Today’s guest on the Successful Pitch is Jefferson Lilly. He has a Wharton MBA but decided to go a different route than most of his other fellow graduates. And he now runs a fund that invests in mobile home parks. So people are somewhat surprised, as he calls it, this quirky little niche, of why they would ever invest in that versus apartment buildings, for example. So no matter what you’re pitching, you still have to get somebody to understand why you and why now, and really explaining how you’re adding value, and that you’re the right team to make sure that this investment’s going to give them a good return on their investment, not only having a great exit plan, but he also talks about how his investments give dividends to people. He tells the story of exactly all the grit and tenacity that was required to get his business to take off. But now he’s the expert. He shows you how you can become the expert in what you’re doing too.
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Getting Investors To Pick You with Jefferson Lilly
Hi, and welcome to the Successful Pitch. Today’s guest is Jefferson Lilly, who owns a company called Park Street Partners. He’s a self-made millionaire, a mobile home park investment expert, educator and industry consultant. His company owns 16 mobile home parks coast to coast, totaling over $30 million in value. Jefferson’s been featured in the New York Times, Bloomberg Magazine, and on the Real Money television show. We are going to ask him to share some tactical and practical stories of his journey, and it’s all about investing and telling stories, no matter what you’re investing in. Jefferson, welcome to the show.
Thank you, John, it’s great to be with you today.
Tell me, if you don’t mind, I always like to ask my guests their story of origin. So, when you were starting out, you’re maybe getting out of school, and you’re thinking, “I’m going to go invest in mobile homes,” or, “I’m going to become a millionaire.” Tell us, how did you decide, did you start at a young age, tell us what happened.
Well, as I say, John, when I woke up from the concussion, it just seemed like a good idea to be buying mobile home parks. But no, seriously, yeah, I had always been interested in investing generally. I bought my first stock at age 17. I won’t tell you how old I am, but suffice it to say this is back when trade tickets were physical pieces of paper, not anything on the internet, and my dad had to cosign that trade ticket. Anyway, so I went on, I was an Econ major in college, did basically a couple of different tours of duty as an analyst in my 20s, went to the Wharton School of Business for my MBA, and came out of that, and all the while was certainly focused on making money. But honestly, I came out of Wharton and went into high-tech, like so many people back in the late ’90s. I rode the dot com boom up and down.
I just began thinking after that, that personal finance is never quite a question of black or white, but to the extent it is, that basically value investing is what’s right. And sort of momentum high-tech, solar-tech, biotech, silly tech investing was just not going to be what I wanted to do anymore. I had already been a shareholder in Berkshire Hathaway and was well aware of what value investing was and just wanted to do more of that. That led to diversifying away from the stock market and buying value real estate. There’s really nothing better that I’ve found than mobile home parks, as far as just generating good cash flow. Value investing is all about buying a dollar for fifty cents, and typically buying and holding. And so mobile home parks just fit really nicely into that perspective that I now have and continue to have, that really value investing is the way to go, and not chase high-priced other investments.
So you, I would guess, would be someone who’s not jumping into the, “Oh, I need to be investing in Uber’s Series,” whatever letter they’re on now.
No, and I don’t intend to buy Uber on the IPO, and who knows. I may be sorry for that or I may be quite happy, but honestly, to be able to generate the kinds of returns that we do pretty consistently, which are 20-30% cash flows, plus of course appreciation in addition to that, but just the cash alone is in the 20-30% range, to have that kind of annual return really is almost venture capital returns. All the fancy firms up and down Sand Hill Road here in the Bay Area, that go after all those sexy deals and have so many wipe-outs are generating that kind of return, and it’s much more volatile and those are far less liquid investments. We’ve got a far more stable asset that’s more liquid, and again, we make those kind of returns and we’re quite happy doing what we’re doing here at Park Street Partners.
Can you tell me about the concept of what you’ve learned about pitching? How do you pitch to get people to invest with you?
We’ve evolved. We got started just really without specifically pitching in mind. And by that, I mean that, I don’t know, probably seven or eight years ago, before I even had my partnership, I was just getting back into the mobile home park investing community. I was posting online at various blogs, answering other people’s questions about mobile home park investing. Because I was giving back, I got to be reasonably well known. Then when I formed the partnership with my partner Brad Johnson, that was about three and a half years ago, I already had some profile on the web, some awareness, and just putting the word out online, that we had a deal and were looking for investors, got us our first set of investors, our first deal that we closed on that was now summer of 2014. I believe we had six investors. And so I had established some amount of credibility on the web, again, for several years, just kind of giving back into the community.
Then we put together a PowerPoint presentation, and pitched investors, but it varied. Some of those investors had a lot of questions. Frankly, the first guy that we thought that was going to do that deal, when through three or four weeks with us, on and on questions on and on. He looked at the pitch, he had questions, he had more questions, then he had the same questions, again and again. He eventually fell by the wayside. So it doesn’t always work, but again, we had honed our pitch and so then we were able to close that first deal. We raised money, roughly from half a dozen other folks. And that pitch, which just lays out first the marketplace, why is the mobile home park industry such a great business to invest in, that’s in our pitch. And the second part in our pitch then is the individual deal in question. Here’s the mobile home park, the location, the occupancy, the rents currently. Here’s what it should be after 12 and 24 months, higher rents, higher occupancy, et cetera.
Let me ask you a couple questions there, because you’ve given such valuable information. Before we get more from you, I just want to underscore it for the listeners. So what I’m hearing is the amount of preparation is so key, so that when you get asked a question, a) you’re prepared, and b) you’re not defensive.
So I’m guessing that some of the questions that you might get asked, because you, as I mentioned, were in the New York Times, the perception of mobile homes maybe not as sexy as a new high-tech startup. Then people say well, for the people who are in a mobile home trailer park, is sort of their last resort sometimes before they become homeless, but it doesn’t mean it should be your last resort as an investment, correct?
We’ve never said it quite that way, but you’re very perceptive there, John. Yeah, so that’s it. We know that this is such a quirky niche, that a lot of our audience, let’s just call it all of our audience, has never invested in a mobile home park before. So we have to start, we err to the side of caution. So our pitch starts with, assuming ground zero like no knowledge of the business. And again, we start off talking about the industry. We actually compare it to apartment investing. Many investors are familiar with traditional multifamily investing, which means apartments. Mobile home parks are still multifamily, it’s just a teeny tiny niche. Maybe 1%, maybe less, of all multifamily is mobile home parks.
Anyway, we’re able to compare and contrast like, well, here’s how our expense line item for repair and maintenance compares favorably to apartment buildings. Here’s why mobile home parks are better, have lower repair and maintenance. People then get drawn into our story and they understand line item by line item, like why are our rents the way the are, why is our repair and maintenance the way it is, why is our tenant retention, our turnover as low as it is, why is it so much more favorable than apartment building investing. So we just kind of walk our investors through the P & L and do a side-by-side comparison, our quirky little niche compared to something they probably already know. Again, apartment building investing. And that’s how we build our pitch.
Every good pitch paints a picture, and you’re painting a picture, giving them a frame of reference of apartments, so they can have some anchor. And then you’re acknowledging that this might be a little quirky, and I think when you have something that’s an unspoken objection and you bring it up, then people feel like, “Oh, I can trust you because you’re not pretending this is some high rise on Park Avenue in New York,” right?
The other thing that I think is important in the pitch is to reduce the risk. So credibility and risk, and it sounds like when you’re going through and comparing, when you start saying you know, people like Warren Buffet invest in this-
And we know he’s very successful and does his due diligence. So you start to have some social proof there, that I would think would be really a big take-away for anyone who’s pitching to get a new client, to get funded, whatever it is, is if you have credibility and you reduce the risk, using social proof, that it really helps get people to say, “Oh, you’re the guy.” And the other thing that I think you’ve really done that everybody can take away is you’ve generated press. You were giving away content, which allows you to be known as the expert, which then of course, if you’re going to invest in this quirky little niche, as you call it, then why wouldn’t you invest with someone who’s known as the expert, but you had to set yourself up as the expert.
The thing I hear over and over again, that you’ve done so well, and why I wanted to have you on the show, is you answered the question why you, right?
You really are the person that is the go-to person. So if you’re pitching any kind of startup, pitching to get a customer, we all have choices. Everyone has competition or there’s no market. So answering this question, why you, you’ve done really well, I believe. And I think that’s a key to your success and I just wanted to have you maybe zoom out a little bit and say, “It’s always been my strategy,” or, “Here’s a couple tips I would say to somebody who’s starting out,” if you don’t have a strategy on how to do that.
You want to set yourself up to be, as you said, the guy to invest with. You don’t want your prospective investors to get super excited about the concept of what you’re doing, and then go do it themselves, or do it with someone else. So to get folks tied into us, we then, in our pitch, we talk about our background, how long Brad and I have been in real estate, which in aggregate between the two of us is now more than 20 years, and we have some very specific quarter-by-quarter graphs that document how much cash our investors have been earning with us historically, quarter-by-quarter. And suffice it to say, again, it’s better than investing in the stock market or most other forms of real estate. Of course, I’m making no guarantees about any future gains here. But by having that kind of black and white evidence of our historical track record, and again, how many years, more than 20 that we’ve been in the business, that helps us to make the case that yes, we’re the guys to go after this niche with.
We also mention, frankly, that because this niche is so small, it’s not like doing single family house investing or apartment investing. Finding these deals is difficult. It’s not impossible, but it’s difficult. We’ve spent time outreaching to both brokers that specialize in bringing mobile home parks to market, and we also outreach directly to mobile home park owners. We send out some postcard mailers, and we’ve made some follow-up phone calls. So we have a little bit of secret sauce in what we do, in our deal flow. And again, if someone else were to say, “Hey, I’m just going to go buy my own park,” or “I’m just going to go invest with some other partnership,” I’m not saying that wouldn’t work, but again, we make it clear that we’ve got good deal flow and there is something unique about our partnership. This isn’t like just looking on the MLS to just go buy a regular single family house, and flip it. So we add value and we’ve got a good track record.
Nice. So that’s the tweet right there. Add value and have a good track record when you pitch, and the track record could be previous successes, even in other industries if you’ve had another startup, or you have another client, a customer that’s happy, maybe. Have you ever told a story of an investor that was a little skeptical at first and then they put in some money and then they got a return, and so that you give somebody that little story, that hero’s journey, if you will, so that they can go, “That sounds like where I am, and I do want to go and be where that guy is three to five years from now.” Is that the kind of thing you do?
We have not made it quite that personal around any specific investor, but what we do tell folks, is hey, Park Street Partners comes with references, and if you choose to invest with us, we will happily provide a fairly lengthy list of references. We make it clear that we’ve got at least one guy who started with us in that very first deal, three years ago, and he then invested subsequently in our first fund, which was our 2015 fund, and he’s invested in our current fund. So we make it clear that we’ve got investors that are happy with what we’re doing and they are repeat investors with us.
There’s nothing more it sounds like.
That’s how we sell with our investors, so to speak.
Yes. Just so people … I try to anticipate the questions people might have when they’re listening, so what’s the minimum amount of money someone has to invest with you to be part of this?
Got it. Okay. And is there some kind of exit plan, much like an apartment building, do you have to hold onto it for five to ten years before you sell the mobile park, or how do people get their money back?
Yeah, exactly. So, John, as you know, you can’t go to the market, at least we’ve not been able to go to the market with sort of a very open-ended investment and say, “Hey, there’s no exit,” because then of course what people hear is, “Oh, my gosh, Jefferson is going to keep my money forever.” So we put a 10-year life on the fund, so that investors emotionally could get comfortable that at some point, we would be selling off everything and getting them their money back. So that, in a nutshell, that’s the answer. But this is such a profitable niche, we’ve been paying our investors about 12% a year, 3% a quarter. So honestly, just from dividend payouts, they’ll have all their money back, probably in eight years, and then still will have the property to sell at year 10. So, there’s really a fair amount of liquidity.
This isn’t like traditional venture capital, where you write a check and you get nothing for five to seven years, until you have a winner and something goes public or gets acquired. We start paying out our investors from the first or second quarter, while we’re still raising funds. This is just a very strong cash flow business, so investors start to see some of their money back, honestly, probably within 90 or 180 days. And then, again, as we grow the portfolio, as we infill any vacant pads with new mobile homes, et cetera, then the returns tend to improve over time, but they actually start getting money back well within that first year after investing.
And is it similar to investing in a mutual fund where you’re owning multiple stocks, in this case, you’re owning multiple mobile parks across the country?
Yeah, you can think of it that way. Folks invest in our fund, which is a Delaware LLC. It in turn owns LLCs in the states that we have properties, and each of those LLCs owns just the one property, so our deal in Dayton, Ohio, is held in an Ohio LLC, which is 100% owned by our fund. So yeah, investors own a diversified portfolio, geographically diversified portfolio of mobile home parks. We don’t also do self-storage, or apartments, or retail or anything, so they’re focused in mobile home parks, but yeah, they’re buying into a portfolio of 10 or 15 parks nationwide. So that’s the way we do it.
And how do you find your investors? Do you use family offices, do you advertise, networking, referrals? I’m very curious about that.
Yeah, a little bit of all of the above. So we’ve evolved, as I mentioned earlier, from doing just some of those blog postings, and really kind of knowing most of those first half dozen investors, to now, we’ve got our own podcast, which is simply called Mobile Home Park Investors, so we were the first people to do a podcast on mobile home park investing. So we get a lot of listeners. Let’s just say we’re averaging about 10,000 downloads a month right now. And so from that, we get both investors, people will just literally every week, I get at least an email or two, or a phone call from somebody that says “Hey, I’ve heard your podcast. I love the investment thesis. This is a great quirky little niche. Too much for me to do on my own, let’s just talk about me writing a check for 100 grand or a quarter million.” We get inquiries like that most weeks from our podcasts, but also, to a lesser degree, but still important, we also get some deal flow from our podcast.
Last fall, we bought a property in Raleigh-Durham, a great market where 15 minutes from Duke and 15 minutes from UNC Chapel Hill, and that came to us through a couple of, I call them the kids, a couple 20-somethings, that want to get into the business. They heard our podcast and we do pay referral fees for people that bring us off-market deals, and so these guys just called out of the blue, and said, “We’ve heard your podcast. We know about a park in this great market, Raleigh-Durham, and if you pay us a referral fee, maybe we can do some business together. So we’ve done some business together.
So it sounds like hosting a podcast sounds like a great way to find new clients and investors.
Yeah. You should try it sometime, John.
I know it well. But I love that I’m seeing someone else use it in a different format. It’s a great way of extending your expertise and your branding beyond blogs, and you can even repurpose the podcast and take some of the transcripts and turn them into blogs if you want. That’s what I love.
Blogs or books, yes. There aren’t all the hours in the day, but you may see a blog or a book coming out of us at some point in the next year. We’ll see.
Very interesting. So, people who are listening that either want to have their own business, have their own business and are really looking for some life lessons that you’ve learned on cash flow, getting a good team, anything you could share would be great, Jefferson.
To be candid, yeah, nobody needs to have top school, Wharton, Harvard or Stanford type MBA to be successful in the mobile home park business. It’s just not that complex. I mean, I think I was pretty good with numbers, and getting through my business school program I certainly took some real estate finance courses, and some basic marketing courses, those sorts of things help. But really, truly, this has been mostly for me, learning trial by fire. I read every book that I could, I went to seminars when I was getting into the business. I just put the word out to everybody that I knew, that I wanted to buy a mobile home park. I certainly got a number of quirky, quizzical looks, but like one guy from my church just said, “Oh, my dad owned a mobile home park, and that was what sent us, our whole family, to a great European vacation every summer. You should call my dad and talk to him.”
So I built up kind of an unofficial advisory board of about 10 guys that had all owned mobile home parks. I started bouncing deals off them to get their input. And then again, finally found my first park to buy and bought it, and just jumped in. I had learned as much as I could, at that point, without actually owning a park. I had learned as much as I could, and jumped in, but certainly the learning curve continues, but again, it’s been a good business. So again, I just encourage folks that are interested in this business to learn about it. They can hit our website and we’ve got resources there for folks that would consider buying their own park. Learn about it, but like anything, at some point you got to just put your foot, or well, your toe, your foot or your whole leg into the water, and just sort of jump in and go for it, and there’ll be more learning hands-on. But this is a manageable, a very manageable business. This is not rocket science, you don’t need to have a fancy degree to be successful. You just need to have kind of the right attitude and stick to it in this.
Let’s talk about that, because that’s true for everybody. The right attitude and perseverance. I mean, you paint a picture of like, “Oh, this is … I found this, it’s easy to do, anybody can do it,” but I’m sure there’s some challenges in any business you have, whether it’s like competing to get the mobile park, or there’s some unexpected bump in the road. So what do you do to keep your attitude positive when things get frustrating?
John, we hire other people to take the headaches off my plate.
Well, you know what? That’s a great tip. Don’t wear all the hats, right?
Yeah. I mean, I did … When I got into the business, I was literally sleeping onsite, one out of every three weeks in one of my trailers being the general contractor, overseeing the roofer that was rehabbing house number 17, and the guy that was putting carpets in house 24, and the new toilets in 24 and 30, and blah blah blah. Now I’ve hired other people to do that sort of general contracting. But yeah, when I got started, I did virtually all of it. I never actually swung a hammer or hung sheet rock, but I answered the phone, I talked to tenants, I collected rents. I was literally living onsite, one third of the time, for about the first six months, being a general contractor. I put up all my own ads up on Craigslist and the website.
So I’ve outsourced most all that now, and I do a lot less, but I know what those jobs should be, and I know what success looks like, because I did it, and now I can say to somebody, like, “Hey, here’s how you do the job, although we generally tend to hire people that already know. But it does then give my insight if it’s like, “Hey, you rehabbed a house, and it cost how much? Why is that? It never cost me that much when I was doing it.
Yeah. That’s the story of tenacity and grit and doing what it takes, that a lot of people are not willing to do it. It’s so funny, I was talking to a co-founder of Barry’s Bootcamp, which is now global, and she said they started off with one location, and she used to be the one that would clean the mirrors in the gym. So now when she has a team of people doing it, they roll their eyes at her going, “Oh, my God, you’re so picky about how the mirrors are clean,” and she reminds them, “I used to do your job.”
It’s just the way I did it.
Yes. So that’s the heart and soul. I can see why people would put their money with you. Not only are you likable, and trustworthy, but you really care. And that’s really what everybody is selling when they’re pitching anything. Jefferson, I can’t thank you enough for being on the show. Let’s give the website, and twitter handle, anything you want to do, so people can really do a deep dive into what you’re offering.
Yeah, sure. So if folks are interested perhaps in co-owning parks with us by investing in our funds, or if you just want to buy your own park, our website is parkstreetpartners.com. And then, if you want to find our podcast, we’ve got now cumulatively something like almost 30 hours of content. And we’ve got actually the largest group on LinkedIn about 3,500 folks. Anyway, you can find all of that by going to mobilehomeparkinvestors.net, to get our content.
We’ll put all that in the show notes for everybody as well. Thanks again, and congratulations on all your great success.
Great to be with you, John.
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