Transcription
Today, we're going to be touring one of Pace Mor's Army [Music] Parks. If we haven't met before, my name is Heather, and I own about $30 million in RV parks in East Tennessee. And today, we're going to be talking all about how you can get started in RV parks.
I am, uh, Pace's assets manager, and these two RV parks that you guys are going to be visiting, these are some of the properties that I manage for him. So, when Pace pulled up a few minutes ago, he told me I could share with y'all that this park, they paid $5 million for, all on seller financing with 5% down.
I don't know anything about what you're bringing in. I don't know if we're sharing that we are shooting for 530 for this year. That would be gross. Yeah, so we're going to gross $530,000 is the goal. And an average short-term RV park has a 50% expense ratio.
And how many sites do you have total? 60. And then we have cabins. How many cabins? About 6 to 7. Okay. Still kind of like a hotel, they're checking in and out, you're turning over pretty quickly, kind of like an Airbnb. But you've got 60 of them here, right? And you think, oh, they just drive in and then they leave. No, they don't. They make campfires sometimes when they're allowed. They have trash every day. Some parks do. Y'all pick up trash, or you have them take it to the dumpster? Yes, we do have to do that. And clean up and all the things that you mentioned. That's very normal. Yep, picking up trash, um, cleaning out the fire pits. Because think about it, if you've paid, how much are they paying a night? So it varies, but it's an average between $95 to $100. So let's just say $100. You paid $100 for the night, you're staying here for six days, you said $600. You don't want someone else's fire stuff mess still there. You don't want any trash there. Some people smoke cigarettes and put them in the fire pit. You're going to want all that cleaned up. So you've got your outside guys cleaning all that up, making sure they're turning over each site before check-in.
And RV park site turnover is usually significantly less time. In the RV parks that I own, checkout's 11:00, check-in is 12:00. So we have an hour to turn over all of our sites. Now, our RVers, because they usually have a long way to drive, a lot of them start checking out pretty early. And so we have a list of who's checking out for the day, and my guys are circling, making sure that they're turning those over as soon as it's possible. Yeah.
So RV parks are underwrote totally different than a short-term rental or a residential property. They are commercial real estate. So you are underwriting them with a cap rate. And we are driving distance for the day and a national park. And so you can find cap rates that are as low as 6%. But if there's a ton of value-add, we've seen them as high as 8%. Um, who's familiar with cap rates? Cap rate is simply your rate, rate of return. So we would be taking that net income number and we would be dividing it by the number. And that, remember when I said 6%? It's counterintuitive. So that 6% is better for the seller, and that 8% would have been better for the buyer. So it's backwards from the way you traditionally think about it. That is literally a really dumbed-down version of cap rates. But if you're thinking about RV parks, you really need to understand cap rates because even if you're not buying it on a cap rate, the people you're communicating with are going to be using that language.
One of the biggest expenses I have when I take over a park that is on a main road like this is I always buy or have made a mac daddy sign like this amazing sign because it's part of your marketing budget. And every call we take, we find out or what they book online, how they heard about us. And 30% in my Pigeon Forge location, which is a tourist town, come to me because they saw my sign. So that sign was $30,000 13 years ago. Way more than has paid for itself at this point, right? But on that sign, you're going to include your things like the cabin rentals, the ice, the firewood, whatever it is that you have.
You've got store sales, which can be hundreds of thousands of dollars even in a smaller park because depending on your location, you're selling food, you're selling camping supplies, you're selling souvenirs. My kids buy a freaking bear, the stuffed animal, every stop we make, right? Whose kids want a stuffed animal everywhere they go, right? So your camp store is a huge stream of revenue. So we've got firewood, ice, camp store, laundry mat, golf cart rentals. We charge $50 to $70 a day depending on the location. And those are a huge stream of revenue in addition to your campsites.
You have your tiny homes, your glamping tents, whatever your alternative accommodation is going to be. Water rentals. So sometimes people will have like a, a river or a pond or a lake or some, some water. And so if it's something as simple as a stream, they rent inner tubes and people float down, right? Or it could be like the lake we were on yesterday and people are doing party boat rentals. And sky's the limit, right? Some people can't do the boat rentals, but they're doing fishing. So you're selling fishing permits. We make a ton off of fishing permits. And you can decide, are you catching or lease, or are they keeping them? We have so many fish, they're, they're keeping them and posting really cool pictures for social media, which obviously helps your property.
Propane is a huge one. If you were thinking you're going to have propane, make sure you check with your city and make sure that you are allowed to sell propane. Some states require someone with a license to fill the propane. Most states. And then your food services. I think is the one I skipped. If you are somewhere like this, you could have something as extreme as a restaurant or some kind of full-service food truck because there's nothing like right here. So the, the original RV park I bought is a mile from Dollywood. Who's been to Dollywood? It's like Tennessee's version of Disney World. And so there are so many opportunities, right? So we simply have a Pizza Kitchen and we sell the crap out of pizzas. Um, we sell $50,000 a year just in pizzas. So while that's not, you know, hundreds and hundreds that you could make if you had a full restaurant, for the location we're in, that's going to be as good as it gets. So we do pizzas and ice cream out of there.
So RV parks are a little unique with the way you staff them. There's something called a work camper. Raise your hand if you know what a work camper is. Yeah, we got a couple of y'all. So work campers are people who live in their camper and they travel around and work in different parts of the country, almost like this gypsy lifestyle, right? And I have like a love-hate relationship with work campers. Like, it'll be one season and I'm like, yeah, I love them. I hired all work campers. And next season I'm like, f that, I'm hiring all local people. This sucks. Um, because it's like, some of them are freaking amazing and some of them are terrible, just like everything else. You, I was telling y'all yesterday, you could be like, can you please make this bed this way so that they all match? And then they're like, drove away and were gone tomorrow because they didn't like the critique, right? And then some of them are older men who don't do really well with a female boss. And you know, when I'm like, this isn't really the way we do maintenance here. And they're like, yeah, we've been doing it for 50 years. I'm like, I don't care, we got to do it this way. That doesn't go well.
Work campers, there's websites called workcampersnews.com, campers with a K, and there's Facebook groups for work campers. And they are harsh in those groups, just just letting you know ahead of time. They pick everything apart and they get really mad at you. But it is a good way to find employees. All of them are going to ask you to be paid under the table because they like getting their money from Uncle Sam and then being paid by you at the same time. Don't do it. I don't care what kind of deal they'll give you, it is not worth the tax problems you can run into later. And you are going to make them mad at some point. Who's had employees long enough to know that at some point, a good majority of them get mad at you and leave? You do not want them to report you. They are not usually smart enough to know they're getting themselves in trouble at the same time, and you will be in big trouble. So pay those work campers like you're supposed to. Just because their last job let them trade work for their site, do not do it. I was audited in 2013. They sat in the office with me for three months and went through everything. It sucks. And I didn't end up owing anything, which is like, my accountants probably aren't pushing hard enough if I didn't owe anything. But you want to know that you've done everything right. Those laundry quarters we talked about, a lot of people will put those in their pockets and not claim that money. When that auditor comes in and sees that you have a laundry machine, he's going to want to know where that money's at. So I highly encourage you to keep your books like you should. But back to work campers, they will tow on you. So pay them the way you're supposed to. I do give my work campers a discounted site rate. I mean, they have a discounted price. Um, there's nothing wrong with having multiple prices in your park. Um, but I am not, I am paying them for all hours that they work. And we use actually a mix. So we have some work campers and we have some people that are local. And so far, it's working out. First year, so we'll see. But I'll get in touch with you.
Not when you have all these different streams of revenue, you're going to need different employees to be responsible for each thing. Some people rent out the spaces, meaning if you have a restaurant, instead of you operating a restaurant, you charge rent to a restaurant operator. Or some people charge a percentage of the money that they take in if a food truck is parked here or something like that, instead of operating it themselves. That is absolutely an option. But the smaller your operation is, who has small businesses and knows that you, like, wear a hundred different hats, right? So when I hire people, they're hired for two positions and we cross-train them so that they can be backup for anything. Because when you have a park with a couple employees, if someone's sick, if someone's on vacation, someone's got to go to a funeral, all these things without notice, you still need to keep operating. In this specific, uh, location, we have two RV parks. It pays as other properties. So I have a general manager that runs all the personnel in the area, and she goes to the different, um, parks or properties that we need. We have two staff trained on office at all times on every park, just for emergencies. And then we rotate them.
There is absolutely that, like, you don't have to be at a national park to be successful with this. There are two types of franchises. There's some like random little ones, but two dominant franchises: uh, KOA. Most people see the yellow KOA signs. And Yogi Bear. Yogi Bear is not near as big as KOA, but they are bigger parks. They are nicer, more expensive parks with water parks built inside of them and all that stuff. Those parks take hundreds of acres because they have literally like $5 million water parks built within them. So people pay significantly more per night to stay there. And that's more of a, "if you build it, they will come." That franchise does have locations that are close to, like, there is a Branson, Missouri location, but it's not going to be right in the middle of Branson. It's going to be a few miles outside of town because they have so many more things going on. But lots of those locations are not right next to a national park because they're, they're bringing the tourist attraction to that location.
So two things that no one has asked that is the most important things about an RV park. First is going to be your permitting and zoning. If you are considering buying an existing RV park or if you are thinking about developing, you're going to want to make sure that the property is properly zoned and permitted, or if you're developing, that it has the option to be. So do not ruin Mom and Pop's operation that they've had for 50 years. Make sure you have negotiated in, are under contract first. Then you are going to call City Planning or whatever it's called in your city or county, and you're going to say, "I am looking to purchase XYZ property. How many RV sites is it zoned and permitted for?" Because what happens is, Mom and Pop bought these parks 30 years ago, 40 years ago, four generations ago, and they were zoned and permitted for 50 sites. And Pop got really mad at Mom one day, and he got out his backhoe and he went and built 20 more sites. And they've been using those 20 sites, and the money you think you're taking in includes those 20 sites, but you can't legally have them. And when you buy the park, you're not BFFs with the permitting guy. And when he drives by because you're the new owner, you're going to be in big trouble. So make sure you are properly zoned and permitted.
If you're buying land to develop, not everywhere lets you develop. We know this. If you've bought any other asset classes, make sure it is an option to have an RV park or glamping tents or tiny homes in those spaces. Not all areas let you have these homemade tiny homes that you see that are really cool to be in an RV park. They need to be RVIA certified. Number two, your utilities. No one wants to go to an RV park that doesn't have power and water and sewer. And now we consider Wi-Fi a utility. There's even something called the North American Camping Report. It's a report that comes out every year, and it's all the data on on the RVers in the country. And that North American Camping Report says that people will stay an average of 3 days more if they have good Wi-Fi. So that Wi-Fi is worth it. So make sure you're able to get utilities because some of these beautiful locations, you cannot get. You're definitely not getting city water and city sewer, maybe not even, um, septics and wells. And when we start getting into things like wastewater treatment plants and lift stations and all this stuff, it can cost more money than the property is worth just to get rid of your waste. So make sure those two things are something you're highly focused on if you're considering investing in RV parks.
And I'm going to be honest, I don't look at things the same way Pace does. I don't give a crap about cap rates. Um, I am looking at how much money can I make this property make. Um, that original park that I bought that you heard me talk about was $3 million and bringing almost nothing when I bought it because it was in bankruptcy. That park is now worth $13 million, um, because it brings in $2.5 million a year. And if I had been thinking about that from a cap rate perspective, you'd have never bought it, right? You need, there is some art in it to figure out what is this property worth as far as like, is somebody actually going to give me a loan? If you're getting a loan on it, if you're raising private money, or they actually going to agree that this will work out? Maybe you've got some data to show some other things. But I'm really looking at what can this property become on a cash flow perspective because my buy box is all about the cash flow that I can make from it.
I know this sucks, but it depends. It depends on the area you're in. It depends on the type of park you have. So let's, let's back up. There are so many different types of RV parks. We talked about this is a short-term park, so it functions like a short-term rental or a hotel. There's long-term parks where people live and function more like affordable housing. There are man camps. Who knows what a man camp is? A man camp would be something you might find in an area that a pipeline's coming through, the oil workers, right? And so maybe you had some land and you were like, this land's not doing much for me, but there's a lot of workers in the area. Those workers come with their campers and they need somewhere to live for temporary housing. The problem with a man camp is for a short period of time, it is kicking out the cash. But when those workers leave, the land is essentially worthless. So be really careful. It's a great opportunity for the short term, but do not pay for it the same way you would pay for a different type of RV park.
Next up, we have some kind of creative RV parks. Um, one of my students just bought a nudist RV park. Um, there's also 55 and over RV parks. Are you for the nudist RV park? Is that, why you're excited? Okay. So point being, there are really niche RV parks that make a ton of money. There's some that cater to people's dogs and they have these huge like dog parks that back up to each site. So there's some really specific parks too that cater to different types of things.
One other park type that I like to talk about and it works similarly to someone's lake house. They're going to drive, maybe an hour each weekend, and they're going to go hang out every weekend at their like quote unquote lake house. But it's their RV park. So they are a seasonal camper and they park their camper at this RV park for the season. And every weekend, every other weekend, them and their family, they go hang out at their quote unquote lake house. Only it's their camper in an RV park. And I see those more in kind of the Midwest, like Wisconsin, Michigan, some of those areas that have a different type of season where people kind of do that every weekend.
The marketing is going to be different depending on what type of park you have like that and if you're located. If we talk about like my Pigeon Forge, Tennessee RV park, for example, there's like a hundred other RV parks there. I'm competing with. So the amount I have to pay per click on Google is going to be significantly higher than this, you know, build it and they will come RV park. I can probably spend the same marketing budget because their clicks are cheap, but they need a big budget to be able to bring people to an area they weren't familiar with. So it really depends on what type of park you have and where you're located.
I'm going to be honest with you, I'm greedy. And it's, I'm dealing with all the staff, all the upkeep. There, I do that myself. My campers bring in, depending on the location, $30 to $50,000 a year per camper. And those are about $30,000 campers. So I have a specific number of them at each location depending on the demand and rent them out on Airbnb or my direct booking site myself. So I'm definitely not letting my campers compete with me with that. And have parking passes to get through the park. So if they had someone else there, we'd be towing their vehicle. So we would know they were there.
That's going to be so different depending on the type of system you have. Different requirements. Yeah, it's all different. And there's different types of septic systems that do different. It's totally dependent and it's very specific to the location, the soil that the location has, all kinds of that is a whole science in itself. And you usually hire somebody who specializes in that for each location if you were developing or expanding something.
On that diligence is also park specific because different parks have different things. But some things y'all aren't used to with due diligence are going to be, or I assume you're not used to commercial real estate. We're looking at environmental studies, phase one, maybe a phase two. Those are kind of expensive. Depends on what the park's been doing before. And trouble with that, it is not uncommon for an RV park to have 30, 60, 90, 90 days of due diligence where you're paying based on how much money they're bringing in. And because of that, you're going to be digging through their books. And a lot of Mom and Pops do not have good records. So some of them are hiding money because they don't want to pay taxes on it. Some of them simply don't know how to have good books. So if you're looking for a park that has great books, good luck. You're going to pay a fortune for it. But what I like to do is get bank statements because usually they're at least depositing most of the cash. So you can get that.
Now, a large majority of the money is credit cards. 90% of my money is because I make people make reservations. Right? And what do you do when you make a reservation? You're paying for it. Some places take 100%, some people take 50% when they make a reservation. So you want that merchant service report also to verify that income.
So when you have a residential property, you're not dealing with reviews. So part of your marketing is going to be related to your reviews. So you're asking your guests, your, your office ladies are trained when people are checking out, happy guests, not someone who complained, to good reviews. And not only do you need them to give the review, you need somebody to respond to that review. So part of your marketing strategy is making sure that you're either someone in-house, um, or you're using a company to respond to reviews across all platforms. So that, that's something that may not cost you a whole lot of money, but it's something that is a big part of it. Some people are spending money on TripAdvisor and those types of OTAs. Is that what we're calling them? Sites. There's also some RV parks go to camping shows. There's huge RV shows where people are looking at the new latest greatest campers that are coming out and purchasing their new campers for the year. That is getting less and less, um, but different areas, that's still a big thing. People put brochures inside welcome centers because depending on what generation you're catering to, um, because while we have the older generation doing some like those 55 and over parks we talked about, the younger generations probably aren't stopping in the welcome center and getting brochures, but some are depending on where you're at.
There are websites to be on like The Dyrt. Anybody use The Dyrt? Websites like The Dyrt, you can pay to be on that are specific to campers. There's another, um, camping club called Good Sam, which people can be members of and they get a certain discount when they come stay in your park. And you pay to have an ad on there. And I don't think Good Sam is worth it. That's a whole rabbit hole to go down. Um, I agree with you. Yeah, we canceled it. Actually, we did too. It's thousands and thousands of dollars. But there's all these random different niche things that you can spend money on. My honest opinion is put all of that money into Google because everyone Googles everything. Social media, Google. Yes. And with that, um, keep in mind that Google Business, it's many people that don't know about it, but it's completely free. You just go claim it and start using it. That is number one for us. We're right now pushing into have a competition that I was just talking about yesterday on, um, content for both parks into bringing up the numbers on reviews. And we have some games going on and a whole strategy on that because that is key. What Heather is saying, I mean, personally, if I would want to go some new place, food, whatever it is, I go and check reviews. So that's something that you want to work on.
Campers also like the familiarity. A lot of them go back, like repeat guests are a huge thing with Airbnb. Like some people go back to where they used to go if they have a reason. But a lot of people are just traveling to one area and they're like, oh, Italy was cool, let's go to France next year, right? Campers are a little different than that. They very commonly go back to the other places that they've been and they tell all their buddies. And so one nice thing is you're getting their email addresses when they make their reservation with you. So you have this giant email list. So don't forget your email marketing and having a decent email marketing strategy. It's not going to be like Helling where you're like, hounding them because they're not distressed in any way. So don't burn out your email list emailing them too often, but don't forget to nurture that email list that you've, you know, created for free by people staying with you.
Cancellation policy is huge. So, um, it depends on where you're located and what your competition's doing because you wouldn't want to have this really strict cancellation policy and the other 10 parks in the area are like, sure, cancel for free anytime you want. Um, it's pretty standard to have a cancellation fee. I charge $30, um, even if they cancel within the amount of time they can. I do 11 days. I know that sounds weird. I used to do seven and then they'd call me and they'd be like, but it was just seven days yesterday. So now I'm like, 11, and I'm freaking sticking to it. Don't call and try and argue with me. I am not going to be lenient. It's 11 days. 11 days still gives me a little bit of time for people to be like, oh, well, next weekend, let's go camping, right? Because campers, some of them plan crazy far in advance, but a lot of them are last minute. That's the beauty of having your own camp. So I like my 11 days. You still get all your money back except for the $50 cancellation policy, our $30 cancellation fee, sorry, um, unless it's a holiday. Holidays and special events, we do no cancellations. And we do no cancellations for groups. Groups are kind of like, okay, who's ever worked at a car dealership? Anybody ever work at a car dealership? Here's my friend over here who's done everything in the world. Okay. So if you've worked in a car dealership, there are these people who come and and they're like, yeah, but I'm going to pay you cash. I don't care if they pay cash because I make money when they finance. I want them to finance because I make money off of the financing, right? So there's these people and they're like, I have a group of 100 people, I want this major discount. And I'm like, yeah, but you want to come in July and I can book the sites out in July for way more money. And then if you change your mind and don't want to come, then I have an empty park, right? So groups do not get to cancel. And a group for me is five sites or more. If they're booking five sites as a group or more, there's a no, no refund.
Software is going to be one of the most important things. Once you get your park, make sure you are not cheap and you are paying for a really amazing software. Um, because we don't want to stand here forever. My two favorites are CampSpot and Newbook. They have everything you need integrated into the software. Two of the most important things on there are going to be your dynamic pricing and your occupancy optimization, meaning it moves the campers around to different sites to optimize any holes that you have. So there's not like a random one-night stay somewhere. And if you move the camper over, you could get an extra seven-night stay somewhere else and make more money. That's a whole session in itself. [Music]