The late Sam Zell was always an advocate of only buying assets with liquidity. That was the secret that allowed him to get in and out of real estate when he felt a crash was coming. And it saved him from doom in the 2007 Great Recession, as he was able to unload his office holdings right before they crashed. His nickname was "the Gravedancer" as he was able to nimbly get out of asset sectors right before they turned bad, as well as buy them when others thought they were doomed and they were actually about to head up. But illiquidity can actually serve as a tool when buying RV Parks if you use that lever to your advantage.
My first lesson on buying illiquid assets
Back in 1996 I bought my first RV & mobile home park in Dallas, Texas. It was a total dump. And because it was so badly operated the seller knew they could not get a top dollar price and the buyer would never be able to get conventional financing. So it was offered to me for $400,000 with only $10,000 down and the seller carrying the balance as a note. It's not because he wanted only $400,000 or to carry the paper, but he knew that the park was illiquid and there were few other options if he wanted to sell. I realized that very moment that buying illiquid assets was something that really interested me, as I was thrilled with the price and the terms and realized there was big money in this concept.
And how it repeated continually
Once I had purchased that first RV park in a dilapidated condition and with a low price and seller financing I devoted my entire business model to that premise. I sought out other screwed up RV park assets that allowed for creative structures from desperate sellers. It was a simple formula and I looked for them everywhere. I would call brokers, do direct mail and cold calling to RV park owners, and explore every on-line listing. I found the same situations over and over and they always ended up the same way: with me getting a low price and attractive financing. I was hooked.
Why it's an essential tool often when you're starting out
If you don't have abundant capital, buying illiquid assets is a great way to start out. There's no way to buy RV parks with less capital than buying up old, beat-up RV parks from worn-out moms and pops. I remember one deal where I thought the seller would ask $800,000 and instead said that he was willing to sell for "eight … ty thousand dollars". And that was for a 28 space property with lake frontage. You could never get a deal like that with any other type of asset other than one that's illiquid. Pretty, clean, liquid assets are sold on a cookie-cutter formula of 20% to 30% down at a retail price. But screwed up RV Parks are for the taking at low prices and with creative financing.
The future of the concept
Only a tiny fraction of RV Parks in the U.S. are professionally managed by institutions. Then you have another subset that is run by moms and pops – but run well. And then you have all those other RV Parks that are totally screwed up and available for whatever you can negotiate. The concept of buying illiquid assets never gets old and is always out there if you work the market. In fact, you will see this niche getting even more fertile as mom and pop owners continually get older and more interested in selling.
Conclusion
If you are interested in learning the correct way to identify, evaluate, negotiate, perform due diligence on, renegotiate, finance, turn-around and operate RV Parks – including illiquid ones – then consider our brand new RV Park Investor's Boot Camp. It's a complete immersion in this exciting and attainable niche of real estate.