Daniel Weisfield is co-founder of Three Pillars Communities and specializes in Mobile Home Parks. Daniel talks with Ryan about leaving his job working with Fortune 100 clients at a top firm to start his own company focused on acquiring and improving mobile home parks around the US.
Learn more at graceadapartners.com
Daniel Weisfield is co-founder of Three Pillars Communities and specializes in Mobile Home Parks. Daniel talks with Ryan about leaving his job working with Fortune 100 clients at a top firm to start his own company focused on acquiring and improving mobile home parks around the US.
Learn more at graceadapartners.com
Start Transcript
Daniel Weisfield:
My grandfather felt limited in Israel. So he came to America in the late 60s, and he came with a suitcase and $50 in his pocket, kind of classic story, and realized that in America you could buy wrecked cars at a junkyard. He'd buy them wrecked and he'd fix them in his backyard, and he'd sell them. That's how started making money. And my mom says, as a kid, her image of her dad is him being under a car and she's seeing his two feet sticking out. And eventually saved up enough to rent a garage. And then he bought a garage, and then around 1980, he bought a mobile home park.
Narrator:
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Ryan Swehla:
So today we're here with Daniel Weisfield with Three Pillars Communities, a mobile home park investor, but more importantly someone that I've gotten to know over time and who have a tremendous amount of respect for. I love your story, how you've gotten to where you are, and I just wanted to spend a little bit of time today talking about that.
Daniel Weisfield:
Yeah.
Ryan Swehla:
So let's start off by, I've heard a little bit about your family history, but I'd love if you could elaborate a little more on your family history.
Daniel Weisfield:
Yeah. So I come from a scrappy immigrant entrepreneurial family. My mother was born on a chicken farm in Israel. My grandfather was born on a chicken farm in Israel, were Holocaust survivors. And my grandfather felt limited in Israel, based on kind of social class. His family didn't have a lot of money. He was a farm kid and he felt like his opportunities were limited.
Daniel Weisfield:
So he come to America in the late 60s with his wife and his two little girls, my mom and my aunt. And he came with a suitcase and $50 in his pocket, kind of classic story and realized that in America you can buy wrecked cars at a junkyard, and nice new cars, only two years old, but it had some bumper damage. And he'd buy them wrecked, and he'd fix them in his backyard, and he'd sell them, and that's how he started making money. And my mom says as a kid, her image of her dad is him being under a car and she's seeing his two feet sticking out. And eventually saved up enough to rent a garage. And then he bought a garage, and then around 1980, he bought a mobile home park.
Ryan Swehla:
Wow.
Daniel Weisfield:
And so I'm in the mobile home park business. I grew up around it, helping my grandfather mow the lawn at the park, paint the fences, I mean, it was truly a mom and pop. My grandfather was a farm boy. That's how we did it. And I went off, I did other things in my career, which we can talk about. And I realized a few years ago, kind of the opportunity manufactured housing.
Ryan Swehla:
Yeah. What are some of your memories of your grandfather, particularly as it relates to business or work ethic or that sort of thing?
Daniel Weisfield:
I guess I should say memories, isn't just in the past, I'm very grateful he's still alive.
Ryan Swehla:
Oh, okay.
Daniel Weisfield:
He's going to turn 90 next year.
Ryan Swehla:
Wow.
Daniel Weisfield:
And so he's kind of a hero and a mentor for me. And I talk to him regularly, and he's still... As I was learning the business, he was kind of a business adviser. Now I [inaudible 00:03:07] business to give him joy. Right? It energizes him. It gives him a lot of energy. But I'd say the big lessons from him, number one, a bias to action.
Ryan Swehla:
Bias to action.
Daniel Weisfield:
A bias to action.
Ryan Swehla:
Yeah.
Daniel Weisfield:
A bias to action. He told me when they had to overhaul a tractor when he was growing up, they didn't have a NAPA Auto Parts, you could go buy the head gasket kit. He's like, "We'd pull it apart. There was no instruction manual. We figured out the gasket was busted. We'd take a piece of cardboard, we'd put it on top, we'd cut it to size. And then we put the head back on, and we'd screw it in. We'd figure it out." And that's his MO in life. You get your hands dirty, you figure it out. As a kid, he always taught me, like, "Oh, the blender broke? Let's pull it apart. Let's figure it out." And I think that's his mentality about fixing a blender. It's also his mentality about business. Yeah, let's buy a mobile home park. We don't know exactly how it's going to run. We haven't done it yet. We're fairly competent people, we trust ourselves. We'll figure it out. I think that's a big one.
Daniel Weisfield:
Second big lesson from my grandfather was, I can just picture his voice in my head, "Daniel, don't pay rent. It is money down the toilet. You need to buy real estate." This is the biggest lesson from my grandfather is, God bless America. You can come here, and it's crazy. It's so good. A bank will lend you money to buy an appreciating asset that cash flows. And then the government gives you a mortgage interest deduction. The whole thing is rigged in favor of people who can save up enough capital to buy real estate. And so it was really hammered into me, you don't want to rent, you want to save that money, you want to buy.
Daniel Weisfield:
And so when I was married young, I was married at 23. My wife was my life partner. And she also comes from a Holocaust survivor family, immigrants who came to America with a similar mentality. And we pooled our life savings when we were 24 and we bought a little duplex. And we painted it ourselves, did the dry wall, GC'd this renovation, actually turned it into a triplex, got another unit added, lived in it, rented it out. That was our first deal. We learned how to be real estate entrepreneurs because of these family values.
Ryan Swehla:
That's amazing.
Daniel Weisfield:
Yeah.
Ryan Swehla:
Well, it's interesting. You mentioned the word, "scrappy." Scrappy background, yet I look at your resume and you're Yale undergrad, Magna cum laude, Yale Law, Yale MBA. You worked for this small company called McKinsey and Company. You look at that, and it's like, okay, we know this person's trajectory. We know where they're going. They're starting out in the consulting world. And then they're working their way up to partner and living this, from an entrepreneur's perspective, living this very predestined path. What changed? What took you off of that path, and why? Kind of getting into that psychology maybe a little bit.
Daniel Weisfield:
When I was doing all those things, I sometimes felt like I had a double life. Superficially, yeah, I'm Yale Law, Yale MBA, working in the fancy corporate world. But inside, who I am, I come from, like I said, this scrappy entrepreneurial family, where I was out there mowing the lawn with my grandfather and trying to help him fix cars. And at some point, when I was kind of in that consultant grind, I learned a lot at McKinsey. I'm grateful for it. I served Fortune 100 clients, I was in boardrooms. That was great. But at a certain point, you're on that treadmill and you're figuring out what I want from my life. Who do I want to be when I grow up.
Daniel Weisfield:
And I just thought, do I want to continue on this kind of quote unquote golden path, and try and become a partner at a consulting firm, and keep working 68 hours a week and earning a W2 salary? Or do I want to be like my grandfather? Who didn't have the benefits of an education, didn't speak English the way I speak English, but worked really hard and built real wealth for himself and his family while also providing great housing to his tenants. And he can go to sleep every night thinking, "I do something positive in the world for my tenants, and I own it myself and I don't have a boss."
Daniel Weisfield:
And it took a lot of courage. I'd been on this very conventional path, and I checked all those boxes of having a fancy resume. And it's easy and comfortable to keep doing the right thing. But I had to really look in the mirror and think, who do I want to be? And I want to be more like my grandfather.
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Ryan Swehla:
Obviously part of the reason people go that route is because it's a lucrative path that McKinsey and Company, or whatever partner, just even from a mechanical standpoint or whatever, pragmatic. How did you make that shift from, "I'm getting a nice compensation," to, "I got to put bread on the table?"
Daniel Weisfield:
So I've got a business partner. He's my wife's brother. And both of us decided to take this plunge. And it was pretty lean. We didn't pay ourselves a salary, and we didn't raise outside money. We were bootstrapping it. So we were both fortunate to kind of live off of our wives' salaries for a while. Our wives were the ones who were kind of putting bread on the table, living off savings. And then we were fortunate. Success is part hard work and part luck. And so we had a lot of good luck, or divine providence, whatever you want to call it. And in my case, my family had been doing mobile home parks. We were able to take over management of their portfolio and professionalize it. And so we started getting some management fee income coming in the door at a certain point.
Ryan Swehla:
Yeah. And then what caused the pivot to investing? Today, by the way, for people listening in, you syndicate investors into these mobile home park communities. How did that transition occur?
Daniel Weisfield:
So that was the goal. I left my cushy job, and I wanted to be an entrepreneur. I wanted to go buy real estate, improve it, operate it, create great communities for our residents and build longterm wealth for my investors and myself. So we picked a niche asset class, mobile home parks. I won't give the whole spiel, but there's a lot of reasons why it's a really good asset class. Basically, people always need a place to live, and it's really cheap. So even in a recession, they stay full and they perform. That's the basic story. It's a really good asset class. And we had a running start, because I grew up around this stuff.
Daniel Weisfield:
So we picked this niche and started looking for deals. And we said, we got to be scrappy, we got to be nimble, we're going to be lean. The first deal we did was a tiny, ugly, $100,000 mobile home park. And we bought it at a tax auction, and we got into contract and then we're like, "Oh shoot." Or actually, we didn't say, "Oh shoot," we said something else. We said, "Oh, shoot, we got to find $100,000 to buy a mobile home park. Where are we going to get $100,000?" Now I'd call an investor and have it in 10 seconds. But at the time it was like, all right, I'm going to call my 10 best friends who I grew up with, and my cousin and my family member, and everyone is going to put in 10 grand. And say, "Hey, do you want to take a bet on us? Do you have $10,000 sitting in your checking account? You want to invest somewhere and take a risk with us?"
Daniel Weisfield:
And we bought it, and the deal's performing great. And our residents are thrilled that we've improved the place. From there, we went to a million dollar deal. From there, we went to a $10 million deal. So it was just kind of getting the ball rolling.
Ryan Swehla:
That's great. I've heard you say, in giving advice, "Go do a deal." Can you elaborate a little bit on that?
Daniel Weisfield:
I believe in that firmly, that the best education, you got to go do a deal. I talk to a lot of people who come to me seeking advice. They're like, "Oh, you've got this company, you've got momentum. How can I be a real estate investor? I'm spending so much time online, looking at biggerpockets.com, or going to the seminars, whatever it is. And I'm like, "Dude, you want to learn how to be a real estate entrepreneur. You've got to go do a deal." And it is about the psychology of taking a risk and being an entrepreneur. It doesn't matter the deal size. It doesn't matter the product type. If you want to be a multifamily developer, or building a hundred million dollar apartment buildings, great.
Daniel Weisfield:
But go start by buying a crappy single family house for a 100K or 200K or whatever it is, renovating it, getting it rented out, seeing what it feels like to be a landlord. If you like it, if you like taking those risks, making those decisions and then reaping the reward, great. Then you'll do a bigger deal. If you don't like it, fine. Maybe it's not for you. That's totally fine also. But I think you're not going to know that until you do a deal. So the faster you can do a deal, I think the better.
Ryan Swehla:
So you mentioned on your first deals, calling up friends, family, asking for small checks, take a bet on you. I'm guessing that's not how it works today. Can you describe a little bit about how you've raised capital over time, and what your investors look like today?
Daniel Weisfield:
Yeah. It's actually not so different today. Our DNA has been, I'd say it's a scrappy capital model, which matches our scrappy operating approach, if that makes sense. We don't have institutional backers. We don't have kind of family offices with deep pockets who we can call up. We started out with our friends and family, it's kind of grown from there organically into a broader circle of small investors. So now I have a big list of them, and it's easy for me to raise money because I have the track record. But our typical check size is still 50K, 100K. For us, a quote unquote big check is $300,000, which in the world of real estate is small. But we really like this model. We're providing great investment opportunities to people we care about.
Daniel Weisfield:
And as word has grown, now it's was not just our friends and family. It's friends of friends, family of family. And we got a pretty big pool now, with these individual investors who are seeking good opportunities, and they trust us. We've got a lot of trust with our investors, and that's something I find gratifying. It's really important to me. And it's nice to not have a pension fund call me with their foot on my neck asking me for what's the quarterly results. I think my investors know that we're invested in the deal. I have my parents and my sister's money in the deal, they know we're incentivized to get the best possible returns, and they trust [crosstalk 00:13:57].
Ryan Swehla:
They know where you live.
Daniel Weisfield:
Yeah. Pretty much.
Ryan Swehla:
Yeah. No, that makes sense. And why do you think people invest with you?
Daniel Weisfield:
I think two things. Number one, there's that trust. I've had investors tell me, and these are sophisticated investors. One of my investors is a very successful multifamily developer in Miami. And he's told me, "I don't know how to underwrite a mobile home park deal, Daniel. When you send me a deal, I'm not trying to go through it and look at what's the net operating income and what's the occupancy." He's like, "That's your business. I trust you. I trust you to make the decisions." And I think a lot of our investors, when you establish a reputation through your actions as someone who's trustworthy and who does the right thing and has integrity, people are willing to entrust you with their capital. So I think there's that stewardship, I think is a big thing. People trust us to be stewards of capital.
Daniel Weisfield:
The second thing is the product type. And it just makes a ton of sense. Like I said, people need a place to live, and they're not building a whole lot more mobile home parks. And so if people are looking for a recession proof place to put their money, mobile home parks performed great in '08, '09. Right now during COVID, we've seen minimal disruption in the business. We're at like 99% rent collections. There's lots of cheap debt available in our product type. So the asset class makes a lot of sense for getting steady income and building longterm wealth.
Ryan Swehla:
How do you see the market playing out? Maybe speak a little bit about the broader real estate market, and then specifically mobile homes, given that we've confronted a year that we never could have anticipated.
Daniel Weisfield:
Yeah. So I thought in 2020, we'd be cruising along doing what we've been doing. It's actually thrown us many curve balls, but it's interesting. I'd say our economy is being disrupted. You've got bankruptcies you never expected to see within the real estate sector. You see retail hospitality getting hit really hard. And within our space, investor demand is just going up. Valuations are going up. In the past six months, I've seen a marked increase in valuations for mobile home parks. Because when you're looking at the global economy and you're figuring out where do you want to put capital, housing is really stable. Mobile home parks are really stable. I think a lot of new investors are coming into the space, and demand is going up.
Daniel Weisfield:
So for us as owners, that's great. We love when our valuations go up. Of course as buyers, that's tough. Right? You know that very well.
Ryan Swehla:
Absolutely.
Daniel Weisfield:
So like I said, we pride ourselves on being scrappy and being flexible, and being able to pivot. And so we're doing two things. On the one hand, we are starting to look for some of those institutional capital relationships that we have not had historically. Like life insurance companies who, maybe they're willing to pay more for assets and get a lower return, just to be a super steady longterm yield. So we're looking for that capital, but at the same time, we're looking at new markets. We're looking at lots of those scrappy sub-institutional deals that fly under the radar. And we're also considering kind of how can we rethink the existing portfolio? We've got a lot of mobile home parks with tired, old manufactured homes that came in in the 1970s. How can we accelerate replacing those homes, upgrading the park, and making more money on home sales? Kind of rethinking the core business.
Ryan Swehla:
Yeah. Fascinating. Earlier you mentioned that no new mobile home parks are being developed, or something along those lines. Why is that?
Daniel Weisfield:
So historically, these are trailer parks. They're taboo, right? The last thing you want in your neighborhood is a trailer park, right? It's about as bad as a refinery or a garbage dump. That was the perception.
Ryan Swehla:
Yeah, that's true.
Daniel Weisfield:
And 20 years ago, my grandfather went to a cocktail party and told people in polite company that he was a trailer park guy, they look at him like he smelled. And actually, he might have smelled. Like gasoline, or [crosstalk 00:18:06] But that's another story.
Daniel Weisfield:
Now I see perceptions are changing. We don't call them trailer parks anymore. These are manufactured housing communities, and they provide affordable home ownership to families. And they're built to a standard that's better than a lot of tract homes. And so I think there is a lot of need in the market to develop this type of affordable housing product. But we're overcoming a lot of headwinds from communities, kind of the classic NIMBY, not in my backyard neighbor who doesn't want new development and they don't want what they perceive as a trailer park. So that's what's made it tough historically, but you are seeing new manufactured housing communities getting built. In Florida, in Texas, some of the markets that are more development friendly.
Ryan Swehla:
Got it.
Daniel Weisfield:
And we would love to do it in our core markets on the West coast, California, Oregon, Washington, Idaho, Arizona. Those are the states where we play, where we're strong. And we're exploring opportunities to develop new parks.
Ryan Swehla:
Interesting. Throughout your investing career, I'd be curious to know of a deal that you passed on, and looking back, you feel like you weren't sure if you made the right decision or not.
Daniel Weisfield:
Hmm. I mean, I can think of deals that I've bought that I regret.
Ryan Swehla:
Okay, how about that?
Daniel Weisfield:
That's an easier one than I can think of deals that I'd passed on that I wish I'd bought. So those are both easier for me. What direction do you want to go in?
Ryan Swehla:
I'm just kind of thinking more learning experiences along the way. Things that have helped make you a sharper investor as you go through. If you can think of a name of a particular property that it's got, "Lesson," all over it.
Daniel Weisfield:
Oh my God. Yeah. Okay. So it's easy to talk about the wins, right? I can tell you my win story, and it's Renton Highland Manor in the Seattle market, I love it for all the following reasons. Our worst deal, is Puyallup River RV Park. It's outside Seattle. We paid $1.8 million. It's a 40 unit RV park. We loved it because of the market. And generally speaking, market is the most important factor. It's real estate, location, location, location. And I see a lot of people in my industry getting confused about that, where they think, we're mobile home park people, so we would only to buy mobile home parks. And they're willing to buy in the most out there markets with negative population growth, because they fall in love with the story around mobile home park investing. Actually, in order to have a good investment, you need at a minimum a steady population, and hopefully population growth. You need jobs, you need a reason for the place to exist.
Daniel Weisfield:
So for all those reasons, we love the Seattle market. Lots of job growth, it's got water, we don't worry about longterm drought risk. So we love Seattle. We bought a bunch of stuff there. We saw this RV park. The price was right. We liked it because of the market. We bought it. We didn't realize we were buying a drug den with drug dealers, hookers, very close relationships with people in the park and the homeless people who lived in the encampment next door. There was septic tank issues. There was issues on the well. It's like every thing that could go wrong has gone wrong at Puyallup River RV Park. And we did our due diligence. We talked to law enforcement, we did our physical property inspection. We did that stuff. And I'm like, you can look at it two ways. Either we just didn't dig deep enough, we had a lot of deals going on, we're doing three deals at once. That's another lesson, when you're doing three deals at once, or four deals at once, unless you're staffed appropriately, sometimes you miss stuff. So we missed stuff.
Daniel Weisfield:
And we've spent way more money than we thought we would to turn the place around. We had to evict half the tenants, so guess what? We didn't meet our revenue targets. We had to rebuild the septic system, so guess what? Cost is way beyond our projections. And we haven't delivered a distribution to any of our investors since we bought it a year and a half ago.
Daniel Weisfield:
And I guess I'm fine talking about it. I don't feel embarrassed. Because if you're a professional investor, you do a lot of deals. You're going to have wins, you're going to have losses. That's a reality. And it's good to own your losses and learn from him. I certainly learned about doing more rigorous due diligence. But the other thing here is having, the saving grace here is I've had a great team, operationally we're turning the place around. We did buy in a great market, because that is the most important criteria for us. So once we do our turnaround, we've got lots of tenant demand. And I am blessed with great investors who trust us, and they say, "Okay, you haven't paid a distribution for a year and a half. All right. We know we're in this long term. We know why, you've explained it, you've communicated it. We believe in the deal longterm. We believe in you as an operator. We can wait." And longterm, this is still going to be a home run. We bought it right.
Ryan Swehla:
Yeah. That makes a lot of sense. Well, first of all, I thank you for spending the time today.
Daniel Weisfield:
Thank you.
Ryan Swehla:
And maybe leave us with a little bit of a jewel of wisdom. I'm going to throw out a curve ball, which is, given all the unrest in the market and all the volatility, Do you have any sort of a thought or opinion that you think might be unconventional? That might go against just kind of this river of what everybody else is saying is going to happen? Whether it be in a sub market, a particular real estate, economics, whatever. What's something that you're reflecting on that might be a little different than what other people are thinking?
Daniel Weisfield:
My advice is, align your money with your values. Align your money with your values. And that's regardless of market cycle, regardless of the industry you're in, align your money with your values. We live once as far as we know. As far as we know, we're on this planet at one time.
Ryan Swehla:
At least as a human.
Daniel Weisfield:
At least as a human. And we are economic beings, and we're also family members, and we're spiritual beings. And there's a lot to us beyond just making money. And when you align your money with your values, you sleep well at night, and you can still build a serious longterm wealth. So I'm looking at what I do. I love it. I'm creating great communities for people. I'm buying neglected mobile home parks, turning them around and creating great neighborhoods where people are proud to raise their kids. I feel really good about that. And in my asset class, we're not usually hitting, doubles and triples. We're not getting 20% IRRs, 50% IRRs in our deals. Our typical returns, we're getting 6, 7% cash on cash, IRR's in particularly that kind of 10% to 14% range, it's a great stable return, especially if it performs across decades. And I feel really good about it.
Daniel Weisfield:
So I'd say align your money with your values, whether you're a professional entrepreneur and an investor, or maybe you got a W2 job and you figuring out what do you want to do with all that money in your checking account. You're putting it in maybe the stock market, maybe some of it in real estate investments as a passive investor. Figure out what you believe in and put your money there, and things should go right for you.
Ryan Swehla:
That was great. I really appreciate your time today.
Daniel Weisfield:
Thanks. Appreciate it. Thank you.
Narrator:
Thank you for listening to Durable Value, an investors podcast where we demystify commercial real estate with safe, sound, investment strategies to help you balance your portfolio. If you enjoyed this podcast, be sure to rate it on iTunes, or wherever you get your podcasts. To learn more, visit graceadapartners.com, where you'll find more information, investors tools, case studies, and more. This podcast is hosted by Joe Maratore and Ryan Swehla. It's produced, edited and mixed by Melodic, with intro music by Ian Post. Thanks again for listening, and we'll see you next time.