RV Park Investing Newsletter

2018 is now here, and it’s time to make our list of New Year’s Resolutions. Each new year represents a new chance to attain goals and execute on plans from the past, as well as to create new goals and objectives. One of our key objectives in 2018 is to increase our occupancy rates in our properties, to harness the power of the amazing sales spikes in recreational vehicles – now at their highest level of units sold in history. With the combination of demand from the 10,000 Baby Boomers who are retiring each day, as well as millennials who are attracted to quality family time that RVs offer, RV sales centers are packed. And the huge improvements in RV design and price point are making these offerings impossible to pass up. Meanwhile, RV park owners are finding new ways to market to and attract these owners as well as to make their properties more desirable and updated. It’s a unique time in the RV park industry, and we’re glad to be a part of it.

We noted a recent sponsorship of the Red Bull Signature Series event on extreme mountain biking by the RV industry. There, behind the landing spot of each participant, was the logo for Go RVing, as well as advertisements showcasing the RV industry during commercial breaks. Why is the RV industry spending aggressively to market to the millennial market?

Good match for the product

There is a huge affinity between millennials and nature, and that harkens back to vacationing in an RV. In addition, millennials have bonding with their friends and family and economic thrift as two of their goals and, again, this ties in perfectly with staying in RV parks. In fact, when you watch an event such as the Red Bull Series, you find that the sponsorship seems completely appropriate and in-keeping with the clientele.

High disposable income

Millennials have elected to delay marriage and homebuying and, as a result, have high disposable incomes to spend on travel and entertainment. This allows them to buy and make payments on big-ticket items, including recreational vehicles, as well as spend money on gas and RV park costs. It’s worthy of note that millennials spend more on gasoline alone than any age group in U.S. history.

It’s always smart to cater to the next generation

One of the best parts of building a strong RV base with millennials is that they are the largest age group in the United States – bigger than Baby Boomers. There are 92 million millennials in the U.S. vs. 71 million Baby Boomers. While the Boomers are heavier users of RV park lots at the current time – since there are 10,000 of them retiring each day – the millennials are in second place, and they will be a huge part of the industry when they begin their retirement years.

Conclusion

Targeting millennials has been an extremely smart strategy for the RV industry. This is one age group that you definitely want on your side, as their numbers dwarf any other age group, including the Baby Boomers.

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In over 20 years, we have done a huge number of seller financed deals. Many people think that this is the result of some type of negotiation power, but the truth is that seller financing makes imminent sense for most mom & pop sellers. There are a number of reason for this.

Higher interest rate

The first reason that any seller would want to carry the note is the simple economic fact that real estate loans pay a much higher interest rate than certificates of deposit or bonds – the type of investments that A.G. Edwards will try to convince the seller to put their proceeds in if they took the money in cash. CDs are currently paying 1% while RV park loans are bringing five times that much. The attraction is easy to understand – that’s like getting 5 years of CD interest each year. Not a hard sell for any sane individual.

Better tax treatment

There’s also the tax angle. When you sell an RV park for cash, you have to pay income tax on the entire amount received and, after tax, you then invest the money. But when you carry the financing on a property, you only pay tax as the money is received, meaning that you actually earn interest on the money that is ultimately ear-marked to go to the IRS. If you assume a tax rate of 30% (between capital gains, regular income, recapture and state income tax), then that’s a third more interest that is derived by carrying the paper until that tax is paid.

Better collateral

While a Certificate of Deposit is backed by the U.S. Government, that’s not where most mom & pop proceeds go after the sale of their RV park. Instead, the stock broker will talk them into either a stock or bond – which means they end up with something that is backed by a company or municipality, which is hardly a safe position to be in. Having an RV park as collateral, on the other hand, is about as safe as they can be, as they already know the property and how to operate it until another buyer can be found.

Default is a good thing

In that vein, if you put 20% down on an RV park and then default, the seller who financed the sale should be having a celebration. They get to keep your money and re-sell the property again. Imagine that ending if their investment in that stock or bond goes down the drain. They effectively lose everything.

Ease of closing

Another benefit of carrying the financing is that it takes all the stress off the seller when it comes to the transaction actually closing. If the seller requires the RV park buyer to obtain a bank loan, that means that there will be an appraisal, property condition report, bank board meeting and huge title and survey scrutiny. Any one of those items could kill the deal and the time delay is at least 60 days plus. However, if the seller carries the paper, there is no time or risk in obtaining the loan, and the closing can be almost immediately following the end if the due diligence period. This gives the seller a huge amount of comfort.

Conclusion

Seller financing is easy to obtain if you understand its basic benefits for the seller of an RV park. It makes complete sense as to why they would be interested. But you may need to give them some low-key education on the matter to get the deal done. The good news is that it’s a win/win for all parties involved (except that stock broker).

One of the most important ways to convince any RV park owner to select you as the person to sign the contract with, is to display endless enthusiasm. This qualify is positively received by the seller for a number of reasons.

It excites the seller; enthusiasm is contagious

When a buyer demonstrates excitement, it also excites the seller about making the transaction happen. It’s a huge compliment to have a buyer basically say “this RV park you built is a fantastic business and I would be incredibly proud to own it”. In addition, the older seller may think to themselves “this buyer reminds me of how I felt 40 years ago when I bought it”. Think about situations that you’ve been in when a buyer (or co-worker) was excited about a purchase or a project – it made the transaction more exciting, right?

The enthusiastic buyer is perceived to be the one that will close on the deal

Selling an RV park is a lengthy process, and certain hurdles can often pop up. The enthusiastic buyer is perceived by the seller to be one that will jump over the hurdles and continue the project to its ultimate conclusion. The buyer who demonstrates only marginal interest may imply that they are never going to take the extra effort to overcome the low appraisal or survey issue. All sellers are drawn to those that seem to be excited about the purchase because they have the best odds of closure.

Enthusiasm equals time urgency

Sellers see the enthusiastic buyer as one who will keep pushing constantly to speed up the closing. Despite the fact that the due diligence and financing periods are spelled out in the contract, there are always occasions where an extension may be required, and the enthusiastic buyer is perceived as one that will keep perpetually trying to find a way to speed things up even faster.

Conclusion

There’s no greater force in buying an RV park than enthusiasm. If you have it, flaunt it. Don’t think that showing your excitement is a bad thing – a sign of negotiation weakness. While that is a popular thought in most negotiation books you’ll find at Barnes & Noble, the truth is that enthusiasm is a deal “maker” and not “breaker”.

There’s no RV park in the U.S. that cannot have higher revenues. Even in a park with 100% occupancy, you can still raise the nightly charge by $1. So what are the ways you can increase the revenue of nearly any RV park? There are a number of strategies.

Improve your on-line presence

The way many Americans find an RV park today is by a simple Google search of “[name of location] RV parks”. If your property does not show up on this simple search, then you might as well not exist. All smart RV park owners realize that the internet is here to stay and has growing usage. At a minimum, any RV park should be found immediately on Google or any other search engine, and should also have a compelling website that shows attractive photos and a list of the reasons to stay at that property. If you do not know how to build such a website, there are many groups on-line that can do so for you at a very reasonable rate. This is really a mandatory marketing step today.

Social media

There are Facebook and other social media sites that many younger RV owners use to find RV parks, as well as to get feedback on different property options. You need to make a complete list of these social media opportunities and work them aggressively. Again, there are professionals who can provide these services for you at a very reasonable rate. Even a half-hearted attempt is superior to none.

Aggressively hit the top sources of customers with brochures and flyers

Think about all the places that potential customers frequent in their RV on the road, or prior to making the decision on where to stay. These include tourist rest stops, welcome centers, event offices, chamber of commerce, propane dealers, RV repair dealerships – the list is gigantic. You should make a professional-grade brochure and/or flyer that can be stacked at all of these locations, as well as personal contract with the top prospects to sell them on why you are the correct RV park for them to recommend. Again, you can find professional help in creating the marketing materials for a low cost.

Consider joining Good Sam’s or other clubs

These discount membership clubs offer you the marketing power of a national platform. There are 1.7 million members of Good Sam’s, and they have huge brand loyalty because all of the roughly 2,100 RV park affiliates have meet minimum quality standards, as well as offer a 10% reduction in their normal rates.

Make sure that your prices are in-line with the market

Every RV park owner should endeavor to be a literal expert on the rates in their market. They should consistently comp all competing RV parks and know their rates and specials. Think of yourself as the gas station that is battling with the others on a “gas war” where each station tries to undercut their competitor by a penny. You can’t be an effective player unless you know precisely what the competition is doing.

Conclusion

The job of maximizing revenues for an RV park owner is never done. You should constantly keep pushing the envelope, as it is not only more profitable, but also becomes an exciting challenge.