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Welcome to the RV Park Mastery Podcast, where you will learn the correct way to identify, evaluate, negotiate, perform due diligence on, renegotiate, finance, turn-around and operate RV parks. Your host is the 5th largest owner of RV and mobile home parks in the United States, Frank Rolfe.
Lucky or smart, that's always what people wanna know when someone succeeds at something. This is the RV Park Mastery podcast, Frank Rolfe here. I wanna talk about the age-old adage of whether someone is lucky or smart and how that relates to buying successfully an RV park.
Now, most people look at the lucky versus smart debate more from a sour grapes perspective, because they missed out, they didn't do the deal, they hear someone doing something, making lots of money, they say, "Well, that guy was just lucky." So that way they don't feel too bad, because they think, "Well, it wouldn't necessarily worked out for me even if I had done that, because I don't have that kinda luck." But let's investigate for a little bit how much luck is really involved in successfully buying an RV park. So let's first start off with the concept, you do make your own luck in life. And in buying an RV park, the way you make your own luck is by sheer volume of deals that you look at. Now, you've probably been out to a fair midway where you play various carnival games trying to win big prizes, I'm sure everyone has done that. And you see someone win that prize, and you say, "Oh, well, they were just lucky." Well, no, not necessarily, they... There was skill involved in them picking which game to play, there was skill involved in playing the game, but most importantly is there were skill involved in having enough cash on them to play the game over and over enough 'til they won.
Because volume is really the key. In the world of RV parks, if you know you wanna buy an RV park, and you know roughly what you want in that RV park, then the big variable is how many you look at, and that will tell the tale on how many you're able to buy or how many good deals you're able to find. So volume really is it. And when people say, "Well, what's the most important attribute to any buyer buying an RV park successfully?" I would say volume. The more you look at, the better your odds of finding something. The more offers you make, the better your chance of getting one of those offers taken. So that's a skill item, that's not a luck item. Then you move on to negotiating. Many RV parks that are successful, they're successful, because they were well-negotiated on the front end. The proper price was paid. So is that a skill or a luck item? That's a skill item. Negotiation is very much of a skill item. Now, in standard negotiating, there are a few basic principles. There's the initial offer, then there's the counter-offer, then there's what's called the wince, where you say, "Oh, that's... Whoa, that's way more than what I thought."
And then you got some more counters, then you ultimately ended up with an agreement that you had to get all on paper. Well, that's all skill involved in that. If you watch shows like American Pickers or Pawn Stars, it can give you an idea of what professional negotiation looks like. And that's skill, that's not luck. And at the end, closing the deal, getting them... Someone to sign the contract, once again, that is a skill item, that is not a luck item. So really the negotiating side of buying an RV park, once again, that's pretty much skill.
And then you had the issue of due diligence. Now, Benjamin Franklin himself encapsulated his thoughts on luck when he said back in the 1700s, he said, "Due diligence is the mother of good luck." So what he meant was people who do really good due diligence on a property, they seem to be the ones who always succeed and rarely fail, because they did the diligence. But it looks like luck, good fortune is luck. So what Franklin was saying is if you wanna be lucky, you make your own luck by doing really good due diligence. And I thoroughly agree with that. I never have seen a case of anyone failing with an RV park that did great due diligence, but I have seen people fail with it who did terrible due diligence. Remember that due diligence is taking and dissecting everything to do with that property, both revenue and expenses, to make sure it performs exactly as you thought that it would. If you get the actual numbers from the providers, if you get three bids on every item you can't document, you can nail the expenses completely.
There's no reason that you have to worry about having some significant failure if you've done great due diligence. You check out everything, you check out the permit, you check out the infrastructure, you leave no stone unturned. And because you've left no stone unturned, you don't have to worry every time you turn over a stone, don't have to worry about what's underneath that. So once again, due diligence, that is a skill item, that is not a luck item. But then you have what they do after the purchase. So someone buys the RV park, and what do they do? Well, they correct all the things that mom and pop lacked. For the first time ever, it's visible on the Internet. For the first time ever, they get social media reviews. They do all of the right things, they clean up the property, they improve the signage, they improve the atmosphere, everything is better. And suddenly, you know what happens? People start coming in, people stay longer, people buy things, do things. And suddenly, the revenues have changed enormously.
Was that luck? No, that's 100% skill. It's a very small playbook in the RV park industry to take a property that is underperforming and make it perform. What do you have to work with? Well, you can increase occupancy, you can increase rent levels, you can hold down expenses, these are the key items that are gonna dictate whether you make or lose money. And none of those are based on luck. Now, there are some luck items in a macro sense, you might have a season where you have an especially cold and longer winter. So with a seasonal RV park, you wouldn't get customers in as early as you normally do. You might have an incredibly wet season with weather. And with all the rain, people don't wanna come and stay, because it's raining out a lot. So those... There are those little factors too, but those typically will not sink your investment. So when it comes to properly running the RV park, making the right decisions, choosing the right manager, making sure it's run well, once again, that is pretty much a skill and not a luck item. Also, you have just the basic desire, the intelligence to go ahead and get in the RV park business. There's lots of different opportunities out there, you see them every day. There's all kinds of alternative investing. Almost everyone has realized now that stocks no longer work, and bonds no longer work, and they gotta do something different. Just look over the last year, look at the year of 2022.
If you account for inflation, the stock market lost either 10%, 20% or 30% based on which type of stock you were in, the NASDAQ, the DOW or the S&P 500, that's a horrible rate of return. If you look at bonds and how they performed, they didn't even match the rate of inflation. So the old traditional investment vehicles that we all heard about in our childhood and were told over and over again, and still are by people who get paid to tell you how great they are, they're awful. They're not working at all. Just so far this year, the stock market's a negative return, bond market's a negative return, everything's negative return. When you've got inflation running 6% to 8%, negative return isn't going to get you anywhere. And when it comes to alternative investing, there's lots of different real estate sectors, there's RV parks, there's self-storage, there's marinas, there's all kinds of junk.
But if you selected RV parks, that was skill, not luck. Most people don't just wake up one day and say, "I wanna invest in an RV park," there's some thought put into that. So it's that thought that is the missing link where you have skill over luck. When you have luck, there's no thought involved. You just jump into something, you just throw a dart at the wall. But when there's skill involved, then you make a decision, an educated decision based on all the variables, and definitely in this case, again, it was skill. So then what is the luck in RV park investing? If everything we've discussed here is just raw skill, why do people even say, "Oh, that guy was lucky." Well, here's where luck comes into it, because none of us can really control what RV parks are available at any given moment in history, and that is a luck component. There are all these RV parks out there and all these RV park sellers, potential sellers.
Well, what triggers them to sell? Well, if you map it out, most RV park sellers are triggered to sell basically by the advance of age, many because of health issues, might be a death of a spouse, maybe just generally lost interest, maybe not physically capable to do the job any more. And that is luck. None of us really know at what moment any seller will truly meet the moment where they say, "You know what? I'm gonna go ahead and sell my property now." And remember that we all operate under the sheer luck of what is available at this one moment in American history while we are alive looking to buy the RV park. There may be one right up the street that would have been perfect for you, but you missed out, because you weren't looking for RV parks back when that was sold a couple years ago.
So that's where the luck component really comes in, because we can't control that. All we can control as an RV park buyer is looking at every available option of every RV park out there that we might be able to buy so we can make the best decision based on the material at hand, but we can't control what that material will be. And that harkens back to my first point of skill, which is volume. Since we can't control what is available at any given moment, it's up to us to control what we can, and that's at least looking at every single one that is available, so that's why volume is so very important.
There's never been a moment in American history where there were not RV parks for sale. The question just is what assortment, what portfolio of parks are available in your lifetime when you're looking, because it's always changing, always varying through the ages. The bottom line to it is that our industry is almost all skill, there is very little luck, but yet there is luck in the random assignment of which properties are out there for you to buy. This is Frank Rolfe for the RV Park Mastery podcast. Hope you enjoyed this, talk to you again soon.