When you buy an RV park, sometimes the seller offers to stay on as the manager of the property. Or maybe you’re thinking of approaching the seller to assume this role. Does this work? Here are our observations on this management concept.
How can the problem be the solution?
The first question is “what condition is the RV park in, both physically and as a business model?” If you are buying an RV park that is a total turn-around with poor marketing, ineffective leadership, poor property condition and/or poor social media feedback, then clearly it would make no sense to keep the person who caused the problem at the helm of your investment. If, however, the property is immaculate and operating well, then the seller might be an ideal manager choice. Since we traditionally buy “turn-around” properties, it is rare that the seller is the solution, but we have kept sellers as manager in select instances.
Without ownership the energy dissipates rapidly
Even if the RV park is well-managed, another issue can be the way that the seller’s energy changes after closing. When the property is no longer theirs, they often lose all of their will to manage. Warren Buffett described this concept when he said “without passion there’s not energy, and without energy you have nothing”. This is hard to gauge prior to closing, as every seller reacts differently. We just want you to be aware of the risk. This is not to say that all sellers lose their passion after they receive their check. Some genuinely like to help people and love the actual business of how an RV park operates. However, on average the passion is not sustainable when the RV park is not their “baby” any longer.
Zero tolerance for training
Many sellers are older and well set in their ways – some would say downright stubborn. Your ability to change the way they market, interact with customers and employees, and maintain the property is probably negligible. And that does not even count their potential lack of ability with internet marketing and using management software. Again, that’s not to say that there are no exceptions to the rule. But, in general, the seller will be very hard to train to meet your expectations and use your systems, and that’s a huge problem in enacting your plan.
Ego issues
Of course, there’s a whole let less glory in being the “manager” as opposed to the “owner”. This can cause the seller to become much more difficult to work with post-closing, as they can sometimes not deal well with this blow to their ego. Again, this is not a condemnation of having the former owner stay on as the manager, but another example of things you have to watch that can scuttle your success. For example, when the seller is no longer the “owners” we have seen them develop a hostile attitude toward the new “owner” (you) and suddenly turn into a bitter employee that actually hopes you fail, simply to show the world that they were a better “owner” than you are.
Is there seller financing involved?
If the seller is carrying the financing on the RV park sale, that can put you in a much more delicate position. In that case, the seller wants to stay on manager potentially to make sure you don’t screw up his collateral (the RV park). This actually can have good aspects, as the fact that they still technically have a stake in the property can keep their passion and ego intact. In this case, you might want to consider having them continue as manager and then augmenting them with someone else (even if it’s a virtual assistant) to accomplish those things they are weak in, such as internet advertising and using software. The downside, of course, if they carry financing is that you have a source of continual complaints right there in the office if you try new things, as they may fear that your changes will cause harm to their collateral. And it’s hard to say “no” to the seller who wants to manager post-sale when they are, in fact, your banker.
Conclusion
Having a seller continue on as manager is always a sensitive issue. In most cases, that option is not on the table as the seller simply wants to retire or do something else. However, when the issue does come up you need to consider all the good and bad aspects and decide accordingly – as well as to watch over the situation closely to monitor warning signs. It can work well, but it can also be a train wreck.