In this episode, Clint Coons, Esq. and Aaron Adams, CEO of Alpine Capital, discuss how to shift focus in the real estate investment space to maintain double-digit growth. Aaron has maximized investments in a market plagued by a shortage of 6 million homes by purchasing RV parks, KOA campgrounds, and mobile home parks to convert them to long-term manufactured home communities. Check the resource links for upcoming live event dates from Alpine Capital in Indianapolis and Idaho.
Aaron Adams has been a full-time real estate investor since leaving his job teaching high school Spanish in the early 2000s. He has purchased thousands of properties in California, Indiana, Missouri, Texas, Florida, Idaho, Nevada, North Carolina, and Illinois, focusing on single-family and manufactured homes in blue-collar and middle-class neighborhoods.
Highlights/Topics:
- Aaron’s journey from the classroom to real estate investment
- Shifting direction to find opportunities
- The industry is short 6 million homes
- Navigating the manufactured home market
- Each month, Alpine offers investors a class to learn their methods- in person or live streamed
- The emotional risks of “over-rehabbing” rental properties
- Affordable housing is at crisis level
- Accessory-dwelling units- upping your real estate game
- Importing storage units from China vs. stick-built
- The impending impact of the commercial crisis
- Active and passive solutions at Alpine Capital events
- Long-term relationships are the goal at Alpine’s live events
Resources:
Alpine’s Cash Flow Summit – Upcoming Dates
Full Episode Transcript:
Clint: Hey. What’s up, guys? Do you want to learn how to make money on real estate in the niches? There’s riches to be found there. I have a special guest on who’s going to be teaching us how to take your existing real estate, or if you’re just getting started in real estate, and find opportunities that no one else is pointing at right now to put more money back in your pocket. All right, let’s get started.
Hey, it’s my pleasure to introduce Aaron Adams of Alpine Capital Solutions. I’ve known him for going on 15 years. He’s an avid real estate investor. He has many different levers he’s pulling on when it comes to investing in real estate.
I couldn’t think of anyone more interesting to bring on to my channel to discuss what the current state of the market is, how he’s driving revenue to his bottom line, and what the opportunities are for you as an existing real estate investor. Maybe someone is considering getting started in real estate. How do you get past that line and really take your investing to the next level? Aaron, hey, thanks for being on.
Aaron: Always good to see you, Clint.
Clint: I know. Before we get started, we’re just talking about the different things that you’re doing right now. Before we go into that, just give some people some context about how long you’ve been investing in the different things that you’re into.
Aaron: Twenty-five years ago, I was teaching high school. I love teaching, I love coaching. That really was my superpower. It was what I was best at. But I didn’t like the prospects of living off of $40,000 or $50,000 a year for the next 25 years, especially in Southern California.
I started educating myself. I started at Barnes & Noble buying some real estate books. I began attending some weekend seminars, and then I just jumped in the water and bought my first property in 2000. It was a duplex. I somehow convinced my wife to move into one side and rent the other out, but we were living there for free. Our tenants pay the mortgage.
That was a shift for me mentally. That was the first time I really thought, man, passive wealth accumulation can be a good thing. We sold that property six months later, and I made $50,000. For a high school teacher making $40,000 a year, walking out of escrow with a check for just over $40,000 in net profits, was massive because now, in addition to having some experience as a passive investor, I also had made some active money.
While teaching, coaching, and finishing up my master’s degree, I started doing deals on the weekends. Over the next four years, year four, fast forward a few years later, I still made $40,000 at the high school, but I made over $700,000 from several projects that I had flipped active income.
I’ve always been interested in active investing as a way to buy more passive properties. I know you and your partners have always been both active and passive in terms of deals that you’ve bought, and I don’t think a lot of people think of that connection. I’ve never considered myself a single family home guy or a multifamily. We just chase returns and we chase opportunities.
That’s been an evolution. It’s like 25 years later, I have this tool belt of different strategies from going to foreclosure auctions, to buying tax liens, to flipping properties that have allowed me to make money actively that I can then park into free and clear passive properties.
Clint: Yeah. Those of you that are watching this right now, full disclosure, I’ve been investing with Aaron for going on 10 years. We’re in a lot of deals together, mobile home parks, apartment buildings, single family homes. I flip properties with him. We have a property management company.
I’m pulling back the curtain. What we’re showing you today by being here and watching this, is that what he’s going to be showing you is how to make money in real estate when you think that you can’t or when people say hey, the interest rates are too high. What I found is he’s always shifting. He’s like, all right, this isn’t working right now. Well, then we’re going to go on to this, we’re going to find another thing that’s working.
What are some of those things right now in today’s market, where everybody’s going, oh, boohoo the interest rates are too high, the cap rates aren’t there. What are you doing?
Aaron: It’s interesting. To understand what the opportunities are, you have to understand that we’re severely underbuilt. If you go back to 2008 when the market crashed, we were overbuilt by about 4 million homes in this country. Fast forward 15 years later, and we’re short 6 million properties. That’s created interesting opportunities in manufactured homes.
I have four manufactured home dealerships now. When that home gets on the assembly line, that’s seven days to completion. Those of you that have built a home, seven months is considered good in the stick-built world.
I don’t think those rectangle home boxes are sexy or cute. But for affordability and speed, it’s one of the reasons why we’ve jumped into that whole space. Under that umbrella is trailer parks, RV parks, and the opportunities that are there.
When I left Southern California in 2005 and started Alpine Property Management in Indianapolis, everyone was like, why are you leaving California to move to a flyover state? Nothing is cute or sexy about Indianapolis. I said, well, you can buy a property there for $30,000 and rent it out for 800 a month. That’s sexy to me. They said, what is it, in a war zone? I was like, no, you can get the war zone house for $1000.
That led us to Indianapolis to Kansas City, ultimately down to Dallas. If you think of the US as one home market like we do, and you have a value on making double digit returns on your money passively, then that leads you to a lot of different ways to monetize the real estate space. That’s really been the art for us over the years.
Clint: Okay, let’s just talk about the manufactured homes, and then I want to get into that stuff you’re doing in China. You’re bringing stuff over here and those other strategies we’re talking about, but on the manufactured homes.
Here’s something. We got a place in Winston-Salem, 28 pads, nothing’s on it. Pick this place up, pennies on the dollar. Now we have to get homes put on that. We did 20 homes, and a lot of them were 3x2s. What did that look like for us to buy those manufactured homes that we put on those pads?
Aaron: The number that really becomes sexy when builders talk about construction, they talk about price per square foot. If I’m building a stick-built starter home, vinyl siding, and three bedroom, two bath, 1100 square feet,15 years ago, I could build that home for $75 a foot not counting the land. It’s just my cost to build that home. Your dad was a builder, so you’re familiar with cost per square foot.
I built a pool house in my backyard, and it’s upper middle class finishes. There’s no way I was less than 250 a foot on that right now. If you call up a builder and say, hey, I want to build a starter home, they won’t even mention anything south of 225 a foot. That’s about the cheapest that anyone’s going to quote you.
You can buy a manufactured home, and we bought those homes for that project in North Carolina for you for about $70 a foot. That’s the opportunity. That’s the compelling because it’s a brand new home built to housing and urban development standards. Now, you have transportation costs, you have to set the home, and you got to put screws in and build a deck. There are some ancillary costs. But even after all of those, you’re still well under $100 a foot.
What’s interesting is that rents. If you have a three bedroom apartment, it’s running for $1000 a month, I can still rent that manufactured home within 5% of that rent amount. You’re getting higher returns, and you’re able to buy for pricing that we haven’t seen in the stick-built world for 10 years. That’s what we’ve done with you, and that’s what we’ve been doing in Kansas City, Indianapolis, and in Idaho.
Clint: That’s something that I think investors should be looking at as manufactured homes. As we did, we brought them out. I think we picked them up for about $82,000 a piece. As you stated, when you’re looking at manufactured homes, it’s just not the house itself. You got to put it on the properties, you have the transportation costs, you then have to skirt it, you got to build a deck around, you have to hook up utilities to it. That’s about another $15,000.
We’re probably all in on the 20 homes that we bought, let’s say $100,000. Here’s the thing, we’re renting those out for between $1200 and $1400 a month. When you do the math, we’re looking at what 15 cap on those properties. That’s the difference that people don’t understand.
You started this. You’re the first person that came to me and said, hey, this is what we’re doing. You started doing this three years ago. You saw this happening. You’re doing it in Idaho, right?
Aaron: Yeah. In fact, we even take it one step further because there’s a little town called Arco, Idaho, population like 1500. It’s next to the National Laboratory, so we’re talking 10,000 jobs, six-figure, nuclear research. It’s a big deal. Little Arco, Idaho is five minutes from the entrance. There’s nothing else near that 30-40 minutes away.
I went and I met with the mayor of Arco. I said, hey, Mr. Mayor, there’s a KOA RV park with 70 lots that is on the market. I said, I don’t want it for a KOA because every year, a KOA closes in the winter because it’s Idaho and snow. I said, what I want to do is, I want your permission to put year round renters in each one of those dirt slots.
I’m going to individually meter the electric, individually meter the water, so that they can pay their own utilities. I want to move 70 contractors in, 70 employees in, who will then work at the National Laboratory and want proximity because they value proximity. He’s like, Aaron. I love that, that’s amazing.
We’ve been doing that in Texas near Tesla where rents are ridiculous. We took RV parks and got permission to put long term tenants. We’ve done that here in Idaho. If you live in an area that has ridiculous rents, we have found that city leaders in city planning and zoning are very receptive to this idea of long term rentals and RV parks. Now I’m making 20% cash on cash returns from that investment.
We’re buying manufactured homes. We’re putting them on foundations, putting them in individual lots, and monetizing them. We’re buying trailer parks like we’ve done with you in North Carolina, and we’re making returns off of those. We’ve also started doing RV parks as long term rentals, and it’s just been phenomenal in terms of returns.
Clint: Okay. If I’m intrigued by this, and I’m a real estate investor, how do I get started to go out there and find a manufactured home? How long does that process take from start to finish? What are some things I should be paying attention to that would be important to me to make sure that this is going to work out?
Aaron: It’s funny because when I look at tech, tech can completely transform real estate. Who hasn’t looked at Zillow to see what their house is worth in the last 15 years? Tech has had a big impact on the mobile and manufactured space. Facebook Marketplace has become this buy and sell platform for mobile homes and manufactured homes. We’ll find homes on there.
Let’s say you live in a trailer park in pretty much anywhere in the country, except for Hawaii, because there’s no such thing as trailers in Hawaii, even in Alaska, they have manufactured and mobile homes, we’ll find someone that lives in a park and they want to sell their home. They’re not listening with a realtor. Craigslist doesn’t exist anymore. They’re putting it on Facebook marketplace.
Those of you listening to this, I know maybe you’re anti social media, you don’t use that Facebook account anymore, you might want to circle back, re-fire that up, and login again because Facebook Marketplace has become the swap meet of the world, the pennysaver, the thrifty nickel that we all used to use to buy and sell before.
What’s funny is we haven’t even set up web pages for the dealership because we don’t find tenants from the web pages. We do a paid out on Facebook Marketplace. We don’t find buyers for our homes.
As a buyer looking to invest, we’re finding them there. On the sales side, we’re moving them and finding tenants for them in that same platform. Tech has just really impacted that whole industry through Facebook. It’s crazy.
Clint: How about if I wanted to buy a new one and bring it in?
Aaron: We’ve worked with a lot of your clients, with Anderson clients, with Infinity clients, to help them with that. A lot of you have seen Clayton Homes, where in your town, maybe on the fringe in the commercial area, there’s a big lot with brand new single wides and double wides sitting on it. You can go in there, and they’re going to mark those up 20%-30%, but it’s still going to be significantly cheaper than a stick-built home would be. The opportunity is there.
We have investors who we work with, and we show them how to navigate that and how to map that out. One little secret, if you want to trailer park, even if it’s three units or four units, you can go to the factory and buy these homes as if you are a dealer yourself. You have access to buying dealer pricing, and we can help with that connection on them.
Clint: Wow. I think it’s a great opportunity because prices are still hanging pretty high right now. If you’re trying to get in real estate, or you just want to keep growing your portfolio, and you don’t want to pay those street prices that the stick-builts are being charged because at the end of the day, it’s all about cash flow. Why spend more money to get that same cash flow if you don’t have to? You can also flip them too, right?
Aaron: Yeah, absolutely. There are some opportunities in multifamily that have popped back up because with interest rates going up, two years ago, I could buy a four-plex and sell it as a 5% deal, because people could borrow 5% money on investment properties. Those interest rates are now 7%. What it’s done is it’s driven the price down on people selling multi-family because nobody wants to buy a 5% apartment building and borrow at 7%.
There are some opportunities, where sellers have been dropping the price in the multifamily that are unique, and then there’s opportunities to buy and sell manufactured homes because we can give you a list of lenders that will lend on a home, even if it’s in a park and not on a permanent foundation. It’s like having the Rolodex and having the understanding. I always say that real estate is five miles wide and about three inches deep. None of it’s hard for your brain to process cognitively. There’s just a ton of information.
One of the things that we do is on a monthly basis, we push pause, and my partner’s from all of our markets. We’re in Charlotte, Winston, Kansas City, Idaho, Dallas, and Indianapolis. We all congregate, and my office is either in Indianapolis or Idaho. It’s like Willy Wonka. We give investors the chance to spend three days with us, finding out what we’re doing.
We discuss active investing, we discuss passive investing, they get access to us throughout the day, and then we do cocktail parties in the evening. We started that years ago. I remember you coming out to Indianapolis over 10 years ago. I left the classroom in 2003. How ironic that I found a path back to the classroom every month.
Clint: Yeah. That’s one of the things about your business as well. We talked about those flyover states, but what Aaron’s also doing is sourcing real estate there. When he tells you, hey, you’re getting a property that’s an 8 or a 10 cap, he’s also finding those properties. We do it together in Winston-Salem, he’s doing it in Indy, and he actually has a class.
If you’re interested, if you would like to come out and spend some time with him on a monthly basis, we have a special link. Look in the show notes. I’ve got to put it inside there. Just click on that link, and we can get you registered for that to go out there, and you’re going to learn a ton when it comes to real estate investing.
I think if you’re just getting started, the questions. I’m going to buy this house, but I don’t know how to rehab it. How much should I put into it? That’s where I think a lot of people run into problems. They rehab the property to a point where they want to live there, right?
Aaron: Yeah, they get emotional about it. All real estate’s emotional. The biggest mistake I ever made a couple years ago was buying a rental property. My kids both swam and swimming every day. I bought a rental, it’s an Airbnb on the way to the swim to the Aquatic Center. Every day I’m driving by, I’m thinking, man, that thing needs a picket fence, that thing needs a concrete.
I over-rehab this property because I kept imagining myself living in it. You and I have done phenomenal as investors over the years in blue collar neighborhoods that we wouldn’t be interested in living in, but we provide clean, safe, affordable homes. Some people lean away when I mention trailer parks or manufactured home communities.
As long as you’re compliant, it’s safe, it’s clean, and you’re providing affordable housing, when you look at the 6 million homes that were short in this country, the biggest and the biggest hole is in affordable housing. It’s becoming crisis level. That’s why you see in areas like California and Washington, accessory dwelling units are just becoming so popular.
Literally, local city councils and mayors are circumventing city planning offices that have been the nimbyism, not in my backyard obstructing all development. That’s okay. We’re going to eliminate single family home zoning, and now you can put a tiny home in your backyard.
You and I have a mutual client, a very blue collar guy who works for the California Department of Transportation, but he’s had two rental properties in Irvine for over 20 years. He’s making good money, $3000-$4000 a month from each one, but now he’s adding three little accessory dwelling units in the backyard of each one, and he will get $4000. It’s going to change his whole financial life.
Clint: Totally.
Aaron: Yeah, and now he’s looking at $20,000 a month. Now, it’s a whole new direction. Having started as a high school teacher, the best advice I can give to someone is put yourself in an educational environment. Put yourself in an opportunity, where you can hear all these kinds of ideas, and then pick something that resonates with you. That’s why we’ve also started live streaming that event.
Maybe you don’t have the money for a plane ticket. Maybe you can fit this into your schedule for work or whatever. We’d love to have you join us on a live stream, and there’s no cost for that. We want you to have that education.
Clint has a phenomenal business. Over 99% of my clients are Anderson Business Advisor clients for their tax, for their legal. We just want them to get the education. We’re not out there trying to sell a bunch of classes, mentorships, and trainings. We’re just trying to put investors with the knowledge they need, so they can quarterback their money and invest passively and invest actively when it makes sense for them.
Clint: Tell me about the storage stuff you’re dealing with China that you’re bringing in.
Aaron: I had an apartment building that I bought, and the previous owner was a slumlord. It was 60 units spread out over 10 buildings. They were 10 6-plexes. Each building originally, when they were built in the 60s, each resident had their own detached garage, and they were lined up behind all these apartments. Instead of putting new roofs on them and repairing them, she just tore them down, so I had 60 concrete pads.
I found a company in China that was manufacturing them. They come in two packs, so it’s 10×20 5000 pounds steel rectangle blocks. They were only about $4500 for the price, but what I didn’t know is how much to ship them, how much to set them up. My net net on them was $6000 per building, so $3000 per unit. They’re 10×10.
What’s great is I don’t need power to them. I didn’t have to pull permits. I literally was able to just put them on those concrete slabs behind my apartment buildings and then rent them out for $100 a month. I’m making $1200 a year for a $3000 investment.
I have no maintenance, I have no property tax, and I didn’t insure them. What am I insuring? It’s just made of steel. The tenants need to get renters’ insurance on their stuff. There’s really no overhead because I already owned the land. Now I got $6000 a month coming in from the six units, and I spent 180,000.
I don’t have a single family home I can buy that can get that kind of return with no property tax, no insurance, no utilities. I’ve got my wheels spinning, and now I’ve been putting them into trailer parks and RV parks. I even bought a lot in a little town in Idaho with less than 200 people, and we’re going to do a micro storage development. We’re just going to plop 30 of those in there, put a fence around it, and advertise it.
The city loves it because they couldn’t convince a big developer to come in and put a nice brand new storage facility. Here’s what’s ironic, because you and I are partners on a storage facility that we bought in Winston, I believe it had 85 full units with the ability to expand, and we’re trying to get permission to put 100 more. How ironic that as we’ve priced out the cost to build these and stick-build them, it’s about $3000 a unit. Whether I get it built in Shanghai, or whether we stick built them in Winston-Salem, $3000 for 10×10 is a number you can take to the bank now.
Clint: Yeah. What’s big in the news right now is they keep talking about commercial. What’s going to happen with the debt, when all those loans or cheap money’s coming due here, next year, the following year? What are your thoughts on that?
Aaron: Oh, man, what a crisis. For the last 25 years, people say, what do you think of commercial? My rule of thumb is I haven’t done a lot in commercial unless I knew I needed it for a business. If I wanted to not rent and be an owner, commercials always made sense for me.
We’re managing 600 million properties. Whether it’s on a management side, or whether it’s me personally with over 300 properties, I have less than 5% in commercial. It’s crazy because my favorite example I was reading about in The Wall Street Journal a few weeks ago was a collection of hotels in San Francisco, and San Francisco has just been annihilated. Three hotels owned by this private equity group for $1.6 billion that are now literally only worth $300 million.
We’re not returning to work, and we’re not returning to work downtowns like we did in 2019, pre-Covid, and we’re seeing this massive shift. Now, it’s going to create a vacuum. There’s going to be huge opportunities for residential development in city centers. We’re going to see an impact from that. What’s great, though, is that the big private equity groups and the big lenders, they’re going to take a beating.
I don’t see it rippling into residence. I don’t see how it could not when we’re still short 6 million homes. It’d be different if we were overbuilt, where mortgage-backed securities spilled over into residential and just annihilated the US market. But when you look at economics 100 or economics 101, we don’t have enough houses in the US.
Anything that gets us towards more housing units, whether it’s taking a commercial building in a downtown and turning it into apartments, which I’ve seen happen in Indianapolis, or whether it’s doing high density RV park, those are the things that I’m tracking daily and that are super intriguing to me because any creative idea to get more housing is exploding right now. As an investor, that’s what you want to think about. That’s where you want to spend your time educationally. Those are the things that we talk a lot about at our monthly three-day event.
Clint: I appreciate you taking the time to come on here. Those of you that are watching right now, if you want to come out to that event, I got that link down there in the show notes. I would highly encourage you to come out.
Our firm’s going to be there as well. I’ve been to the event. You’re going to come out there. We’re going to teach you about real estate, or Aaron’s going to teach about real estate. He’s also going to take you out and show you what it’s like to do a rehab because you put everybody on buses and you bus them around.
Aaron: Yeah, and I even bought the bus now. When you came, we were renting a bus. Now, I have a bus in Idaho because we do half our events out in Idaho and one in Indianapolis. Those buses can be $3000 for the weekend, and you can buy one for $10,000.
Clint: In Indiana State pen, they have bars on the windows.
Aaron: A friend of mine does tours up in Detroit. He said he rented a bus, and they delivered one of those party bachelorette, party buses with mirrors in the pool. I said, what did you do? He said, we just went out and looked at properties. I was like, oh, my God, the mirrored windows. We haven’t had anything like that happen.
One thing that I don’t know that we mentioned, but we have properties for sale. We buy properties, we fix them up, we sell them to our clients, and then we also let you partner with us. That storage unit facility is one that we’re going to allow our clients to put money in, and you have to be accredited. You can invest in us on some of these bigger deals with as little as $50,000.
I don’t want to get into all that today, but in your head, the education is there, properties are there, and access to different relationships in different markets. Anderson always has attorney representation there, so you can sit down and map out what you need from a legal and tax standpoint.
Investors can come over three days. What we see is they’re able to get through that crossroad and move forward. Whether you’re trying to create more passive wealth, whether you’re trying to maybe get into real estate more and quit your job, we have an active or a passive solution for everyone.
Clint: What I think is also great about it, when you come out there, you’re going to be part of a community, and you’re going to build connections. You’re going to find people. If you want to do joint ventures with, they’re going to be there, people that have deals, people that have money.
I highly encourage you. If you’re watching this right now and you’re thinking, hey, is this for me, I’ll tell you, if you’re involved in real estate, you’re thinking about getting involved in real estate, it’s a great event that I think everyone should at least go out to once, if not twice or three times.
Aaron: Yeah, and we hold them at our offices. This isn’t some hotel ballroom. Indianapolis is our biggest operation. We’re managing 1800 properties in Indy. We have multifamily, Airbnbs.
In Idaho, the ones that we hold there in Idaho Falls. We literally have the cocktail parties at my house. We’re looking for long term relationships, whether we can educate and partner with you, or whether you’re interested in buying properties. We’ve been doing these events going back to 2009. We’ve just had a lot of success with it.
We don’t try to pretend to be anything we aren’t. There’s no big club that you have to invest in, and there’s no $70,000 mentor, none of that. If you want to invest with us, we have properties.
If you don’t have the money for this, and you’re just getting started, then get to our live stream. We’d love to have you join us virtually and plant that seed now so that you’ll think of us down the road when you are ready to invest passively.
Clint: Perfect. Aaron. Hey, thanks for being on.
Aaron: Always a pleasure, man.
Clint: All right. Take care.
