Episode 61: RV and Mobile Parks: Opportunities & Due Diligence | Guest Bob Turner, ALC
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Welcome to the REALTORS® Land Institute Podcast, the Voice of land, the industry's leading land real estate organization.
Justin Osborn: This is Justin Osborn, Accredited Land Consultant with the Wells Group in Durango, Colorado. On today's episode of the Voices of Land podcast, we're talking to RLI member and accredited land consultant Bob Turner from Memphis, Tennessee, about RV and mobile home parks. Welcome to the podcast, Bob.
Bob Turner: Thank you. Glad to be here.
JO: Yeah, enjoying kind of reading your bio here, man. So you've been doing this for 48 years all over the South, Georgia, Alabama, Tennessee, Texas. And looks like you started by selling productive farmland to European investors.
BT: Yep.
JO: Man, I'd love to hear just a little bit about that before we get into mobile home and RV parks.
BT: All right. Well, my father was a banker in Covington, Tennessee, where we grew up. And a guy that had a lot of money in the bank there that was a friend of his was talking about what he was buying and selling for European investors. And he was looking for managers to manage the farms that they were buying. And so my dad called me, he said, "He wants to talk to you. Go talk to him." So I went and talked to him, and I already had my real estate license. I was in the real estate business. And I walked in and we started talking about what he was doing. And he hired me that day on the spot to buy and sell land, not manage farms. And he put me to work. And the funny thing was he told me, he said, "Okay, you need to go down the street here to the Cadillac place and buy a Cadillac car, and you need to go get you an apartment, place to live, and we're going to work." And I said, "Why do I need a car? I got a good truck outside." He goes, "We show land in Cadillacs." And we drove them out across the cotton fields and everything else everywhere we went.
JO: Wow. Man, that's great. So that's, I guess, just knowing your clientele. And so they were impressed by the Cadillacs, not the pickup trucks. That's great.
BT: Well, they were the uber wealthy German, Swiss, English, all over Europe. And the simple part of it was they were all buying land in America so when the next time the tanks rolled, they could leave with their family and get a visa in the United States because they owned land they could live on.
JO: Wow.
BT: That was the simplicity of all of it.
JO: That's a great story. I love hearing that. So how did you transition from selling farmland to Germans and Swiss to getting in the RV and mobile home park field?
BT: Well, it all came through a real estate deal. As I say, everything comes through a real estate deal, seems like. But this was during a time when the world had crashed. Everybody was broke. It was 2009, '10, where, I mean, literally, you couldn't give property back to the bank. They wouldn't take it. You couldn't do anything and you couldn't sell anything. It was just standstill. Everybody was broke. It didn't matter who you were. From the top of the class to the bottom of the class, everybody was standing still. And I was sitting in our commercial council at the Board of Realtors that I started in 2004, where we had all different classes of people doing industrial and everything in the room. And there was a guy sitting in that room that I had been to a meeting in Chicago of our RLI guys because I went up there, I was broke like everybody else in the room, except a few of them there were broke. And I went up there to figure out a way to make a living. And that's what I told my wife. And I got in the truck and I drove to Chicago. And Ray and everybody else was there, and we all started talking about what's going on.
BT: And they were talking about how much land they were selling and how fast it was going up. I'm going, "Are y'all nuts?" I said, "We can't give it away. Nobody wants to buy anything." He goes, "We're selling it every day. It's going up 20% a month." And I said, "Okay, give me your formulas." And they gave me the formulas how they were doing it, how they were selling it. And I went home, and in that meeting I was sitting in, I made that presentation to our commercial council, which was like 15 people that were in the business. And I said, "Here's what's going on in Iowa and Illinois and all up through there." I said, "So the land is taking off. Y'all get ready. It's coming this way." And there was a guy sitting three chairs up, and he got up right then in the middle of the meeting and walked down beside me. He said, "You want to sell our 10,000 acres?" I said, "Sure." And I knew them. They were friends of mine. And that was on Friday. On Wednesday, we met and went through everything. And Saturday, I showed it to John Dean, who's an ALC, had a client. And he wanted to buy it that day. But had another buyer on Sunday, and on Monday, I had two contracts, and the world changed.
JO: Wow, man. In a down market, too. I love that.
BT: Yeah. Oh, yeah.
JO: So walk me through the process. Like, are y'all looking at land that's in the outliers, I would imagine outside of city limits, that says, "Okay, we've got this much acreage, infrastructure's close by. Let's kind of go through this checkbox and see if it's going to be best for a mobile home park or RV park," or are y'all doing commercial water wells and septics in rural areas? Tell me a little bit about that.
BT: It's really a unique field and there's no set way of doing them. They're all different. They all have different sewer systems, they all have different approvals. It is very hard to get them approved. Most of the trailer parks and mobile home parks now that are true mobile home parks are old and you buy those. What's new is the RV side or the high end, where they put in real high-end properties along the oceans and got a view of the ocean or lakes and all that stuff. But typical trailer parks, as we call them, you buy the existing ones. They're not making many new ones. They don't allow the zoning of it because of the negative context of, "We don't like trailer parks." So the cities are hard to get anything approved in them, but if they're existing, you can go in and redo them and make it into a new park and you can put in new trailers, whatever you want to do, or you can have people bring in their trailers. So there's two models. One is you own everything. The other one is you own all the infrastructure, all the land, and you let people bring their trailers and park them on your lots and you rent it out to them. And they can be RVs or they can be full mobile homes.
JO: Now my simple mind would say it's better to do the latter of the two as an investor. Otherwise you got people calling you and saying the water heater needs fixing and the dishwasher needs fixing, versus if they're just paying for the dirt, then it's kind of a little bit more out of sight, out of mind. Is that an accurate statement or am I off there?
BT: In somewhat. So I'm of the model that they own all the trailers. I own a few trailers, but they own all the trailers. But they bring their trailer and park it on my lot. They hook into my infrastructure, the electricity, everything like that, and they pay a rental every month. I don't maintain those trailers. I don't want to maintain trailers. I don't want to be going in and out and fixing a refrigerator or fixing a stove or fixing anything inside that trailer because they're not the best asset class there is. They're pretty cheesy way of putting them together and they get them down the road and they park them. And my trailers never move. They've been there for probably 40, 50 years. If they're bad, they'll remodel them or they'll take them out and they'll bring another one in and it just backs on there. And I still own the land. I rent that slot to them is what I do.
JO: Okay. Now, where I'm at in Colorado, they passed a law a couple years ago that, I'm going to get this a little wrong, but it's close to accurate. Is that the tenants of the mobile home park have a first right of refusal now to match whatever offer an investor makes to buy the mobile home park. And the state of Colorado has some very favorable financing terms for the tenants in the mobile home park to allow them to acquire that park without getting basically kicked out in so many days and being homeless. Do the states you're operating in have anything like that?
BT: No, that's not come here yet. I have read about that and that is going on, but we don't have any of that around here. That I've seen, that I know of.
JO: Gotcha. All right. And so the mobile home park, is it kind of the end goal? Okay, we're going to own it for this many years and over time we'll slowly raise the rents and then we'll sell it and maybe roll into something else at a certain point in time? Or is it, man, we're just going to have this and pass it on to the kids at some point?
BT: You got it. That's it.
JO: Gotcha.
BT: Going to the kids.
JO: All right. And then are you personally dealing with RV parks yourself or just representing buyers and sellers selling the RV parks?
BT: I own so many slots within my... I've got two parks. In one of them I've got RV parking. I allow RV parking in both of them, but mainly I've got guys that come in and work for three, four months how they're moving around, they've got their own trailers. They come in and park. They may be there two or three months and they're out and somebody else comes in. So we turn those over. The rest of them never move. And then they just pay normal rent. My rents are 425 a month, which sounds cheap, but that's what the market is and it works well. And we provide them... I've got a full laundromat there, we've got a restaurant there, we've got all the equipment, we do everything. We maintain... We're a city is what we are. We've got our own rules and regulations. We've got our own sewers. We own every bit of it. We maintain everything. Water lines, sewer lines, you name it. And I've got a system with all of it. I've got my own jetters, I've got my own mowers, equipment, you name it, we've got it all. It's a full 100% operation on site.
JO: Well, us Osbornes, we've spent some time in some RV parks, man. Living in a small mountain town in southwest Colorado, once your kids get to a certain level in sports, you have to travel anywhere to compete. And so, man, for soccer with my son, for cheerleading with my daughter, we would always be traveling in RV parks. And they built one a few years ago. The name of it, I think it's Canyon View RV Park in Grand Junction, Colorado. Man, they got it dialed in. We would pull in with the camper and the kids are running to play with their friends. They got volleyball, they got cornhole, they got pickleball. They've got a game room with pool and ping pong and foosball and horseshoes and it was like almost going to church summer camp as a kid. All the parents were having a good time. I couldn't believe the next level of I guess just customer service that these RV parks had gotten to. Are y'all seeing anything like that out in your states or...
BT: Yes, yes we have those. We've got several of them that they've got... They even got the small tiny houses sitting there that you can come in and pull up and not even bring your trailer. So they got those built in beside the RVs that are there, and they've got swimming pools and all kinds of stuff. So, yeah, they've got those. And they're double or more what we charge for a month. Literally, they're 800, $900 depending on where you're at. Some of them are 3, $400 a day. But most of them are 7, $800 a day.
JO: Yeah, yeah, man, that's getting outrageous. Well, talk to me. Do you have like buyers that say, "Okay, Bob, I'm sitting on this cash. I'm thinking about doing an RV park or maybe I'm thinking about doing some industrial. Which direction should I go?" You ever have those kind of buyers?
BT: Yes, I do. The difference in what we call trailer parks around here is they're older, they very seldom trade. Even though you've got all the mobile home brokers calling every day and wanting to buy everything out there and they've always got something. But for the last, I guess it was about 10 or 12 years ago, people didn't want to deal with trailer parks. They didn't want to fool with all the stuff that went on with it. And now it's come up that it's one of the top class to buy. I get calls literally every day on my parks wanting to sell them. And people are always doing that. And I got one this morning already. They're just constantly hawking, trying to get them because that's what people want because the return on them is extremely good. And if they're operated right, they're not hard to operate. You just got to have the right people and the right equipment. But we don't have that issue going on that much around here. Ours pretty much, they are what they are and they work well and they don't turn over a lot and they're just part of the community.
JO: Okay, so we talked a little bit about the ones you personally own. Do you also broker the sales of them?
BT: There's not any for sale. That's the thing. You got to go talk somebody into selling. And I bought... I got my first one literally for free. I don't know if you've heard this story or not, but.
JO: No, but I need to.
BT: Well, that guy that walked down beside me when he said, "You want to sell it?" We were putting the deal together, 10,000 acres and everything. The trailer park was already there. And we had a deal. I had two buyers and ended up with one buyer. And the hang-up came when the seller didn't want to separate the trailer park from the farmland and recreation land. And so then I just, what I did was both of them were friends of mine, the seller and the buyer. And I said, "Well, he's not going to break it up and you don't want it." I said, "So I'll buy it from you," my buyer. I said, "I'll buy it from you for $10 and consideration." And they said, "Okay, that's fine." And then I went to the seller and I said, "I'm going to buy it for $10 and consideration and I'll take that part. You get paid your full amount. The buyer's going to pay the full amount and I'm buying it for $10." He said, "I'm good with that. Let's go." And we went forward and closed it from there and I got it for $10.
JO: Man, I can't believe that. And then you started selling ice to Eskimos, huh? Is that just the kind of salesman you are?
BT: Yeah, that's pretty much it.
JO: Man, that's a great story, Bob. So obviously that's a deal, right? When a buyer's looking at an RV park, trailer park, what's the due diligence involved? Are you looking at long-term leases? Are you looking at returns? What exactly are you looking at?
BT: The first thing you got to look at is the infrastructure. What's your infrastructure? What's it like? Is it in good shape? Is it operable? Where is it? My trailer parks, there is no model anywhere that tells you where any pipe in the ground is whatsoever, literally. Most of them were built where they dug a ditch and they put the water, electric, gas, everything in one ditch, and good luck when you want to fix something. And so it's really knowing what's under the ground. Above ground's easy because you got your slots you're going to park and you got your stuff hooked up to and you got your roads, you got electricity, you got water, you got everything you got to deal with. So you got a lot of due diligence to know. Is it in good shape? Is there a lot of leaks? Or is your sewer system operating? Because we've got separate sewer systems. I'm not hooked into any city whatsoever. I work with the state part of it. And in one of them, I've got a treatment center. Another one, I've got a natural system, a green system. So you've got so many different ways of looking at it, but you've got... All your leases can be analyzed real quick.
BT: Of course, you can drive and look and walk and look, but a lot of it's asking questions. Is it in good shape? Can you look at it? Can you figure out what's going on with it? And it's not something you figure out in a few days. It's complicated to figure out is everything working and is it working properly and are you in good graces with the state and the city and all that stuff around you? Just is anything going on? It's just a lot of time to figure out is the person that's selling it to you telling you what it really is. You get a sheet from somebody selling one of them and you go, "This doesn't sound quite right." And you get to digging into it and the income and all's raised up real high and the costs are down real low, and you can't really tell whether he's telling the truth or not the truth. So you got to spend time figuring it out. It's not easy.
JO: Gotcha. And obviously, if the infrastructure needs work and there's a lot of neglected maintenance, then that's going to affect the price that it's going to sell for.
BT: That's right. That's right. Exactly right.
JO: Okay. So is the eviction process when tenants get behind, does that vary from state to state, or is it similar to landlord-tenant law, whether it's a single-family home or an RV park or mobile home park?
BT: It depends on if you're in the city or the county and state to state. Every one of them's different. In Mississippi, they're very landlord-favorable. If they hadn't been paying, they're going to move them out, period. And I can have them out, literally, if I send out an eviction on the first of the month, I'll have them out of there before the end of the month.
JO: Gotcha. Okay.
BT: And I can take the trailer, I can... They can take the trailer with them, but they never move in my park. So we end up getting the trailer and everything, or they sell the trailer. There's so many ways to do it. It's really a, we'll call it a free society, how you do things. And you go to them and say, "You wanna sell your trailer? You going to walk out? Or what are you going to do?" And all those things happen. Literally, every bit of that happens.
JO: So for a realtor that's, let's say they're fairly new to this industry and they're listing an RV park, obviously they got to have a good offering memorandum with all the numbers and leases. Where would you recommend they advertise that? Are there niche websites for that?
BT: Yeah, you can get online and you can pull up all those websites just like that. There's a bunch of them. There's people looking for them everywhere. You can put out literally a real simple ad that says "RV park for sale," and you'll be inundated overnight.
JO: Okay. So the demand's that high?
BT: That demand.
JO: Man, that's impressive.
BT: Yeah. So it's, like I said, trailer parks and self-storage are very similar. The only difference is that credit card getting in the gate. They're asset classes that people want because once you move out of your house and you put your stuff in storage, 90% of the time, a year or two later, it's still sitting there. And you're paying every month.
JO: That's the American way, man.
BT: That's right.
JO: Buy more than we can afford. And what's the saying? There's a saying, I think it's old Dave Ramsey says, "You're spending money you don't have to buy stuff you don't need to impress people you don't even like."
BT: That's right. That's right. And trailer park people like to collect things [laughter] just like we all do. They like to collect things, except they don't have the money to put it in self-storage.
JO: So is the financing on these things similar to most commercial investments, where the banks are going to want to see a significant amount down?
BT: Yeah. It just depends, but more than likely, yes. They're pretty much the same. And there's companies that specialize in RV parks and trailer parks and financing. Their rates are a little higher because the banks and everybody does not understand all that I'm explaining about the infrastructure and all that. So they're very standoffish at first. If they know you, they're okay. If they know you know how to operate it, they're okay. But if you're new in it, they're going to scrutinize you pretty heavily and you're probably going to have to put out a lot more money.
JO: Okay. So other than the infrastructure, and like you said, it's a cash business, so you kind of got to trust that the numbers are accurate. What are some of the biggest red flags that you would say buyers should be aware of?
BT: Infrastructure. Infrastructure you can't see.
JO: Gotcha.
BT: You don't know what's going on with it. You don't know what's underground and where it is underground a lot of times. And that's very costly and very hard to get done right, especially when you got nine pounds of a bag in one bag and the rest of it's, you don't know what it is. So it's... 'Cause you can't literally, there is no map or layout for these existing trailer parks. You have to literally go get a shovel and dig and find the lines and figure out where they are. I've got the maps on both of mine that we own, but literally we've drawn the maps by fixing and going through it. And we know where everything is now, but it took several years to figure that out. We'd have a leak and we start digging and we find go, "Okay, where's this go?" And that's a lot of what the problem is in trailer parks. A lot of people, when they find all that out, they don't like them because it is a lot of work and somebody's got to do it. And you got to have a lot of equipment or you're going to spend a lot of money with plumbers and electricians and everybody else trying to fix stuff. And 90% of the time, if they drive up with a backhoe, you got problems because they're fixing to tear up something else.
JO: Yeah. Well, and that's... I mean, it's such a great opportunity when you're doing that stuff to map it out as you're learning. In the classes that I've taught, a lot of the students have heard me talk about that a buyer's going to buy the product that they understand the most. And maybe in an RV mobile home park world, there's just not enough inventory that it's not as relevant. But I would think that if you've got one of these for sale and you're getting on Land ID and you're drawing out some good maps and you're saying, "All right, here's the water lines, here's the sewer lines, here's the electrical lines," that buyer's going to understand that product more, and then the seller's going to get more money for selling that than if they didn't have all that there.
BT: That's right. If you got a good operator, they're going to have that information. If you got the ones that have been there, they've been operating it for 20 years, and they hadn't really kept it up, and they want to sell it now, you may not find that stuff that's been worked on because they're just not keeping those records. They're keeping their money records, but they're not keeping the rest of the records that you've got to deal with every day. It's literally... Our shop and our shops, we have three different shops full of equipment that we use on a regular basis because you've got to maintain this old infrastructure. Just like a downtown of any city, you're always maintaining water lines or sewer lines or whatever, and that's what you're dealing with. So you going to be prepared for that, and that costs money.
JO: What would you say is the approximate range of units that you can manage as a mom-and-pop operation versus you start getting too many units, now you got to have an on-site manager involved?
BT: You need an on-site. Whoever the operator is, if it's an owner that operates it and sits in there and collects the rent, that's one thing. It's the outside operations. So I've got a laundromat, an 18-unit laundromat that we built in, and that's a unit within itself. I've got a restaurant, that's a unit within itself. So you got all these things, but you've got so much you've got to do in so many different things, you're going to have a manager. When you get above probably 20 units, you're going to need a manager because one person cannot do it.
JO: Okay. Yeah, I would think that that would definitely be a logistical nightmare trying to manage that yourself. But I'm not familiar with the industry, so that makes sense that once you start pushing 20, then you got to have that.
BT: Yeah. And the other thing is the size of it. You can have, like I say, I own a few trailers just when somebody wants to sell it and I buy it and rent it out or put one of my guys in it or something like that. But when you're renting everything, you've got a lot more maintenance to it because they don't know how to maintain things either. And trailers are just not something that maintains itself. They'll sit there and fall apart if you let them.
JO: Sure.
BT: So it's work all the time.
JO: Well folks, if you'd like to gain more expertise and connections in the land real estate area, consider taking a LANDU course, attend a webinar or virtual roundtable, or come to an in-person event like the National Land Conference or a local chapter event. Registration for courses and events can be found at rliland.com. Bob, thanks for joining us today, man. Is there anything else that you'd like to throw out here as we're wrapping up for our listeners?
BT: Well, in the background of me and the older guys that I used to run around with that aren't here anymore, George Clift and Jimmy Settle and a few others that we all used to teach each other how we learned how to do this stuff, don't be afraid to go get it. And my saying and our saying that George and Jimmy and I always said is, "We're the first buyer of every listing."
JO: We're the first buyer of every listing. I love that.
BT: Somebody calls wanting to sell something, we're looking at it first.
JO: Well, I think, Bob, I've got like 46 right now between Colorado and New Mexico. So if you want to go look at all my listings on my website, I'd love to have you as a buyer.
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BT: In other words, buy and own instead of just selling. You'll make more money.
JO: I love it, man. And if some of our listeners wanted to get in touch with you directly, what's the best way for them to do that?
BT: Just call me at 901-3028-901.
JO: I love it. I love it. Well, for more expertise on land real estate topics, be sure to check out the RLI blog, follow us on social media, and of course, tune in for upcoming episodes of the Voices of Land podcast.
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