How a 100-Agent Real Estate Broker Still Flips Houses and Buys Mobile Home Parks | Chad Costa

Chad Costa (00:00)

I would say to take your time to do your due diligence. there’s many times, especially early on for me when I got emotionally involved. I really like this house, I really like this neighborhood, or I really like the kitchen, or I really love what I can do with this house. when none of that matters when you’re an investor. It really shouldn’t matter, I guess.

What matters are the numbers and know your numbers, know your numbers, know your numbers cannot be said enough.

Chad Costa (00:00)

I would say to take your time to do your due diligence. there’s many times, especially early on for me when I got emotionally involved. I really like this house, I really like this neighborhood, or I really like the kitchen, or I really love what I can do with this house. when none of that matters when you’re an investor. It really shouldn’t matter, I guess.

What matters are the numbers and know your numbers, know your numbers, know your numbers cannot be said enough.

Scott Bursey (00:59)

Welcome back.

Scott Bursey (01:00)

to the Real Estate Pros podcast powered by Investor Fuel.

I’m your host, Scott Bursey. Glad you’re with us.

Scott Bursey (01:12)

And today we’re thrilled to be joined by Chad Costa. Chad is a real estate broker in California. He owns five REMAX franchises with about a hundred agents. And he never stopped doing deals himself. Chad has been an investor for about 20 years, and he mostly flips with mobile home parks in the mix. And now he buys out of state too. Listeners today you get both sides of the table. The

Scott Bursey (01:31)

Broker.

Scott Bursey (01:32)

who runs the offices and the investor still in the game.

Chad, welcome to the show.

Chad Costa (01:37)

Thank you. I appreciate it. Glad to be here.

Scott Bursey (01:39)

It’s awesome having you here and to help our listeners get up to speed. Please give us the ninety second highlight reel of how your career ignited and where you’re pouring your fuel now.

Chad Costa (01:49)

I think when I was a kid, I was always fascinated with real estate. I remember when I was 14, 15, 16, we had a friend that was in real estate, and I would always bug her with questions. I’m sure she was annoyed as hell. Here’s this kid who is not gonna buy a house asking her questions about real estate. but it always fantasized me. so that’s really what drew me to real estate. And I got into it when was twenty four, I believe. I’m now aging myself pretty well.

Used to have a full head of hair back then too, but now I have a hundred agents and lost all that. I started off as a real estate agent and then about fifteen years ago or so I had the opportunity to buy the company I was working for. And it was just a great opportunity for me. And we started with twenty five agents at that time and now have about a hundred.

Scott Bursey (02:30)

That is quite a journey. Thank you for sharing that with us. And Chad, what really caught my attention about you is the mix. Most brokers with five franchises stop doing deals. You still flip houses yourself. And you buy mobile home parks as well. And now you’re even looking out of state. Taking that a step further, curious to know, with five franchises and about a hundred agents.

You see deals all day long. What do you see that solo investors never see?

Chad Costa (03:00)

I think probably off market stuff is what I have an opportunity to see. having the agents that work for me with me out there looking as well. it’s just a leverage point, I guess. And they often will bring us transactions, hey, I have this, I have that, it’s property that’s in bad shape, they just want to sell it quickly.

Things like that. So I guess that’s the opportunity of having both sides.

Scott Bursey (03:22)

Thank you for describing that. Chad, talk to us about this. You flipped houses in California for about twenty years. What part of the flip has become the hardest?

Chad Costa (03:33)

I think finding the transactions have probably been the hardest. I think that’s where you make most of your money is when you buy it. we’re pretty good at being able to establish what it can sell for. I think most investors are. And we’re probably fairly good at what it’s gonna take to rehab the project. and so that starting number is so critical. And I think that’s where the focus needs to be. I think it’s where a lot of agents or a lot of investors can make it or break it.

so finding the transactions the biggest challenge. but leveraging the opportunities that you have, there’s some advantages within AI too, to be able to tap into nowadays that are fascinating to me that I didn’t have twenty years ago.

Scott Bursey (04:10)

How have you adjusted to do that?

Chad Costa (04:12)

Well, I’m adjusting, let’s put it that way. I don’t think that have adjusted to AI yet, Scott. I was just on a webinar before this with a company presenting what they can do. And all of these companies have these niches, these areas in which they can benefit us in certain ways. Hopefully trying to find something that can really encompass all of the business in one.

instead of having to go to multiple places to get data. I think once that’s ironed out, we’ll have some opportunities to find more transactions.

Scott Bursey (04:41)

Thanks for laying that out. Chad, let’s talk about this. You just started buying out of state in the last few years. What pulled you to different states?

Chad Costa (04:49)

Well, I don’t know if we can talk about politics a little bit or not, but really I wanted to go to some red states because basically, the laws are different in those states. in California, it’s definitely different when it comes to landlord tenant laws. tenants have a lot of rights. In other states it’s a little bit different. And

During COVID is what really changed things for me. I couldn’t collect rent, but yet tenants were out buying new cars and new boats. I still had to make the mortgage payment and the insurance and the taxes. That was all still my responsibility because I was the big bad investor, I guess, is kind of how they make you feel. But yet the tenants can do whatever they want. They could buy the boats and buy the cars, and it didn’t matter. They didn’t have to pay the rent. So

That changed things for me. I got to thinking this is not the greatest business model if I have all the expenses and no income. And so looking at other options, mostly in a lot of the red states, the landlord tenant laws are just different. And then if you really dive into the return, I found that the return was literally almost double in other states versus what it was here. My cap rate here was four percent, where

In Arkansas, I’m just a tad over eight percent. And so it just made sense. I always wanted to touch it, feel it, drive by it and see it until I looked at the numbers and look at the landlord tenant laws and said, That’s crazy. why do I need to drive by it and touch it and see it? this makes more sense from a business perspective. And I should have done it a long, long time ago.

Scott Bursey (06:58)

Chad, curious to know, when the market turns about a hundred agents feel it right along with you. What’s the hardest part of that side?

Chad Costa (07:07)

I think in any business you have to pivot based upon what the market’s doing. And I think that education’s important. one of the struggles I think agents face now is a lot of homeowners have three percent mortgages. And why would they want to sell that? But maybe we can talk to them about renting that property and buying another, and showing them, that, just giving

our agents the tools and resources they have to be able to go out and have these conversations with the clients. Because maybe this is something they haven’t thought about. But if we can show them this is what that looks like, right? this rent can not only make your mortgage payment because your interest is so low, but maybe even some gain there as well. And we can buy the house that you want. A lot of people feel like they’re stuck because they have this 3% mortgage and I got to stay here and it’s a 1500 square foot house and now we have four kids and we really need to move up.

to something larger, but they haven’t really thought about renting because they maybe have heard some horror stories. And there’s definitely some horror stories out there about renting. But we have some property management companies that we work with that do a great job of maintaining the properties and managing tenants. So just showing them the options, I think.

Scott Bursey (08:12)

What’s the key to holding on to good agents when deals slow down?

Chad Costa (08:17)

I think that’s something that we don’t face too much of just because of our agents are more seasoned. our focus has always been on seasoned agents. Our average agents have been in the business for 15 years. They’ve seen these downturns. They’ve been through this. They’ve learned what to do and what not to do. our focus has never been on new agents. We do have a couple and they’re usually hand selected referrals, things like that. but the failure rate in real estate for real estate agents is fairly high. it’s ninety percent.

fail in four years. And so our model has just been, let’s not focus on new agents. So fifteen years experience, our agents have been there, done that.

Scott Bursey (09:28)

Thanks for putting that on the table. All right. If you could walk us through this, Chad. Mobile home parks are in your mix too. What drew you to that niche?

Chad Costa (09:38)

I don’t know, and I don’t even know if it’s a good idea, but I’m trying to figure it out. I started about three years ago. It’s an area in which I’ve never set foot in, but heard a lot of investors talking about it and mentioning the return and the benefits of it. And so I started dabbling into it. again, trying to get out of California a little bit. So Alabama, Oklahoma.

Just to mention a couple states that we went to. it’s a different model for sure. there’s sort of two avenues, when it comes to mobile home parks. One that the tenants own the home and you’re just collecting space rent, which there’s a benefit too. There’s no phone calls for repairs, right? My water heater’s broken, my ceiling fan quit. You’re just collecting space rent.

So, from a management perspective, those make a lot of sense. Just really low maintenance, low management, kind of low turnover, things like that. Then there’s the park owned homes, which is the opposite of all that, but the returns a little bit better, typically. So um some of the parks that we have are mixed. we have some park owned homes and tenant owned homes.

So there’s some that are all park owned, some that are all tenant-owned, and some that are a mixture of the two. again, pros and cons for both kind of depends on, I guess, probably your bandwidth for how much time you have to spend on maintenance and management, who you have as management. On-site manager is so critical. I’ve learned that pretty quickly. It’s been one or two that they had to find a job and be great somewhere else. but

There’s just learning curves when it comes to that, but management is critical, especially that on site manager. And then we have a management company that oversees the managers and deals with the day to day. So that helps kind of lower my amount of time that I need to spend on managing and oversight.

Scott Bursey (11:16)

What surprised you the most once you got into the parks?

Chad Costa (11:21)

I guess I went from these sixteen rentals in Arkansas to I don’t know, there’s probably two hundred doors, I guess, between the four parks that I own and a lot more tenants. the demographic of the tenants is a little bit different. my rent in Arkansas probably is averaging about fifteen hundred dollars a month.

Where on the parks it’s more about 650. depending again if you’re space rent or park-owned homes. So the demographic is different. That was an adjustment for me. Understanding that was probably the biggest adjustment for me. And then management from afar is not easy, and then can be challenging for sure. And so

With some of the technology we have, it’s definitely helped. video tours, so now we’re doing kind of monthly video tours with the managers where they’re walking us around, not telling us everything is great, but showing us everything is great. And so some of those things can help with that.

Scott Bursey (12:12)

Thanks for covering that ground

for us. Curious

on this, who are the people in your corner right now, Chad? The ones you lean on in this business? what has made the biggest difference for you over the course of your career when it comes to relationships and networking?

Chad Costa (12:27)

the oversight management company for the mobile home parks is one I really leaned on because they’ve been doing it for 20 years, right? I’ve been doing it for two. So I’m still new at this. I’m still learning. And so I really rely heavily on them. They’ve been doing it for 20 years. When it comes to REMAX, I don’t really need someone. I’ve been doing it for 28 years, right? So it’s just one of which I’m really, really learning a lot. You never quit learning when it comes to real estate, especially real estate management, real estate brokerage, but

It’s one I’ve been doing for a long time versus one that I haven’t been doing for a long time. And so I lean on those people that just know more than I do. I’ve always thought that you gotta surround yourself with people that know more about things that especially that you’re interested in and want to do that you do.

Scott Bursey (13:04)

That’s the type of network that opens doors right there. Right. Chad, let’s dive deep. If a new investor comes to you with money saved for a first flip, let’s say, what do you tell that investor to do first?

Chad Costa (13:18)

I think they’ve got decide on the location in which they want to buy within. Do you want to be within California? I assume so. First time investors probably want to be, in their backyard, right? I know I did. I wanted to be real close by. that’s probably the first step is where do you want to buy? And then build your buy box from there, price point, square footage, bedroom, bath, location, even though it’s in California, there’s

Great locations and not so great locations. So picking your location, picking what you’re looking for. Is this a fix and flip or is it a hold? If it’s a hold, then we need to look at rental values. what is this going to rent for when you fixed it up? but really, really know your numbers, know the location, big factors. I think those are probably the big two.

Scott Bursey (13:58)

Appreciate your perspective on that. And Chad, you have given our listeners just a ton of really good perspective here today. But is there an additional golden nugget or two that you’d like to leave with our listeners?

Chad Costa (14:10)

I would say to take your time to do your due diligence. there’s many times, especially early on for me when I got emotionally involved. I really like this house, I really like this neighborhood, or I really like the kitchen, or I really love what I can do with this house. when none of that matters when you’re an investor. It really shouldn’t matter, I guess.

What matters are the numbers and know your numbers, know your numbers, know your numbers cannot be said enough. you really got to know, what can buy this for? What’s it gonna cost to rehab it? And those costs are fluctuating all the time too. So you gotta be really careful about that. Lumber costs and labor costs can go up and down quickly. So kind of having your thumb on the pulse when it comes to material and labor costs is pretty important.

But just knowing your numbers, not getting too invested, not getting emotional about a project, and just looking at it from a business perspective is probably the best advice I can give. It took me years to learn that. And finally I’m learning it twenty years later.

Scott Bursey (15:09)

Sound advice right there. Chad, for those of our listeners that want to keep this conversation moving, stay in your lane, or collaborate with you potentially on future deals, what’s the best way for them to plug into your pipeline and reach you directly?

Chad Costa (15:22)

Probably email is best. chat at chadcosta.com is my email address. Pretty simple. just feel free to email me if you have any questions. I’m happy to help. I love helping other people, other investors. that’s at the end of the day, I think what scratches my itch, I guess, if you will, is just helping other people. And I think that’s one of the things I’ve enjoyed about being a real estate broker is helping agents. but I’d love to help investors too. So if any questions I can help them with, let me know.

Scott Bursey (15:43)

Chad, thank you for joining us today on the Real Estate Pros podcast.

Chad Costa (15:46)

Yeah.

Thank you for having me. I appreciate it.

Scott Bursey (15:48)

It’s been a blast. And to our listeners, we appreciate you. If you receive value from today’s episode, please subscribe. We’ll be fueling your tanks with a lineup of elite guest, just like Chad Costa, who are accelerating and setting the pace for the rest of the industry. Until next time, keep your standards high and your vision clear. We’ll see you in the next episode, everyone.