RV Park Investing Newsletter

March is an exciting time for the RV park industry, as it signals the return of the “prime-time” portion of the year for RV travel. Warmer temperatures and new foliage urges many RV owners to start planning their next big adventure. So what are you doing right now to get ready for the prime season of 2018? We suggest you grab a legal pad and a pen, and review your property from top to bottom. Start at the entrance – how can you make it more compelling and capture attention better? Then look at the necessary improvements to your common areas. Look for dead bushes and trees to trim and/or replace. Think about any new amenities you want to add this year. List any potential hazards to mitigate, such as un-level sidewalks or holes you could trip on. Basically, make a complete list of what you want to do with the property in 2018, from A to Z. Then turn to your payroll. Do you want to add any employees (or let some go)? Do you need to get three bids on any services? Make a list of all action steps. You’ve heard of the expression “Spring Cleaning”. Well, Spring is almost here and it’s time to make your list so you can hit the ground running in only 20 days. To us, this is the most exciting time of the year – and one that you can’t afford to procrastinate on.

The “Greatest Generation” is roughly those born in the 1920s, 1930s and 1940s. This is also the largest component of the mom & pop RV owners in the U.S. We’ve been working with these folks for over 20 years now, and we’ve learned a lot about buying from mom & pop owners. Here are some of the key issues.

They deserve the name “Greatest Generation”

We have the greatest respect for mom and pop sellers. They are the finest people we know, and literally built America (as well as the RV park you’re looking at). As a result, we are very interested to hear what they have to say, and we always enjoy our interactions. Once you start acknowledging how terrific these sellers are, you will lose your fear of “cold calling” them, and begin to realize that you can learn a ton even from those who won’t sell you their RV park.

They don’t need your money, so you better get a better attitude – it’s called “win/win”

One of the most important lessons we’ve learned from over 20 years of buying RV parks is that the only approach that works is “win/win” – which means that both the buyer and seller are happy with the sale. Remember that most mom and pop sellers have no debt and plenty of cash flow and really don’t need you. As a result, the only way to get a deal done is to be a pleasure to work with offer a fair price. That does not mean that you have to accept a bad deal – remember it’s “win/win”. But you cannot push a mom and pop seller into a corner and try to strong-arm them into a ridiculously low price, so don’t even try.

They often have a higher purpose than just money

Most moms and pops are not all about money. Sure, they want a good deal when they sell their RV park, but they have other considerations which are often just as strong. They want a good steward of their property. And they want to sell to someone they like and that they identify with. This often manifests itself in the concept of “bonding”. “Bonding” is when the seller sees you as someone that they want to help, and offers you more favorable terms as a result. In a dog-eat-dog world, it’s refreshing to work with people that have more on their mind than just dollars.

Seller financing is a win/win for smart sellers

One of the best parts of buying RV parks is the frequent occurrence of seller financing. When you combine properties that have no outstanding bank debt with low interest rates on mainstream investment products like CDs, the end result is the desire to carry the paper. Here’s why it’s a win/win for both buyer and seller. The seller gets up to five times more interest (5% real estate loan vs. 1% CD), better tax treatment, and the ability to “control” the sales process without a bank’s input or intervention. The buyer gets to circumvent the entire loan process, better loan terms, sometimes a lower amount down, and non-recourse debt. Mom and pop sellers are the only group that has this capability.

You need to be “easy to sell to”

Given the fact that RV park sellers don’t really need you, and that they respond well – and give better terms to – people they like, and that they can also offer seller-financing, then it should come as no surprise that the best thing you can do as a buyer is be “easy to sell to”. This expression means that you should pride yourself on being a good listener, and being early to appointments. Basically, give every mom and pop seller your complete VIP treatment. It’s one of the most important attributes a smart buyer can bring to the table.

Conclusion

The Greatest Generation are tremendous people. They bring out the best in smart RV park buyers. Rise to the occasion and the rewards can be huge.

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No RV park owner wants to ever have a problem. Yet some put very little effort into preventing the most likely occurrences of harm in their properties. What’s worse, they don’t carry the correct insurance. The correct combination of proactive monitoring of potential risks, coupled with adequate insurance for those risks, is key. So what are those most common risks?

Power surges

Most RV park buyers are unaware of this, but it can be one of the most costly disasters in any RV park. Basically, you have an electrical problem in your main line and it creates a sudden power surge that destroys all of the electronics of every RV connected to electricity in the RV park (or a section of the property). Think of how much money it would cost to replace the complete electronics in a $100,000 RV and then multiply that by 25, 50 or 100+. Make sure that you are fully insured against this potential catastrophe.

Manager guiding the customer in parking their RV

Another of the most common insurance claims in an RV park is the situation in which the park manager helps the RV owner in backing their RV into their space. Invariably, there is that risky moment where the RV nearly hits the tree or the neighboring RV – and occasionally these actually happen. The net effect is a property claim on the RV, or the neighbor’s RV, or both. And, of course, the RV owners are going to blame it 100% on the helpful RV park manager, regardless of whether or not they had any impact at all. You’ve got to have insurance for this issue, and also instruct your manager as to their allowed involvement when the RV owner asks for assistance (and get this operations statement from your insurance agent).

Slip and fall claims

These are every RV park owner’s most basic fear – the customer that trips on a speed bump and falls and breaks their hip. The good news is that most every insurance policy covers this risk. However, these are obviously bad for a number of reasons including bad word-of-mouth and the potential to get your insurance cancelled if they happen too often. Here you would be best served in giving your property proactive scrutiny to make sure that all risks are minimized or eliminated.

Employee theft

RV parks are often a cash business. And where there’s cash, there’s the potential for theft. Talk to your agent about insuring this risk. We had a situation, not too long ago, where a manager stole a large amount of money. And the insurance company gave it back to us, because we had that covered. Remember that even the best managers – ones you’ve had for years – can one day go bad. We have at least 100 stories of this happening. So never assume you can get away without insurance coverage on this topic.

Conclusion

These are the four most common risks that any RV park faces. Make sure that you have these fully covered under your policy. Bad things happen to good people. But that’s O.K. as long as you have the right insurance.

The term “megatrend” was coined by John Naisbitt in 1982. It defines changes in the U.S. that are so strong that they literally change the world around us https://en.wikipedia.org/wiki/John_Naisbitt . For RV park owners, it means a seismic shift in consumer taste or behavior that propels occupancy forward. And the RV park industry has never been in a better position of being lifted by these trends. So what are they?

The Baby Boomers

These are the 76 million people born between 1945 and 1964. And there are 10,000 of them retiring each day in the U.S. This is the largest second largest segment of the population in the U.S., and their aging is creating huge demand for RV parks, as they are huge fans of this form of travel.

Millennials

The only group bigger than the Baby Boomers in the U.S. are the 86 million millennials, which is defined as those who are born roughly around 1982 to 2002. What’s interesting is that they are also huge fans of RV travel. A recent study showed that they like three basic things about RV travel: 1) outdoor cooking 2) family bonding time and 3) the ability to travel in an impromptu fashion.

Cultural shift to simpler things and experiences

It comes as no shock to anyone who watches HGTV or reads the paper, that Americans are having a new love affair with simpler things and experiences. From the tiny home movement to the success of the Magnolia brand, people like the old-fashioned offerings of RV parks.

The price of gasoline

The collapse of gasoline prices has been a big story for several years now. It comes as no shock that lower gas prices leads to a higher use of an RV, which requires a large amount of gasoline to go long distances. This megatrend is expected to continue for years to come, as the advent of electric power for autos – and the return of coal – is suggesting that oil and gas have already seen their best days.

The price and quality of RVs

A simple visit to an RV dealers will make this megatrend completely obvious: the advancements in RV design, quality and price. And it stretches across all price points, from $15,000 to $150,000. The values are enormous, as the latest design makes the current RV products the best they have ever been, while continued advances in construction deliver this great product at a reasonable price. The sales of RVs in the U.S. are at their highest point in history right now and, obviously, the more RVs sold equals the more on the road and the more occupied RV park lots.

Conclusion

RV park occupancy is the sum of many different pieces, and the good news is that virtually all of these major components are favorable to the industry. These megatrends will propel the industry forward for years to come.

With the peak RV occupancy season approaching, it’s a good time to reflect on exactly what you’re doing wrong and fixing it before the phone starts ringing off the hook. Here is a list of the top three dumbest mistakes that some RV park owners make – and how to fix them.

Not embrace internet marketing

The future of RV park marketing is the internet. There’s no #2 to the power of this sector of advertising. If you do not show on a simple Google search of “RV parks in [name of town]” then you are never going to succeed in the 21st century. And if you don’t have a great website that is professional and compelling, your competition is going to crush you. If you are not a part of the internet generation, you need to hire someone who is, because to avoid internet marketing is RV park suicide.

Retain a weak manager/staff member

The most important person in any RV park – after the customer – is the manager. They can literally make or break your business. Every manager should be judged on a daily basis. Those who do well should be embraced and those that are not should be immediately removed. Don’t let managers rest on past laurels. Every day is a new day, and you have to make sure that your manager is part of the solution and not the problem. Stanley Marcus – the founder of Neiman Marcus – once said that you should “take your markdowns in people and merchandise as quickly as possible”. He was right.

Have a poor entry

Your entry is your key marketing piece that gives the first impression to your customer base. Even if you have a terrific RV park, a weak entry might make potential customers pass you by – and that’s a terrible shame. A great entry should put your best foot forward, and a bad entry is a missed opportunity. We have seen some terrific properties that had mediocre attraction from the street, and we always wonder what their revenue could be if they would only improve that most important feature.

Conclusion

If you’re violating any of these three issues – we know you’re better than that. None of these is expensive, and every RV park owner can succeed in these three areas. Don’t make any of these three stupid RV park mistakes in 2018. If you’re guilty of any of them, the year is still young and the peak RV season is only beginning.

In any RV park, the most important part of the business is the “team” of the owner and the employees. This delicate partnership is essential to success, yet many RV park owners do not set themselves up for success. So how do you negotiate this careful balance for maximum results?

Understand the role of boss and not friend

A good employer understands their role, as that of boss and not friend. When you cross that line, the net result is a lack of respect and poor performance. It sounds bad, but studies have shown that bosses that are unfriendly get higher performance than those that are. It’s human nature that you work harder when pressed. Don’t fall into the “friend” trap.

Give respect and demand respect

The relationship between employer and employee should be based on respect. And it goes both ways. Value the employee as a person, and they will reciprocate. No business can function effectively if there is no mutual respect.

Team-building

Good employers appeal to the concept of team play. “There is no I or U in TEAM”. Every successful football coach has found their most important asset in constructing a strong team environment. When you can build a group of individuals with supporting talents, the sum of the group is more powerful than any individual.

Goal alignment

The best way to succeed as an employer is to build an environment in which everyone has the same goals. Hopefully, that goal is to exceed your budgeted revenue and net income. Set things up so that when you win, they win. Bonuses are great, as long as they relate to beating the budgets. When all interests are aligned, you will me amazed at how much better the work environment is.

Avoid toxic traps

A good employer knows to avoid those toxic traps that can sour the entire business. A weak manager, a manager with a bad attitude, and a manager that has poor customer skills should be immediately let go. And don’t burden your RV park with an employee that you can’t stand being around – life’s too short for that.

Conclusion

Being a good employer is an art form. It takes study and practice. And when you get good at it, you’ll find that your business will prosper in ways you never imagined.