00:00I just want to meet a guy who bought an RV park for $400,000. The cash flows $15,300 a month.
00:13It's not me. I wish it was. His name is Kenworth. Not Ken. Don't get it twisted. This guy is Southern.
00:19He is a real estate man from South Carolina who focused on single-family home investing for years.
00:25Then one day he got a call and he gets a phone call from one of his investors and the phone call basically goes like this.
00:32It's like, I got an RV park. Nobody else wants to buy it. It's a little bit outside of town. Do you want it?
00:38And Kenworth said, well, I've never looked at it, but let me take a look.
00:41We're going to break down how Kenworth invested in this deal, his lessons learned, and how you can mimic it too.
00:47So this phone call actually came through in 2017.
00:50And despite Kenworth having hundreds of single-family deals, five kids, and a brewery, check this out.
00:55Isn't this a cool brewery? Also, this shirt of mine is from there, 13 stripes.
00:59He also said, I want to own an RV park. And so he said, okay, what makes this a good asset?
01:04Well, he paid $400,000 for it, put about 10% down, and with closing costs, he's in for around $47,000.
01:11This park of his had 35 spots at $350 a month.
01:16So he is actually making a 283% cash on cash return.
01:26So you can see the graph right here.
01:28And here's how it shaked out.
01:30But by the way, I've massaged these numbers a little bit, assumed some of the costs and loan amounts.
01:34So every single specific detail of Kenworth's deal won't be shared in case, you know, you guys are the IRS.
01:41Okay.
01:43But look at these numbers.
01:48Current revenue there, 35 sites.
01:51Current rent for each site, $350, equals a monthly rent of $12,250 in his pocket for an annual rent of $147,000 a year.
02:03At the time in 2017, they were only charging that $350 and they didn't include any extra services on top of it.
02:14Meaning things like charging your RV or sewage, lighting, et cetera.
02:20When he threw those costs on top of it, he was looking at making almost half of his whole loan amount back in year one.
02:27So let me show you what that would look like.
02:29Basically, here's the breakdown.
02:31Future site.
02:33RV sites, still 35, charge an extra hundred bucks.
02:36That means the monthly rent gets to $15,750 or total rent of $189,000.
02:44He adds maybe another $10,000 on top of that in variable costs that he charges them.
02:50Then he takes out expenses of a property manager who makes $3,600 a year and gets to live there for free.
02:57Maintenance costs of $10,000.
02:59And that means he's making an annual profit of about $175,000.
03:05Now that in itself is awesome.
03:07I love $133,000 profit with somebody else managing my asset and an almost 300% cash on cash return.
03:13Oh, that's almost as good as you JPEG nerds out there with your NFTs.
03:18But here's where it gets even better.
03:21As he adds the site upgrades and looks at the total appreciation cost of this real estate,
03:27he's making closer to a 373% cash on cash return.
03:32Now he did some work to make sure this was a good deal.
03:41And I thought I would ask him, Kenworth, if you were going to tell other people what to do,
03:44what exactly should you look for in an RV park deal?
03:47He gives us our details.
03:48All right, here it goes.
03:49One, location.
03:51Make sure you like the trajectory of the park.
03:53Basically means that you like the location, the growth of the population there,
03:57and that you don't have too many issues with things going wrong with the police or anything like that
04:01if it's in a low income neighborhood.
04:03Bankable.
04:04This is a great one.
04:05If you can't get a loan on the deal, it's not worth doing.
04:07So the bank is actually your best friend in checking if the deal is a good one or not.
04:11In order to get in the deal, you want to make calls to competitors, go visit parks,
04:16go stay in one to ensure that the costs are correct, that you aren't under or overpriced,
04:21and that you know what the market is.
04:23Then you got to make sure the cash flows there.
04:25And then it nets enough to pay an operator and you, unless you're going to go and live in an RV park.
04:29But typically, you need somebody else to manage it for you, and they need to be on site.
04:34Marketability is also really important.
04:35Like, is this place getting calls?
04:37Can you fill it?
04:38What I actually like to do is I like to throw up a Craigslist ad.
04:42It might look something like this.
04:43And it basically says, I have this RV park.
04:46It's located in this area.
04:47I have open spots.
04:48Now, I'm not looking to fill it because I haven't even bought the park yet,
04:51but I'm looking to see if other people out there are looking for what I'm selling.
04:54You know, do they already want it?
05:02The other thing that you need to know is that there's nothing in this world that is ever free.
05:06So there are good and bad things about every park.
05:09And there are some things that you really got to be careful about.
05:11One of them is you got to be wary of contractor tenants.
05:15So that basically means when he bought the park originally, it was full of local construction contractors building a power plant.
05:21Then one day, the plan was completed ahead of schedule.
05:24And when he came home from a tropical Christmas vacation, the park was empty.
05:28He had to go and replace every single tenant there.
05:31So you have to figure out the average length of stay before you do the deal and why they're there.
05:35So I would make sure when you buy a park, you want to actually go talk to the people and figure out why they're located there.
05:40And is there just one reason or many?
05:42Many would be better.
05:43Then he has something else called the path to progress, which basically means Kenworth likes to invest, build and buy on fringes that are on the path to growth and progress.
05:52That way he makes money on the cash flow, AKA money in every month and on the appreciation.
05:57So I might not buy an RV park in Austin, Texas, because it's right in the middle of everything.
06:02It's already expensive.
06:03The city's growing regardless, but I would rather buy one in the periphery of the city where I see the city expanding.
06:09I like the progress, but it's not right in the middle yet.
06:12The third is whenever he works inside of his sector, he looks at the growth around his sector.
06:17He was in construction and saw the booming housing demands, but limited supply.
06:21AKA RV park needs.
06:23What is your unfair insight and how could you leverage it?
06:26With RV parks, if you're in advertising, your unfair advantage may be that you know how to market the hell out of that RV park.
06:32If you're in graphic design, it might be that you actually know how to clean up some of it.
06:36If you're in interior design, you get the gists.
06:38The fourth is if you want to get more deal flow, you got to tell people what you're looking for.
06:41He didn't even have to go find this deal and found him.
06:44How?
06:45He told people over days, months and years that he always wanted good deals to be brought to him.
06:50But the problem is you can't just ask for people to bring stuff for you.
06:54You got to be number five, easy to work with.
06:56They bring in deals because he's a classy southern gent.
06:59Nice, fun, easy going.
07:01Hell, I had him do a call as a favor and by the end of it, he's sending me free beer and merch.
07:06That's how you sow seeds in the future.
07:08The last one is you do the deals you say you're going to do.
07:11He said he has never not followed through and closed a deal he said he was going to do.
07:15That's rare.
07:16I've certainly had deals fall through on my side.
07:18An ability like this to execute or at least say no and say no early is big.
07:23The last and most important one is never ever in all years should you do a deal without an on-site operator in RV parkland.
07:30Every single RV and mobile home park owner I speak to tells me the same thing.
07:34Your operator is critical.
07:35They're expensive, but they're crucial.
07:38Usually a few hundred to a few thousand dollars a month depending on how big the park is and how much additives they have.
07:43But they run the show.
07:45Shout out to Karen, his operator, who he said is the...
07:48He said, he didn't say she's a sh**, he's southern, but you get the deal.
07:53And I think the most important thing for all of us to learn today is that this opportunity is out there.
07:58The fascinating part, the icing on the cake, he bought it for 400k in 2017 and he just got an offer on it for 800k.
08:05I think that's a mighty nice return.
08:07If you want to learn more about how to buy RV parks, how to buy cash flowing assets,
08:11you should definitely, definitely, definitely join the Contrarian Cash Flow group.
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