RV & Dog Park, Glamping, Fishing,
& Family Campground
Frequently Asked Questions
Is Metropolis (Chad) looking for $300,000 or $400,000? I have seen both numbers.
Hello to everyone. I am looking for $400k total, but I only need $300k to close.
(The $100k extra will enable me to generate another $50k in revenue a year or more, but I do not need it for the current business)
It appears that Chad is looking at selling the RV park in 24-36 months. True?
I am looking to refinance the RV park in 2 to 3 years. At that time, I will pay you, the money partner off and give you the extra exit bonus. I will also pay the seller finance loan.
However, if you want to stay in the deal, you are welcome to. I write SBA loans and am looking at this from that exit strategy. The cash flow from this is also great for monthly premiums inside infinite banking accounts.
Why is the seller selling?
The seller wants to enjoy his retirement and get a monthly payment without managing the manager. Do not worry, I am not buying a job... this business supports itself.
Does the RV park own and operate the restaurant, store, laundry, etc?
Yes, the RV park is the store/ restaurant/ leasing office/ general operation. It only requires a part-time employee every day because of the store. The manager lives on site.
Are the financials the actual results for 2022, then with forward expected expenses near the bottom?
The financials are actual numbers. I took all of the sorted quick books and consolidated them all giving as much respect to the real numbers and only generalizing certain items when the "mom and pop" book keeping began too tedious... but this is an accurate depiction of the numbers.
The debt service costs below the cap rate line merely simulate how the business supports the debt service and the investor 10% return easily using last year's numbers, not even taking into account the new value adds.
On a side note, I would like to personally say "thank you". I can tell by your question that you really studied the spreadsheet, and I appreciate that... Considering I spent countless hours curating the info and coming up with these breakdowns, it's nice to have people be able to ask me intricate questions because I made a functional spreadsheet people can understand, and they actually took the time to read it... (I am a loan broker and banking inside life insurance agent so I make presentations alot and sometimes my charts bore people) so thanks.
The RV park by itself loses money.
I can appreciate and understand that perspective... but it is also relative to the business, not just off fixed costs, because if I cut the business and restaurant out then I also cut most expenses out as well.
Do you have any comparable sales of RV parks?
I do not have the comparable sales of other RV parks, but I am buying it for a 15 cap and my value adds can possibly grow it to a 25 cap. RV parks, like all other commercial real estate, are valued with multiple factors which include location comps and asset class, in addition to the cap rate. In most cases (before the pandemic, the dollar being massively diluted, and the interest rate roller coaster causing a multifamily value reshuffle), Class A to A+ property might be in the 4 to 5 range. Mid-range B+ might be 5 to 10. Class B- might be 10 to 20 depending on the condition (and I am just giving a sensible guess here), and the condition of this property is in really good shape that does not have any expected major deferred maintenance waiting to happen.
It appears that the interest rate on the “bridge” loan is 10% annually which is a very low return. Also, having the RV park as security is not a lot – if any – collateral, as the seller will have a first mortgage. Does Chad have any other assets he can pledge as security?
Yes, I understand that thought process, and it sounds like an underwriter.... and I would say that you are correct if you look at this as a lender.
It is basically a 2nd lien with 100% CLTV at 10% interest only with a 10-point origination paid at refinance in 2 to 3 years.
But if you look at this as a passive investor... This is an investment that will be paying 10%, and it is guaranteed by real estate... and you have ownership and the right to take over managing control of the asset if I do not make the monthly distribution to you. There are not that many ways out there for investors to make this big of a return in something that is so not risky. Yes, I know the cash flow business has the human risk element, but it's not like "YOLO"ing into the stock market and definitely better than keeping your money in the dollar and losing 8% a year to inflation.
How much is Chad investing in the deal?
I have $15k earnest money and three weeks' worth of due diligence, which included driving half way across the country from California to Texas to go look at it and also the ability and willingness to live and to be local as the managing partner, especially during the transition of the business and ownership. I will be living on site or nearby over the next few months to ensure I maximize as many cash flow revenue building opportunities as possible, like a good entrepreneur is supposed to.
Again, thanks for taking a look at all of this. I can tell by your level of questions that you are an intelligent investor, and that you have studied my material thoroughly enough to have an in-depth conversation about it.
I look forward to working with you long term on many future opportunities if it is a good fit and we have similar investment thesis.
If it sounds like we might have similar sensibilities, I will be a good steward and protector of your money.