RV Park Investing Newsletter

January is the time for New Year’s Resolutions. Everyone should have some. They may include losing weight, or spending more quality time with your family, or perhaps making better investment decisions. And one investment decision that you may be considering is the purchase of an RV park. If that’s the case, the first necessity is to learn everything about how RV parks work and what the key profit drivers are. The second step is to create your limitations on geography and deal size, based on your capital and what parts of America interest you. The third step is to look at as many deals as you can that meet these criteria. The more deals you look at, the better your chance of finding the right fit. The final step is to do terrific due diligence of the RV park in question, to make sure that you understand it from top to bottom, and that it completely fits your goals and desires. Finding a good RV park investment is not that hard as long as you realize that it’s a combination of four steps, and not one massive step. And in doing those four steps, you reduce your risk by a tremendous amount.

We would also like to take this opportunity to extend to everyone a Happy New Year! We hope that 2016 proves to be a terrific year for you and your family!

It is evidence of the RVs iconic membership in American culture that many classic car shows and events now include RV entries. In one recent car show, we noticed more of a crowd looking at the RVs than the cars. Why are RVs becoming “hot” at car shows?

Something new to the car show circuit

RVs are a new entrant at classic car shows. There’s always something attractive to being the new kid on the block. Of course, the reason that classic RVs are showing up is that people are interested in them and they have a long history in American culture and a particularly tight relationship with the automobiles that pulled them. They were also popular items in the top-tier eras of car enthusiasts, namely the 1930’s through the 1960’s.

More rare than most automobiles – by far

Most classic car enthusiasts are attracted to rarity. That’s what gives certain cars their value. The most valuable cars in the U.S. are the ones that are the only known example in existence, such as prototypes and cars that never went into full production. But RVs are even rarer than most cars, as there were far fewer produced and even fewer still in existence. Think about the last time you saw a classic 1940s RV on the road. How about a ’57 Chevy? I bet you see a lot more of those classic Chevy’s.

High values in today’s collector’s market

Perhaps pioneered by Airstream collectors, the values for classic RVs is extremely high. Some Airstream models from the past – decades old – sell for $50,000 and up. These prices are right in line with expensive collector cars. So these RVs have earned respect at car shows because they are the same cost or higher.

Difficult restorations that are worthy of respect

Most car enthusiasts are all about restorations, particularly painstaking “frame-off” ones. This brotherhood of restorers extends to classic RVs. In fact, doing an RV restoration is even harder than most cars. Sure, the RV does not have an engine or transmission to worry about. What they do suffer from a near complete lack of parts and extensive interior work required. Also, most are made of wood which requires the same level of play as restoring a “woody” automobile.

Affordable entry cost if you have the time to put in the work

Unlike most collector cars, the antique RV market is still relatively new and unappreciated. You can buy classic RVs at rock bottom prices (with the exception of Airstreams), often in the hundreds of dollars requiring complete restoration. And since there are few folks who restore RVs – unlike cars – you are going to have to do the work yourself.

Conclusion

If you are interested in classic RVs, check our local and regional car shows. You will find more and more RVs at these events. And if you want to see a huge number of classic RVs in one place at one time, check out the MH/RV Hall of Fame and Museum in Elkhart, Indiana. It’s the nation’s first automobile-style museum devoted to RVs. But even at some car museums like the Peterson Auto Museum in Los Angeles, you’ll find some RVs. They are becoming a mainstream addition in the collector car world, and deservedly so.

In 2001, a small RV was created at the amazingly low price point of $4,995. It had a retro look and were marketed at classic car shows and on eBay, as no major dealer would sell them, saying that they were too inexpensive to make any money with. Today, the “Little Guy” trailer company has annual sales over $14 million, and a healthy cult following. But one key aspect that the “Little Guy” story represents is the growth of a younger audience that is interested in RV travel. “Little Guy” has strived to serve a “hip” crowd with such features as constantly adding features suggested by customers, as well as very active social media and forums. One unbelievable fact about the company is that it’s made up of only seven employees. This has allowed “Little Guy” to make product decisions quickly and develop a highly personalized degree of customer service and involvement in the design process.

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We get asked frequently what the difference is between RV parks and mobile home parks, as we own both. The truth is “not a lot” and yet “a huge amount”. Remember that mobile home parks and RV parks used to be the same thing until the 1950s, and only really separated significantly in the 1970s or so. So you have basically twin industries from the same common ancestry. But they have developed into two very different business models over the years.

How they are the same

Both mobile home parks and RV parks are effectively big parking lots. The customer brings in their personal property – whether an RV or a mobile home – and park it on your land in exchange for paying rent. They are also similar in the duties of the landlord, which is to provide decent roads, working water, sewer and electricity, and groomed common areas. In addition, the landlord is responsible for maintaining law and order in the form of rules, and rely on marketing to fill vacancies.

How they are different

RV parks are much more management intensive than mobile home parks. Mobile home parks simply offer a place to park your mobile home, but RV parks offer a complete experience of not only a place to park, but often recreational activities and much more customer service. RV parks are typically valued as a “business” based on past performance, while mobile home parks are typically valued just as a parking lot in which only the lot rent is used to calculate value. RV parks are also much different in required location. While most mobile home parks are for permanent housing, they are located near higher population areas that offer employment and schools. RV parks, on the other hand, are most successful when located near major attractions, which can often be in sparsely populated environments.

Which is better?

It’s not really an issue of which is better: the bigger question is “which fits better for you as the owner?” Both can be highly successful investment, but they are very different business models. An RV park would be a better choice for owners that:

• Want to be on-site and in control of the business, or at a minimum actively involved in management using systems and constant contact with the manager.
• Enjoy a mixture of duties from customer relations to property maintenance; much of which is outdoors.
• Want a property that can be quickly and massively turned around using strategy and marketing, and not capital (many fortunes have been made by smart owners buying RV parks in terrific locations that are terribly marketed, and then dramatically increasing the promotions and occupancy. Mobile home parks, on the other hand, are much more capital intensive to turn around, as the owner must often engage in major capital expenditures such as water, sewer and roads, as well as buying homes and bringing the in to fill vacant lots).
• Believe in the aging of the Baby Boomers and their desire to buy and travel in RVs, and want the ability to invest in this belief (which has proven to be 100% correct so far).
• Want the ability to buy an established business and take it to the next level, through expansion or changing the product mix to include cabins and other profit centers.

Conclusion

RV parks and mobile home parks have a long history together. But over the years, they have become two entirely different business models that appeal to two entirely different types of owners. Both are great investments, but very different in how they function. For many owners, RV parks are the right decision. Review your own goals and make your own decision.