RV Park Mastery: Episode 43

What Does Opportunity Look Like?

RV parks with the most potential all have a certain look. And when you see that “look” you need to heighten your push to get it under contract. In this RV Park Mastery podcast we’re going to review what a good deal looks like and what those symbols represent. A sign of an effective RV park buyer is the ability to spot great

Episode 43: What Does Opportunity Look Like? Transcript

One of the hallmarks of a good RV park investor is the ability to put any RV park into one of two boxes: a box labeled "has potential" and a box labeled "has no potential." But how do you do that? Well, this is Frank Rolfe, the RV Park Mastery Podcast. We're going to talk about some of the giveaways that let you know that an RV park has really solid potential. These are things that I've learned over the last 25 years of buying mobile home and RV parks, things that helped me visualize when I first see a deal, there's more than likely something that might really have good opportunity that came with it.

So what are those items? Well, the first thing that lets you know that an RV park is probably something that might interest you, is a missing sign or a sign in poor repair. Invariably, when you see the actual entrance sign to the RV park, the item is supposed to instill desirability and glamour, and confidence in the customer. That thing is missing and all you have is a couple posts where it used to be. Or the sign is there, but it's completely faded. That's always a really good sign. Because when Mom and Pop lose all enthusiasm for their property, even the most obvious things you would never do, they just let them go. So whenever I see an RV park that's got a sign that's in horrible condition or completely missing, I know immediately that is an RV park that is very, very poorly managed. And that's a real turn on. Because when you can buy a property that's poorly managed at a value based on its current operations, you have lots of opportunity to fix that up.

Another thing is when you see an RV park that has absolutely no charm from the street. Nothing at all. Overgrown trees, poor mowing, rusted signs, all those common features. Once again, I know Mom and Pop have lost all their enthusiasm. Warren Buffett would say, "Without enthusiasm, you have no energy without energy, you have nothing." Well, that's what you find, you find nothing on the part of some moms and pops with their RV parks. They one time we're really excited about it maybe 20 or 30 years ago, but over the years, and their biological clock ticking, they just kind of lost interest. And one way it manifests itself beyond the sign is the fact that it just looks bad from the street because they're just not trying. They just don't care at all.

Another item is when there's very, very poor mowing throughout. A lot of the green spaces in RV parks are all important to let people know that there is a quality property and that you really want their business and you're trying hard. When you see basically mowing gone bad, they're not doing weed eating, they're not edging and sometimes not even mowing at all. Just these little things of landscaping, dead tree limbs, dead trees, tree stumps, once again, what you're seeing is you're seeing a complete lack of attention, lack of affection, lack of enthusiasm on the part of moms and pops. So the bottom line is when the property looks kind of junky and more poorly maintained, that should be a turn on to you as a buyer. Because as long as the location is good, then why would I not want to buy like they do on the Flip or Flop TV shows about home investing where you try buy the worst home in the best neighborhood. Obviously, I want to buy the worst looking RV park in the greatest location, because that's where I have the most potential to turn it around and make the highest profits.

Another item that lets me know immediately that an RV Park is a really, really good potential target is when it's got really, really poor records. Now how poor? Well often we find these people don't have any financials at all. Nothing. So that's one category of seller. Can I see your last several years of P&L statements? What's a P&L statement? Well, I don't know, like, what's your revenue and your expenses? I don't know what that is. Well, how do you operate this? Oh, you know, people just pay me in cash. And then when I pay a bill, I go down and get a money order.  And they have no records at all. Now I bought things like that, where people had no records. But you know, when there's no records, you're going to get a big old discount. So there's lots of money in the fact that when Mom and Pop have no records sometimes they should have kept them because they're not going to get full credit for what they've done.

Another type of mom and pop with bad records is the one where they give you the records, but they're like in a crayon. So he once gave me their records in a purple crayon on three ring binder paper, stains all over it. Guy put, you know, a cup of coffee on it, big old coffee ring on the first page. Second page, he dropped a sweet tea on it, couldn't even make out some of the numbers on there. Those kinds of records, because when you see those kinds of records, it typically means that Mom and Pop, they just don't have a clue as to how business operates. And so they don't understand that all beloved cap rate, that's a multiplier of income, and they have to prove the income out. And often when they just can't do it, they don't have any financial records, they just kind of guesstimate and often they estimate low as far as what they're producing. And then on top of that, even if they want better than that, they'll have to contend with the fact that the bank probably isn't going to do it. Because they'll say, "Well, I don't see any concrete evidence in any possible way that you made X dollars of income. So the only way I'll do the deal is we're going to take it at a big deep discount."

Another way to spot an RV park that's not doing what it supposed to do is when it does not have any kind of online presence. So whenever you see an RV park and it doesn't show up under any simple Google search of RV park in whatever the location is, when you find the RV park has no website, has very poor social media reviews. All of these things hearken back to the fact that no one is really manning the store. No one really is out there learning how to properly market in the year 2021 and beyond. So they're stuck in the past. Maybe little brochures at tourist stops, maybe a little signage on the road. But you know, that isn't what draws people today. That isn't how you get customers. And they don't know that because they're so out of the game. They're so out of touch with what they're used to that they're just too sloppy. When you find a park that doesn't have a very good online presence, then it's a definite, here's a property you can really improve on. Sometimes you can turn around the occupancy enormously by doing nothing more than simply giving yourself visibility on Google and online. So that's another very much turn on, there may be some real potential in that deal.

Another one is when mom and pop the owners themselves are in fact, the original builders or are really, really up there in years. We really like buying properties that Mom and Pop have owned and operated for 30, 40, 50 years, because that means they probably lost a lot of enthusiasm over time. And that means I probably have the best opportunity to improve things, instead of a buyer who maybe bought the thing as only owned it for two, three, or four years. Because then what's going to happen is they probably put a whole lot more energy in, and I'm not certain that I can do any better than they did.

Another time that we know that an RV park deal has a lot of potential is when people own it outright. Because when they own it outright, when they have no debt, two things happen. One, they can sell at a lower price and still be happy, because it's all profit. And number two, they can sometimes carry the financing. Now you can't carry the financing if you have a big old mortgage, that mortgage won't allow you to carry paper. But if you have someone who owns it free and clear, well they can do anything they want. So if they want to sell it to you at 10% down, 5% down, or 0% down, that's their right, they can do whatever they please. They don't have to follow any certain pricing guidelines, any certain banking guidelines whatsoever.

Another way we know we're getting really good deal on an RV park is when we're getting a really good deal in the RV park. When you run the numbers and you say oh my gosh, this price is crazy low. Now, we're always pessimists, my partner Dave and I, so we're always looking at the worst case scenario. We like to take and do an analysis on every property we buy of the best case and the worst case, and the realistic case. Now the worst case is the important one to us. Because if you can't survive the worst case, what will ever come of you? You'll worry all the time Oh my gosh, am I going to be able to pay the mortgage, what's going to happen to me? Some of these RV parks are priced so low, that you really can't go wrong even on your worst case scenario. If you have someone who's got an RV park with 70 lots, and they only got normally 20 occupied and you're in a great location, you know you can do double that and they sell to you at a price based on those 20 how can you go wrong with that? More than likely your realistic case scenario still going to be very, very, very attractive.

The bottom line to it all is that every RV park has its own personality and none of them are perfect. They're all very, very different. But when you're out there in the big wide world looking to buy one, often you'll see all these different deals come across your desk, whether they come from things you see on Loopnet, RV Park Store, brokers, maybe they come from cold calling, direct mail, whatever the case may be. It's very, very important if you can to try and sort them into those two categories quickly of might be deal with might not be a deal so you don't waste your time. And that gives you a pretty good list of things that tell us that yes, this deal definitely has potential, we definitely want to get more information on it, we may want to put it under contract. This is Frank Rolfe, the RV Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.