Ep 71 - Franco Perez (audio)
[00:00:00] Franco Perez: I still today tear up when I see a family that felt like they could have never afforded something and they finally closed on their first home. And when you see them have so much fulfillment of finally getting their first piece of financial security, a dream that they've always thought was impossible. And that to me is the best. Form of payment over anything. And that's the whole reason why I work so hard every morning and every night to get this thing to work. And I urge people to really find a business. Helps create a positive impact for people. and when you do, you'll just want to keep working and working.
[00:01:21] Tim Little: Hello, everyone, and welcome to the Journey to Multifamily Millions. I'm your host, founder, and CEO of ZANA Investments, Tim Little. And on today's show, we have with us Franco Perez. Franco is the founder and president of Franco Mobile Homes. Having grown up in a family with an unstable housing situation, Franco is on a mission to create affordable housing in Silicon Valley. Inspired to reimagine mobile homes and expand affordable housing opportunities across the Bay Area. Franco's team strives to unlock the pathway to home ownership and help families establish financial security where it might have otherwise seemed impossible. Franco, welcome to the show.
[00:02:01] Franco Perez: Thanks for having me. I'm so excited to be here, man. Yeah.
[00:02:04] Tim Little: And I am excited to have you. It's an inspiring story and I know you seek to inspire others. So I gave everyone a very high-level overview of your background. But on this show, we really like to get into the details of how you got started on your journey. So please take us back to the beginning and tell us how you got to where you are today. Yeah, sure.
[00:02:26] Franco Perez: yeah, so basically, long story short, grew up here, immigrated, moved here with immigrant parents from the Philippines, and longs, there's a long story to this, but I was in an unfortunate situation where my dad was the main breadwinner. They divorced, they split, and I was left with my single mom trying to help support me 17, 18 years old. I immediately dropped out of school and had to start working multiple jobs right away, just to continuously pay rent at the end of every single month. And I remember that vividly because it was so difficult just to keep up with that payment. And I remember the pain. And I remember asking, why is The world this way? Why is it that I feel like we're good people, but we have to struggle with continuously paying for rent while the wealthy get to benefit from homeownership and all of that? and that kind of really started. My curiosity about how real estate works and that sort of thing. And, from there I got into real estate for a while. I became a real estate agent. And then after doing pretty well at being a real estate agent, about three, four years into it, I really hated actually being a real estate agent. I, I. I was being influenced to help the wealthiest people I could get the most expensive home that they could or their third and fourth Property and I it hurt me so much to have to tell people No to have to tell people that were in my shoes back then and say hey, unfortunately, you don't make enough money Unfortunately, you don't have enough saved as a down payment You can make more and save more and I can help you later down the line but the truth of it is that those are the people I wanted to help and Those are the people that were in my shoes back then that I wish that I had guidance and I didn't. And left being a regular agent, trying to find out how I could help the regular people, the working class, get into ownership, check affordable housing in the government, didn't work out that way. And I accidentally came across mobile homes. I thought. I thought mobile homes were places for drug dealers and bad quality homes and what we see in the media. but can we come to find out there are so many families that are starting their wealth-building journey through mobile homes and through mobile home parks that we don't even know are around? So started a business, helping people get out of that rental rat race. Out of renting into mobile home ownership. And then from mobile home ownership, they were able to build their assets, start their net worth, get out of that, and start owning real estate. and then today we're doing that plus converting a lot of old-style mobile homes into large, luxurious 2000 square foot, 12 foot high ceilings, three bed, two bath mobile homes with courts, countertops, stainless steel appliances, and as modern as could be. And now we're doing that and growing from there and trying to help as many families as
[00:05:39] Tim Little: We can. Yeah. And that's awesome. And I want to dig into that obviously because I think we, we all know that. Affordable housing is an issue, not just in the Bay Area, but across this country. and it didn't always used to be that way. I know, I talked to my dad when he was growing up, he was a TV repairman. not the most lucrative profession and one that eventually just disappeared. but at that time, you could go up like this stair-step ladder. In order to gain housing wealth, he started off. They were living in an apartment, a really small apartment saved up enough to buy a condo, and then bought a condo and then sold that condo for enough to buy a house. And there used to be this stair-step approach that doesn't seem as feasible nowadays for a variety of reasons. So it sounds like you're trying to find another way for people to at least get on those stairs to start climbing. Talk to me a little bit more about how that works, right? Is it just based on the fact that these mobile homes are less expensive? And the money that they have to save up for the down payment less or are there special programs? For mobile homes that allow them to put down less money. Yeah.
[00:07:03] Franco Perez: So it's a mix of both. and I'm glad you brought that up. In the past 20 or 40 years, there were several different rungs on the ladder steps on the staircase, Where we could get out of renting, afford a home, or afford a condo or an apartment and work our way up from there. But the hard truth is that. These steps are now getting further and further, and there's this wealth gap that's now being created to where affording housing is very difficult for the regular people out there, right? So essentially, if we look at the scope of the Our country today material costs are getting more expensive. Labor is getting more expensive. The cost of construction and building housing is going to get more and more expensive as well. So at the rate that we're going, if we don't fix things now, this wealth gap is getting Harder and harder you either own real estate or you don't, and those that own real estate Benefit from all these perks these tax benefits the appreciation the equity and leveraging alone to build up their net worth right and unfortunately, if you aren't able to capitalize on that And then it becomes harder for you to grow. And that's exactly the stepping stone we're trying to create with mobile homes is that now the pricing for entry-level for regular real estate is getting so much higher than it used to be. We're now creating a stepping stone where it's. where we've realized that mobile homes are a perfect step to be that in between when you can't yet purchase a single family. It becomes that middle ground that's very much like a hybrid version of ownership and renting. It helps you get out of that full rental model and get into the Entry level model that's much more attainable. And like you said, lower down payment, more affordable monthly payment to be able to start accessing a lot of those key benefits, right? And I'm in an area where it's probably one of the most expensive in the country in Silicon Valley, right? So we see it. We see the future of the housing problem at a much drastic, much more drastic rate, right? I'm going to talk numbers a bit, but I don't want you to steer away from the high cost of these because the ratios are pretty similar in all metro areas. But in our area, you rent a two-bedroom apartment. It's about 3, 500 a month. If you wanted to buy a single-family home in our county, the median average home price is about 1. 5 million, right? How does somebody renting ever dream of affording a let's say 10 percent down is 150, 000 down payment and maybe an 8, 000 monthly payment with insurance and mortgage and all of that? It's so hard to ever feel like you can attain housing in that way, right? And through mobile homes in our area, it's become a perfect rung or a perfect stepping stone to get out in our area. It. An average mobile home for a three bed, two bath could be about $300,000. and how that monthly payment would look like, actually, how a down payment for 10% of that would be, $30,000 instead of that huge down payment. And then they have a space rent that's about a thousand dollars. And then a mortgage that's about $2,700. So all in to get into mobile home ownership. They're putting 30, 000 down and they have a payment of about 3, 700, which is just a little bit more than what they were paying for renting an apartment, right? So just by shifting that payment model to mobile home ownership, they get to leverage the tax benefits, the rate, the appreciation, the equity, and leverage a loan to gain their net worth as well. This step allows people to focus more on their careers to get a better financial stability structure to be able to in five years have an asset that they can sell and then get into home ownership. And I know those numbers were huge. These numbers could be half in another area like Atlanta or in Dallas, but those rungs and those steps are key in all of these metro areas.
[00:11:25] Tim Little: Awesome. And you're right? It's all relative. I'm on the East coast. So like I said, those numbers may need to be cut in half and that totally makes sense. I did have a couple of questions though. you were a realtor or maybe still are, FHA and VA loans. Are those still viable options for mobile homes? They aren't for
[00:11:45] Franco Perez: mobile homes and mobile home parks. However, there's a big perk to that. And the first thing is we do a lot of we've I've recently been doing a lot of lobbying with government entities to help them get more backing and better funding for mobile homes and in these communities. however, if you were to get out of renting and own Your first mobile home, you can't use FHA, but let's say you lived in that for three to five years and you sell, then you can use FH, you can, you still have access to using FHA as your first home, later down the line. So there aren't yet FHA availability for this, but the perk of it is like you're, you have a much lower price point, which, you know, if we're talking San Jose numbers again, 3 percent of. 1. 5 million is a huge number as well versus 10 percent of 300, 000, right?
[00:12:40] Tim Little: Yeah, that's exactly. And that's why I'm just trying to narrow it down even more. Because FHA 3. 5%. I've personally used that. I've never done the whole 20 percent for a house. and then having access to the VA loan is huge because I actually did zero. Percent, on one of them when I used my VA loan. And so that's why I was really curious if that was available too, because that would be an even bigger perk, for people to get in at a very small amount. Yeah, it's very
[00:13:14] Franco Perez: true. and there are now some options coming up where it's just 5 percent down, that are coming as well. So that's a huge plus as well. So there are. Ways to get 5 percent down instead of 10%.
[00:13:31] Tim Little: Yeah. And I can imagine that'd be hugely beneficial to anyone trying to get in there. So I guess one of the main concerns that I hear when it comes to mobile homes is depreciation. Can you talk to me a little bit about depreciation and how that fits in? Because the whole intent is you want to hold it. You want to live there for a couple of years, but maybe you use that, like you said, as that stepping stone to get that next property to save up that down payment. So what does that look like for most buyers?
[00:14:02] Franco Perez: So when it comes to mobile homes, there's so much bad information and false myths out there. And one of the biggest is, like you said, the depreciation, right? What people have to understand is that every market has its own dynamic mainly in high-density areas. like in California markets or Atlanta markets or Dallas, Austin areas where homes are very difficult to get and price points are high. These mobile homes are actually appreciating the same ratio as single-family homes are as well. So in our area in the last two years, they've actually appreciated by 11 percent which is huge. We have a lot of people that moved into a mobile home two years ago and are selling for 40, 000 more than they were when they bought it. So appreciation is something that needs to be analyzed and where you're at and you get the real information of how you are, how it works in your market. I'll be honest though, if we're talking like farm areas, not very high dense. areas, then you might see some sort of depreciation in these areas, right? If it's like a farm market,I have a friend that's doing projects out in Bozeman, Montana, and those homes have doubled in about four years, right? And It's, it's something that's one of those myths that you should really try to find out the reality of.
[00:15:28] Tim Little: Yeah, exactly. And that's why I wanted to bring it up because I know that's something a lot of people believe to be true. But just like you said, it really comes down to knowing your market. and everything being local when it comes to real estate as it always is, and so it really comes down to supply and demand. It sounds like that density that you talked about. That's good to know. and I guess, I'm trying to think it through because I know a lot of mobile home park owners, right? And so how do you deal with those folks or do you deal with them, in smoothing the journey for these folks who have never lived in a mobile home park before they don't know what to expect. Do you work directly at all with the mobile park owners? Can you answer that? Yeah.
[00:16:49] Tim Little: Yeah. so
[00:16:50] Franco Perez: we work directly. We work a lot directly with the direct residents themselves, but we do work with the park owners as well. And part of the beauty of what we do is it really becomes a benefit for multiple parties at the same time, right? It's a great opportunity. Thank you. the situation when we're converting these old homes and new homes, we're raising the value for the mobile home residents themselves. And at the same simultaneous time, the park owner loves it because they have a new home in their community, and it influences others to want to do the same. And in return, it becomes much more there, the valuation of their mobile home park goes up as well. And that's part of. The consulting work that we started doing recently as well as it is. Hey, Mr. And Mrs. Park owner. You have this community here and they'll reach out to us to see how they can raise the valuation of their community, whether it's adding amenities or whether it's replacing a lot of the old units for new ones. And that is something that we do. but the main thing, the main, our main clientele is really the community. Somebody that's already living in an old mobile home. I'd say they have a single wide one bedroom or two bedroom home. Their family's growing. They don't really have an area that they want to move to or can't afford real estate just yet. We'll help them convert their old mobile home that was built in the seventies because it was built in the seventies. It wasn't really meant for high density. So we'll find that 700 square foot home, more than double the square footage. And in return. they'll be able to appreciate the value of their asset by a drastic amount. For one that we just did here, let's say their single wide mobile home is worth about 90, 000 as a 1970 unit, if they spend 250, 000 to replace that 700 square foot home with a 2000 square foot home, their asset can be worth about 420, 000 later when they sell it down the line, right? So it's pretty much creating development opportunities for families that live inside the mobile home parks so that they can raise the value of what they have, where they have, and in return, be able to gain equity and gain and build on their asset that they already have.
[00:19:06] Tim Little: Okay. So just to clarify, it may be in the same mobile home park that they're already in, but they're upgrading the unit that they have essentially. Is that what you're talking about?
[00:19:17] Franco Perez: That's exactly it.
[00:19:18] Tim Little: Correct. Okay. And in terms of development,what does that look like? Is it a matter of showing the potential buyer what newer, nicer units look like, and then talking through what their budget is like you would,on any kind of home, except they have the opportunity to You know, see some of it before it's built. Yeah.
[00:19:41] Franco Perez: So surprisingly, a lot of our clients reach out to us through our YouTube channel. but basically because a lot of these mobile home parks were built in the seventies, they usually were built a long time ago. Worrying about maximizing the square footage of their lot wasn't a priority. if you imagine there's a lot of people, like what's trending now is somebody owns a single family home. They built an ADU, which in return they're able to raise the value of what they have. That's pretty much exactly what we're doing with these mobile home owners. Hey! You own this old home. If we use a loan to replace what you have with a much bigger unit, maximize the mobile home lot that you have, you spend 250, you get a profit margin of about 120, 000 by leveraging this loan. The pros are you get to live in a newer home, a higher quality home. You get more square footage for an office or for your kids. Plus, your asset is worth more than what you paid for it. more than what you paid for upgrading the home.
[00:20:50] Tim Little: Yeah, and I think, there's trickle down benefits to that as well, right? because whenever you have a newer unit, if you're going from a 1970s mobile home to something that's a little more current, it's going to have better insulation, better efficiency, all this stuff. So all of a sudden their electrical bills, their water bills may be going down as well. Is that right? Absolutely. Yeah.
[00:21:13] Franco Perez: So we basically do an analysis of their lot. We let them know how big of a square foot they can,how big of a home they can put. They get to design their floor plan the way they like, and we do a full evaluation of the value for them. After that, Yes, all of the construction is done in a very, in a much higher quality way compared to what was normal in the seventies, right? So you know, if you haven't seen our channel already, definitely see, I love showcasing how we build these because the level of quality that we're building, this is amazing, right? is what we use. All the materials that new homes are being built with today. And we have high standards of the quality of how they're being built as well. I kind of use this analogy, but cars originally were built for only the rich and wealthy to afford. And it was only until we were able to build them in factories on assembly lines that we were able to get it accessible for everybody to afford. And that's exactly what we have to be doing with. When it comes to construction, and that's what we're doing today with the mobile homes that we build, these homes are being built on an assembly line inside of a factory in the most effective way possible. And the workers are, we're able to maximize the utility of every single construction worker there. And then in the end, have a much better product at a much more affordable rate for the consumer. And it really becomes a beautiful thing. And especially when we're comparing it to site built housing and how it's always been the same for about a hundred years, it hasn't really changed. And we have to make these changes now to be able to improve more affordable housing options for people in the
[00:23:00] Tim Little: future. Yeah, and I saw some of the houses when people were moving in and doing the poppers and everything. And one, I think people would be really surprised by this. The finishes that you had on the interiors, right? When you go, when you think mobile home, you're just not thinking marble countertops, and stuff like that. So you see, you're like, wait, this is a mobile home. I think people think about what their parents live in. Like my dad has lived in a 55 and over mobile home park, community, for the past, probably 10 years, both in Florida and now in Pennsylvania. And they're fine, right? But they're not fancy. so I saw some of the interiors that these folks have, and they were up to date, they were very nice finishes. And I was not expecting that, even on a new mobile home. So I was impressed. Yeah.
[00:23:55] Franco Perez: Oh, totally. and I know we're on a podcast here, so it's tough to visualize, but definitely time to take a look at this because most of most people's associations with what a mobile home is from the media is from TV shows from Breaking Bad or, and unfortunately, the media makes mobile homes look like. Lowest of the low when the truth of it is just like apartments. Yes, there's bad apartments that you don't want your kids going around, but there's also luxury style apartments, right? It's the same spectrum with mobile homes. Yes, there are bad mobile home parks and mobile homes, but there's a full spec spectrum of quality. That shouldn't be ignored as well. So there's beautiful mobile homes. There's beautiful mobile home communities. And in many cases, we keep pushing the stigma and the quality of how these are built and they end up looking way nicer than what a lot of regular single family inventory looks out there today.
[00:24:50] Tim Little: Yeah, and one more thing that I want to highlight, because like I said, I know a lot of mobile home park owners and some of them are going to be listening to this. The benefit for them is I saw the faces of those people who were getting those houses. There was pride there. There was real pride. And, having tenants that have pride in ownership is value in and of itself, both material and spiritual, right? Spiritual because you want your tenants to be proud of the part that they're living in, but because they're going to take better care of it, right? And then there's the, The third benefit of that. It's a nicer unit that they're putting on here. I don't know of any mobile home park owner who's going to complain if you get rid of the old beat up home and put a brand new one in its place on that same lot.
[00:25:44] Franco Perez: Exactly. Man, you gave me goosebumps when you said that. To be honest with you, I still today tear up when I see a family that felt like they could have never afforded something and they finally closed on their first home. And when you see them have so much fulfillment of finally getting their first piece of financial security, a dream that they've always thought was impossible. And that to me is the best. Form of payment over any, over anything. And that's the whole reason why I work so hard every morning and every night to get this thing to work. And I urge people to really find a business. Helps create a positive impact for people. and when you do, you'll just want to keep working and working. And I think that's what really got me to get our company and our team to where we're at, because we all, every member of our team, have so much. empathy and so much care for our clients. And we all collectively love the success stories of these clients and they do see that pride of ownership and they take care of their homes. and it becomes a win for so many people. And we have teachers that felt like they weren't able to live in this area anymore, but because they own a mobile home. they get to stay where they want to stay. And that to me is the most fulfilling
[00:27:08] Tim Little: feeling. Yeah, that's awesome. Franco, we do need to move on to the turbo round. So I'm going to ask you three questions that I ask every guest that I have on the show. And I just ask you for a quick, honest answer. All right. First one, what is one red flag, every investor. Should look out for. I think
[00:27:31] Franco Perez: a red flag for me is when you're going into real estate investing, you always work with people, but I, for me, it's always a red flag when someone's over exaggerating and not being realistic. I think that's one thing that's a pet peeve of mine, let them. pitch whatever they want to pitch to, but make sure you take on your own right information and do your own due diligence before getting excited about somebody telling you that this is going to be great.
[00:28:00] Tim Little: Yeah, absolutely. And I'd say that's true with almost any investment, right? yeah, we definitely have that issue in multifamily too, with some of the gurus telling you, you'll. You'll get rich in a year and all this nonsense and in real estate in general, just based on its very nature is a long term gain, right? No one should expect to get rich overnight investing in real estate. It's just not the way the asset works. All right. Second question. What is a myth about this business that you would like to set straight?
[00:28:33] Franco Perez: You gave it away earlier, but I think the biggest myth is the depreciation of mobile homes. And there's a lot of myths, but I think that's one that should really be broken because like I said, I've seen many homes in many areas double over the course of five, six years. And in our area, It's been, it's those that really take in their own information and are able to thrive from that benefit. So that's probably the biggest myth of our, that I'd like to talk about.
[00:29:04] Tim Little: All right. Awesome. And finally, Franco, what does success look like to you? I'd say
[00:29:13] Franco Perez: To me, success is helping as many families as possible. I really, just like what we did here in this California area, I'd love for mobile homes to be seen as that. As a beauty that it is. and for more people to be doing this in other markets and for people to take a lot of them. Associations or bad myths or bad thoughts about mobile homes and seeing them for the reality of it is seen as a stepping stone to get to start their ownership journey and for more people to get out of that rat race of renting just like I did, right? To me, I just want to be able to, to me, success is knowing that these homes are making a huge difference for as many people as possible.
[00:30:00] Tim Little: Yeah, that's awesome. All right. hey, we got to let it go there, but tell our listeners how they can get ahold of you. And if there's anything else that you'd like to share with them,
[00:30:12] Franco Perez: Sure. All of our links are at www.franco.tv, or you can Google our YouTube channel, Franco Mobile Homes. I think it's that I think if for a lot of those investors out there, I know there's a lot of people that chase that dollar amount and that sort of thing. But I honestly believe there's a lot of people. There's a huge amount of people out there that maybe that isn't what drives them. And that was never it for me. I think if you find something that makes an impact for families, that can be your driver to help you succeed
[00:30:42] Tim Little: too. Yeah. I couldn't agree more. All right. Hey, again, Franco, thanks for coming on. We'll have all that information in the show notes for anyone looking for it. I appreciate you coming on and I look forward to continuing to see you do big things on your journey.
[00:30:59] Franco Perez: Awesome. Thanks for what you do too, Tim. Take care.
[00:31:02] Tim Little: All right. Have a good night.
