Why RV Resorts are an uninvested, undervalued asset that has great untapped potential? Today, Sam Wilson will tell us why. In this episode, the How to Scale Commercial Real Estate host shares his experiences on why he has invested in these spaces, how to make this investment scalable, and the things to look out for when we’re acquiring these assets.
Sam Wilson is an active investor in self-storage, multi-family apartments, RV parks, and single-family homes, bringing vast industry knowledge from a diverse background to the show.
Sam is the Founder of Bricken Investment Group, where he helps clients find commercial real estate syndication investments that align with their investing and lifestyle goals. Unlike other established real estate investors, Sam is in the middle of his growth journey. He invites you to rise alongside him and his team members as, with each conversation, he’s learning too!
[00:01] – [07:11] An Investment of Possibilities
- Sam shares with us, in a solo episode, about what he has invested in.
- Explains to us the difference between RV Resorts and RV Parks, who usually own these spaces, and the possibilities of expansion.
- Why Dynamic Pricing is a great opportunity to diversify your earnings and make your investment scalable.
[07:12] – [10:42] Uninvested and Undervalued
- The potential of investing in an underrated and fragmented industry.
- Who are the demands of the customers and how to keep up with them
- Why RV rentals have the best tenants of all real estate investments.
[10:43] – [12:03] The Compelling Reasons for Investment in RV Resorts
- A summary of the reasons why RV Resorts are a must-invest asset right now
[12:04] – [12:36] Closing Segment
- Final words
Tweetable Quote
“We’ve got expansion opportunities. We’ve got opportunities for storage on a lot of these properties. There’s, again, I talked about utility build back. It’s something we’re working on right now where you can build back your utilities.” – Sam Wilson
—————————————————————————–
Connect with me:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on. Thank you for tuning in!
Email me → sam@brickeninvestmentgroup.com
Want to read the full show notes of the episode? Check it out below:
Sam Wilson [00:00]
Financing is good for it. The industry is fragmented. There are loads of room for operational improvement. We can buy the assets, right? And we’re just really excited about where this is taking us. We’ve acquired one, two. Going on our third acquisition this year in the RV resort space, and really ramping that up here moving forward. But that’s just kind of a cool asset class that nobody’s talking a lot about and where we’re just seeing blue ocean.
Intro [00:27]
Welcome to the How to Scale Commercial Real Estate Show. Whether you are an active or passive investor, we’ll teach you how to scale your real estate investing business into something big.
Sam Wilson [00:54]
How to Scale Commercial Real Estate listeners today you get me. I don’t know what episode number this will be, but I’m sure we’re pushing 700 or more. And up to this point, I’ve never done a solo episode. So here you get me today, where I’m gonna tell you a little bit about what we are investing in. This was a comment that I’ve received someone recently that said: “Hey, one. I’ve never heard from you on the podcast. And then secondly, I really don’t know what it is you’re investing in”. I said: “Man, I felt like I communicate that pretty well”. Obviously not.
[01:23]
So here we go. Today’s episode we are going to talk about: Where We. Me. I guess it’s just me standing here. I am gonna talk. About where I’m finding opportunity in the commercial real estate space right now, and that is in RV resorts. Those of you don’t know anything about RV resorts. I’m gonna break down the difference between an RV resort and an RV park to start. An RV Park is gonna be something like a um, think Kansas, I think Interstate 70 in Kansas. It’s gonna be a one-night stop. You’re gonna pull in, you’re gonna, you’re going to stay there for the night as you finish your, or carry on your drive across the country.
[02:01]
You’re looking for a place to plug in your RV, a place to dump your sewer, a place to get water and just spend the night and then you’re gonna keep moving. I have no interest in buying RV parks. Those are fuel price sensitive. They are not places that retain customers. They are just a layover. I have stayed at plenty of RV parks in my time. And that’s just not something that we have an interest in acquiring. An RV resort, however, is the destination. RV resorts are a place where people want to go and they wanna stay for three to four days at a time. There’re loads of amenities on site. Think about things like pickle ball, tennis courts, game rooms, fishing, dog parks, swimming pools, water features, you name it. There’s an endless array of things that we can be considered amenities at an RV resort. We want people, a camp store where you can get firewood, rent, golf carts, get your propane, you name it. We want to have those at our RV resorts. And it’s something where people go with their family and they’ll stay for two, three, sometimes four days at a time depending on what the suite of amenities may or may not be. That’s what I want to acquire, and that’s also where we are finding it just almost completely unmet demand.
[03:18]Let’s get into who owns RV resorts right now? It’s largely a mom-and-pop owned operation. It’s fragmented. Usually, it’s a single asset. It’s a couple that owns it. Again, said that’s the only asset that they own. And the why we’re finding opportunity on that front is because they don’t generally possess the sophistication that maybe you would find across a institutional owner or you know, a more sophisticated owner such as ourselves, that own multiple resorts across the country.
[03:48]That’s the only thing they own. So, they haven’t taken the time up to figure out the operational improvement opportunities. Especially because it’s not scalable for them, cause it’s their only asset they own. So they go: “Oh, it’s not gonna make that big a difference here. It makes a huge difference for us if we figure out utility billback programs”. Right? So, here’s some of the things that we see for the operational improvement side of things in these mom-and-pop owned assets. One, many of them don’t have a website. You just heard that. We have a property and a contract right now with no website. It has no online booking. It has enormous land opportunities attached to it, or we can expand the park. They may be a hundred percent full, but mom and pop don’t wanna put the money into expanding the park because it’s a big capital investment, understandably so. It’s a lot of money. It costs money to expand a park.
[04:35]So, we’ve got opportunities for expansion. We’ve got opportunities for storage on a lot of these properties. There’s, again, I talked about utility build back. It’s something we’re working on right now where you can build back your utilities. Let’s assume that somebody pulls in a big giant RV, a big 40, 40 something foot class A diesel pusher with three air conditioners attached to it, and they plug into your 50-amp service for the weekend and they run those air conditioners wide open all weekend long.
[04:59]We as the owners go: “Oh my gosh, that’s really expensive cuz we’re paying utilities”. Well, we’re working on a program right now where we get to build those utilities back. Again, that’s time and infrastructure or time and effort, put not into running the park, but into finding ways to creatively improve the bottom line on these assets that mom and pop just don’t have the time to do because they’re out fixing sewer lines, they’re fixing water lines. They’ve got say frozen pedestals or whatever else is going on at the park. They’re putting out fires, not thinking about ways to strategically improve the value of their park. We know what that brings when we improve the bottom line and what it brings to a future sale. So that said, there’s just huge opportunities for operational improvement. I know I talked a little bit there about a website and online booking. Dynamic Pricing is something I haven’t talked about, really at length with you yet.
[05:45]Dynamic Pricing is something where we conservatively estimate that we can change the net operating income by 10% just by adding Dynamic Pricing. There’s a park we bought earlier this year at the same price on April 4th that’s on July 4th. July was the busiest weekend into the year. Why do mom and pop keep the prices the same throughout the year? Because they can remember it. Think about that for a second. “Oh, it’s 49 bucks a night to stay.” It should be 49 bucks a night maybe to stay on July, or excuse me, on April 4th. But on July 4th, when you have a waiting list and your resort is completely full, that probably needs to be a lot higher than that. So, implementing software solutions that dynamically priced the sites on a daily basis versus it’s what it costs this year to stay here, no matter what day it is. That drives an enormous difference in revenue there at the end of the year.
[06:34]So, we see huge opportunity for operational improvement. The next thing that we’re seeing right now, and you probably heard a lot of what I’ve said here when I tell you this in the sense that these are operationally complex assets. That’s probably the biggest detractor in this whole asset class is that it is operationally complex. You know, we just bought a resort that had the RV park, I’m gonna use the word park component to, it had a hundred sites. There is a marina on site with a couple hundred boat slips. There is a guide service. There’re bait sales, there’s a camp store, there’s a restaurant, there’s a 40-room motel.
[07:12]On and on it goes, you go: “Wow, that’s a lot of moving pieces”. And it certainly is. And that’s something that’s part of the business that is both the blessing and the curse is that it is operationally complex. But the more complex it becomes, the less the competition is out there buying it. So that said, our going in cap rates right now, anywhere from nine to 13% and sometimes higher. Which is really just astounding. To think about that in the commercial real estate space, we can acquire a cash flowing asset at a 13 cap. That’s our going in cap rate. That’s not even our stabilized cap rate.
[07:48]That’s awesome. I mean, think about that, and then the number of levers that wehave to pull inside of these assets to drive revenue in a meaningful way. I know I mentioned a lot of ’em already, but just simple firewood delivery, golf cart rentals. You might think, Okay, that’s a pain in the neck he’s gotta manage that and run that and take care of the golf carts. Yes. That’s what good systems and good people are for. But inside of that we can really change the trajectory of a property with 3, 4, 5 of those different items. And suddenly this property became way more valuable or the business became more valuable just based upon the operational improvements we were able to to pull off. So there you go. Going in cap eight, nine to 12%.
[08:30]
Talk about the demand side of things, so that gives you a little bit of color so we can buy, right? We have, this is an asset class that is largely underinvested in. It is undervalued, underinvested in loads of room for operational improvement. It’s a fragmented industry, mostly mom and pop own. All of those things are great, but the real question is this an asset class that has legs to it? If you’re listening to this, you’re probably going: “Oh wait, yeah, this is great. But I mean, isn’t all of this largely fueled by the pandemic? Isn’t this largely fueled by the fact that, a couple years ago, everybody just wanted to get outside and be left alone, and isn’t that gonna wane?”
[09:05]This statistic will probably blow your mind a little bit. The largest group of RV owners in the United States right now is millennials with children. If you’d asked me that question three years ago, four years ago, I’d have said: “Now, you know, the largest group of RV owners would probably be somebody north of 60 on a national park tour, that’s retired, going around to see the country and just having a good time.
[09:29]That shift has been pretty dramatic and it’s not really going anywhere. The people that own RVs there, it was KOA put out a survey here recently and they came back and said that 60% of the people that own RVs are looking for a bigger and newer RV. Wow. Okay. That tells you something about what people think about the RV industry.
[09:48]Now, I mentioned, or maybe I did or maybe I didn’t, but mention the fuel prices being one of the detractors to the RV space. And that’s also one of the reasons that we love the RV resort idea. We’re trying to buy assets that are within a couple hours of a major city. It’s something where it’s not gonna break the family bank to drive the RV to the destination, keep it parked there for the weekend. There is a a long-term component to the RV resort space that many people don’t think about. A long-term component is this, is that 50 to 70% of the sites at most RV resorts are leased on a long-term basis. Think about that. It is a better tenant. It is someone that they don’t live there all the time. That’s the other thing is that it’s just a space. This is their vacation home on wheels. So, they don’t live there. They pay their site rate on an annual basis. And so, we get a better quality of tenant that pays on time, but isn’t there very often. Great.
[10:43]That’s absolutely ideal for us in this space. Now we’re gonna try to trim that back cuz there’s a fine line. How many long-term tenants and how many short-term spaces to leave available. And that’s a bit of guessing here as much as it is anything. And just looking at historical trends and figuring out where the right sweet spot is for that. But, that said, on the demand side, the people that are parking their RVs at these places and say: “All right, you know, I want to have my spot at XYZ resort cause I’m gonna take the family down there and we’re gonna hang out every weekend and I’m gonna go fishing and the kids are gonna go, do whatever they do. Play in the swim in the pool and it’s gonna be a great time”. That demand just isn’t gonna go anywhere once you get into that culture, if you will. We don’t see that decreasing in any meaningful way in the near future.
[11:28]So that said, there are a lot of compelling reasons as to why we are buying RV resorts right now. Financing is good for it. The industry is fragmented. There’re loads of room for operational improvement. We can buy the assets, right? And we’re just really excited about where this is taking us. We’ve acquired one, two. Going on our third acquisition this year in the RV resort space, and really ramping that up here moving forward. But that’s just kind of a cool asset class that nobody’s talking a lot about and where we’re just seeing blue ocean.
[12:04]So that’s it. Thanks for listening in today. Certainly, appreciate you tuning in. That gives you an idea of what it is we’re buying and why we’re buying it. You know, if you need any insights on that or wanna talk further about. The opportunities that we see and where we’re acquiring assets, feel free to reach out. But thank you again for tuning in here today.
[12:24]Hey, thanks for listening to the How to Scale Commercial Real Estate Podcast. If you can, do me a favor and subscribe and leave us a review on Apple Podcast, Spotify, Google Podcast, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank hire on those directories.
So, appreciate you listening. Thanks so much and hope to catch you on the next episode.
