RV Park Investing Newsletter

We recently drove by an RV park in Missouri that had a unique concept. They have placed four huge inflatables with giant slides out on their frontage to the Interstate. You know that any kid going down that highway is going to want to stop there. And you know that any parent or grandparent is going to want to make them happy. It’s interesting to see all of the marketing tricks that various RV parks use in the summer to attract customers. Indeed, summer is the epicenter of creative marketing in RV parks. Some of the ideas are great, and some are wastes of time and money. Keep your eyes open – you might see some great concepts that you can use on your own RV park. And we’ve found that most RV park owners are generous with their advice if you call and ask them how their tricks are working.

An important skill in buying RV parks is learning the art of renegotiation. While some buyers believe it is in bad taste to renegotiate agreements, this is not the case. There are very few deals that get done that do not require renegotiation at some point in the process. You have to be ready to do so.

When and why you need to renegotiate

Since you already negotiated the price and terms before you put the RV park under contract, why should you need to renegotiate it a second time? The answer is simple. Because you made that original deal based on the facts presented by the seller, which often prove to be erroneous in due diligence. In addition, on the front end, you can only guess what the bankers will say, and their real input in loan committee may put a whole different spin on what is possible in the sales price.

How to do it correctly

You cannot renegotiate like you see on television. That aggressive “here’s my price or else” stance will never get you anywhere. Instead, you must make a list of everything that is different from what you were originally told, and then show three bids to fix each of these items. On economic differences – such as occupancy or revenue – you must show the economic results and what it would require to bring the price back to par.

Why the presentation is critical

The seller must believe that you put in some effort and thought, and are not just trying to lower the price for the heck of it. Have you ever watched the show “Pawn Stars”. When the store owner calls in the expert in that area of collectibles who then points out the flaws in the condition and the price of recently sold similar items, the seller has a much different opinion of the correct price than when the pawn shop owner just throws out a price much lower than was offered.

What can happen

When presented with a well thought out and realistic plan of renegotiation, the seller has several choices. They can 1) agree to it as presented 2) argue the facts and agree to a lower price but not as low as presented and 3) refuse to make any concessions at all. If you do the job right, you always end up with options #1 and #2, and rarely #3. You may not get the price you need, but you’re going to have something to consider.

Conclusion

Renegotiating the price and terms of an RV park is normal business. You need to be prepared for it, and you need to do it right. If you do a good job, you will succeed in getting the price lowered, and that can be the difference between an average and a great deal.

Dave Thomas was the not only the founder of Wendy’s hamburger chain, but also was the inventor and originator of Kentucky Fried Chicken, having taken over an early, failed franchise and experimenting with how to make consumers want to buy fried chicken. Dave Thomas, having started as just a restaurant employee, had years of expertise as a restaurant manager, and his knowledge of the reality of the job allowed him to come up with some definite opinions of what makes for a good business manager.

What “riding the wave” means

Dave Thomas had a theory that the best managers were those that could “ride the wave” of the ups and downs of running the business. A good manager, when faced with the lunch time rush, would make sure all the ingredients were handy, and that there were already some burgers on the grill. By comparison, the bad manager would not realize that there were no pickles until the last one emptied the jar, and would not start putting burgers on the grill until the first order came in. The good manager could handle the rush with ease, and similarly scale down when demand was light and let employees go home early. The bad manager hit a panic mode in the rush, failed to get the food out fast enough, and then never scaled down when the rush was over.

Where do you find good “surfer” managers?

With “riding the wave” the most important quality of successful managers, Dave Thomas also found that this skill was not something that you could spot on conventional resumes. They don’t teach these skills in college. What he decided was that there was no real way to spot this quality on a resume, so instead he would substitute interview questions on a “what if” basis to see how the potential manager would handle a “wave”. And he also realized that the best test would be to have the manager jump into the fray and see how they fared, on an experimental basis.

Conclusion

RV managers also need the ability to “ride the wave” as most customers come in at roughly the same time each day. Managers need to be able to handle the highs and lows of the RV park effectively if they are going to maximize the performance of the RV park.

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