less friction = more occupancy

Happy Friday, fellow RV/MH park investing enthusiast!

Today’s newsletter is about my favorite hack to increase occupancy with ANY real estate asset class, not just MH/RV parks. I stole this hack from Amazon…

But first, I’m hosting 2 webinars next week, and you may be interested in one or both of them.

On the fund side of things, Blue Metric is rolling all investments up into a single fund structure, as opposed to deal by deal as we’ve traditionally done.

There are 3 larger acquirers eyeing us right now, and things get a little hairy when you have 28 parks in 28 LLCs and 28 bank accounts. Our ultimate goal is to become a $500M fund, and this new structure will help make that easier.

I’ll be hosting a webinar on Wednesday with my partner, John Cascarano (Blue Metric founder) to discuss the Fund 2 structure and deck. REGISTER FOR THIS WEBINAR HERE. Here is the Fund 2 deck.

I’ll also be hosting a webinar at 11:30 CST on Tuesday for anyone that might ever be interested in buying their own mobile home or RV park. I’m going to get very tactical and give a way a bunch of free info. REGISTER FOR THIS WEBINAR HERE.

What does Amazon's "1 Click Checkout" have to do with 2-3xing the value of your property?

Friction!

Here's exactly how you can buy a piece of real estate from a legacy owner & use what Amazon taught us about removing friction to triple the park's value. I’ll use mobile home parks in my example.

The key word is "backfill."

The big “secret” to tripling the value of your RV or mobile home park is increasing occupancy.

And the secret to increasing occupancy lies in a magical technique I call "backfilling."

Backfilling makes it easy for people to live there.

What is backfilling? Backfilling is buying used or new RV/MH units to place on an empty pad site to rent out.

How likely is it that a family is driving down the highway, pulling an oversized mobile home, and they see your park and say:

"This is it, kids! This park will be our new home"

Impossible! Way too much friction.

Yet most park owners are ignorantly expecting that to happen by building a park & then waiting for homes to come.

Not gonna happen. I’m sorry Mr. Costner, if you build it, they will probably never come.

For a campground RV park, sure. But not for a long term MH/RV park. You have to add the homes first.

Here's how: This begins before you purchase the park.

Crunch the numbers on how much it will cost to backfill and include that in your capex estimate. Slightly used units are best but hard to find at decent prices.

Investors should know this cost is critical & you can do it in tranches. Stop by a used MH dealership (IN PERSON) and ask about bulk discounts.

Can they knock off $3k each if you buy 5+ units? $7k?

Get this in writing before you close. If you play hardball with a seller why not with a used mobile home dealership?

You want 3+ bedrooms. 4 is ideal. Doublewide if the pads are big enough. Take pics while you're there! This is key.

Budget $28k per. As soon as you close, start listing the units on Zillow, FB & CL.

Make sure the move in date is after they can be delivered.

The tenant needs to know how much of the monthly payment is for the lot rent and how much is for buying the unit.

You'll seller finance the unit. Why? You don't want to have to maintain them.

You want to collect lot rent only.

Imagine owning a self storage facility & being responsible for fixing everything inside the units that break?

Sounds like hell.

Include a generous warranty & seller finance the units. But they need to know:

"$250/month is your lot rent and $300 pays down your unit."

Include the duration and interest rate. It should be fair. They also need to know utility costs.

Get it papered with a lawyer & ensure you're following local regulations. They vary by state. Sometimes you can pass off financing altogether from the company you buy the units from.

This is ideal but not always available. In any economy the demand for affordable housing will be massive.

Lately it's been making more sense to buy new vs used, but there are lead times. This also enables your tenants to have more pride of ownership.

They can be homeowners AND you won't need an onsite manager. They will also stay much longer, as moving these are a pain and expensive.

This is key if trying to buy mid sized parks at higher cap rates. And yes, the same logic applies for long term RV parks.

Buy 3-5 year old pull-behind RVs on FB marketplace for $10-15k.

Get a good lock on them! (I have stories...)

DO NOT buy class Cs (or people will ESPECIALLY drive them off).

These are for living in, not traveling. Do this strategy a few homes at a time until you're full.

The best way to get insane returns is to buy at an insane cap rate because a park is half empty (because not backfilled).

But it doesn't scare you.

And then use this strategy to get to 100%.

For example, let’s look at buying this park, for example:

• $63k NOI

• 12.6% cap rate at purchase

• 70 pad sites

• 50% occupancy

• $200 lot rents

• Buy for $500k

• Spend $700k backfilling to 100% occupancy

Sell the park at:

• $168k NOI

• 7% cap rate at sale

• 95% occupancy

• $250 lot rents

• Sell for $2.4m

I didn’t even include seller finance revenue, only lot rents. These deals can be found and are very doable.

You can 2-3x your money in 1 year and your downside is covered even if you don't increase occupancy.

Now, ask yourself how the principle of reducing friction can convert to better occupancy on YOUR asset class.

Any questions? Feel free to reply directly. Thanks for reading!

Chris Koerner
chrisjkoerner.com