How Do You Invest in Mobile Home Parks With Little Money? with Nasir Ali

Host: Hello and welcome to another expert insight interview. My name is John Golden from Sales Pop online sales magazine, joining you from an extremely sunny San Diego. Today I'm delighted to be joined by Ali Nasir, who is up in Silicon Valley in the Bay Area. I'm sure it's pretty scorching up where you are too.

Ali: Today is pretty warm, but overall we're blessed in California. We've got great weather year round, and I'm grateful.

Host: Absolutely. Ali, you're the managing partner of Rise 360 Ventures and a multi-generation expert in manufactured housing communities. You were raised in your family's manufactured housing community and were active in the business from a young age. You've spent decades acquiring, valuing, operating and revitalizing communities, and today you help investors achieve stable, inflation-resistant returns by transforming underperforming assets into thriving communities while preserving affordable housing opportunities. What we want to talk about today is going from the first deal to funding: how to build a real estate business that scales without you. Everybody wonders, if I start a business, even on the side, how much of my time is it going to consume? Is it going to be like a startup where I have to be a thousand percent in all the time? Tell me about when you first got involved in this business as a child and a teen. What were the first lessons you learned? I'd say they're very different at that age than for somebody coming in later in their career.

Ali: What a great way to dive into this. John, before I get into my examples, I should mention what Warren Buffett says all the time. In fact, I woke up to it this morning as a reminder: if you're not earning while you're sleeping, you'll be working till you die. Another high-level comment I want to make is that a lot of people go from being employed to taking the plunge and becoming self-employed, and many of us stop there because we think we've achieved something. I believe one of your other speakers has brought this up before: we should be talking about going from self-employed to having the business work for you without being needed on a day-to-day basis, and having that passive income. That third stage is what most people don't even consider. Ultimately none of us can continue working with our hands or our minds forever, and that passive recurring income has to be there. That's the focus, if I can frame it that way.

Ali: Now, how do you get that first deal going? For those who have even limited capital and limited resources, it's a matter of tapping into a distressed or real value-add opportunity. For those who don't have any liquid capital at all, I still wouldn't want that to be an excuse. I can give you an example of an income property I got with $2,500 down. If you can't muster up $2,500 by borrowing it from somebody, then we should probably talk a little more to come up with ideas. It was a $25,000 total price with 10% down and seller financing, and I was able to exit within six months.

Host: Now, that's not every day.

Ali: Of course. Those are the ones where results are not typical. But the point is that I have several of those in my history, and it wasn't by accident. It was hard work: finding and sourcing the deals, understanding the fundamentals of underwriting, negotiating the deal, operating it, stabilizing it and then being able to have it operate without me.

Host: I think the big takeaway for anybody listening is that sometimes you tune into a podcast and hear somebody like Ali and think, this sounds great, but I have no money, how can I get in? Ali's just outlined that there are ways to do it. If you find a little bit of money, you can find a way to start with an investment. Maybe it won't be a seven-figure exit. Maybe you'll just get a couple of percentage points on it. It's like the saying: the best time to plant a tree was 20 years ago, the second best time is now.

Ali: Even for those who say there's absolutely zero liquidity, and I appreciate that somebody may be in that circumstance, I would say there's still opportunity. I don't mean to make light of hardships. A lot of people have figured this out: get into sales. For me, I got into sales in the form of being an intermediary for businesses, buying and selling businesses. There I learned how to value and source good deals in mainstream businesses that generate cash faster than commercial real estate. That's not necessarily the long-term play I would recommend for somebody who wants passive income, but it's a way to get in. I was learning all about this industry and commercial real estate at home, more than from any professor or teacher at that young age, although I do respect them now. I was learning so much more from my incredible father as a mentor. Because I didn't have money to get started, since that was his money, and he always told us, "I'm going to teach you how to fish, I'm not going to just give you fish," when I ventured out on my own at 17, one of the things I did was become an appraiser. Not for the money, because you don't earn much, but because I wanted the book smarts and the textbook theories of underwriting and the fundamentals of valuation, which I think are key in any investment. So I became an appraiser of mobile home parks and manufactured housing communities. I was getting the street smarts at home and the book smarts there, aside from any formal education. That's another way for your audience: if you're getting involved in sales, getting the education, putting yourself out there and networking, you're going to come across a deal, you're going to come across people who want to engage in that deal, and you're going to understand the fundamentals. You can get in without money. You just have to step up.

Host: That's great advice. Even if you're sitting there desperate and think you have no money, there are things you can do. Ali, tell us more about manufactured housing communities: what they are for those who don't know, and why they represent good investment opportunities.

Ali: They represent absolutely the best investment opportunity. I know I'm biased, but for rightful reasons. I've invested in a number of asset classes and a number of Main Street businesses over the years. I'm second generation in this asset class by choice, not by sheer luck or by force. It's a deliberate decision. Historically this was known as your grandpa's trailer park. The trailer was the size of a travel trailer back in the day, which has now coincidentally become popular again in the form of tiny homes and ADUs, and it certainly wasn't the best quality. Those travel trailers became what we call in the industry park model trailers, which are updated, modern and designed to be lived in permanently. They even have the exterior feel and facade of a home despite being the size of a travel trailer. They won't have portable tanks like a travel trailer, and they won't necessarily have a permanent tongue to pull with a truck, but they are that size and can be pulled with a truck. Then you go from trailers to mobile homes, and the word mobile is misleading. It's difficult, expensive and cumbersome to move a home. Typically, when mobile homes were placed in a community, they were never going to move again, and residents usually never move again because they own the home. In California, I would say it costs somewhere between $5,000 and $10,000 per section to move, and these homes come in one, two or three sections: single-wides, double-wides and triple-wides. It's cost prohibitive, so they never leave. That's why residents are oftentimes residents for life. They own their home at an affordable price, and they would never want to move it.

Host: As the cost of real estate has changed, I think the stigma around what used to be called trailer parks is going away, especially now that communities are creating some beautiful spaces. People are realizing this is a sensible, affordable option. Even around San Diego, there are great parks near the coast. If you want to live near the coast and you don't have five million dollars, this is a great option.

Ali: We have a community down in San Diego where homes sell for $500,000. Whereas in my community up north near Mount Shasta, a tertiary market, the same home might sell for $50,000. It's about the location. You're right: a regular home in that area might cost you $5 million, and this is a very affordable way, relatively speaking, to live there.

Ali: Going back to the progression from the trailer and park model to the mobile home: the mobile home was replaced by the manufactured home in 1976, because after 1976 those homes started meeting HUD code standards, and in some ways exceeding them. Try taking your stick-built home down the freeway at 60 miles an hour and see how it holds up. These homes do a fine job of still being in place when they get to their destination. And with the modern technology in the last 10 to 20 years, you have pitched roofs, island kitchens and energy efficiency equal to or better than stick-built. You have two-by-six studs instead of two-by-fours throughout the walls, so you have that type of structural integrity. These homes are nothing to sneeze at.

Ali: I'm here in Silicon Valley, John. You talk to a young techie, millennial or Gen Z, who wants to stay within 20 miles of work as opposed to two hours away, and they're embracing living in our communities.

Host: As the cost of living and housing has gotten out of control in certain areas, these become great options. And people coming up now have a different approach. They may want a base, but they don't want that albatross around their neck, because they want to travel and do other things. Being in a $500,000 manufactured home close to where they want to be might be the right decision, rather than buying a single-family home that everything goes into.

Ali: I'm so glad you brought that up. Speaking personally, I'm 56 years old, John, and I've subscribed to that model, so it's not just the young guys. I've been a long-term fan of the subscription model, whether it's my cars, my home or anything else. I don't want to be burdened or locked down. I believe in investing in real estate, of course.

Ali: I don't necessarily believe in investing in my own home, because that's not the smartest way to tie up my capital, especially if you want to live in a larger, higher-value home. This is a tangent, and it may not apply across the entire country, but in California, New York or other expensive places, consider a home north of two and a half million, which is not anything super lavish anymore in California. I want to make that caveat for people listening around the globe.

Host: Just to put that in context: at two and a half million, you're talking about a regular family home, not anything fancy. What you might pay $500,000 for elsewhere, you're going to pay two and a half million for here, and you'll probably get less, not a bigger yard.

Ali: Thank you for clarifying the numbers. The point is that as you go higher in scale, whatever the scale is in your area, rent per square foot doesn't proportionally go up after about three or four thousand square feet, whereas below that it does. If you're going to be in a 5,000-square-foot home, your rent won't be the same per square foot as a 2,000-square-foot home. You can live in a larger home for less money per square foot, without all the headaches and without being locked into a 30-year mortgage. I would rather have the 20 or 30 percent you'd put down go into an income property, hedged over multiple units with much lower risk. And being able to say you own your home, you don't really own it unless you own it outright. We're all carrying a document in our safe or lockbox that says we have control and possession of a property. Yours happens to say ownership and mine happens to say renter, but if you have a mortgage, neither one of us is the outright owner.

Ali: I don't get caught up in those things personally, whether it's cars or homes. But going back to why I'm so bullish on this asset class: it's true all the time, but especially in these times, with so much uncertainty and volatility in the market, sanctions, the global power dynamic and the competition. In markets and economies with so much downturn or uncertainty, I would argue for being in hard assets, and within hard assets, something essential like shelter, and within that, the most affordable form of shelter. That's always in demand. In every downturn we've experienced since we got into this business, whether you talk about the savings and loan crisis, the dot-com bust or the more recent ones, we've seen an uptick in our business.

Host: Somebody recently said storage units make sense as a boom industry right now, because people are downsizing and traveling and using storage more than in the past. It's the same thing: look at how the behavior of society is changing and what pressures are on it. The economic pressures, the global pressures and changing lifestyle habits all coalesce around manufactured housing communities as an asset class.

Ali: I'm glad you brought up storage, because the audience may be thinking, why not storage or some other asset class? You don't have to be a genius to make money in any commercial real estate asset class. I love storage and parking too, because they're the same business model as what I'm doing: small areas of real estate leased for relatively short periods for the highest rate of return per square foot, with maximum efficiencies and hedging my bets over multiple units. That said, I'm in the manufactured housing space, formerly known as the mobile home park space, primarily because it's an absolute essential. I have made money in parking. That $2,500-down business I mentioned was actually an airport parking business.

Host: Okay.

Ali: I enjoy it and I love it. But if I had to be in only one asset class, and it's the one I'm only in right now and have been for years, it's this one, because it is an essential. I often hear storage folks rightfully say storage is recession resistant. I believe that. I just wish I could get a megaphone and make the point that if that's recession resistant, this business is absolutely resilient.

Host: Because with a storage unit, you may have it for a number of years and then decide you don't need it anymore. In your situation, you're living in your home. There's an extra level of permanency to that, and you own it.

Ali: Exactly. That's the number one reason why this is the best business: I have all the upside of commercial income real estate without the typical landlord headaches, John. If I have 300 units, I don't have 900 toilets. I don't have all the walls to paint, the carpet to replace and the electrical issues that come with 300 units. I just have 300 lots of dirt that I'm getting rent on.

Host: Explain the economics of the park itself. There's the cost of the home, but isn't there also the land it sits on?

Ali: Correct. As the operator of a community, you're buying essentially the dirt, the land, the infrastructure, which you should be really careful about, especially the underground utilities, and the amenities. Then you're renting out the lots. That's the conventional business model. The value-add play is often filling vacancies, and that's why you're able to buy a community for maybe half of its stabilized value: it's essentially half full. So how do you solve that gap? Lenders, appraisers and brokers, for good reason, do not want the owner of the community to also be the owner of the homes. You can't just buy homes as the owner-operator and put them in and rent them or sell them, because now you're mixing income from personal property, the home, which isn't tied directly to the ownership of the land, with income from real property. You essentially become unbankable in the eyes of many.

Ali: For that reason, we set up a vertically integrated infrastructure, and many people have followed this business model since the early pioneers, including my father. I was privileged to be a sponge and part of the development of this model when I was 12, 13, 15 years old. It's vertically integrated not just with property management and asset management, as you might hear in other asset classes, but also with a dealer arm where we buy homes wholesale and sell retail, and, where applicable, finance the home for the end buyer and earn a compelling return. Check your own laws and get your own legal advice. Interest rates on mobile and manufactured homes average about three points above mortgage rates for regular stick-built homes. That's market. You would see at least 9 to 11 percent, and in higher-risk loans it wasn't uncommon to see 13 to 16 percent on those notes. Those components are profitable businesses in their own right, but would I be in those businesses just for their own sake? Absolutely not. I'm in them because they're like an inverted funnel: filling my vacancies, increasing income at the real property and therefore increasing the asset value. Once I get stabilization, I do a 1031 exchange or some other exit, and then repeat.

Host: We talked earlier about opportunities with no money, and the two and a half grand you got in with. Those exist. But realistically, what's the entry point if you want good ongoing income?

Ali: For starters, try to get at least 50 units. That might sound daunting, but 50 units in a mobile home park or manufactured housing community is different from 50 industrial or multifamily units. Get to 50 so you have the economies of scale and efficiency I was talking about. I would say two to three star would be ideal. One star might be too great a risk. You're going to get a much higher cap rate and it's going to look really sexy on paper, but if you can't walk in comfortably without getting shot, think twice. And the five-star parks, like in the coastal communities we talked about, would not be the best place to start either, even if you had the funds, because they're probably already stabilized or close to it, so you won't have as much value-add. You're looking at about 65% LTV, so 35% is what you need up front. In addition, you should be raising enough for capex and for carrying any loss or minimal income in year one or year two. It is a heavy lift up front, make no mistake about it. This is not for the weak or the faint-hearted. Getting vacancies filled, dealing with installers and transporters, and buying and setting up homes is a capital drain and requires experience and wherewithal. It's not a walk in the park. But the great news is that once that's done, you're back to the Warren Buffett philosophy. As I mentioned, our residents are usually residents for life. Having that passive income, or the closest thing to it that I've ever seen, is very likely in this space.

Host: Thank you so much, Ali. All of Ali's information will be below this video. Before we go, remind people about you and what you do.

Ali: We're in the mobile home park and manufactured housing community space. We help people by helping other people. We help residents buy their homes by helping investors invest passively in mobile home parks and manufactured housing communities, making it a win-win-win for the resident, the investor and ourselves. You can find us at rise360ventures.com, where you can get a free detailed report, I think about 80 pages, on this asset class. You can also find us on social media: YouTube, LinkedIn, Facebook and more.

Host: Fantastic. Thanks again, Ali. Thank you for watching and listening, and I'll see you all again very soon.