RV Park Mastery: Episode 77

The Importance Of Neutrality

When you’re doing due diligence on an RV Park the worst thing you can do is to make early decisions about whether or not you’re going to go forward with buying it. A good buyer must remain like Switzerland and remain neutral until all of the facts have been explored. In this RV Park Mastery podcast we’re going to review methods to remain impartial until the appropriate moment to make a final decision.

Episode 77: The Importance Of Neutrality Transcript

You remember back in World War II, Switzerland were the neutral country. They didn't align themselves with the US, Britain, nor with Germany or Italy or Japan. They basically refused to commit to anybody. They just wanted to be left alone, kind of like Greta Garbo. And in that way, they could do what they wanted to do without having to worry about any repercussions. Well, this is Frank Rolfe with the RV Park Mastery Podcast. I wanna talk about being like Switzerland, how to be neutral, because when you're not neutral when looking at buying an RV park, you can get yourself in trouble. Now, why is neutrality such a key item? Well, the problem is, when you stop being neutral, when you start taking sides in your brain on whether you're gonna buy that RV park or not, you put yourself in a precarious position, because you often start selling yourselves on the good attributes and overlooking the bad. Or it could go the other way. You could be overly focused on the bad and never really notice the good. So you gotta keep your white lab coat on at all time and be completely impartial, completely just simply focused on the facts.

Well, that sounds easy enough, right? But how are you really gonna do that? Because you're all excited about buying the RV park and you're looking at what the numbers might be, or possibly you wanna move into the thing and self-manage it, it's hard to remain impartial, so here are some tips to help you try and remain impartial when you're looking at buying the RV park. Number one, make an agreement with yourself that you will make no decision until all the due diligence is gathered. I think this is a very important initial building block. Now, as you gather your due diligence for an RV park, it's a good idea to get a three-ring binder and a bunch of those little plastic sheets, we used to call slick sheets in high school debate, those plastic pocket folders you can put papers inside of, and number those corresponding to all the elements you're going to drive in diligence, and your initial goal is just to fill in all those slick sheets to get that paper insert in each one, which each item represents an item of due diligence. And don't make any decisions until you get all of those filled. So make it almost like a video game. You're not going to make any decision, you've had this agreement with yourself, you won't do anything until you have completed the due diligence. So in that way, you're not making any initial thoughts as to whether you're going to buy it or not.

Another thing you can do is simply focus on the math. I live in Missouri, and as you may have seen, the Chiefs have done pretty well over the years, because Andy Reid is an excellent coach. But the Chiefs are very concerned on simply statistics and the math. You could have a player who's got a big name and they sound all kinds of good and they were really important several seasons ago, but yeah, Kansas City will cut them because their most recent stats weren't that successful. In the same vein, you need to be focused on the math and the stats on the RV park you're looking at buying, because math has no emotions. Math is pretty cut and dried. And one of the best ways to look at the math on an RV park is to do a best case, worst case, realistic case scenario. Now, your worst case scenario would be typically the property as it is and all your turnaround goals fail. And some people would say your worst case might be even making it worse by adding on maybe a stress test, like having a 10% reduction in revenue, but the worst case scenario is just that, is just, "What would happen if I bought this RV park and I just totally bomb at it?"

And then you've got your best case scenario. That would be everything works properly. All of your dreams come true. You buy it, you put in all kinds of new internet marketing and you push that occupancy and that revenue up double what it was for Mom and Pop, or maybe all these things you thought you could cut costs on and they all succeed. So then what is the best case scenario? And then what's the middle of the two, known as the realistic case scenario. It's not the best, it's not the worst. It's somewhere in between. How does that work out for you? And then look at those three, and then say, number one, "Can I survive the worst case?" Number two, "Would I be highly excited by the best case, and would I be happy with the realistic case?" But focus on that, focus on the math, the actual dollars, how much you will make in each of those scenarios and help let that drive you to decide whether to go with that deal or not.

Another key feature is promise yourself you will not tell anyone at all that you're buying the RV park, because what happens is if you tell people you are buying an RV park, it's going to push you down that path to do it, because you'll be embarrassed if you don't. So if you tell all your friends and neighbors, "Yes, I'm gonna buy this RV park in Idaho," well, if you drop that deal now, you'll feel kind of sheepish, kind of stupid. You told all your friends you'll buy the park in Idaho. They'll say, "Hey, did you buy the RV park in Idaho?" And you say, "No." Well, then they might look at you differently like, "Gosh, this guy is not very good or isn't really a very smart investor." So don't get involved in that. Keep that information to yourself, don't tell people you even have one under contract, because the minute you start talking about it with others, it's going to potentially sway your thinking. You do not wanna be buying an RV park that isn't the right one for you, that you've determined is not right in due diligence or financing and then have to go forward because you feel embarrassed. That's not a smart way to be. That's, in no way, part of being neutral.

Also, another way to maintain neutrality is after you've gathered all of your due diligence, after you know all the facts in the property, then seek out the input of others and say, "What do you think about this deal? Is this a deal that you think would be smart, you think it would be bad? What are your thoughts?" And get their input before you make that final decision, because they are also at that point, probably completely impartial. They don't really know much about the deal, they don't have any skin in the game, they're just telling you what they think. And sometimes when you talk to them and get their feedback, it helps you make decisions, because now you can test against them playing devil's advocate, "What about this, what about that?" And you'll find it actually helps your decision-making out too. But again, you must do all of these things while wearing your white lab coat in the complete absence of making any firm commitment.

Now you're gonna reverse course, of course, once you get your due diligence done, 'cause you then have to make a tough decision. Do you wanna go forward? Do you wanna go ahead and try and get financing, 'cause when you go forward to get financing, now you're gonna start putting money out in the form of third party reports, etcetera. So that's when you're gonna have to flip and go from being Switzerland to a more committed country, because that is the moment in which you actually do have to take sides, you have to make a choice. But as long as you've remained impartial during your due diligence inspection period, then that's going to put you in much better state because you're gonna have a much clearer head when you make that final decision. You're gonna reflect back on the diligence, you're gonna look at those numbers, you're gonna listen to the opinions of others, and by putting all that together and without having any additional commitments from telling people you were gonna do it or weren't gonna do it so you have no feeling of guilt or embarrassment, now you can truly make a smart decision and not one that's been influenced by factors other than the strict math and the strict science of whether or not that RV park will work for you.

This is Frank Rolfe, the RV Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.