Most RV Park buyers consider any property owned by a large company to be “off - limits”, but the truth is that good buys can be derived from big players in certain circumstances. In this RV Park Mastery podcast we’re going to explore the methods and situations that making buying from larger owners attainable.
Episode 145: Buying From Bigger Owners Transcript
Most of our brains are calibrated to believe that the only opportunities in the RV park industry are buying from moms and pops, single asset owners, often lacking energy, not tied into the modern internet world. And you think you can buy that RV park from someone who's relatively inexperienced on the modern world of real estate at a really low price and you can turn it around and make lots of money. And that's very, very true. That is the angle most people take. But you can successfully buy RV parks from larger owners. This is Frank Rolfe with the RV Park Mastery Podcast. We're gonna explore how and why you can buy RV parks from some of even the largest chains and largest owners under certain circumstances. Now, the first thing you need to know about buying RV parks from larger players is big companies often sell off lesser performing units or inefficient locations just as part of grooming and distilling down their business model. You see this all the time in most of these large businesses, but you don't really follow it. You don't really watch it that closely. Look at something like McDonald's. Not every McDonald's location that is opened is still in business today.
There are McDonald's which are often very quietly eliminated from the chain. They pull the sign down, they take all the signage off the building, they put the building up for sale and later it gets turned into some other form of fast food endeavor. And they do that because when they're out there adding on locations, some of them don't perform that well. They don't work out within their system. Sometimes the issue is just simply a management thing. That extra location is just too diverse from all the others and they don't feel like they can adequately support it. And so what they may do on a regular, ongoing business, many businesses go in and say, "Well, every year we're gonna eliminate maybe 5% of our stores that are not performing as well as the others." And so you can often buy things when people are simply trying to shrink down and get rid of those locations. And remember, when they're trying to get rid of the location, then they're gonna be very reasonable on price because they just want to get it off their books.
Also, often the problems that these big companies encounter with RV parks can be easily solved. Don't be thinking that, "Oh well, they're a big operator, so surely they know every solution." That's not actually the case. Many times those large companies, in fact, are the worst at finding solutions because everything is based not on the founder mentality like you would have as a RV park buyer, but instead it's based on committee decision. Look at everything that's gone on with Cracker Barrel, for example. Do you think any individual could be as stupid as the people who have been running that chain? I often, when I'm on the road visiting our properties, have stopped at Cracker Barrel. I was always impressed by the food quality, the staff. I like the kitschy interior. I even like the little store. And then the CEO decides, "Oh, no, let's just rip everything out and paint it bright white and make it light and bright." It's everything that Cracker Barrel is not. And that's why people like it. Someone made that decision. How did that happen? Well, obviously some committee at Cracker Barrel decided, "Oh, these are great ideas," but clearly they are not. And as a result, their performance has tanked.
So could you beat out a big company in turning around a property not doing well? Absolutely. I would have more faith on you, and I would definitely bet more money on you fixing it than some committee at some big office building. Also, you have to remember that oftentimes those big companies are very inefficient in everything. Travel, you name it. We all know this. We all know that big companies often make giant mistakes as far as being smart about what they're doing. And as a result, you can often be more efficient and do a far better job than they could. So let me give you some examples of when you can buy an RV park from someone at a good price and turn it around. One was a property we bought that was in a floodplain, or they thought it was in a floodplain, but that really wasn't the problem. The property had flooded, but it didn't need to flood. And we put the thing under contract at a really low price. And we just had this inkling that surely we could solve the flooding. And to our amazement, we found it almost immediately. There was an electric meter sitting there on the side of the road, not tied to anything, and the meter base was out of it. Someone had disconnected this thing. And we asked the manager, "Okay, what is that thing?" They said, "I have no idea what that thing is." I just called because I couldn't see anything attached to it. I had them remove the meter. I turned it off. What we came to find out was what they had done is they had actually turned off the pump that kept the property from flooding. This property was built at a slant. All the water went to one corner. And then a giant pump blasted that water over a berm into a lake. The minute they disconnected the pump, it could no longer drain.
So as a result, they had literally created their own problem because this one manager did not know any better. And rather than asking or investigating what the problem was, they just had the thing terminated because, gosh darn it, it was a whole lot easier. All we did, put the meter back in, never had another flooding issue. Also, we bought a mobile home park and RV park once in Wisconsin, and it was a one-off situation. It was a hybrid property. And the owners of this property, they did not want it because it just didn't meet their footprint. They had been buying, they were on an acquisition spree, and somebody made them buy a bag of properties. And one of those properties sat all by itself. The others were all cohesively tied together, but then one was distantly far from the others. So immediately their opinion was, we gotta sell this thing. And they didn't want to manage it. They didn't have a manager that went that far. So as a result, they were very eager to get it out the door because when they looked at a map and all those dots on the map, it looked like the odd man out.
So we stepped in, bought it at a very reasonable price. It fit with our systems. We don't have a giant footprint of all kinds of management layers, and we're used to buying things that are a little one-off the radar screen because if you really look at any grouping of properties, there's always the ones on the fringe. But they just didn't want it. They couldn't handle it. They thought it was too far out, and therefore they wanted to do nothing more than to sell it. If you talk to people within the RV park industry, you'll find many such stories of properties that people were able to buy from big companies successfully because they had the one magic ingredient. People always think of big companies as being superior in operations. I beg to differ. It's been my experience that the lone, sole owner of the RV park is definitely a much more successful management structure than having a giant layering like you have within a lot of those big companies.
So as a result, when you see RV parks that are for sale or you're out looking for RV parks to do a direct mail campaign or cold calling, do not be rebuffed when they're owned by a larger operator, because often what that operator is hoping, they're praying, is that someone comes to them quietly and says, "Hey, do you want to sell that RV park?" Because the answer will definitely be yes. This is Frank Rolfe with the RV Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.