RV Park Investing Newsletter

Thanksgiving is one of America’s best holidays. It doesn’t cost much money – just some food and a decorative centerpiece – and it’s never really been commercialized (unlike Halloween and Christmas). Instead, it’s a holiday that’s based on a positive theme, and that’s giving thanks for what we have. It started with a feast in 1621 to celebrate an abundant year in food gathering. Today, it’s more centered around general appreciation for all that has been accomplished and given over the course of the year. In that vein, we’d like to take this opportunity to thank everyone who reads this newsletter, participates in our forum, has read our book and course, and has become a part of the RV park industry. We’d also like to thank our amazing timing for being in a sector that has directly benefitted from the 10,000 Baby Boomers who are retiring each day, and will be for the next decade – that’s the magic force that is pushing RV sales to their highest level in history. We are also thankful that the RV industry has improved their level of play in product design and pricing that there is a new wave of younger buyers who look to RVs as a positive source of vacation time and family bonding.

Trash is one of those things that nobody ever really talks about. It’s not sexy, and it doesn’t even make for a good article title. But the fact is that all humans create trash, and all RV parks have to do something about it to pick it up. So what are the options, and how do you decide what form of trash collection to use?

Type of customer

Let’s start with the type of customer you are catering to. If it’s overnighters, then a barrel or receptacle that’s lined with a trash bag, then emptied by the park maintenance man and placed in a dumpster is probably appropriate. It the customer is longer term (weeks or months or years) then a polycart may be a better solution.

Money

Another element of the decision on trash is a simple one: money. A comparison of dumpster cost to polycart cost is simple to do. Make sure, however, to be realistic on the dumpster rate of collection – in other words, how many times a week, or month, it is to be emptied by the trash company.

Roads

One of the big cost elements to deciding on trash collection options is the wear-and-tear on your roads. While the typical vehicle in the U.S. weighs around 4,000 pounds, the average dumpster truck weighs about ten times that amount. As a result, those heavy trucks will tear your roads apart over time, causing potholes and general destruction of your road surface. Polycart trucks, on the other hand, only weigh about half as much, so they are slightly less destructive. Since the cost to repair roads is significant, you may be better off going with polycart just to save the cost of fixing your roads. However, if the dumpster can be placed near your entrance – and far from your road system – then the dumpster may be a better choice.

Other

If you do use a dumpster collection method, then be sure to put a “screening” wall around it. It should include two swinging doors that are only opened on trash collection days, remaining locked the rest of the time. One of the best ways to build an enclosure is with white vinyl fencing panels. These never require painting, and look great continuously.

Conclusion

Trash is something that every RV park owner must analyze and make the proper decision on. Focus on meeting the customer’s expectations, the basic cost, and the additional consideration of impact on your roads.

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We’ve been buying RV parks for over two decades. In that span of time, we’ve been able to amass a large amount of lessons learned, which have evolved into some fundamental theories on negotiation in general, and RV park negotiation in particular. So what are our basic thoughts on RV park negotiation?

Think win/win

RV park owners are a relatively wealthy group that rarely sell their property in distress. As a result, you will never get far trying to use a “win/lose” negotiation strategy – one in which the seller feels that they have been “taken advantage of”. If they are not happy, they will simply walk away from the table and you will not be able to make the acquisition. The better strategy is “win/win” in which both the buyer and seller are happy with the final sale. To us, the heart of “win/win” revolves around honesty: treating the seller as we would want ourselves to be treated.

Be “consultative”

Sellers respond well to buyers who are “consultative” in their approach. But what does that mean? It means that you back-up what you say with actual bids and facts. For example, if you say “the roads need $10,000 of repair so I need you to reduce the price by that amount” you should show the seller three bids proving the point. If you say “I’m worried about the market occupancy” show them a chart of the occupancy of the RV park showing declining revenue, or a graph of the occupancy of all the other RV parks in the area.

Have a “walk away price”

It is essential for the buyer to have a pre-determined price that they will not exceed from the first meetings with the seller. The reason is that you want the seller to know that there is a firm limit, and you will exude this with your speech patterns and body language. This helps to steer the negotiations to the correct price that fits your needs. Without this pre-set “spending limit” you will not appear firm enough and the final price will probably exceed your budget.

Be “easy to sell to”

Many buyers shoot themselves in the foot by not being “easy to sell to”. What this means is that you have to give the seller VIP treatment so they actually feel guilty if they don’t sell to you at an attractive price. If you tell the seller that you will meet them at 4 PM on Tuesday, what time do you arrive? The answer is around 3:30 PM and then sit in your car until the seller shows up. Or if you tell the seller you’ll call them on Saturday, you would never roll that to Sunday because you wanted to go to a football game instead. All the things you do are constantly watched by the seller and judgements are made as to whether you’re the type of person they want to do business with.

The importance of “bonding”

“Bonding” is one of the most important parts of negotiation – yet is rarely discussed. “Bonding” is the unique relationship between a buyer and seller in which the seller wants to help the buyer – even against their self-interest – because they like the buyer. This is the magic ingredient that leads to zero down deals, seller financing, and incredibly low prices. To get the seller to “bond” with you, the most important factor is to spend time with the seller, either in person or on the phone. Our favorite initial question is “so how did you come to own this RV park – tell me the whole story”. The answer can take hours and your road to “bonding” has begun.

Conclusion

We’ve been negotiating RV park purchases for over two decades. That’s hundreds of negotiations. We think we’ve learned a lot during that time, and these will get you off on the right foot.

Here’s an item from the Popular Mechanics magazine in 1959. This is a top-of-the-line RV built by Custom Coach Corp. of Columbus, Ohio – which is still in operation today. Their current product line is the popular Prevost motorhome, and costs between $400,000 to over $2,000,000. Back in 1959, they were also an industry leader, and were very advanced in their design and construction. The price of $15,000 in 1959 translates to $125,000 – so that was a pretty good deal at the time. Note that not a lot has changed over the past six decades, except for consumer tastes in interior design and, of course, fashion. Bet you never saw anyone dressed like that in an RV park recently!

It is very rare to find an RV park that is 100% RV units. In many parks there is a street or section of the property that has mobile homes on it. So you can’t really be in the RV park business without understanding mobile homes and their certain attributes. So what do you need to know about mobile homes in RV parks?

A close relative

Back prior to the 1950’s, mobile homes and RVs were the same thing. They have the same family tree. They can both fit on the same lot, use the same water and sewer connections, and sit in the air on a frame. As a result, putting mobile homes on RV lots is not difficult – there’s no problem there.

A different business model

While not physically that different, the business model difference between RVs and mobile homes is gigantic. While RVs are a nightly commitment, mobile homes are forever. The difference is the cost to move: $0 for the RV and roughly $5,000 for the mobile home. So mobile homes are a more stable form of revenue than the typical RV.

And a very different customer base

One of the primary differences between RVs and mobile homes is in the demographics of the customer base. RV owners tend to be successful and financially prosperous. They look at their RV as a form of entertainment, not a full-time housing option. Mobile home residents, however, are typically in the bottom third of income earners, and do not have very strong financial stats.

Stay on top of property condition and pride-of-ownership

Because of this difference in demographics, it’s important to stay on top of property condition for any mobile home residents. Since most RV owners are seeking a high-end property to stay in, you cannot let any mobile home tenants bring down the image of your RV park. Stay very tight on what you demand from all residents, including proper skirting, painting of their homes, neutral window coverings, yards mowed, free of debris, and a strong sense of pride in ownership.

But don’t be afraid to expand this concept – it’s a larger space for retirement for many people

All that being said, don’t be afraid to increase your occupancy of mobile homes if your RV park is getting demand in that regard. Remember that mobile homes can offer a safe baseline of monthly revenue to cover such necessities as the mortgage, and it’s a basic fact of life that mobile homes offer much more interior space than RVs do, which attracts some retirees to trade in their RV for a mobile home. As long as you remain proactive on rules violations, you can have a hybrid of mobile homes and RVs that work well together.

But know the laws

In some RV parks, you do not have the freedom to accept any customers who are not in RVs. Some cities restrict RV parks to only RVs and park models, and even restrict how long a customer can stay there. Others only allow a certain percentage of lots to be occupied by mobile homes. So before you even think about moving in mobile homes, you better check with the city and get their permission.

Conclusion

Mobile homes and RVs can happily co-exist, if you understand the mechanics and have the blessing of the city. In some markets, mobile homes offer the RV park owner a stable base to cover the bills every month of the year.

In a recent episode of the television show “Secret Lives of the Super Rich” there was a segment on a small RV pulled behind a Rolls Royce. This RV is the Bowlus Road Chief, manufactured in Henderson, Nevada, and found on this website. These units start at $137,000. If you’re saying “I think I just saw that in this newsletter recently” you’re 100% correct. This is a replica of the original Road Chief built by William Hawley Bowlus (May 8, 1896 – August 27, 1967). Bowlus was an American designer, engineer and builder of aircraft (especially gliders) and recreational vehicles in the 1930s and 1940s. He is famous for two amazing accomplishments: 1)his key role in the design of Airstream travel trailers and 2) his work as the Superintendent of Construction on Charles Lindbergh's aircraft, the “Spirit of St. Louis”. One of the original Bowlus Road Chief models is in the RV Museum in Elkhart, Indiana, featured in this newsletter recently. It’s also interesting to note that Bowlus convinced Charles Lindbergh to also travel in a similar RV, designed by Lindbergh himself. It featured four wheels – front and back – because Lindbergh hated to try to level the hitch when the unit was parked.

Everyone is aware that there are roughly 10,000 Baby Boomers (those born between 1946 and 1964) retiring each day in the U.S., and that this phenomenon has been a huge driver to ever-higher RV sales in the U.S. But what’s not discussed nearly as frequently is the impact of younger age groups on soaring RV sales and, as a result, booming RV park occupancy. Here’s one of the many articles on this phenomenon that appeared recently on CNBC. So how are millennials equally responsible for the skyrocketing sales of RVs and occupancy gains in RV parks?

Enjoy “living small”

Young people are strong proponents of the beauty of “living small”. You can see evidence of this all around you, from the Tiny Home programs on HGTV to those new 300 square foot apartments that are going up in many urban markets. This appreciation for small spaces has translated well into new RV sales, as these folks create a ready market for lower and mid-priced and smaller recreational vehicle models.

Are very cost-conscious

Millennials are very aware of what things cost, and how to reduce those costs. They look at RV parks as an inexpensive, value-oriented form of travel -- $150 per night in a hotel vs. $40 per night in an RV park. Better fuel economy and lower gas prices has made this argument even more compelling.

Appreciate family bonding time

Millennials are very strong on their values regarding spending time together as a family. They see RV parks as opportunities to have quality time and recreation. They would rather cook hotdogs around the fire as a family than eat at a noisy casual-dining restaurant. To many Millennials, there is no greater way to spend an evening than telling stories and hearing about the day’s events.

Are very interested in the outdoors

Do you know a Millennial who is not into outdoor activities? They have literally created an outdoor sports industry with Dick’s Sporting Goods and Bass Pro Shops. Hiking, fishing, rock-climbing, running – they do it all. And, of course, if you’re into outdoor activities, there’s not better spot than an RV park.

Are receptive to the latest designs in RVs

We don’t think the power of the Millennial buyer would be present today if it was not for the strong advancements in design in today’s RV models and prices. You feel that you are getting a terrific value with designs that resemble the best of the hotel industry – even in small units. There was a huge leap forward in design over the past decade, and that’s made the RV attractive to younger shoppers.

Conclusion

Although the RV industry talks constantly about the positive impact of the Baby Boomers retiring at the rate of 10,000 individuals per day, there is much less discussion of an equally strong drive to RV sales and RV park occupancy, and that’s the younger generation.