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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.
30 days of diligence. We've built our career based on that mantra. That's how long we typically ask for... To do due diligence on the RV park. But can you still hit it today or is that something that no longer is attainable in a post COVID world? This is Frank Rolfe with the RV Park Mastery Podcast. We're gonna be exploring 30 days of due diligence to see whether or not that is still what you should offer your mom and pop seller. Now, yes, 30 days of diligence is certainly feasible. Not much has changed over time. You can definitely find out if the permit is valid. You can find out the utility bills, the tax bills. You can do all kinds of things in 30 days. It really is a lot longer than people think. We even have a book on it, a guide called 30 Days of Diligence. So obviously we feel strongly that it's a goal that you can hit, but remember that that goal is only possible when you get the parts to start the process.
That's why typically in our purchase contracts, our clock doesn't start on diligence until mom and pop give us such things as their financials because it's not fair to me as the buyer to think I can start diligence 'till I've been given the tools that would be like the auto mechanic who tells you, yes, I can go ahead and replace your alternator in five days, but you don't bring him the car until the day before and then you have a fit because gosh, you said you could do it on this day and you didn't. And then he says, well, but you didn't bring me the car until yesterday and I told you it would take five days. So don't let mom and pop be laggards on providing you the necessary information because then 30 days of diligence is not attainable. You have to have that information in your hand for the diligence clock to start.
Also, if your contract has both a diligence and a financing contingency, there's no reason you couldn't roll some of your diligence into financing. 'cause really it makes or breaks whether the bank would make the loan such things as a phase one environmental. It would not be uncommon or unrealistic to roll that to the financing side if you needed to because there's no way the bank would ever approve the property until that phase one is completed. So that gives you one more backstop if you can't make the 30 days of diligence because diligence, you typically have an additional like period to get the financing.
Another thing which it's important to remember is we're in a competitive world. If you have an RV park deal you're looking at, it's possible another buyer will come along the way, and particularly if you're bidding against other people to get that RV park. If their contract calls for 30 days of diligence and yours calls for more than that, let's say yours calls for 45 or 60 days. Who do you think is gonna get the deal from mom and pop? Two contracts, same price one's 30 days of diligence, one's 60 days of diligence. Clearly the answer is the 30 days of diligence guy. And since you're competing all the time with other people, it doesn't make a lot of sense to break out of that norm. Most buyers operate under the concept of a 30 day window for diligence. And if you suddenly go to them and say, look, I'm not sure I can really hit 30 days.
I think I'd need more time than that. I don't think I could hit the old standard. Well, that's fine and everything, but just remember, they may well go with the other party because the other person went with what they think to be accurate, which is 30 days. And to be honest with you, on most deals, you know earlier than 30 days if that RV park will work, when you start really exploring it in all regards, the records, the permits, the location, talking to the competition, looking at their rates, you're gonna form a gut instinct earlier than 30 days. You don't need the full 30 days. 30 days is just to wrap it up. I would say in most deals we look at, we've already formed a first impression within the first week to two weeks. That's not to say that every item in due diligence is not essential because it is. But the big ones, the big items, the items that really sway the deal or make or break it, those are gonna be rectified probably earlier than 30 days. So if you wanna cancel, you can cancel after maybe the first two weeks if you have a bad gut instinct on it. And if you go on to go forward, then you can mop up the rest after that.
Also, don't forget that you can always probably renegotiate the thing longer if you need to. We've done that many, many, many times. You can go to the mom and pop seller and say, mom and pop seller, I've done my best. I've done all the right things, but unfortunately that city or county official won't get back to me, so I need a little extra time. Whatever the reason is, you can't get your diligence, or you're not comfortable. If you go back to mom and pop and tell 'em the truth of what happened, they're more than likely gonna go ahead and extend it. They're gonna say, okay, I understand, 'cause they don't wanna start all over again. Who wants to start the whole process all over again with another buyer? Run the ads, find the person, negotiate the price, sign the contract. It's gonna take a lot of time.
Wouldn't they rather have a week or two extension than a three or four month redo? And the answer, of course, is yes, they're probably going to wanna do that. And also don't forget, you can probably extend the financing. In fact, financing is typically extended more than due diligence is. Because financing is very different. Today in a post COVID world, some of the biggest holdups you'll have on your RV park are things such as the survey. For some reason, a lot of people dropped out of the survey business, or at least that's how it appears now. So it's not uncommon for the surveyor to totally miss their target. And don't forget the fact that a lot of banks have made their staff much smaller. So when you go to the bank and they promise you, yeah, I can get you a decision in X number of days or weeks, they often can fail.
And then you have the dreaded attorney for the bank who has to draw off the loan documents. All he has to say is, oh, I'm sorry, I have to go on vacation. And you're gonna miss your deadline again by a week or so. So even if you don't hit the diligence or you do hit the diligence, you're probably still gonna have to have that extension in the financing. So if you go for 30 days of diligence and you can't hit it, well, you can probably still extend it again anyway during the financing to finally get where you want. So the moral to it all is you need to kind of stick with 30 days of diligence. You need to draw a line in the sand and say, no, I'm sorry, you gotta get me all the stuff. Or, I'm not starting the diligence clock. I think that's completely fair, but I would not try and be a pioneer of some kind of new diligence period. Rhetoric, remember, the pioneers often were ambushed, they were often killed, they often starved out in the desert. So being a pioneer may sound all kinds of sexy in some kind of movie format, but the reality is people who get out of the norm rarely are gonna hit their targets. And it's better just to play it safe and stick with 30 days of diligence. This is Frank Rolfe, the RV Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.