Mobile Home Park Investing, Depreciation, and Tax Strategy Explained

Stephen Vereb (00:00)
During COVID, I joined a mastermind called the Lifestyle Investor Mastermind. And actually, the one I even joined before that was called Front Row Dads. And Front Row Dads was started by a guy named John Roman. He’s got a stellar podcast I highly recommend. But the premise of the Front Row Dads group is that we are family men with a business, as opposed to businessmen with a family. It was all about

keeping family at the forefront.

Michelle Tack (02:02)
Hi folks. Thanks for joining Real Estate Pros podcast. I am Michelle Tack. I am the host for today’s session. I’m super excited to have Stephen Vereb here. Stephen, just give a shout out to folks and…

I’ll give them more information about you. There he is. The man with the Tee Box on his head. I’m really happy to have Stephen on because he does a number of different things. He owns Massage Envy’s and has done so for 19 years, but it’s very active in real estate in a variety of ways, from commercial to mobile homes to begin with and continues to look

for partnerships to ⁓ ultimately ⁓ produce revenue that will be as equal, if not greater than his ⁓ massage envy. So with that, Stephen, ⁓ maybe you can give us a bit about your background for those that don’t come from a franchise world ⁓ and don’t come from maybe the orientation of having a different business, but also have been very successful in real estate, how you’ve done that.

Stephen Vereb (03:16)
I’ll do my best to give a Cliff Notes version. I was a corporate sales guy selling data, even though my original background was in the mortgage space on the loss mitigation side with Wells Fargo and with Freddie Mac. And while I was selling data, I had a colleague come up and say, Hey, do you read? I’m probably like 32 years old at this time. I said, sure. You know, sporting news, sports illustrated. I read a lot. said, no dummy. mean like for growth. I had no idea what she was talking about.

She introduced me to a book called Rich Dad Poor Dad and another book called The Instant Millionaire, which was a tiny read that really talked about measuring backwards, five-year plans. Chewed through those at record speed on a flight to Dallas, never forget. And it really turned my world a quarter turn, the whole Rich Dad premise about real estate, passive cash flow. ⁓ I was hooked, I bought his board game, Cash Flow 101.

And I became obsessed with getting out of the proverbial rat race, creating enough passive cashflow to replace my corporate income. And through reading that material and playing the game, I realized on the fast track, it was going to take me longer than I wanted it to, to cobble together individual pieces of real estate and doors. And I didn’t have the capital to invest in big, huge multi-unit, multi-family deals quite yet. But franchising appealed to me.

So I borrowed against one of my rentals, bought some licenses, got into franchising, and then remembered what Rich Dad said, which was my money works in real estate. I work in my businesses to build my businesses, but my money works in real estate. And I never forgot that. And so the cashflow I produced from the massage envies, I continue to try to find different, and I say different because I’m spread across multiple different.

types of real estate, whether it’s industrial, whether it’s multifamily, it could be commercial office buildings. ⁓ What else? Mobile homes is a big passion of mine for multiple reasons as well. So yeah, that’s probably my cliff note version.

Michelle Tack (06:18)
That, I mean, that’s incredible, right? I mean, that real estate has always been there consistently through your career. How do you keep your operation that’s, that is pretty complex? mean, I would think that you’ve got, you know, a bunch of massage embodies, but you’ve got your focus also on a, know, you know, the right buy box for you, you’re doing industrial, et cetera. How do you keep the operational side of the business,

not really talk about massage energy, but the total real estate piece running smoothly. What do you employ to do that?

Stephen Vereb (06:57)
A very, very good CPA and a great tax strategist as well, which has a lot to do with the different types of real estate I invest in and at which point in time. ⁓ Mobile home parks jumped onto my radar. So having grown up in a mobile home park when I was younger, ⁓ I understood the

home ownership aspect and you’re really owning more of a piece of land ⁓ because typically the tenants own the home and so you’re leasing your land. So there’s a lot of different components I love about that. I don’t operate any of them myself. I go straight with syndicators who have the systems in place to find a park that needs some love. And when I mean by love, it’s usually repaving the…

parking lots and the pathways and upgrading the electric and all of these different upgrades, you can, and this gets into the tax aspect of it, but you can do a pretty serious ⁓ segregated depreciation, which produces a nice phantom loss on your K1 at the end of that first year. And during some of the recent administrations, they’ve been doing some bonus depreciation as well.

Why that’s important is from my operating businesses or other cash flowing real estate on the K1. I can take those losses and offset those losses. And if any, you for those who have read the rich dad, poor dad, I’ve, you know, I’ve read it probably five or six times. And the first time I had no idea what they were talking about, phantom income or tax depreciation on real estate. Um, and so that was a great guide book in order to understand the benefits because mobile home parks, when you look at it.

It’s probably at the lower end of the return on investment in terms of a return on capital. But when you add the significant tax deferral savings, that ROI goes through the roof. So I rely heavily on syndicators.

Michelle Tack (09:09)
Yep.

That’s a great, ⁓ and this comes from your experience of having been early in the market, real estate market is to look at the picture as a whole, right? I mean, not just the cashflow, but the tax tax implications, because that is the whole, if we don’t look at that part. ⁓ You have done a number of different things, and there’s a lot of good advice that…

You you underscored in preparation for this call. I’m wondering if you could, with the complexity of the business that you have, describe a deal that you had that was sliding, you know, was in peril or started to morph into something else and that you had to quickly pivot to either save it or if you weren’t able to save it to…

do something else and you’re able to capitalize on that into your experience later on. Can you speak to any of that or a situation like that that you could specifically ⁓ recount?

Stephen Vereb (10:55)
That’s a tough one, mainly just because I’m, you know, as an LP, a limited partner in these deals, I’m not usually the one with my hands on the captain’s wheel making those types of decisions. I’m relying through my due diligence that I’m going with syndicators and partners that have that experience to know how to pivot.

You know, I’d say there’s some of those types of situations in some of the mobile home parks. guess I’ll use as an example. ⁓ Nirvana is to have the tenants own their own home. Well, sometimes you’ve got a bunch of empty lots and you’re not able to attract enough people that can afford to qualify to own their own home. So now they become renters as if they’re in a multifamily apartment or whatnot.

And so now the ownership group of the mobile home park, ⁓ now contracts to go out and buy the homes and now rent them. That adds more complexity because now you’re turned into a landlord as opposed to just owning the dirt and expecting everyone to take care of their own homes. Now you’re going in and taking homes over, refurbishing them, replacing them with new ones. ⁓ but that’s, that’s probably an area of pivot. easiest one that comes to mind right now is when you’re buying a

park that’s been not so loved because usually it’s been a mom and pop for 30 years and ⁓ sometimes it’s not easy to want to reinvest in the homes. You’re trying to suck all the cash out of it as much as you can. Those are usually the places of investment for mobile home park syndicators is to take a look and bring in some new homes, tidy up the park, get some tenants in there and

you know, try to get them to buy the home from you and then turn that home over to them and provide them with the opportunity for the dream of home ownership in a mobile home park.

Michelle Tack (13:03)
That’s great. Help me understand, as we discussed earlier before we got on the podcast today, 12 months from now, what opportunity, or opportunities, and again, I allow you to define what that is, would you like to have accomplished by June the 8th, 2027?

Stephen Vereb (13:27)
So I’ve got some goal, know, like most of us that are in real estate or any type of investing, I’ve got spreadsheets that map to other spreadsheets that map to other spreadsheets and spend a lot of time in there, but I’m continually trying to grow that cash flow ⁓ because I’ve got a number that I would like to hit that makes me comfortable at some point in time to exit my operating businesses ⁓ in that cash flow from.

My investing experience, I feel the safest with it in cash flowing real estate. So I’ve got a certain number that I try to hit each year, not just by the end of the next 12 months, but it’s a renewing each 12 months. I’m trying to continually add ⁓ to that cash flow. And while I still have my operating businesses, I reinvest whatever cashflow is being ⁓ generated to continue to buy more and continue to offset the taxes provided by.

the operating businesses. it’s it’s kind of a cycle, right? It’s kind of a life cycle.

Michelle Tack (14:28)
I know that one of the things, one of your goals that you had mentioned earlier to me was that you’d like to, your goal is to spend more time with your family, but also that you would like to have equal amount of income coming from the real estate as you do from the massage envy, which would allow you to, you know, spend more time with your children. And although you’re doing a lot of that now, you know, when do you think that that, when,

What do you think that’s gonna happen? I know that we can’t say when deals are coming up exactly, but what in your mind is a realistic timeframe for that?

Stephen Vereb (15:52)
So a great question. you there’s a statistic that 92, 93 % of the time we spend with our kids happens before they turn 18. And that’s just a broad statement. I’d say once they had given the teenage years and now they want to hang out with their friends more than you, that time starts to wane and then they start to drive and it’s even less. And the picture that I have behind me for those that can see is, is Blake wall and pop pack and the Poconos.

It’s I keep it because it was vacations. It represents vacations that we used to take my daughters and I with my high school buddies. And they grew up with with their children as cousins. And I asked them one time if you had to pick between Christmas or the lake trip, which would you pick? And in unison, my three daughters, they scream Lake Trip. So I know those memories are dear to them. And we’ve always rented places. I have a really good idea of, know,

In my mind, I always thought it’d be really cool to own our own place because I want a reason for them to want to bring their kids back. Even if they’re scattered, know, two of them are sophomores headed into junior year of high school and one is at university. So my time with them is waning and it won’t be long, hopefully a little longer than now, but it won’t be long before they start having families of their own. And I would love to have a short-term rental on the waterfront.

And I’d say my timeframe for that is probably in the next, it’s, it’s a wide, but probably two to five years, because that gives me some time to continue to accumulate capital and kind of figure out interest rates and, you know, will it cash flow all of those things, but it’s still going to be real estate centric. And I think a pretty cool legacy to be able to, to pay pass pass on or pay forward to them as a legacy.

Michelle Tack (17:35)
Yeah, exactly.

Awesome. One last thing before we close, and I ask you to provide your contact information to the folks that are on the call today, is I was really fascinated by ⁓ your network and specifically if you could just describe the network that you had mentioned about Family First. ⁓ Could you talk about that to the group in terms of something that’s sort of unique?

Stephen Vereb (18:14)
Absolutely. During COVID, I joined a mastermind called the Lifestyle Investor Mastermind. And actually, the one I even joined before that was called Front Row Dads. And Front Row Dads was started by a guy named John Roman. He’s got a stellar podcast I highly recommend. But the premise of the Front Row Dads group is that we are family men with a business, as opposed to businessmen with a family. It was all about

keeping family at the forefront.

We tell ourselves, we’re doing this for our family. We’re working hard for our family. And sometimes that’s just the default switch. We think that, but what the family really wants is our quality time. And through that group, there is a bunch of like-minded, highly successful, hard-charging, some best-selling authors in the group. Everyone bringing their vulnerability and their weaknesses to the forefront, looking to become better.

dads, better men, better husbands, better fathers, you know, leveling up, if you will, iron sharpens iron. And through that, I learned of other networking groups. There’s groups called Go Abundance. There’s the Lifestyle Mastermind, Lifestyle Investor Mastermind. Some of my friends that were in those groups spun out and created their own groups. For doctors, there’s one called Cash Flow MD that’s been started by my buddy, Danny Braemer. I could go on and on, but it was really kind of a springboard for

People in franchising quite frankly is a mastermind in of its own within that singular brand in order to get in you’ve had to have some success to afford the license and build the business and so you’ve already got some like-kind interests in mind and The next thing you know you start talking about similar things. you invest in real estate what kind of real estate do you have any deals? I do here’s a few syndicators that I believe in that I’ve done five deals with and

It went from the Rich Dad Poor Dad book. We’re reading about these deals that sounded great, but I didn’t know where to find them myself. I was just doing my own single family rental type stuff. And lo and behold, getting into the groups with similarly like-minded people, you just start asking questions. And I remember one of my…

A network I just recently did a couple years ago, we were looking for another piece of commercial real estate for one of our businesses. And I asked the representing broker, Hey, I’m looking for cash flowing deals that look like this, where the minimum buy-in would be this, where the return would be that. You’re a broker. I’m guessing you have a network of people or brokers who are looking for those deals. Can you plug me in to anybody in your network that you know? And he went, let me think about it.

And then a couple of days, he referred me to three guys, ⁓ two of which are now in my buy box whenever they have a deal. One is in the retail space, retail shopping center space. And the other one is in the industrial space, the light industrial. And these are guys I’ve built relationships with for a couple of years and done the due diligence. And when they have a deal, I then asked them for references. called the one guy.

Sent me nine people, I called all nine and that was part of my due diligence and reference checks. And now when he has a deal, I’m ready to roll. I believe that this guy is gonna do what he says he’s gonna do in his PPM.

Michelle Tack (21:49)
That’s great. ⁓ Stephen, before we go, can you provide your contact information for folks that may have a deal, want to talk to you, level up, what have you?

Stephen Vereb (21:59)
Absolutely. ⁓ Feel free to text me. It’s probably the fastest, easiest way. ⁓ You can text me anytime at 703-626-7713. You can also email me at Vereb, V is in Victor, E is in Edgar, R is in Robert, E is in Edgar, B is in Bravo, at franchiselifestyleconsulting.com.

And from there, I can text you a Calendly link. That’s usually the easiest way to carve out some time. And happy to share whatever it is that I know and pay it forward, because I’ve had plenty of mentors that I owe a lot of my success to that have helped me get to where I am today.

Michelle Tack (22:42)
Well, that’s awesome. Thank you very much, Stephen. For those that are subscribers and found value to this content, we appreciate it and hope you continue to subscribe. And those who have not as yet, please ⁓ subscribe. Again, Stephen, best of luck in the future.

you.

Stephen Vereb (23:00)
Michelle,

thank you so much for having me. It’s been a pleasure to spend some time with you today.