RV Park Investing Newsletter

On this month in 1886, Coca-Cola was invented. For over 130 years, Coke has offered a product that continually grows in popularity and customer retention, simply because customers love to drink it. It’s a refreshing oasis from life’s normal requirements – and that’s exactly what RV parks are all about. The RV allows people to break out of their normal routine and appreciate the scenic wonders of America and the great outdoors, while also offering family bonding time and enjoying a strong community environment. A good RV park should allow the customer to enjoy their time there and feel pampered and valued. It should be clean and well-managed, and worthy of the nightly rent. RV parks that do a great job are rewarded with a strong following and financial gains. Be like a refreshing bottle of Coke and enjoy the positive feeling that comes from a job well done!

A decade ago, a “park model” (which are essentially cabins for overnight rental, by definition) was a simple one-story unit which was completely no frills. Manufacturers were not that interested in designs or finish out or really much of anything other than producing them inexpensively. However, in recent times the park model has become one of the most dramatically engineered offerings at many manufacturing plants. So what’s currently going on in park models?

Lower pricing

Many manufacturers have been focused on making these park models more affordable in order to tap into a larger base of RV park owners. While mobile home manufacturers have long worked towards producing a range of models to fit every budget, park model manufacturers had previously not been that concerned in this regard. What’s interesting, if you go to the home shows, is that the appearance of these units seems to go up while the price is coming down, which raises the perceived value enormously. Figure on a pricing range of $20,000 to $40,000 per unit.

More choices

Many manufacturers used to only have one or two models to choose from. Now there are a ton of different options to consider, in a range of prices and finishes. This has actually started to put a burden on the RV park owners, who now has to put in some real consideration as to what’s right for their purposes. One key consideration is how many people most customers are wanting to include in the home – are they typically couples or larger families? To make the right choice, you need to do some serious market research and thought of past customer profiles.

Better floorplans

One of the big takeaways from the all-new park model offerings is the wide variety of floorplans. Every inch of every park model is usable space, and the ability to build spacious lofts and attractive screened-in porch areas has been a focus of skilled designers. Although most park models have a small amount of interior space, it’s amazing how well that space is utilized and how they’ve fit a living room, kitchen, bathroom, bedroom and often upper loft bedroom into a compact size. It you walk through a park model from a decade ago (which resembled a simple hotel room with a kitchenette) and one from today, it’s a night and day difference.

Conclusion

The level of play regarding RV park models has elevated enormously over the past few years. If you have not considered placing a few in your RV park to offer visitors yet another vacation option, it might be time to give them a second look.

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In the movie “The Accountant”, Ben Affleck is part CPA and part James Bond. He is also the owner of an Airstream RV that he keeps hidden in a self-storage facility. In this RV are millions of dollars in rare coins and artwork, and effectively serves as his “real” home, as opposed to a brick house which is really his “pretend” home. After he gets done defeating the bad guys, he hooks up this Airstream and heads down the highway. It was a great cameo appearance of an RV in a movie, and the RV had a great depiction as one of Affleck’s favorite possessions.

One of the most powerful sources of getting a great deal on an RV park – as well as seller financing – is to “bond” with the seller. Bonding is the foundation of the relationship between a buyer and seller that is based on mutual trust and friendship. So how can you establish a “bond” with the seller when buying an RV park?

Spend time with them – in person or on the phone

Bonding begins with spending time with the seller. That time can be spent either in person or on the phone. But the most important part of the equation is just that: spending time. That means never being rushed or pushing to get the seller off the phone, or saying that you have to make another appointment. Sellers want to feel that you value them, and if you are not willing to invest your time, then you are not perceived as a “friend” or someone who values the relationship.

Ask the right questions to begin the process

One of our favorite initial questions to a seller is “so how did you come to own this RV park?” The answer can take hours in some cases, as the seller tells you about their early life, how they thought of building or buying at RV park, how they put the deal together and obtained financing, the challenges in the early years, their biggest wins and biggest losses. By the time that question is answered, you’ve probably already invested a couple hours of time and the bonding has begun.

Think win/win

The thing that most successful RV park buyers have in common is that they are obsessed with only engaging in win/win relationships with sellers. While this term is massively overused in today’s world, the concept of win/win is simply that both the seller and buyer are happy at the close of the transaction. That means never trying to take advantage of the seller – instead feeling that you are part of the same team. Seller’s respond extremely favorably to buyers who are advocates of win/win, because that’s what everyone wants in any transaction: a focus on fairness and the Golden Rule.

Be enthusiastic

Sellers love it when a buyer is earnestly excited about their RV park. It means that they appreciate all their hard work and that they also will really come to the closing table and buy it. Even if you are having a bad day, you should put all that behind you and be 100% excited every time you talk to the seller. If you seem lacking enthusiasm even one time, it sends the message to the seller that you might be losing interest and they will subconsciously start to think about who’s next in line if you drop out.

Never be phony

Sellers like honestly. They hate buyers who lie. The best path in buying an RV park is to be 100% honest from your first contact with the seller. You’ve heard the old adage “honesty is the best policy”. That’s 100% correct when buying an RV park. Equally importantly, always tell the truth regarding your due diligence on the property. Keep them in the loop and tell them your concerns. Sellers hate uncertainty, and they respond well when you tell them where they and their property stand.

Conclusion

Successfully buying an RV park begins and ends with bonding and creating mutual respect with the seller. If you give this your focus, you will be able to buy RV parks at much better pricing and often with seller financing. When you can close the transaction and use that seller as a reference on your next deal, you will know you’ve done a good job.

Summer is nearly upon us, and it’s time to get the pool ready, as well as any other amenity that revolves around hotter temperatures. While some people find winter relaxing, as the demands of operating these type of amenities is reduced along with the RV park population, most owners appreciate the spring and summer, as this is the time where the revenue spikes and the cash register gets filled with currency. So don’t look at taking the cover off the pool as a chore – look at it as the best time of the year, when you see how high your revenue can go and how good you can be at pleasing your customers. Most RV park owners got in to the business because they love people – so here’s your chance to spread the love.

Buying an RV park is more than just walking around and counting how many RVs are currently parked at the property and multiplying times 365 to get the gross revenue. There are some basic strategies in evaluating an RV park that all buyers should follow. So what are they?

You need at least three years of financials

One key to successful buying of RV parks is to take the last three years of financial performance and average it. This gives you protection in that it not only blends the months of each year (and seasons) but also blends individual years that may have been not representative of normal performance (like higher renovations that reduced traffic, or a special event that spurred occupancy for a brief time). You should never take any given month and annualize it – you must rely on averaging larger periods of time.

Normalize them

On the expense side of things, it’s very important to “normalize” numbers. What that means is to peruse the expense line items and search for things that shouldn’t be there or were one time charges. For example, we’ve seen cases where the RV park owner has a sudden $30,000 cost classified as “repair and maintenance”. But upon further scrutiny, it’s discovered that the charge was not repair at all, but simply the owner buying a new car for their own personal use and trying to avoid income tax on that money. In that case, you would back that item out, and then re-analyze that cost item.

Average them

Just as you should to in revenue, you also need to average the expense line items over several years, to get the most accurate portrayal of the park’s performance. For example, let’s assume an RV park has a $40,000 electricity bill in year 1, a $60,000 electricity bill in year 2, and a $50,000 electricity bill in year 3. What’s the normal electricity bill? The average of those three, which is $50,000 per year. Look at how different (and inaccurate) your budget would be if you simply annualized year 1 or year 2.

Use byproducts to verify occupancy

So how can you ensure that the occupancy at the RV park is as portrayed? What if the seller just lied and made up those numbers? A smart buyer will combat this by looking at supportive byproducts to occupancy. For example, higher occupancy should be visible in higher electricity bills, as all RVs use power. You can even break down the average electricity use by occupied unit based on prior numbers, and then mathematically support the occupancy. All industries have byproducts from customer count – whether it’s water use, or power use, etc. – and all you have to do is determine those byproducts and see if it looks logical. Scientists cannot see the atom, but they know when they’ve split it because of the byproducts of that force field. You can do the same with an RV park.

Compare to current – what do you see

While there are rare anomalies – such as visiting an RV park in a blizzard – most RV parks should show numbers that resemble what you can see in the field. If the seller is saying that the revenue in May 2016 was $110,000, and you are there in May 2017 and you only count 5 RVs on property, then something’s wrong. Why would you see such a different environment than what the financials suggest? When you see things that are different in the field from what the historic numbers portrayed, then you shoud put on the brakes and figure out what’s really going on.

The importance of gut feeling

Have you ever watched the PBS special on how an aircraft carrier works? You have all these computers lining a room, and sailors that are shouting out data like “incoming missiles at 1,000 miles” and “three planes on the deck” and “20 knots due east”. And in the middle of the room is the captain with a glass wall and an erasable marker, writing down data, and screaming things like “fire the anti-missiles”, “have those three planes take off and put ten more on the deck” and “turn the ship north and advance to 30 knots”. Why don’t they just have the computers interface directly and cut out the middleman? The answer is that the human mind is still considered to be superior to the computer. So taking that a step further, a smart RV buyer should listen to their own mind, in the form of “gut instinct”. You should never buy an RV park that you are not excited about 100% -- both with your rational mind and your gut instinct.

Conclusion

Budgeting is all about analyzing and normalizing data. If you do this correctly, you will be able to make unbelievably accurate budgets and projections.

Well, not quite. During the lunar missions of the 1960s and 1970s, NASA was extremely concerned about the potential for dangerous bacteria potentially found on the moon creating a world epidemic, so all astronauts were quarantined inside Airstream RVs upon re-entry from space. This was a great P.R. opportunity for the RV industry, since Airstreams were chosen over all the other housing alternatives.

We talk to RV customers all the time, and here’s a list of the Top Ten items that they look for in any RV park that they visit, or contemplate visiting. While not all RV parks offer 100% of these traits, it’s important to know for evaluating RV parks to buy.

Amenities

This would, of course, be high on the list, as the whole point of going to an RV park is for the activities and communal fun of doing things together. Of the amenities, the most important ones are a swimming pool, laundry facility, and area for an open fire.

Seclusion/privacy

Most RV owners prefer to be off the beaten path – but not physically. They like the convenience of easy access from a major road, but they like the “feel” of being in the country. This would suggest that building landscaped “buffers” would be a great idea for any park on a freeway. Who wants to camp on the edge of the right-of-way?

Proximity to attractions

The reason that “destination” RV parks are so much more valuable than “overnighter” is that one of the key reasons to stay is to enjoy local attractions. The closer the better.

Trees

Trees are a huge attraction to RV owners, as they create shade in the summer and just contribute to the general feel of being a part of nature. Mature trees create a canopy that is extremely attractive.

Pull-through lots

RV owners love the convenience (and lack of stress) of not having to back into their lot. They favor properties where they never have to put their RV or vehicle in reverse.

Dump station

Only makes sense that any RV owner would like the opportunity to dump their waste while stopped at the RV park.

Propane for sale

Same as the dump station – a good chance to recharge before hitting the road again. It is not hard to set up the ability to sell propane if your RV park currently does not have such a facility.

Store with essential groceries and other items

Customers love the convenience of being able to stock up on essential items while they’re staying at the RV park. From a bag of Fritos to shaving cream to paper towels, this is a real crowd pleaser.

Clean bathrooms and general cleanliness throughout the property

Customers are very demanding on cleanliness. The lack of it suggests improper management or an attitude of indifference on the welfare of the visitors. It costs very little to keep everything maintained and clean. The Golden Rule applies here.

A friendly and supportive manager

This is probably one of the biggest items for any RV park customer: a manager that makes them feel special and valued. Who doesn’t want VIP treatment? Enthusiasm is free and contagious.

Conclusion

RV park customers’ needs and wants are fairly easy to define. Use these as points of analysis on RV parks you are considering buying. And if you already own an RV park, note that half of these items are simply about attitude or are inexpensive to add to your property.