Nowhere to go but up

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Middle Market Investors Find Their Way

Kevin Bupp will tell you he’s in a better place today than he was just three years ago.

That’s saying something for a guy who’s spent two decades in real estate successfully buying and capitalizing on single-family homes, commercial properties and apartment buildings.

There are worse fates.

And, Kevin wears a big smile and readily shares his joy about where he and his associates have landed.

Sunrise Capital Investors is in the value-add niche

“We’re still small fish in a medium sized pond, because the industry is still not as large as it could be,” said Bupp, a resident of Clearwater, Fla., and co-owner with Charles DeHart and Brian Spear of Sunrise Capital Investors. “Manufactured is all we focus on now.”

Bupp and his partners are seasoned investors who purchase and improve what most often are referred to as “mobile home parks”, though a true mobile home, by definition, hasn’t been manufactured in the U.S. since June 1976. Since then, and today, manufactured homes are stamped for quality by the U.S. Department of Housing and Urban Development (HUD).

Some of the communities Sunrise purchases have homes that pre-date the 1976 regulatory change, but most are small to mid-size communities with homes from the 1980s and ’90s, some newer.

Their investment targets represent a middle-market niche that larger investors and owners overlook, though less so in recent years.

2016 Real Estate Returns by Sector

Value-add Niche

“We’re really value add guys,” Bupp said. “We are really good at taking a community that is in distress, but in a good market, and taking out the bad elements, bringing in some improvements and making things work.”

It’s a niche that’s gaining stability and wider recognition all the time, largely because the ROI doesn’t lie.

“It took us a year to buy the first park, then it’s been one or two in those in between years,” Charles DeHart said. “In the last 18 months, we’ve purchased six parks.

“We have five more parks currently in contract (pending sale) that represent 430 spaces,” he said.

Sunrise has raised more than $2 million in cash during the last two years from the attraction of 10 dedicated outside investors, and they look to raise $3-5 million more to purchase another six parks – perhaps 800 land-lease spaces – during the next 12 months.

It’s not BIG business investing, but it’s been shown as a way to steadily grow wealth. And, if you ask the Sunrise partners and similar investors, it’s a way to improve affordable housing stock – for the metro area and for the park residents.

“We’re in a niche that allows us to earn a very reasonable return for our investors,” DeHart said. “And also provide quality housing for people who may be coming into home ownership for the first time in their lives or even in their family’s history.”

How it’s done

They don’t buy through a broker. Brokers typically want to work with higher volume investors, and also make sizable commissions. Rather, Bupp and DeHart delve into county records within a geographic area of interest. They find out where the communities are and who owns them. If they’re fortunate, they find a phone number for the owner.

After that, it’s sales 101; they make cold calls, employ heavy use of direct mail and sometimes put out bandit signs.

“We typically have five or six unique owners in the system at any given time, and check back with them three to four times per year,” DeHart said. “It’s not just finding the right seller, it’s about finding the right seller at the right time.”

Often, they’re in front of a prospective seller before the owner of a property realizes they’re in a good position to sell. So, checking back often is key to being in the right place at the right time.

They work some of the prospects themselves, but commonly put out a post to acquire a “trainee broker” who can visit communities of interest, take photos and notes, and possibly make an introduction to get talks underway. That trainee broker also learns how to access county records that are unavailable online, and does this on their own time and earns a commission when a sale is made.

In training these brokers, Sunrise is creating more than a strategy, more than a company brand. They’re helping to build an industry. Along those lines, the three operate Mobile Home Park Academy, which teaches others how to do what Sunrise does. Charles and Kevin host a podcast on the topic, and also are in the final throes of writing a book on mobile home park investing.

“We intend to be in the business for a long time. We really enjoy it, it’s lucrative and we appreciate being able to provide a critical affordable housing segment,” Bupp said. “We only buy stuff that makes sense. If we only buy one community in a year, that’s good with us. It will be the one we want to buy.”

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