You can’t buy an RV park until you have a signed contract – and you can’t get that until you’ve arrived at an agreeable price. That often requires the old-fashioned skill known as “negotiation”. So how do you successfully negotiate the price of an RV park? Here are five important tips.
Embrace the necessity of win/win deal making
You are absolutely not going to “steal” a good RV park. The goal should not be to buy the property for a penny on the dollar but instead at a fair price based on current net income and that leaves you plenty of opportunity to increase that net income with better management. The only kind of RV parks you can “steal” are those that have terrible locations or other problems that cause the seller to have to sell the property in a panic and in the absence of buyers. There is rarely profit in those type of transactions. Your goal is to engage in win/win deal making, in which both the buyer and seller are happy with the conclusion. This is the same type of style that Warren Buffett has long advocated.
Understand that it’s not all about the money (bonding is more important)
The price you will pay for the RV park is more based on how much the seller likes you than the dollars and cents. That’s why bonding is essential – the mystical magic that happens when a seller likes the buyer and wants to help them get a good deal. Maybe it’s because you remind the seller of somebody in their life they liked a lot or maybe just because you remind them of a more youthful version of themselves. How do you establish bonding? By spending time with the seller either in person or over the phone. Our favorite way to start the bonding process? Ask the seller how they came to own the RV park. That answer may take hours and will get you off on the right foot.
Start low so you can negotiate higher
It’s a basic rule of negotiation that you start low and then end up paying higher. That means that you always have to start offering lower than your actual target price. Never initially offer the price you want to pay – it’s virtually guaranteed that you’ll never hit it. If you want to pay $300,000, then start at $250,000 and let the seller “beat you up” to $300,000 – that makes them feel successful.
Have a handle on the price before you begin
You should never enter into negotiation until you have run numbers and have a firm handle on what the target is. When you say “what do you want for the RV park” you need to know if that answer is low, high or on-target. How can you negotiate until you know the goal? Don’t think the whole point is to get the seller to just name a price. Your reaction to that price is an important part of the process and if you don’t show shock with the pricing it will be hard to negotiate it down later.
Be a good listener
A lot of negotiation is based on listening and not talking. Don’t be quick to respond and don’t think about your response until you hear what the seller has to say. Many good RV parks deals have been the result of the buyer listening and producing a creative deal that meets both party’s goals, such as swapping a higher price for more generous seller financing at a lower interest rate. Be a team player and be collaborative.
Negotiation is sort of an art form. It takes practice and a unique skill set. These tips will get you off on the right foot.