RV Park Investing Newsletter

Have you noticed all the people who are buying RVs? I was recently talking to a neighbor who is a college professor and approaching retirement. I asked him what he was going to do when he stopped teaching school and he told me “I’m buying an RV and talking it out on the road for months at a time”. As you’ll see in the articles below, the baby boom is having a huge positive impact on the RV and RV park industry. Millions of Americans are planning on using their new-found retirement to see America in their RV, and that will increase RV park occupancy and revenues enormously. It’s a great time to own an RV park!

I recently called several RV dealers to find out what was hot and what trends they are seeing in their customers, price points and sales. They all told me the same story, and it makes a lot of sense when you analyze the data – and it definitely bodes well for the RV park industry.

$100,000 Motor Homes are selling well, as trade-ups from fifth wheels

Their first observation was that they are having a huge run on $100,000 and under motor homes, with customers trading up from fifth wheels. The hottest segment are the Class A models, with the gas engines. Some dealers can’t even keep these in stock. These luxury units are attractive, well-built and spacious. The customers buying these RVs also met the same description: affluent baby boomers entering retirement and wanting something nicer to travel in than their old fifth wheel.

$50,000 Fifth Wheels are selling well, as trade-ups from travel trailers

In the #2 position, I heard from the dealers that they were having huge sales numbers on $50,000 fifth wheels. These customers were, again, baby boomers who were retiring and upgrading from their current older travel trailer. They are wanting more room and amenities, and the new units are delivering on that goal.

It’s all about the baby boomers

When you add it up, it all spells the same thing: baby boomers and RVs make a good combination. With about a third of the U.S. population those who were born between 1946 and 1964, the baby boomers make are a powerhouse of consumer behavior. And now that they are all retiring in unison, at the rate of 10,000 per day, this impact will be huge. And it will continue for the next 15 years, based on the data. This is not just a blip for the RV industry, but a permanent trend. Baby boomers are either choosing to vacation in their RVs or, in some cases, to live in them full-time.

It means more time on the road – and inside RV parks

Any way you cut it, this phenomenon means millions of more nights of occupancy in U.S. RV parks. Whether it’s destination resorts or overnighter, that many more RVs on the road means they have to stay somewhere each night. Sure, the low cost of gas is helping, but it’s simple math that millions of more RVs will mean a huge spike in RV park revenue wherever they may park for the night.

Conclusion

The RV industry got blasted in 2008 by the recession and the collapse of the mortgage market. However, the bigger news story is the rise of the baby boomers and their retirements, and that’s giving fuel to perhaps the strongest RV stats in history.

Being original is a huge help if you are a rock group, or designing a car, or Ben & Jerry’s. But in the RV park business, being a maverick can often lead to financial ruin. Apple would never be successful in the RV park business, as innovation is not necessary to win at this game. This is one of those rare times when being a follower is the way to go.

There’s no reward for being different

RV users like consistency. When they pull in, they have their own rituals that they like to do. Nothing turns off RV customers more than the shock of everything being different. They don’t want health food in the store instead of Fritos. They will hate the pool having a sauna where the tables and chairs are supposed to be. They want miniature golf, not improvisational dance. If you bum out your customers, they will not come back – and they will tell their friends!

Banks hate pioneers

Just as much as RV owners hate change, so do banks. When you are making a loan on an RV park, the old adage is “before you can have return on principal, you have to have return of principal”. What that means is that a banker is preoccupied with losing his money. If you think about it, the banker gets no upside in your RV park other than 6% or so interest, so he’s not much of a gambler by nature. Banks want RV parks to look exactly like other loans they have made, and shun that which they have not seen before. When you are pioneer with your RV park, you risk not being able to get a loan. And the bank’s appraiser feels the same way.

Buyers hate the unknown

Since most buyers rely on getting a loan, if banks hate your RV park, then buyers will hate it, too. Most buyers want to mitigate their risk by sticking with a proven business model. Although you may think that your new RV park concepts are cool, they may only seem that way to you. There are RV parks out there that the owner will never be able to sell and are stuck with for life, all because the owner wanted to be a pioneer.

The roadmap has been well established

The RV park industry is not new. It’s almost 100 years old. The modern RV park was perfected 20 years ago. Leave well enough alone, and be a follower, not a pioneer. Why would you go down an unkown path when your GPS is showing you the way to success without much risk at all? Go drive some successful RV parks and you will notice that they all look and feel the same. Copy that.

Conclusion

If you have a creative side, you can paint, or write music, or take a pottery class. But don’t apply your creativity to an RV park. Follow the standard, conservative path to success and don’t be a trailblazer. It’s simple and reassuring to have a well-worn path in front of you – so don’t meander off in the weeds.

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So you’re negotiating with an old mom and pop owner of an RV park. He wants more for his park than it’s worth. So how do you educate them on the actual value of what they own?

Approach them from their perspective

Well, the worst thing you can do is to start telling them what you need as a buyer. They don’t care about your needs. They want to get as much for the RV park as they can, and they don’t want to be taken advantage of. So turn it around and talk to them from their perspective. Explain to them that you will have to get a loan and an appraisal and the price will have to be bankable. Point out similar prices on similar properties. Act like a consultant that they have hired to figure out the fair price, not as an adversary that is trying to steal the property from them.

Approach them like you would want to be treated

Donald Trump would probably never be a good RV park buyer. You cannot act holier than thou and bark our orders and conditions. You have to be the epitome of easy to work with, so as to not offend the seller. Think of your last trip to Neiman Marcus – that’s the level of service that you need to offer. Your behavior can truly influence the price they will agree to – if they hate you, it just went up.

Remember that they can’t be bullied

In 20 years, I have never met a seller who could be bullied. Why would they? Most sellers own their property free and clear and it’s an income property. They are making money with it every day. So don’t ever think that you can issue them an ultimatum. If you can’t make a deal amiably, then it’s not going to happen.

Conclusion

RV park owners can be educated on property values. Many a seller has admitted his mistake and lowered his price. But to accomplish this, you have to approach them correctly and send the right message.

There’s more to life than money. That’s sometimes the motto of elderly RV park sellers. They want to get a fair price, but they are also open to helping others and changing the fate of the universe. And what makes them shift from money-centered to people-centered is something called “bonding”.

What is bonding?

Bonding is what happens when the buyer and seller create a relationship that transcends simple laws of economics. Sometimes the seller sees the buyer as the son or daughter they never had, or as a re-creation of themselves as a younger person. Whatever the reason, bonding is the magical ingredient that leads to unbelievable deals for buyers.

How can it help you?

When you have bonded with the seller, they want you to succeed as much as you do. They will lower down payments, lower prices, carry seller financing – whatever it takes. All of the zero down deals we have ever done began with bonding with the seller. And that bonding is something that money can’t buy.

What can you do to create bonding?

Bonding comes from listening to the seller and creating an atmosphere of trust ad friendship. Remember the movie “Gran Torino” and the bond that grew between Clint Eastwood and his neighbor? Those type of relationships are a function of spending time together. If you can’t spend in-person time, at least spend time on the phone. Our favorite conversation starter is “so how did you come to own this RV park?” and the answer can last for hours.

Conclusion

If you want to get the best RV park deals on earth, the key is bonding. With bonding, you’ll be able to overcome problems, and get terms that are unbelievable. So listen to your seller, strike up a conversation, build a bond. Nothing is a better investment of your time.