Jefferson Lilly is the co-founder of Park Avenue Partners, which invests in mobile home parks across the country. Jefferson was an early investor to get into the mobile home park space. In this episode of Real Estate Launchpad, he explains how he discovered this class of property to invest in, why he believes mobile home parks continue to be a great investment even at this point in the market cycle, and how you can best participate in this attractive investment class. You don’t want to miss this conversation, so be sure to listen.
Jefferson’s first mobile home park deals
Jefferson spent a year and a half to find his first mobile home park deal. With interest in real estate investing, he began to research online. Looking at apartments, he would sometimes stumble on mobile home parks that were priced better and had a higher yield. He was intrigued by the idea of investing in a mobile home park and wanted to know if they were truly better than apartments. He read books, talked to people, and built an advisory board of those who knew the business. For his first mobile home park investment, he used his own money. With no investors, he borrowed about 80% loan to value. His second deal was very similar. It was not until afterward that he began to raise outside capital. Jefferson continued his day job for a year after his first purchase, and then he began to transition into the niche of mobile home park investing. Be sure to listen to hear more of Jefferson’s journey to a mobile home park investor.
What managing a mobile home park looks like
A mobile home park has a park manager that handles all 3-figure issues. These are anything under $1000 – collecting rent, posting late or eviction notices, or handling issues like a main sewer line backup. Jefferson explains that in his early days, he would get involved in 4 or 5-figure decisions such as should he buy a mobile home and sell it one a rent-to-own note… Now, he hires someone to make those decisions, and he is only involved in 6 or 7-figure decisions.
Jefferson gives a spectrum of how management intensive mobile home parks are ranging from a seniors mobile home park where the residents own their own homes (least intensive) to a park where the landlord owns and rents all the mobile home parks to families with kids (most intensive). These are very difficult to manage because you get to own all of the maintenance of the homes as well. While not all of the homes in Jefferson’s parks are tenant owned, 90% of them are, which makes the headaches of managing a park decrease heavily.
The transition from investing in mobile home parks to raising money for deals
Jefferson began by using his own money to invest in mobile home parks. He then began to partner with people to do deal-by-deals. These would be single assets, where 1-7 people would fund the acquisition. He would simply put the word out there through his networks that he had a goal, and money would be raised in a timely manner. Because he had a track record with partners, in 2015 he began to raise money for his first fund. This fund raised 5 million dollars, with his second fundraising 14.3 million in merely 7 months. Currently, Jefferson is on his third fund and has raised about 5.1 million in only 90 days. He says that because he does not charge fees, the amount of money he will raise is based solely on the deal flow.
Raising money for a fund – the basics
Jefferson explains that if you are going to raise money for a fund, you should always hire an SEC attorney, who is experienced in the field. The law is vague when it comes to raising money from friends and family. There are very few regulations – you don’t have to register with the SEC, can raise unlimited money from unlimited people, and can use whatever agreement you would like. However, when raising money from “strangers,” the fund must be registered with the SEC. There are two types of funds: 506B and 506C. A 506B must have a Private Placement Memorandum in place, be registered with the SEC, and have up to 35 investors. It also mandates that you cannot advertise and you must have a prior relationship with investors. A 506C is also registered with the SEC, but it allows you to advertise and solicit investors. It mandates that you only take money from accredited investors. Don’t miss Jonathan’s insights further into this matter on this episode.
In This Episode Jefferson Lilly says…
- [1:35] Who he is and what he does
- [6:32] His first mobile home park deal
- [9:05] On freeing yourself from your corporate job
- [14:07] What managing a mobile home park looks like
- [19:21] How management intensive owning a mobile home park is
- [24:13] Pad-only vs. owning mobile homes
- [26:19] What returns you can expect from investing in a mobile home park
- [29:20] How to find deals
- [30:45] The transition from investing to raising money
- [38:58] What is really involved in raising a fund
- [50:38] The prerequisites for building a fund
Resources Mentioned In The Episode
- Jonathan@MultifamilyLaunchpad.com – Learn to be an asset manager and Investor
- Bellwether Enterprise(sponsor) – contact Will Oldham firstname.lastname@example.org
- Website: www.www.Loopnet.com
- Podcast: Mobile Home Park Investors
- Tool: www.VerifyInvestor.com
- Private Placement Memorandum Attorneys: www.CrowdFundingLawyers.net
Connect with Jefferson Lilly
- Phone: 415-228-6900