You may not even own an RV park yet, but you eventually will, and at some point it will come time to sell it. In this episode of the RV Park Mastery podcast, we’re going to review the top 3 action steps to maximize your sales price and better ensure that you get top dollar as well as a faster closing. Since the price you achieve will tell the tale on your total overall return for the RV park it’s essential that you do as good a job in selling as you did in buying and operating.
Episode 6: The Top 3 Action Steps To Being A Smarter RV Park Seller Transcript
Welcome back to the RV Park Mastery podcast. We're going to be talking today about the three action steps to being a smarter RV park seller. Now, wait a minute, you'll say I haven't even bought an RV park yet. Or wait a minute. I'm not in the need to sell my RV park yet. Well, I know all that, but the problem is when you buy that RV park and while you're operating that park, you always have to be aware of the potential, the possibility, that one day you will want to sell it. And as you'll hear two of the three things, we're going to go over that a smart seller does, he does years ahead. In fact, he starts doing these pretty much from purchase. So really, if you want to learn how to be a good seller, you have to think now, even when you first buy the property, because a lot of what you need to do to lay the groundwork for that sale later, it comes immediately on.
Now also let's talk about selling for a moment. You know, Warren Buffett once wrote a paper that he sends to his investors. He talked about a strip shopping center that he owns near NYU across from, there in New York, New York University. And in it, he says that every time someone gives him an offer for that strip shopping center, if he doesn't take it, he effectively has bought it for that same price. That's how he always looks at every offer. Well, the same is true of your RV park. It's possible after you buy it, after you fix it up, get it all cleaned up and turned around that someone may come in and want to buy it. My partner, Dave, he had a guy come in at an RV park he just recently purchased, many, many years ago. He'd only been in there a very brief while in charge of the property. Guy came in in an RV, said, "I love the property. I'd be interested in buying it. Here's what I'd pay." Price was very attractive to Dave. And he took the price. He hadn't planned on selling it. He planned on self-managing it for quite a while, but it didn't happen that way.
So you have to understand that when you go into selling properties, you're not always going to master plan when that moment may come. May come a lot sooner than you think. Therefore, you want to be a smart seller and do the things we're going to talk about here well in advance. So the first one is computerized records. Now I know that some RV park owners, when you go to buy their RV park, they will produce a whole lot of sheets of paper, maybe done in a, in a, in a purple or a blue crayon. And that may work for mom and pop sellers, people from the greatest generation, silent generation, those folks, they may be able to produce that. And we may all be forgiving enough to accept that. And even banks will say, "Well, the guy didn't know anything about computers, so I guess it's okay." But that won't be true with you, because in the modern world, we're all using computerized financial records, whether it's just QuickBooks and Excel, or maybe it's Rent Manager or some other software, but you've got to have computerized records.
When you first buy that RV park, it is not satisfactory to say, "Well, I'm not very good with computers. So for the first year or two, I'll do it by hand on this little ring bound notebook here." No that doesn't work anymore. If you can't do it yourself online using a computerized method, then you need to find somebody who can. So if that's beyond your capabilities, it doesn't mean that you should suffer on doing it the old fashioned way, because that's not really going to help you down the road when you go to sell. You want to have continuously computerized records from the beginning. Bear in mind that your appraiser is going to want it. Your bank is going to want it, your future buyer's going to want it. Your accountant, who does your taxes is going to want it. Everybody wants it. Everybody demands that really good, precise, computerized record keeping. So you've got to start that from day one.
There's just no alternative to doing it the right way from the beginning. And don't forget words I just use will be important even if you don't sell your RV park. If you financed it, which I know you financed it, or I know you're going to finance it if you're buying it, you're going to want to keep that updated because at some point that loan will become due on a balloon payment. And once again, you're going to want to provide good, solid computerized financials to that appraiser and that bank. So you just got to do it. It's absolutely the norm today.
Number two, you got to make sure that your RV park obviously shows well. That's the big part of selling any real estate property, single family home, duplex apartment. It doesn't matter. People like to buy things that look good. People like to buy things that look like they don't need a whole lot of work. And once again, this is something you need to start from the beginning. When you first buy that RV park, you need to take the attitude that you're going to keep that thing always well-maintained. That's what really happens and shoots many people in the foot, people who are very miserly on upkeeping property, who look at all real estate, kind of a little bit like a slumlord. Someone who doesn't hate to put anything back in the property. They want to take it all out, but never put anything back in, never replenish the quality what's going on.
That's really not going to work for you in the RV park business. It just isn't. You're going to have customers who can see and feel the fact that you don't seem to care about what you're doing and they won't be happy. And they will tell friends and family and social media reviews to that nature. So basically you've got to be someone who's a preservationist of RV parks to keep it up to where it needs to be. Now, when you buy that RV park, typically some things are already in pretty good working order, but then there's some things that are not. Typically things like the pool, other amenities like that, they've really not been kept up there. They're working. The pool is turned on and yeah, you can use it, but the concrete's broken up and there's tiles missing all kinds of things like that.
It's a whole lot easier just to fix those things a little bit at a time than to have to play catch up for 20 years of deferred maintenance all at one time. So it really makes sense for you as a seller, a smart seller to keep those things up at all times. Plus again, we don't know when you may want to sell. Let's assume you go to the doctor. He gives you a terrible prognosis. You only have a day to live or a month, a week, a year, whatever the case may be, that would may move you ahead of where you were. As far as thinking you might sell it on your schedule. So as a result, you always want to keep everything looking pretty good at all times.
Now there's some things that people do right before they sell when they intentionally sell, which we'll come to in a minute. And those things might be to go in there and repave the roads, things that are more higher capital expenditure, but a whole lot of an RV park as far as keeping it looking good are very inexpensive items. Literally like cans of paint. If you're going to go ahead and put out the effort to make that thing look nice for your customers, then make sure that you don't hold back on the holistic whole of the property. You want to make everything looks good at all times. It works for you in every possible way. It helps customers be happier, better reviews, higher revenues. It's going to make a future bank happier, appraise a higher value, a future buyer happier, just the [inaudible 00:07:26] community happier. So just one of the big items for a smart RV park seller is always to keep the property showing well. Not to hold back.
The final item is when you go to sell an RV park, history has proven that smart sellers traditionally don't sell it themselves. Now you may say, "Whoa, wait a minute. Now I can sell it myself. I've got good people skills. I want to save the commission." Well, let's just think about this rationally for a minute. Typical RV park commission may be anywhere from 3%, I've seen as high as 10% on a smaller RV park, but can you really beat that deal? Because what the question here is not that just the commission. Of course, if you do it yourself, you'll save 3%, 6%, 10%, whatever the case may be. But then that you must offset that by how much money they bring in and what I've seen time and time again, there's no better negotiator than a third party on your RV park. You just care too intensely about it.
You're not really a good person because it may mean too much to you. And you may just not have the right people skills to talk from an arm's length nature about your property, because people are going to pick on it. They're going to say, "Well, this is broken, that's broken. This could be nicer." It may just get you all kinds of mad. And then you just break down in the whole negotiating process. So typically having that third party who it's not their baby, it's just a piece of property with some improvement just in RV park. They often can negotiate better than you can. And they're also more skilled at it than you are. A good RV park broker negotiates RV parks all the time. You probably haven't negotiated an RV park since when you bought it. And even then let's admit it, you weren't that good back then you were okay, but you weren't a professional.
I would much rather myself to have a professional negotiator at work for me. So I think using a broker, if you want to get a really good price, if you're a smart RV park owner looking to sell, using a broker is definitely the way to go. Also, don't forget that those brokers come with often giant lists of potential buyers day one. You don't have any, you haven't been combing the streets of America looking for 1031 buyers or people looking for RV parks, right? All you've been doing is simply running your RV park. And now you're hoping to get a good sale out of it. You don't have a built in network. Well, they do. And that network can be very, very important to you. So you want to make sure that you've got a broker who's got a long list of customers, 1031 obviously among the best.
Okay. When you have 1031 people, they already have a built in time clock that they have to use their money from their sale to do a 1031 and they have cash in hand. But another reason that I think brokers are super important is that they typically have a stable of potential buyers from day one.
Finally, brokers know how to process the deal all the way to conclusion. Something that you probably don't because you don't work in a world of trying to get deals closed all the time. So what's a broker bring to the table? They know all the hot buttons of things that can break down during the deal process, of how to get that surveyed, how to get that survey on time, getting the title work, all the various items. And they also know how to patch things up when things fall apart. Sometimes your buyer will suddenly get where they might have buyer's remorse and your broker may be able to get them over the hump on that.
Also, if your bank starts to fall apart, they're known to be able to help find replacement banks, or they can help that. The bottom line is they're able to take all their skills and apply them to one specific item, that's getting your RV park sold and they have so much history of doing so and so many skills and so many resources and so many people. It improves your odds of closing enormously when you use a broker. Again, this is Frank Rolfe, the RV Park Mastery podcast. We've been talking about the three action steps to being a smart RV park seller. And we'll talk to everyone again soon.