(intro)

Welcome to The Gold Collar Investor Podcast, with your host Pancham Gupta. This podcast is dedicated to helping the high-paid professionals to break out of the Wall Street investments and create multiple income streams. Here’s your host Pancham Gupta.

Dave Zook

Hey, this is Dave Zook. I listen to Pancham at The Gold Collar Investor Podcast, and so should you.

Pancham Gupta

Welcome to The Gold Collar Investor Podcast. This is your host Pancham. I really appreciate you for tuning in today. My guest is Charlotte Dunford on the podcast. She is a graduate of The Georgia Institute of Technology where she earned her Bachelors of Science in Business with a focus on business analytics and technology. Coming from China at the age of 16, without her parents, Charlotte’s strong drive to succeed led her onto a path to build her own company. Along with her business partner, Rick, Charlotte started Johns Creek Capital in early 2020. From only two investors at the beginning of the firm’s founding, Charlotte and the team led the company to a total investor subscription of over $5 million. Charlotte is also a Certified Associate in Project Management and speaks fluent Mandarin. In her spare time, she enjoys playing the piano and doing equestrian sports.

Pancham Gupta

Hey, Charlotte. Welcome to the show.

Charlotte Dunford

Thanks so much for having me.

Pancham Gupta

Thanks for your time. Are you ready to fire up my listeners break out of Wall Street investments?

Charlotte Dunford

Absolutely.

Pancham Gupta

Let’s do this. So, Charlotte, let’s talk about your background, how you got started into what you’re doing today and, more importantly, the person behind that background.

Charlotte Dunford

Right. So, a little bit background on myself. My name is Charlotte Dunford. I am a partner at Johns Creek Capital, which is a private equity firm that focuses on mobile home parks syndications. How it came about the space was, long story short, I came to the United States when I was 16 years old for high school. I came by myself. My parents never came with me. I did not speak English at the time, so I had to learn everything from scratch. All of that experience gave me the entrepreneurial qualities, I would say, and the drive I needed to succeed to start a venture.

After I got into college at Georgia Tech — one of the top engineering schools here in the south — I chose industrial engineering and then switched to business major soon after to pursue a deeper study in business. After graduation, like a lot of other college grads, I took a pretty typical corporate job as a business analyst. But right off the bat, I started to buy real estate using my salary, very small salary, to finance my real estate deals.

After about a year and a half working in corporate, I acquired a single-family home in south of Atlanta, and also a duplex in lower north of North Georgia area. At the time, I wanted to scale. However, I found it difficult to use my salary to finance a larger scale property. As you can imagine, out of school grad, 20, 22, 23 years old, that’s difficult to finance a large scale million-dollar property. So, I pretty much took a calculated risk and took the jump from corporate to working full time as a real estate investor and started my own company. That’s when I got my first mobile home park the first year. I quit my job in 2019 with the first syndication of mobile home park. We’re actually still holding that park in South Georgia.

Soon after that, we were able to scale pretty quickly, because mobile home park has been along in the north sector, and we got in a very attractive cap raise. Investors were very interested. Today we grew to a portfolio of almost 30 parks, from pretty much zero to one investor until to today’s large portfolio that we have.

Pancham Gupta

That’s awesome. That’s an amazing background. It resonates a lot with me. I emigrated and went to school here. I started working and got some single-family homes. Let me ask you this. When was that when you bought that single-family home and at what point you realized, after buying all that, that you have to quit?

Charlotte Dunford

Quit my corporate job?

Pancham Gupta

Yeah.

Charlotte Dunford

Well, it was when I hit a brick wall in the financing scenario. Because your salary only gets you so far. At that point, it becomes — for those of us or you guys working in finance or in real estate syndication, private equity — it’s a full-time job. You can’t be a full-time job at your day job. Then all of a sudden, you have to continue pursuing the other full-time job. So, I decided to focus my efforts on what I really wanted to do. I really do not see myself really going long term in the corporate space of where I wanted to go.

I really wanted to do real estate. I really want to do private equity. That’s what my interest was. That’s what I believe that I was good at, and I would like to scale. It was not an easy decision, but it was definitely a calculated risk. Because the risk for me at the time was, I barely made it out of school. Well, I made it out of school a couple one and a half years ago at the time. My husband, at the time, was still in school. He did not graduate school yet. So, that was a big risk. So, I had to take that calculated risk, in that I had to choose a career path for myself at a young age. I was 24 years old. I believe that when you’re young and you have your youth, that is really valuable. You do have more room to make mistakes and fail and get up again. I think I did not want to wait. Because, for me, time is money. The longer I was on the wrong track per se in the corporate world, the less time I’ve left for myself in the right track. So, I just decided to quit.

Pancham Gupta

Got it. Did you have any — I remember I’ve interviewed a lot of people here who have gone through the same path. A lot of people have a very hard time quitting. In your case, your husband was still in school. Did you have to go through some negative thoughts, anything, before you made that decision?

Charlotte Dunford

Yeah, I think for every decision, they are always challenging. Two questions you have to ask yourself. With any entrepreneur, with anybody starting their own business, and anyone starting anything, really, is difficult. Of course, we have the same challenges. But I think all of those challenges, you will encounter in your entrepreneurial journey, in any kind of company, if you want to run and start and run a successful company, a successful venture. But to win out in any competition is difficult.

The difficulty is already something that I fully expected. I fully wanted to take it head on. The worst thing you can do in the face of challenges is to run away from it. Because if you run away from it, the more complicated the challenge is to come. The harder it is to solve them. Of course, negative thoughts and negative emotions, that’s on a daily basis. When you’re an entrepreneur, you’re trying to create something. You’re trying to run something. Of course, it’s difficult. But I think the important thing to remember is that you have to be honest with yourself and really understand the business, really understand where you’re lacking. You need a team. Know what you’re good at, what you’re not good at. Really, be honest with yourself and, really, just don’t shy away from the problems and challenges.

Pancham Gupta

Got it. When you graduated, you had invested in a single-family home, right? Why mobile home parks? You had never done those before, right? Had you invested in them? How did you pick mobile home parks? Like, this is what I want to do.

Charlotte Dunford

Right. That’s an interesting question. Because a lot of people say, “Oh, mobile home parks.” They have a stigma.

Pancham Gupta

Why don’t you explain what those are, in case people don’t understand what mobile home parks are?

Charlotte Dunford

Mobile home park, the closest thing that you can compare a mobile home park to is a parking lot. Really, what it is, is a piece of real estate, a park, a parking lot where mobile homes are located, two or more mobile homes are located. It’s called a mobile home park. How it runs is that, a mobile home park is in charge of infrastructure, utilities, and the ground, running on the dirt of the real estate. You own the real estate.

The mobile homes themselves, you don’t own. They’re considered personal property. It’s like a car your tenants own. They have that ownership of the home, so they do take care of all the repairs and maintenance within the home. You take care of the repairs and maintenance outside of the home. That gives a special expense ratio. A mobile home park is really mobile homes parking on your lot. Think of it as a parking lot. Think of it as an HOA.

But back to your question though, how I chose it, is because people will say — well, there’s a stigma associated — “Why not something glamorous? Why don’t you get a multifamily apartment building in the middle of Manhattan? How cool is that? Why do you want to get into mobile home parks?” The fact of the matter is, as someone who had a single-family home and duplex under her belt, I was really just looking for new projects. I wanted to go into multifamily. However, it’s extremely competitive. People who have done multifamily have been doing it for decades. They have the experience. They have the broker relationships. When you talk to a broker in multifamily, they see that you don’t have experience. They don’t even talk to you. It’s just a matter of pragmatism, to be honest.

At the time, I just found mobile home park to be at a sector where I could implement a blue ocean strategy, where there’s not a lot of competitors in the space, which means there’s a lot of meat on the bone. People did not realize how lucrative this space could be. I got into it knowing that it’s not extremely heated. Because when something becomes extremely heated, your profits get competed away. So, that’s why I liked mobile home parks. Really, it goes with the philosophy of one of my favorite books — probably, my favorite book of all time. It’s called Zero to One by Peter Thiel, a co-founder of PayPal, a really, really very successful Silicon Valley investor and entrepreneur. He believes in the reason why businesses fail is because they cannot escape competition. I wanted to go away from competition from the very beginning, which led me to mobile home parks.

Pancham Gupta

Got it. Now you picked that in 2019, you said, right? Or 2020 was the first park you bought?

Charlotte Dunford

The first one, I got my first park in August of 2019, the second park in December of 2019. I figured that’s when I quit too.

Pancham Gupta

Those are a lot of changes. Now you said you have 30 parks. For someone listening, it’s been only two years, and 30 parks is a big number. How did you scale? How did you find these properties? Are they all in Georgia where you’re located, or you had some broker relations? How did you get to find so many parks? How big are these individually, on average, for example?

Charlotte Dunford

I have close to 30 parks. The actual number is 28, 29, depending on the one that we sold one as well. Just a small, not correction — close to 30, but not yet 30. We’re trying to hit that number and exceed it this year, for sure. So, how did I scale? I think a lot of times, it’s putting yourself out there and really just trying to connect with people and investors. Tell them why. Show them your track record. Show them your real estate track record. Show them what real estate, what mobile home parks could do, why you believe in it, and what kind of returns you have delivered for investors. Really, put yourself out there. That way, people are starting to get interested in your space. That’s where attraction happens. The most important thing really is to deliver the results.

For example, we sold — we completed a full cycle of a mobile home park last year, May of last year. We got that park in June of 2020 for $325,000. We sold that one 22 months later last year around May of 2022 for $495,000. So, the IRR that we delivered to investors on that deal was a little over 20%. It’s the numbers like that, it’s the results that you deliver to investors that matter the most at the end of the day. Because you really do deliver an investment product.

Pancham Gupta

Yeah, I know. Absolutely. Are you getting loans on these?

Charlotte Dunford

Some of them. Yeah, some of them, I do have loans. Some of them, I don’t. Many of them are cash purchases, because they are trending to smaller size, small- to medium-level mobile home parks. We’re not getting 500 lots mobile home parks. It’s smaller. But we do have loans if the loan terms make sense for us. Sometimes we make it a cash offer. You do get a better cap rate. You do get a better price. But the most important thing is the spread.

For those of you listening, a spread is really the difference between the cap rate and the interest rate. A cap rate is, if you were to pay cash for a property, how much return you’ll be getting, for example, if you’re paying 100% cash for a mobile home park? The return is the cap rate. For example, if your cap rate is 8%, you want your interest rate to be 5% and below. That creates at least a three-point spread, a 3% difference between the interest you’re paying and the return you’re getting. That’s how you’re able to succeed in investment. That’s one of the most important parameters. It can be tricky to calculate those numbers. That’s when it requires experience.

Pancham Gupta

Got it. So, how do you classify? For someone listening who don’t understand this space, how do you classify these parks? Are they in terms of — I know mobile home parks go from one-star park to five-star parks, right? Can you explain what those are, and what kind of parks are you investing in when it comes to that?

Charlotte Dunford

Right. The one-star park and five-star park is, first of all, it depends on the conditions of the home and the age of the home. If you have a park full of old homes, they’re boarded up, and there’s no pride of ownership for the tenants, they don’t care that they own the home, there’s trash everywhere — obviously, that’s a one- to two-star park.

But if you go up a little bit where the homes are better kept, it’s a slightly bigger park, but not only that, you have people with pride of ownership — which is huge in mobile home park space. Because really, you’re running a parking lot where the car owners who parked in your parking lot care about their car. It will be like having a parking lot with a bunch of Bentleys and Porsches parking in your parking lot. That would be a five-star parking lot. Versus in a parking lot where a bunch of rundown cars that doesn’t even start, leaking oil on your ground, that’ll be a one-star park. Really, I keep mentioning the parking lot analogy. But that really is the closest thing to it.

Pancham Gupta

Got it. I don’t know if you mentioned that. What kind of parks do you invest in or you look for?

Charlotte Dunford

We usually pick things in the middle where there is solid fundamentals but there’s also room to value add. Because the value-add park, cosmetic upgrades a lot of times. Because a lot rents are behind, and they’re low. We’re still catching up. So, there’s a lot more meat on the bone. If you buy a five-star park, class A, you’re buying at maybe 2% to 3% cap rate. So, it’s really a lot of REITs buy that, but they’re not going after the profit. They love having it for the stability. You’d buy so expensively. Usually, there’s not much meat on the bone left. We don’t buy run-down parks. We don’t do really super distressed properties. We do something in the middle, where there’s room to value add but there’s got to be a very solid infrastructure. The backbones of the park and the infrastructure has to be solid. If not, it’s not going to work.

Pancham Gupta

Got it. That’s great. Awesome. Overall, your strategy is to improve them and sell them, right?

Charlotte Dunford

Right. We’ve all heard this saying that you make the money when you buy real estate. The most important thing, one of the most important strategies we have is that we have our parameters down for what kind of deal we want. Because once you close on the deal and it’s supposed to be a losing deal, none of the fundamentals work. You’re already doomed from the beginning. There’s not much you can do.

First of all, buy right. We have a proprietary algorithm that runs all the parameters. We assign different weights to them. There’s a number that it’s either a pass or fail for that park. For thousands of deals that go through our desk every month, we pass on most of them and only keep the little one or two that we think would do well. Good things are always hard to find. So, that’s number one.

Once you buy the park, you buy right. So, you’ve already succeeded. You have 50% succeeding. The other half, it really needs solid property management. We manage everything in-house. We believe no one else cares about our asset as much as we do. So, we manage everything in-house. We have a system where we have a local team on the ground handling repairs and maintenance. Because we have parks all over the country, in 10 different states. Some of them are far. But that didn’t stop us. The one that we completed full cycle with, it was in Iowa. It’s far from Georgia, but we’re able to handle that based on our system and our team. The actual strategies include periodically run increases and meat on the bone, and also cosmetic upgrades — adding a new sign, adding white fences, cleaning up trash, adding to the curb appeal, increase the landscaping.

The most profitable value-add yet expensive is infilling. Infilling means that you buy a mobile home that is either used or new, and you put that into your park so that you have a new lot, you have a new lot rent, a new income stream that adds directly to your top line and bottom line. But that tends to be expensive. So, you really have to do the numbers on how much budget you need. Because once you get into the infilling realm, then it becomes a bigger project. Those are the typical strategies.

Pancham Gupta

Got it. Great. This is awesome. Anything else you would like to add before we move on to the second part of the show?

Charlotte Dunford

Oh, I think you asked good questions. I think I pretty much told you everything I pretty much know.

Pancham Gupta: 

Great. Thank you, Charlotte. Let’s stop. We’ll be back after this message.

(break)

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(interview)

Pancham Gupta

Charlotte, let’s move on to the second part of the show, which I call Taking the Leap Round. I ask these four questions to every guest on the show. My first question is, when was the first time you invested outside of Wall Street? Was it that single-family home you bought in Atlanta?

Charlotte Dunford

Yes, it was.

Pancham Gupta

Got it. Did you have any fears you had to overcome, given that you had just graduated and you bought it right out of that?

Charlotte Dunford

I had very little fear at the time. Because I just graduated college, I really had nothing to lose. I was a fresh-out-of-college grad. To me, it was adventurous. And it was my own money, so it was — as anybody who is in private equity would take, when you take someone else’s money, invest your money, you’re a lot more careful. You want to be truly diligent on your due diligence. But with me, it was a small money down, and it was my own salary. It was just for me to experience real estate. So, I had very little fear at that time.

Pancham Gupta

Got it. Okay. My third question for you, can you share with us one investment that did not go as expected?

Charlotte Dunford

Yes. So, in a real estate investment, there’s only one thing that you can expect. That is surprises, right? Every single real estate investment has surprises. I will say, I invested in mobile home parks, duplex, single-family home, but also mobile homes. That’s one thing that I would advise everybody against. Do not get into mobile home investing. Because a mobile home is a depreciating asset, and it’s not considered real estate. It’s considered personal property.

It’s very difficult to make it work. Here’s why. Because for business to be profitable, you first need to have a top line. You have to bring in revenue. But the clientele that you serve in mobile homes tend to be low income, but at the same time, they have problem paying. So, the top line is not secure, let alone growing. That’s already a very, very big red flag. My investments in mobile homes, I’m not into it anymore. But when I was in it, it did not do very well. So, I would caution everybody against it.

Mobile home park is real estate, is appreciating asset. Go for it. That’s great. But mobile homes itself, don’t get into the car-dealing business. It’s not a profitable model from how I experienced it.

Pancham Gupta

Got it. Thank you for sharing that. My last question for you is, what is one piece of advice would you give to people who are thinking of investing in Main Street that is outside of Wall Street?

Charlotte Dunford

I will say you have to pick, first of all, the asset class that fits your risk and profit standards. If you want to do active investing yourself, then you have obviously a lot to learn if you’re not familiar with the space. But if you want to do passively because you have a day job in Wall Street or a day job in finance, you will want to vet your sponsor like us. Talk to us and see if we will be a good fit. So, it’s either do it yourself, or someone else does it for you. But you will need to — my advice is to really educate yourself and get to know what you’re getting into, really.

Pancham Gupta

Got it. Awesome. Well, thank you so much, Charlotte, for your time. How can people connect with you if they want to reach out and find out more about what you’re up to?

Charlotte Dunford

Right. The best way to reach me is to go to our website at johnscreekcapital.com. There’s an investor contact form. We usually receive the message and reach out within the same business day.

Pancham Gupta

Awesome. Thank you so much for your time.

Charlotte Dunford

Thank you so much for having me.

Pancham Gupta

Thank you for tuning in today. If you have any questions, don’t hesitate to email them to me at p@thegoldcollarinvestor.com. That’s p@thegoldcollarinvestor.com. This is Pancham, signing off. Until next time. Take care.

(outro)

Thank you for listening to The Gold Collar Investor Podcast. If you love what you’ve heard and you want more of Pancham Gupta, visit us at www.thegoldcollarinvestor.com and follow us on Facebook @thegoldcollarinvestor. The information on this podcast are opinions. As always, please consult your own financial team before investing.