Teddy Roosevelt once said “nothing in the world is worth having or worth doing unless it means effort, pain or difficulty”. While Roosevelt never owned an RV park (although he did enjoy camping), his thoughts are as accurate today as they were over a century ago. In this RV Park Mastery podcast we’re going to explore the correlation between effort and progress and isolate what areas you should apply the most effort to.
Episode 27: No Pain No Gain Transcript
Teddy Roosevelt once said, "Nothing in the world is worth having or worth doing unless it means effort, pain, or difficulty." This is Frank Rolfe, the RV Park Mastery Podcast. What Roosevelt was talking about is a correlation typically between the difficultly of something you do and how important it is. It was true back when he was a Rough Rider, true as president, true in all the main decisions we face in our life. It's not that hard to go out and decide between Doritos and Fritos when you're getting that sandwich, but it's really, really hard when you're doing things that might have a huge impact on your life.
Let's start off with the difficulty in finding an RV park. You may say, "Gosh, I've been looking for a little bit of time and I haven't found the perfect RV park yet." You don't have to get a million of them; you're just trying to get one. You can spare a little extra time and effort to get the right one. Remember, it is the very fact that RV parks are scarce that gives them value. When things are abundant from a supply and demand standpoint, there's very little value to them. Look at it as a blessing that it's hard for you to find that perfect deal because it's that scarcity that creates the value. On top of that, don't get in too big a rush. You only really need one great property. Most people that own RV parks just own one. Some own a couple, a few. A few own a lot. But for most people, hitting your financial targets can be accomplished with just one deal.
Also, sometimes it's difficult negotiating. Sometimes, some sellers are really, really hard to work w. Again, it's not necessary a bad thing. They've run off all the other buyers. As a result, you may be able to get a better price if you just hang in there with them, because they aren't aware really of anyone else looking to buy the property because they've scared everybody else off the whole idea of ever buying that RV park from them. So when you have that tough person, you can't nail them down, never will commit, again that's not bad. It's worth the effort. Keep following them. We have many, many stories of situations where we've gone in there and attempted to get a deal struck, and we go ahead and spend sometimes months, and we've had in some cases even years before we get that deal fully negotiated so it's definitely worth the effort. Do not look at that as being something where you say, "Well, gosh, you know I refuse to go beyond five phone calls." Don't do that to yourself. Teddy Roosevelt would tell you that's a bad idea. Keep persevering on because often those deals that are most difficult like that can often turn out to be the best.
Also, let's assume there's difficulty in getting the city to agree with whatever you need from the city for your loan document. Certificate of zoning, whatever the case may be, when you have a city that's tough to work with that can be a good thing because that means again you'll have scarcity. If the city is very, very concerned about RV parks and your RV park, and all RV parks, that's what we like to hear. We don't really want to be in a place where the city says, "Yeah, you can build an RV park anywhere. We don't care." I would much rather them have some concern for what's going on. That makes me feel better as the investor as to the value of my asset. So once again, Teddy Roosevelt would say that's okay, again that's worth the trouble, worth the effort.
Onto lending, sometimes you'll have trouble getting that loan for that RV park. You'll hit some lenders and nothing really materializes correctly. Keep going. Lending has always been an issue for RV park owners because it's not something that most people are out there trying to do. It's not like a single family home. Everyone, probably at some point in their life, has built a single family home and the lending on single family is so, so common. You could even do it online. But RV parks, not so much. Not that many RV parks in America, not many people own RV parks, and not a whole lot of banks have made loans on RV parks. If it's more difficult, again don’t' think of that as something that's bad. It's worth the effort. I don't know of many RV parks that were worthy of buying where the person did not get the loan, but I do know many cases where people had to go through many, many different banks before they could find the right one. So it's definitely worth the time and trouble to do it.
Do not give up hope, do not say, "Oh gosh, it's so hard to get a loan. I'm not going to continue on or carry on. No, that's the wrong decision, wrong decision. Yes, it may be difficult. It's completely worth your time and effort to get that done. Remember when a bank said I can't make the loan it does not necessarily mean that the property shouldn't be bought, it doesn’t mean it’s not valuable for the loan, it just means it's hard for that banker to fit that loan into what they like to bank. Banks have loan committees. Loan officers like to have a job. If they propose things to the loan committee, the loan committee doesn't much like, they're probably not going to push that through. They're not going to throw their whole career on the line for that one RV park. And maybe you just have a bad matchup between what you're trying to do and what the bank is trying to do. Again, that's all okay.
But then let's move on to the big one, the big item of difficulty for most people. The big item that Teddy Roosevelt would say here's a time when we must really, really fight hard, and that is making the actual decision to buy the RV park. What does it mean when you have trouble making that decision, where you agonize over the decision? It simply means you're smart. You should be agonizing over the decision. It's a really big deal. You're typically going to write a big down payment. It's going to be life altering, owning that RV park. So how do you get over that? How do you get over the difficulty of making the decision? To me, the best way to do that is through doing a best case/worst case/ realistic case scenario. This is to me, that is the absolute best way that you can overcome whatever concerns you have, and it's very reasonable to have concerns, is by modeling that and letting the math answer the question for you.
So how do you do that? Well, first you do it with the best case scenario. Best case scenario is you say I buy this RV park, everything goes completely according to plan. I increase my occupancy, I increase the rents, I cut the costs, everything just works perfectly. Okay, great, that's one scenario. Then there's the scenario of the worst case. The worst case, everything I thought would go well doesn't. Now, if you go too severe on your worst case you'll never buy anything. Just like driving a car, if you say well if I back out of the driveway I could just get T boned by a car going down the street as I back out, so you know what I really shouldn't drive my car at all. I'll just have to stop ever leaving my home unless I can go on foot. So you can't go too extreme.
But you can look at the revenue of that RV park based on the last three years of financials and then reduce it down. Instead of increasing it, drop it a little if you want. Drop it 10 or 20%, say okay let's assume I'm a lousy RV park owner/operator and I can't even do as good as mom and pop who I thought did a not that great job. Let's just assume I'm not as good as I think I am. All right, well when you then model that out what happens? Can you still make your note payments? Or would you have to feed it? If you have to feed that thing, write a check for negative loss every month how much would the check be? How long could you go feeding that property? So look at the downside, what really happens when we strain this asset, what is the worst case scenario. Is it just that I don't get any kind of return on my capital for a while? Or is it that I can't even cover the mortgage?
Then you move on to the realistic case. The realistic case basically says all right, I'm not going to take the assumption of the best, nor the worst, somewhere in between. Perhaps I could increase the revenue of this property by 10%. My best case was I was going to take it up 40%, my worst case was I was going to drop 10%, let's assume I can just get it up 10%. Then you look at all of these assumptions, they're somewhere between those two polar extremes of good and bad. Then what happens? If you're happy with that realistic case scenario, if you say man this would be great if this worked out like this, I would be so incredibly happy, okay fine. So then let's just read the three gauges. If your best case scenario is spectacular, well that works. If your worst case is you know what I could still survive this, I could make it happen, I could still cover the note payments, and your realistic case is this is the best investment thing that ever happened to me in my entire life, then you definitely want to pull the trigger and buy it. But, if your best case scenario isn't really that spectacular, the worst case scenario is life ending, completely crushing, can't make the payments on it, ruin everything, and your realistic case just doesn't really have that much power either to make you feel good about what you did, then you shouldn't buy the deal.
But the very fact that making the decision is difficult, you should pat yourself on the back for that because that means you're being a smart steward of your money and of your future. There's nothing scarier in the world than people who don't worry, who aren't pessimistic by nature. Sometimes they get in terrible predicaments by being too happy, by viewing life in rose colored glasses. So if your biggest, most difficult step in that RV park purchase is making that final decision, well then I applaud you for that because that means you'll probably do really well. This is Frank Rolfe, the RV Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.