RV Park Investing Newsletter

Someone I know just recently completed a three-week trip in a rented RV and loved it. They had never been in an RV before that rental, and drove the vehicle from one end of California to the other. They particularly enjoyed the family bonding time, which was missing from prior vacations. It’s amazing how well the RV is adapting to the desires of the U.S. population. The product has never been better designed, or of greater value. That’s why sales statistics of RVs in the U.S. keep growing annually. And, of course, with all the RVs on the road, this has translated into record occupancy at many destination RV parks. We don’t see that trend ending any time soon. With the Baby Boomers retiring at the rate of 10,000 per day, and younger American families growing and looking for better vacation values, it would seem that the stars have all aligned for the RV industry.

Buggy manufacturers never saw the horseless carriage coming. Then, by the 1920s, they had virtually gone out of business. The bottom line is that any smart business owner should be on the lookout for new inventions that can either hurt or help their business. These are a few of the latest inventions, and their impact on the RV industry, in our opinion.

Self-driving vehicles

This technology allows for driverless cars and trucks – and eventually RVs. While it was the stuff of science fiction just a few decades ago, several manufacturers have already brought out prototypes that seem to be working perfectly. We think that this invention will be positive for RV parks. What’s at issue is not how they get there, but how many nights the RV stays parked on the property. We think that the advent of self-driving vehicles will actually encourage people to take their RV out on the road more, as it will remove all stress of driving for the occupants. In addition, it may encourage even more people to buy RVs who were formerly afraid of driving large vehicles on the road.

Electric vehicles

Again, we see this as a positive trend. One of the great criticisms of recreational vehicles has been their gas mileage. With an all-electric alternative (or even hybrid) you will see a much lower operating cost, which will result in more RV usage by owners. The only downside to the RV park industry that this development could result in is a reduced attraction to areas that do not have sufficient charging stations – such as areas that are extremely rural.

Automation and lower labor demand

RVs have long been a bastion of mostly affluent and retired customers, so we do not think that they are highly susceptible to lower-level jobs. In fact, the advent of automation should actually increase the incomes of those who own the factories and businesses, as they have to pay less in salaries and healthcare, etc. While this change will be crushing to those in low-level jobs that can streamline and reduce their employee count, we think that RV customers will either be helped by this or, worst case, find it a neutral addition.

Conclusion

The RV park industry is well positioned for the latest technological advancements, and should have no problem continuing to gain momentum from them. While these inventions will no doubt leave a sea of casualties, RV parks will not be one of them.

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Squirrels are famous for pre-planning for the winter by hoarding enough nuts to eat until the snow melts away and winter ends. But there’s a good moral in this for RV park owners, as well. The peak RV usage season ends at New Years, and you don’t want to be caught without as much in the bank as you can.

Push revenue as hard as you can

“Chainsaw” Al Dunlap, the famous American industrialist that would buy sleepy companies and make them into powerhouses, would say that the key to a successful business is to “sell, sell, sell”. That’s completely true for RV parks, as well. You should look at this part of the year, in particular, as the final 100 yard dash in the one-mile run. If you have discovered marketing tricks that bring in customers, now is the time to unleash them one more time. Had a sales idea that you forgot to enact this year? Do it now. Bank as many dollars as you humanly can.

Cut every cost possible

There’s no point to bringing in dollars if you hemorrhage them out the other side. Misers often make the best RV park owners – especially when winter is approaching! Try to figure out a way to lower the cost of everything you do at the RV park. This is a valuable exercise year-round. You will be amazed at how much you can save if you just approach each cost item as a laboratory experiment to find a new, cheaper way of doing it.

Pray for warmer weather and a longer season

Here’s one item you can’t really control, but it seems that Global Warming may be lending a hand. A warmer winter will result in greater RV activity (unless you have a RV park that is focused on northern “snowbird” customers). The facts are that each winter seems to be getting progressively hotter and that’s great news for RV park owners.

Add amenities that are not water-related

Some RV parks have far too much focus on summer activities. It does not hurt to add activities that are appealing when warm weather is over. There’s a KOA Campground that I drive by frequently that seems to be 100% focused on its pool and lake and water sports. But what does the customer do when it’s 50 degrees out? Try to come up with additional items that are fun when it’s colder. For example, bouncy houses and inflatable slides for kids, and bonfires, cookouts and concerts for adults.

Have a goal

It’s often best to push yourself with a goal structure that is hard to hit, but possible. It’s easy to not hit on all 8-cylinders when you are not reminded of where you are falling short. Make a year-end sales goal and then tell yourself “I’m going to hit that no matter what it takes” and then go out and do it. Better yet, put a bar graph on the wall where nobody but you can see it (like inside a closet door) and mark your progress.

Conclusion

With winter approaching, it’s important to store away enough money to get you through January, February and March. These dour months are much happier when you have money in the bank.

In the Civil War, the submarine was developed. This is an artist’s rendering of a Confederate submarine sinking a Union ship. It never even knew what was coming. It was just sitting in the harbor and suddenly there was an explosion and it sank. What are some of the hidden deal killers that can destroy your RV park as an investment, and how do you find these out ahead of time?

No permit

All RV parks must have valid city, county and state operating permits. Without this one item, an RV park is just a piece of farmland with some utilities on it. Just because an RV park has been there for decades does not mean that it is legal – only undiscovered or untested by officials. There are RV parks out there that have no permits whatsoever, and the city has failed to shut them down only because they like the mom & pop builder of the RV park and are waiting to pull the rug out from under the next owner that they don’t know or care about. You can find out the permit situation on any RV park by requesting a Certificate of Zoning from the city, county or state (whichever is applicable on that property). This document tells you that the property is either legal, legal non-conforming (which means grandfathered) or illegal. If it’s illegal, then the deal is dead.

Permit for fewer lots than what’s on the ground

Also in the Certificate of Zoning will be the number of permitted lots the RV park is allowed to have. And it needs to match up exactly to what you are buying. If the Certificate of Zoning says 100 RV lots and the seller says 120, then that’s a huge deal killer unless they are willing to reduce the price proportionally. In some cases, the seller can go to the city and get the permit corrected, but typically not.

Failing water or sewer system

All RV parks must provide safe water to drink and environmentally correct disposal of sewage. You cannot buy an RV park that is failing to meet this mandate. The RV park’s water/sewer system should be completely analyzed and any problems should be completely corrected prior to purchase. Private wells and private sewer systems require especially tough due diligence.

Failing power system

Electricity is mandatory for RV customers. It lights their lights, runs there air conditioning, powers their television – all the things that we all take for granted. Make sure that the RV park’s power system is 100% to code and in full working order. Anything less is a deal killer.

Amenities that are not up to code

Many commercial pools today fail to meet modern code. They were built decades ago, and many mom and pop owners are unaware that the pool they are so proud of is completely illegal based on modern requirements. Make sure that any amenity has been inspected and improved by code enforcement and the health department.

Future problems with the market

Is the market where the park is located on the upswing or a downward spiral? In real estate, you are always buying location, location, location, so you can’t scrimp on your diligence that you are buying into a winning market and not a loser. Check current stats but also examine future trends. Talk to the local chamber of commerce and become an expert on that part of America.

Road issues

We’re not talking about how the roads in the park appear. That’s not a hidden deal killer. What we’re talking about are future road projects that might impact your access or even place on the main road. We looked at a park recently that was going to be cut in two by a future highway project – wiping out 50% of the spaces. You can find this type of information from the state highway departments, who tracks, of public record, every future highway project reaching up to a decade into the future.

Failed Phase I environmental

Back when the U.S. became more environmentally conscious in the 1970s, the government brought out a system to insulate property buyers against hidden pollution in their property. Called a Phase I Environmental Report, this important document is written by a licensed and insured environmental engineer, and gives you the green light to go forward. At the same time, a failed environmental report means that the property is polluted and you should never buy such a property.

Survey problems

Most RV parks are located right where they are supposed to be. But some are not. It is not uncommon to find that a portion of the RV park is not located on the correct property. We once saw a park that was actually missing one-third of its total land mass on to a neighboring farm – including its main entrance road. Be sure that you are buying the RV park you think you’re buying, and that it’s wholly contained on that parcel.

Title problems

Do mom & pop really own that RV park? You’ll find out when the title to the property is examined by the title company. We’ve seen it all. Properties that are not owned by the seller alone, but multiple heirs who never agreed to sell. Land that has never been properly surveyed in the past, and handed down generation after generation with simply “the land from the big tree to Aunt Mabel’s fence”. You cannot close on any RV park unless you have good title. No exceptions.

Conclusion

There is nothing more frustrating than finding that a RV park you were buying suddenly can’t be bought due to a hidden defect. But the important thing to remember is that you want to find these defects out before closing instead of after.

From the August 1959 issue of Mechanix Illustrated comes this photo of a top-of-the-line motor home. While the $15,000 price tag may not look bad today, it represents $122,763 in today’s dollars. If you look closely, you’ll see that the current product in this size is far superior and less expensive. That’s why RV sales are so high in the U.S. right now – the offerings are very reasonably priced and extremely well engineered. The “Good Old Days” for RVs are right now.

While the RV is an American cultural icon, and the RV park is a popular investment vehicle, it is not alone in the world. RV parks also exist in other countries, although somewhat different than our U.S. industry. Here are some of the places where you can find RV parks.

Canada

The Canadian RV industry is the most similar to the U.S. The “Go RVing” ad campaign is also used in Canada, and the RV parks appear almost identical to those found in the U.S., with the only exception being that there are much fewer of them. With a total population in Canada of 36 million, everything in Canada is roughly 1/10 the size of American RV ownership. Since they are much fewer in number, Canadian RV parks traditionally sell for a lower cap rate than U.S. properties, due to the simple rules of supply and demand.

Europe

In Europe, the RV is called a “Caravan”. The Caravan Club in Europe has 1 million members with around 200 self-owned campsites and over 2,500 third party certificated locations. The Camping and Caravanning Club is a non-profit organization which has over 400,000 members and 100 campsites in the United Kingdom. It is over 100 years old, which demonstrates the interest that Europeans have had in the industry. In France, Germany and Italy, and to a lesser degree in Norway and the Netherlands, a large network of caravan parks have been developed since the 1980s. These sites are called Reisemobil-Stellplatz in German or Aire de Camping-car in French. These properties cannot, however, be adequately compared to North American RV sites in size, quality or capital investment.

Australia

In Australia there is generally no difference between an RV park and a mobile home park. The term "holiday park" is becoming increasingly common, with many parks increasing their stock of on-site cabins, often accompanied by a reduction in the number of caravan sites. The properties there are basically a hybrid of American RV and mobile home parks.

Conclusion

While the American RV industry is the largest in the world, there are offshoots in other countries. Although often more primitive in nature, these foreign parks have remarkably similar goals: to provide a clean, attractive place to park your RV, near to recreational amenities and attractions.