RV Park Mastery: Episode 58

Bonding With Your Lender

We all know the value of bonding with sellers to attain the best prices and terms on an RV park. But what about bonding with lenders? In this RV Park Mastery podcast we’re going to discuss the benefit of building a relationship with your lender and some practical pointers to make that happen.

Episode 58: Bonding With Your Lender Transcript

We all know about the value of bonding with sellers, but what about bonding with lenders? This is Frank Rolfe, the RV Park Mastery Podcast. We're gonna talk about the simple fact that you will be a much more successful RV park investor, a much happier person, if you have a really good working relationship with your bank. Now, what is bonding? Bonding is this magical thing that happens when two people form a friendship that allows their business relationship to transcend to another level. They trust each other, they like each other, they look out for each other. Now, when you're buying an RV park and you create bonding with the seller, you typically end up with a lower price and often seller financing. So that's fantastic. So we all know that bonding with the seller is vital, it's one of the most important factors in being an RV park buyer, but we don't often think about how important it also would be to bond with the bank. Now how do you bond with people? Well, the best way is to talk to them, or more importantly, listen to them, which means contact. Now, contact doesn't have to come strictly in the form of face-to-face, although face-to-face is fantastic, in today's world, that could be very difficult, and certainly if you are many, many miles away from your bank, nearly impossible.

So when I talk about contact, I mean not only face-to-face when appropriate, but more importantly, probably by phone or possibly by email, or maybe even really mail. That's how you create bonding is you literally invest your time because time is precious and too much in America today, we forget about the importance of devoting some time, you see people looking at their phones incessantly rather than having conversations with others or not taking the time to call people anymore, thinking they can do it in a quick email or a text. The problem is, that it defeats the entire purpose of building those all important bonds that you really wanna have with your bank, so how can you then take this and translate this into action, what can you do to actually bond and make that connection with your banker? 

Well, the first thing is obviously to keep them in a constant loop of what you're doing. Now how frequently do you need to? Well, it depends on your bank and kind of how the relationship begins, but at a minimum of quarterly, you need to report to your bank the progress on the property, even if it's not required, most banks only ask for financial statements annually, they may do an annual property inspection, but they don't really expect you to communicate with them quarterly, and they're extremely impressed when you do. Now, you could do it monthly, but monthly might be overkill, it might be hard for you to produce that much content, and they might think it's a little intrusive, but certainly not quarterly. What would you put in that quarterly report? Well, I would talk about the progress on your RV park, I show some photos of the RV park, the great things you're doing, possibly even a video, if you're proud of all the great improvements you have made, so make it as meaty and as transparent as you like this is your bank after all, tell them what's going on, and don't be afraid to tell them the good and the bad, everyone knows in real businesses and RV park is a real business things happen.

So talk about your successes, but at the same time, talk about your struggles and things you've done to improve your situation, be honest, be open, be transparent, those are the things that banks really appreciate. I would also do a follow-up call, even if you send them a quarterly report of some type with photos and videos of showing them what you're doing and talking about the things that you've done, maybe you've increased revenue 20%, you've increased net income 10%, whatever I would then follow that up with a phone call just to say, "Hey, I was following up. Did you see all the great things we're doing at the RV park?" Why? Because it's more effective when you do that, number one, you make sure they saw it, but number two, you reinforce it, it also gives them a chance to then ask you questions and say, "Okay, I did see that, so how in the heck did you get the revenue up 20%? How in the world did you fix that issue with that bridge over the lake?" That then allows you to form further bonding by talking and listening to the bank. So it's one of those double task moments when you kill two birds with one stone.

Another thing you can do with your bank is to show them a graph of your basic budget actual and different successes. Make it easier to read. When you send people just raw financials, that's boring. Banks see that kind of thing all the time. It's really hard to look at, for them, so they're just gonna look, just to take a quick glance. Instead, hammer home what you want in the form of a graph, some kind of graphical tool. For example, let's say you bought the RV park and the revenue when you bought it was $100,000 a year. Now you're 12 months in, and now you're at $120,000. Well, instead of writing those numbers down, why don't you just show two bar graphs. Bar graph when you bought it and bar graph today, you can even color code that part of the bar graph that extends beyond when you bought it to show how much additional profit you had made. People love those things, they love bar graphs and pie charts, anything that makes looking at information easier and frankly, more interesting. Do not be afraid to graph that out for people, they really like that.

And also don't forget the power of a meal if possible, see if you can have a periodic lunch or dinner with your banker. It's not hard. It's not that expensive, it might cost you to take your banker out to lunch, what? $20, $30, and thats if you take them to a really nice lunch, I've had lunches with bankers where I end up going to the Dairy Queen near the property, things like that. They're perfectly happy with that. When you have lunch with your banker or dinner with your banker, it gives you time to discuss what's going on with the property, and once again to build great bonding. So there really isn't too much bonding you can create with your banker. Now, why should you? Why should you put out the effort, I'm describing? Why send quarterly reports? Why go and spend $25 having lunch with your banker, why would you even do those things? Well, let's just describe that for a moment, and what the benefits are.

Let's assume you buy your RV park and things are going great, and there's some national calamity. We've already seen COVID. Now, COVID actually helped RV parks. I don't know what the natural could be, but let's say we have some crazy thing and I don't know what it could be, a gigantic fire of some type, and there's a disruption to your RV parks business or there's a decline in the revenue. You think a banker that you've bonded with is more likely to say, "Yeah, that's okay, we understand. We'll work around it will abate a few payments in a certain period." You bet they would.

Let's assume you have a giant flood, there's damage to your RV park, now you need to borrow extra money to fix the damage, who do you think would be more likely to give you that loan, a banker which are nothing more than just a name or someone that you have a relationship with. Of course, once again, if you bonded with the banker, then you're gonna get probably that extra loan to get your park put back, and let's assume you're looking to buy another RV park, and then suddenly you need to get a loan on it. Who do you think can get that thing done in a more timely fashion, let's assume that the salary is on a very tight schedule, you can get a great deal on the RV park, but the problem is, you have to close by a certain date. And that's very soon approaching, who do you think is more likely to get that loan done for you on that expedited basis, the lender you have great bonding with, or the lender you've never even talked to before, the bottom line is you will sleep happier and more soundly at night, and you will have a much more successful RV park career, and you might meet interesting people that you really enjoy and look back on your death bed and say, "Wow, I'm really glad I got to know that person."

If you'll put forth the effort to bond with your banker. And one final note, you know there's probably no greater source of good financial information than your banker. Banks typically and particularly most older banker's life time, they've seen so many businesses, they've seen ones that have succeeded, they have seen ones that have failed, they've been through any number of cycles of boom and bust in the American economy. These are people who are extremely knowledgeable and when they give you their thoughts, those are really valuable thoughts. If I was trying to make a decision, who would I talk to? A banker. I once had to decide on a property, should I buy it or should I not. Who did I go to? My banker. Why? Because he was gonna do the loan on the deal? No, that wasn't why, 'cause banks have really good decision-making capabilities because they just have seen so much in volume.

You've only seen the trials and tribulations of your life span and businesses you've been involved in, or properties you've been involved in, but they've seen them by the hundreds and by the thousands, they're also probably ahead of you as far as the in-depth knowledge of interest rates and other issues that have a lot of importance on the real estate industry. The bottom line is we all need to always focus on and spend time bonding with our bankers, it's a very, very important part of being a successful RV park owner. This is Frank Rolfe, the RV Park Mastery Podcast. I hope you enjoyed this. Talk to you again soon.