Memorial Day weekend marked the start of the summer travel season for many RV owners. School has just let out and it's time to start using that RV again. For many RV park owners, June 1st is the start of the best time of the year - particularly in northern RV parks that close for the winter. And this year, once again, should prove to set industry records on RV usage. A recent study found that 66% of owners plan on using their RV more this summer, while 28% plan on using it the same and just 4% plan to use it less. That's great news for the roughly 16,000 RV parks in the U.S. So if 2018 is going to be a banner year for RV park owners, then June 1st starts the clock on what could be the record for RV park occupancy and revenue.
Memo From Frank & Dave
How To Build A Winning Loan Request
Nobody buys an RV park with cash. They buy it with a combination of cash (down payment) and a loan. That's one of the big attractions to real estate investing: the ability to obtain sensible leverage that allows you to buy bigger properties and to spike cash-on-cash returns to incredible levels. But to get the process started, you have to get that initial loan. One of the biggest parts of obtaining a bank loan is writing a good loan request package. So what does a winning loan request look like?
The introduction to the industry
Although you may be interested in RV parks and have read quite a bit about it, there's no reason to assume that your lender has. So you should start your presentation with a quick rundown of the strengths of the RV park investment model. These would include:
- A simple business model in which you are merely renting dirt and without heavy capital infrastructure to maintain.
- High profit margins.
- Perfect collections with a pay-as-you-go system.
- Rising demand based on skyrocketing sales of RVs - the highest rate of sales in history is right now.
- The megatrend of 10,000 Baby Boomers retiring per day with many buying RVs and travelling America in their retirement. And this megatrend will continue for over a decade, at which time there will be more RVs in circulation in the U.S. than ever before.
- Rising demand for the RV travel experience by the Milennials, who favor the simple, family bonding experience that RV parks provide.
In this section, you discuss the key components of the property.
- How many lots in the RV park.
- What amenities the RV park provides.
- The utility systems (water, sewer, electric and (if applicable) gas or propane.
- Road construction material (paved, gravel, concrete, etc.).
- Photos of the RV park.
- Map of the RV park location.
- Traffic count on the road in front of the RV park.
- Itemization of all activities near the RV park that would attract visitors.
- Any other pertinent information to explain the benefits of this RV park.
Here is where you describe to the bank exactly what you want to borrow and under what structure. This section should include:
- The total price of the transaction
- The amount you propose to put down on it.
- The amount of the loan.
- The proposed amortization length.
This section is essential, and is the one the banker will put the most scrutiny on. Remember that the banker's best case scenario is to get their money back and the applicable interest. They do not share your master vision for future financial independence and, as a result, have no enthusiasm about owning the RV park like you do. They simply want to see that they are going to get paid every month. The financials, therefore, are what really make them want to do the loan or not.
In this section, you give a step-by-step rundown in your plans to enhance occupancy and revenue, as well as cost containment and even proposed capital improvements. This is extremely important if you are buying an RV park with the assumption of making it much higher producing. For example, if you are buying from a mom & pop that have zero internet marketing skills and don't even have a website, you will want to explain in detail your roll-out plan and even a sample of what the website will look like, along with assumptions for revenue increases based on bringing the RV park up to the modern era. While these plans are only thoughts, the fact that you have proposals to make the RV park better performing gives the bank a warm fuzzy feeling that you'll do well as an operator and that their risk will diminish over time.
Obtaining a loan for an RV park is much easier than many other real estate sectors. But never take the lender's knowledge or interest for granted. Write a great loan request and you will be rewarded with a great loan.
RV Park Home Study Course
Our Home Study Course is not like anything you have ever listened to or read before. We do not fill it with a bunch of fluff on how your are going to make a million bucks with no money down. We tell you the whole story... the good, the bad, and the sometimes ugly.
Click Here for more information.
Professional-Grade Interior Signage Is So Easy To Achieve - And Inexpensive
Many RV park owners have nice entry signage - that big sign on the highway or street that announces that you've arrived at the property. But what about those signs inside the park? Are they on old rusted pieces of angle-iron, or bent wooden stakes? The truth is that professional-grade interior signage is extremely easy to create and maintain - and inexpensive, too. So how do you do it?
What is "interior" signage?
This is the signage that runs throughout the interior of your RV park, offering instructions such as speed limit, stop signs, and instructional signs such as "dump station". Unlike the entry signage, the interior signage is not intended to be giant or attention getting. Instead, it's role is to inform. But it also serves to create the first impression and general "feel" of your RV park, so it's equally important.
What do you make it out of?
If you drive inside hundreds of RV parks (which we do) you'll find that one sign design stands out from the pack. It's a simple white vinyl post with white vinyl PVC cap, with the sign screwed directly to it. You can do this either by digging a hole and putting the PVC sleeve directly in the hole and cementing it in, or by installing a wooden 4"x 4" post and then putting the white vinyl sleeve over that post and adding the white vinyl PVC cap (which is much sturdier and recommended). You can buy white vinyl PVC posts virtually anywhere, from Walmart to Lowe's. They're inexpensive and regardless of where you buy them, they're all basically the same.
Where do the signs come from?
We buy our signs on-line. There are a wide number of on-line sign stores that sell professional-grade products and can even custom-make them with the name of your RV park on the top if you desire. These signs are not expensive - about $30 each. And they can mail them to you anywhere in the U.S. The turnaround time is around two weeks, which means you can still get these new interior signs up for this summer.
Why is this so smart?
How often is the best-looking product also the longest-lasting and the least expensive? Hardly ever. But in the case of white-vinyl interior signage, it's true. You never have to paint white vinyl, and each rain storm tends to wash it clean. And if someone should hit a sign with their RV, it's not a big deal to replace that post. You simply unscrew the sign, put in the new post and sleeve, put the cap back on, and then screw the new sign on. Compare this to architectural-grade aluminum signage, which can cost $1,000 to do the same thing.
If you want to really improve the look of your RV park this year, consider replacing all of your interior signage with white vinyl posts and new signs. It's inexpensive, easy to do, maintenance-free, and lasts nearly forever.
How Does RV Keep Hitting Home Runs In Product Positioning?
It's unbelievable how lucky the RV industry has been in gaining positive media positioning across all formats, from magazines to television. Here's an article from the recent issue of Southern Home Magazine, which shows the RV product as an upscale part of an outing to an equestrian event. Perhaps it's the product of all the "Let's Go RVing" campaign that's been appearing on national television and in major magazines. But we think it's more than that. Most media targets higher demographic viewers, and there are few viewers with more disposable income than RV owners. The other factor is its widespread popularity with the two largest age groups in the U.S.: the Baby Boomers and the Millennials. The bottom line is that the RV industry is receiving millions-of-dollars-worth of free advertising constantly, and that may be a component that has driven RV sales to their highest level in U.S. history.
Our Top 5 Real Estate Investing Rules
Over the past thirty years of real estate investing, we have developed some basic principals and sayings that we believe to illustrate the core values necessary to successfully invest in RV parks. Here are out top five of these mantras, and what they mean to us.
Acknowledging the relationship between risk and reward
Sam Zell is the top real estate investor in U.S. history, having been the largest owner of RV parks, office buildings and apartments at various times over the pasts half-century. And his biggest concern is the relationship between risk and reward. If a deal has little risk and huge upside, you should always buy it; if it has huge risk and low upside you should never do it. Most deals fall somewhere between these two polar opposites but should be evaluated based on this principle. There has to be a healthy relationship between risk and reward, or you should not buy that RV park.
Time kills deals
This theory is that, if you find a good RV park deal to buy, you should get it under contract immediately and not procrastinate. In that one day that you failed to push the seller to sign up, someone else might call and steal the deal from you. Or the seller might change their mind. There is a constant sense of urgency when you are trying to buy RV parks and you should never forget that.
Diligence is the mother of good luck
Benjamin Franklin said this and, although he was not an RV park owner, he did have a knack for making great common-sense sayings. What he meant is that if you perform great due diligence on a property, it is unlikely that you will not succeed. You see this every day in the RV park business. Those buyers who turn over every rock and gather every fact during due diligence always make money and those who do not frequently lose their investment. If you want to try your luck, go to Vegas. If you want to make your own luck, then focus on great due diligence.
Before you can have return on principal, you have to have return of principal
We think this should be a part of every investment - whether an RV park or a stock or bond. Don't be lured into making risky investments that offer ridiculously high returns, as that frequently leads to catastrophe and you will not only not hit those returns but, more likely, lose everything. When you evaluate any RV park investment, you should first look at the security of your investment, and then the return level. Don't lose sight of the big goal, which is capital preservation.
Think like a person of action and act like a person of thought
There's no point to taking action in buying an RV park if you don't know what you're doing, and there's little purpose in learning how to buy an RV park without putting that into action. To be a successful investor, you have to have both education and action. This is true, of course, in all aspects of life. There's nothing more troubling than talking to someone who is buying an RV park without knowing how to perform due diligence or even evaluate the proposed financial performance.
We think that these five maxims will give you a good base for RV park investing. It's been a foundation for our success and applies to every investor.