding about a year ago. It’s a 6000 square foot house and it appraised for $3.8 million. We started building that house year ago, and it’s about three months out from completion; it’ll be completed in September. And again, that has a price of $3.8 million. So the price of leverage and everything went up, materials and everything else went up. And we spent another $300,000 on it, that’s how much we’re spending by the time we finish it. So the cost to build that house went from, say $2.8 million to $3.1 million. And I’m a part of that deal, I just put the money up.

First of all, I don’t know anything about building. I know I don’t look at plans. I know what I want in a house when it’s built, particularly a customer home. But other than that, I couldn’t drive a straight nail. So I’ve got people that I’ve known for years that are confident in doing that, I trust them to do the right thing. They know what they’re doing. That house, actually we didn’t even have it on the market. About two months ago, a realtor called and said, “Do you want to sell that house?” I said, “Yeah.” And she said, “What do you want for it?” So I called my partner and we said, we did take a shot at it and put on the market at $4.5 million. And one week later, we got an offer for $4.4 million for that house.

Ash Patel: That’s a win.

Mike Anderson: And we had to put a pool in, which was about $100,000. So we actually got $4.3 million for it. But the point of the matter I’m making, that house went up $500,000 in a year’s time, and that’s what’s happening all over.

Where do you live?

Ash Patel: In Cincinnati.

Mike Anderson: Well, how is the business up there?

Ash Patel: The houses are through the roof, multiple offers upon listing.

Mike Anderson: Yeah.

Ash Patel: Yeah, it’s all the same. Do you see a downturn coming?

Mike Anderson: I do. First of all, rates are at historic lows; rates right now on a 30-year conforming loan, which is anything below [unintelligible [00:17:03].19] in Texas, are about 2.65%, 30 years, with no points; 15 years for about 2.25%. In other words, they’re giving money away, and they have been for a long time. They’re trying to stimulate the economy with this stuff. But we’ve got inflation [unintelligible [00:17:18].21] There’s a lot of articles about inflation going back, so that the fans will probably keep – and again, this is an educated guess – will probably keep the rates low, probably for the next 15-18 months. But when I say “low,” I think they’re going to go up half a point in the next six months. But still, it’s a bargain. If you can borrow money at [unintelligible [00:17:38].03] 30 year fixed, it’s a great bargain. And I see the materials picking up… And then I see that there’s a point where people can’t afford houses in Dallas. And it’s like you said, you’re getting multiple offers. There’s some properties in Dallas who are getting 50 offers and going $50,000 to $60,000 — and I’m talking about $400,000 homes getting $50,000 to $60,000 offers more, and 25-30 offers in the first day. It’s just a great seller’s market. It’s a bad buyer’s market.

Ash Patel: Agreed.

Mike Anderson: I have a radio show on Dallas on CBS every Saturday. And people call me all the time and they go, “Mike, is it a good time to buy? Is it a good time to sell?” I say, “It’s a bad time to buy and a good time to sell.” But really, I don’t know what the answer that question is, because if you buy a house today — I know people that bought a house a year ago, a brand new house for say $400,000. And now we’re at $550. So you tell me, I don’t know.

Ash Patel: I don’t know either. I’m looking at—

Mike Anderson: But what do you think?

Ash Patel: Well, at some point, the bubble’s got to pop, right? You and I have lived through a couple of these market cycles, and we know when everyone’s getting high, there’s a down-low coming.

Mike Anderson: Not like this. I’ve never seen a market like this. I’ve been doing this for about 55 years, I’ve never seen a market this hot.

Ash Patel: Well—

Ash Patel: And I don’t care what you touch. I don’t care if it’s raw land, I don’t care if it’s apartments, I don’t care if it’s mobile home parks, I don’t care if it’s RV parks, I don’t care if it’s single-family buildings… Well, the hotel business is bad. That’s obviously—and shopping centers are not particularly good right now, depending on what area they’re in. But other than that, the real estate market – I’ve never seen it like this.

Ash Patel: Yeah, very reminiscent of the dotcom bubble in ’99.

Mike Anderson: Yeah, it is.

Ash Patel: It was fear of missing out that drove a lot of people to pour money into the markets.

Mike Anderson: And then you’ve got so many people who moved to Texas from California. The three states, the [unintelligible [00:19:14].23] Texas with a lot of growth is California, New York and in Illinois. A lot of people [unintelligible [00:19:19].25] down here. The last I heard, there was 480 people a day moving to Dallas. And so it’s just a big market. In fact, half the high prices that we’re selling are from Californians; they that are paying cash for it.

Ash Patel: Yeah, it’s cheap for them. Mike, I want to dive into your RV park, if we can.

Mike Anderson: Okay.

Ash Patel: Because it’s a unique topic. You’re developing this RV park?

Mike Anderson: It’s already developed.

Ash Patel: It’s already developed. So you developed it?

Mike Anderson: Yes.

Ash Patel: You bought the land… Tell me about that. What inspired that? Why did you do that?

Mike Anderson: It was 15 acreas on I30, which is a major interstate here in Texas. We put 70 tanks in and we had to put 370 tank systems in it. And we ended up with 75 units and an office, and the rental on them is about $550 a month. And we opened it last September, and it gets—now, it got fully occupied; it’s 98% occupied now. And it’s just a cash-flowing machine. But—

Ash Patel: And are these permanent residents, or transit?

Mike Anderson: No—well, I’m going to say that 60% of what is living in there, they’ve got a year lease. But there’s a lot of people staying in for three or four days, workers that are moving through Texas. Just had 10 people that will be here, they’re going to be here for two months on a commercial building they’re building down in Greenville. And quite frankly, it’s more advantageous to rent it month to month, because you’ll get, say, 50-75 hours a night for a single space, that’s worth $550 a month. So it’s better cash flow to rent them by the night. But again, you don’t have steady cash flow. So either one of them is pretty good. So we want to keep it about 60% permanent residents there, and another 40% for people that are transient; they maybe live there a week, two weeks, one day, or two months.

Ash Patel: And this was raw land that you purchased?

Mike Anderson: Yeah, which—

Ash Patel: Flat raw land… Did you have to put any amenities in?

Mike Anderson: Yeah, we put the [unintelligible [00:21:00].07] and there wasn’t city utilities do it; there was city water to it. So we had water to it; we had to put three big septic tanks systems in, that all 75 people using it. And then we put the [unintelligible [00:21:14].09] They weren’t concrete or asphalt, but they’re pretty permanent. But again, it’s on the highway, so there’s a lot of demand for it. And it took us 3-4 months to get a sign up after we opened it up. And once we got that signed, it just—it went crazy. But again, we did our research on it, because this is the first RV park I’ve ever done… And every RV park around there is obvioulsy occupied and had been there forever. So that’s not particularly cash-intensive.

Now, your average investor, if they found a [unintelligible [00:21:41].01]  it’s not that expensive to get into it. But for example, this deal, if you had good credit and some money, you could build a $2 million RV park for 25% down, which is $400,000 to $500,000. And once it’s completed, there’s a lot of buyers.

Ash Patel: Did you have to put in any amenities upon the park, common bathrooms? Or is it just pads and water?

Mike Anderson: [unintelligible [00:22:05].07] six washing machines and six dryers in it.

Ash Patel: Okay.

Mike Anderson: And an office in it for the manager that lives on premises. And it’s about 18 square foot in the building we built on it. But all we do is put the street and utilities in, and electricity. It doesn’t have any gas to the park. So it really wasn’t hard to do.

Ash Patel: Interesting. And then when you compare that to mobile home parks – because you’re in that space as well, right?

Mike Anderson: Well, I’m doing my first home park right now.

Ash Patel: Tell me about that. How is that different than the RV park?

Mike Anderson: Well, it’s more of a permanent structure, because when you’re dealing with a mobile home park… An RV park, you just drive in and park and plug in electricity or utilities and you’re done. Well, a mobile home park, to move a unit in and set a unit, I’m talking about 60-70 foot long unit, depending on the size of it, it takes about anywhere from $8,000 to $12,000 to bring it in and set it and what they call skirt it, put it on a foundation, hook it up to electricity. So you’re talking about a major expense for the buyer or whoever is going to live in that park. And you get a more permanent residence if you do a mobile home park, because of the expense of moving them in.

The problem we’ve got in Texas and all over the country is the mobile home manufacturers are way far behind. Tiny homes, you can’t get for months. You can’t get mobile homes and RVs for months. And believe me, I’ve been in both of those business. So the manufacturers that are manufacturing these things are dying for spaces for mobile home parks, and they just don’t have enough spaces. And we’ve put in a lot of amenities in this thing. We’re building a 6500 square foot amenity center with a big swimming pool, entertainment rooms and that sort of thing. It’s got a dog park, it’s got [unintelligible [00:23:40].18] court, it’s got a basketball court, and it’s gated; so it’s the top of the line. There’s 424 units in it and we’re going to strictly rent it; we’re not going to sell any of the units at all. And we’re going to rent those units, hopefully, for $650 a month.

And what we did – we did some research in it, and a mobile home is anywhere from $38,000 to say, $65,000. You can pay more or pay less, depending on what you want. So what we did, we took those numbers, what it would cost to rent it, $650 a month, and what the average cost to finance a mobile home was around $600 a month, so we’re $1,250 a month. So we went to the nicer apartments in the area and we’re about $150 under apartments rents. And the advantage we’ve got is you have a yard, where you don’t have a yard into the park. Typically, you don’t. We have three parking places; typically, apartment places have to have two. We have a gated community, we have a clubhouse there, and the kids can get out and run in the yard, and you’re not even right on top of somebody or right next to anybody. So we think there’s a lot of people that would rather live at a mobile home quite frankly, than—and I don’t know if you’ve lived in any mobile homes lately, but they’re nice. They’re not like you’re thinking about this years ago. They’ve really got a lot of amenities in them, and it’s affordable housing. The thing that people are looking for all over the country is affordable housing. That’s the keyword, affordable or value homes.

Ash Patel: I don’t think I’ve ever seen a really nice mobile home… I’ve only seen the ones that blow away in the wind.

Mike Anderson: These new homes we’re building are really nice.

Ash Patel: I’m going to research that.

Mike Anderson: [unintelligible [00:25:06].10] I mean, they’ve got everything in them.

Ash Patel: So I’m curious, whenever people buy mobile home parks, they try to offload all of the owned trailers or mobile homes; they don’t want to own them. They don’t want to do the maintenance on them. They just want to get lot rent. Why is your decision so different from everyone else? And you’re going to buy all those new—

Mike Anderson: Since it was my first venture into mobile home parks… When I get into something, I don’t know much about, I’m going to do a lot of homework on it. And so I found out four or five big manufacturer in the United States and I called them all on the phone, had long talks with all of them. Then they gave me the biggest developers all over the country, that were developing the mobile home parks. So I called them all, and you’d be surprised how many business people will help you if you say these three words, “I need your help.” Let’s say you’re buying and selling a lot of single-family homes, and if I call you on the phone and say, “Ash, I need your help on some advice,” I bet you would give me whatever advice you can, because we’re not competitors. It’s just a way to help people.

So when I call these people and I say, “I need your help. And I here’s what I’m doing. I don’t know anything about what I’m talking about. But I want to find out what I’m doing.” So it’s like a lot of people will tell you that buying and selling homes – they’ll buy a home that needs a massive amount of repair work, remodeling. When I was buying and selling homes, I didn’t want to do any big remodeling jobs on homes, I don’t care what the problem was, I just didn’t want to take the time to do it. I’d rather buy a home that needs $10,000 or $20,000 worth of work or $30,000 worth of work, that I can make $20,000 on, than buy a home that needs $150,000 work on that I make $50,000 on. Because me screwing around with doing all that remodeling, it wasn’t worth it timewise.

But the infrastructure didn’t function. I’m not saying you can’t do it, it’s just something I didn’t specialize in. So what I found out is that everybody’s got a different opinion. Some people said, [unintelligible [00:26:49].12] Other people said, “I wouldn’t rent those things. People will tear them up, they don’t take care of them.” It’s a gamut. And I’m talking about some of the most successful people in the United States. So everybody’s got a different opinion. So I took the opinion of all of them and I decided I didn’t want to own mobile homes.

And the other thing about owning mobile homes – if you’re paying $50,000 a mobile home and you’re putting 400 in, that’s $20 million. So I didn’t particularly want to get that involved in it. So it’s a decision I make, but I would rather rent them and keep the rent coming in and put in, and put a nice amenity center in. Because another thing with mobile home parks – the cities don’t want them anymore.

Ash Patel: Right. So how did you get by with zoning?

Mike Anderson: It was in the county. And it took us a year and a half to get what they call entitled. Entitled means that you’ve got water, utilities… I mean, the utilities to bring to that site were probably $4 million. But once you get it done, I bet there’s not 20 places in the United States who have got entitlement where you can build a 500 unit or 400 unit mobile home park. The cities just don’t want them.

Ash Patel: Right.

Mike Anderson: So once you get one entitled, it’s worth a lot of money. Let me give you an example of this. We have an offer on it to sell it for $5 million more than we paid for it, and not do a thing to it, and I decided that we may sell it, because quite frankly I’m 77 years old, I’ll be 78 next month, and I don’t want to sign a $20 million note at my age. I really don’t want to, I don’t need to, I don’t want to take the risk… And that’s kind of a long-term hold anyway. Typically, they take three years to build it up. I, on the other hand, think it will take—if we get the unit’s, if the manufacturers come back and [unintelligible [00:28:20].23] units, I think they can fill up in a year’s time if there’s that much demand. But if it takes three years to fill it, I don’t want to screw around. I’ll be 81 by the time it starts cash flowing. Nah. I’m not going to do that.

Break: [28:31] to [31:35]

Ash Patel: Mike, out of curiosity, let’s say you buy one of these for $50,000 to $60,000. If somebody that’s renting from you offers to buy it for 150k and continue to pay you lot rent, would you entertain that?

Mike Anderson: Yes, a lot of people do that. They’ll actually put the mobile homes in and take a note for them.

Ash Patel: Okay.

Mike Anderson: Generally, the rates on those are around 10% what they’re charging a consumer, and they’ll get $5,000 or $10,000 debt when they get out. But bear this in mind – if somebody buys their own unit and they’re moving into that track, and they’re going with the expense [unintellgible [00:32:07].10] rather renting a unit that’s already in place, they’ve got a capital investment. And so I think that, from my opinion, somebody that owns their own units, that’s putting that kind of capital in and are buying a $50,000 to $60,000 mobile home and spending $10,00 to $12,000 to move it on the spot is likely a longer-term candidate than somebody’s renting it.

Ash Patel: Right. So is there a target market for this park? Is it seniors, young people, workers?

Mike Anderson: No, I think it’s all over the board. I think it’s mostly for working people, except some seniors, maybe seniors, maybe retired. Again, if you haven’t looked at mobile homes, they’re much nicer than what do you think. I mean, they’re 1,800 square feet, 1,200 square feet, 1,300 square feet, whatever you want. And they’ve got granite countertops in them and they’ve got microwaves and they’ve got all the new supplies in them. They’re really decked out really nice. And a lot of them now are [unintelligible [00:32:54].14] instead of having that—

Ash Patel: Paneling.

Mike Anderson: [unintelligible [00:32:57].20] them and painting them, and they look a lot better. They look more like homes. But that’s the reason I went for that. People have told me that you can make more money if you buy your own units, and buy even used rental units and put them down there, and they make more money. But the capital investment is a whole lot more, and you’d better know a lot more about it. I just didn’t know that much about it where I wanted to get into renting a bunch; 424 units – like, there’s no way I wanted to do that.

Ash Patel: So the person that’s buying this, or that made you the offer, are they going to allow people to bring their own in, or are they going to follow your model and actually buy the units and put them in and rent them?

Mike Anderson: They do it both ways. They probably are going to follow our model. Let me just tell you how. We’ve got three manufacturers that want to put mobile homes; a company called [unintelligible [00:33:42].28] and the other big one. One of them is owned by Warren Buffett. And these manufacturers, as soon as we get this built, they all want to put 10-15 units on their at their cost. They’ll do it with their costs as a sales price; they actually would have their sales offices in our mobile home parks, because there’s that much demand.

The problem is that it’s going to take a year and a half to develop this property. And with a shortage of materials – it’s hitting them too; it’s not just hitting builders, it’s hitting everybody. We don’t know — every one of them are four, five or six months behind in production. They’re shoving them as fast as they can get them off assembly lines. Even tiny jomes, which there’s a lot of tiny home communities, tiny homes being defined as anything under 385 square feet… And if you’ve ever been to a little tiny home, you’d be surprised how spacious it is once you get in; they’re really efficient the way they build them. But it’s taking you months to get those down there. Everything’s in short supply. So that’s the one thing that bothers me about this mobile home park, is the fact that, are they going to have the manufacturing capabilities to fill the orders that they’ve already got, the back orders.

Ash Patel: Have you looked into, instead of mobile homes, tiny homes? And are the numbers better on that?

Mike Anderson: Yes and no. It depends on where you are. A friend of mine has got a tiny home deal down in Houston, and he’s got 78 units down there. And these things are renting for $750 a month, but it’s a first-class operation; you’ve got a swimming pool, you’ve got a clubhouse, you’ve got game rooms, you’ve got everything down there. And believe it or not, most of the people that rent those tiny homes, they [unintelligible [00:35:09].08] places to stay. So it’s renting them for $750 a month. And I think that tiny homes are costing like $30,000. And he was renting them like crazy, but he can’t get tiny homes fast enough now. So now he’s slowed down. It’s a niche product that if you’re going to go into, you need to find out — if you’re [unintelligible [00:35:24].22] a tiny home – because you need to do it on five acres of land to get 20 tiny homes on it. And you need to go look at tiny homes around them and find out what they’re doing and find out what their capacity is, and just ask them for help. Because they’ll find that most of these tiny homes and all these rental places are all full.

Ash Patel: And I would imagine tiny homes are more appealing to zoning than mobile home parks, because they’re trendy.

Mike Anderson: I don’t know. I don’t know that. I’ve never checked that out. But I suspect they’re probably the same way. They would rather have single-family homes than mobile home parks or RV parks.

Ash Patel: Yeah.

Mike Anderson: That’s why the two we’re doing are very close to the city. They’re three or four miles from the city. But they’re an ETJ of the city, but they’re not in the actual city itself. We have all city requirements.

Ash Patel: Got it. Mike, what’s your best real estate investing advice ever?

Mike Anderson: Work.

Ash Patel: Work.

Mike Anderson: Work hard. And follow up. Be persistent. I’ll tell you a little story, and this is true. When I was about 25 years old, I was driving down the street and this is when I was buying about 100-200 homes a month. And again, that sounds like a lot, but it really wasn’t when I was doing it. Because when I was getting these homes, I was paying $10,000 a piece for them, and I could get them fixed in two or three days’ time, put a slab of paint on them and clean up the yard, clean them up. It wasn’t big remodeling jobs, no kitchens and none of that sort of thing. So it was pretty easy to do and I had four or five contractors that did work for me. So you could knock out a house in two or three days’ time. So it wasn’t near what it is today. So I don’t want your audience thinking, “This guy’s crazy. How’s he going to build two of these?” You couldn’t do it today. And also back then, the FHA was carrying the notes for me. I was so big and strong at that time that they wanted to get rid of these houses. So they were actually carrying the notes; they could give you a six-month note at no interest FHA.

Ash Patel: Yeah.

Mike Anderson: So if they were selling a package of, say, 10 homes, for, say, $80,000. Then I had to put up all the money to do the repair, all the closing costs, which is again $2,000. So I had to put up all that money, and they would carry the note for me for six months. So I didn’t have to get bank lines of credit, the FHA was actually carrying the notes; now that they called the PPPO program, public program package offering, when I was doing that. That stuff’s gone with wind.

But I’ll tell you this, before I started in PPPO with the FHA, I was driving down the street one day and I saw eight brick homes on 56th Street here in Dallas, Texas. So I went back and looked it up and that was back before they had computers and everything. And I found out that a lady owned these eight houses that lived in the [unintelligible [00:37:42].13] neighbors, Evelyn Sidley. So I called her on the phone and said, “Ms. Sidley, this is Mike Anderson, I’m with Centurty 21 Value Properties and I’d like to know if you’d like to sell those houses that you’ve got up here.” She said, “They’re all rental houses.” “I said, “I know that, ma’am.” And she said, “Yeah, I’d consider selling them.” She was probably 73-74 at that time. So she said, “What would you give me for them? “And I said, “I’ll give you $64,000 cash for it.” And they’re worth about $80,000 apiece. So she went off on me like a skywire and she said, “You’re just nothing but a thief, a crook. Don’t ever call me again, you bastard.” And just on and on and on.

And the truth of the matter – she was right. I was trying to steal the house from her. I didn’t think she was wrong with what she called me. She hit the nail on the head. And I was trying to steal houses, which is what you’re trying to do when you’re buying and selling houses.

So I had a little green book, a four by six notebook, and I wrote a million dollars on the outside, and I wouldn’t get rid of that book until I made a million dollars. So whenever I go look at houses, and I’d look at a newspaper, look at the houses I was buying from FHA… But actually, that was before I was buying also from FHAs, and so I was looking for houses.

So I keep this book and every Friday afternoon I’d call everybody that I’d called the week before, the month before, because you never know. So Friday afternoon, between three and six o’clock, I’d call people, and that was a dead time in the real estate business. People weren’t doing anything Friday night—

Ash Patel: You were just trying to ruin people’s weekends, huh?

Mike Anderson: No, no. Actually, I was trying to raise some money. So every Friday afternoon, I’d call Ms. Sidley on the phone and say, “This is Mike Anderson—.” And I didn’t have to say anything more than that. She’d usually go, “And you’re the thief bastard that’s trying to steal my houses,” and she said, “No way,” and slammed the phone down. So after a couple years, my staff was going, “Mike, what is wrong with you?” And I go, “Look, you guys, it takes me 20 seconds before she hangs up on me. It’s not a big deal. And if I buy them, I can make a lot of money on them.” So then it got to be kind of a [unintelligible [00:39:25].23] thing in my head, and everybody’s laughing at me. It took me five years.

So one day I called her on a Friday afternoon, and she was crying. And I said, “Ms. Sidley, what’s wrong?” And she said, “[unintelligible [00:39:35].20] my business. Somebody snuck up on me from the back and hit me in the head with a pipe and took my purse with all my rent money and drove off with my new Cadillac, and I don’t know what I’m going to do.” And I said, “Ms. Sidley, I’m so sorry. Do you want to sell the house?” She said, “Yes, I want to sell.” I go down there that night and got those contracts signed.

So again, follow up to me is everything. Let me just say this – and I truly mean this; if you call me today, and I don’t care if it’s five o’clock this afternoon or three o’clock this afternoon and I’m busy as hell all day long or whatever I’m doing, I will never leave my office until I call everybody back.

Ash Patel: That’s incredible.

Mike Anderson: [unintelligible [00:40:10].04]

Ash Patel: Work hard and—

Mike Anderson: And let me tell you this—

Ash Patel: Work hard and follow up.

Mike Anderson: Even if you—follow up is everything to me.  Even if you’re mad at me, you perceive that I screwed you over or given you the service you deserved… And you could be right or wrong, I don’t really care, but I’m not going to [unintelligible [00:40:23].27] with somebody that wants to chew my ass out. And the best thing if somebody’s [unintelligible [00:40:26].05] is to agree with them. Just call them saying, “You’re right, we should have got this done quicker. I’m sorry, the [unintelligible [00:40:31].03] or we screwed it up,” or whatever. I’ll tell them the truth, whatever it is. If they can’t take the truth, they don’t need to be dealing with me, because I’m deadly honest. I don’t lie to people. I’m not going to start lying to them right now. I never will. So if they can’t handle the truth… And after somebody chews your ass for about five minutes, they turn nice. So if you’ve got an ass chewing coming that’s deserved, or even if not deserved, just take it and go on down the road; it’s not a big deal. And you call me anytime you want to, I would never be offended about it. I don’t care.

Ash Patel: Great advice. Mike, we’re running way over time.

Mike Anderson: Okay.

Ash Patel: So are you ready for the lightning round?

Mike Anderson: What is the lightning round?

Ash Patel: Oh, you’re about to find out. Mike, what’s the best ever book you recently read?

Mike Anderson: I don’t read anything but novels.

Ash Patel: Okay.

Mike Anderson: I’ve read a lot of those books… In fact, I’ve been on the stage with Robert Kiyosaki a lot of times, and I’m not a big believer in reading a book on how to make money. I think you’ve got to go do it to learn how to do it.

Ash Patel: Yeah, I agree. What’s the best ever way you like to give back?

Mike Anderson: Helping people. I enjoy helping people. Even though it’s costing me money at times. Helping people is the name of the book. So I’ve always helped people – my family, friends, relatives, business associates. I’m always willing to help people.

Ash Patel: That’s great. Mike, how can the best ever listeners reach out to you?

Mike Anderson: It’s actually Southern Star Capital in Dallas, Texas, Reliance Mortgage Company. My website is www.reliancemortgage.com and my email address is Mike@RMCDFW.com.

Ash Patel: Awesome. Mike, thank you so much for being on the show today and sharing a lot of great advice, and what a fun conversation. You dropped some little golden pieces of advice.

Mike Anderson: It is hard work, I’m telling you. You cannot overcome hard work.

Ash Patel: Yeah. And I love the “I need your help.” I’m going to start using that. Mike, thank you again for joining us. Best Ever listeners, thanks for joining us, have a best ever day.

Mike Anderson: You too. Have a good day.

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