Andrew Keel's Financial Mastery: From Mobile Home Flips to a $100 Million Real Estate Empire

Embark on a journey of financial transformation with Andrew Keel, as he shares the blueprint for building a $100 million commercial real estate empire from humble beginnings in mobile home flipping. From the aftermath of his parents' bankruptcy to his meticulous approach to personal finance, Andrew's story is a masterclass in the pursuit of financial independence. Our chat uncovers the pivotal moments and strategic decisions that led him from being a W2 employee to a real estate tycoon, emphasizing the critical role of investing in cash-flowing assets. With a mix of dedication and savvy, Andrew unveils how he saved half his income while nurturing an unshakeable resolve to take control of his financial future.

As we navigate the niche world of mobile home park investing, you'll be privy to an insider's perspective on the unique financial mechanics and operational challenges of this lucrative market. Andrew pulls back the curtain on tenant relations, occupancy maintenance, and the intricate dance between maximizing returns and improving the quality of life for residents. He also sheds light on broader market trends, such as the scarcity of supply and the increasing demand for affordable housing, offering precious nuggets of wisdom for anyone looking to dip their toes into the stability of mobile home park cash flows.

The episode culminates with Andrew imparting his ethos of financial discipline and the art of intelligent investing. Discover how frugality and early savings can supercharge the path to financial freedom and why emotional intelligence, particularly in sales, can be your greatest asset. Andrew's candid insights into the compound effect of savings and the importance of self-discipline over raw intelligence are not just inspiring but immensely actionable. If you're aiming to craft your own success story or elevate your investment game, this conversation with the Keel team is packed with motivational anecdotes and practical advice that can set you on the right trajectory.

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Transcript

Speaker 1: 0:02

Hey everybody, david McElwain, with another great episode of Bicker Golden Handcuffs, I'm excited to have with me today Andrew Keele. He has built a commercial real estate empire worth over $100 million. In a little over seven years, he went from flipping mobile home trailers to owning over 50 commercial properties, including 42 mobile home parks and 12 self-storage facilities. He invests for cash flow and is a huge fan of buying from retiring mom and pop owners.

Speaker 2: 0:28

Andrew, welcome to the show Thanks for having me, David.

Speaker 1: 0:32

So I don't think I was able to tell everybody in the beginning, but when we were talking a little bit offline, you said that you had a W2 job a long time ago and you can hardly remember it. What's it like to hardly remember having a W2 job? How does that work in your brain?

Speaker 2: 0:51

Yeah, that's interesting. Back when you had the W2 job, there was clear hours, right. It was okay from eight to five I'm plugged in, and then on the weekends it was a complete open canvas of things we could do and just time right. And I think when I started my own business that changed right, You're kind of always on and checking things, but now that we've kind of built it to this scale, it's just awesome because I just remember thinking, oh my goodness, this $150,000 a year W2 job is everything, and if I lose this I'm done, for I don't have anything to fall back on. My parents didn't have a lot of money. They went bankrupt when I was in college, so it was a lot of pressure.

Speaker 1: 1:43

Yeah, I can understand that. Fortunately, my parents never did go bankrupt, but my dad had a W2 job until he lost it at 62, and then he never had another Classic structure. So do you mind if I ask the questions about your parents' bankruptcy when you were in college and what you learned from that, because that's kind of personal, but I think it's really germane to the idea of breaking our handcuffs.

Speaker 2: 2:07

Yeah, yeah, that changed everything. My dad he started a hurricane shutter business down here in Daytona Beach, florida and this was 2007 that he started this and invested a bunch of money and then 2008, 2009 came and nobody was getting shutters. He just had all this overhead. It was also a couple of years there, like 2006, 2007, there was a couple of big hurricanes that came through. Well, I mean, everything dried up right and he took out a second mortgage on our primary residence to take a loan out to get money, capital, to go start this business, and then it went belly up and he had to shut it down. They foreclosed on our house that I grew up in, that we lived in for 20 years and that was rough. He took out the second mortgage at the peak, like 2006, 2007, and then put all of that into this business and it was brutal. I just remembered them having a downsize from a life that they once had and, yeah, there's risk to start a business and that was just bad timing.

Speaker 1: 3:20

I hope they're doing great today.

Speaker 2: 3:23

They're doing much better. Yeah, much better. He started another little business that's just doing better and they downsized into a condo out on beachside. But yeah, I mean, I was just, I was in college, all this was happening and it was just like a weird time. But I just remember thinking like, geez, I wish I could help, right, and I'm young and I just, I kind of just I couldn't, I wasn't ready yet, I didn't know what. I didn't know you weren't in the position.

Speaker 1: 3:51

I wasn't in the position, so you know. I know this is kind of an atypical spot and we'll circle back. I promise what did you take away as the biggest learning? Watching your dad go through that while you were in college.

Speaker 2: 4:05

Yeah, I mean motivation was the one thing that, like I was like I need to understand personal finance because my dad wasn't the type to save for retirement. He was, you know, he was the money was coming in and it was going out, you know, the back door right away. There was not like a well thought out retirement plan, and I mean not that he worked hard, you know, it was just this wasn't like in his repertoire to, like you know, think about personal finance and savings. It was just the answer to the problem was always just make more money, you know. And he was in sales his whole life, so he had some really good sales jobs that made a ton of money and it was just say, if there's ever a money problem, just make more of it. Right, like, work harder and sell more the next month and we'll dig out of it. So I think that that was the biggest lesson was like, hey, I need to read more personal finance books, I need to like, really understand, you know, personal finance.

Speaker 1: 5:04

Quite honestly, yeah, I love that because prior to this career I was a sales executive and money for me is a renewable resource Totally, and people can view money one of two ways it is a finite resource, aka scarcity, or it's renewable and it's abundant, and the beauty of having money as a renewable resource mentality is that I know I can always make more Totally.

Speaker 2: 5:29

The downside is you talk through so well here, andrew is that sometimes people forget to plan for the alternative and I'm guessing that this had a big impact on you starting the mobile home park investing and that's kind of what my read was is, if you learn this as a young adult, as a young adult, it's going to create a whole lot of demand to not be beholden to anybody else 100% and like my whole mindset was, hey, I want to control my own destiny, right, like I got this sales job, but the whole time I was saving 50% of my income because I had read three or four books on building assets and not blowing it, and I knew that I wanted to have a family, and I wanted to have a big family with multiple kids, and I knew that that was coming right.

Speaker 2: 6:21

And a lot of our youngsters nowadays they just don't think like, hey, when am I going to start a family? Is it 28?, is it 30?, is it 35? But you want to have your ducks in a row before then, and I was investing, I just knew I wanted to create passive income somehow. So I literally started at the lowest denominator, which was individual trailers, individual mobile homes that I could buy for $2,000 and then fix up a little bit and then sell to an end user through monthly payments and a small down payment and create that mailbox money. The mentor that I followed was Lonnie Scruggs and he teaches a course it's like deals on wheels and how to create mailbox money. So that's how I got started investing in manufactured housing.

Speaker 1: 7:08

So I know very little about manufactured housing in mobile home parks In Colorado, where I live. I grew up in Oklahoma, so there's an old joke that what happens in a divorce? You lose your wife and you lose the trailer, or what two things are common. In a tornado, everybody loses a trailer. And I forgot the rest of the punchline. So I don't have a whole lot of experience in the mobile home park world. But you're telling me that you would buy a trailer for $2,000 and then you would create an added value. Flip on that.

Speaker 2: 7:44

And is that something?

Speaker 1: 7:44

that's still happening today in South Florida.

Speaker 2: 7:49

People do this everywhere Lonnie dealers but basically you'd buy. So people when they're selling their mobile homes and they live in a community, they're very motivated because they don't. You know, these are affordable housing tenants. They can't afford to pay two house payments. So if they're paying lot rent to the community for a vacant home, that could be $450 a month and then they've moved into a new home. So they're very motivated.

Speaker 2: 8:14

So when you find one of these homes that comes up for sale, you can genuinely get a pretty good deal on that. So you can buy a vinyl sided shingle roof house, like I did in this case, for $2,000. And then you know, I would invest into it a little bit. I was painting it and doing some floor work, things like that and then I would list it on Craig's list and have 25 people that wanted to buy it from me a month later, you know, for $2,500 as a down payment and then $250 a month for five years. And I did 19 of those deals and that got me out of the rat race. So it was hey, I had that monthly income coming in that was offsetting all of my expenses. My car was paid off, had very low rent and everything was paid off. So then I just had this freedom. Now that I didn't have to rely on my W2 job for income to cover my expenses, I was able to, like, start flipping houses and then eventually get into mobile home park. You know, full mobile home park syndications.

Speaker 1: 9:14

Yeah, fascinating. So I've got a lot of apartment syndications knowledge. So what would you say is the distinction between a mobile home park and an apartment, multi-family apartment complex and the operational differences I think about? I've got a lot of stereotypes and I want to kind of debunk some of those for the listeners because I think sometimes why am I not in mobile home parks? I don't have a really good answer other than it's just not my demo.

Speaker 2: 9:40

Yeah, you got to know what you don't know, right? And I think a lot of people that stigma scares them away of this trailer trash, slumlord, kind of eight mile, you know, or an episode of cops, you know, is this first thing that comes to their mind? Right? But I would say that, you know, out of all of the 42 mobile home communities that we own, most of them are in the secondary markets in the Midwest that are blue collar. The stigma, I guess, is not as strong in the Midwest where people it's normal for them to live there as like their first home out of you know, out of high school, out of school, and kind of save up money and save money to be able to buy a house eventually. So I think the stigma, you know, scares some people away and that's a good thing.

Speaker 2: 10:24

Obviously, in our model we want the tenants to own their own homes, so they're just paying lot rent. So you know, I owned several single family rentals and I just remember, you know time and time again where, hey, an appliance would go bad and then I'd have to come out of pocket and you know my whole you know something would go bad, a heater, something would go bad, and like my whole annual year worth of cash flow would be blown where. With mobile home parks, you know, typically they operated 35% expense ratio. 35% of the income coming in is used for expenses, so less repairs and maintenance. But I will say it's operationally intensive, it's property management intensive, it's affordable housing. You know we collect on average 97% every month, but by the fifth of the month when rent is due, you know, with a grace period we've probably only collected 80 to 85%.

Speaker 1: 11:19

So the rest of the month, you got to work chasing, so you got a big delinquency. You've got a big late fee business then I imagine as well but you know sometimes we'll waive those.

Speaker 2: 11:29

You know like it's really about keeping the tenant there, having that sticky long-term tenant. But you just got to work with people sometimes, you know, because they're very vulnerable. You know if one car repair happens it can throw off everything. It could lose their job because now they can't get to work.

Speaker 1: 11:45

You know, if there's not a bus stop nearby yeah, it's a domino, sure, and so with the Class C apartment complex, I think that you're talking about some very big similarities here. Like with the Class C apartment complex, you're probably going to be operating somewhere around a 50% off-back expense ratio and you're at a 35%, and so I'm assuming that 35% really goes into taxes, into insurance and management costs and then a little bit of maintenance on the landscaping and the upkeep. Is that about what it is?

Speaker 2: 12:17

Yeah, yeah, I would say that's a good generalization of the expenses.

Speaker 1: 12:21

So how do you deal, how do you work through the challenge of you miss somebody, going bad debt and then wanting to vacate If they own the home. Are they literally relocating the home off of your lot and then you got to bring in a new lot? And if so, is there a cost for you on that kind of thing?

Speaker 2: 12:39

Yeah, but that's very rare because it's so expensive, David, to move these mobile homes.

Speaker 1: 12:43

That was my next question. Typically, what will?

Speaker 2: 12:44

happen? Yeah, typically what will happen is we'll evict someone and then they'll have 30 days after they're evicted to remove their home from the property, and they will not do so. So then we'll file for abandonment to get ownership of their trailer and then, once we get a title, about 30 days later, we'll go look at the home and say, hey, do we want to renovate this thing or do we want to tear it down or do we want to pull it out of here? And a lot of times we'll renovate it, put in $4,000 to $5,000 and then reoccupy it, sell it again, get a new tenant in there that's willing and able to make the rent payments.

Speaker 1: 13:20

And what do you think, what do you see as the difference, because you also do self-storage. So what do you see as the difference between the mobile home asset class and the self-storage asset class?

Speaker 2: 13:30

Day and night difference is, you know, self-storage is more of a commodity business where it's very price driven and price sensitive and that's how you're going to get move-ins. Where mobile home parks is less right, it's where someone lives. So you know you could come in and raise rents. You know, make some improvements first, that's what we're, you know, pride ourselves on, but then raise rents. You know, say 25% to get up to market and the turnover will be a lot less because you know these are where people have their homes and the homes are very expensive to move. So they will, you know, they will pay the higher rates and stay there where in storage, it's very common for people to bop around and to move out.

Speaker 1: 14:13

Right, and you know, obviously storage is a much shorter timeframe for leases, right? Because storage can have leases that change on a monthly basis or on a six-month basis or on a three-month basis or all kinds of stuff, and I assume you're doing multi-year or single-year leases to make life simple for you guys, right?

Speaker 2: 14:30

In the mobile home communities. Typically it's an annual lease that will auto renew yeah.

Speaker 1: 14:35

Okay, perfect. So tell me, what do you see as the inherent benefits of mobile home park versus the risks of mobile home park investing as a passive investor?

Speaker 2: 14:48

Yeah, I think the biggest thing that investors have to realize is, hey, there's this supply constraint factor. There's more mobile home parks every year that are torn down than there are new ones being built. So it's like the only commercial real estate asset class that has that supply constraint. But the demand is so off the charts for affordable housing that you know we're seeing mobile home parks that have been 100% occupied for 10 years because it's that in demand in that market for affordable housing. So it's very interesting there, I would say. Also, there's really good financing available.

Speaker 2: 15:27

Agency lenders are lending in the space Freddie, freddie Mac, fannie Mae and they are not just going to lend on anything. It has to meet certain requirements. The property cannot have sidewalks that are heaved up or deferred maintenance. That's happening. So there's a win-win here to be struck, where you're creating a better quality of life for the residents and you're keeping these affordable housing units in a market by improving a mobile home community. But yeah, rents do have to be increased to market so that it makes sense from an investment standpoint. But we're keeping those affordable housing units. We're not tearing out all the trailers, giving people 60 days to move out and then making a subdivision out of the land or building apartments.

Speaker 1: 16:14

Is that the most common? Is that the thing that's happening the most to create the shrinkage in the asset class is that people are taking the homes, moving them to vacancy and then re-purposing the land for other addition.

Speaker 2: 16:28

Exactly. Yeah, they'll come in, they'll buy it for redevelopment or, since it has the multifamily zoning, they can come in and say okay, we're going to pay you a fee and you can move your trailer out, or you can leave it here and we'll get rid of it for you, but you've got to be gone in 60 to 90 days and these poor people that have invested in their trailers they don't have anywhere to move it. Like, there was one just in Fort Lauderdale that I posted on LinkedIn and they gave people 90 days. They said here's $11,000. You can use that to move your home where you want to go, but you've got to be out 90 days.

Speaker 2: 17:06

And they scrapped 200 mobile homes out of there and now they're going to build an apartment complex because it had that multifamily zoning. So it's just obviously it's the highest and best use argument there and people there's this stigma, like we talked about earlier. People don't like trailer parks. They don't want to live behind a trailer park. So you have this NIMBY plus you have people that are. The tax revenue from an apartment complex is a lot more than from a mobile home community, because the mobile home is a personal property Exactly so.

Speaker 2: 17:39

It's just these conflicting issues that are resulting in a lower supply of the asset class.

Speaker 1: 17:47

So I'm going to kind of dig in to something here which is interesting because I own a residential real estate brokerage as well as a private equity commercial firm and I think that you two are a residential, have a residential license, correct? I have a residential license, but yeah, I don't don't really use it, Just kind of but you talked about real property and for our listeners there's a big distinction between real property and personal property and I think, from an education point of view, if you're an investor, it's something that's valuable to understand.

Speaker 1: 18:16

And can you give a little spin on the difference for the investor from real property versus personal property.

Speaker 2: 18:27

Definitely. I think the best way to look at it is, you know, comparing the individual mobile homes to vehicles. Right, like they have a title, just you know mobile homes have a title, just like your car has a title. And you know your annual taxes are probably pretty similar, right, because the values are probably similar. So you know you may pay $140 in personal property taxes, you know, to the local DMV where, if you had a single family house, you're going to be paying, you know, a heck of a lot more than that because of the real property, you know, and the structure and however your assessor splits it up. But that's really, you know, really important from an allocation standpoint, when you know when you're buying these assets, because you can allocate a certain percentage to personal property if there's a lot of park owned homes and that you know will have different ramifications to kind of help maybe keep down the real estate taxes.

Speaker 1: 19:20

Is that skyrocket. The benefit of cost segregation then as well, because obviously personal properties is a depreciation schedule that's different than the depreciation schedule of real property.

Speaker 2: 19:31

Yeah, so it you know, typically to get a cost segregation study done. You know it's around $4,000 to $5,000. But yeah, there's more to look at right and more depreciation schedules to account for.

Speaker 1: 19:47

So if you're one of the investors is looking to learn more about mobile home parks and you don't know a whole bunch about it kind of like myself how do I start learning more?

Speaker 2: 19:57

Yeah, there's some great podcasts that are free resources for you. There's a good forum. Bigger pockets has a mobile home park investing forum. That's good. Mhu is like the leading educator in the space. They do a virtual boot camp and in person boot camps. It's like a three day boot camp bus tour, the whole bit. I've gone to that three times. It's a great, a great deal with Frank Rolf who runs it. You can learn a ton there. But yeah, there's also a forum that MHU provides. And then there's some Facebook and LinkedIn groups that are you have over 7000 members that you know active operators in their asking questions.

Speaker 1: 20:37

Wonderful. So we've been talking now for about 20 minutes and I try to keep these things at around half an hour or so and it's been fascinating learning a little bit more when you think about all these things you've gone through. You know watching your parents bankruptcy when you were in college and then getting W2 job and then saying you know, I'm going to go build it and you started with basically it sounds like zero resource and you built it from the ground up. What do you think is the worst piece of advice that you were taught or that you followed along this journey?

Speaker 2: 21:08

Yeah, you know, I've marinated on this, David, and I saw that you're going to ask this question. And you know there was there was a couple of different ways I could have gone with this, but I'll, never, I'll never forget.

Speaker 2: 21:22

You know, when I first told my father that I was really into mobile home park investing and that I was, you know I was considering going this path and his first response was Andrew, you should not go into, you know, investing in trailer parks. They're dangerous, you know. You don't want to be this slumlord, right? That was what his response was, and I think it's that stigma that scared him and others. So it was just you really have to have some inner confidence, you know, to be able to just pursue what you feel is right and what what lines up with your, your goals.

Speaker 1: 22:02

Well, so that's a really direct piece of advice. I remember when I left my first corporate job, my father told me I was throwing away a great career and I left a job where I was making $23,000 a year to go take a job where I was making $25,000 a year, and that was a 10% raise.

Speaker 2: 22:20

Wow, I cannot imagine. I mean to go back on the Golden Handcuffs piece it didn't quite use that exact-. Yeah.

Speaker 1: 22:28

Say it again, pardon.

Speaker 2: 22:29

To go back and talk about the Golden Handcuffs piece, because both of my brothers my dad was in sales, I started out in sales.

Speaker 2: 22:36

Both of my brothers are in sales right now and they have, I mean, very good jobs with Fortune 500 companies and they're doing really well.

Speaker 2: 22:45

Both of them are in the President's Club. It's just, I can't stress how we all have limited time on this earth and you know, to have the ability as an entrepreneur to take my daughter to swim lessons this morning she's, you know, she's taking ISR swim lessons and to be able to work out every day and not, you know, have to wake up at 4 am to do that has just been a huge advantage. And even if you're making $250,000 a year somewhere, you know really like every dollar when you're young and when you're first starting out is so important with the compounding effects. So I would just like really stress to not overspend and try to get on that, like you know, keeping up with the Joneses right, you need the new car, you need this, you need that. Your first 10 years, just live poor and just invest and it will set you up for success for the rest of your life, which is a heck of a lot longer than 10 years.

Speaker 1: 23:46

I'll give a testimonial of that concept right now. I was a W2 sales guy and I had a home run gargantuan year before my kids were born and I deposited the maximum amount allowable for each 529 plant the year they were born. My daughter is a junior. Her school was paid for. Her grad school is paid for as well through the same 529 plant. My son is a sophomore. His school is paid for. His grad school will be paid for through his grandfather's 529 plant. He's an older school in Europe. My daughter just finished doing a semester at sea and she's going to school at a you know, at a big 10 university out of state. And so you're right, the compounding effect is massive One contribution One contribution 20 and 21 years ago.

Speaker 2: 24:32

Provided all of that. That is so awesome.

Speaker 1: 24:35

Yeah, so I talk. That's how I broke. That's one of the ways that you break a golden handcuffs is you take plans and you make plans. And I knew that if I got my kids college funded early, I could take that to build real wealth In a different direction, and that's how I got to where I am today.

Speaker 2: 24:51

That's so amazing.

Speaker 1: 24:52

I'm going to take that as your best piece of advice is that conserve money and live for, and it's not sexy and as sales guys.

Speaker 2: 25:00

right, it's not sexy. You want the cool hot rod car, you want to go on the cool vacations. You know like it's really tough. Like I see it in my brothers, I'm like, dude, you got to save your 28. Like you got to double down on this because it's going to free you up. You know, 10 years and now that I'm 35 and I'm financially free, I, that's the number one thing. It doesn't take a huge high IQ to do this stuff. It takes that self discipline.

Speaker 1: 25:28

It does. It does take self discipline. It's not a high IQ job in some ways it is. In others it's almost a high EQ job. You know you got to have the emotional quality to deal with people Fascinating, to think about it in the terms like I never owned a Rolex. The book that I read that was the most compelling to me was a millionaire next door before rich debt came out.

Speaker 1: 25:50

That's good. I've read it, yeah yeah. And then the millionaire mind and the millionaire mindset and there's a whole bunch and you know, all those things taught me a great deal. So great conversation. Andrew, tell me, is there a thought or a quote that moves you day in and day out that you'd like to share with our listeners?

Speaker 2: 26:09

Oh man. The first one that comes to mind is the harder you work, the luckier you get. You know, things kind of fall into play and just being in the right place at the right time, you know, pays dividends.

Speaker 1: 26:24

I love that. The harder you work, the luckier you get. So accurate it's, you know, just to date ourselves. There was an episode. There was an NFL football game this weekend and a little girl was held up by one of the Kelsey brothers to meet Taylor Swift. And I saw her interview this morning and she said I am going to meet her and she figured out how to get to that side of the stadium during the second half and she presented herself. And that's hard work and this five year old girl.

Speaker 2: 26:53

She wasn't sitting down in front, she came she moved.

Speaker 1: 26:57

Wow, I saw her interview this morning on the Today Show and she moved. She swapped tickets with somebody else who had already tried to get there and hadn't gotten there. So teamwork, yeah, plainty Hard work. It shows us all that stuff.

Speaker 2: 27:12

So tell me what's the best way, go ahead. I got a circle back. I showed my wife that story about you know Jason Kelsey picking her up and my wife. You know who's 32 goes. Wow, that girl is really lucky. I'm jealous. She's a Swifty.

Speaker 1: 27:29

If you couldn't, tell my 20 year old son's a closet at Swifty and will deny it to the, to the to the death. Oh, that's awesome. Yeah Well, it's been great talking with you, Andrew, Tell us, tell us if the listeners want to get ahold of you or learn more about the Keel team, what's the best way to contact you.

Speaker 2: 27:49

Yeah, the best way would be via our website. I have a free ebook on there that talks about mobile home park secrets the top 20 secrets I've learned from investing in mobile home parks. But that's just keelteamcom, wonderful.

Speaker 1: 28:08

Well, thank you so much for joining us. Andrew and you've been listening to another episode of Brick or Golden Handcuffs.