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Show Summary
In this conversation, Leo Young, founder of Cornell Communities, shares his journey from working at Tesla to becoming a successful real estate investor focusing on mobile home parks. He discusses the challenges and opportunities in the mobile home park sector, emphasizing its affordability and resilience during economic downturns. Leo also highlights the importance of effective management and the evolving perception of mobile home communities as viable housing options for younger generations. The discussion concludes with insights into current market trends and investment strategies.
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Investor Fuel Show Transcript:
Leo Young (00:00)
Yeah, yeah. So you touched on two great points, Dylan. And first off, yes, there’s a lot of younger couples. They want to just get into something like this. They actually don’t mind the quote unquote stigma that was present, you know, in the past 20 something years. You know, you had like Eminem saying like it’s a trailer park, you know, things like that. It is getting better. And a lot of the times you would drive by these communities, you wouldn’t even know it’s a mobile home park. It’s just changed so much and it’s cleaned up a lot.Dylan Silver (02:00)
Hey folks, welcome back to the show. Today’s guest, Leo Young, is the founder and managing partner of Cornell Communities, where he acquires and operates manufactured housing with a focus on affordable housing and operational turnaround. He has completed over 75 million in transactions as a broker and principal, and currently operates more than 500 pads across multiple states. Leo, welcome to the show.Leo Young (02:27)
Dylan, thanks for having me on.Dylan Silver (02:28)
It’s great to meet you and I have to say as a fellow podcaster, you’ve got some really impressive guests. I was very impressed by your YouTube channel. How did the YouTube channel get started? mean, aside from the investing, you’ve got a very impressive YouTube channel. How’d that all come about?Leo Young (02:45)
Yeah, well, thank you. I appreciate the compliment. think the YouTube was more so of a consequence, I think. So when I got started in brokerage pre-COVID, I knew that to stand out, I had to be really on top of marketing. And at the time, social media was all the rage. mean, now it just sort of went into its own thing.⁓ Back then I would be on Instagram, I’d be making videos for YouTube. I think that was one way of me differentiating myself. So you’ll see a lot of my earlier videos in YouTube are me touring houses and listings and things like
Dylan Silver (03:23)
I was looking at one of them. said, I gotta go look at Massachusetts. I didn’t realize this was out here. And I lived in Massachusetts for years. I wanna ask you specifically pivoting a bit here about some of the different segments that you’ve been involved in. So involved in brokerage, you’ve been now involved as a managing partner of Cornell communities. How did you get into that space and were you always an investor or did the brokerage come first?Leo Young (03:31)
Okay.Yeah, so my sort of foray into real estate began back when I was working in another industry. I started off as a passive investor into some apartment buildings. And ⁓ I did this when I was working back at Tesla. I was just ⁓ I remember I was getting really burnt out because I mean, at the time I joined Tesla when they were at a period of intense ⁓ growth.
And everyone was just getting pushed and stretched and not getting paid enough and all that stuff. I just remember getting burnt out. And I wanted to look for a way to generate some wealth, some income that just isn’t dependent on me punching in, punching out. So that’s when I landed on Real Estate. I did a ton of research onto like Thirgo Pockets, all that stuff. So I started with this, got my first distribution check, and I was like…
wow, this is nice. I don’t have to work for this. And yeah, I mean, I started doing more, got my license, went into brokerage, and then I worked for a real estate firm. They’re, they’re sort of buying a niche kind of real estate nationwide. So was on their acquisitions team, helping them do that. And then started this firm focusing on the old home parks. And the funny story how this happened was, it was a
mutual friend, he knew I was in real estate, his backgrounds in private equity. He was doing some, you know, moonlighting in real estate, knew I was in it, sat me down, walked me through the investment thesis of why mobile home parks, why now it’s very recession resilient. It’s very ⁓ optimistic in the long run, there’s like institutions coming in and we have this small window of opportunity to sort of build wealth as individuals. So I thought that was super compelling. You know, that’s why we, started Cornell communities.
Dylan Silver (05:36)
Now, I don’t want to gloss over you worked for Tesla. What years was the did you work there? Because I know it was a lot of a lot of long hours from every engineer that I’ve spoken with. I lived in Texas. And of course, they moved to Austin, huge gigafactory. What years were you working for Tesla?Leo Young (05:46)
ThankYeah, it was 2017 to 2019. this was, I think they were worth like 30, 40 billion at the time. And, but yeah, I was on their sales team and it was, it was a constant uphill battle. I mean, talk about nobody believing in you, everybody hating your company. And it just felt like fighting the world at the time, but the camaraderie within that organization is just.
world-class like I’ve never seen anything like that and just yeah
Dylan Silver (07:09)
What was the, so when we think of buying Teslas today, I think of walking into a facility tablet, that type of thing. That time period, was it the same process? What were the obstacles that would be keeping you guys up late, seemingly around the clock is what I’ve heard about ⁓ being at Tesla at that time period.Leo Young (07:31)
Yeah,yeah, yeah. it is their business model. It’s direct to corporate. So they don’t go through dealerships. All of the locations are owned by corporate. So people walk into a mall, they buy a car. That’s pretty much it. And, you know, back end logistics is a lot, you know, getting the right cars, the right place, making sure they have the right trim and things like that. ⁓ So coordinating that and then obviously, like ambitious sales targets and then ⁓ educating. think education was a huge component.
of helping the market understand the product. Because for the longest time, people did not understand it. And there was a lot of misconceptions, a lot ⁓ of strings being pulled, especially by media companies, media companies owned by oil people. And it was always an interesting time.
Dylan Silver (08:16)
Yeah.What at that one more Tesla question because this is fascinating to me at that point in time and maybe still now is it like the main or one of the only especially then car manufacturers that was direct to consumer like walk into like the Prudential Mall in Boston and buy a Tesla was that was Tesla one of the only ones to be doing that at that point in time.
Leo Young (08:21)
Yeah. Yeah.Yes, and they were the first, well, in my knowledge, the first one to be doing that. So they paved the way for other manufacturers like Rivian, like Lucid to come about. And for some time, know, like if you pay attention to the news, people are saying like Rivian or like Lucid is the Tesla killer. Like nothing is the Tesla killer. Like it is extremely difficult to have a car manufacturing company.
let alone like their other business verticals. like, mean, in the past hundred something years, there’s only what? One car manufacturer that didn’t exactly. Ford is the only American car company that did not go bankrupt. So, and Tesla. Right. That’s right. That’s right.
Dylan Silver (09:08)
Yeah.Ford.
F-150s and Mustangs. F-150s and Mustangs. I came
from the car business world. So you were ⁓ involved in a different side of the business. I was working in dealerships. I worked for Stellantis. I worked for Nissan. And I experienced just wild burnout. Like I’m talking, I understand how hard established automotive companies will work.
the people and so I can imagine an up and coming just what it was like. And I remember getting into real estate thinking like, okay, there’s gotta be another path. This is before I was really on the AI train. I think AI was still developing. So I kind of Googled like other ways to build wealth and real estate was what came up. I think it was cash for keys. And so it sounds like you got involved as a limited partner, as an investor, but we’re not doing
a ton of hands-on work initially in that first deal. Is that accurate?
Leo Young (10:17)
Right, exactly. Pretty much no hands-on work and that was what I liked about it because I didn’t have to do anything. I just had to deploy my capital and I have a team that I trust to run the whole business plan.Dylan Silver (10:30)
Was that first deal a mobile home park deal? How’d you get into mobile?Leo Young (10:33)
No, no. that was an apartment deal. then mobile home parks was through my buddy, who sort of sat me down and walked me through the investment thesis. I mean, there’s a lot of characteristics that make mobile home parks an interesting bet right now.Dylan Silver (11:21)
Yeah, yeah, I’m with you. think that the number one, I’d be curious to your perspective on this is affordability, right? So if you’re if you’re talking about average price of a home in Boston, in New York, where you’re at, I grew up in northern New Jersey, but I’m licensed in Texas. So I’ve seen, you know, several different markets, and you’re not going to find, you know, a brand new home anywhere, basically for under $240,000. And that’s, you know,shockingly low for some people that they’re building, know, D.R. Horton, Lenar, Meritage are building brand new homes in certain markets outside in Texas for that price. But then mobile home, what’s the what’s the price of a new mobile home? Right. It can vary wildly, right?
Leo Young (12:03)
Yeah, it definitely can. think from the manufacturer. So two components. One is the manufacturer costs and the setup costs. And then one is the location is real estate location, location, location, right? So the materials, I mean, you can be all in for a home around 80 K nowadays. It’s gone up a lot since COVID. And then you have the pad prep costs. So you have to prepare the pad. You might have to pour concrete, things like that. That might be another, you know, 30.35K depending on if you need concrete. So I mean, you’re easily into it like 100K. ⁓ But for residents and why it’s so compelling is that they can get in at a really low monthly payment and they can finance these homes within 10, 20 years, be done with the payments and then all they’re left is the lot rent. And for them, you know, it’s a super affordable way to live. I mean, I’ll give you one example is
Dylan Silver (12:58)
Yeah.Leo Young (12:59)
in one of our communities in New Jersey, the average two bedroom rental is $1,900, $2,000. And you can live in a mobile home park for $700 a month plus your home payment, which will go away after you’re done paying it off. So a lot of people do that and they just stay around. And the resident base is very sticky because once they build that equity, they’re like, why am I leaving? Right? I mean, my payments just…It’s 700 bucks compared to 2000 elsewhere.
Dylan Silver (13:28)
Now, with mobile homes in general, one of the criticisms that I hear for people who are looking at buying a mobile home is, you know, you get a VIN number and it’s not real property unless it’s a fix to the land, this type of thing. And then also too, I don’t know how long it takes to have equity in a mobile home or what the buyer pool is like for a pre-ownedmobile home and that of course to mobile home versus manufactured right it’s two different designations and refers to two different time periods. For folks who are looking at manufactured homes right now how long realistically do they have to be in them making their minimum payments before they have some equity?
Leo Young (14:09)
That honestly depends. ⁓ You would have to look at the payment calculator. mean, different people, like different loans have different amortization schedules and things like that. ⁓ it’s hard to like give a blanket answer. But ⁓ for them, I will say that a lot of people, they come with the idea of just living in it long-term. So like the average residency in our communities is around 10 years or more. Yeah.Dylan Silver (14:22)
Sure.wow. ⁓
In the mobile home park space, what’s the trickiest part of management, right? Because you don’t have to maintain the homes, they own the homes. What’s the pad maintenance like? is plumbing, you know, does this come into play? How difficult is it to manage a park?
Leo Young (14:54)
Yeah, I I think that’s an interesting question because the misconception is that mobile home parks is a very simple business or a very easy business. Well, I will say it’s simple, but it’s not easy. So, you know, it’s very compelling. You know, it has high cashflow, high depreciation and stuff. So it makes it perfect for a passive investor, but it’s a lot of hands on work. And for two big reasons, one is managing residents and two is managing infrastructure. SoThe residents generally at the mobile home parks or manufactured housing communities, they’re generally a different kind of clientele than a lot of people are used to. know, they’re like working class, you know, there’s a lot of like Latino people. So then you have to like hire Spanish speaking staff. You have to walk them through like how to submit things and like they just have a certain way to them. And it’s just managing collections. That’s very, very important.
⁓ The collections don’t come in like you have to stay on top of it.
It’s not like in a class A apartment building, like people pay their rent on time. They have things to lose here. Like if you don’t follow up, they’re not going to pay. So you have to call them. You have to text them. You have to like send notices and like be on top of things. And you have to also keep the, community nice because if someone leaves junk, someone else will leave junk and so forth. So managing residents is one thing. Infrastructure is another. The interesting part about mobile home parks is that A
They’re not making more of them. It’s very, very hard, almost impossible to improve, to get this zoning approved because to the municipalities, the numbers don’t make sense. They take too much tax value or tax cost to service compared to the tax revenue they bring in. So to a city, it’s a net negative for them money-wise. So they’re not going to approve these projects. So consequently, it means that a lot of these mobile home parks, they’ve been approved many, many years ago, 50 plus years ago.
And as a result of that, a lot of the infrastructure is very old. So you have to be sure that you’re setting aside the proper reserves, you’re doing proper maintenance to make sure these septic tanks and these pipes are functioning well. And especially when it comes to the pipes, it’s not cheap. ⁓
Dylan Silver (17:44)
I’ve heard this,septic can be sometimes finicky.
Leo Young (17:47)
yeah, yeah. And there’s many different kinds of septics. There’s obviously like the regular tanks. There’s also lagoons. There’s also wastewater treatment plants. And these are common ⁓ because of the age of when these parks were built. Back in the day, just everything went up like gangbusters. You when Elvis lived in a mobile home park, it was all the rage and people were just putting these up left and right.Dylan Silver (18:13)
Yeah, I want to ask you about that. So I’m imagining because you’re in the space, you know a little bit about the history of it. So at that point in time, I mean, as far as tax revenue, I’m thinking, why did they start saying, hey, we don’t want to put up more mobile home parks because they’re not generating enough tax revenue? Did something change? What was the culture and the sentiment like? Because, of course, at some point in time, whether it was the 50s, 60s or 70s, whenever these were all being made,it seems like they’re all kind of about the same age in the country.
Leo Young (18:45)
Yeah, yeah, that’s a great question. think the economic forces there’s this chart that I wish I could show you, but the cost of everything just went up so much in call it the past 30 years. So like from our our parents generation until now, it just completely changed. So that’s labor costs. That’s material costs. That’s also the way that people live. So back then.the labor cost was much cheaper, like cities were smaller, you don’t need that many people to serve them. Now labor costs have gone up and obviously material costs have gone up a lot more and to service these things, it’s a line item, it’s a budget that needs to be allocated.
Dylan Silver (19:26)
I’m thinking as we’re talking about this, we talk about affordable housing. ⁓ I think there’s a lot of efforts being made in so many segments. You’re the second person that I’ve spoken with recently who talks about ⁓ mobile home, manufactured communities being a way to address this, not for folks who may even traditionally be people who live in mobile home parks, but also for younger people who are feeling like locked out of home ownership, right?feeling like how am I going to be able to get onto the on-ramp of homeownership? I view mobile homes and manufactured housing as a way to get onto that on-ramp. Like, hey, let me get in the game versus renting an apartment. Do you see that as well? Are you seeing maybe a different demographic into this space than in previous decades?
Leo Young (20:14)
Yeah, yeah. So you touched on two great points, Dylan. And first off, yes, there’s a lot of younger couples. They want to just get into something like this. They actually don’t mind the quote unquote stigma that was present, you know, in the past 20 something years. You know, you had like Eminem saying like it’s a trailer park, you know, things like that. It is getting better. And a lot of the times you would drive by these communities, you wouldn’t even know it’s a mobile home park. It’s just changed so much and it’s cleaned up a lot.So first off,
Yes, it is attracting a lot more younger people and them wanting to stay longer. second is, so the whole idea of buying a home, a lot of people buy homes as an investment, right? They wanna get themselves ahead financially, but times change. And maybe 50 years ago, buying a single family home was a great way to build wealth, but.
But nowadays, I mean, look at the stock market. It’s been going gangbusters for the past few years. Why not do that? Why not rent and invest the rest? And then you have your time freedom. You don’t have to pay a realtor fee and transaction costs when you buy and when you sell. Because that’s the silent killer profit. When you’re selling your home, boom, all the transaction fees are gone. So yeah.
Dylan Silver (21:14)
Yep.they’re gone. To
your point, I was speaking with a ⁓ husband, wife, flipper couple today, wife is a realtor. And they were talking about how they encounter so many cases where folks don’t have homes that are modern enough or like on par with what is new that they’re wanting to get like new home pricing in these areas of Texas.
because that’s what in their minds they’re seeing homes selling for, but they’re gonna have to put in like tens of thousands of dollars of their own money into some kind of rehab, whether it’s new roof found in Texas, it’s a lot of pier and beam foundation, so you’re gonna have to have some type of ⁓ maybe additional piers put in or some type of leveling, right? And then you’ve got to update the kitchen, bathrooms, like this is a lot of money and people don’t have the money to do that.
So now they’re in a situation where it’s like, I can’t really even sell my home at the price that I want to. So I think right now, especially, and maybe this will change, folks who even are in the game and who have spent a decade plus two decades, three decades in the home, it’s not as simple as let me just put it on market and find a buyer if you’re in a state like Texas, for instance.
Leo Young (22:51)
Yeah, and it is very interesting that a like the progression of residential real estate in the past few years has been crazy. I mean, it just keeps on going up, right? You commercial real estate took a correction down after the interest rates came up. But there is just far more forces in the residential market to prop it up because, you know, the powers that be see it as a sort of bellwether, like a measure of consumer confidence in the economy. Because like back in wait, when when, you know,the housing market was allowed to fall like, you know, that that took a real big hit and just like the general consumer sentiment, which just means that like people were not confident in a long time. It literally changed entire generations of people’s mindset. So I think that the powers that be are just trying, trying really hard to keep the residential market there. But the spread, the risk to reward is like very, very slim. Like you have like little to no margin for error. You have a lot of downside risks.
Dylan Silver (23:33)
Yeah.Leo Young (23:48)
And a lot of people are not factoring that in.Dylan Silver (23:50)
I wanna get your perspective on some of these other segments of real estate investing that I’m seeing people get involved in. You mentioned being active in New Jersey. I know that it’s ⁓ a different climate in New Jersey than Florida, than the Carolinas, than Texas. So it’s a little bit comparing apples to oranges. But I’ve seen a lot of people pivot away from maybe fix and flip, right? And some single family strategies.into multifamily, whether it’s small multifamily or large multifamily, also into storage facilities, also into RV parks. Is that a tangent space to mobile homes? What’s your perspective on some of these other real estate segments?
Leo Young (24:33)
Yeah, I think there’s always money to be made. that’s, you know, the question is like, how much money is there to be made and, how good at you at doing that. So, you know, there’s been many opportunities where, me and my team had had the chance to look at different asset classes and, you know, explore that, but just, you know, we, stuck with mobile home parks the entire way, because we’re like, well, we, built our machine to operate mobile home parks. And, you know, when it comes toCommercial real estate especially, like you’re running a business and the business is a machine and you need specialized tools to operate that machine. You want to make sure that your business plan is going well. And so much of it depends on operations rather than buying. think a lot of people, especially, you you’ll see in the multifamily space, you know, like during COVID, a lot of people came in because the barrier to entry was low, it cheap debt. I mean, there’s like some, you know, operators that maybe they weren’t the best and you know, then…
Now we’re seeing keys being handed back to lenders, like everyone’s losing money. So we’re like, okay, we don’t want to be like that. So we should fix our operations, make sure it’s airtight and just stick in our lane. Cause there’s money to be made everywhere, but you have to stay in your own lane. Cause if you chase two rabbits, you’ll catch none.
Dylan Silver (25:47)
Yeah, I mean, you’re exactly right. I’ll go a step further and say that there was a lot of people that hit their pro forma like exit in half the time, maybe from like 2016 to 2019. And people were seeing this and being like, everything is making money. Like, if it’s if it’s available, we’re buying it, we’re buying it at close to ask, right? Well, then you had, you know, arm rate loans double, literally double.Then you had rents stabilizer in cities like Austin, Texas, like go down, right? And then you had the cost of materials increased drastically. All of these things factor in and it makes it so that, yeah, I didn’t even mention that, right? So you’re looking at it now and there’s a lot of distress. It’s not just in one or two or a handful of operators. There is a lot of distress on the operator side and multifamily.
Leo Young (26:30)
insurance taxes.Dylan Silver (26:44)
which makes it interesting because then they’ve got to consider how do we get ourselves out of this? More people are making creative offers. I’ve definitely seen that recently. But ⁓ Leo, are coming up on time here. Where can folks go if they would like to learn more about Cornell communities or maybe they’ve got a deal they’d like to bring to your attention? How can folks reach out to you or your team?Leo Young (27:06)
Absolutely. So if you’re interested to learn more about our team, potentially join our investor waitlist, just check out our website, Cornell communities, plural.com, or you can reach out to me on LinkedIn, Leo last name, young Y O U N G. Always happy to chat.Dylan Silver (27:22)
Leo, thanks so much for coming on here today.Leo Young (27:24)
Definitely. Thank you, Dylan. Thanks for having me.
