From Mortgage Broker to Mobile Home Park Fund Manager | Walter Johnson on Finding Off-Market Parks

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Show Summary

In this conversation, Walter shares his journey from being a mortgage broker to becoming a successful real estate investor, particularly in the mobile home park sector. He discusses the advantages of investing in Arizona real estate, the simplicity of single-family homes compared to multifamily properties, and the unique dynamics of mobile home parks. Walter emphasizes the importance of understanding financing and investment strategies, as well as the demographic shifts in mobile home park residents. He also touches on maintenance issues and the benefits of cash flow from mobile home parks, encouraging listeners to consider long-term investments in this space.

Resources and Links from this show:

• • • Investor Fuel Real Estate Mastermind
    • Investor Machine Real Estate Lead Generation
    • Mike on Facebook
    • Mike on Instagram
    • Mike on LinkedIn
    • Walter Johnson’s Website
    • Walter Johnson on LinkedIn
    • Walter Johnson’s Phone No: (480) 674-2935

  Listen to the Audio Version of this Episode

  Investor Fuel Show Transcript:

  Walter Johnson (00:00)
  I would never do a land play, ever. Especially in self-storages. I was actually looking at getting self-storages probably 2008, 2009, 2010, right around there. And I met somebody and he actually developed one in Colorado. Took him five years dealing with the state and the city and literally his hair turned gray. Like literally, it was like dark black like mine. And by the time he was done and he sold it to some other developer that actually developed the self-storages because he did a land play, his hair turned gray.

  So no, I would actually just buy mobile home parks, they cashflow from day one. And why would I actually develop something and wait that year to go through that much stress versus I can actually just buy something and cashflow 60 days from now.

  Dylan Silver (02:09)
  Hey folks, welcome back to the show. Today’s guest, Walter Johnson with Sonos Capital is in the mobile home park investing space. He’s based out of the Phoenix, Arizona area. Walter, welcome to the show.

  Walter Johnson (02:22)
  Thank you. Thank you for having me. It’s going to be a great show. Let’s do it.

  Dylan Silver (02:25)
  I always like to

  start off at the top of these shows by asking guests, know, how they got into the real estate space.

  Walter Johnson (02:33)
  Yeah, I mean, I got into it, I tried to, it’s pretty bit of odd story. Actually, I got into it because I wanted to play professional basketball, which is weird, right? That’s not weird, but I wanted to play professional basketball to make enough money to buy real estate. So it was never about professional basketball. It was vehicle, was a to an end.

  Dylan Silver (02:54)
  Wow.

  So where were you looking at playing ball in? Were you looking at getting to, you know, NBA overseas? Where were you looking at?

  Walter Johnson (03:01)
  Yeah.

  So I was actually looking at playing here and ⁓ so I was walking for Sacramento Kings. And then I think when I was 29 years old, I tried to play for I was trying out for BJL, which is a league in Japan. None of them worked out, but it was I want to make enough money to buy apartments like these huge apartments, complexes and real estate. So I guess sports was never my my, you know, the the the

  It wasn’t the destination, was actually the journey. But here I am buying real estate, so I think it all worked.

  Dylan Silver (03:35)
  I want to get a

  little granular on this because I haven’t had a guest who’s walked through this path like you have. Because I’ve had professional athletes on the show. I’ve actually had NBA players on the show, ⁓ past generations, 80s and 90s. And they were walking me through, you know, transitioning from

  Walter Johnson (03:38)
  Yeah, 100%. Yeah, let’s do it that way.

  in

  Dylan Silver (03:56)
  being a professional athlete to then what do I do next? And that’s where real estate came into play. You had the opposite approach. Hey, I’m gonna get into this real estate game and this is gonna be the vehicle. Where did you get that drive to go pursue real estate?

  Walter Johnson (04:12)
  Where did I get it? I think I was just growing up and a lot of people, you know, lot of people around me, like maybe a neighbor’s, you know, husband or, you know, something like that. I was like, hey, he made it in real estate or something like that. And he had a cool car. Maybe it was a Corvette or he had a motorcycle or something that was flashy. You know, as a kid, you’re like, I want to do that. Right. And so growing up to that, to that, you know, looking up to

  Maybe it was a neighbor’s husband or something like that. And I was like, that’s what I want to do. So I never thought about sports as a career. I just want to be like my neighbors because he had a cool motorcycle or something like that. And so that’s kind of how. Yeah, exactly. It just clicked.

  Dylan Silver (04:57)
  That was the waypoint. Walk me through.

  Walk me through. sounds like coming up. Was it G League? you walking on the Sacramento Kings you mentioned? I know nothing about this world. How does one walk on?

  Walter Johnson (05:56)
  Well, back in those days, I mean, I think it was easier than what it was today, right? So I think that, you know, growing up in Sacramento, living in Sacramento, I had a coach and the coach was like, hey, I think, you know, you have the gift of this. you know, Bobby Hurley actually played for the Kings at the time and he was actually my neighbor. So that’s kind of how it worked out.

  Dylan Silver (06:21)
  Wow, the world is a small place. Talk about a connection that gets you places. That point in time, are you looking at real estate deals? In your mind’s eye, are you thinking, okay, I’m gonna have single family, multi family, duplexes, triplexes, apartments?

  Walter Johnson (06:35)
  No.

  I had no idea. No. I had no idea what I was going to do in real estate. I had no idea about real estate. I just wanted to be in real estate.

  Dylan Silver (06:43)
  And so when did, I mean, you mentioned playing overseas or looking at playing overseas. When did you start to look at, hey, this is going to be, you know, the ways that I get more involved into the real estate game.

  Walter Johnson (06:55)
  Well, yeah, so Overseas is probably like 29, 30 years old, but I was buying property when I was like 22. So I my first property, investment property when I was 22, when I moved to Arizona. That’s when we were talking, you and I, I think it was maybe off camera, and I was like, Arizona is a gold mine in more ways than one. So I came out here to visit my cousin, he got a job at Intel, and I started seeing how real estate was so cheap in Arizona. I mean, it was dirt cheap compared to, let’s say, California.

  Dylan Silver (07:22)
  Yeah.

  Walter Johnson (07:22)
  you know,

  anywhere else that matter, right? So you could buy a brand new house for like 100 gram. Totally brand new house. From like reputable builders. And I was like, this is cheap, right? And then you’re like, hey, I can rent this house out and the payment’s 800 bucks, but I can rent it out for 1200. In a sense, it makes, it looks like you’re gonna make 400 bucks a month. You really don’t, single family houses, but.

  on paper looks like that. So you’re like, wow, this is actually cheap. And so I took that plunge and moved to Arizona.

  Dylan Silver (07:50)
  So you were in the single family space at that point in time. Was there a specific reason where you said, I’m gonna go single family versus small multifamily or even larger multifamily? Was it something about the single family space?

  Walter Johnson (08:01)
  Yeah.

  No, no, no. I think this is actually really good for you, for your readers. So I was 20 too. And, I was good at math. I was always good at math, but I didn’t actually understand apartment building math, like cap rates and vacancies and, and how to calculate in a lie. Like that was really foreign to me. Right. I actually had to learn that. had to learn that for, it took me a couple of years actually learning. But

  single-family homes which is easy. You have rent, have your expenses, and then you have your mortgage payment. It’s really simple math.

  Dylan Silver (08:37)
  So I’m imagining

  because you’re a professional athlete and you’re obviously you can’t do it all.

  Walter Johnson (08:42)
  I tried to, I

  was an athlete, not professional already.

  Dylan Silver (08:45)
  Okay,

  okay, so walk me through that transition there. So, 22 years old, you are full time at real estate at that point in time?

  Walter Johnson (08:53)
  Yeah, I was a mortgage broker. So I got into mortgage broker and I got into it September 11th, 2001. Actually, September 11th, 2001. And then so I was a mortgage broker and cut my teeth in that, a lot. And then I think a year later I bought my first investment property.

  Dylan Silver (09:11)
  So when people are coming into the real estate, and I’m a newly licensed realtor, I got licensed earlier this year, I’d prior to that been working with distress sellers and fix and flippers and folks who are looking maybe for Airbnbs in the Dallas and San Antonio markets of Texas. I almost feel like I maybe, and I hate to say this, I almost feel like I got in on the wrong side of real estate, because the lending portion of it is where everything.

  you know begins and ends. someone comes to me I’m going to say where’s your you know pre-approval letter or what source of funding do you have. So you got in on the mortgage side was that very strategic on your part?

  Walter Johnson (09:50)
  Yep,

  yep. So I worked at a company, think like in like the 2000, maybe 2000 before I moved to Arizona, it was called GM Mortgages. And I seen these guys, it was different at the time. They actually had suits and they had like the cell phones and they had the convertible Mercedes. I mean like they were doing it. I was like, oh, I wanna be like them. was almost like seeing people work on Wall Street.

  But when you go into the mortgages versus real estate, mortgages actually you learn way more about investment properties, about numbers, about how it’s underridden, it gets underwritten how processing works, how funding works, how title companies work. It’s really the nuts and bolts of finance, right? Of real estate financing. So if somebody actually says, hey, I actually want to learn about how this really works, I will get into mortgages.

  Dylan Silver (10:29)
  Right.

  Walter Johnson (10:37)
  versus being a real estate agent. Real estate agents, compared to mortgages, you can’t compare. You can’t compare.

  Dylan Silver (10:43)
  I tend to

  agree. tend and yeah, I’m a realtor. So here we go kind of in that duality. I know, you know, today you’re heavily focused in the mobile home park space, totally different from the single family game. And walk me through that because I also know there’s a lot of interest right now in mobile home parks from lots of different segments in real estate, not just from folks who have that background in mobile home.

  Walter Johnson (11:29)
  in

  Okay, so let’s kind of add on what you said. So one of my clients, when I was actually a mortgage broker, was in mobile home, the industry. So he had what’s called Park model. So he would buy a Park model, let’s say in Arizona. So he’d it for 15 grand and then sell it for 50 grand in California. So he did that multiple times a year. That’s actually one of ways that he made his money. so since I was in mortgages, I did a few of his mortgages refi.

  finances, etc. So he did a great job and he taught me about mobile home parks. So in a sense, when you’re on the mortgage side versus the real estate side.

  I think it’s more personal because you see, you know, in your industry, you don’t see their social security numbers. You don’t see how much money they have. You don’t see their assets. You don’t see, you don’t see none of that stuff. You don’t see divorce degree, like none of that. This side of, you know, when your mortgage is, you know, it’s more personal because you actually see that and you actually have different, I would say in a sense, deeper conversations.

  Dylan Silver (12:42)
  When you were looking at that first mobile home park deal, walk me through how you came across that deal, negotiations, what that was like, what area of the country it was in.

  Walter Johnson (12:46)
  Amen.

  Is it in Arizona? Yeah. So my first, first one, I didn’t actually pull the trigger. It was actually, it’s scary, right?

  It was like, I think it was like 60 or 80 spaces. But 60, 80 spaces times 2.5 people in a place and you’re dealing with a whole bunch of people. like, how do I manage this, right? ⁓ So I think it’s one of those things to where you get gunshot. So you’re like, that’s a good deal, but.

  Dylan Silver (13:11)
  Yeah.

  Walter Johnson (13:23)
  deep inside I maybe had self limitations, right? You’re like, I don’t want to do that, maybe it’s the next deal, right? So you kind of build up the courage to actually really take down a property. So yeah, I did have that. some, I was going to shy in my first few deals.

  Dylan Silver (13:38)
  Walk me through that first deal if you remember. When we talk about finding ⁓ single family homes, for instance, you’ve got a couple avenues where you can go to find single family on market, off market, probate reports, foreclosure, pre-foreclosure. How does someone find mobile home parks for sale? Is it Crexi? How are you finding these deals?

  Walter Johnson (13:57)
  So what I did, and what I would recommend, ⁓ whether it’s your listeners or somebody that’s actually looking at this podcast, I would get a list from the title company. I wouldn’t do Crexi, I wouldn’t do Loopnet, I wouldn’t go to a broker, because they’re trying to get the top dollar, right? Which there’s nothing wrong with that, but you’re actually just paying retail. So who actually wants to buy a real estate deal and pay retail?

  buy something and then she get a good deal. And so I would just get a list for a title company and just call or mail to park owners in your area, whether it’s, I’m just going to Ohio, right? The state of Ohio. Somebody lives in Ohio, just get a list from a title company saying, I want to get these park owners in my state and either call them or mail them.

  Dylan Silver (14:43)
  I wasn’t even aware that title companies had that but that makes perfect sense right. When when you’re looking for a mobile home park there’s segments of this space I think most of the time when mobile home parks differ from other segments because they’re more affordable housing but there’s also mobile home parks where they own the home there’s mobile home parks where they don’t own the home and then from what I understand as well there’s instances where they will even sell the

  Walter Johnson (15:04)
  Thank

  Dylan Silver (15:13)
  land underneath versus rent. So it’s almost like ⁓ a development type deal but for mobile home. Which types of deals are you looking at or have you looked

  Walter Johnson (15:18)
  Mm-hmm.

  Yeah, I just, you know, what we usually do is we actually just buy a park that usually they come with some type of, it’s called park owned homes to where the park actually owns the homes and we usually just sell them or give them away depending on the condition. We’re not, I don’t want to be in a landlord business. I’ve been into that. I just don’t want to fix roofs and toilets and drywall and cabinets. So, you know, let the actual tenants, you know, fix their own.

  Dylan Silver (16:29)
  handle that portion of it. When

  we’re talking about buying mobile home parks, I actually have not experienced with a mobile home park, but with mobile home specifically, because I had a deal in South San Antonio area called Floorsville, ⁓ where it was super difficult to get financing for this deal. And I later learned that basically any time that there’s an older, it wasn’t even that old, but an older mobile home, that it is very quickly challenging to secure funding for this deal.

  Have you gone the route of creating a fun syndication? How have you been able to purchase mobile home parks?

  Walter Johnson (17:06)
  ⁓ So if they’re difficult, know, usually kind of the sellers know ⁓ in a sense, so you could probably do seller financing. Lenders still lend on parks and you know, you can actually have some attractive terms and rates and whatnot. But if it’s too difficult, just have a ⁓ seller carry the paper.

  Dylan Silver (17:28)
  When we’re talking about them holding the note, I’ve noticed there’s some specific risks that come in with mobile ⁓ homes in general. Like for instance, these can be moved, right? So then if something happens at that point in time, there’s maybe a larger degree of risk. Is that a thing or is that such a small percentage chance that it’s probably not gonna?

  Walter Johnson (17:51)
  Yeah,

  that’s small. mean, one, that particular tenant actually has to find a mover that would move. so let’s say I go to that setter that company said, I want to move 10 houses. So 10 times 20, which is, let’s say $200,000. Or you’re going to take on this tenant that wants to move this house for $25,000 or 20 grand.

  And then they didn’t build up a relationship with you and they had to get the permits and they actually have to. So they’re gonna probably in a sense, mean, life is not fair at times. They’re gonna take my business versus this one off. And so that’s actually what happens and plus most people just aren’t gonna move. So I think the average tenant in a mobile home park stays for about 14 years. So they’re not mobile. What I’m trying to say.

  Dylan Silver (18:39)
  Yeah, I

  think that risk is probably overstated. That was the risk that was relayed to me from the folks that I was trying to connect investors with for lending on the deal. I want to

  Walter Johnson (18:50)
  Yeah, then,

  yeah, and then, so, sorry, let me interrupt. And then you actually have something, so it’s called park rules and regulations, which is all those, if you ever bought something, let’s say in an HOA or condominium, you have CCNRs. So in parks, it’s something similar. So if you move that home or you sell it, I have the first right of refusal.

  So that’s usually in the park rule. So you have that backstop and then you have fighting at a setter and they’re super busy right now. I think that somebody moving their house out of your park is relatively rare.

  Dylan Silver (19:23)
  I want to pivot a bit here, Walter, and ask you about some of the other what I would call colloquially land plays that investors are looking at. You mentioned coming from a background mortgage, then we’re looking at single family deals, got into mobile home investing, mobile park investing.

  I’ve seen investors in the single family space now look at ⁓ getting land basically like shovel ready, selling it off to developers. I’ve seen them getting into mobile homes, RV parks, and then a big one right now also seems to be storage facilities. All of these require like vacant land. So it’s not like you can necessarily do this where I’m from in Northern New Jersey originally, but ⁓

  Walter Johnson (19:53)
  Mm.

  Dylan Silver (20:01)
  Is there one thing or is it a multitude of factors that drew you to mobile home versus some of these other what I would call land plays?

  Walter Johnson (20:08)
  Yeah,

  I would never do a land play, ever. Especially in self-storages. I was actually looking at getting self-storages probably 2008, 2009, 2010, right around there. And I met somebody and he actually developed one in Colorado. Took him five years dealing with the state and the city and literally his hair turned gray. Like literally, it was like dark black like mine. And by the time he was done and he sold it to some other developer that actually developed the self-storages because he did a land play, his hair turned gray.

  So no, I would actually just buy mobile home parks, they cashflow from day one. And why would I actually develop something and wait that year to go through that much stress versus I can actually just buy something and cashflow 60 days from now.

  Dylan Silver (20:46)
  When we talk about the exit strategy for these deals, forgive me for being a little bit fish out of water in the mobile home park space. With you and your partners, are you looking at five-year exit strategy? Are these longer-term holds? What’s the, and in general in the mobile home park space, is there kind of a cookie-cutter approach to owning these deals?

  Walter Johnson (20:50)
  and

  So mine was our you know, fun was was you know five five years and we exit out in like six year like the beginning of the six year or something like that or the seventh year but

  The overall consensus, I think we have a hundred and something investors. They’re selling miles. If they need their cash from them, they’re not making any more mobile home parks. Like they’re not getting redeveloped or anything like that. Why are we going to just sell them? Why don’t we just keep them forever? So our next fund, we’re just going to keep them forever. I don’t think it makes sense. You know, we talk about real estate and making money, but you do all this work and you’re away from your family. You sacrifice your, you you leave your home for the weekend and then in five years you actually sell it. So you have to reinvest.

  event yourself ⁓ in your business model, so to speak, right? Based on how much you just keep it. So that’s that’s.

  Dylan Silver (21:48)
  Right.

  I’ve never I’ve never had an investor come on the show and say, Man, I wish I ⁓

  hadn’t sold, you know, or excuse me, I wish that…

  I had kept it, meaning like they’re sorry for keeping something. I’m stumbling over my words here, but the biggest regret that everyone has is that they sold in that they shouldn’t have. Especially I think when we talk about affordable housing segment, right now mobile home parks, even folks who are like RVs, type of thing, ADUs, alternative dwelling units, these are huge right now. Are you seeing…

  Interest you know in in the demographic shift potentially changing from who would? Traditionally you would think be in a mobile home park versus who may now be looking more into this space

  Walter Johnson (22:41)
  ⁓ 100%. So mobile homes, mobile home parks, I actually got a buyer right now. I kid you not, she just got married. Promise you this, she just, in Arizona, think, I believe so, right? Like you can get married at like 17 in Arizona with the Paris permission. I didn’t know that because she got married. And she’s like.

  She moved out of her parents place. She got married and she’s like, I want to buy this mobile home in this mobile home park, like next door to her parents. So you’re having a younger demographics, actually 17. So.

  Dylan Silver (23:10)
  getting

  more into the space. ⁓ Long term, for folks, you mentioned this is a heavy cash flow asset. For folks who are looking at something that’s going to be lower maintenance, and I think especially when you’re delegating, I shouldn’t say delegating, but when you’re not having to fix faucets and roofs and this type of thing, what is the types of issues that you’ll face when you own a mobile home park but you’re not.

  Walter Johnson (23:18)
  Mm-hmm.

  Dylan Silver (23:38)
  you know, responsible for those faucets and roofs. What are the typical maintenance issues or tenant issues? And I’m probably using the wrong terminology here, but you can help guide me. What are the issues that folks face?

  Walter Johnson (23:48)
  So I think, so sometimes you actually face it with the city or the county, with the municipalities. think, you know, one, actually have a park in Colorado. We’re dealing with a water issue. I got it late last night, I think like nine o’clock. ⁓ You know, we have to do a water check, right? And so things of that nature, right? So, you know, they’re probably not open right now. They’re probably open in a couple hours, but I have to call the city of, or.

  state of Colorado and just figure it out. So little things like that. So instead of a toilet, maybe it’s the county or the city, but those are more like conversations and let’s see how we can actually fix this versus fixing a roof or a hot water heater.

  Dylan Silver (24:33)
  Are they quick to respond to that type of thing? I’m thinking if it’s a city issue they should be out there like immediately.

  Walter Johnson (24:38)
  Yep, yep, yeah, so they’re quicker and I think they’re, you know, I think the cities and states, they do a good job just making sure that everything stays between the white lines.

  Dylan Silver (24:47)
  We are coming up on time here at Walter. ⁓ Where can folks go if maybe they’re interested in learning more about Sonos Capital? Maybe they have a deal they’d like you to take a look at. How can folks reach out to you?

  Walter Johnson (24:59)
  Yeah, I do that all the time. look at deals. don’t want people, know, kind of to add what you said is that.

  People say like, I wish I never sold that 65 Mustang or like Volkswagen Bug, right? And so, and people say that about real estate. So, I want people to actually get into this business and that they actually buy a mobile home park and they reach out saying, I wish I would have kept this or I want to buy this and keep it for my family or for legacy. yeah, feel free to actually reach out to me. So, our website is sonoscapital.com or call me in my office, 406742035.

  And they’re like, hey, I found this deal in Indiana. Is this a good deal, yes or no? And I would just give them my honest opinion. Because I actually had mentors that I had to reach out to and pick their brain as well. So I think there’s a level of playing it for.

  Dylan Silver (25:52)
  Walter, thank you so much for coming on the show today.

  Walter Johnson (25:55)
  Yeah, thank you. Appreciate it. Have a good day.