Manufactured Housing, Operator Discipline, and the Shift Toward Debt Investing: Nathan Jameson of Arx Capital

Steven Weinstock (00:00) Hello and welcome back to another episode of the Wealth Clock Podcast. I'm your host, Steven Weinstock. Today's guest is Nathan Jameson, founder and managing partner of Arx Capital. Arx — ARX Capital. Nathan has spent more than 20 years in real estate construction operations before launching Arx Capital. He helped grow a national home builder from approximately 30 million in annual revenue to more than 160 million, giving him first-hand experience scaling systems, managing people, and executing through different market cycles. Today, Arx Capital focuses on manufactured housing and other resilient real estate investments, with an emphasis on disciplined acquisitions, operational excellence, and protecting investor capital, which is number one. Nathan believes successful investing is much more than buying good assets — it's about having great operators behind those assets. Nathan, welcome to the podcast. Nathan Jameson (01:01) Steven, thanks for having me. I'm really looking forward to it. Steven Weinstock (01:02) No problem. Okay, before we start, I do have a sponsor, and that is CableNOI. CableNOI helps landlords who own properties that are twenty units plus earn revenue from cable companies. They will pay you money to be the exclusive at your property, which means the tenants still call their local cable company to order internet, phone, TV — the landlord gets a piece of the action, and they will even get an upfront per door fee, somewhere between 100 and 200 bucks. There's no wiring, there's no tenant friction, there's no telling the tenants anything about it. You don't have to bill the tenants. And depending on the property, the cable company will even give a free account for the leasing office. So visit CableNOI.com — CableNOI, net operating income, CableNOI.com. Nathan, what's going on? Nathan Jameson (02:01) I am back from a recent family vacation and I'm a little jet lagged, which is not something I feel very often. So my empathy to those who feel that. Steven Weinstock (02:10) Okay, so since you mentioned it, where are you from? Where did you visit? And how'd you get there? Nathan Jameson (02:16) Yeah, so I live outside Philadelphia in the western suburbs of Philadelphia. Go Birds. I was in Switzerland for almost two weeks, first time in Switzerland. We took our entire family — our youngest is 10, we have four kids, oldest is 19 — and we traveled throughout the Swiss Alps area. The number of times that we remarked it just feels like you're looking at a green screen — I mean it had to be fifty times we said that. And it's really true. It's unlike any place of beauty that I've visited before. It was a very active vacation. We did a lot of hiking, we were outdoors a lot, which we really enjoyed together. Steven Weinstock (02:59) Got it. When you say Philly suburbs, does that mean New Jersey or Pennsylvania? Nathan Jameson (03:04) Pennsylvania. Some people call it kind of the Main Line area. We're on the train line that's west of the city. As the crow flies, it's a dozen miles or so. Steven Weinstock (03:13) Got it. I used to hang out in — I think it was called Haverford. Nathan Jameson (03:18) Yeah, not far from us at all. Steven Weinstock (03:20) Okay, so tell us about your journey before Arx Capital. You helped grow a home building company. Tell us about that. Where was this company, what did you do, was this your first job in real estate? Nathan Jameson (03:35) Yeah, it was my first job in real estate. Although it's interesting — I was there thirteen years and I did something new and different kind of every two years. I started in land acquisition. We were a very small home building company at the time in 2004. And I think it's relevant because acquisition and underwriting has really been what has driven a lot of our success — if you don't buy something right, the work to make it productive for your investors is all the more challenging. In some cases you can't overcome a bad buy. I learned that really at the outset of my career. From there we had a lot of success acquiring property and we had an institutional partner. For those of us old enough to go back to 2006, which were pretty heady days in real estate, we raised a $200 million fund to go invest in home builders in 2006. Sounds brilliant, right? Well, we were at the end of the cycle, and I was placed in the role of chief investment officer of that fund, looking for builders who would be good stewards of capital, particularly in 55-plus age-qualified home building — clubhouse, swimming pool, first-floor living. I'm proud to say we invested very little money because we had a front seat to what was going on in the home building markets. Most of what we invested, we invested in our own company, which gave us the staying power through the Great Recession. We shut down the fund and I stepped into an operating role with my partners, managing first a region and then multiple regions of the home building company through the Great Recession. As a younger person, your eyes are really open wide when you spend most of your day meeting with people who've bought a home from you. We were building these homes custom — these are older people, 60, 65 years old, they've given us a significant part of their savings to build their home, and builders are going bankrupt and belly up every day. I'm meeting with them, articulating why they can count on us to build their home, to build it in a quality manner, and to create the kind of lifestyle they're hoping to live in retirement. Proud to say we had a ton of success — we were named multiple times the nation's best 55-plus builder by the NAHB. And in 2016 I had an exit from my partnership and I started Arx Capital. Steven Weinstock (06:08) So let me just simplify — when you were at this previous company, were you there as an employee, were you there as an owner, how did that work? Nathan Jameson (06:16) Initially as an employee and then as an owner. Steven Weinstock (06:19) Got it. Was this your first real estate job? Nathan Jameson (06:21) It was, yes. Steven Weinstock (06:22) Did you have a previous career before, or were you fresh out of elementary school at this time? Nathan Jameson (06:28) I had about three years prior. The first year was spent in economic development, which is where I really affirmed my love for real estate in the built environment. That was in the South, in North Carolina where I grew up. And then I had a stint where I chased my heart — I was an assistant basketball coach at Lehigh University for a couple of years. Steven Weinstock (06:50) Is that how you got to Pennsylvania? Wow. Nathan Jameson (06:51) It is. I played basketball at UNC Greensboro for a Philly guy, Fran McCaffery, who's now back in Philadelphia at Penn as the head coach. And kind of sight unseen, my wife and I moved to Bethlehem, Pennsylvania. In 2002 I thought I wanted to be a coach forever — you know, Mike Krzyzewski and Nathan Jameson. But about a year in I realized that the business of coaching was not something I really enjoyed. I loved the camaraderie, I loved the competition, I really loved investing in the young people we were entrusted with, and we had a lot of success. I'm one of the number who've both played and coached in the NCAA tournament, which is pretty cool. But after two years, and after getting an MBA, I moved on to real estate. Steven Weinstock (07:42) Okay, so let's fast forward to Arx Capital — you're focusing on manufactured housing? Nathan Jameson (07:49) We are. And I would say housing generally with a focus on affordability. We also do RV as housing — the seasonal kind of RV, not really transient hotel-style RV — self-storage, value-add self-storage, and then we do some development. Because of my background, we finance or provide equity for entitlement work and land development, where ultimately the lots are usually being sold to national builders. Steven Weinstock (08:15) And you're buying existing properties and doing development. Which part of the country? Nathan Jameson (08:19) Geographically, we really like the Northeast and Mid-Atlantic. Today we own property in New Jersey, Maryland, Delaware, Pennsylvania, and Ohio. We will soon own property in Missouri. We like the Midwest as well. And a qualifier on why we like the Northeast and Mid-Atlantic — based on my experience in home building, we really like places where it's really hard to produce new housing. I spent six hours yesterday sitting in a hearing in the Pennsylvania Court of Common Pleas where we're trying to get land approved for apartments. I had to sit into a hearing where the township is suing itself — the township is suing its own zoning hearing board because the zoning hearing board gave us, the developer, a special exception to reduce the parking required from two per unit to 1.6. And the township is suing itself. I had to go there on behalf of the developer and the current landowner to make the case for why the zoning hearing board should prevail. I sat there thinking, people don't understand how hard it is to produce one of the most important resources we have as a country, which is housing. Steven Weinstock (09:23) Yeah. Some of the biggest factors in the price of real estate has to do with regulation. Most investors are chasing apartment buildings — it seems that you're focusing on manufactured housing. People think manufactured housing means trailers. Is there any luxury aspect to manufactured housing? Is this Class B workforce housing? Nathan Jameson (10:24) Sure. Yes, you mentioned trailers — I think most people think about manufactured housing as a mobile home park. Often it's the real estate that goes unnoticed. Many people don't even realize they have a mobile home park in their community. Those who do, if they don't live there, would say they don't want it there. I always say affordable housing is something everybody's supportive of — they just don't want it near them. The reality is it's meeting a significant need for lower-income folks who need a monthly payment — including utilities, the rent for the site, and maybe a loan for the house — under, say, fifteen hundred dollars a month. That's readily achievable, in many cases way below that, for many mobile home parks. The number of mobile home parks in the US is decreasing every year because it's too hard to build new ones. And when old ones aren't maintained, there becomes a higher and better use — someone buys that, clears everybody out, and builds a strip center or higher-end products. We like to think that we're in the business of preserving and ensuring that this affordable housing can remain for the long term. Steven Weinstock (11:47) Got it. In the areas where you have manufactured housing, are you managing these properties? Do you partner with other operators depending on location? Nathan Jameson (12:08) We are self-managing all of our mobile home parks. For your audience — there's really only two or three qualified third-party managers for mobile home parks. In the multifamily industry, which is much more mature, you could pick up the phone and speed dial a dozen professional third-party management groups who would handle your 50 to 250 unit community. Mobile home parks don't lend themselves to that at this stage in the industry's maturity, in part because if I have 250 mobile home units versus 250 apartments — the apartments might have 300 feet of sewer line and 300 feet of water line. A mobile home park might have three miles of sewer line and three miles of water line. So the maintenance and the capital nature of the land improvements is much more intensive than in a typical multifamily scenario. Steven Weinstock (13:14) And you're hiring people to work at the property directly? Is there some sort of leasing office? How big are these parks? Nathan Jameson (13:30) In general, no. We almost have a hub-and-spoke system. Where we have a larger property in a region that has staff on-site, they would also support smaller properties in the region. We think about it more on a per-unit basis — how many people are employed by the property management company per hundred units. Those hundred units might be a single property, or we might have a 50-unit property 30 minutes away and a 60-unit property 45 minutes away, with the hub being a 150-unit property. Steven Weinstock (14:10) Are you guys buying or investing in housing that's manufactured but not necessarily a community — single-family homes, two-family homes that are manufactured? Nathan Jameson (14:25) We are not at the moment. Maybe it's worth talking about the difference between manufactured and modular. All modular housing is manufactured; not all manufactured is modular. It has to do with how the home built in a factory is affixed to the ground. Mobile home parks or manufactured housing are generally not on a permanent foundation. Ironically, that's one of the things that keeps homeowners from getting more affordable financing — a lender views it as "well, that home could drive away," even though 98% of homes never leave the original site they're put on. A modular home would be affixed to a foundation or crawl space or basement, much like a site-built home. Each category benefits ideally from the efficiencies of being built off-site and moved to the site. Steven Weinstock (15:17) And are you investing in modular? Nathan Jameson (15:21) We are not investing in modular at this time. Steven Weinstock (15:24) Why not? Nathan Jameson (15:24) For one, the cost to produce it is higher and we're more focused on that affordable price point. In general, in modular housing you see a little less density typically. I just came from Europe, so I'm thinking about how Europe is advancing beyond us in some factory-built housing. But the downside of factory-built housing is you've got a physical plant. You've got a line that needs to run every day, shifts where workers need to show up and be paid, and you need orders to fill that shift. The reason it hasn't taken off in a greater way in the US is you can be more responsive as a home builder when you're site-building homes if the economy turns or orders decline. Whereas if you own the physical plant and the throughput slows down, you're burning millions of dollars a day and not building any product. We like the space we're occupying with manufactured housing. We think that's where the demand is likely to remain, and we'll continue to watch as it develops. Steven Weinstock (16:40) You've been through 2008. What are investors who are investing today not learning from what happened in '08? I'll start — 2008 was a crisis for many reasons, but a lot of it had to do with the real estate sector. When we have other bad economies, like 2022 when interest rates went up, a lot of it is not real estate focused. Back then, pre-2008, you had a lot of investors and homeowners buying property that was either leveraged to the hilt — 100% financing all day long. People were buying with 80% loan to values with a second 20% loan to value closing on the same day. Since 2012 you've had a lot of DSCR types of loans, tons of liquidity, funds and non-traditional banks lending in this space. But the one thing I did notice since then is that they've still stuck with a decent loan to value — for the most part it's 25% down. Every once in a while they have loan-to-cost formulas, but for the most part LTVs have been 75, sometimes 70 on a refinance, sometimes 65 or 60. That keeps a lot of the potentially catastrophic outcomes from leaving the lender holding the bag — property's worth 100,000, they lend 75,000, take it back from an investor, sell it, recoup their 75 LTV. Is there anything happening today that people who've been through '08 should still remember? Nathan Jameson (18:58) I'm not sure the people who went through '08 are the ones with the problem. I agree with you — home loans, and the lenders who make them, have been significantly more conservative on every measure. What do we have new? One of the big things is the ability for accredited investors to invest broadly in private offerings. There's a lot of wealth generated over the last decade, and people are looking for ways to invest that wealth. Add on social media and podcasting, and all of it accentuates FOMO. People fear missing out on an opportunity. It's human nature. We fall in love with the sexy Instagram ad, or the marketing on the stated IRR for a deal. In my experience, a lot of these people have never really made any money and never really risked their own money — they might be risking their time. People who lived through '08 have a greater appreciation for the wisdom that comes through when everything is not up-and-to-the-right. I'll be the first to admit I've missed some opportunity because I'm dubious about how long this up-and-to-the-right can continue. One of the marks of '08 that scarred me was the level of financial innovation. When that increases — back then CDOs, CDOs of CDOs — it's Wall Street trying to figure out how to make money on other people's money. We have a scenario right now that looks a lot like that. The risk is in different sectors of the economy, but we've got increasing financial innovation. The big question mark for me is how much leverage is out there. Margin loans are at an all-time high. And you start to think about single-stock ETFs that do 2x or 3x — you could lose 90% of your money if the stock goes down 30%. All of that is feeding this FOMO. I really like physical assets. I like assets that are out of balance in terms of supply and demand — less supply than demand — which is why we're in the space we're in. Steven Weinstock (21:32) A lot of our audience raises capital from investors, sometimes family and friends, sometimes sophisticated investors. What has changed over the past few years — let's say the last three or four years, post-COVID, post-2022 — when it comes to investors raising capital? In my industry, multifamily, there's a lot of hurt happening. A lot of it is properties purchased in '22 and '23. People who bought in '24 and '25 sort of have the rate shock already built in, the insurance costs, the cost of labor. But there's a lot of bad news happening in properties purchased in '22 and '23. That's some of the properties we own, and that's where we struggle. Stuff bought in 2019 is doing fine for the most part based on the basis it was purchased at. But investors are getting burned on the equity side in multifamily. What are you seeing from investors today differently than a few years ago? Nathan Jameson (22:58) To your point, getting burned has led them to ask more questions, which is appropriate. You're seeing some shakeout among syndicators and people who had initial success riding the wave of late-COVID and 2020-2022 capital raising — there was a next step to the capital raise, and that was the operation. There needs to be some substance behind the raise to produce compelling returns. From my perspective, I always came to this from an operating perspective — that was my background, boots-on-the-ground operations. Then I had a personal dilemma where I had capital I needed to invest and I was looking for a sector to invest in. We've grown our investor family more slowly because I was the one who needed to invest. I was making anywhere between 50 to 75% of the equity investment. Now, as we've proven out our operating model and had a number of successes for our investors — it's kind of like one of those old truisms. Getting rich quick, to me — I read the Bible daily, and you go to the Proverbs — getting rich quick is a recipe for disaster. I've chosen to take the slow-and-steady road. It's hard to post on Instagram about taking the slow-and-steady road. Steven Weinstock (24:27) Definitely. That's why on Instagram, anything I post are short clips from my podcast interviews. Nothing too fast unless it's recorded on 2x. Nathan Jameson (24:37) Yeah. What's your sense? You were around — what do you think has changed in the last few years among LPs? Steven Weinstock (24:48) I'm seeing a lot of LPs — well, there are different types. There are professional LPs and non-professional LPs. People who have a few bucks, don't like the stock market, hear about real estate, stick a few bucks into a deal and see how it goes. Then you have the professional LPs who've been around multiple cycles — they ask better questions, they understand when the preferred return is not being paid for a few quarters, they have a long time horizon. I do see a shift going from investing on the equity side to investing on the debt side. There's a lot of debt investing these days, and I think it has to do with investors who didn't do well on the equity side. Some projections didn't go through and they're getting opportunities to invest on the debt side. They lose some of the benefits of the equity side, like depreciation and tax benefits, but on the debt side they really like their consistent return. Most debt investors are getting paid every single month. Here and there you might have some accruing structures. Investors are liking that, and they seem to be investing in a lot of bridge type debt where rates could be 8% to 12%, typically short term — one year, two years, maybe an extension. I'm seeing a lot of debt investing. Even myself, I've always invested in debt over the years, but it was more "hey, I have some money sitting around, let me package it with a few other people and give somebody a first lien loan on a fix and flip." Only the past year or so have I been more on investing in debt. I've been in real estate since 2001 and I've been waiting for this concept of mailbox money to come through for a very long time. My first property was in Trenton, New Jersey. Even though I did well and the appreciation skyrocketed, it was hardly mailbox money. And as I started buying nicer properties closer to home — I'm based out of New York — better properties, easier to manage, some multifamily about ten years ago, out of state — nowhere near mailbox money. It was a job. I'm compensated for the job and living my best life, but it was the furthest thing from mailbox money. When I had these little investments into some of these debt deals, other than really vetting the opportunity up front, after that I guess you could say it's on autopilot. Yes, I have to be aware, but on the operational side there's really nothing for me to do. There's also a lot less variables that can go wrong on my part. As a debt investor, either they're paying or they're not paying. As an owner of the property — and I still own and manage property — the property management side takes a lot of time. There are so many variables that could happen — tenants not paying, banks being tough with inspections, insurance, code enforcement. Obviously the buck stops with me. When it comes to the debt side, after 25 years, I'm enjoying seeing the ACH or the mailbox money come through, and it's pretty nice. Nathan Jameson (28:48) Steven, if I may — your experience of the investor looking at equity versus debt: do you think that the typical limited partner really understands the collateral on the debt side? Steven Weinstock (29:01) That's a great question. When I speak to some of my investors on the equity side and I've told them about some of the debt opportunities I have, some of them get it — but those are the ones asking questions. Some of them are asking questions but not listening to the answers. In theory these people are bright, they make some money, they either have a good W-2 or a small business, but they're not real estate people. I try telling them, "Hey, you have a house, you have a mortgage on it, the bank couldn't care less if you lose your job. Obviously they pray every night that you have your job, but at the end of the day, they don't care that the toilet is running, they don't care that the roof collapsed. On the first, it's due. Thirty days later it's late. They move for foreclosure." Investing in debt, I tell them, is something similar, but the bank on your house is only getting 3% or 5% — there's no upside. Your house triples in value, the bank gets nothing. Some people understand, some people don't. To answer your question, a lot of people don't necessarily understand it. Nathan Jameson (30:17) Yeah. I follow the shift toward debt, particularly the private credit markets. In my mind, private credit markets broadly fall into two categories — one is asset-backed, I'll say real estate-backed, and one is not. Where the real problems are, I think we're seeing, are the ones that are not asset-backed. The genesis of my question is that a lot of people bought into this idea that they were getting this coupon and they didn't really ask where the money was coming from. At the end of the day, somebody has to pay rent, somebody has to buy a product, there has to be a transaction for that money to make its way back through the claim on the cash flows and make that debt payment. It's kind of like what we saw happen in the syndication market where people just said, "look at that return I'm being promised," plopped the check down, and didn't care to understand what could go wrong. Steven Weinstock (31:14) Yeah. I'm seeing that on my end with the people I deal with. I used to say years ago, the banks — the JP Morgan Chases, the Deutsche Banks — they have big exposure to real estate, but for the most part they're on the debt side. They don't get the big pop when it doubles or triples. But for the most part the banks, or rich people, are more about preserving capital. It's the people who aren't rich or the people who need to make money who have to really go in on the equity side. I used to say when you have no money and you want to be in real estate, you have to be on the equity side because you have to find the deal, find some sort of investor, get a loan, invest your money, put it together, operate it well, eke out a profit, give most of it or part of it to the investor, and whatever's left you get. When somebody has money, they want to beat inflation for the most part. Obviously some people are more prone to risk-taking in a good way — they want to be diversified, or for personal reasons they hate the stock market, they love crypto, they love real estate. But there are a lot of different types of investors and a lot of different appetites. And the best thing — I tell this to investors — for the most part you're investing in me, or in the operator. That's what you're investing in. Nathan Jameson (32:47) Yep. Yep. Steven Weinstock (32:49) So the deal could be great, the deal could not be great, but if I'm a great operator, I'm showing you this crappy deal and I can make it work. And if you're a horrible operator, I can show you this great deal and it's not going to work. Here and there with debt investing, we could sort of convince them that it's more secure, a lot less variables to go wrong. I don't have to be a great operator to invest in debt — I just have to know how to underwrite the deal upfront. There are so many different ways to skin the cat and invest in real estate. Like I said earlier, I'm really enjoying the mailbox money aspect of the debt investing, and I'm saying that as somebody who's been in the business 25 years and still owns and manages and deals with all the operational challenges. When it comes to debt investing, I'm sort of having fun. Nathan Jameson (33:49) Yeah, well, I'm intrigued. I love the way you've described that. At Arx Capital we've looked at some options to have some asset-backed vehicles. When you've had success producing compelling returns for investors that are appropriately risk-adjusted, they say, "Hey, what else do you have?" One of my greatest appreciations is of our team — Arx Capital isn't just Nathan. We've got a team thinking every day about how to drive value for investors. As we think about different products to add, I may want to pick your brain a little more if you don't mind. I love if I can say that you're close to the loan. If we think about some of the stuff that's gone wrong — you read the headline, "JP Morgan writes off half a billion dollars with First Brands" — because somebody was incentivized to make a loan and didn't check the collateral. You had collateral that's double-pledged. If investors can find their way to somebody like you — some people would have the opinion, "Well, JP Morgan's not gonna miss it because they're JP Morgan." I have the opposite opinion. I think Steven's not gonna miss it because it matters everything to Steven. At the end of the day, that's on their balance sheet — they've got the cash to just take care of it. I'm a big fan of finding those smaller managers where it really matters for them. Reputation matters in a huge way. Steven Weinstock (35:24) Yeah. I agree. It's all about investing in the operator. You have to feel comfortable with the person you're giving the money to. That's the number one lesson. We went a little long here, but Nathan, tell everybody how they could reach out to you. I'm going to put everything in the show notes, but just mention any websites, emails, phone numbers, LinkedIn, etc. Nathan Jameson (36:00) Sure. Email's great — nathan@arxventures.com. Again, Arx is A-R-X. Our website is arxventures.com. We just raised — our team raised — fifteen million dollars last week for our third fund after a successful transaction in our second fund where we sold some properties. We're filling out our third fund right now and it will probably be oversubscribed in the next few months. I encourage people, if what we're talking about is interesting, follow along. I've realized, maybe it's taken some maturity on my part, I'm not looking to make converts — I'm looking for members of my tribe, people who see the world the way I see it, who think about risk and conservatism the way I think about it. If that resonates, we'd love to talk to you. If you're looking for me to convince you that you should invest in mobile home parks, or that the depreciation's great, or that we're a great operator — the reality is people have a certain lens they look at the world through. My lens tends to be a little more conservative than a lot of people out there. If that resonates, we'd love to spend time together and ultimately have you invest alongside me. Steven Weinstock (37:30) Okay. Nathan, thank you very much for appearing on my podcast. I'm happy we finally got to talk. For all of you listening, this has been another episode of the Wealth Clock. I'm your host, Steven Weinstock. Please like, subscribe, share, tell your friends. Follow us on Instagram, Twitter, TikTok. Either way, just keep listening. Thank you, Nathan. I really appreciate it. Nathan Jameson (37:53) Thanks, Steven. Really enjoyed it.