Should You Start An RV Park?: Podcast Episode 25


Welcome back to The Mobile Home Park Expert Podcast! On today’s episode, Jay and Glenn are joined by Charles Dehart. Charles serves as an Agent Assistant for The Esterson Manufactured Housing Community Team. The trio has gathered to discuss whether or not it’s advisable to start an RV Park in the coming years.

Before we dive in, be sure to check out our blog section. It’s filled with endless information about virtually every aspect of the industry. Another great resource is Glenn’s book, The Mobile Home Park Manifesto. In it, you’ll find an even deeper dive into the world of mobile home parks. It’s available on Amazon now, or for a cheaper rate, you can get the ebook on our site!

Investing In RVs

2020 brought about many significant changes that have lingered into the new year. In particular, the stock market has seen its fair share of momentous occasions. As Jason puts it, “a lot of people have become retail traders.” This along with the “boom” of publicly traded companies in the field has led to more curiosity.

This begs the question: how does this impact the RV side of the business? It’s always good to stay abreast of these changes. They can very well mean the difference between success and failure for investors. Luckily, these MHP experts have the full scoop for our audience.

Identifying RV Parks

First, it’s important to note that RV Parks and Mobile Home Parks are not the same. “Sometimes you find RV lots in a mobile home park,” says Glenn. But, while some RV and tiny home settings are competitive, they aren’t nearly as much as MHPs. Some investors are even finding higher returns as a result of these trends. This is especially the case following the onset of the pandemic.

Glenn and Charles are currently working on some RV park deals, and it isn’t difficult to see why. “It’s complicated, but it is a little bit easier overall than building a mobile home park.” Currently, less than a quarter of their deals account for RV parks, as well as RV/MHP hybrids.

RV Parks In The Pandemic

Much like every other industry, the pandemic had a huge impact on the RV space. Luckily, it was an impact for the better! In 2019, the field saw massive, and downright historic gains. Surprisingly enough, 2020 managed to top those accolades. Hearing this, it makes sense that investors are hoping to cash in on that momentum in 2021.

RVP VS MHP

As stated, there are some major differences between RV Parks and Mobile Home Parks. This is even clear when reviewing major events associated with the two. Past RV conventions have cleared over 50,000 attendants. Compare this to an MHP equivalent, which may only pull in a few thousand patrons. These figures are a testament to the promise of the industry.

The Mobile Home Park Expert

Both the RV and MHP space are viable industries brimming with opportunity. Whichever you choose, the MHP expert can help guide you! Contact us today if you’re ready to get started!

Podcast Transcript

Jason Sirotin:
Hello, and welcome to The Mobile Home Park Expert podcast. I’m Jason Sirotin and joined by always Glenn Esterson, and today our special guest, Charles DeHart. How are you guys doing?

Glenn Esterson:
Fantastic. It’s another great day. It’s a little wet out there, but things are rocking and rolling, setting up to be a great year.

Jason Sirotin:
I should have bought you a larger poster of your book in the back there, so people could read, we need to blow that up. I’m just now seeing it.

Glenn Esterson:
[crosstalk 00:00:33].

Jason Sirotin:
You guys got to check out that book. If you haven’t read The Mobile Home Park Manifesto, Glenn’s book it’s available on Amazon and he basically gives it away. So, go check it out. Charles, how are you?

Glenn Esterson:
They can get it on our website, at the mhpexpert.com now. We just posted it the other day for cheaper than you can get it on Amazon. But just the ebook version.

Jason Sirotin:
That’s great. As long as people can get the information, right?

Glenn Esterson:
Yeah.

Jason Sirotin:
How you doing Charles?

Charles DeHart:
I’m doing well. I’ve got nothing to complain about. We got perfect weather here in Florida, so I’m not going to be as gloomy as Glenn.

Glenn Esterson:
Florida, man.

Jason Sirotin:
It’s nine degrees here.

Glenn Esterson:
Florida is Southern California. I don’t know why I don’t live there.

Jason Sirotin:
No, we live in Wilmington, Wilmington is nice.

Glenn Esterson:
It’s a good spot.

Jason Sirotin:
Today, I want to talk about… I’ve been seeing a lot of people chatting about, is starting an RV park a good idea in the next few years? And I think that’s being driven by a lot of people have become retail traders this year in the stock market, and they are seeing the boom in stocks like Winnebago and Yeti. And I don’t remember the other publicly traded ones, but I think that is driving interest. I think that’s getting people thinking of other investments in the mobile home park space. So, I was wondering if you guys could give us the lay of the land on where you think RV parks are going to land. If it’s a good investment and what the steps would be in getting involved in one.

Glenn Esterson:
Sure. RV parks are not mobile home parks, at least most of the time. Sometimes you find RV lots in a mobile home park. As we’ve been seeing the mobile home park industry compress its cap rates and really consolidate and become very much a very competitive market, we’re finding other buyers looking just beyond that into the RV park world than in the tiny home world and stuff like that. The RV park will at most places, some of the premium locations still are very aggressively priced. But in most places you can get more yield on an RV park as an investor right now, and you’re seeing more people kind of go that direction. Especially this year with all the COVID that’s been happening and seeing how RV parks are really outperforming their historicals this year, because people are just trying to get out and have some extra space.
I even took my to an RV park this year in Virginia, and it was a fabulous time. So, we’re seeing much more interest on that. And of course than it leads to, well, should I develop one? How does that work? It’s complicated, but it is a little bit easier overall then building a mobile home park. Charles is actually working on a RV development right now. We’re selling a few RV developments right now. They get a lot of interest. Maybe 15, 20% of our parks that we sell is an RV park or a mixed MH-RV type of park. We’re getting familiar with it, but we’re not the aficionados in the RV park industry just yet, but we’re learning as much as we can about it every day, too.

Jason Sirotin:
Charles, what are your thoughts on where the space is going?

Charles DeHart:
Well, I think the biggest telltale sign of it, really COVID probably made this industry even more popular than it already was. But in 2020, the industry posted record sales way above what they had before posted for RV sales. That was actually 2019. So, going into 2020, they posted record sales and then through COVID they shattered all of those records. The big RV show, one of the big ones is down here in Tampa. I went to it right before COVID started. There’s about 60,000 people there at the RV trade show, which in the mobile home park space-

Glenn Esterson:
It’s an amazing amount of people. Compare that to the biggest MHO and maybe there’s three to 5,000 people there.

Charles DeHart:
Maybe.

Glenn Esterson:
Maybe.

Charles DeHart:
Maybe. It was uncomfortable to be there, 60,000 people. They had it again this year. It was the only RV show, they had it just a couple of weeks ago. Only RV show that actually they did it publicly.

Jason Sirotin:
How many people were there?

Charles DeHart:
It wasn’t as many as there were… I didn’t go to it, but I know someone that did .it wasn’t nearly as many as they had the previous year, but it was still a lot. And at that show, they still sold way more RVs. So, just online sales and things like that. Then the manufacturers of RVs are consolidating. So, when you start seeing mobile home parks had consolidation through the mobile home manufacturing space, before it came over to the ownership side and similar things happening over there. If you’re looking at where are they in relative to mobile home parks, you could draw some conclusions, maybe they’re incorrect or correct. But they’re probably about four or five years behind the consolidation curve. So, if you’re about the way things are going in the mobile home park space, you might want to look at it.

Glenn Esterson:
You might want to look at this one. It’s a much smaller vertical real estate than even MH. We’re the baby in the bunch most of the time. There’s only 50 something thousand parks. And most of those are really tiny parks. So compared to an apartment, the industry it’s a fraction, it’s barely a fraction. With RVs, there’s only about 12 or 13,000 RV parks in the United States, and a lot of them are tiny little parks as well. So, there’s a much smaller amount of investment grade RV parks out there. And that industry apparently seems very underserved and it could help justify the desire to build more of these parks, because the zoning is a little bit easier to get for an RV park and compared for an MH part for some reason beyond my knowledge, but they do seem to build more RV parks than they do MH parks.
A lot of workforce housing, is fine with living in an RV park and we’ve seen a lot of those pop up over the last couple of years, that you have a lot of contractors that you’re on a six month or 12 month job. They don’t need to stay at a hotel. Oftentimes they’ll bring their own RV, whether it’s a small one or a class A one is up to them and then they’ll park it there and live out of that spot for awhile and provide very strong recurring revenues for the park owners. But different than MHD, the true RV parks that are more daily, weekly, monthly have a much different operation than the MH parks. If you’re looking at getting into that, I would really advise to be talking to some of the specialists in some of the third-party managers out there that specialize in RV operations. Because it’s not as easy, in my opinion, as a mobile home park.

Jason Sirotin:
Wait, you think an RV park is harder than a mobile home park?

Glenn Esterson:
Yeah, a lot of people moving in and out every day, you’ve got a lot of different kinds of revenues to keep track of your utilities are often just straight up included in the camper stay that stay there. If you’re catering to a specific niche of the RV, class A type of vehicles, those are big. Those are really big vehicles, they won’t fit into a lot of parks when they’re coming in and out. So, your park has to be up to grade four. You can’t be having to make hairpin turns and stuff like that, or backing up in hard positions. A lot of these parks that are being developed now are being catered more towards class A type of things, because the phenomenal sales we’re seeing is mostly in that class A side. And that’s something to consider. It’s in a portion of that industry that’s very underserved nationally, because most of the parks are the old school type of RVs that are pulled behind your car and it doesn’t accommodate as well.

Jason Sirotin:
Well, let me tell you what I would do. I would to add value by putting a store, a convenience store, 24/7 open and pay showers.

Glenn Esterson:
A lot of them have that, a lot of them it’s… At the workforce housing staff, oftentimes the showers are, I guess, included. They have their own little kind of spot, but with the… I was just at [inaudible 00:09:28] about an hour from where I lived and he had a… You would buy a bathroom pass depending on how long you were staying there, and you’d have your own private shower room and all that kind of stuff. They also had a store. There was a lot of little add-ons you could add to an RV park.

Jason Sirotin:
Wood, selling wood for fires.

Glenn Esterson:
Selling wood, selling golf balls to hit the golf ball range stuff. The one that I was at the other day, we had batting cages at this [crosstalk 00:09:53].

Jason Sirotin:
This sounds sexy to me. Especially right now, this sounds like a really cool thing to build. This is actually exciting to me, because you can build like your own little town almost.

Glenn Esterson:
You can build your own little town. We’re working a project just outside of Phoenix right now. It’s approved for 800 RV sites, so development is just outside of… About an hour from the Phoenix airport. And it’s a monster, this thing is huge. The development costs, like they got approved to bill hotels, restaurants and stuff like that at the front-end. So, you have a lot of construction costs going in, but once it’s done, it’s its own, self-serving standing type of city.

Jason Sirotin:
People aren’t going to go anywhere. Especially now, we’ve been us in a cycle long enough where habits have changed. People don’t want to go out. They don’t want to go as far, going out has a layer of stress in it. And there’s going to be a transition period. So, we have a few years in my opinion of people learning to be back in society. And I think that RV parks sound like a really good transitional investment.

Glenn Esterson:
Absolutely. I think-

Jason Sirotin:
You can turn it, because… Then you’re building a fan base, sorry to interrupt you. But once you open the doors, you’re kind of allowing people now to build those memories and family experiences. Then if you keep it open, maintain it, you can get people coming back for years.

Glenn Esterson:
For years. And ultimately they buy an annual type of state at these things. Because they don’t always want to shuffle their RVs around. They might leave them there. They might want to come back as needed you. Up where you live, I used to take my kids all the time to these RV parks up there. There’s some fantastic ones. There’s one particular I used to really like, it was a Yogi bear park and they had waterslides, pools and a big lake to take the kids on. It was fabulous, and it was a very affordable way to go get with nature and still have a great time with the kids without them arguing about, this is boring.

Jason Sirotin:
Right. They’ve got the amenities.

Glenn Esterson:
Charles is looking at a deal right now in Virginia. That’s a little bit different. I’ll let him kind of talk about it a little bit, but it’s… Within the RV world, just like anything else, there’s all these little kind of segments of how to be profitable. And this is actually a development that just got all the approvals and it’s on the Blue Ridge Parkway. He’s looking at it to help the seller from an advisory standpoint on what can be done with it. It’s a really neat project, but Charles, why don’t you tell a little backstory on that one?

Charles DeHart:
Even for RVers it’s a bit of a niche product, but it’s an HOA exit. It’s more along the lines of a hybrid co-living type investment / it’s an RV park. But the entire apodous to this thing is that basically you’re building an RV park, you’re subdividing the lots out, and then you’re selling individual lots. Someone buying at least the paperwork and the dirt as it sits today would be breaking ground, building the RV park. The design is supposed to be a really nice design, fire pits and little outbuildings and stuff like that. Fire pits and all kinds of things. But it’s catering towards the super wealthy class-A customer. So when you think about how easy it is to get a project like that approved with a city, it is, you go in there and say you’re going to build this thing to attract extremely wealthy people who have… In many cases, some of these RVs are a half a million dollars.

Glenn Esterson:
A million plus, a lot of them are a million-plus nowadays.

Charles DeHart:
Some of them can be upwards of over a million. So, you’re attracting people into the local area to spend money in local businesses. It’s not a hard sales pitch. Whereas a mobile home park-

Glenn Esterson:
[crosstalk 00:13:59] take that guy to get his final approval, it took a hot minute.

Charles DeHart:
He was fighting another battle. He had an access point to the Blue Ridge Parkway that he fought for a long time to get. It didn’t end up going that way, but he kind of got robbed on that deal. But as far as getting the approval from the County, they immediately loved the idea. It wasn’t something that was ever in question.

Glenn Esterson:
A lot easier than getting the mobile home park approvals. That’s for sure.

Charles DeHart:
It’s not even along the same lines. It’s something that every town would probably welcome, is an RV park, because it’s tourism. People like tourism.

Jason Sirotin:
It’s a much easier sell than a mobile home park, because it doesn’t have the stigma.

Glenn Esterson:
Right. But municipalities are wising up a little bit and being like, well, are you going to have permanent tenants living there? Is this tenant going to live here 365 days? Or is he just going to be here one week and every few months? Because that’s the thing the cities are starting to wise up to, because as you get a lot online that can handle a nice size unit. And today we haven’t seen, it’s called park models. It’s technically classified as an RV umbrella type of [inaudible 00:15:15] people can live in. They’re really nice. They’re about 400 square feet and they put those there. Is that personnel allowed to live there year round? The argument mostly is, yes, they are.
But lately we’ve been seeing municipalities go through and if they’re not still properly zoned for that, they might be giving the landlord some headaches about it. But that’s a great conversion for a lot of people, is taking an RV park and converting it into permanent RV tenants. There’s a real nice fish camp in the park, up by me at the owner. He doesn’t want to run an RV park. So, he’s got this beautiful piece of land right on the water with a big dock and all that stuff. And people like to fish there. He took his RV park and makes his tenants pay annually. He sells out instantly, and those tenants just come and go as they please, but they’re not allowed to stay there for any extended period of time without having a break within their stay. It’s pretty interesting way. When you think of fish camp, you don’t think of something fancy, but if you go to that place, it’s pretty fancy.

Jason Sirotin:
Charles, what is the… Because you’re looking at it, the ROI on something like this? How do you calculate where it might go?

Charles DeHart:
On an HOA exit type situation, or just a regular RV?

Jason Sirotin:
Well, I’d like to hear both, if you have insight into that.

Charles DeHart:
Sure. The HOA exit, what we’re looking at with that, and it seems to be in line with where… There’s only a handful of people that do this niche. But it seems to be in line with what they do is, you’re probably developing the property at about 25 to 30,000 a lot that includes the land, which is very similar to what it takes to do a mobile home park. On this particular one, we’ve actually got the benefit of having sales comps on another project that was done pretty close by. Those lots sell for anywhere from 90,000 to 150. So, it’s a pretty decent ROI. It’s basically 4X and there’s leverage in play too. Leveraged returns of eight to 10X, but it might…
There’s some risk of not being able to fully exit there, but you break even point on 49 lots here as you sell basically 13 lots and you’ve broken even and pay back the bank. Then you can always rent. If you don’t sell them, you can always rent them. And in this property, there is a neighboring KOA park that would probably, if you had a batch of 20 lots, they would probably buy it from you if you got stuck there. So, it’s a lot of risk mitigating things that you look at when you do development. But as far as a traditional RV park that operates traditionally, that’s stabilized. Cap rates are changing on that. It’s all based on a spread from the interest rate, but probably five years ago was…

Glenn Esterson:
They were all on the teens, five years ago.

Charles DeHart:
Yeah, low teens. Now, it’s probably in the nine, 10. It’s really funny how-

Glenn Esterson:
Eight to 10.

Charles DeHart:
Yeah. They use the GRMs a lot more instead of cap rates over there, because it’s more of a business

Glenn Esterson:
More of a a business model. Then of course like the Myrtle beach stuff and the coastal stuff, they’re still trading at premium pricing, five, six caps. Just because it’s very location-based, historically it never had too much problems in their P%Ls and occupancies and things like that. When you go into the middle of America today, our parent company markets similar chap that does the brokering side of life. They broker a lot of RV parks. We’re seeing that consolidate and compression value and getting more aggressive every year as well. The stuff in the Midlands America, they’re definitely training probably mostly in that seven to 10 cap range. Whereas most of the mobile home parks we’re trading nowadays are trading in that, call it five to eight cap price, and an eight cap is utter dog poop, 90% of the time.
The five cap is kind of that premium stuff. In the RV world, you can also, especially if you’re an owner operator, get a much better loan that you can for mobile home parks. You can get an SBA loan most of the time that you can get into a deal for five or 10% down. That’s pretty attractive if you’re going to be an owner operator. Then you go to the other side of the scale and you’ve got companies like ELS who have some of the most beautiful RV parks in the country on some of the best dirt in the country. They are like Disneyland, but in an RV world, it’s pretty impressive stuff. They’re a juggernaut in that industry, as Sam Zell tends to be in any industry he’s involved with. But his parks are beautiful and they stay well occupied.
They’re ran very much like a business as compared differently to the mobile home parks, which it’s pretty much like, once you stabilize it, you know how it’s going to run pretty smoothly from that point on. Whereas an RV park still has much more fluctuation beyond just stabilizing the operations, the operations are going to swing. Like right now in COVID, one of the RV park guys that we do a lot of business with, he’s out of Virginia. He was telling me about one of his parks, their maintenance shot through the roof during COVID, because they’re having to wipe down tables every hour or something like that.
So, the maintenance staff and the cleaning supplies, cleaning the showers, the benches and all that stuff is making it almost hard to be profitable at that particular park. But he’s not in the greatest of locations. And he was struggling at that location before COVID. If you go to Texas, parks are popping up left and right in Texas and New Mexico, and a lot of the towns are starting to give five-year term limits to a lot of these workforce camps. These RV parks that are more workforce base. So, you kind of have to understand a lot about the municipality that you’re trying to do business in before you go and start building your own… You’re trying to think about building your own RV park there. Long-term, long-term in location dependent, they’re always going to win. You want to use those strategies.

Jason Sirotin:
I think that I want to do this. It sounds like you could really make a pretty penny and set up successful businesses, and you could even set them up as separate entities and sell them off piece by piece. Your shop is this, that way, when you get loyal customers who come every year and you’re building people that you can sell off pieces to.

Glenn Esterson:
It’s a really interesting model. I fantasize about having a really bougie RV park somewhere one day, very exclusive type RV park. That’s one of my retirement dreams. I think it would be a lot of fun, kind of like on the hotel side of the world. But a little bit more my style. I think it would be interesting.

Jason Sirotin:
Man, that’s… Charles, do you think you’ll spend time at the park if you get it?

Charles DeHart:
I definitely will. It’s in my hometown where I grew up at.

Jason Sirotin:
Wow.

Charles DeHart:
So, I’ll end up there from time to time, but it’s definitely something. I don’t have an RV yet, and I’ve never driven one. I don’t know if I could afford the RV that you have to have to be in that park. I could probably get it done to build it, but I don’t know if I could afford to be there.

Glenn Esterson:
My accountant seems to think I should buy an RV and [inaudible 00:23:26] my logo on it.

Charles DeHart:
I’ll sell you a lot, Glenn.

Glenn Esterson:
[crosstalk 00:23:28] drive around the country with it doing stop bys and saying hi to people around the country. I guess there’s some really great tax incentives for these Class A RVs right now that make them kind of make sense.

Jason Sirotin:
If somebody wants to sell or buy an RV park with you guys, what would be the process?

Glenn Esterson:
Same as anything else. We do the whole interview with the seller, understand everything about the operations of that thing. Dig deep into the financials and see the trajectory of how it’s been, where it’s not performing as well on certain line items and trying to figure out why. Figuring out what the debt’s going to look like on there, developing a buyer profile and seeing if there’s even a buyer out there for this type of park. It’s a very complicated process, but it’s essentially the exact process as we do for MH, which is a very complicated process to get a park from here to Seoul. And an RV park is not different, than it is a smaller buyer pool out there that even know our industry. There’s definitely a lot of good guys out there.
There’s four or five groups that come to mind that are just phenomenal to work with, that we’ve done numerous transactions with now. There’s a buyer pool out there and it’s developing more and more every day as yield continues to be what people chase, regardless of how hard or challenging a deal might be. Years ago, nobody would do MH and nowadays, everybody wants to do MH. A few years ago, people started looking at RV and now a lot of people are looking at RV. So, I have a feeling as yield continues to be elusive for many investors, these little niche products will become more and more popular.

Jason Sirotin:
Man. Well guys, if anybody out there is interested in an RV park buying or selling one, you definitely got to reach out to Glenn and his team. You can reach Glenn at [email protected] You can also call Glenn anytime. Glenn, what’s your number?

Glenn Esterson:
So phone’s (423) 483-0492, you can ring me anytime you need. If I’m available, I’ll answer. You also call our team hotline, it’s 720 M-H-P, the number four, Y-O-U. MHP 4YOU.

Jason Sirotin:
Nice. And Charles, how can people get in touch with you?

Charles DeHart:
My phone number is (276) 237-4311. It’s [email protected]

Jason Sirotin:
Guys, thank you so much. I learned a ton and I think I have like a goal. I want to own one of these parks at the bottom of a mountain.

Glenn Esterson:
Me, you and Charlie, we’ll make it happen.

Jason Sirotin:
That’d be so fun.

Glenn Esterson:
It’s so fun.

Jason Sirotin:
I think we could brand the hell out of it and do something really cool. I’m actually really stoked on it.

Glenn Esterson:
[crosstalk 00:26:27].

Charles DeHart:
We’ve got a neat one out in Nashville. You got one out in…

Jason Sirotin:
What?

Charles DeHart:
Where’s that one that you had Glenn, you were looking at? The one out in Maggie Valley.

Glenn Esterson:
That one’s a pretty one. [crosstalk 00:26:38].

Charles DeHart:
Based in the mountain, everything. It’s [crosstalk 00:26:39] wheelhouse.

Jason Sirotin:
I’m seeing it in my head guys. I’m seeing it.

Glenn Esterson:
We’ve got to just pop up 10, 12 billion dollars, and it could be all ours.

Jason Sirotin:
That’s it?

Glenn Esterson:
Yeah.

Jason Sirotin:
No problem. Chump change. Guys, thank you so much. Everybody, thank you for watching, listening, whatever you’re doing. You can always check the mhpexpert.com for more information, and feel free to hit us up on SoundCloud or on social. We’re always looking for topic ideas. So, let us know. Thank you, and we’ll see you next time.

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