Welcome to The Darin Batchelder Multifamily Real Estate Investing Show, where we bring you the latest insights and expertise from industry leaders. In this episode, we are joined by the experienced investor, Robert Preston, who has made notable strides in the RV park industry. Robert shares exciting news about developing strategic relationships and providing various types of debt and equity, including bridge loans for development and construction. He also delves into his company Climb Capital's target loan for the year, his focus on the RV sector, and his plans to expand lending in the RV space. Robert's invaluable insights continue to highlight the unique social atmosphere and investment opportunities present in RV parks, shedding light on the potential for growth in this market. Stay tuned as we delve into Robert's journey, from transitioning to the RV space, the unique features of RV parks, and the future of this expanding industry.
- 00:00 Acquaintance discusses RV investment and potential benefits.
- 05:19 State park camping differs from low-end options.
- 08:23 Affordable housing through living in RVs.
- 10:42 Upper middle class struggles with housing choices.
- 16:18 Sellers lack systems, marketing, online presence.
- 17:12 Unused land in parks can be profitable.
- 21:30 Focus on low-tech industry, integrate solar panels.
- 25:23 Limited options for property management in RV space.
- 28:56 Multifamily deals offer expertise and flexibility.
- 31:26 "Kid-centric amenities and green meeting spaces."
- 33:59 RVing, developing sites, maximizing pads, Montana memories.
- 37:25 Announcement of exciting strategic partnerships in January.
- 42:09 Future focus on RV sector and lending.
- 43:44 Making money while strengthening family and community.
Episode Table of Contents
- The Value of RV Parks
- Investing in RV Parks
- Innovative Solutions in RV Parks
- Financing and Management in RV Parks
- Enhancing the Park Experience
- Robert Preston's Announcement
The Value of RV Parks
The Social Atmosphere of RV Parks
Robert Preston emphasizes the uniquely social atmosphere of RV parks, where meaningful connections and friendships readily form between guests. He contrasts this to more isolated experiences in neighborhoods or hotels, noting how RV guests actively help one another and quickly develop communal bonds over shared interests. Robert cites examples of kids forming swift friendships and parents connecting with other parents while relaxing at campfires. He conveys RV parks as fostering a tight-knit, family-like environment.
RV Parks as an Affordable Living Option
Additionally, Robert discusses how RV parks provide an alternative, affordable living option, particularly for young professionals. He notes several examples of college students living in their parents' RVs while attending university, as this can prove far cheaper than dormitories. More broadly, Robert identifies emerging lifestyle shifts valuing location flexibility and remote work capabilities. He suggests RV living can uniquely support such demands.
The Future of Work: "Everyone wants a flexible in office versus hybrid. They want flexible location. So, if you have that desire in life, then there's very few ways to live, better than remote work and traveling in an RV." — Robert Preston
Investing in RV Parks
Robert's Acquisition Criteria for RV Parks
Robert looks for RV parks located primarily in the Southeastern US, below the freezing line. They can operate year-round without being forced to close for months at a time. He targets locations within a reasonable driving distance to a major MSA to capture both long-term residents and weekend travelers. In terms of the actual property, Robert aims to buy parks with at least 100-150 sites. The presence of water features like a lake, river, or pool is also desirable.
When evaluating potential acquisitions, Robert considers both geographic criteria as well as financial metrics. He looks for parks producing cap rates of at least 8% and preferably deals yielding cap rates in the 9-11% range. These parks tend to be solid cash-flowing assets right out of the gate.
Investing in the RV Space: "I purchased an RV last year, and my wife and I traveled around, and we really enjoyed it." — Darin
Driving Value Through Marketing Upgrades and Site Expansion
In terms of adding value after purchase, Robert often buys RV parks from mom-and-pop owners who do an excellent job operating the property and taking care of guests but lack of infrastructure and marketing capabilities to take the business to the next level. He can boost performance by improving the online presence. Implementing dynamic pricing tools, getting onto Airbnb, and better leveraging syndicated booking channels. Robert also looks for properties with excess land that can be developed to add more RV sites without requiring investment in new amenity buildings. The key is finding parks where he can increase the number of sites by 10-20% without major CapEx.
The importance of positive online reviews and high ratings on Google cannot be overstated. Robert notes that as an RVer himself, these are some of the first things he looks at when considering a park. So focusing effort on managing online reputation is critical.
Innovative Solutions in RV Parks
Robert discusses the "low tech" nature of the RV park industry currently and his company's efforts to integrate more technology into their parks. This includes adding things like solar panels over RV sites to provide shade and offset electricity usage. He also mentions using RFID wristbands for customers that can unlock amenities like kayak rentals or arcade games. Most critically, he emphasizes the need for online reservation systems. This ensures potential guests can easily book sites even when the office is closed; no lost business. Robert sees lots of opportunities in bringing technology into RV parks to improve customer experience.
When looking at the progression of other commercial real estate sectors like self-storage and apartments, Robert predicts a similar growth path for RV parks. He expects institutional-level debt and publicly traded RV companies. Plus, more widespread third-party property management in the future. Robert compares where RV parks are now to where other asset classes were 10-20 years ago in their life cycle. He sees the integration of technology and professional management platforms as part of this evolution.
Financing and Management in RV Parks
The discussion transitions to comparing the management side of RV parks to multifamily properties. Robert emphasizes the importance of the on-site operational team when acquiring a distressed RV park asset. Explaining that the existing staff typically needs to be replaced in these situations. He contrasts this to well-run parks that he acquires, where retaining quality management staff can provide significant value.
Challenges in RV Property Management: "There's two barriers to entry into the space, and that's why there's money to be made. It's the third party property management, or the requirement to have to manage the property yourself, however you wanna look at it." — Robert Preston
Robert also notes the limited availability of third-party property management companies in the RV space compared to the multifamily sector. As a result, RV park owners essentially have to self-manage their properties from the start. He indicates that his company will likely start offering third-party RV park property management services soon. Targeting strategic relationships with aligned RV park owners.
Seller Financing and Property Management Fees
Regarding financing, Robert explains that seller financing is more common in RV park deals than in other commercial real estate asset classes, although not ubiquitous. He describes his strategy of providing two offers to sellers. An outright purchase offer and a seller financing offer. This facilitates the negotiation conversation to determine if the seller has an interest in providing financing.
Additionally, Robert mentions that the property management fees in the RV sector tend to be 2 percentage points higher than equivalent multifamily assets. With RV parks likely starting around 5-7% of revenue. He says his company could provide nationwide third-party RV property management services, given their operational expertise in the space.
Enhancing the Park Experience
Creating Connections and Community Experiences at RV Parks
Robert discusses ways to enhance the guest experience at RV parks through special events and programming. He gives examples like s'mores nights, craft days, bingo nights, and Nerf gun wars. Fun activities that bring people together but are inexpensive to organize.
The conversation centers on the community atmosphere unique to RV parks. Robert emphasizes the importance of having open green spaces and astroturf yards where both kids and adults can gather for activities like pickleball or kickball and mingle with their neighbors. He shares how the open layout and communal amenities facilitate spontaneous friendships in a way seldom found in hotels or apartments.
Creating Connections at Campgrounds: "That simplicity of having a common meeting space where your kids are gonna go meet new friends, you're gonna meet new friends, you've got a beer sitting there, and the kids are out there, pickleball or whatever it may be. That's the stuff that matters. That matters to you, that matters to me as an RVer." — Robert Preston
How RV Parks Build Lasting Relationships Between Guests and Staff
Robert contrasts the isolation of living in a traditional neighborhood, where you may never interact with people next door, to the bonding over campfires and impromptu hangouts that arise organically at RV parks. Unlike driving straight from your garage to the house, kids at RV parks quickly form "gangs" with other children and spend all day adventuring around the grounds. Darin relates his own memory of a recent stay at a KOA with a large grassy area where families gravitated to with pets and kids playing together, cementing the value Robert sees in building connections between guests.
The familial bonds also extend to park staff and long-term residents Darin notes. The flexibility to change locations supports a collaborative, helpful rapport between managers and guests rarely found in multifamily housing. Robert emphasizes that the reliability of on-site staff both operationally and for relationship-building plays a significant role in underwriting decisions during park acquisitions.
Robert Preston's Announcement
Strategic Relationships for Debt and Equity
Robert announces some exciting news regarding strategic relationships his company has formed. Through these relationships, they can now provide various types of debt or preferred equity. Including bridge loans for development and construction projects. Rather than focusing strictly on purchasing RV parks and other assets for their own portfolio, Robert aims to support other real estate sponsors and syndicators by offering flexible financing options.
The primary targets for lending in 2023 are bridge loans, whether for developments, construction, or repositioning other assets. This allows Robert to build partnerships with aligned sponsors requiring more time or capital to complete their deals.
Target Loan Amount and Parameters
For 2023, Robert has set a target average loan amount of $10 million. However, his new lending capabilities allow for flexibility on a case-by-case basis. With the ability to explore up to 85% loan-to-cost lending if the asset and sponsor meet qualifications. By supporting other firms expanding in sectors like RV parks and multifamily housing, Robert seeks to take part in the industry's growth.