The Hidden Goldmine in Parking Garages and Mobile Home Parks

Aviva (00:00)
This week's listener of the week is Marissa Joey. Marissa, thank you so much for leaving us a five star review. And for those of you listening, if you leave us a five star review below, you might be next week's listener of the week, week, week. This week on Commercial Real Estate Secrets, we have Kevin Bupp. Kevin is the founder and CEO of Sunrise Capital Investors.

He is also the host of the Real Estate Investing for Cash Flow podcast. Kevin, thank you so much for being on the show today.

Kevin Bupp (00:36)
Thanks for having me. I'm excited to be here.

Aviva (00:39)
Hey, Kevin and I were laughing before we jumped on the show because I was on his show. What feels like a lifetime ago, but the tables have turned. Kevin is now on our show about to bring all the listeners a bunch of value. Kevin, for everybody listening, who are you and how did you land yourself on Commercial Real Estate Secrets, the podcast?

Kevin Bupp (01:01)
Yeah, no,

I appreciate that. So I mean, as you had mentioned, I'm the co-founder and CEO of Sunrise Capital Investor. So we're a private, know, a private boutique real estate equity firm that specializes in two verticals, one being manufacturer housing and the other being parking investments. So parking lots, parking garages throughout the country. I've been a full-time investor since I was basically 20 years old about my first rental property. When I was 20 years old, I'm 45 now. It's all I've really done. Never had a real job of any sorts.

been at this game for quite a number of years, decades, I guess you could say, and, uh, got in, uh, you know, I've, I've, I've owned hundreds of single family homes. I many different types of commercial real estate over the years. Well, it's been landed kind of by accident on mobile home parks back in 2011, started buying, communities and now we, we own them in, uh, today it's 17 different states, Northeast, Southeast and some of the Midwest. And, and then in addition to the mobile home parks also.

Again, as I mentioned, own parking as well, parking garages mostly, but also some, parking lots and some great locations across the country. So that's the, really quick and dirty version of me in the background and who we are what we do.

Aviva (02:07)
So, Okay, if you could choose one product type, mobile home parks or parking garages, which one?

Kevin Bupp (02:14)
Yeah, and I mean, they're both great for their own, they've got their own merits. residential housing, I think it's very easy for me to understand. It's one of the, basic needs, everyone needs a roof over their head. And we've got a massive affordable housing crisis in the country. And mobile home parks fill that void incredibly well. And so if I had to choose between the two, I would choose mobile home parks.

again, for that reason, mobile home parks really are the best option to help put a dent in that crisis.

Aviva (02:41)
as someone who analyzes real estate every day, manages real estate, buys real estate, talks to people like you about different product types, I find that there's two things in common with mobile home parks and parking. And it's both are minimally intensive in terms of management.

I, this is not a breakthrough. This is probably exactly why you have these, you run these two product types.

Kevin Bupp (03:11)
Yeah, minimally management intensive. I don't know if I would define mobile home parks at least as that. Yeah, it's we're vertically integrated. So we have our own in-house property management. It's, it's it's the largest part of our organization as far as staffing. And, seemingly, everyone paid the rent on time each and every month and everyone took care of their homes and, just

didn't have staff turnover, you didn't have challenges like people that lose their jobs, right? Like things like that, then I would say that it would be, a very simple and easy to manage. But when you're dealing with hundreds or really in our case, thousands of different personalities, different individuals, I mean, that, that, that by itself, creates, just normal challenges, but then add on top of that, there's financial responsibility, again, just, enforcing neighborhood rules on a regular basis and

Just so there's complexities that exist there that I wouldn't wouldn't classify it as easy. It's not like, surely there's nowhere near like a triple net like, Walgreens or CVS or maybe even any form of triple net property at that. Right. And then same thing with like a litany of other commercial types. We start talking about whether it be retail, industrial or office that shouldn't be thrown in that category right now. But, you you don't have longer term leases. There's three, five, seven, 10 year leases. And, we're dealing with

A lot of times, annual leases that renew on on a, on a, by year basis. So again, just, got a little bit more movement in and out, what have you, than you might have with a normal commercial asset parking on the other hand. also not as easy, in, in theory, it's just, you drive in, we've all done this, you drive in, you pay either an attendant or you pay the machine to park, you park there and then you leave, right. And, there's a little bit more moving parts to it than that, as far as where the parking's coming from.

different times a day, know, adjustment of rates based on supply demand factors and all that. so with that being said, we do work with professional operators, big, there's big management companies in the space, some that are publicly traded. And so as far as from an intensity standpoint, we do have a full time asset manager in house, but he typically is the one that's running the day to day with the, the, the, the, the management arm of the folks that oversee the day to day operations of the parking. So for that reason, it's simpler.

but we're also not vertically integrated with the manager. If we were, it would be equal as complex. So.

Aviva (05:24)
You know, it's funny. Yesterday,

I was talking to a fund that buys mobile home parks. it just so happens that I have two folks this week who specialize in mobile home parks. And the group yesterday, they said, it's so easy. All you do is buy the land. All you do is, it's just the dirt. Right. And I'm thinking to myself like,

Kevin Bupp (05:45)
Yeah, I could give

you that argument. I mean like that's that's a storybook, but like it's just not that that's not the case

Aviva (05:51)
I literally am sitting there thinking to myself, that makes no sense. you know.

Kevin Bupp (05:55)
You should bring them back on. We'll have a debate of a, you know, I've been doing for

15 years. We've owned tens of thousands of lots. that is, I could, in a perfect world, it's easy. So here's the thing. I know, know I some context to what I mean by that in a perfect world. So back when a lot of these mobile home parks were built, the basic business model was, Hey, I developed this land.

these folks bring their mobile homes in. They just pay me a lot rent. don't own any of these homes. They maintain their roof, maintain their HVAC. They pay me on time, like I said, we're in a perfect world. They all pay on time. And everything's hunky dory. Well, I mean, over time, know, a lot of these parks were built 40, 50 years ago. So now, we deal with aging infrastructure. A lot of these parks have older, water lines, sewer lines, just maybe they were

a lot of these things were built by folks that weren't necessarily developers, farmers are like, I got a piece of land, I'm to put some roads in and waterline sewer lines. find that maybe they didn't dig the waterline sewer lines deep enough. And so you got issues there that come up with, know, frost lines and things freezing. You've got just again, material that was used 50 years ago that we don't use today that corrodes on the ground cast iron, one of them, just things like that, that are, that's like below the ground and above the ground. You've got,

over time what happens is, and this doesn't happen all the time, but like, you get folks that they've lived there 20 years and they pass away and guess what their heirs don't want that home. And then so you'll find instead of the mobile home owner or the park owner not owning any of the homes now instead of zero now he's got maybe 10 or 15. And ideally, we like to sell them back, we don't like to own the the homes themselves. But in our portfolio of roughly 3500 lots, we own about 350 mobile homes and some of the communities we own zero.

They're literally 100 % resident owned, which is still, that's the easiest way. But again, there's still day-to-day stuff we deal with. But then we've got other communities where, give the other end of the spectrum where, one that comes to mind is we've got a tuner space community and we literally own a hundred other homes that are in there, right? And so we've got normal turnover. These are rental units, which operate, they live and breathe very differently than someone that owns their home, right? These people are coming and going every 12 or 18 months, right? So we've got to turn units and we've got maintenance.

Aviva (07:48)
Hmph.

Kevin Bupp (08:00)
crews on staff and all the other challenges that come with just managing a lot of rental units. So again, any perfect world it is hunky dory. All the units are new, they pay the rent on time and we don't own zero, we own zero. But I can promise you if you talk to any mobile home park guy that it's truly been in the space for quite some time has done a lot of transactions. He's never going to say it's an incredibly easy business. It's just that's kind of BS. So again, not to call out whoever was on the show, but like, it's BS.

Aviva (08:07)
Yeah

very, very funny juxtaposition. Because, I was thinking, I manage, I have managed residential, I don't manage residential anymore for this very reason. But, you think about intensity of tenants, it's like you said, easiest tenant is going to be your net, net, net. Okay, not a Walgreens this week because, but like, a net, net, net.

a credit tenant in the trades in a warehouse. and I'm thinking to myself, how in the world, if you have all these folks in a mobile home park, are you not having exactly what you're saying? Rent collection situations, folks moving in. No, it was just a funny thing and I love hearing the juxtaposition in.

Kevin Bupp (09:08)
Yeah.

And I'm not going to say it's all bad. mean, we do our, we have very tight credit requirements of folks moving in, right? So we ensure that we do employment checks and income verifications and credit checks and, verify trade lines and all this kind of stuff. Right. So like we, we, we, and we've got pretty strict criteria. And so, I mean, we're not, we're not the ones that just,

just got out of jail, you need a place to stay, you come to one of our communities, that's that's not that's not how we operate. And then that's not what our communities are like. Most of ours are just good hardworking folks that want to be in good school districts, they want to send their kids to the better schools, but ultimately can't afford to, spend three or $400,000 on a stick belt home, right? They might, it's a dual working household, but they

Husband's a manager at Walmart makes 22 bucks an hour. Wife is a secretary or admin makes 18 bucks an hour. And they're just trying to get by. They're doing their best. They pay their bills on time and they can want to have a clean, safe, healthy and affordable place for their children and to create family memories. That's literally who our resident base is for the most part. Outside of that, I'd say we've got a few communities that are mostly made up of seniors. Again, empty nesters.

they just they downgraded maybe even from a single family home. They want less maintenance upkeep. Typically we we maintain the the lawn care and all that kind of stuff. So like they just they want it easy and they wanted something cheaper, more affordable and and they don't need much space. So that's our other demographic that we serve. So it's in there and they're all great for their own purpose. But again, still challenges that are associated with with either one.

Aviva (10:34)
look every you know yeah

Kevin Bupp (10:35)
People are challenging, Just inherently, the

human race is challenging. And so when you start dealing with thousands of us on a day to day, and when finances are involved, just, there's complexities that come up.

Aviva (10:45)
And that is life, and that's okay, that's reality. Kevin, when you're looking to buy a mobile home park, A, what's your criteria? And B, what type of returns are you expecting your one, five, and 10?

Kevin Bupp (10:58)
Yeah, no, it's, it's a great question. I mean, basic criteria revolves around the market, we want markets that are growing and growing a population that have good diverse employment bases there and you people can get jobs. We also want a place that has a not everywhere in the country has an affordable housing crisis, there are places where you can buy single family homes still for under $100,000. the areas of Michigan, probably areas in rural Iowa, you just there's a lot of areas where you can still

find affordable housing, right? That's under a hundred grand. And so we want to know it's in an area that's got a shortage of that. know, the median home prices are 250 and above. And then, I think lastly is the size, for us, the bigger, the better. I'd say our ideal minimum is about a hundred sites or larger. We do own some smaller, but ideally a hundred sites are larger.

just more scale, more economies of scale, when we've got a larger footprint in that respective area. And then as far as returns, again, that's it's some of a, it's it's a little bit of a loaded question. We're mostly value add guys. And so a lot of times we'll, it's not about, what's, what's going in cap rate. It's like, what is it at stabilization? And, know, our business plan, depending on how heavy of a lift it is, it could be anywhere from, truly might be able to get to stabilization within a year. Normally that's

a little short fused, would say mostly it's probably like a three year plan to really get it to either ask stabilization or darn near like 90 % to what we would consider to be stabilization. But once once we hit that point in time, your levered returns are, we shoot for about eight or 9 % cash on cash return. And then, if you're looking at IRR, which I hate that metric, because I think it's misused quite often. But if we underwrite, take a five year exit, and then look at IRR, we're somewhere like in the 16.

to 17 % range somewhere around there. So it's a very misleading metric. And most people don't understand actually how to even arrive in IRR and what that means for them. But I give it out anyway, because I think it's a common one. Cash on cash, I think is much more relevant. And so the cost of our capital, we bring in capital from retail investors. And so really, our objective is once we hit stabilization that we can meet or exceed the pref just

purely on a cash on cash lever cash on cash basis, year in year out, we can exceed that that mark and really the pop comes at a recapitalization event or a sale with us is normally every finance event. We don't like selling all that often. So we tend to hold on to a lot of things that we buy. We'll prune our portfolio every once in a while, but 80 % of what we buy, we have the objective holding onto for 10 plus years.

Aviva (13:19)
Sure.

I get it. I always say the most you can do in real estate to extract the most amount of money is to do nothing at all. Obviously when I say nothing at all, it doesn't mean you don't maintain the property, but it means just sit and wait and let the property provide. So that's our strategy. But tell me about parking. I haven't had anybody on the show

Kevin Bupp (13:47)
Yep, absolutely.

Aviva (13:54)
who does parking. Tell me about it, what you look for, where you look for it, and what returns you expect there.

Kevin Bupp (14:02)
Yeah, I'll tell you that's not the first time I've heard that on the different shows I've been a guest on. yeah, we're kind of we're unique in that. that's one of the things that attracted me to the space. I met a guy that as these stories commonly go, I met a guy that happened to own parking, interviewed him on my show about seven years ago. And I was so intrigued because I never knew anyone that owned parking. Never met anybody owned parking. However, we've all parked somewhere and paid the park there. Right. And we might someone might be listening to this in a paid parking spot. Right. As they listen to this podcast.

And so for me, was intriguing enough to during our interview, I asked a lot of questions and I left the interview and I was even more excited to learn more. And so called him back and you'll really spend another hour on the phone with him, flew him to Tampa a little bit later. Like literally I couldn't stop thinking about this, this, what, seemingly was a very fragmented asset class and there's parking all across the country. Half of it's owned by cities and municipalities. The other half is owned by private, private companies, a couple of institutional groups out there, but like generally private companies.

And so for me, how we look at the asset classes, you only buy on buying larger primary markets. We want to be in markets that have growing populations that have thriving, you urban cores. The example to use is we just purchased an asset about a month and a half ago in downtown Charlotte. It's an 800 stall parking garage. It's right, literally, it's right across the street from the Spectrum Center where the Charlotte Hornets call home.

It's where all the big concerts happen there. It's literally the closest parking garage to that arena. On top of that, it's got a skywalk that's attached to the Bank of America US headquarters and they don't have the parking there and so they literally pay us for like 300 spots a month. It's right around the corner from the truest headquarters. Charlotte, for those that don't know, Charlotte's a banking hub of the US. A lot of folks aren't aware of that. And outside of that, there's a ton of like...

Charlotte's a booming, a booming city and this immediate sub market of Charlotte and downtown is huge. So we look at it as we can go in. Number one, this was owned by an institutional group. It fell in the receivership, not because of the garage, because it was attached right next to an office building that was cross collateralized and alone. We figured out that we've we found a solution to that that problem brought someone else in that could take the office because we didn't want it. They're turning it into apartments. But we wanted the garage. And so we got that a great price, but also

Aviva (16:01)
Whoa.

Kevin Bupp (16:11)
we found just like, even though a lot of folks think that institutional and stuff like they've got to be there on it, like they've got the finger on the pulse, like they're doing a better job than anyone because they have the resources to run and operate things. And, they get lazy too, just like everyone else does. And there was a lot of lot of levers to pull there. So it's a great condition, well maintained, was was doing about $2 million of NOI, and we took it over and we identified like,

three big levers that we could pull one of them was literally the parking rates are about $1.50 and adjust the parking rates in like four years in this garage. And they're about $1.50 an hour under everyone else. So literally just pulling that one lever added about $300,000 of NOI to the bottom line, just in literally no one's not going to park there because we raised it to what all the other garages are charging, right? And we're the most convenient one. So we like parking because it makes money. If you buy it at the right location, it makes money. But more important than that is,

Aviva (16:57)
Wow.

Kevin Bupp (17:04)
It's irreplaceable real estate. want to, when we look at it and we don't underwrite this portion of it, but it's got to be in a, just an absolute phenomenal location. this one's like a two acre footprint, literally in the most desirable part of Charlotte. And it actually makes money. So it's a cash flowing covered land play, one that stands on its own, as an investment. then 15, 20 years, whenever cars are flying or whenever people aren't driving anymore, whatever that might be.

And we're left with a garage that that might not, you'll grow up a parking garage might not be the highest, best use. Well, guess what? We can easily knock it down and we have still a prime real estate underneath it. So that's kind of how we look at it. And that's icing on the cake down the road. But for the first, part of the investment thesis, it's got to make sense as parking. We got to feel confident that there's at least like a 10 year runway, which this one's got way more than that. Charlotte, Charlotte's very much a driving town. I got a call from our asset manager this morning. It was there like 8 45.

Aviva (17:50)
Hm.

Kevin Bupp (17:55)
He was staying at the hotel right next door. And so you could see the, he was on the 10th floor and ours is eight stories. He could see the upper deck. so normally like you only ever park in the upper deck when it's full, like literally you keep driving until you find a space and at like 8 45 he's like, yep. And right there, the last spot just got taken, slowly by like nine in the morning, the parking garage is full. Most of it's from the, a lot of some bank employees, but, but sure. It's also 24, another important criteria for us. It's gotta be a 24 seven city. So it's gotta be a city that not just has nine to five.

It's got to have after hours and then also weekend things happening. So restaurants, entertainment, sports venues, offices, retail, multifamily. It's got to have all those factors and it's got to be fairly diverse. Government buildings. This one doesn't have government buildings in Europe, just so it's an exciting space. It's there's way more deals that don't check our box on the space than that do check it. So we've ended up buying one a year for the last four years and and they've been great assets have been

Aviva (18:29)
Hmph.

Kevin Bupp (18:49)
phenomenal locations. The last one was in downtown Charlotte. Great cities, great locations. And again, just a great way to hold phenomenal real estate and make money while we're doing it.

Aviva (18:59)
Makes sense to me. So it's less about the difference between a parking lot and a parking structure. You're looking for a structure as opposed to just asphalt lot. OK.

Kevin Bupp (19:01)
you

We like both. own asphalt.

We own asphalt lots as well. We like both. In fact, asphalt lots are quite easier. They're very simple. The challenge with asphalt lots in big cities, like using Charlotte as an example, on that same footprint, the footprint of where our eight-story, 800-lot garage is, could probably, if it was just asphalt, there'd only be 100 cars there. And so,

Aviva (19:20)
I'm

Kevin Bupp (19:36)
The challenge in big cities like that is now with that surface lot, our competition as far as a buyer comes from developers. And a lot of times if a developer is going to come in and build a, a mixed use structure of any sorts, they could probably pay quite a bit more than we can because we're not underwriting it as an immediate development opportunity. We're underwriting, for the cashflow that it's currently creating. So that's the tough thing about finding surface lots at the right price in really great markets. And we have, but they're definitely

Aviva (20:00)
for.

Kevin Bupp (20:04)
few and further between than that of an actual parking garage.

Aviva (20:08)
Yeah, that makes sense.

Kevin Bupp (20:09)
So

you kind of have to buy like the surface lots. have to find the markets that, that are kind of on the upswing. Maybe not. It's not going to be a Charlotte or it could be a sub market at Charlotte. Like it could be literally like a neighborhood that's like going through the re gentrification process. it's going there. If you're willing to like kind of hop in today, you might not make a lot of money the first couple of years, but knowing that like, you're gonna be very happy in five years looking back, you bought that service lot, right? that's how you make those make sense. But

Aviva (20:32)
Yeah.

Kevin Bupp (20:35)
you gotta be, a lot more forward looking and take a little bit more of a gamble in order to buy them in just phenomenal locations. So a little more challenging, but definitely doable.

Aviva (20:47)
cool. It's I know as a podcast host, you sometimes I feel like I'm just learning. Like I learn more than I could even I ever thought I would. And I'm excited because clearly I'm learning our listeners are learning and we appreciate you doing that for us. Kevin, what makes you happy with what you do every day in commercial real estate?

Kevin Bupp (21:12)
Yeah, I I've always been a deal junkie. So I love hunting deals and I love creative structuring, just finding complex problems and finding solutions for those problems. So I think that's how we make really good money as real estate investors is again, be able to find a complex challenge, one that maybe others run from and figure out a solution for it. So I enjoy that.

Aviva (21:33)
Well from one deal junkie to the next. On to the next deal. Kevin, aside from listening to the real estate investing for cashflow podcast, where should our listeners find you, follow you, learn more about you, et cetera?

Kevin Bupp (21:48)
Yeah, so I mean, you can my last name is unique enough, BUPP, B-U-P-P. I'm pretty active on LinkedIn. I'm active on Instagram and Facebook. So you just type my name and you'll track me down pretty easily. Outside that, if want to learn more about what we do in our company, Sunrise Capital, you can go to investwithsunrise.com. We've got a current offering there, but also we've got a lot of different resources. We have case studies up there that we kind of show on deals that we've gone full cycle on. give the full story of what we paid for it, what we did to it.

how many years we held it, what the business plan looked like and then what the exit looked like. it just, some educational things like that as well. A couple of white papers on there as well that you can download about parking or mobile home parks and, but outside of that, again, I'm pretty easy to track down any of the, the social, social pages. So.

Aviva (22:31)
Awesome. Well, Kevin, thank you for being on the show today. Listeners, go ahead and listen to the Real Estate Investing for Cash Flow podcast with Kevin Bupp and for everybody listening. We'll see you next week.