JF2586: From Negative Net Worth to Financial Freedom in 2.5 Years with Bryce Robertson

Australian native Bryce Robertson made a goal of traveling the world while passively making money in the meantime. That’s when he began his journey into entrepreneurship. Bryce is sharing how he became financially free in 2.5 years with mobile home parks, the future of mobile home parks, and three main evaluations to take into consideration to remain profitable in this asset class. 

 

Bryce Robertson Real Estate Background:

  • MHP Owner, operator, syndicator, educator
  • Self-storage owner and manager. He manages all his properties through his property management company. 
  • Active investor with 8 years of experience
  • $20M AUM
  • Say hi to him at: propertyworkzusa.com
  • Best Ever Book: Autobiography of a Yogi

 

 

 

 

 

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TRASCRIPTION

Ash Patel: Hello, Best Ever listeners. Welcome to the Best Real Estate Investing Advice Ever Show. I’m Ash Patel and with today’s guest, Bryce Robertson. Bryce is a mobile home park operator, syndicator and educator. Bryce is also a self-storage operator.

Bryce, thank you for joining us, and how are you today?

Bryce Robertson: Good. Hey, Ash. I’m fantastic today, mate. Thanks for having me.

Ash Patel: We’re excited to have you. Bryce, before we get started, can you give the Best Ever listeners a little bit more about your background and what you’re focused on now?

Bryce Robertson: Yeah, let me try and knock this one out quickly. So originally born and bred in Australia, got into the blue-collared field, because I didn’t want to continue school and go to university… I had no idea about entrepreneurship or anything like that. Then in my early 20s, I left Australia with a desire to travel the world, and I did exactly that for the next six years. And the way I did that is I actually started off with a base camp. My first base camp was London in England; I would work for a couple of months, save up a bunch of money, go traveling Europe for a couple of months until my money ran out, and then I would come back and rinse and repeat. And I did the whole UK, Europe and Africa cycle for about three years, then I went over to Canada up in the mountains there and British Columbia, snowboarded downhill, mountain biked, had my own business in the coal mines out there, and was also firefighting as well. That time, I actually spent about two years there, saved up a whole wad of cash, and then I took an 18 months surfing and scuba diving trip through Central and South America. In the last six months of that is where I met my wife, who’s a native of California. So about 11 years ago, I ended up in America.

And when we ended in America here, my wife actually and I made a commitment that we would recreate the lifestyle that we’d been living – traveling and living free. However, this time, we’re going to do it without our money running out, and not only that, but our money growing and expanding as we’re living free and traveling wherever we may please; and that began my journey as an entrepreneur.

In the beginning, I actually looked at all of the different ways that I could make money. The three main ways is in the stock market—I think crypto fits into that category now—business owner, or real estate. And in the beginning, I tried about seven different strategies, because I wanted to feel it all out. But I found that I was having mediocre success spinning plates, and then I ended up deciding to laser focus on one thing; it was definitely going to be real estate with my 20-year background in construction and construction management, and for various other reasons as well… But I needed to pick one strategy in real estate. So I looked at all the financials, the profit and loss, return on investment, and then everything kept coming back to mobile home parks. So in 2015, I went out there, and — at that point, I had a negative net worth, $2,000 in the bank in unseasoned credits, and I used the power of syndication or capital raising to reach out to my family and friends to get my first deal across the finish line. Then we’ve used the syndication model to expand from there, took about 2.5 years to become financially free, and then ever since then, we’ve geometrically expanded.

Ash Patel: Incredible. I think we can do a couple of podcasts, but this isn’t called The Best Ever Travel Network. It’s the real estate show, so… Amazing story. 2015, you had a negative net worth. So all the money that you saved up – gone.

Bryce Robertson: Yes, absolutely.

Ash Patel: And then you decided to get into mobile home parks because you thought that was a good potential avenue for income. Did you have any other real estate experience prior to that?

Bryce Robertson: No. Apart from like education, I’d been out there probably for about 18 months previous to buying my first mobile home park, getting educated on different strategies and asset classes and business models in real estate, but had not actually physically had any experience.

Ash Patel: Bryce, how did you educate yourself?

Bryce Robertson: Self-educated, I took a lot of courses, I definitely paid for my tuition… One of the reasons I had a negative net worth at the time is because my wife and I put a bunch of education on credit cards. We were just committed. We saw the opportunity. I suppose we essentially burnt our ships, so to speak, and just went all in.

Ash Patel: What was your first mobile home park? Where was it? What were the numbers on it?

Bryce Robertson: Yeah. Sure. California, purchase price $570,000, it was a 37 space park with one single-family home, I think it was a three-bedroom, two-bath… I ended up purchasing it for $570,000. We increased the occupancy, we increased the rents, we held it for about four years, we rebranded it, repaved the roads… And then I think it was like 4.3 years later, we ended up selling it for $1.3 million. Interestingly, our investors on that one, they wanted 12%. Coming into it, they said, “If you can exceed 12%, we’re going to be super happy.” I projected somewhere between 20% to 30%, but we just really crushed it on that deal, and ended up providing 56.7% annual returns for our investors on that one, which is a very unicorn deal. Certainly not like the other deals that we’ve done.

Ash Patel: So now you set the expectations pretty high for the next deal.

Bryce Robertson: Yeah.

Ash Patel: What was that like?

Bryce Robertson: Definitely raised the bar pretty high for that one… But I also wanted to let the investors know, this is not your typical investment. We did exceptionally well on this one. But yeah, it’s been great. We’ve had tons of interest since. The mobile home park market is phenomenal right now, and with the economy the way it is, and what I believe is potentially declining and going to get much worse, it’s going to create an even higher increase in the demand for affordable housing, and we have a very limited supply of mobile home parks across America. In fact about 44,000 mobile home parks, and that inventory is declining at 1% a year, because they’re closing more down than they’re allowing to be built.

Break: [06:24] to [08:24]

Ash Patel: Bryce, on your first indication, with that huge return, was there a waterfall clause where you got to benefit from the huge win?

Bryce Robertson: It was actually more—instead of the typical LP/GP setup, it was actually more of a joint venture, because we did that one with family and friends, and everybody in that investment had a slight role. So there was no waterfall structure, it was just a straight-up percentage ownership split on cash flow and equity. And then we’ve had a lot of different waterfall structures with recent investments.

Ash Patel: Can we go through some of those?

Bryce Robertson: Yeah. We’ve actually got two different business models that we have. First one is if we purchase and we get an acquisition loan upfront; right now we’re seeing our hold period be about 5-7 years, and we’ve been able to historically bring to the table a preferred return for our limited investors of around about 8%. And then after that, we typically split the cash flow; 70% goes to our investors, 30% goes to me and my partners, and then at the sale events, at the end of the business cycle, which is about 5-7 years, then we split the equity 70/30 as well; 70% in favor of investors, 30% to us. That’s one particular business model, and we typically do that if we have around about a 70% to 80% occupancy on acquisition, and then we crank that up to as close as we can to 100%.

The other business model that we have is we buy a lower occupancy mobile home park, and in that case, we could be as low as 50% occupied, and it’s our intention to drive it up to 70% or 80% in the first 2-3 years by remodeling mobile homes and bringing them in and filling in the vacant lots, or bringing in new homes and putting them on vacant lots as well. So we’ll have the same setup upfront. Typically, we’ve been able to bring to the table an 8% preferred return on that type of structure. However, this time we’ll do 100%; excess cash flow goes to investors until the refinance event, at which point we return the original capital invested to investors, so they’re out of it and they’ve got a zero capital balance. However, they still get to remain in the deal for the remaining 2-4 years, claiming on 50% cash flow and 50% equity.

Ash Patel: I want to rewind that for a second. So 8% is the preferred return for investors, and they get 100% of the profit until you refi.

Bryce Robertson: Until we refi. So we’re very performance-based in the way that we operate. We’ve got our own in-house property management and asset management company. And we believe that if we perform and do what we say we’re going to do for our investors, and then after that we get paid, that’s just the most honest way to do business.

Ash Patel: And is that because the returns might not be as high initially, because it’s a value-add proposition?

Bryce Robertson: Yeah, it does create higher returns for investors upfront; it also allows us to just completely focus on providing returns to investors. And we actually hardly make any money at all until that refinance event; we make a little bit on the property management and asset management side, but most of that money keeps the lights on. It’s really just about performing and getting to that refinancing event as soon as possible, and cranking out the highest investor returns that we can in that interim period. And then afterwards, we get to benefit from 50% cash flow and 50% equity. So in the long run, we get to benefit, but we have to do that main part of the business plan in the first 2-3 years.

Ash Patel: And have you found investors pretty receptive to that model?

Bryce Robertson: Yeah, we’ve launched two of those deals this year with absolute great success… Because that way investors at the year two or three mark, when we refi, they get to take their original capital, go reinvest it in another deal or another one of our deals, and then they get to compound their overall returns.

Ash Patel: Bryce, what are some of the pitfalls of mobile home park investing?

Bryce Robertson: I think one of the biggest pitfalls would be inaccurately evaluating the purchase price of a mobile home park. The main things to take into consideration is utility systems. If we own utility systems and there’s a risk involved with that, we need to subtract that risk amount off our purchase price, and any infrastructure repairs we’re going to do over the first 12 months, or any immediate repairs that are needed, like if roads are in terrible shape, or if there’s major problems with the underground water and sewer lines – those things need to be subtracted off the purchase price.

And I think another thing too is a lot of people take their lot rents and their home rents, and then include that into their net operating income before they apply a cap rate, and I believe that’s a very inaccurate way to evaluate a mobile home park. If we just tap the lot rent only, and then take the actual homes themselves, look at the market value of the homes, discount that by about 20%, so we’re paying about 80% of market value for a whole portfolio of mobile homes, and then adding that on to the land value, and then subtracting off the immediate repairs that need to happen in the first 12 months, I believe that’s the most accurate way to buy a mobile home park where you’re going to remain profitable. Hardly any people are actually evaluating products like that.

Ash Patel: Bryce, you know mobile home parks are hot right now… How do you find deals in this market where everybody’s chasing the same thing?

Bryce Robertson: So we’ve built a good reputation over the years, we’ve got good relationships with brokers… So we actually see a pretty good deal flow. Also, a lot of our students bring deals to the table. We’ve also got a team working behind the scenes, cold calling and sending out mailers. But one of the reasons that brokers have actually gone with us this year is not because we’re paying the highest purchase price, it’s because people are in a position where they need to liquidate, they need to move. They’re looking for an operator that’s going to perform on what they say they’re going to do, and they’re going to do it on a timeline they say they’re going to do… So really, it’s come down to confidence [unintelligible [00:14:07].23] That’s why we’ve been chosen this year.

Ash Patel: That need to liquidate – it seems like a lot of smaller parks are unsophisticated sellers. They don’t have a package of P&Ls and historic expenses, tax returns. How do you go in and underwrite a property where you have limited information?

Bryce Robertson: That’s a great question. So for starters, we don’t actually look at how they’re operating the park. We come in, we know our own operating expenses, we know our own assumptions, and we apply those to the park. We do want to do additional due diligence and we have a very extensive 30-day or four-week due diligence plan, and in that, we’re digging into bank accounts and financials and whatnot. We’ve got a lot of backup systems that we can do. We can do tenant estoppel letters as well. And also, we’re driving through the parks and we’re making sure that, “Okay, they say that there’s this many occupied, but it’s actually that many people there with cars and lights on at night time?” So we do a lot of checks and our due diligence, and we basically put ourselves in a position where we know that it’s going to operate under our assumptions, not the seller’s assumptions, because absolutely every single time we purchase a mobile home park, the sellers’ assumptions have been different and inaccurate to some capacity. So we can only really take them with a grain of salt.

Ash Patel: And now, you’re also an educator. How did you get into that?

Bryce Robertson: Yeah, I said earlier, I took about 2.5 years to become financially free by investing in mobile home parks. And previous to that, I had a 20-year background in construction and construction management. And I can’t say that I enjoyed the whole 20 years of that; I kind of felt like a little bit of a slave towards the end of it, because I didn’t have full freedom. And now I look at what I did in a 2.5 year period – created financial freedom with no need to continue working, and only just a desire to keep working because I really enjoy it, and I just felt really, really compelled to share how that’s possible, how I did it and other ways I believe people could do it… Hence starting my education platform which started live courses, online courses, I wrote a book with real estate mates too, 10,000 Miles to the American Dream… I write articles for BiggerPockets. I host my own podcast, Freedom Hack Radio, and I’m out there, speaking on stages and getting on a load of podcasts like this, spreading the gospel, because I really truly believe that if anybody’s listening to this podcast, they are in the capacity to be able to become financially free, I believe, in a short period of time, and you’re literally in the best country on the planet to do that. I know this, because I’ve traveled all over the world to 60 countries and I’ve seen how things work.

Break: [16:43] to [18:45]

Ash Patel: If you take a successful real estate investor in any asset class that is looking to syndicate, what advice would you give them? Maybe they were hesitant about taking other people’s money or syndication just seemed overwhelming. They’re doing fine, chugging along… What advice would you give that person?

Bryce Robertson: The advice I would give somebody who is an operator that wants to begin syndicating – I think the biggest thing is right now, you have to have really conservative underwriting. Coming into the economy that is very unpredictable, there’s a lot of possibilities and probabilities, and most of them I believe, are very grim… There’s a lot of things we need to take into consideration, like increasing interest rates, increasing cap rates, property taxes that could massively increase, price inflation on materials and labor… All of these things need to be taken into consideration. That’s what we do with our underwriting. We take every single one of these things into consideration and mitigate them.

For example, for the business model where we refi at year two or three, we’ve got two deals going on like that, that we’ve launched this year, and we have underwritten — even though we can get financing in today’s market for about high 2% or low 3% on interest rate, we actually are underwrote with a 6% interest rate just in case the next two years there is a massive increase in interest rates.

So I think conservative underwriting is the best approach, and to not get too overexcited and have too tight numbers, because we really are coming into unpredictable times.

Ash Patel: Great advice. Bryce, what is your best real estate investing advice ever?

Bryce Robertson: It’s very simple. It’s go out there and just take the next step. If there’s a thought that you have on a next investment or your first investment, just take the first step to get it done. You don’t have to figure out the rest; just know the first step and then you can take the second step from there, but I think most people fail or don’t get where they want to get to, especially in the timeframe they want to get to, because of analysis paralysis of not taking action… All you need to know is the next step.

Ash Patel: Bryce, are you ready for the Best Ever lightning round?

Bryce Robertson: Let’s do it.

Ash Patel: Let’s do it. Bryce, what’s the best ever book you’ve recently read?

Bryce Robertson: Autobiography of a Yogi by Yogananda is actually what I’m reading right now, and I’m finding it very powerful.

Ash Patel: What’s one big takeaway from that book?

Bryce Robertson: One big takeaway from that book is that we are much more powerful as human beings to be able to connect with the divine, and that’s something that I don’t know if that many people really understand.

Ash Patel: Bryce, what’s the best ever way you like to give back?

Bryce Robertson: It’s definitely through my education platform, through my podcast, through my investor group, bringing what I believe interesting investments to the table, especially given the times that we’re in right now… So yeah, definitely through my education, my books, my articles, my podcasts, and spreading the gospel of freedom, the freedom Trinity.

Ash Patel: Bryce, how can the Best Ever listeners reach out to you?

Bryce Robertson: I would say go through our website, propertyworkzusa.com and then click on the “Become an Investor Today” link, and then one of our team will reach out and start a conversation.

Ash Patel: Bryce, thank you so much for taking time out of your day and sharing your story; all the way from Australia to traveling the world and having the determination to live, passive income, growing your income and continuing to travel and not change your lifestyle. You made it happen. Bryce, thank you so much.

Bryce Robertson: Thanks, Ash. It’s been a pleasure.

Ash Patel: Best Ever listeners, thank you for joining us, and have a best ever day.

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