Tesla is near to bringing out their all-electric truck, which it is rumored may result in an all-electric RV offering with a 500-mile range per charge. Within a few years, it’s possible that all-electric RVs will be a part of our industry, which may require charging stations. But that’s not too much of a capital investment, if it ever occurs. What’s more important is that RV parks are not susceptible to changes in the types of vehicles that people put on the road. When you go to any RV sales lot, you will be impressed at the wide variety of offerings. But the good news is that regardless of what the customer buys – travel trailer, 5th wheel or motorhome – they will always fit on your designated space. Although the types of vehicles have changed dramatically over the years, the basic sizes have not, nor has the requirements of what they need to spend the night. That’s the great thing about being in an old-fashioned industry – you don’t wake up one morning and find that technology has put you out of business. Just ask any investor that owns a shopping mall.
Memo From Frank & Dave
Extreme RV Park Rehabs: The Inside Story
Many RV parks are in pretty good shape, and the new owners step in and quickly update it and move on. But other RV parks begin the acquisition process as a big hot mess and need massive amounts of work to be bought back to life. Buying those type of properties is much more complicated than RV parks that need simple steps to get back on track. So how do intensive RV park turn-around projects work?
Solving pricing problems
The first issue on an intense RV park turn-around process is to come up with a price that is fair to both parties. This can often be very difficult. We have seen deals where the current net income of the property is negative, so the fair price would seem to be a negative number. To make these deals happen, you typically will have to include some of the potential in coming up with the price. With some deals, however, you simply may fail to arrive at an agreeable price, and that’s ok.
Solving Lending problems
Another issue is that lending can be extremely difficult on faltering properties. That’s why seller financing is typically the go-to lending plan for most of these type of deals – there’s no bank committee approval necessary. But if the seller cannot carry the paper then the only game in town is bank debt. If you’re going to succeed in getting a bank loan on a troubled RV park, then it’s going to require a great loan package and a clear message on what your plan is and how you’ll execute on it. Even if you have to get a loan with higher rates and tough terms, you can always refinance the deal later after you’ve turned it around.
Solving physical plant problems
An office filled with mold, a pool that has broken pipes and filter, roads with potholes – these are the type of things that a tough turn-around entails. The key here is that you budget correctly for all these items and have the money on-hand. The plan of fixing these items gradually over time is normally not the best concept, as you will have trouble improving the revenue if the property is rundown. You also have to be ready, obviously, to deal with more problems than you expected – surely, you’ve remodeled your house before?
Solving management problems
On a tougher turn-around project, you know going in that the current management will have to go. That means that you’re going to start off with the lonely job of having no support until you build a new team. It also means that you’ll have to learn many things that a normal owner can cheat on by having the current manager continue in their duties. We recommend that you make these changes immediately. Stanley Marcus (the founder of Neiman Marcus) once said “take your mark downs on people and merchandise as quickly as possible”. A failing RV park represents failing leadership, and you’ll have to start from scratch.
Solving operational problems
You will have to plan on re-building the systems of a failing RV park from ground zero. Many of these type of properties do not have any systems in place on such items as accounting, reservations, marketing – not even simple tasks like checking the pool chemicals. You’ll need to write an operations manual to cover every single item in the property – which can be a good thing sometimes because you’ll write a much better one than the old owner and on functioning RV parks the new owner often gets lazy and sticks with less efficient systems that hurt their overall net income.
Buying an extreme turn-around RV park can be extremely lucrative, but it also comes with some difficult tasks to solve. There’s an old saying “no pain, no gain” and these type of properties offer both.
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.
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Dealing with Road Construction and Access Issues
America’s infrastructure is crumbling in many areas of the U.S. and the result is a massive re-building program, particularly on roads and highways. Across the nation there are roads closed, bridges out and orange cones and pylons lining hundreds of miles of highway. So how do you deal with this issue if that road under repair happens to be the one serving your RV park?
Learn everything about what’s really going on
The first thing you need to do is to figure out the true information on exactly what is going on. Don’t operate from the perspective of the rumor mill – instead you need to contact the governmental body doing the work and figure out the exact timetable to completion, as well as any potential delays.
Notify your lender if necessary
If your exit ramp is being closed for a year for re-construction, it may require seeking a mortgage payment reduction until the exit is open again. Or you may just want to notify your lender that you’re going to do your best but you may be assistance at some point. We’ve found over the years that one thing that banks hate are surprises – so you never want to put them in that position. Asking your bank for help due to a surprise road construction project is not a condemnation of your RV park but simply a need for temporary relief, no different than if you contract a curable disease but need some time off to get a full recovery.
Modify signage to acknowledge access awareness
If they closed your exit for repairs, the solution is typically to exit traffic farther up the highway. That will require either renting a billboard or coming up with a privately funded plan B, such as putting that information on the side of a used metal storage container with a giant banner and then removing it when your exit reopens (this type of sign is typically illegal but the highway department often looks the other way since it’s a temporary issue) .
Be honest with customers and make light of it
Make your customers fully aware of the road issue. In fact, make fun of it. Tell people that you’ll give them a free gift for making it to your RV park and avoiding the traffic hassle. Tell everyone the correct way to get around the construction. Be vocal. Don’t hide from the issue.
Remember that there are benefits in the end
The good news is that when the construction end you get a free gift: a new bigger exit or bridge or highway lane or whatever the item was. This will be a huge benefit for your future customers and although it takes away from your happiness now, you will reap the benefits forever into the future.
Road construction is not the end of the world. But it does require some nimble actions and positive thinking. These tips will get your started.
Looking At Buying An RV Park That Costs $2,000,000 Or More?
M.J. Vukovich is one of the top capital consultants in the industry. His specialty is to help you obtain bank or CMBS debt for your RV park. He charges roughly 1% of the loan for this service, and frequently pays for himself with lower interest rates and better deal terms than you can obtain. He’s paid only on successful completion of the loan.
For a free consultation, contact MJ at (612) 335-7740 and let him tell you what he can do for your property, or email him at [email protected].
Should You Generate Power For Your RV Park?
Many Americans are seeking new “green” methods of deriving utilities, and these efforts include solar or wind power to generate electricity. But is this the right choice for your RV park?
Building a “solar array” to generate electricity with sun energy is not cheap. It can cost the RV park owner hundreds of thousands of dollars, based on the electrical needs. And wind power is even more expensive. For many RV park owners, these upfront costs are simply impossible to afford. Additionally, if you look at these costs as an investment, it is not a great use of funds, as your annual power cost ends up the same or, in many cases, higher.
Generating your own electricity is no simple task. You are effectively your own power company. And that means that you have no one to call when things break. You have to be ready at any moment to spring into action to get your power system back up and running, and that can create not only stress but also potential capital costs.
Is that really something you want to get involved in?
Even though you may be extremely passionate about conservation and “green” energy, this may not be the best place to focus your interest. I know one RV park owner who told me that converting to solar energy was the worst decision he ever made – it sounded good at the time but the reality makes him feel that he acted on impulse and is stuck with that decision in perpetuity.
Future sale complications
Even if you’re sold on the idea, having a private electrical system may cause you giant problems down the road, as it may turn off many buyers and even potentially lenders. Being a pioneer was a great idea in 1860s California, but most people don’t like being a trend setter and prefer the safety of old-fashioned methods of just turning on the switch.
It may still be too early-stage to power your RV parks with “green” energy sources. It’s your decision, but make an educated one and not one fueled by passion alone.
Interesting Depiction of a RV In Top-Rated Movie
The film “Bohemian Rhapsody” was a box office blockbuster. It documented the rise of the rock group Queen and the redemption of its lead singer Freddie Mercury. It also had an interesting scene in an airstream RV that was their base of operations for the Live Aid concert which was their last formal engagement. It’s clearly decorated in a 1970s style that would be a part of that era. It also provided additional support for the endless positive public relations the industry has been enjoying for years now.
No, It’s Not That Easy
This is a photo of a Richie Rich cartoon, in which he’s walking through a diamond mine with valuable jewels falling on his head. Sure, it sounds easy enough in that scenario to make a fortune, but it has no basis in reality. So what is the roadmap to success with RV park investing?
This is not a “get rich quick” industry
You’ve probably seen those late night television infomercials where you can make $50,000 a day flipping houses. Only problem is that you’ll never find a house like that, and if you did it might make $5,000 and not $50,000. People tend to promote schemes that don’t actually make any money – except to the person selling the course. RV parks, on the other hand, are a legitimate business that has been around for a half century and operates on a proven business model based on facts. Nobody promotes RV park investing as a way to make a fast buck.
That being said it can be highly lucrative if you know what you’re doing
A typical RV park should generate a 20% cash-on-cash return if you can buy it at a cap rate that is 3 points higher than the interest rate on your loan (for example, a cap rate of 8% and a loan interest rate of 5%). On top of that, you can then spike that yield even higher by increasing occupancy or rates coupled with cutting costs. These can be huge numbers for the RV park owner. If you increase the net income on an RV park by $40,000 per year, that’s an increase in equity in the property by over $500,000 at an 8% cap rate.
Benjamin Franklin said it best
We have always liked the quote from Ben Franklin “diligence is the mother of good luck” because that’s the best summary of buying an RV park. Diamonds don’t fall on your head like Richie Rich, but instead are rewarded to those who take the effort to understand every aspect of the property and to properly analyze the key drivers to profitability. That’s not a get rich quick scheme but instead a smart investing model.
Stay away from deals that are “too good to be true” because they’re not
It’s true in all sectors of real estate that deals that appear too good to be true are typically the exact opposite. There’s an old RV trick called the “gypsy traveler scam” which has ripped off more than one trusting investor. What happens is that a bunch of people who own RVs buy a vacant RV park on the wrong side of town for $10,000. They then fill it with their own RVs and give it the appearance of a successful operation. They run ads in the paper offering a 20%+ rate of return, and sell the property to somebody who does no due diligence for $100,000. Then they move all the RVs out and back home. Real RV park deals offer fair rates of return, but we’ve never seen a deal promoted at insanely high return levels be legitimate.
RV parks are a great business model, but they do require work and intelligence. You have to know what you’re doing and you have to be smart about the investment and its potential. Diamonds are not just going to fall on your head by simply poking around a few RV parks for sale. You have to put in the effort to succeed.
Bridge Funding Options Needed to Get Some Deals Done
Let’s assume you want to buy an RV park, but you don’t have the necessary capital or credit score. Or maybe you’re looking at a deal with so much hair on it that a traditional bank won’t consider a standard loan. How can you put deals together under these circumstances?
The best way to finance any RV park is with seller carry. It’s stress-free and you always get rates that are far superior to bank debt. On top of that, you can often get by with a smaller amount down – sometimes as small as zero – and therefore this is the best initial option to bridge the financing gap. There’s an old saying that “all things are possible with zero down, non-recourse seller debt” and that’s completely true.
Friends and family
You would be amazed at how many investors there are in America who are extremely unhappy at the performance of their traditional investment. As a result, they are willing to take a gamble on some non-traditional investment concepts, of which an RV park would qualify. Friends and family are a great way to also bridge the gap and a good deal represents a win/win for all involved.
This is an extension of the friend and family concept, and pertains to the ability to turn a normal IRA into a “self-directed IRA” for about $500 through groups such as EquityTrust (the nation’s biggest SDIRA provider). This will make your proposal even more interesting to people, as IRAs represent extremely patient money with long-term focus.
If you are trying to raise even bigger sums for the purchase of RV parks – but want to stick with a lot of investors with smaller amounts instead of a few with large amount – you might investigate the JOBS Act, which allows you to raise money similar to a public company but with a fraction of the cost and regulations. It costs about $15,000 to set up one of these fundraising plans. Here’s some initial information https://en.wikipedia.org/wiki/Jumpstart_Our_Business_Startups_Act.
When traditional debt and equity is not in your playbook, consider these options to get deals done. Part of being a deal “maker” – as opposed to a deal “killer” – is contingent on thinking outside the box on arranging financing.
What Can Be Learned from Other “Hospitality” Business Models
RV park owners are really in the “people business”. We’re not simply in charge of taking reservations, making sure that utilities are working and that amenities are open, we’re actually responsible for the overall positive experience of our customers. And to that end, it pays dividends to study other sectors of the “hospitality” industry to see what they do to further customer satisfaction.
Focus on being a “purple cow”
In 2007, Seth Godin wrote a book titled “Purple Cow: Transform Your Business by Being Remarkable” that made the case for the positive nature of being different as a business. The book claims that today’s competitive business climate requires you to stand out from the crowd to be successful. You see hints of this in many fast-growing food-service companies. For example, Jimmy John’s has the founder’s mission statements and quirky humor hanging all over the walls. The bottom line is that there is nothing wrong with being unique, and you should put a little of your own personality into your RV park and not try to be a “sterile” environment, but rather one filled with your own brand of humor and optimism.
The importance of social media reviews
As America has transitioned into very much of an internet nation, it is an essential part of your business to obtain and retain high levels of social media reviews. It is very hard to succeed if you have poor on-line ratings. So how do you obtain these? Doing a great job is one part, but that still does not necessarily get customers motivated enough to take the time to rate your RV park. Instead, you have to be a more active participant in the process. Urge them to rate you. Reward them for rating you, by giving them some free gift for doing so. Many of those businesses with 5-star ratings are not really that great, but they are terrific at fostering customers in giving those reviews.
Virtually all successful hotel chains are brilliant at the concept of “standardization” – the art of taking random chance out of their business. There is a playbook for everything at such companies as Marriott and Hilton. The lobbies are always arranged in the same way each day, as are the way the rooms are presented and pool chairs organized. The ultimate presentation has been calculated and photographed, and all the staff has to do is focus on re-creating this perfection. You can build the same type of playbook for your RV park – one that strives to maximize consumer satisfaction but takes the guesswork out, kind of like a “paint by the numbers” painting set.
We’re not talking about social media reviews here, but you getting a handle on what you’re doing wrong and right to make improvements. Hearing from your customers is an essential part of providing the best in customer service and experience. These surveys can be either on paper and dropped into an anonymous box at the office, or on-line. Look at these as your report card.
To take customer service to an even higher level, consider establishing a “Help Line” to allow your visitors to reach a higher authority if necessary – particularly if you do not self-manage your RV park. It’s simple to set this up. All you have to do is to get a dedicated Help Line phone number (typically one supplied by Grasshopper or Google) and an email address. It’s up to you whether it is live-answered or simply goes to voicemail, where it is automatically transcribed. You can then act on these calls and solve problems and ensure customer satisfaction. Post the Help Line notice prominently, so that customers can easily make contact. Over the years, we have discovered some of our worst manager problems with these calls and emails, and it also keeps your staff on their toes since they know that any customer has the ability to report their shortcoming.
All RV park owners are in the “people business”. These tips will help you better navigate the issue of customer experience and how it relates to your business.