On this episode of The Investing For Freedom Podcast, Mike is joined by third time returning guest Tyler Gunter. Mike and Tyler converse about affordable housing and the impact COVID-19 has had on the affordable housing industry. Mike and Tyler share what they’re currently seeing within the affordable housing market and also their predictions about what affordable housing will look like in the next 5 years.
HIGHLIGHTS:
0:00 – Intro
0:35 – Mike states that this episode will cover the topic of affordable housing
2:11 – Mike speaks about how he and Tyler have worked together for a long time and how Tyler is the CEO of Park Place Communities, their property management and construction company
4:24 – Tyler talks about how he’s seen an increase in occupancy over the last 18 months
8:01 – Mike discusses how even pre-covid times, Trump was talking about putting pressure on local municipalities to allow for more affordable housing
14:27 – Mike asks Tyler about what is pushing on affordability and making it challenging and also what he thinks the government are going to do
20:23 – Tyler states that operators are waiting 16-18 months before they see their homes
26:52 – Mike and Tyler discuss how just because the eviction moratorium was in place, that doesn’t mean peoples credit wasn’t getting hit which is part of their approval process so we’re going to see a lot of people not being able to find a home
31:40 – Mike states that he is optimistic about the future of affordable housing
35:02 – Tyler speaks about how affordable housing is not a new problem but it’s just been overlooked a lot but now he thinks due to COVID-19 the government are going to have to step in and help
41:30 – Mike shares his belief that there are some great opportunities ahead of us
42:15 – If you are an accredited investor who is interested text the word ‘DEALS’ 4805317519
42:56 – Tyler mentions how he is appreciative of their team and how he is excited for the next 5 years
43:49 – Alternatively if you are interested in investing you can visit the deals landing page on https://www.michaelayala.com/
TRANSCRIPTION:
Are you looking for freedom, freedom from the daily grind and hustle, or just finding a way to live the life you always wanted. Then join us on the investing for freedom podcast. Our host Mike Ayala will help you discover new ways to find freedom. With tips, insights, and interviews you’ll learn the exact systems he’s used to travel the world and live his best life. True success and happiness are all about freedom. And here’s your roadmap on how to find freedom on your own terms. Welcome to the investing for freedom podcast. Here’s your host, Mike Ayala.
Mike Ayala: Thank you for joining me on the investing for freedom podcast. Today, we have a little different show. We are going to talk about affordable housing. I’ve got Tyler on, who is a returning guest, Tyler Gunter. Actually, we were talking about this. He’s been on three times. This will be his third time. Ty I’ve had some people on twice, but never three times. I probably told you that one when you’re on the second time.
Tyler Gunter: Yeah, I’m honored. Always a treat to get on here and chat with a great friend and wonderful colleague. So this is always fun.
Mike Ayala: Yeah. And the reason why we decided we would do this you know, a lot has changed you know, over the last 18 months, two years, it’s kind of funny. I’m not trying to get political here, but I saw this meme the other day that said you know, the worst part of I don’t know, two weeks, what was the calm, the curve or whatever…
Tyler Gunter: Yeah. Flatten the curve.
Mike Ayala: The worst part about two weeks of flattening the curve is when it’s eight months later or something like that. But yeah, you know, we just thought we’d jump on and talk about, you know, a lot has changed for everybody and everybody’s trying to figure out, you know, what’s next. And obviously last year we were all just trying to figure out where the housing market was going to go and where real estate was going to go in general and how politicians were going to handle all of this. And just been a lot of changes even recently, the eviction moratorium, you know, the deadline came and then they reinstated it and then the Supreme court overturned it. So it’s just so many, you know, variables and stuff. And us being in the affordable housing space for those of you that haven’t heard the previous episodes where Tyler was on, Tyler and I have worked together for a long time. And Tyler is actually, he’s the CEO at park place communities, which is our property management and construction company. The company that oversees all of our assets, the mobile home park communities in all the states. So again, for those of you that, you know, didn’t hear the previous episodes, a little bit of context and background, but I think it’s a valuable conversation for us to just kind of talk about, you know, state of the union and where we see things and all the interesting things that are happening. So where should we go?
Tyler Gunter: Yeah. Well, gosh, just as you were talking about that, Mike, I was just thinking like, imagine if we had that crystal ball, right. There were so many variables, 18 months ago that we just didn’t even, we didn’t even know. All we could do is kind of like, okay, let’s hunker down. You know, what do we need to do to preserve the asset, protect our investors, protect our team. Cause we can’t do all this by ourselves. We have to have the team too. And Like thinking about everything that’s come to pass since then, I don’t think anybody even could have seen. I mean, some of the stimulation, some of the regulations that came across you know, we joke about it the two weeks to flatten the curve and we’re 18 months into it. Another meme I just saw the other day is like, what are you going to do for the two year anniversary? You know, it’s like nothing, none of this we could have foreseen, right? The unemployment that came with it, the mental health industry and what happened as we locked down. And some of other stuff that we just couldn’t see coming, and all we could do is prepare and prepare and prepare. And you and I, and our team, we’ve talked a lot about the clarity that has come from these last few months as well. The opportunity to kind of slow down. It forced some reassessments of things. It forced us to look. And then also from a standpoint of public image and the government even, there’s been some great movement in the affordable housing sectors, right. The demand for it has been proven. It’s been brought to light like, Hey, wait, you know what used to be maybe like the redheaded stepchild of the housing rental and investment world has really become like this golden child. It’s like, holy cow, wait a minute. This is something right. Some of the amazing things we’ve seen through the last 18 months is not a decrease in occupancy, but an increase in occupancy, right? Not an abuse of the moratorium, but a willingness and an eagerness to, Hey, help me. And our end as well, like how can we help our tenants? How can we get them through this and to see that most tenants want to stay here and don’t want to take advantage of an opportunity, but yet, come in and say, Hey, look, I can’t quite do this, but if you guys can help me with a payment plan, this is what I can do. And then to see them come through on that, because I think we’ve all experienced in the past where our hearts sometimes Mike, I know you and I, especially when we were early on in this business and we had our own personal communities and our own personal rentals, right. Our hearts cost us a lot of money over time. And so to see this over the last 18 months where people’s hearts and our hearts as an operator kind of came together and for a really great, a really great thing, right? These people wanted to be here. People were begging to come into our communities. As a matter of fact you know, we were just sharing some reports the other day in our weekly high level meeting where we’ve got more demand for our houses than we actually have right now. And a lot of that has to do with just this recent appreciation for affordable housing. And I believe also the re-insurgence of the government in the last couple weeks as well, stepping up and saying, Hey, we need to make it easier. And we need to make it quicker and more attainable for people to get into affordable housing, especially mobile manufactured housing which has been a long time since we’ve seen any kind of regulation in favor and in assistant to mobile manufactured housing. So just a lot of really, really exciting for lack of better terms, a trailer park nerd like myself, right? It’s kind of exciting to see other people starting to grab on and see the excitement in it. We’ve seen the excitement in the acquisitions market, right? We’ve been able to, as part of our big reposition, we’ve been able to off a few communities that don’t fit our future Growth trajectory, don’t necessarily fit into our current model anymore. They did it one time, but they don’t now. And we’ve been able to unload a few of those because of this recent surge of investors and operators that are saying, Hey, wait a minute, this is a great opportunity. And they didn’t see the fluctuations that we necessarily saw in single family housing or apartment class investing in things like that too. So it’s really kind of picking up quite a bit. And it’s great for us to see that, because we’ve seen this jewel, this diamond in the rough for so long, it’s really neat to see other people start to see the shine as well. It’s kind of cool.
Mike Ayala: And you know, what’s got me really excited. You know, like you said, that none of us had a crystal ball and I’ve been a little, I said it this way, I’ve said it multiple times this way. Like on a scale from, you know, negative a hundred to positive a hundred, I was like 10 in when it came to like real estate only because, I believe that real estate is always going to be a great play long term. But when we get into seasons and situations like, you know, what we’re in, I mean, even leading up to COVID, we were kind of slowing down our acquisition strategy, because of, you know, like some of the things that you were saying. I mean, even pre COVID Trump was talking about, you know, putting some pressure on local municipalities and that kind of stuff to allow more affordable housing because at the root of all this, and a lot of our listeners probably know this, but a lot of them probably don’t. At the root of the challenges with affordable housing is kind like the idea of, you know, not in my backyard, everybody wants to get on board and, you know, help the little guy that’s suffering and say all the right things, but nobody wants a mobile home park or even an apartment complex in their backyard. I remember back in the day when we were working together in the construction and plumbing and HVAC company, we did a big apartment complex. And I was also on the planning commission at that point in time. And it was hell getting even then like a brand new apartment complex approved, because all the neighbors didn’t want an apartment complex in their backyard. And so when it comes to affordability, you know, there’s all these challenges on a local level. And everybody’s just like, well, why don’t you just build more apartments? Why don’t you just build more, you know, affordable housing? Well, number one, there’s a bunch of red tape because everything’s, you know, voters and constituents and who’s, who’s the loudest. And so there’s all this red tape where politicians on one side saying we want to help the poor guy, but then on the other side of it, the people that are voting for them on the other side are screaming. And so everybody’s saying the right things, but nobody’s doing what actually matters. And so even leading up to COVID, I remember there was a bunch of initiatives and on all that, but we were kind of like slowing down our acquisition strategy because pricing was so high and I didn’t know where this was going to end. And so a scale of negative a hundred to a hundred, I’ve been like at a 10 when it comes to real estate, again, not long term, but in the short term, because, you know, in my mind, the way everything was trading and the pricing, I felt that there had to be a correction at some point in time. But back to your point on the crystal ball, a lot of things have played out, you know, really interesting that I honestly wouldn’t have expected. I missed it. You know, if we would’ve just kept, here’s the real thing that’s interesting. What we found ourselves saying a lot was, you know, how can we, and there’s a lesson to be learned in this. And I want to tell myself that I’ve learned it. With the prices that assets were trading, and the way that real estate prices were increasing, again, even pre COVID, I couldn’t get my brain around, you know, how can this remain affordable housing? Because wages were not keeping up with the price that these things were selling at. And so if we were selling a community or somebody was buying a community that we would buy at 2 million, and they’re buying it at 3 million or 4 million, I was looking at it through the lens of our current market rents. Which is something that we have to generally we have to take into.
Tyler Gunter: It’s the critical part of our process, right?
Mike Ayala: Yeah. So I was having a really hard time reconciling, you know, the prices, the assets we’re trading at, but then you fast forward and you see that assets have continued to actually escalate even faster. And so the reason why I’m saying all that though, is we know that asset prices have gone up and we know that rents are going to have to go up to stay even with that. I mean, there’s just no way to get around it. The thing I couldn’t reconcile in my brain and why I was at a 10 is because I didn’t understand, I couldn’t get my, my head around if wages aren’t increasing at the same pace that rents are increasing how are these people going to pay, pay their rent? And then here comes COVID and all this government assistance, which I still don’t even, there’s still some variables in that, that I don’t completely wrap my brain around or don’t know what’s going to happen. But I got actually a little bit nervous when we started seeing the eviction moratorium extended and all that kind of stuff. And to your point earlier, fortunately, I think the majority of residents are doing the right thing, at least in our space. I heard a podcast the other day. It was actually Ken McElroy and David Green, and they made a lot of great points. And, you know, if you want a podcast that Ru really helps kind of sum this up, I would go listen to Ken McElroy’s podcast with David Green, cause they made a lot of great points going forward about how the government needs to step in. And it helped reconcile a lot of things for me too, that I’ve been thinking was probably going to happen, but now we’re actually starting to see it happen. So the moratorium ended, the Supreme court decided you know, to back the end and that it was unconstitutional. That’s all good news for landlords, but then we still have this issue of affordability. So this is what I really want to talk about. What are in your mind and I think, you know, there’s some obvious drivers, but then there’s some challenges too. So number one, what’s pushing on affordability and number two, the reason why we’re saying, you know, the government stepping in, what was a concern for me 6, 8, 12 months ago, the government stepping in is now actually something that I was concerned that the government was going to say that housing is a basic human right and basically in some way, shape or form, you know, maybe push landlords out and this still could happen to the smaller landlords. Because I think the landlords that have one or two or three houses could be in trouble. There’s all this money out there. The problem with government is it’s really slow and there’s all this money out there to help our 10 and residents that need it. But now that the federal government has lifted their mandate or the moratorium, there’s all this money at a local and state level that isn’t getting to. I read a statistic the other day and I could share this if anybody wants to see it, just reach out to me, find out where the article was, but there are states literally that have gotten, you know, hundreds of millions of dollars for rental assistance. And they’ve gotten like 3% of it spent, they’re making it so challenging, which government does, this is the problem. They’re making it so challenging to get that money to the people that actually need it. That simultaneously you know, landlords, weren’t able to evict these people, but they’re having to make their payments. And again, I think there’s more small landlords that are affected than even the big ones. So the two things what’s pushing on affordability, these are the two things I want to talk about. What’s pushing on affordability. What’s making that challenging cause we can’t even get houses right now. So let’s make sure we dive on that. But then the other side of it is, you know, I want to really have a conversation around what we think the government is going to do. And there’s some solid, you know, information out there about what they’re already doing, but I’m leaning more toward, you know, I’m probably in the 50 to 70 range now toward positive than I was at the 10 because of the way that we’re seeing government act and step in. I just think there’s going to be more people that need the government assistance and government, I’m confident saying at this point, and I wouldn’t have been three months ago or even six months ago. I don’t believe that government wants to be in housing. I don’t think they want to housing. So I think they want us to step up and do what we need to do, thoughts?
Tyler Gunter: Yeah. There’s one thing I can absolutely for certain walk down the street and confidently say day after day and it’s that bankers and government do not want to be landlord ever. So that’s why they’re always willing to work through and try and find the way to help and assist when the time comes. And so that’s what we’re seeing here with Fannie and Freddy loans, right? The president came out and said in his speech, was it last week or, oh, maybe even just a few days ago, Right? We were looking at this over and like, look, we have to make this more obtainable. These people, we have to remove the barriers. We have to tear down these walls and allow them an easier opportunity to find the funding to do what they do. And we’re not even talking about large sums of money. I mean, there are, there are full ends of the spectrum, right? We we’ve got mobile manufactured housing, that’s, you know, $40,000 brand new, maybe $50,000 brand new all the way up to several hundred thousand dollars for used units, depending on market and where you’re at and what’s going on. But what we’re talking about is like removing, like you talked about the restrictions to get the assistance for your rent. Let’s tear down some of those walls. And I think a lot of what’s going on is these states are just overwhelmed and they don’t know what to put into place as criteria to allow for the assistance. And I think they’re going to, they’re afraid it’s just going to blow out the door and then they’ll have nothing and still be in the same situation they were 18 months ago. What we’re starting to see in our 30 plus properties in the 13 different states and tens of municipalities that we deal with on a daily basis is that it’s starting to loosen up. They’re starting to get an idea of what it is. Is it coming a little too late? I think so. But at least it’s here and it’s helping and we’re starting to see several of the families that were hit the hardest in these regions are starting to finally gain ground again. And a little bit of traction they’re getting caught up. Some of the things we didn’t anticipate school’s shutting down. That means mom can’t go back to work In many of our communities, right. And affordable housing is literally dual income housing, right? These are people who are working at the gas station. They’re at Walmart. They’re not making $70,000, $80,000, $90,000 a year. These guys are making $24,000 a year. The median has changed. Do you remember what the median income is? It actually dropped again. So, I mean, these are not people who are out, you know, just blowing money on exotic vacations and things like that, and need to figure out a way to get a house. These people are both working, sometimes three producing members inside of a family. And so it’s really great to start seeing that those people are getting back on their feet. They’re getting traction again. Kids are back in school, moms are back at work, things are happening. And the governmental assistance loosening up a little bit is helping tremendously on that end. What we’re seeing and what we needed to talk about as far as what’s driving costs. And why affordable housing might not be as affordable in the near future as it is right now is the, the delay in shipment and getting materials. And I mean, we’ve ordered homes eight months ago at this point. And we’re being told that we might not even see them until August. Because of the severe backlog, the demand, the demand for these homes, the manufacturers can’t even keep up with the current demand. I was talking to our rep the other day and one of his plants, he’s already booked through 2022. His plant’s capacity is 100% full through 2022. So that’s changing the scope of what’s going on, right? I mean, if they’re going to be able to start producing more homes, which it’s become very clear, the need is there, they’re going to have to expand an air warehousing. They’re going to have to expand their processing. And, and not just the warehouse and everything else, but the shipping, the containers, the pre-ordering, the processing they’re going to have to build entire factories in different regions in order to accommodate this. And that takes time. And so we’re taking, internally, we’re taking a shift right now. It’s like, okay, we’re going to order the homes that we need and understanding that it’s going to be a longer time out for delivery and setup. Some of our demos are now, now it’s becoming like, you know what? This home is going to be a refurbished home. We’re going to go in there and we’re going to maybe gut it down all the way to the stud. The metal stud, the biggest misconception, right, is that mobile homes are built [19:54 inaudible]. These things are built, They’re built strong, they’re built in a weatherproof environment. They’re built to roll down the road at 65 miles an hour. These things are pretty strong, durable things. They’re also really well engineered and so we’re going to strip some of these homes down to the bones and put new walls in, put new windows, put new flooring in, put new plumbing and electrical in, and it’s going to be much more cost effective for us to do that. And we can turn a home like that in three weeks versus waiting. You know, at this point, it could be for many operators, 16 to 18 months before they ever see a home. So those are some major, those are major pressures that are being put on the affordable housing that’s really out of anybody’s control at this point, right? This is just catching up to market demand.
Mike Ayala: Yeah. Well, and even just back to the fundamentals, which again, this was a pre COVID thing, and this was a pre, you know, printing trillions and trillions of dollars in the 12 month period. It was a pre that issue as well. But, you know, from a macro perspective, like one of the things that I’m constantly thinking about, just even back to like the, you know, local municipalities and all that, not wanting, you know, to have mobile home parks or apartment complexes or whatever in their backyard. But one thing that Ken McElroy is always talking about every time I’m ever with him, he’s talking about like, when the cost to buy is less than, or even equal to the cost to build, you’re going to buy. And he’s talking about from an investment perspective, not necessarily a single family, you know, your personal residence. When you think about the amount of time and money and energy that it takes to get blueprints done and get it through zoning. And I don’t think a lot of people think about this, but it takes years sometimes, you know, and the bigger the city and more again, I don’t want to get political, but the more certain way leaning.
Tyler Gunter: Yeah, yeah. We have a mutual friend who is developing a, a mobile manufactured housing community. It’s going to be beautiful. It’s down south, it’s a lot of acreage. It’s not even necessarily in the backyard, but almost 36 months just to break ground. That’s just the red tape all the way leading up to it. I mean, you think about building a single family home, you’re talking weeks, sometimes, maybe a month and a half to, to get through the permitting process, get through all that. Right. Even apartment complexes normally be pushed through in less than a year. Major housing developments are pushed through typically in less than a year, but in this particular niche, this poor gentleman three years, three years going through red tape for what’s going to be a class a very nice, great amenities community. That many of us would really actually probably enjoy living in.
Mike Ayala: Well, and when you look at all that red tape and the amount of time and costs are so out of control right now, you can’t even like budget something for 12 months right now because of, you know, the variability and costs and everything else. And so it really, when we look at the amounts, you said a couple things that are, you know, interesting there, and that are key. I think when we look at things that maybe didn’t used to make sense, like the demos, we had certain, you know, homes that we would demo because it would cost more to remodel them and bring them up to standard or code or whatever, or even just finishes that we want. It would cost more at a certain period of time where now it actually makes sense. And when you think about that, even just, you know, investing infrastructure in lots and the cost of new houses, I mean, what has our cost gone up like 30% in 12 months or something like that? I mean, it’s crazy, but the reality is, is this is happening across the board. And so the only thing that I can reconcile in my mind at this point in time is that there’s different levels of affordability. And when the lower end, I mean, if everything’s going up 30% and even just again, from a macro perspective it’s getting to the point where people cannot afford to buy a home because of, you know, the approval rates with FHA and Fanny and Freddy. And so it’s getting to the point where, and this is Ken McElroy’s constant point. I don’t mean to keep bringing him up, but he’s a voice in my head, you know, he’s become a great friend and mentor. Highly intelligent individual. Who’s been in this for a long time. And he’s seen many, many twists turns and changes over the past 30,plus years. And when you see that affordability, not even from a, you know, a payment perspective, but even just from an approval, just in imagine what used to be a jumbo alone is like almost the average median price in, in America now. And so, you know, it really brings me back to, okay, where is this heading? It’s going to get harder and harder for home ownership. I think homeowner, ship’s going to go to an all-time low, which means that everybody that doesn’t get a home is going to get the, I think the renters are just going to get pushed down. I think, you know, what used to be a, somebody that could afford a $3,000 rental is no longer, you know, a three bedroom house it’s probably, or a four bedroom house. It’s probably a three bedroom house. And then the three bedrooms go to two bedrooms. And then those people go to three bedroom apartments or two bedroom apartments and people that used to be able to afford an apartment, you know, maybe go to manufactured housing or, you know, I think there’s going to be a huge, almost shifts. We used to think of section eight housing in a bad way. And I think that there’s going to be a form of section eight government housing. That’s no longer thought of so negatively because after the debacle of all this money getting from the feds to the states, to the counties and not getting to the people, it wasn’t that big of a deal before because the eviction moratorium was still in place. And so the microscope or the magnifying glass, the lens was not on the states and the counties and the local governments. It was just kind of quiet because the landlords couldn’t do anything about it. But now I, I heard that there’s 23, no, there’s 23 million people facing eviction right. That’s huge. And the thing about…
Tyler Gunter: That, yeah. I was going to bring that up. This is, this is a major teller in what, where in what’s going on right now, right? Yeah. And the thing about it is government is going to have to step in because, and you can answer this question, but if, if somebody just because the eviction moratorium was in place doesn’t mean that those people’s credit wasn’t getting hit and they don’t have, you know, and so we don’t, I mean, that’s part of our approval process in the manufactured housing space. Like they can’t have an eviction. And so there’s all these people that are getting evicted that aren’t going to be able to find a home. And so, right, I think it’s even going to get to a point where the government like financing programs for rent and all that they’re going to allow us to get, you know, maybe even if the Fanny and Freddy step goes through to buy mobile homes or, or even finance, you know, even cheaper apartments, they’re going to give us really, really, really favorable terms. But we’re going to have to forgive, you know, let people in that have eviction and stuff on their background, right? Yeah. I don’t. And I have no backing to say this or anything else, but my gut feeling and my intuition on this is that they’re going to have to offer some kind of guarantee. Like, Hey, look, we’re going to make sure that it’s guaranteed for the first year or something like that, just to prove, right if they default, then we’ll step in something. Because there’s a lot of landlords who are going to be very wary, especially the landlords. Like again, I think we jumped out ahead of it, we’re in great communication with our residents, things like that. There’s a lot of things I think that we did very, very well that assisted it in this, but also just pre-vetting are in an our tenants and things like that too. And the fact that we went off, these tenants that, you know, are, are in an industry that we’re very selective about where we buy, right? We’re buying communities near manufacturing plants, and things like that. The services that we need. Right. And so being strategic in where we acquire some of these parks, but a lot of investments and a lot of these landlords apartments, single family housing, and such where they’ve been bitten by this moratorium and people haven’t stepped up and tried to abide by the obligation of their lease. And then it comes to heads, where they’re, they’re going to be jaded. When it comes to somebody who comes in and, and maybe has a legitimate reason why they weren’t able to make those payments throughout the moratorium. There’s tons of things that happened. The breadwinner and the family fell ill with COVID and passed away. These things happened. Right. And suddenly you’re in a place where you can’t make these lease payments. And they might be coming in saying, Hey, look, I need this. And a landlord like that, especially a small operator or something like that, like you were talking about earlier, some of these guys that are getting head harder than, than larger operators, they might be so jaded that they’re like, look, I don’t care what happened or what your sob story is. The person that, the person, that bit me had a sob story too. Go back to our, our hearts get in the way. So there’s going to have to be some kind of guarantee or, or something where the landlords step up and say, okay, well, I’m willing to take that risk again.
Mike Ayala: Well, and I think there’s going to be a lot of negotiations and I think it’s going to have to happen pretty quickly on those fronts, you know, some sort of guarantee, but also, you know, like steep discounts very cheap money when it comes to yeah, You know, borrowing and being able to refinance and all that. I would imagine, I would imagine that’s going to roll out pretty quickly, but, you know, I don’t know. I mean, it’s borrower or beware, I think when it comes to, you know, us landlords and stuff, because not that we shouldn’t always read the fine print, but to your point, yeah. There’s going to be some sort of guarantee, but I think there’s also probably going to be a whole bunch of restrictions on, you know, who we can say yes to and who we can’t say yes to and All this stuff. And so I think we just have to be really careful getting lured in by, I think there’s going to be plenty of cheap money and I think it’s probably going to be good, but I think we really need to just think through the ramifications of that. And I think again, a, at the negotiating table, I think the go, you know, one of our, one of our mentors Tom Wheelwright, you know, he always, he always says like, you know, basically the IRS code is a set of incentives, that the government wants us to do. And so I think as long as long as that negotiation is hammered out front I think they’re going to be pretty art about this. And, you know, just even, like you said, the current president, you know, sending a mandate to Fanny and Freddy to, you know, fund affordable housing, I think it’s all great. And I’m excited about it. I just get a little concerned about the fine print and what that’s going to mean for what we can and can’t do at the same time, but overall, the problem has to get solved. And so I’m optimistic around it.
Tyler Gunter: Yeah, absolutely. As are we, that’s why we’re in the position right now where we’re at coming out of COVID, coming out of the pandemic fresh set of eyes, right. We’ve had that opportunity, and why don’t we talked a little bit about what we were doing on the last podcast count, and it’s coming to fruition now where we’re, where we’re finally launching it out and talking to people about it, but how we’ve completely repositioned. Many of our portfolios into, I call it a mega portfolio because it’s just so exciting what we’re going to be able to do with it. Just by repositioning a few things. And, we’re underway with that right now. It’s really exciting. I know that’s a lot of what you and Andrew and I sit down and talk about on a week basis is where we’re going, what we’re doing, how it works what we’re seeing, what’s working, right. What’s not working how we’re adjusting it. And it’s been, I mean, it’s been pretty exciting to see this coming together because for the longest time it’s been multiple different and never, never as a whole. And now when we combine it as a whole, we’re sitting back going, wow! And we didn’t know we had this great of an opportunity.
Mike Ayala: Well, and even just, and that’s really what it is. Yeah. And even just yesterday, you know, like we were on a, we were on a call with a, her, and they were looking at one of our properties that’s kind of out here by itself and we don’t have everything, you know, merged yet. I think we’ll be able to get that done in the next few weeks. But what’s exciting about it, you know, like this broker was talking to a bank that was interested in it, but then the loan size was too small. A lot of, there’s so much money. You kind of said this earlier, but there’s so much money out there right now that needs a home. And it’s an exciting time for affordable housing and manufactured housing. You know, we’re talking to a broker right now that has a pretty interesting, you know, LOI in front of us. That could be basically like up to a 30 million line of credit over the next three years to buy homes. Now, when, and, and this is, this is basically backed by one of the big life insurance companies. When, when in the past, have you ever seen life insurance companies like want to come in and fund manufactured homes? Not, not the park, it’s just the homes. And there’s all this, there’s all this money out there looking for a home. So it it’s an exciting time. But again, the thing that we finally realized is like, we need to, we started working on like bringing this all together because you know, one and two and three and even 10 parks at times is too small. But when you pull all this together and bring it all into one centralized place, which is why we started offloading some of the communities that didn’t make sense and try to bring this into one single portfolio, we’ve got lenders now that are, you know, really taking a serious look at this that wouldn’t have a couple years ago for two reasons. Number one, the portfolio size was too small, because like you said, it was chunked down into a bunch of different I guess we’ll just call it investment groups, but also there’s just so much money out there that’s looking at this space now because they know that affordable housing, affordable housing’s been an issue for a while. Now It’s like a mega issue. It’s like a nuclear bomb getting ready to go off. And I think the government is going to come in. I mean all hands on deck to solve this. So it’s an exciting time.
Tyler Gunter: Yeah. That’s what I’m saying. This isn’t a new problem. It’s been kicked to the side so many times because it just didn’t quite have enough umph to get on the radar. That’s why all these manufacturing plants and these, all of these mobile home producers, like they’re so far behind on, on getting and developing and, and pushing this stuff forward is because it finally became, and I think the last 18 months had a lot to do with that. It finally became front of sight and we went, holy cow, this is a problem. And as consumers have come in and said, Hey, wait, this is my option. This may be my last option. So how do I get in here? How do I do this? Like I said, we have people knocking down the doors right now for our community. We can’t fill. We cannot keep up. I shouldn’t say that we can, but it’s, it’s become where we are just catching up right now too saying, okay, here we go. Yeah. Where we’re actually selling home. I just got an email yesterday. We sold a home. It’s not even done yet. That’s a great place to be in right now, but that just tells you where the demand in the market is. Buying a rehabbed home site unseen with sending a check here, please. I want it.
Mike Ayala: So the there’s a, I saw a post in a mobile home park mastermind group and they’ve, pre-sold nine homes that are waiting to be remodeled. Right. And that’s like the market that we’re in. And again, at the end of the day, you know, I was talking with Kara about this. This is how serious the issue is, when you look at it, just even from, you know, the homeless level’s rising. When you come down to that basic fundamental level, you drive through any major city in the us, and almost all of them have major homeless issues. And you know, when you look at everybody getting pushed down what are we, you know, what are we going to, what are we going to do when they can’t afford to pay when you, when you look at our average lot rent our average lot, rent’s like, what? 289 a month or something like that.
Tyler Gunter: Right. Very affordable.
Mike Ayala: Yeah. When you look at that average lot rent and even all in, like we can get a family in a, you know, a three bedroom, two bath home for 7, 8, 900 bucks, depending on, you know, finishes and where it’s at, if somebody can’t afford and that’s for a new home, but like even a remodeled older home, you know, six, $700, If somebody can’t afford that for a three, like what’s next, it’s homeless, it’s literally homeless. Or even, you know, maybe a step above that is two or three families living together. But, it’s ultimately homeless. And so this has to get solved because if we don’t solve it and I think the government is all over this, if they don’t help solve it, they’re going to have an even bigger issue on the backside because the hardest thing to solve is homeless camps. Everybody knows that, the mental health issues, the homelessness, not eating, you know, that’s the biggest most challenging thing to solve. And so I think they’re going to get ahead of this and figure it out. And we’re seeing, you know, we’re seeing the early rumblings of it and, and I think it’s going to come out. So I’m, I’m ultimately optimistic. I think it came at us so fast and it’s such a big problem. I think they’re going to take it serious and they’re going to get this fixed. Well, any other wisdom insight when it comes to affordable housing and you know, where we’re headed.
Tyler Gunter: I just hope everybody is beginning to understand. I think you and Andrew were ahead of your time five years ago, when you guys teamed up and started going down this route with your passion and your vision to solve the home, I was going to say the homeless problem, which is part of it, but the affordable housing arena you and I, when we jumped into this 10 years ago, it was by default by accident, we got into a great space and then we realized the potential of it. And so I hope if others are starting to see the great need for it, right? This sounds funny, but there’s a real philanthropic end of this too, where you really are helping people. But then on the flip side, you know, as businessmen and investors, we don’t do this. In the middle of feeling good about it. I’m hoping that, that through all this much like the government has now seen it much like even REITs and some of these other large, larger operators are starting to explore it much like the banking that we just talked about, where it’s, where it’s being backed by the insurance companies and many people, many people in the investment world know that insurance companies invest in real estate heavily. But the fact that they’re saying, Hey, look, these homes have value. And we want to be a part of that, seeing that coming to fruition over the last few months, really in that arena. But the last couple years for the rest of it I just hope, and that maybe some of your listeners and those people that they influence are starting to see this too. And they can see where there’s tremendous opportunity. And it’s a great, it’s a great way to feel good about building your retirement, building your legacy, and moving forward, right? You really are helping people and maybe one day down the road, Mike, we can get on and we can share a podcast on all the good we’ve been able to do over the last 5 years, 15 years between the two of us and other things and just success stories, right? One of my favorite things to see is when I have a tenant call me up and give me eight month notice. Cause they’re building a house, right? They’ve peaked on that. They’ve done that, but I saw where they started too. And so it’s really exciting to see how this together.
Mike Ayala: Yeah. Well, I appreciate you coming on and just kind of sharing the insight and I, I think you’re right. It’s such a noble, you know, cause and to be able to do good and do well at the same time and being an asset class that you know, like you were even just talking about the insurance companies, the reason why they’re optimistic at this point is because they know, even though they used to just look purely at the asset, which is what they do. And it makes a lot of sense in real estate. But what they know is that most people are not going to default on this asset because it’s all they have. And so they’re looking at the, we had these, you know, several these around affordable housing and, you know, through the oh 8 0 9 recession, they did great. They obviously performed well through COVID, even though we were a little nervous along the way, it doesn’t mean that it’s easy, but I think there’s just some great opportunities ahead of us. And like I said, it hasn’t been easy, but you know, getting everything rolled up. Sometimes I feel, you know, some of it is skill and, and foresight, as you said, but you know, some of it’s also luck and, and just timing. And I just, I think it’s a great time to be in this space and I’m super thankful to have you on the team because you know, having the right team in place is really all that matters. You can have the best idea in the world and, you know a noble cause in front of you, but if you don’t assemble the right team, it’s never going to work out anyway and you’ve done such a great job with the team. And so I appreciate having you and look forward to getting this thing pulled together. So for investors, potential accredited investors that are, you know, listening to this or you know, support the podcast, if you’re interested in as you know, Tyler talked about and we discussed it, we’ve repositioned a lot of this and we’ve got some great investment opportunities ahead of us. By the time this show airs, it should be live, have everything kind of figured out with the lending and all that. So if you are interested text the word deals, deals to (480)-531-7519. That’s my text. I’ll respond and we can get on a phone call and see if it’s a fit for you. So Ty, anything else? I appreciate you, man. Any final, last words?
Tyler Gunter: No, I’m glad you mentioned the team, cause we have a killer team. It’s taken us a few years to get the right people in the right seat and we’ve got them and we’re frankly kicking at this point. And so I appreciate your acknowledgement and doing that. And I’m just excited about the next four or five years, man. There’s so much great things down the pipe. And we’re starting to see where the rest of the world’s aligning with that vision. It’s great.
Mike Ayala: Yeah. Yeah. And you know, you talked about that future episode where we talk about the good we’ve done. That might be something that would be fun to bring, you know, a Lori and an Amy on and just kind of like have a round table about. Cause there, you know, they’re the ones that deal with the manager is on, you know, boots on the ground and, and hear the stories, the good and the bad. So I think that’s a good idea. So yeah, Ty really appreciate you. Appreciate you being on. And again, if you’re interested in investing text the word deals to 480-5317-519, or of course you can go to my website at michaelayala.com and there’s a deals landing page there. So signing off have a great day,
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