Non-Glorious Investments - Episode 9
Carl Moore:
I bet when you were getting into business, you were thinking, "How can I get my name on the side of that dump truck?"
Brant Greathouse:
How did you know? That's exactly what I've always dreamed of. Hey, #goals, right?
Carl Moore:
That's right. I'm Carl Moore. This is Brant Greathouse. This is Meaningful Capitalism. Today we're going to talk about non-glorious investments. I think a lot of times when people think investments, their mind is triggered to something naturally. It might be a retail space or an apartment complex, a high rise building, but do you ever think a car crushing company or what about when you take your trash out? You ever think, "Man, these guys are killing it. They're making a ton of money taking my garbage."
Brant Greathouse:
I have never thought that.
Carl Moore:
No, never. I thin, "I'm sure glad this thing is empty because my neighbors didn't fill it up." I might think that, but I don't really think about the financial side of that, or right here in town, and I should probably go talk to these guys, but they're a septic tank company, and so they go and they clean out septic. On the side of their tank just as big as day just says, "Number one in the number two business."
Brant Greathouse:
Yeah, I've seen those guys.
Carl Moore:
I love that. I love that. They know what their business is and they're good at it. There's other non-glorious investments like metal scraping or sewage companies. But why would you invest in one of these non-glorious investments that don't put your name on the side of something big?
Brant Greathouse:
Well, first of all, there's not very many people that think about those types of things. So what you get is is what we call a stigma premium.
Carl Moore:
That's right.
Brant Greathouse:
Okay? If you could invest in something that looks really shiny and flashy and make this much margin or invest in something that looks like a dumpster and make this much margin, that's called the stigma premium. Why would you invest in that? You get the stigma premium. Why else do you think we would invest in something like that?
Carl Moore:
That's right. Our non glorious investment are mobile home communities, and we intentionally seek out mismanaged, underperforming assets or mobile home communities that they need a lot of work and those are our gold mine because while they might be ugly when we buy them, our ability to go in and fix these communities up and make them look nice and clean out the garbage and make them a place, just because a mobile home community is ugly, doesn't mean it has to stay ugly, and we can take and make it so that our residents have a place that they're proud to call home.
Brant Greathouse:
That's right.
Carl Moore:
They can bring family over for Thanksgiving after we've owned these communities for a short period of time, and we've even had people tell us, "Hey, I'm having Thanksgiving at my house," and they'd never done it before because they were ashamed of where they lived.
Brant Greathouse:
Yeah.
Carl Moore:
We can turn something non-glorious into something that everybody can be proud of.
Brant Greathouse:
Yeah.
Carl Moore:
I love that that's what we do. I feel like that's very different than beachfront hotels and it's very different than high rise buildings or apartments that sell for 3 and 4% cap rates. You almost have to go upside down and lose your shirt to get into it and let appreciation happen over time so you can refinance and get better deals just to start making money in the future.
Brant Greathouse:
Yeah, yeah. That is not a business model that I'm interested in. Now, not that I wouldn't buy an apartment complex or that I'm recommending that they're a horrible investment. You can make money at it, but-
Carl Moore:
Oh, absolutely.
Brant Greathouse:
.... the competition is so high in that industry that what oftentimes happens is people pay such a premium and like you said, takes a lot longer to get those gains and those returns.
Carl Moore:
If you're a company that's already really good at it, you're probably not going to let your investors in making a huge piece of the pie. You're going to negotiate something and if you're not in that industry, whatever that other industry is, that barrier of entry into getting into it, if you find somebody you can invest in that's going to give you a huge investment return, you're also taking a risk on that investment firm, especially if it's their first one or two go rounds.
Brant Greathouse:
Yeah.
Carl Moore:
How many communities have we done in this non-glorious field?
Brant Greathouse:
Goodness, what are we? What's the count? Is it 15? 14?
Carl Moore:
14 is what I had in mind.
Brant Greathouse:
Yeah.
Carl Moore:
Yeah. We're looking at number 15 right now.
Brant Greathouse:
Yeah.
Carl Moore:
Excited to move forward on that one. We actually are in the process of opening our fourth fund. We've already opened and closed fund one, fund two is in the process of liquidation, and so we've got a few of those under contract and are moving out, and we're really excited to announce and open up the fund four's on its way. If that's something you're interested in investing in, please reach out to us. It's just a plug for it. I'd love to talk with you one on one. But yeah, we love these non-glorious investments and ...
Brant Greathouse:
And we can bring out kind of a glorious aspect of it in that we're providing a quality product for our client base.
Carl Moore:
Oh, absolutely. Absolutely. I think a lot of times as people do think about investments, they think, well, they're going to get their name tied to something, but by investing in a fund with the name of True Star Capital on it, you can still kind of hold that glorious part if that's important to you and we'll do the investing and our name will be tied to the mobile home community if that's something that gets in your way.
Carl Moore:
Brant, what do you think is the best way to find a non-glorious niche? Like what we've found?
Brant Greathouse:
Well, if you guys are looking for something that has that stigma premium that's maybe not as glitzy and glamorous, but that really produces returns and is a great business model, many times those type of deals, those type of niches are right under your nose. They go unnoticed. You'd be driving down the road, you drive by there all the time, and you never notice it because it's just kind of background noise to you. That's where you're going to find them. The best way to do it is just being more aware of your surroundings and kind of paying attention to things that you normally wouldn't pay attention to.
Brant Greathouse:
Guys, it's really true. There's opportunities all around us all the time. When are we going to snap out of our robotic way of living? I love this quote by Michael Gerber. He always says, "The natural tendency of a man is to fall asleep and become a machine."
Carl Moore:
Hm.
Brant Greathouse:
If you guys are grinding at your business or at your work or whatever you're doing, don't fall asleep and become a machine. Look all around you. There's opportunities to be had. Why don't you tell some of the early on stories about how we got into the mobile home industry?
Carl Moore:
Yeah. I kind of fell into it. It was not something that I really was like, "Mobile home communities, that's where it's at," and I just knew it naturally. I had a job working for an oil field company and the downturn in the oil, they just basically walked in, gave everybody a check, and said, "Hey, have a good life. You can do whatever you want. You just can't do it here." I thought that I really had this secure job and so I came home and I talked to my wife and I said, "Look, I want to get into real estate. I'm good with my hands, I know what I'm doing, I can understand it, and I don't have to worry about getting fired. I might have a lame boss, but I don't have to worry about getting fired."
Carl Moore:
She agreed. She said, "Well, let's try it." After flipping a bunch of houses, I had my signs up all around the neighborhood that said, "We buy ugly houses," and I was doing that thing because that's the thing I understood how to do.
Carl Moore:
A lady called me and said, "Hey, I've got a home for sale."
Carl Moore:
I said, "Yeah, perfect. Tell me the address," and I drove out there. Well, when I got there, I drove into a mobile home community and I was like, "Oh, this isn't really what I was thinking I was getting into." She shows me the home and I said, "Well, is this your home?"
Carl Moore:
She said, "Yeah, it is."
Carl Moore:
I said, "Well, why are you selling the home?"
Carl Moore:
She said, "Well, the whole community's actually mine. I'm selling the home because I have to pay the taxes this year."
Carl Moore:
I thought, "This lady's in a devastating spot. When you're going to sell a home to pay taxes, this is not going to last long term."
Brant Greathouse:
Yeah.
Carl Moore:
I turned to her and I said, "Well, can I buy the whole community from you?" In that moment, my eyes opened up to a whole asset class that I thought, "For the price of this community," and now this was a rather small community, 'For the price of this community, I could buy one single family home and have about 15 incomes." That was my eye opening moment when I was, like you said, driving down the road, doing my thing, keeping my eyes peeled, not falling asleep and becoming a machine, but constantly looking for there's opportunity to be had around me. While we didn't buy that community, it was what? Within two months I had come to you and we had decided, hey, this is a really good path, let's partner, and we had put that first property under contract and-
Brant Greathouse:
Rest is history.
Carl Moore:
... the rest is history. That's our non-glorious investment.
Brant Greathouse:
Yeah.
Carl Moore:
I'm Carl Moore.
Brant Greathouse:
Brant Greathouse, thanks for joining us today.
Carl Moore:
Meaningful Capitalism. Have a great day.
