In this conversation, Ben Schuster, a partner at Comfort Capital, shares his unique journey from a challenging childhood to becoming a successful investor in mobile home parks. He discusses the transition from institutional investing at BlackRock to working with individual investors, emphasizing the importance of building relationships and trust. Ben highlights the challenges faced during the COVID-19 pandemic and the significance of clear communication with investors. He advocates for simplicity in investment structures and shares insights on the importance of financial literacy and education for investors.

Best Real Estate Operators Keep It Simple with Ben Schuster

Joe Guidi (00:00)

Ben, thanks for joining me.

Ben Schuster (00:02)

Thanks Joe, I'm happy to be here.

Joe Guidi (00:04)

Yeah, we're looking forward to this call. We had a few minutes to catch up before this, so I'm looking forward to diving in. But before we do, it would be great if you could just give the audience a quick overview of who you are—a quick intro.

Ben Schuster (00:17)

Yeah, absolutely. So my name is Ben Schuster. I'm a partner at Comfort Capital. Comfort Capital is a manufactured housing investment firm based out of San Diego, which is a fancy way of saying that we syndicate capital and buy mobile home park deals. We're an operator, so we have 60 employees. We're vertically integrated. We do everything in-house. Been doing it for 16 years—family-owned business. We go deal-by-deal syndications. We just really love this asset class and understand it intimately, and so we only invest in this asset class.

Yeah. So I'm happy to talk as much about the business as you like, but that's probably the 30,000-foot elevator pitch.

Joe Guidi (00:55)

Thanks for telling me about the business. Why don't we dive in a little bit about you, because your background is interesting. You're coming to this from the institutional side. Give us the quick overview on Ben as well, not just Comfort.

Ben Schuster (01:06)

Yeah, absolutely. So yeah, I have a pretty unique backstory. I was actually youth homeless growing up. I had two parents who struggled with addiction. So most of my life was driven by housing instability and just instability in general. I was very blessed and fortunate to have a family that took me in to live with them when I was 12. So I lived with them from 12 all the way through high school, played a bunch of sports. I'm an avid sports guy just in general, mostly playing versus just watching.

After high school, I went to undergrad and studied finance and economics. I was just really interested in financial literacy, just in general. I did not grow up around people that talked about money or managing money; I saw the opposite of that. And so that was my curiosity to dive into economics and finance. I did a dual bachelor's at Chico State, a small state school up in Northern California.

After that, I worked my ass off and got into BlackRock. I spent seven years at BlackRock in San Francisco and Newport Beach. I started on a trading desk. I always wanted to get into private equity real estate, so then I moved horizontally onto the capital formation team for the private equity real estate platform—which is another fancy way of just saying I went out and raised institutional capital for private equity real estate that BlackRock did, both on the equity and the debt side. It was really cool as a fly on the wall, meeting with large pension funds, family offices, endowments, sovereign wealth funds. You got to really understand how the thousand-pound gorillas think about real estate, think about risk, think about overall portfolio allocation.

Then from there, I got really close with the portfolio managers and the CIO for the private equity real estate platform, and I ended up going and working for him. So I was an investor during my last couple of years at BlackRock. I was managing a portfolio of industrial, Class A apartments, retail, and did some development as well. I had one office in Houston, so I do have some experience in managing office assets.

Then one day, my wife and I—this is during COVID—we’re sitting in San Diego. We just bought a rental property down here and we’re sitting at a Starbucks. This guy walks in and starts talking about mobile home parks. I was fascinated. I’d never met anyone that worked on the asset class, but I was very familiar with them; my mom lived in one. So I just always wondered who owned these things. I was fascinated by the fact that the tenants own the homes and someone is actually owning the dirt and someone's paying a space rent. I always knew that there were great assets.

So on his way out, I stopped him. I was like, "Hey, I've heard what you do. I'd love to buy you coffee and pick your brain." That person was Blake Comfort, who is the principal and the founder of Comfort Capital, the firm that I'm a partner with now. He's like, "Absolutely, I'd love to chat." He's like, "What do you do?" I told him what I was doing at BlackRock. He's like, "Man, I would love to pick your brain and see what you guys are doing."

So we just became friends for about a year, just talking markets, talking deal flow. Then our dads passed away within the same year over the same thing—cardiac arrest. So we bonded over that. And then I think we just came to the same realization: "Hey, have you ever thought about leaving BlackRock and coming and joining us and helping us scale the business and grow it?" I love the entrepreneurial spirit of it. I love what they're building. I love the asset class.

And so I did that in 2023. And since then, we've almost doubled our AUM. And this year, we're on track to acquire about $100 million worth of real estate, raising about $50 million of equity—all from high-net-worth friends and family, people we know, people that understand who we are and trust us. And so we don't do any advertisement or anything like that. And so it's been amazing. It's a blessing. So, sorry, it's a little bit long-winded, but it's tough to go through that story without giving all the details.

Joe Guidi (04:59)

No, it’s great. It's also like a testament to the value of curiosity. It seems like you chased curiosity throughout your career. And then obviously the ultimate in terms of this story is just hearing a guy in a coffee shop. I guess the value of curiosity and taking a minute from both of your sides, right? You never know what you never know. So obviously a big transition from... even if you were working on the real estate side, a big transition going from BlackRock institutional, raising from pension funds theoretically and the like, to talking to individual investors. Walk me through that transition for you.

Ben Schuster (05:37)

Yeah, it's a huge transition. I was actually catching up with a buddy that's still on the institutional side, and I was telling him about a deal we’re closing and told him the capital stack. He's like, "How many investors do you have in this deal?" It's like about 75, average check size about $250,000. He's like, "Oh my God, that sounds like a lot of work."

But he's sitting there through the entire year hoping he gets that $150 million check, right? Or maybe it's the $100 million check. And he's got so many decision makers involved, whether they're consultants or an investment committee. Where I'm working directly with the decision maker—people that are managing their own checkbooks.

And then they become friends, right? It's someone that puts me in contact with a person or maybe it's somebody I meet at an event and they want to hear about the business and about you. So you just kind of go down that path. They start talking about a deal after about a month or so, and then maybe they invest. I don't have a big sales team—I have a couple of guys that help me on the backend, but I'm the one that's speaking to everyone.

So they become investors, but then they become dear friends. And so that's been probably the coolest part about that transition is just being able to not only grow a business and buy really good deals and making money for people, but most importantly, becoming... some of these people are like mentors to me, right? Our average investor is 50, 60, 70 years old. They've probably sold a couple of businesses they held. They know real estate.

So they become dear friends. They meet my wife and my kids; I know about their lives. So that's probably the coolest part about the job—just that connectivity and those relationships that you build and that trust. So it means a lot to me. When they write that check and for the deals that we buy, when I tell them, "Hey, this is a good deal," it's because I truly believe it's a good deal. And I put my mom or my sister or my in-laws into these deals because I believe in them.

It's much more emotional than just taking an institutional check where it's such a revolving door. You might have a good relationship with a CIO at a CalSTRS or CalPERS or Texas Teachers, but they might be leaving, right? And they might retire or go to the next job in five or six years. It's so much more transactional on that side where this side is so much more relationship-based. So I really like it.

Plus, I like the educational piece of it too. I love educating investors about risk and returns and deal flow and, "Hey, don't put all your eggs in one basket, right? What other things are you investing in?" So I do feel like that piece of me—where it goes back to my story of the financial literacy—I've learned a lot through my years on just managing risk and understanding portfolio allocation. And so I try to instill that to my investors that want that advice on how they should think about retirement and how to manage their own portfolios, not just about investing with us, but anything that they do.

Joe Guidi (08:48)

No, that makes sense. I think the thing you're saying there that is so critical is just the value of those relationships. Obviously, you guys are 506(b) primarily, right? So all of your relationships are kind of closely held and have been with the firm. That's an interesting dynamic that I think people really struggle with as they make the transition to more of a lead-gen mechanism—506(c), Reg A+, whatever, however they're going to do it. And it's so important because it doesn't matter; just because a firm needs to scale doesn't mean that relationship is any less important to the next investor that comes through the door, but you don't have it when they get there. And so it's a very interesting thing. Tell me a bit about this: Comfort Capital existed for a long time before you got there.

Ben Schuster (09:43)

Yeah, 14 years before I got here—13 or 14 years. Now we're on our 16th year.

Joe Guidi (09:49)

So how was the transition? Obviously there's the transition of you institutional to retail, but then there's also this transition of—theoretically they've been dealing with one of the Comforts for 14 or 15 years, and now there's the new guy on the street. Walk me through the process of establishing and transferring trust.

Ben Schuster (10:04)

Yeah, no, it's a great question. So Blake used to... his primary role is sourcing the deals. He has all the relationships with all the brokers, obviously our mortgage bankers and everything like that for our debt. He's got the reputation on the street and then with actually other property owners who were buying these from mom-and-pops. So he was doing that, managing the buying and the selling and then the 1031 exchange.

We do a 1031 exchange strategy after we sell our deals. We're kind of forever holders of the asset class because we just like to compound cash flow and net worth and avoid taxation—or just defer taxation as long as possible. And he was raising the capital. So as you can imagine, wearing both hats is a lot of work.

And so when I came in, it was taking over the existing investor base. People were... and they'll tell you now they're kind of... I took over those relationships and I think you have to be a pretty special person to be able to do that where it's like, "Hey, no, I don't want to talk to you, Ben. I want to go talk to Blake, right?"

But I talk to all of our investors and they trust me. And it's because I think for a couple of reasons. One is I understand it very well. I'm in with the investment team, right? It's Blake and Jen—her brother and sister, the co-founders, the principals—and then we have another guy who leads all of our acquisitions and underwriting. But it's really Blake, Jen, and myself who are the decision makers on a buy-sell, right? And so because of that, I will never go raise capital on a deal that I didn't give the buy approval for or that I don't believe in.

So that transition went pretty smooth. It took a couple of years and then I brought on all my own network of investors, right? So the historical investors I still talk to and love them dearly, but we have been adding more and more investors. And so our capital stack on our list—on the names—looks much, much different than the capital stack just four years ago. There's a couple of names that are still there, obviously, but it's a whole new transition of individuals. And that's primarily just because, as you can imagine, people start to age out and there's only so much liquidity that a person has to allocate to an illiquid asset class.

Joe Guidi (12:30)

Yeah, that makes sense. Well, without a doubt, and we hear that as a challenge occasionally, especially if things aren't dispositioning or something like that. Because most of your investors either had a relationship with you or existed in the firm prior to you being there, they kind of all know your track record, right? I mean, at the end of the day, you're not dealing with having to talk about track record probably as frequently as most firms because they've experienced it.

Ben Schuster (13:07)

Yeah, that is true. I mean, on any given raise, 20% to 30% are all new investors. And so it's all repeat and referral. And the referral is the piece of the new, right?

And so you talk about track record. We have a 16-year long-standing track record. Never lost capital, never had a capital call. I won't go through our numbers, but they're good—just because this is a public forum and we're a 506(b). But yeah, you talk about track record... track record is incredibly important, but people really at the end of the day sign the front of the check to people that they trust and people who are authentic, as well as experienced operators, right?

Because the last cycle that we're coming out of now—I mean, anyone could have bought any asset class and made money from 2012 to 2021. Now is the time where actually the true operators—the true people that understand risk and how to manage risk and how to structure deals and source deals and buy right—those are the folks that are coming out of this and growing, like us having our largest year ever on record.

And it's because of cycles. You know, when the tide goes out, you start to see who doesn't have pants on, and we're going through one of those cycles right now. And so that's what people really look at. And so right now we're raising more capital and seeing the best deals we've ever seen because people are experiencing capital calls or bad communication from other GPs, whereas our entire portfolio is performing.

We do 50% fixed-rate loan-to-value deals. We don't financially engineer our things. We run a clean 80-20 split. We don't overcomplicate our structure. And so the less time that you have to go through and explain to somebody all the times you messed up—you know, how complicated your structure is—you really have to oversell to try to get a deal. It's kind of a red flag for most people where it's like, "This just kind of sounds like too much, and I just don't have the time for it." So it's like the keep-it-simple-stupid really does go a long way. And we try to keep it simple.

Joe Guidi (15:21)

Yeah, simplicity is really, really important, especially with just high-net-worth or accredited investors. These aren't professional investors at the end of the day. They could get bogged down, which actually leads to something else we talk about on this podcast a lot, which is over-communication and under-communication. So let's focus on communication just in general. I want to touch on over and under in a second, but first, in terms of establishing the relationships with your investors... it sounds like it went relatively smoothly. What I'm always interested in is when things don't go exactly to plan, or someone was used to some sort of communication and you weren't giving it that way. Because you guys went through that transition, talk to me about a time where—either at a firm level or an individual level, either inadvertently or things... you know, inadvertently violated trust, or things didn't go quite as planned—and how you think about navigating those situations.

Ben Schuster (16:28)

Yeah, I know. It's a great question. Yeah, communication is key. I think you don't always want to over-communicate as well. So maybe I'll touch on that after I hit the more direct question that you have. Like a time where things didn't go right... I think early on, going back to Blake both raising the capital as well as deploying the capital... some of our earlier deals were more heavy value-add in nature.

So you could think about low occupancy—it's a big infill strategy because you infill the homes—or maybe you're buying a deal that sits on private utilities, whether it's private septic. Knowing all those risks going in, but then maybe not having... because loans shifted at the last minute... not having the ability to ensure that you are budgeting correctly and raising enough capital to then execute on those deals effectively.

That is kind of some of the stuff that we experienced during 2019 and then going into 2020 on a couple of deals. One deal in particular, well aware of the risk—it had all septic sewers that were old and they knew that going in. And then there was also 50% occupied and a big infill strategy. So they raised all the capital—they came up a little bit short on the capital stack but just pushed through—ended up infilling those homes. And the thought was that you infill, you sell those homes, you replenish the reserve, you get a couple of years with these septics, and then you could then have the money to budget to then change the septic-to-city sewer connection.

The infill strategy was going well. It takes a lot longer than anyone thinks to infill and sell homes in our space, which we experienced firsthand. But then 2020 came where COVID came, and right at that time, those septics started to fail. And so then you get pulled forward on having to address it and do the city sewer connections, which is a big multi-million dollar project—which they knew going in.

But the problem with COVID is that as they started these projects, the workers had to leave and material prices increased tremendously. And in order to get through that time, which was very stressful, they took another supplemental loan out. And then the GPs even loaned the property money at no interest, no points—loaned some additional cash to the property to be able to execute.

And then through that time, distributions got cut from five to three and a half. It was an early deal, so one year in usually starts at like 5%, cut to three and a half for six months. But they did a great job communicating, both sending out emails and then calling all the investors. Luckily, at that time it was a black swan event, so everyone kind of knew with COVID... they understood. See, everyone kind of got a pass during that time.

And then they were able to get the property 80%, 90% occupied. They got the city sewer conversion, and then we sold it to a $50 billion private equity shop that just got bought out by Apollo last year. We only did an 11% return on that. But no investors lost their capital. Returns only... their cash flowing went down for six months from five to three and a half.

And then we decided not to continue to hold it because we wanted to redeploy that capital into a better, more secure asset that we thought had better long-term value. So we don't always play to a track record. If there's money tied up into a deal and we have a better deal that we think has a higher net present value—which is just a mathematical way of saying it has a better long-term return structure behind it—then we're going to sell that deal even if it's only a 12% or 10% deal in a still-early 1031 exchange and then roll it into something where we think we're going to get a 15-plus with more certainty.

We kind of operate more almost like a family office rather than just this deal-turning machine that plays to a track record because we're always struggling to raise capital for our next deal. We don't struggle to raise capital because we're not buying deals that we believe is going to be hard to raise capital for.

Joe Guidi (20:51)

Got it. That makes sense. Okay. So what I heard in that story was obviously like the problem that you ultimately encountered was already underwritten, but it was underwritten further into the future. Couldn't underwrite COVID. So that happened. Steps the GP took were communicate early. Didn't stop distributions, just cut them. Loaned the deal money at no points, so at their own expense. And then kind of disposed of the deal at a gain for the investors along the way there. Like... was anyone coming back being like, "Hey, this is unacceptable"? Or do you feel like the communication... you weren't there, right? So the communication strategy... you weren't there, right? Okay. Well, I won't dig too much into this. This is a good story. Thank you. That's perfect. One of the things we try to get a sense for is how do you react when something goes wrong? And what's your...

Ben Schuster (21:39)

Yeah, and you always like... I mean, the question there is... and so I've been fortunate that... and knock on wood, it's only been two and a half years. So we'll follow up in five years and maybe I'll have a story. But the way you always address this, right, is you've got to be upfront with communication. You always have to communicate the solution that you're working towards. Being clear, because people look for leaders and they want to see that people not only address an issue and they don't blame somebody else—they take responsibility—but they have a clear line of action on how to resolve it, right? And they lay out exactly how they're going to do that.

So that's the way you always communicate to any sort of investors, especially when you have the responsibility of managing capital—which I think is the most important thing. I mean, money is a very sensitive topic. It's like religion, family, and then money, right? So it is a very important job. And so you need to make sure you do a really good job at communicating and instilling trust in people and keeping trust. It's hard to get trust. It's really easy to lose it. Otherwise you're going to have a short career in private equity real estate.

Joe Guidi (22:48)

Yeah, I think without a doubt. It's really hard to scale if you can't get investors. I think that part of what we're seeing—the dynamic that we're facing in the market—we're seeing it obviously in the reviews, right? Like... not only do people... I don't want to judge what people actually did, but it appears that some people didn't underwrite their deals properly, maybe pursued financial strategies that were a little overextended. Some investors are paying the price. I think the problem... what we see from LPs is not even like... they know they're taking a risk. LPs in general, if they've been communicated to properly, know they're taking a risk. They get really upset when the person who they trusted is not honest with them or just is not present. That seems to be the underlying theme. LPs can tolerate some amount of market volatility or things not going exactly the way they planned. They know that if they took a pie-in-the-sky deal, sometimes that doesn't go exactly right. But when the person they trusted doesn't take ownership of that and communicate with them, that's when they really get upset.

Ben Schuster (24:06)

I agree. And like... I agree completely with what you're saying. And even just like... another thing... because I don't have a huge sales team, I'll get clients that call me every once in a while. And who knows—maybe it's someone that the mom or dad died and the kid has it now, and he's like, "What is this that I got that I inherited?"—doesn't understand it. So he's calling me asking to redeem or whatever. And so I'll work through him to try to find someone that will buy those shares.

And so sometimes you don't always know who you're dealing with. And so what I always try to do is understand it from their side. Not every investor is the easiest to work with. And because I don't have a huge sales team and I have young kids and I have a life as well and helping grow and run a business... what I always try to do is, if someone calls me and I don't get back to them right away, I'll make sure that... "Hey, I'll send them a quick text or an email: 'Hey, really busy, I promise I'll get back to you.'" And I always make sure to follow up with them.

Whether or not they're happy—if it was a couple of days or a week—everyone has their own perception of what's urgent and how fast you need to get back to somebody. But stuff like that happens all the time, you know what I mean? And so I just always try to over-communicate. People have my cell phone number. All my investors have my cell phone number. So it's like you just call me, you get in touch with me, and I'm pretty responsive. I'm a little bit of a workaholic and so I'm trying to change that, but it's not hard to get ahold of a senior person at Comfort, which is nice.

Joe Guidi (25:37)

Yeah, got it. That's good. It’s important for maintaining those relationships with investors. We should have a... I'm interested in the recap that we do two or three years from now that you just suggested. It would be interesting to see how it scales, too. Because I think one of the things that we note—and we wrote an insight article on this, InvestClearly Insights—the communication pre-investment to post-investment communication gap specifically starts to really show up in the reviews as firms scale, especially over a billion AUM. We really start to see it because the teams are bigger. So it would be interesting for you to get your perspective as a leader as your team builds out on how you maintain that.

Ben Schuster (26:16)

Yeah, for sure. Dean Graziosi—who's just an interesting guy, we like to subscribe to Tony Robbins and he's kind of part of that network—I read one of his books and he talks about how no one focuses on the post-sale transaction. And so that's something that we really are trying to emphasize. We do quarterly reports, we have big investor events every year where we bring everyone out. And so we do fun stuff; we really actually enjoy our investors.

As much as I'm pitching to someone to convince them, there's times where I'm allowing them to do the same to me because I don't want to take on a problem. I want to work with people that actually will improve my life and I enjoy speaking with. But he talks about that post-sale transaction. And so we think about that a lot. So we do really cool... like, today's closing day for us on a $28 million portfolio that we're acquiring. So I'm just waiting for the text on title recording, but money's been issued from escrow.

So we're going through our entire list. And I know everyone personally, and I know like, "Oh, I know this guy loves Ferraris and has a 296, so I'm going to get him a model 296 Ferrari." I know he or she likes really nice wine, or I know they like these restaurants—I personalize those gifts out to them, right?

And so trying to do stuff like that, because that's what's cool about being a young entrepreneurial firm. We're all in our mid-30s, young 40s with kids and trying to grow a business. It's like we want to do things differently. That's why we office out of a hangar. In San Diego, we are all like the aviation background. So it's like we just want to do things that give people a sense of, "This is cool. These are great returns. But I actually like this experience, and it's fun and it's different than just investing with somebody else."

So we're trying to... not only are we trying to change the stigma of mobile home parks—manufactured housing communities really elevating the living standards and bringing the standard up so we could... a rising tide lifts all boats. That's why we invest millions of dollars back into the communities. But the same thing with the investors. We just want it to be a really fun, cool experience that way we can all have fun and make money together and enjoy our lives.

Joe Guidi (28:32)

That's great. I think that's a good place to start wrapping it up. Before we do that, we ask everybody this question. Pat would say, "What part of passive investing needs to die?" Like, what element of this whole ecosystem is no good and needs to go?

Ben Schuster (28:48)

Oh my gosh, that's so funny. You asked me this question... I was thinking about this last night. I was reviewing a couple of deals that people sent me to invest in personally. And I think all the tiered different asset or share classes to invest in—that needs to die. The complexity on the investment structure, to me... I hate it. And I'm a very sophisticated investor. I understand waterfalls, but I just looked at someone's deal and it was like Class A shares, Class B shares, Class C shares... for like a $20 million or $30 million deal.

It's like, "What are you doing? Why do you have so many shares?" And one of them was cash flow only. Like... if anyone's listening to this, you should never invest in equity if it's cash flow only—just go on the debt side and get into a more senior position than to get a cash-flow-only position.

So I think that people that overcomplicate waterfalls and tiered structures... I just think it's ridiculous. And to me, it's the first red flag that it's not a great deal if you need to financially engineer through different tiered waterfalls. I'm not talking about co-GP—if you invest 5 million bucks and you get a piece of the GP and you get a little preferential treatment, I'm not talking about that. I'm just talking about all these different share classes that people try to do and all the complexity. It's like, just keep it simple.

So that's what I think needs to die in that syndication and passive investing realm—all just the tiered waterfalls. It's too complicated and investors just don't understand it. And I don't even understand it—I've been doing this for a long time.

Joe Guidi (30:19)

I think it's a good word. All right. Well, if someone listens to this podcast and wants to find you, wants to find Comfort Capital, where should they go?

Ben Schuster (30:27)

Yeah, you can find me on LinkedIn. I'm active on LinkedIn—Benjamin Schuster—or you could find us at comfortcapital.com. There's a button there to submit your information if you want to learn more. You can't see deal flow unless you kind of go through me and we build that relationship, but I'm an easy guy to talk to and I love meeting new people. So feel free to reach out.

Joe Guidi (30:47)

Thanks, man. Really appreciate your time.

Ben Schuster (30:49)

Thanks, Joe. Have a good one.

Joe Guidi (30:50)

You too.