Mario Dattilo is the owner of Celebrate Communities, which raises capital to invest in mobile home parks that his management company runs. He also hosts the Mario Dattilo Show podcast. In this episode, Mario discusses his decision to build peripheral businesses to scale his portfolio, when he recommends bringing community operations in-house, and why he thinks there’s safety in scaling for mobile home park investors.
Mario Dattilo | Real Estate Background
- Owner of Celebrate Communities, which raises capital to invest in mobile home parks that his management company runs.
- Host of the Mario Dattilo Show podcast.
- Portfolio:
- $50M in AUM
- 1,000+ lots
- Based in: Naples, FL
- Say hi to him at:
- Greatest Lesson: I could’ve partnered with others and scaled my portfolio so much faster than building it all myself.
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TRANSCRIPT
Slocomb Reed: Best Ever listeners, welcome to the best real estate investing advice ever show. I'm Slocomb Reed, and I'm here with Mario Dattilo. Mario is based in Naples, Florida. He's the owner of Celebrate Communities, that raises capital to invest in mobile home parks. And then he has a company that also manages them. He also has his own podcast, The Mario Dattilo Show. The current holdings in Celebrate Communities is $50 million in assets under management in mobile home parks; that's just over 1000 lots. Mario, can you tell us a little bit more about your background and what you're currently focused on?
Mario Dattilo: Hey, Slocomb. Thanks for having me on, I appreciate it. Basically, what we do is we buy mobile home parks, we turn them around, and we operate them for an extended period of time, and we've got a group of investors that we look out for and earn attractive returns for. So our business is pretty simple, but it's very complicated... Just like any other commercial real estate. So in simple terms, that's what we do, and I've got some other businesses that are supporting around that mobile home park industry as well.
Slocomb Reed: Mario about your business plan - the majority of our best ever listeners are involved in some degree with apartment investing or apartment syndication, so they're very familiar with a value-add business plan. So just a couple of things, and then I want to ask you about your other businesses. Are you purchasing with a targeted defined hold period and a targeted return? Or are you adding value, forcing appreciation and then holding indefinitely?
Mario Dattilo: Great question. So our business model has been primarily to buy underperforming assets, and we hold them for an indefinite period of time. Our capital partners are pretty patient, and their mindset is they want cashflow, with obviously appreciation, and forced appreciation in the mix as well. But we are not a three, five-year, seven-year buy, turnaround and sell type model. We are 10+ year holds on everything that we buy, for the most part.
Slocomb Reed: I know you said - or at least I said - that you own a management company for mobile home parks, and you said you have some other peripheral businesses around mobile home parks. Tell us more about those.
Mario Dattilo: Yeah, Celebrate Communities is actually the management company that operates the communities. We've got a few holding companies, Real Estate Acquisitions USA, Equity Growth, and a couple others that actually own the real estate... But Celebrate Communities is the management company, and we use third party management as well. We also own a title company for mobile homes, it's called Celebrate Title. And we also have Celebrate Homes, which is a dealership that infills vacant lots and communities, does the home sales, and then also does brokering of homes for residents within our communities as well. And I've got an education company called Real Cashflow that is focused around teaching people how to acquire and invest in mobile home parks as well.
So we've got this ecosystem going where regardless of what someone's involvement is, or they want it to be in the industry, we can help service them and take care of them. And it really is nice, because not only are we doing these things for our businesses, but we can use it as a way to build relationships with other community owners too, and it's kind of evolved over time.
Slocomb Reed: So with your title company and your development and brokering company, if I'm describing it accurately - are those primarily to service your own portfolio and your own transactional needs? Or do those companies spend more of their efforts working for other mobile home park owners?
Mario Dattilo: So we started all these companies really to support our business. And the reason is because mobile home parks in the industry in general is still pretty old school, I guess you could say; it's not very efficient, there's not good property management, there's not good mobile home title companies... And I'm not ripping on anybody; everybody knows it. It's in the consolidation phase right now, so you don't have a lot of really good support companies. So each one of these businesses was formed really to support our portfolio, and just recently, we started offering it to outside clients. But I would say the majority of the business is still supporting our portfolio. And I think in 2023, will see that shift; we've started doing some different marketing and hired someone to handle relationships for outside clients a little bit better, so that we can drive it to the public more as well.
Slocomb Reed: Tell us more about the relationship with deciding to build these peripheral businesses and scaling your own portfolio. Did you come to a time or a portfolio size where you realized that having a little more control, having the ability to bring in-house these other activities related to your assets? Was there a particular portfolio size where you just realized, "Okay, now it's the time; we should be developing our own empty lots"? Or did it come about for some other reason?
Mario Dattilo: Really good question, and I think anyone that is getting into the manufactured housing industry, mobile home park industry will hit this same situation, they're gonna hit that benchmark, where you're like "Okay, I think we're at the point where we either need to take control of this, or we've got to find a really good vendor that can handle it." And I would say it was about when we hit about five communities, we recognized that the management company that was managing our property was just not going to be able to manage it the same way we did. So that's when we formed our own management company; I hired a great person who had been a clo for a very large apartment group, and helped me to put that in place. And the dealership was a mechanism of a couple of things. It had to do with regulations, because depending on how many homes you're selling per year, you need to be a licensed dealer. So for us, we had to do it from a regulatory standpoint, but also bringing people in who are experts in renovating mobile homes, and selling and doing things like that just gave us the efficiencies that we need. And we're constantly improving that, but it was purely out of necessity. The title company is relatively new, and that's because we've tried both local and national title companies.
And anyone who's in the mobile home park industry knows that titles are a nightmare. They're just a mess. Think about car titles and dealing with the DMV. Well, put that on steroids; every county of every state has different processes, and every state has different licenses. So it really made sense just to bring somebody in-house. And they are treated as separate businesses; they bill each other... It's run as separate companies, but it was really the focus of just trying to get better at what we're doing for our own portfolio, and then in the not so far off history, we decided, "Well, there's a lot of other people who could really use this." And it also helps to attract better staff, if you are a more profitable company, and just pulling back the curtain, and giving your listeners the inside scoop on this. When you are your own client, it's hard to charge yourself market rates. You find yourself discounting things, you find yourself not trying to make a profit as much, because you're just trying to get efficiencies out of things get work done. But when you start offering it to the public, you can then offer market rates, which then allows your companies to become more profitable, and in return attract better talent to work in those companies. And that's why we are making them outward-facing, versus just inward-facing companies.
Slocomb Reed: I have a small, detail-ish question, and then I want to get into a bigger picture conversation, Mario.
Mario Dattilo: Sure.
Slocomb Reed: Your title company, with every state and sometimes localities operating very differently in that regard, it makes me curious - how many states is your title company operating in?
Mario Dattilo: Well, we're working in the five states that we currently own communities in, and I think as we grow that, we'll take on more states. But because we already have had to go through the process of learning each DMV and each state, it's easier. It's not like a real estate title company. It's purely a paper pushing comp. Literally, we're requesting documents from the DMV, we get those documents, we provide all the supporting documents, fill out the forms, provide checks, give them instructions, sometimes we've got to run newspaper ads... But it's really a paper processing company more than what you would think of as a real estate title company. But some of the states get really, really goofy. So we've tried to work with in the states that we know and are already doing business with, and over time, if we get a big client that's got a good amount of volume, then we'll enter that new state. But we haven't done that yet.
Slocomb Reed: Which states are those?
Mario Dattilo: We're in Florida, Georgia, Minnesota, Pennsylvania, and Texas right now. So we're pretty spread out, actually.
Slocomb Reed: That is pretty spread out. Mario, a few minutes ago you mentioned that when you're scaling a mobile home park portfolio, you get to a point where it makes sense to start these peripheral businesses, because you realize that - I'm going to add some of my own words here - you realize that you could do a better job than the third party vendors, contractor service providers you're working with. Naturally, it's your portfolio, and you care more. But also, you start to realize that you have the scale to get people working directly for you, full-time, accountable to you. And that, like you said, brings a lot of efficiencies.
The only place where I might disagree with you here is that I think this applies to scaling any type of real estate portfolio and not just mobile home parks.
Mario Dattilo: Sure.
Slocomb Reed: I say that... I am an apartment owner-operator in Cincinnati, Ohio. In 2020, I started a property management company, and at the very end of 2021, I started a renovations company. And then in the second half of 2022, I started an HVAC company, for very similar reasons to what you are referencing here. As my portfolio grew, the first thing I needed was full-time employees. The other thing that was happening for me - and I'll get off my soapbox in a moment and let you do more of the talking, and I'll do more of the asking... But my portfolio was getting to a point in 2020 into 2021 where two things were happening. One was that I had enough units to manage and I needed to have employees. Another was that I had partnerships that because of the way that they had evolved over time, those partnerships were hiring me to manage our properties, and I needed to find a way to formalize that.
I now offer third party property management services for a lot of the reasons that you're discussing - charging market rate, sure, but also because the larger the portfolio that I manage, the larger the company that I can build out, the greater efficiencies that I create for myself.
I'll tell you, we're recording at the very beginning of January 2023, and just before Christmas, on the night between the 23rd and the 24th, you probably are familiar with the crazy winter storm that we had in Cincinnati. It got to 15 below zero, and that's Fahrenheit; that's negative 26 Celsius, for anyone internationally who's listening in... And I managed properties where tenants have their basement garages open and the pipes exploded. And I had some loss of heat issues that I had to deal with, I had some other indoor rain type leaks that resulted from frozen pipes... And I had a company with staff and 1099 contractors who work for me full-time, who could go address all those issues the moment that came up.
Because of the size of the company that I had built, and especially because I started taking on third party management clients, I was in a better position to respond to emergency situations that arose, because I had built that company the way that you're building a management company and a dealership; I hope your dealership doesn't deal with too many emergency situations. But I'm sure your management company does every once in a while.
I'm coming from a very similar position here, where through the building of my portfolio, I'm creating and building out peripheral companies. I want to come back to a question and hone in on it, specific to mobile home parks. And then I kind of want to answer this for apartments, for our listeners, particularly our active investor listeners...
Mario Dattilo: Sure.
Slocomb Reed: In the mobile home park space when is it that you really need to start bringing more of the operations of your communities in-house?
Mario Dattilo: So there's a unique aspect to our industry, and I kind of touched on it before... But because most of the owners that own these communities nationally are mom and pops, meaning a lot of them have developed these communities with their bare hands over long, extended periods of time, some of them still live in the community, and they're not running these properties efficiently, there really isn't a lot of supporting companies for our industry. For example, there's probably four to five sizeable management companies in the country that manage mobile home parks. In apartments, you can pretty much go buy an apartment, find a management company to manage in almost any market, and you're good to go. And that's what's beautiful about apartments, is it is a very efficient, very professional industry and market. That isn't the case yet in the mobile home park world. So really, anyone who gets into the world of mobile home parks needs to plan on starting a management company from day one, and building it out that way. And the reason that I did not is because I was in a unique situation. I had someone that was a regional manager for one of the top five owners in the country, and I had been talking to him and his office was out of a pretty good sized community down the street, and he said "I could manage that 57-space community for you on the weekends and evenings. That's nothing." So he pretty much started his own management company on the evenings and weekends to help me on my first, and then as we grew, he left that company and went full time with me. And he basically built his management company alongside of us, and then at some point, I just said, "Look, we need to do this on our own." But most people are not going to have that luxury of just looking up a management company to operate the mobile home communities.
The title company - some people will probably always contract that out, just because it's not a super-profitable business. It's paper pushing, and it's very complicated. The others, the dealership, most owners of communities are going to start a dealership, simply because they have to. And whether they run it properly, and run it as a business, or they just have a license hanging on the wall to do what they're doing and they do and kind of more mom and pop style, they're going to have to get a dealer's license if they're doing any sort of scale in any market.
So it's very different than apartments, and I'm excited to hear what you say in comparison to apartments, because most people getting into the mobile home park space are coming from the apartments or self storage world because they're seeking yield. So they're thinking that they can get into our industry and do it the same way that they do in apartments in the storage world. And then once they realize they can't, they get burned out very quickly and say, "Whoa, I thought this was going to be easier. I thought I could just get a management company to run this for me", and they can't. So it's something that I think all investors looking to get in in active capacity should know about our industry.
Let me say one other thing about that - because the industry is so dated, and there isn't a lot of efficiencies or professionalism yet, there's a lot of opportunity. And that's where we're able to get really attractive returns and buy great deals with lots of upside and value-add opportunities, because there aren't the efficiencies, there's not the data like you have in a lot of these other industries. So it is a challenge, but it's also the opportunity in our industry, and as our industry consolidates, that will become less and less the case.
Slocomb Reed: Mario, that makes a lot of sense.
Break: [00:18:14.09]
Slocomb Reed: This is a part of my answer to the same question, specific to the management company... But one place where I want to push back is that you started with a 57-lot community, and a guy who had experience who told you it was an evenings and weekends gig. One of the things that you said is that most people who get into mobile home parks on their first deal aren't going to find someone like that. But my gut tells me is that 57 units is too small to "start your own company", because you don't have the scale required to bring on staff who are handling day to day operations for you the way that the efficiencies of a management company can as you grow. So what is the best metric and the best number within that metric for knowing when it is time to have your own staff managing your mobile home portfolio? Is it lot count? Is it monthly gross rents? What is the metric, and then what is the number within that metric?
Mario Dattilo: So responding to what you're saying, the problem is is you're 100% right, you can't go and hire people, in the sense of you can't just go hire a bunch of employees to create a management company to operate without you. But when you buy your first community, maybe it's a 30-space, 50-space, 100-space, whatever, you are going to act as the regional, and you're going to have onsite community managers that are reporting to you. The point at which you should hire that first regional manager or leadership position is as soon as you can afford the salary to pay that person, and it's going to vary from a lot count standpoint, because rents are different in every market, and obviously, that's going to vary. But as soon as you can hire that person, you need to do it. And one tip here - you should be charging a management fee. Even if your partners or it's even yourself just owning it, you should be charging a management fee day one, and then using that revenue to pay for the operations of the management company. And once that hits the number of that you can make that first hire -- and realistically, you might find a part time person with some property management experience to come in and help you with that earlier than you can hire that full-time experience regional manager from one of the big companies that can come in and teach you how to do it; you can at least get someone to help, or you can also look at getting an assistant. So while you might still be that leader, the regional manager, let's say, that the community managers are reporting to, you could still get an assistant to take some of your workload off of you, so you can focus on also going out and acquiring more communities.
And I'm not giving you an exact metric, because it's gonna vary market to market. My communities in Florida range from $450 to $600 in lot, rent where my community in Pennsylvania generates $300 to $350. So it's hard to say it on the size, but it's going to be more revenue-based, and when you can afford it. And I would recommend hiring as soon as you possibly can, because it'll free you up to work on your business, not in it every day.
Slocomb Reed: I'm not going to end up giving you a specific metric either for very similar reasons. One thing I'll point out though about the differences between mobile home parks and apartments or residential multifamily, and frankly single family, is that I don't know what the equivalent in mobile home parks is of a duplex. I don't know anyone who's buying two-unit properties in mobile home parks. So a lot of apartment investors and residential investors, if I can say it that way, end up starting there, starting with a single family, accidental landlords... So there's a much smaller scale that people start with from a single families, residential multifamily, and apartments.
Putting my words to a sentiment you've already shared, Mario, I would say that it's important to scale your way into a management company. This should be its own episode of the Best Ever podcast, but there are ways to scale yourself into having a full-on, full-service property management company that doesn't require you in its day to day operations, and that it is important to figure out the best first ways to start that as quickly as possible, because there are a lot of remedial tasks that do not require any expertise, but they do require time, and they do require energy and focus, and those tasks should be delegated to someone else as quickly as possible if your focus is building a portfolio or doing things that are much more dollar productive with your time.
So we resonate there... I usually tell people within residential investing not to hire someone else until there will be on 10 units. The first 10 units you ought to be doing by yourself anyway, so you have a feel for it. The only other piece of advice I have in this format is that I start by hiring anything that can be done remotely first. I want to make sure that I'm the one who is the boots on the ground at the beginning, that I'm the one who's visiting the properties, I'm the one who's going to notice things, I'm the one who needs to be posting the notices if there are any notices to be posted... But anything that can be done remotely can be done by someone whose time is much more affordable than mine.
Mario Dattilo: VAs are great for that.
Slocomb Reed: Yeah, absolutely. Do you work with any virtual assistants?
Mario Dattilo: We have VAs for some project type work, but all of our staff is salaried employees. We do a little bit of contract work, but for the most part, it's all salaried employees. The other thing I wanted to mention about that too - and I would almost encourage - it's gonna sound backwards - new investors to not go too small. And I don't want to give you the wrong idea that you should take too much risk, but there is safety in scale. So buying at -- and I'm kind of going off of your to space community comment, and you're exactly right, nobody should buy a two-space or five-space mobile home park. I truly believe that. Because one surprise expense will wipe out returns. There's a reason that smaller parks struggle, and it's because the payroll of the onsite manager is going to be somewhat close to what a little bit larger communities is going to be. That one plumbing break is going to have a lot more impact on it.
So I would look at going as large as you can, and that will also help you get into the scale where you can afford the employees sooner. This is going to shock people, but I've never collected rent from a tenant in my life. Ever. Personally. I've never collected rent from a tenant, ever. So that's very backwards from what a lot of people do, because like you said, it's good to be in that seat where you are managing things yourself, because it's a great learning opportunity.
In the situation that I was in, I was able to do it and avoid that whole process by finding someone day one that was very good at it, and from then on, I've always had people with experience come in and run that company, where they were trained by large institutional investors.
So I would highly recommend going as large as you can, and get to the scale where you can afford people to help you, because ultimately, every day that you're in the daily grind, you aren't paying attention to the big-picture strategy, you're not paying attention to a lot of the things that make great asset managers great. You can't do that when you're collecting rent and posting notices and doing things like that, because it takes a long time.
So that's my recommendation, is scale as fast as you can, responsibly, into good assets that are cash-flowing strong. I want to add that to the end there.
Slocomb Reed: Absolutely. Mario, are you ready for the Best Ever lightning round?
Mario Dattilo: Bring it!
Slocomb Reed: What is the best ever book you've recently read?
Mario Dattilo: I would say -- it's not recent, but Traction is a book that I would recommend everyone reads if they're investing in real estate, especially commercial real estate, or building businesses. It is the foundation of our company, the EOS system, and it's completely changed how we run our companies.
Slocomb Reed: What is your best ever way to give back?
Mario Dattilo: Twofold. Faith-based organizations are big for me, and secondly, giving back to the industry through education. And that could be through formal education like an education company, or it could just be through speaking engagements, talking at conferences, or even just helping one on one with someone who's new in the industry. I think there's a lot of noise out there, and being able to be honest and give good accurate information that will help other investors get off their feet faster and avoid a lot of the mistakes is very rewarding as well.
Slocomb Reed: Thus far in your mobile home park investing, Mario, what is the biggest mistake you've made, and the best ever lesson that resulted from it?
Mario Dattilo: Great question. These are the important questions, not "How do you have success, and how do you fail?" Because that's what people learn. So I love this question.
Slocomb Reed: Totally.
Mario Dattilo: I've got two. Number one, hiring. When you hire people, hire people who have done what you need them to do, not who've overseen somebody else who's done it, or been next to the person who's done it. I've made that mistake several times by not interviewing properly and asking the right questions. But also, I didn't take personality assessments very seriously early on. And personality is very, very important in a position. You may have done a job before, but you very well could have sucked at it and worked there for a good amount of time. So your resume looks really good, but if your personality doesn't fit your work and your responsibilities, you won't be very successful at it. So we use personality assessments now to better determine if someone is going to last in that role, and if that personality aligns with their responsibilities.
And then my second mistake - and this is more real estate-specific - would be believe what you learn in your due diligence. I bought a community - thankfully, it's been profitable, and it will continue to be profitable, but it's been a major problem property for us, because we bought a community in a market that the demographics just weren't very good. I saw it, I probably just didn't take it too seriously, because I was focusing on growing, it was early on, and it was a nice-looking park, in a what looked to be a good location, but after I understood the demographics, I should have stopped and went, "Whoa, whoa, whoa, this is more of a rental market and not an owner-mentality market", which in our industry, our residents own their homes, and they pay us lot rent. So they're really homeowners. And when you get into a market that has mostly a renter mentality, there's a lot of turnover.
So that community has had nonstop turnover since we bought it, and it's time-intense, it's capital-intense, and it burns out your staff, it burns out your team members, because they're having to put a lot more focus on something than they should have to.
So just be really thorough in your due diligence, and believe what you learn in your due diligence, and don't let your ambitions make you overlook it or not take those things seriously.
Slocomb Reed: That's an excellent example. Thank you. Mario, what is your best ever advice?
Mario Dattilo: Shoot, wasn't that it? No, I'm kidding... There's two things. I would say for someone who's getting into commercial real estate, and trying to determine the property type that they're going to invest in - because I talk to a lot of people like, "Oh, yeah, I really want to get out of single family flipping, I really want to get out of this, and I want to get into commercial real estate... But I like apartments, I like parks, I like storage, I like all these different property types. Can't figure out which one to get into." I highly recommend people look at the economy as a whole first; come up with your view on where the economy is going through researching that.
For example, if you see the economy is trending in a negative direction, which I think we can all agree right now, it's pretty clear where the economy is going... But in previous years, it hasn't always been clear. Determine where you see the economy is going, and if it's going in a direction where people will have less disposable income, will be holding back on their spending on housing and things, invest in properties that are going to benefit from the future economy.
So if we're going into a recession, this might ruffle feathers, but I wouldn't be buying class A apartments, or buying class A office, or buying things that are more expensive, that are a choice place of living and working, versus necessities, that would be in the affordable housing side... And that's why obviously we invest in mobile home parks.
If it's going to be the opposite, and we're going into a boom economy, then that's when you should be investing in luxury assets that people are going to spend excessive amounts of cash to live in that apartment or to have that fancy office and things like that. So that's a great way to narrow down what you should be investing in, or at least narrow it down to the top couple asset classes, and then use other filters to narrow it down further.
Slocomb Reed: Excellent advice, Mario. Last question - where can people get in touch with you?
Mario Dattilo: I would say if someone's just looking to learn more about mobile home park investing or commercial real estate, just connect with me on Mariodattilo.net, because it's got all my social media links, it's got my podcast on there, my YouTube channel, everything in one central location. If you're looking to actually learn mobile home park investing, I would just go to getrealcashflow.com. I'd love to connect with people. I love helping them; if you're are looking to get into the industry, let me be a resource for you.
Slocomb Reed: Awesome, and those links are available in the show notes. Mario, thank you. Best Ever listeners, thank you as well for tuning in. If you've gained value from this conversation, please do subscribe to our show, leave us a five-star review, and share this episode with a friend you know we can add value to through this conversation about mobile home park investing and building peripheral businesses. Thank you, and have a best ever day.
Mario Dattilo: Thanks for having me on. I love the show. I'm a big fan.
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