I receive frequent calls from individuals looking for guidance on RV parks that they are looking at buying. It always amazes me at the quality of deals that some of these folks find. And they always seem to follow the same pattern. The buyer contacts an older mom & pop that has totally dropped the ball on marketing, and they are wanting to retire and throw out a ridiculously low price – often far lower than construction cost. In some cases, they are also willing to carry the financing. The strategy is simple: to buy these RV parks at a low price based on bad business management, and then putting the pedal to the metal on marketing and increasing the revenue substantially. Recently, someone called me on a deal they had tied up at $250,000, which bought them 80 RV lots, a nice brick house, and enough historic occupancy to cover the mortgage and even pay them about $20,000 as the manager (they wanted to re-locate into the park and be the live-in owner/operator). So they had their bases covered day one, and all of their upside was straight profit. When you modeled it out, if they had moderate success increasing the marketing by pushing the internet (the mom & pop did not even have a website) and other marketing attacks, they could arguably have around $100,000 in income after the mortgage. This was the dream deal for this buyer, and a game changer since they hated their day job and wanted a complete quality of life change. The bottom line is that deals like this are out there if you search for them. And that’s fantastic.
Memo From Frank & Dave
Let Your Creative Side Out To Improve Revenues
Charlie Chaplin was a silent movie star from the early days of film. He was a pioneer in using creativity to make his films more interesting to watch, and the results were box office magic. There is plenty of room for creativity in managing an RV park, as well.
One of my favorite promotions that I have seen recently is buying or renting a bunch of inflatable slides and “bounce houses” and putting those along your frontage. You know that there’s no way a kid going down the highway is not going to want their parents to stop there. It’s a beautiful promotion, as it requires absolutely no explanation and is very visually exciting from the road. Another successful promotion has been bringing in live music on Friday and Saturday nights. This is something that attracts adults who look forward to the mini-concert as the great way to end each day over the weekend. There are a million ideas out there, and it’s up to you to put your creativity hat on and choose the best.
Most highly successful RV parks have created their own identity with superior strategy and marketing. And the best of these are highly creative. If you take the unique, biggest draw to your RV park, and then base all of your marketing around this compelling item, you will be building a brand that, in itself, is the central marketing push. To really sweeten the deal, you need a terrific logo and website. One tip here is to use the website Fiverr.com, which will produce logos and web designs for $5 in some cases. In the world of the internet, there’s no excuse for not producing fantastic marketing.
Southwest Airlines has been hugely successful, in part, due to their sense of humor and fun. Customers react favorably to a light-hearted atmosphere. Goofy hats, signs with jokes on them, funny themes, these are all ways to stand out from the crowd and make the customers have a good time.
Bringing out your creative side may also bring out your higher revenue side. Loosen up and let your creativity fly (and if you don’t have any, get some other folks on your team that have no shortage of fresh ideas). Creativity and profitability seem to go hand-in-hand these days.
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.
How Much Can You Trust The Seller’s Books And Records?
So you’re looking at buying an RV park. The seller presents you with their historic books and accounting. Since your whole deal is based on these numbers, you have the persistent concern “how much can I trust these numbers”?
The reasons seller’s cheat
In the “Lord of the Rings” movies, there is a gold ring that makes men go mad with greed. In the RV park business, that gold ring is the “multiplier effect”. If you buy an RV park at a 10% cap rate, then each $1 of income stated yields $10 in value. This makes a cheater out of folks who would never traditionally lie. They just can’t help themselves when an easy $1,000 cheat gets them $10,000 in cash. So it’s a pretty good bet that all sellers might be cheating at least in some small way.
How to treat these numbers
The seller’s numbers are important to cast some type of historical perspective and to derive an initial value. But they are not to be held as the gospel truth. You can often see the immediate fallacy when you also obtain the seller’s tax returns for the park, which often don’t match their own numbers (typically from them trying to pay less taxes). So these numbers need to be viewed as nothing more than a guideline.
How to effectively confirm them
Smart buyers know to re-build the park’s numbers from the ground up, both revenue and costs. On the revenue side, you can get a handle on historic occupancy by doing some mathematical calculations on the park’s power bill. If you can come up with a rough estimate of power usage by each customer, you can then make a crude ratio analysis to see what the approximate occupancy was. You can also watch the revenue for the period you have the park under contract (you should receive the daily reports of deposits during the due diligence period) and see how those tie to the claimed revenue of the same period in the year prior. You can also pay someone to periodically go out and hand count how many lots are occupied and compare that to the seller’s reports during this period. This will give you a rough idea of how accurate the seller has historically been. You can also re-build the expense side from the ground up, working only from actual bills from the provider (like electric, water, sewer, etc.) or three bids for each line item. You can only really trust the work that you do, as you are not trying to puff things up.
It does not hurt to get an appraisal – even if there is no bank loan to obtain. The appraiser will look at comps of similar sales, as well as do some research on the occupancy at the other RV parks in that market. Having a bank scrutinize the deal – most loan committees are pretty negative folks to begin with – also can give you some valuable input. Our opinion is that you can never get too much information, and the worst thing in the world are “yes men” who have a vested interest in the deal closing.
You can’t buy an RV park without a budget and historical performance. But you have to protect yourself as many sellers may not be truthful. Do great due diligence and confirm everything you derive to make certain that you are not overpaying and capable of hitting your budgets.
This is a retail store in Los Angeles that is nothing more than an Airstream painted black. It’s parked along the street in a high-profile area. On top of that, it’s an upscale women’s boutique. It’s amazing in what a high regard the public is holding classic RVs as a visual icon. Even Tony Hsieh, the founder of Zappos.com (and nearing billionaire status) has moved into a classic RV in a park he bought in Las Vegas. RVs are truly chic these days.
Popular Show Examines Renovating Classic RVs
If you like vintage RVs, then you’re going to love the show “Flippin’ RVs” on the Great American Country cable channel. In each episode, the hosts track down and purchase a classic RV in need of total refurbishment, and then do the renovations and re-sell it. And, of course, as part of the restoration process, they give the history of that unit and tips on how to do the work. After seeing a few of these episodes, you may feel the need to start looking through the classified ads in your local newspaper.