RV Park buyers all have different financial conditions and down-payment restrictions, but the good news is that there are methods to buy RV Parks with very low – or no – capital required. In this RV Park Mastery podcast we’re going to review the methods of buying RV Parks with lower amounts of money at your disposal.
Episode 138: The Low Capital Playbook Transcript
RV parks come in all shapes and sizes and so does the pocketbook of RV park buyers. This is Frank Rolfe with the RV Park Mastery Podcast. We're going to talk about the playbook for those moments when you have a low amount of capital to spend all the way down to no capital to spend. What's nice thing about the RV park industry is it is very egalitarian, does not exclude people who have lower amounts of money for down payments. In fact, that strata of buyers has been a godsend to many old mom and pop owners who are unable to attract better capitalized buyers who elect to move on to properties in better condition or sometimes that are larger. So those buyers out there who are willing to put in a lot of sweat equity are just the thing that some of these properties need when they do in fact have issues and problems which can be fixed and but are not within the taste buds of some of the most normal buyers. So here are some of the things you need to know about buying an RV park on a smaller amount of capital. The first thing is I'm no stranger to this idea because I bought in my early career and the first two mobile home/RV parks I bought, I bought both for only combined $15,000 of down payment.
So I love those low down deals. To me a low down deal is always not only a challenge, which is interesting, but also the rate of return is stellar because when you put very small amounts down, your average rate of return skyrockets. However, you have to look for a certain type of property. Obviously if you want to buy an RV park at a low amount down, you are going to be looking for heavy turnarounds, properties that have problems, things that scare away typical buyers. That's going to be your forte and what that typically means with an RV park or nasty property appearance issues, but not with big capex problems. Now what I mean by that is it's not that expensive to mow grass, it's not that expensive to paint. These are all things that are well within most buyers ability. In fact they could do the work themselves, but they show terribly. Well if you have an RV park that no one has ever mowed the grass or blown the leaves or put one moment of care in the physical plant, it clearly looks terrible. Anyone drives in goes, "Oh my gosh this is a hideous property. I would never want to buy that thing."
But does that cost a lot to fix? No it doesn't. A brush hog, a mower, a weed eater, a blower and you can get those things fixed. That is contrary to some properties where the ugly thing are expensive things such as roads or water lines. So you've got to identify what you are looking for if you are a low capital buyer, or situations where you can get that park cheap with very little competition, but that you don't have to pour money in after purchase. That defeats the whole purpose. There's nothing more wrong than when someone tells me, "Oh yeah, I'm buying this RV park, it's a zero down deal, but it needs $200,000 of capex." Well, that's not a zero down deal, that's a $200,000 deal. So you have to come to grips with that and accept that. Also, if you're trying to buy an RV park for a smaller amount down, you definitely are going to want to bond with the sellers because bonding is this magical force between buyers and sellers that makes those kinds of deals possible. What happens is a seller likes you and since they like you, they naturally want to help you.
Now why do people do that? I have a million bonding stories, but they all revolve around one thing, and that is a lot of times the older moms and pops nearing the end of their life, they want to believe that there was more to life than just money. They want to help people when it doesn't really make a lot of economic sense. And we're all guilty of that. Have you ever put a dollar in the bucket at Salvation Army at Christmas time with the guy ringing the bell? Well, then you're guilty of it because that was an action that cost you a dollar. And if we're all about the money, well, you would never put a dollar in there, but you put the dollar in because it made you feel good. And that's how a lot of mom and pops are. So bonding is critical. How do you bond with people? You just basically listen to them very attentively. You don't talk, you listen. You create situations where you can hear the whole life story. If they care to share that with you, ask questions like, "So how did you come to own the RV park?"
But bonding is critical. You don't have to do it in person. In person is great, but you can also do it by phone. I know that a buyer is well on their way to pulling off a really good deal when they tell me, "Yeah, I've been talking to the seller for months or in some cases years." That means you've got a very strong bond with the seller. Maybe they weren't ready to sell yet, but when they are ready to sell more than likely you are going to be the buyer and they will bend over backwards to make that deal work. Also, if you have low amounts of capital, you really want to focus, if you can, on RV parks that offer seller financing. Because typically if you have low capital, you also won't look that great on paper with the bank. So when you see RV parks that are advertised publicly as having seller financing built in, or when you talk to moms and pops with an often ugly looking park, telling them all the things you'll have to do to turn it around, and as a result you have to use your capital to do the turnaround and not the down payment.
Those kinds of deals typically predicate seller financing and that's terrific. You love seller financing. All buyers love seller financing. It's non recourse, it's a lower interest rate, and most importantly, it's a much lower amount down. Case in point, my first property, Glen Haven RV and mobile home park, I bought that for $400,000 with only $10,000 down. That's crazy. That's a two and a half percent down payment. So if you're going to buy stuff with low amounts of capital, you want to search out seller financing opportunities. But yet there are some other things you can do with an RV park that's still not even low, but all the way down to zero capital required. One would be doing a master lease with option. A master lease with option is when you take over management of the property but you haven't yet bought it with the idea you're going to buy it within a certain period of time. It could be three years, five years, you already have an established price you can buy it at, but it gives you years to build up the net income and value of the property to reach the level which you could buy it.
Let's say mom and pop say, "Well, I know my RV park is ugly, but I won't take a penny less than a million dollars for it." Well, you then say, "Well, I think I can make it worth a million dollars. It isn't now, not in its current condition, but I bet I can in five years. So how about I take the thing over and I work on it and I bring it back to life and then I can buy it from you for a million dollars up to five years from into the future." It's an attractive arrangement for the seller. They're getting the price that they wanted. It's also very attractive for you because basically you have no money in it while you enact your plan. And once you solve that RV park, you would be able to theoretically close on it once it has attained the correct value. You might sell it if you choose, and it would certainly make it a whole lot easier to finance.
Another thing you can do is selling a contract assignment. That's where you find an RV park. You negotiate it and you get it under contract with your name or an entity name and or assigns, which then gives you the ability to assign the contract. Now check the laws in the state you're in because we all know America has become just a kind of a federation of states with all kinds of separate laws and ambitions. But in most states you can do contract assignments to my knowledge, and that would allow you to actually make money with no capital in. So you find a deal, you negotiate it perfectly, then you go and find somebody else who wants to buy the deal at those exact specifics and you sell it to them. There's many people in the industry who began life doing contract assignments and then finally built up enough money from the contract assignment profits to buy their own RV park.
The bottom line is, if you don't have a lot of capital, do not feel excluded from this industry. I know so many people who started off just like you with not a lot of money and yet have made a roaring success of it using good strategic thinking and being aware of the opportunities. This is Frank Rolfe of the RV Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.