The Hidden Risk of Small Real Estate Deals Most Investors Miss
Show summary
In this conversation, Gabe Petersen shares his journey from a $19,000 investment to building a multimillion-dollar real estate portfolio. He discusses the benefits of podcasting for networking and authority in the real estate space, particularly focusing on RV parks and mobile home parks. Gabe provides insights into market trends, the demand for different asset classes, and offers advice for new investors on how to navigate the real estate landscape effectively.
Key takeaways
- Buying small properties (e.g. 10,000 sq ft self-storage facilities) is riskier than buying large ones because small facilities generate less income to cover unexpected repairs; a single broken door or failed gate can eat up a long stretch of profit on a property making only ~$2,000/month, while a 30,000-100,000 sq ft facility has enough cash flow to absorb the same issue.
- Starting a podcast builds authority even for non-media businesses: Gabe started his during COVID when in-person meetups stopped, and found that having 'the podcast' behind his name got him better responses from sellers, helped him raise capital, and let him learn from roughly 600 guests over time.
- Podcasting doesn't require daily output to be effective: Gabe tried five episodes a week early on, found it too much given real estate is his main business, and settled on recording for about four hours on one day (Friday) twice a week; he says even once a month, done consistently, builds credibility.
- Septic systems are a major hidden cost in RV and mobile home parks: Gabe's company had a septic fail on an RV/mobile home park they owned after the county updated codes, requiring a roughly $50,000 new septic system and significant time to resolve.
- Mobile home parks are hard to get built because most cities resist permitting them, which is part of why RV parks have proliferated instead; some operators run 'long-term stay RV parks' where guests stay multiple months, effectively functioning like a mobile home park.
- RV park tenants tend to fall into three groups: temporary workers (e.g., oil rig contracts), snowbirds staying for a season, and tenants driven purely by economics, since a space can rent for around $400/month, undercutting typical rents.
- Gabe's advice for new investors: pick one asset class you resonate with and focus on it for years rather than spreading across many; competition and cap rates in 'niche' asset classes like RV parks, mobile home parks, and self-storage have increased as more investors have discovered them via social media, so the old perception of easy deals in these niches no longer holds.
About the guest
Gabe Petersen is a commercial real estate investor with Kaizen Properties, focused on mobile home parks, RV parks, and self-storage facilities. He grew a $19,000 investment into a multimillion-dollar portfolio over four years. He also hosts The Real Estate Investing Club podcast on YouTube, with roughly 600 episodes recorded.
Listen to the audio
“I thought that small, there's less risk... but it's actually more dangerous to buy small properties because you don't have as much income, essentially. You don't have as much cash to deal with issues when they arise.”
Gabe Petersen
“Don't buy small anything.”
Gabe Petersen
“It's all real estate, but they all operate, they all function differently... if you really want to get the best return and the best deals in any different asset class, then you need to focus in there.”
Gabe Petersen
Questions answered in this episode
Why is buying small real estate deals riskier than buying larger ones?
Gabe Petersen explains that small properties generate less monthly income, so there's less cash on hand to absorb unexpected repair costs. A facility making only about $2,000 a month can have its profit wiped out for a long stretch by a single issue like a broken door or failed gate, whereas a larger 30,000-100,000 sq ft facility has enough income to cover the same problem without major disruption.
Why are there more RV parks being built than mobile home parks?
Gabe's guess is that most cities push back against permitting new mobile home parks, making them difficult to develop, while RV parks face less resistance. Some RV parks operate as 'long-term stay' parks where tenants live on-site for months, functioning similarly to a mobile home park.
What should new investors watch out for before buying an RV park?
Septic systems are a major risk; Gabe's company had a septic tank fail after county code updates required an expensive replacement costing around $50,000. He also advises checking water expenses for signs of line breaks and understanding other utility and common-area costs like laundry.
Should a new investor focus on one asset class or spread across several (mobile home parks, RV parks, self-storage)?
Gabe recommends focusing on one asset class rather than spreading thin, because each type operates and functions differently with its own brokers, systems, and ancillary revenue opportunities (like U-Haul partnerships or selling locks/insurance in self-storage). He says if you find a genuinely good deal in another class you can still buy it, but a thoughtful strategy means picking one niche and sticking with it for years.
Has competition increased in niche asset classes like RV parks and mobile home parks?
Yes. Gabe says these asset classes used to be overlooked, which allowed for better cap rates, but social media has driven increased investor interest, so there is now comparatively equal competition to buy these properties versus other real estate types.
Is starting a podcast worth it for real estate investors who already have a business?
Gabe says yes, even at low frequency like once a month, as long as it's consistent, because it builds authority that leads to better responses from sellers, helps with raising capital, and provides networking and learning opportunities. He personally scaled back from five episodes a week to recording for about four hours on Fridays, producing two episodes a week, to keep it from taking over his main real estate business.
Resources and links
Full transcript
Gabe Petersen (00:00)
When I got started, I bought small self-storage facilities, so like 10,000 square foot self-storage facilities.
I thought that that would protect me because I thought, you know, small, there’s a less risk. It’s not, you know, I don’t have as much on the line so I can’t lose as much. And I felt like I was being responsible, being conservative like that, but it’s actually more dangerous to buy small properties because you don’t have as much income, essentially. You don’t have as much cash to deal with issues when they arise.
Dylan Silver (02:03)
Hey folks, welcome back to the show. Today’s guest, Gabe Petersen is a commercial investor with Kaizen properties and he’s also the host of the real estate investing club podcast on YouTube. took a $19,000 investment to a multimillion dollar portfolio in four years. Gabe, welcome to the show.
Gabe Petersen (02:24)
Dylan, thanks for having me on. Should be a blast.
Dylan Silver (02:27)
It’s great to connect and great to have you on here. ⁓ You’ve been involved in podcasting, you’ve been involved in, of course, commercial investing, which came first, the podcast or the investing?
Gabe Petersen (02:41)
the investing. for sure. The podcast I just started, it was COVID. Before that, I was doing all the meetups that everybody was doing, going to in-person meetups, and then COVID hit. I was like, still want to network. I still want to talk with other investors, but I couldn’t. I started a podcast and I ended up loving it. I just kept doing it. Here we are, 600 episodes later and still doing it.
Dylan Silver (03:06)
It is kind of a huge hack, right? Like I realized this as I’ve hosted more and more episodes, so much network building is being done through me meeting guests on the show. And I never realized that this would be a tool for for networking. But to your point, like COVID disrupted everything, it was probably a great time to get started.
Gabe Petersen (03:19)
Yeah.
Yeah, I always suggest when I’m talking to investors, I always suggest that they if they have the inclination to start a podcast, do it because there’s so many benefits that come in. It’s not direct directly ties to money, but it’s like insiliary to it. And it kind of brings along other benefits that you don’t necessarily think about before the podcast. Like before the podcast, I’d be reaching out to sellers. I’m commercial investors and it was, it was just my name.
And there was nothing else. didn’t have any context. And so you’d get these curt responses. And then I noticed once I started the podcast and I had that name behind me, I had that, that like inbuilt authority that I would get better responses from sellers. And so it helped with closing deals. it helped with raising capital. ⁓ you know, I got to meet a lot of great guests, know, 600 guests, so they all have different perspectives and different. Educations in real estate. And so got to learn a lot. Yeah. I always suggest people.
Dylan Silver (04:21)
Yeah.
Gabe Petersen (04:27)
If you want, if you feel like you would enjoy podcasting, it. ⁓ It’s a great time and there’s a lot of benefits to it.
Dylan Silver (04:34)
Do you think folks who are, you know, managing a personal portfolio or realtors or lenders who already have a successful business and they’re thinking, well, I don’t want to add something that’s going to be, you know, taking up too much of my time. Could they do one episode a month or, you know, every couple of weeks with that add anything or that do they really need to be like every week or every other week?
Gabe Petersen (05:43)
No, I mean, so long as you do follow a schedule, it can’t be like once a year because then you don’t have enough consistency. But even once a month is something. And it just shows that you’re on the scene. You’re still engaged. You’re still going out there talking to people. ⁓ It doesn’t have to be, we do twice a week. originally started out with five times a week, but that was just too much. And my main business is real estate. That is what I do primarily. And podcasting is just kind of a side thing.
And so five times a week was too much. So I put it down to just twice a week. And I, you know, I run my podcast, it’s what four hours on Friday and that’s the entire extent of everything of the entire podcast. And it’s a lot easier once you get the systems up and the guests just kind of come in and you just sit down on a Friday and have some conversations and build your authority.
Dylan Silver (06:32)
Yeah.
It’s probably I don’t know if anyone’s mentioned this to you. It’s probably a good change of pace too, right? because you Monday through Thursday, you’ve got one block and then Friday you’re like, okay, I’m mixing it up on Friday. It’s you may maybe even look forward to that.
Gabe Petersen (06:49)
Yeah, yeah. It’s fun just to kind of sit down and ⁓ I focus 100 % on mobile home parks, RV parks, self storage facilities. I love those niches, those assets, but I really like all types of real estate. And so it’s really fun to just sit down and talk with people who are investing in land, who are developers, who are doing short-term rentals, you name it. like learning about the other strategies and kind of picking their brain. And so it’s fun to…
you know, at the end of the week, kind of decompress, hear about what other people are doing, that kind of stuff.
Dylan Silver (07:23)
I want to ask you about RV parks and mobile home parks. I’ve noticed as a trend, they’re not making any or I don’t not aware of them making any more mobile home parks. But when I was living in Texas, I saw RV parks going up all over the place. So why is it that there’s RV parks going up or not seeing mobile home parks going?
Gabe Petersen (07:45)
it’s because most cities don’t want mobile home parks. ⁓ they, well, that, that is my guess what the primary reason for it is it’s difficult to build mobile home parks because cities push back. ⁓ they, they don’t want them. ⁓ RV parks are also, they can be operated as a mobile home park. and we actually like that model. It’s called long-term stay RV parks where a guest will come in. They’ll stay, you know, multiple months. ⁓ and basically live at your park.
Uh, and so it’s, there’s, there’s a lot of reasons, but I, my guess is, um, I’m not a developer, so I don’t really look into the numbers behind development, but my guess is the city’s pushback. and then also, you know, the demand for RV is a little bit higher, uh, but you can still have those people live on, you know, you can operate as a mobile home park by having those long-term state guests there.
Dylan Silver (08:35)
Are you seeing any drift from the single family residential space into like RV parks from maybe a different type of buyer than we would normally assume would be looking at our views are folks who are maybe, you know, for whatever reason, either not able to or ⁓ have a bad maybe taste in their mouth from the experience and looking at single family now looking at some of these other asset classes and in your experience?
Gabe Petersen (09:05)
You mean in terms of guests like tenants or are you talking about investors?
Dylan Silver (09:08)
Yeah, they long term
RV as well as mobile home park. Yeah.
Gabe Petersen (09:13)
⁓ For RV, feel like the tenants fall into three buckets. It’s people who are doing temporary work. They’re working on the oil rig. ⁓ They have a contract at whatever company and they’re going to be there for a couple of months. They bring an RV and they just stay there temporarily. ⁓ Especially in Texas, in the south, there’s snowbirds on people who come for a season and then they leave.
And then there are people who are really driven by the economic economics of it. know, $400 a month beats any rent out there. And so there’s a lot of people that do that are incentivized by the money itself. But in terms of stealing from single family, I don’t really feel. There are other people who can speak better at this topic. I don’t really know. I don’t really feel that, you know,
I don’t talk with tenants on the daily, but yeah, but I don’t really feel like single family people who would have otherwise rented a single family house are moving into RV parks. ⁓ It could be. just not sure.
Dylan Silver (10:12)
In the single family space, sure, yeah.
I when I’m originally from northern New Jersey. So when I think of real estate as a whole across the country, I have the perspective as a Texas realtor. But then I also have the perspective as someone who grew up in northern New Jersey. It feels like two totally different worlds because of the entry point of you know, a very middle class home being totally different.
And I’m looking at it like, well, how can people afford homes in northern New Jersey? Who is affording those homes? What’s their, you know, avatar like? And then I look at it in Texas. And although it is more affordable, I still think that it is in many cases cost prohibitive. And I forget what the exact age is. But don’t quote me on this. I want to say like the average age of a homebuyer this last year was either late 40s or early 50s.
Gabe Petersen (11:49)
wow, really?
Dylan Silver (11:50)
And
so that was very surprising to me. I didn’t think it would be that age bracket. But at the same point in time, I’m looking at well, who are my peers and what’s their experience like with homeownership. And as someone who’s worked with a lot of investors, I’ve seen tremendous interest from investors in mobile home parks, RV parks, like self storage as well. And that’s made me think, hey, I wonder if there’s more interest from the general public. ⁓ But
Gabe Petersen (12:20)
I think the interest on the investing side is just social media driven. mean, they are great asset classes, the interest is from the fact that they were kind of niche investments. And so not a lot of people were ⁓ interested in investing in them and they were kind of overlooked in a lot of cases. So you can get great cap rates. then people realized this, then the hype train started to move.
You got a lot of interest in them just from the people thought they could get better deals on the RV mobile home self storage side. That’s not the case. mean, the cap rates are going to vary based on the asset. But now that everybody knows about RV parks, mobile home parks, self storage facilities, there is an equal amount. I mean, not 100 % equal, but a comparatively equal amount of ⁓ competition to buy all these assets. So ⁓ yeah.
I mean, if people are getting into investing, I would just focus on the asset class that you resonate the most with and just focus on it because you can’t. It’s all real estate, but you do need to learn each asset class and you got to get good at it. And so if you just choose one and then stick with it for 10 years, ⁓ that’s the way to go. And don’t worry really about what other people are investing in. All asset classes work. You can buy industrial, you can buy.
Dylan Silver (13:24)
Yeah.
Gabe Petersen (13:46)
Mobile home parks, RV parks, multifamily, whatever it all works. Land, land without anything on it. You can buy that. ⁓ just pick with something and, and focus on it.
Dylan Silver (13:52)
Yeah.
In the RV park space, I understand that there’s different grades of RV parks, you’ve got some like super ultra luxe, almost like a resort style RV. I haven’t seen one of those I would like to. I’ve heard that there’s they’re all over the place. I just I gotta go see one. And then you’ve also you know, got what maybe more people are accustomed to, which is basically a space to put an RV but nothing ultra glamorous. Do you have a segment that you look at more so than others within the RV space?
Gabe Petersen (14:05)
Yeah.
We do not look at the higher end RV parks, the ones that have, some of them have ⁓ community home or community buildings. have like water slides. They have crazy stuff on them. We don’t look at that. We just look at your run in the mill, bring in your RV, plug in and live there kind of stuff.
Dylan Silver (14:47)
Now, for folks who are newer to the RV park space, ⁓ I think from the outside looking in, you look at it say, okay, well, that’s not a tremendous amount of maintenance that goes into it. maybe septic is the biggest thing that comes up. Are there any things that you would advise newer RV park investors to look at before jumping into the space?
Gabe Petersen (15:50)
⁓ Septic is a big one. We’ve bought a ⁓ mobile home RV park that one of the septics failed and the county had updated their codes. The type of just the gravity ⁓ septic tanks, it wasn’t allowed anymore. You had to get this fancy $50,000 septic tank and cost a lot of money, took a lot of time. ⁓
are definitely a big thing to be aware of. Sure, you don’t have that ongoing operating expense or expense of like if you were to just do pay for sewer, city sewer, but you do have every once in a while, one’s gonna go out and you have to spend $50,000 to get the thing fixed. So yeah, septics are big, but outside of that.
I mean, look at their water expense. If it’s really high, you might have breaks in the line. That’s an easy one to fix ⁓ and a good way to add value. ⁓ But it really is utilities. And then you’re going to have a common area. You might have laundry on site. ⁓ those, yeah, I mean, there’s not a ton there to worry about. ⁓ Besides, you’re just standard utilities. It’s the lines in the ground that matter the most.
Dylan Silver (17:09)
is there any and I don’t know, because I’m not in the space, but but is there any ⁓ movement to like have RV plots effectively that are for sale versus for rent? Would someone come in and say, Hey, we’ve got septic here, this is ready to go, we’re going to sell this within this community, there’s an HOA fear or what have you? Is that is that happening anywhere in the RV park space?
Gabe Petersen (17:23)
Hmm.
I have not heard of that is happening in the self storage space. They’re selling like condos basically like storage condos. But I’ve not heard that heard of that in the in the RV space. Even in mobile homes. I haven’t really heard of that when they do your you’re subdividing this lot into you know, a bunch of individual plots and but in terms of like selling it as like a condo type of legal structure.
I haven’t heard of that. I’m sure somebody’s thought of that, but ⁓ I personally haven’t heard of it.
Dylan Silver (18:07)
Yeah, I saw it. had an investor on the show who does. He’s in a niche where he’s a realtor for automotive enthusiasts, so he’ll sell like homes with extra garage space. And he told me that there are garage condos which people are purchasing to like, house their cars or a automotive business. And I was thinking I was while he was explaining this to me, it didn’t occur to me that
Gabe Petersen (18:18)
No. ⁓
Dylan Silver (18:37)
business for purchase because I’m thinking the whole time it’s got to be for rent, but they’re building these condos for sale, which, you know, it is very unique.
Gabe Petersen (18:47)
Yeah, yeah, I don’t know why you would want to do that. But yeah, I mean, hey, if it works, it works.
Dylan Silver (18:55)
Hey, right, that’s that’s, know, the niche that he’s in. ⁓ You mentioned a couple different segments that that you’re involved in. Do you have any advice for folks, you know, when when they’re just getting started, should they be looking at, hey, I’m just going to stick to mobile home, hey, I’m just going to look at RV self storage, for instance, or is there some level of similarity between these three areas, let’s call it like less tenant based?
know, service orders and that type of thing where you could look at three of these, you know, segments and have maybe some spread and your concentration of the deals that you’re reviewing.
Gabe Petersen (19:34)
⁓ I’m not sure I understand the question, but, ⁓
Dylan Silver (19:38)
Like
⁓ if new investors basically should they narrow in I’m just one of those segments or can they be looking at deals in all three of those?
Gabe Petersen (19:41)
watching them.
I
mean, can look at a deal is a deal. So if you find a deal, just buy it. ⁓ but if you are trying to be, if you’re trying to be a little bit more thoughtful about how you’re approaching real estate, ⁓ stick with one asset class, because like I said, they are all real estate, but they all operate, they all function differently. And so you need to, if you really want to get the best return and the best deals in any different
asset class, then you need to focus in there. Because like if you choose self storage, then you’re going to be calling self storage brokers, you’re going to be understanding, you’re going to know all the systems that work with self storage, you’re going to figure out other ways to make revenue with self storage, like, you know, U-Haul locations, ⁓ selling insurance, selling locks, that kind of stuff, you’re going to figure out the different systems that work with self storage. so there’s
There’s a lot of ⁓ benefits to just focusing in on that one asset class. If I were talking to new investors, one, yeah, just choose one asset, focus on it, but also don’t buy small anything. ⁓
When I got started, I bought small self-storage facilities, so like 10,000 square foot self-storage facilities.
I thought that that would protect me because I thought, you know, small, there’s a less risk. It’s not, you know, I don’t have as much on the line so I can’t lose as much. And I felt like I was being responsible, being conservative like that, but it’s actually more dangerous to buy small properties because you don’t have as much income, essentially. You don’t have as much cash to deal with issues when they arise.
So if you have a, you know, 30,000, 50,000, 100,000 square foot facility,
If you have an issue that happens, know, a door gets broken into, your gate fails for whatever reason, you have that income, the monthly income that you can use to make repairs. But if that same thing happens for a facility that makes maybe $2,000 a month, then your profit for a long time is eaten up by just that one issue that arises. if I were to go back to myself, when I was just started investing, I would tell him, ⁓
you know, don’t look at small, small deals, small deals are not unless you can find a bunch of small deals in one area and you can get that, ⁓ you know, economies of scale that works, but don’t just buy one off small deals. It doesn’t work. And there’s more risk than, than you think. I’m just because you don’t have as much income coming in.
Dylan Silver (22:21)
Yeah, the economy of scale can hurt you if you’re too small and something comes up, right? You don’t have that cash flow there. Gabe, are coming up on time here. Where can our audience ⁓ go to reach out to you or any new projects that you’ve got coming up? ⁓ How can folks get in contact?
Gabe Petersen (22:40)
Yeah, the best way is just go to the podcast. It’s therealestateinvestingclub.com. Like I said, we have guests on from all different areas. We’ve had guys that flip farms. have multifamily guys, land guys, you name it, we have them on. ⁓ Yeah, that’s the best place to go, therealestateinvestingclub.com.
Dylan Silver (22:58)
Gabe, thank you so much for your time. Thanks for coming on today.
Gabe Petersen (23:01)
Thank you Dylan.
