JF2778: Thinking Outside the Box with RV Parks and Storage ft. Sam Wilson

Ash Patel: Hello, Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I'm Ash Patel and I'm with today's guest, Sam Wilson. Sam is joining us from Memphis, Tennessee. He is the founder of Bricken Investment Group, which syndicates RV parks and storage facilities across the country. Sam, thank you for joining us and how are you today?

Sam Wilson: Hey, I'm good Ash. How about yourself?

Ash Patel: I'm very well. It's a pleasure to have you. Sam, before we get started, can you give the Best Ever listeners a little bit more about your background and what you're focused on now?

Sam Wilson: Yeah. I've always been an entrepreneur, grew up in an entrepreneurial family, owned my own business until I was about 30. I sold that and didn't know what to do next in life. I accidentally wound up buying a house and got into real estate. Here we are, almost a decade later and I've done every iteration of real estate mentor that you can imagine, solely focusing on commercial real estate now; RV parks, boat and RV storage. I still have my hands in some other business interests, but that's the primary focus.

Ash Patel: Sam, what was the business that you sold when you were 30?

Sam Wilson: It was a flooring company. We were involved in the trades, we weathered the '08 crisis. I had 30 guys working for me, and then when all the way down to one, which was a very painful experience. From dress clothes back to boots and jeans, and out working in the field for a couple of years. We weathered the storm, built that company back up and sold it in 2012. But yeah, it was in the flooring industry.

Ash Patel: I would imagine all those years you were exposed to a lot of different real estate investments.

Sam Wilson: It's funny, I've thought a lot about that, and maybe I just wasn't -- still not very smart, but just didn't have the intellectual understanding of all these guys that I'm working for, and gals... I mean, people making huge money doing huge projects, and there was never that consideration of like, "Oh, that could be me." I was just the guy, just heads down, running flooring crews. I was on the wrong side of the equation, I'll tell you that. But yeah, a lot of exposure.

Ash Patel: Or on the flip side, you saw some of the headaches and wanted no part of that, and that's why you're doing something a little bit more passive.

Sam Wilson: Yeah. Well, that's true. Certainly my 10-year goal, I'll be honest Ash, is to be a completely passive investor. I've got my hands in a lot of passive investments now, and I love those. As you know, it's the ultimate form of mailbox money, which is why I think it's easy to talk to investors. It's like, I get an ACH every month and I go, "Oh, good. Thanks." And my phone never rings. I want more of that so that's exactly where we're heading for sure.

Ash Patel: How did you get exposed to the RV parks and RV storage industry?

Sam Wilson: Again, like I said, I've done a lot of different -- it's almost schizophrenic, the number of different commercial assets I've been involved in. But last year, we did a couple of multifamily projects which are going great, and then I had an opportunity brought to me to build a boat and RV storage facility up on a large reservoir. I was like, "Well, that's really interesting." I'm always curious, so I couldn't help but -- I say no to most things now, my "no" button is getting bigger...

But this one I just couldn't pass up on; did the research on it and we said, "Oh, hey, there's huge opportunity here." Upon doing the research, I realized that cap rates are trading on a much higher basis than they are for other asset classes. They are operationally complex, which is probably why they trade at a higher rate. But also, there's just huge runway there. The RV and boat industry - the pandemic fueled it. It already had excellent tailwinds, and then the pandemic just threw gasoline on already raging fire. That's when I just said, "Hey, wait, there's opportunity here." Again, I love multifamily, but we don't have to duke it out with every other syndicator for the same pool of deals. I can go somewhere where -- it's not blue ocean, but it's pretty close to it. That's when I said, "Hey, there's opportunity here. Let's move forward and figure this thing out."

Ash Patel: What were the numbers on your last deal?

Sam Wilson: Well, that's a great question. On the boat and RV storage facility, or do you want to talk RV parks?

Ash Patel: I want to talk about both of them.

Sam Wilson: Okay. We only did one. It was a small project, a couple million-dollar project, just kind of get your feet wet deal. It was 226 units, a couple million bucks, it was 10 acres... 150 of those were 14-foot high, 12-foot wide, 40-foot-deep bays; it was all gravel, we did not concrete that. To be honest with you, Ash, we never even got the concrete. We got nothing more than the land cleared, the signs up, everything in place to take it down, and somebody else came along and bought it from us.

They're like, "Hey, we love what you're doing. We want your project." And they bought us out. [unintelligible 00:07:20.14] and kept moving. So I never even actually got it completely built. I say we built it, I halfway built it, and then took a paycheck. That also was further confirmation that "Hey, we're onto something."

Ash Patel: What was your percentage return on that deal? Did you double your money, and then some?

Sam Wilson: Yeah. I did, personally, invested capital, which is great. That again - I see opportunity there, but I see even coupling that with RV parks to be a really unique opportunity. Because a lot of these RV parks are mom-and-pop run, it's a very fragmented industry; there's usually land attached to it where you can add all these ancillary revenue streams, be it boat storage, RV storage, and buying properties.

We've got one that's probably going to go into contract here this week. It's on a reservoir, it has a marina attached to it, and there's event centers... We're looking to build more of the resort style RV park and not necessarily just interstate 70, roadside, pull-off, and stay for the night type place... But that's where we're going.

Ash Patel: Sam, mobile home parks versus RV parks, educate us, pros and cons.

Sam Wilson: Yeah. Far more complex. Mobile home parks are great, because they lot-rent. You mow the grass, you make sure the utilities stay working, you make sure your tenants are doing what they're supposed to do, and you collect your monthly check. As long as, of course, there's no park-owned homes, which you could have.

RV parks - again, it's more operationally complex. We're looking at a deal right now, it has marina attached to it. It'll have boat rentals, it will have fishing, tackle, guide service, RV park storage... It has a lot of different moving pieces. Included with that, of course, is increased personnel. So it's more of a business and less of a real estate play, though there is real estate obviously involved.

The cool thing about an RV park is that a lot of these will have the long-term component to it. You're looking on average of probably 60% of that is on a long-term RV stay. So people will rent the one space for an entire season. It'll be a 12-month rent, just like a lot rent at a mobile home park... Which is great, because they're typically better tenants. It's like the lower middle class, maybe even vacation home for them, because they can drive their RV there, they've got the same spot, they've even leave their stuff, they might even have a shed out back, something where they can keep all the little fun stuff for their kids to go play... And you get more for the lot.

The cool thing about it is that you're getting a greater rent with a better tenant, that's not there very often, which is perfect in my book; and you get the stability of that 12-month lease on that spot. So that's a cool part of it. Your money is made though on the transient people stay. So say you get 100 bucks, 600 bucks a month, whatever it is. On a long-term person, you're going to get 50 to 70 bucks a night for somebody that's just coming in for the weekend. You've got to kind of balance that out. But those are some of the major differences.

Ash Patel: Interesting, very similar to short term rentals in residential.

Sam Wilson: Very much.

Ash Patel: Now, we started this conversation with you talking about wanting to be passive. And now I'm hearing that running a RV park is a business.

Sam Wilson: Yeah.

Ash Patel: Come on, what are you doing, man? Help me understand this.

Sam Wilson: That's a brilliant question, and those are questions I ask myself all the time, like, "What am I doing?" The key to that is finding good partners, so really building out -- I've got meetings later today with building out the team, with good asset managers, with people that are good operators, or at least that love operations. I'm not an operations guy, I'm just not; it's not my strong suit.

I'll go out and buy stuff and probably do things that most people would be like, "Wait, what? What are we doing?" But to get down in the nitty-gritty and actually make the thing go round - I'm just not good at it. So the short answer to your question is, yes, it seems a little bit nutty, but I want to find people that love to be in that day-to-day, and really put the right people in the right seats on the bus. That's what we're building out right now.

Ash Patel: Sam, what are you seeing as far as returns?

Sam Wilson: Oh, gosh. Low 20s on an average annual return basis; it's very, very attractive. On a cash-on-cash basis, we're in the mid-teens, 15%-17%. Again, as an operating business, they're going to trade at a higher cap rate. The national average right now is somewhere... Again, not that national averages really mean a whole lot, because local is what matters... But it kind of gives you some ideas about 8.75% on average of what RV parks are trading at right now.

Ash Patel: In terms of your investors returns, is there a pref and a split?

Sam Wilson: Yeah. We're working our way through that, to be honest with you, Ash. I've always done that on our syndications, I've done a pref with the split and whatever variation each deal will allow. One of the things that I've typically been disappointed with in syndications is that once you get your money back, you've got to go find another deal to get into. Again, this is not fully baked yet, but I want to find a way to return investors capital and then hold deals indefinitely.

So I'm trying to work a way where we can do that, have it makes sense, and yet not keep equity tied up for far too long of a time. I know it makes sense at some point to punt the deal, reap your equity, and go do it again. Just working our way through that right now. But yeah, we've certainly done it the traditional way in the past.

Ash Patel: Yeah. I love the way you're thinking. It just seems like everybody, 8% percent pref, 17% IRR... Okay, like, I want something exciting.

Sam Wilson: Yeah. That's what we're getting right now. I mean, shoot, the deals we're looking at right now, if you can collect a 15%-18% cash-on-cash annually, have an annualized return of 25% if we did sell it in five to seven years... But there's a way to make the numbers work where we can get your money back and hold as long as we want to. I want to go for that. I've explained my reasoning behind that, but that's where I'd love to go.

Break: [00:12:51] - [00:14:38]

Ash Patel: You also mentioned this being seasonal. Why not buy RV parks in the South?

Sam Wilson: Bingo. You're onto it. Another reason why we see opportunity here, because a lot of these are mom-and-pop owned and operated. They're tired come late fall; they've been hustling it out from late May or maybe even early April getting the place ready, they've been booked up all season long... And come October, man, they want to go sit back somewhere and hide in a corner and recoup for a few months.

That's where we see opportunities, because we want to bring an institutional approach to this to where they can be open year-round. There's value add right there. We're seeing a lot of parks - we haven't transacted on, but that's one of the first things they've implemented, is a year-round Park. Even in the Mountain West where you go, "Wait, you're at 9000 feet and somehow you're figuring out a way to run an RV park in the dead of winter?" People are coming and staying, which is really astounding. It just shows the demand for the outdoor and hospitality space. That's certainly one of the things that we will be doing in all of our parks, going year-round.

Ash Patel: Again, love the way you think outside of the box. How hard is it to get a loan on an RV park? What does financing look like?

Sam Wilson: It's not as good as some of your other products. A lot of this is going to be local bank stuff, especially on your sub 10 million stuff. Our intention is not to buy anything North of that mark really, as we get this figured out. I want to buy some smaller four to eight million dollar deals, get a few of those, really get our feet wet, figure out our process on something that's manageable, and then go for the bigger stuff. On the smaller stuff, it's all local bank; it's enough, it's available. I don't know what rates are going to be now because of what happened this last few days ago, but it is available. It's just you're working with your county banks, you're not dealing with your big institutional players on the smaller stuff, of course.

Ash Patel: Are you looking at 30% down more?

Sam Wilson: Yeah, about 30, that's an average. What we're underwriting is a 30% down so it's not an astounding hurdle to get over. But I'm happy with that. And we can even go less leverage and still meet some really attractive returns. Obviously, the greater the leverage, the more we can use our investors equity typically. But on these, we can even go less leverage and still get some really healthy returns. For me, the less levered we are, the less risk there is - I'm good with that.

Ash Patel: Alright back to being more passive. What about RV storage?

Sam Wilson: Oh, gosh, I love that space. I think this one has legs for a while, because we've seen such an uptick of RV deliveries. We had 600 and some odd thousand deliveries in 2021; we're already on track for that in 2022. Just for reference, we had roughly 350,000 deliveries in 2020. So you're seeing 40 something percent increase in deliveries in 21, over 20, and then the same for 22, which is really crazy. But people need places to store these. Where they're going to put them? What neighborhood association once you park a 35-foot RV in your driveway or on the street? It doesn't happen anymore. The largest demographic of people buying our RVs now is not north of 60, it's 35 to 55 with a family. Where do most of those people live? In a city, somewhere where they can't park them, somewhere where they have to take them somewhere and store them. Once they buy them, they want to protect and they want to take care of them, they want them into a storage. They won't stick them out in the muddy lot with a fence around it. They're like, "Oh, hey, I'm going to park this thing somewhere that I know it's protected from the elements."

So that's 1.2 million RVs being delivered in the US within a 24-month period. That's a lot of vehicles to store. We had a facility built an hour and a half outside of Memphis in the cotton fields in Northern Mississippi. 240 units is full in three months; completely full. An hour and a half outside the city. People are driving massive distances just to find a place to park these.

So yeah, there's a lot of opportunity there. This is not a new concept, but we're exploring the idea of what even luxury RV storage could look like, something with 100-amp hookups inside their unit. Maybe even going crazier and thinking along the lines of doing fractional ownership where they actually buy their RV slot. I don't know, those are things going on down the road, but those are kind of some of the further thinkings in this space.

Ash Patel: You're thinking crazy again, I love it. Help me understand, if I see an industrial space, a large warehouse, what do I need to turn that into RV storage? A bay door that's 14-foot tall?

Sam Wilson: 14 feet tall, 12 feet wide. Yeah.

Ash Patel: Okay. It doesn't matter how high the ceilings are as long as they're 14 feet or higher, right?

Sam Wilson: I guess. Yeah, that would make sense. Yeah, that makes sense.

Ash Patel: And do they all need at least a 110 hookup?

Sam Wilson: Oh, shoot. No. You get into some of these big 40-foot class A diesel pushers and you might even need 220. I would imagine most of them run off a 110. But no, I don't own one, so I haven't done the research on what that would take to convert a facility like that. But yeah, I don't know.

Ash Patel: In terms of returns, would you rather chase RV storage or RV parks?

Sam Wilson: Good question. It depends on the model. I like RV parks, it just kind of does something for me, I don't know. I like it. Outside of the returns, it's just kind of more fun for me to think about owning RV parks across the country than RV storage. I think both of them have a very attractive return profile though.

Ash Patel: Sam, what's the hardest lesson you've learned in transitioning to the RV industry?

Sam Wilson: Tough question here, Ash. I would say really just because it is so fragmented and because there's just not as much information out there, it's really getting the education part of that nailed down; that's probably it. It's getting what I feel like as thoroughly educated. I feel like I understand multifamily really well, or at least well enough to be dangerous. In this, it's like, "Okay, I've gotta really up my understanding of the space, especially as it becomes more operationally complex." I think that's a hurdle that I'm working through. Again, I'm looking for excellent partners that can help really come on board on the operation side.

Ash Patel: Sam, I'm going to paint a picture for you. Imagine you have to start all over, you lose everything, all you have is your knowledge and your network. What's your 30-day plan?

Sam Wilson: If I need funding, like if I'm dead flat freaking broke, 30-day plan is to get 50 grand from the bank. I'd say "Alright, I need some runway." If I need to generate cash really, really quickly, I'd go to single-family wholesale, I'd go out, I'd hustle for 30 days, and I think I could generate 50 grand in wholesale fees in 30 days. If I did that, then I'd have some money, and then I'd turn around and start a commercial syndication business all over again.

Ash Patel: Awesome. Sam, what is your best real estate investing advice ever?

Sam Wilson: Find a mentor, that's it. Find somebody you know, like, and trust. I always say don't hire the guru but no-do. Run away from courses, at the person selling you a course but doesn't do it. Don't talk, just leave. But if you want to accelerate your game, find somebody that's ahead of you and pay them for their knowledge, and get out your checkbook. That's it. Be prepared to pay up for somebody that knows what the heck they're doing and don't be cheap about it.

Ash Patel: Sam, are you ready for the Best Ever lightning round?

Sam Wilson: Let's do it.

Ash Patel: Alright. Sam, what's the Best Ever book you recently read?

Sam Wilson: Oh, shoot, man. That's a great question. It's all about leadership, it's the four success principles. Hang on a second, I'm going to tell you here, it's on Audible. The 4 Disciplines of Execution; there it is, I was close. The 4 Disciplines of Execution, it's a great book. I'm halfway through it and love it.

Ash Patel: What's your big takeaway so far?

Sam Wilson: You're going to kill me. It's called focus, that's the first one. Whatever it is, focus. Which goes back to my point of why I've said, "Look, we are going long in the RV park space." If storage comes along with it, that'll be a secondary bonus. But for us right now, we're going long solely in RV parks.

Ash Patel: I need to read that book as well. Sam what's the Best Ever way you like to give back?

Sam Wilson: I feel like there's nothing left to give back to be honest, Ash. We took in three foster kids last February, six, three, and eight months old. It's still a daily grind when you have kids who are from a trauma and abuse background. There's just no rest for the weary, and I'll tell you here, 13 months later, we are very, very tired. Right now, that is my give back, just trying to turn kids that have been, like I said, from a severe trauma abuse background into decent humans hopefully someday.

Ash Patel: Amazing. Sam, how can the Best Ever listeners reach out to you?

Sam Wilson: Man, first of all, the How to Scale Commercial Real Estate podcast - it's a daily show, much like yours. Listen to that. Secondly, you can catch me at our website, brickeninvestmentgroup.com.

Ash Patel: Sam, thank you again for joining us today, telling us your story from being an entrepreneur in the flooring industry, being exposed to real estate, getting into multifamily, and finally getting your niche in RV parks and RV storage. We appreciate you sharing all of your knowledge with us.

Sam Wilson: Thank you, Ash, I appreciate it.

Ash Patel: Best Ever listeners, thank you so much for joining us. If you enjoyed this episode, please leave us a five-star review, share the podcast with someone you think will benefit from it. Please also follow, subscribe, and have a Best Ever day.

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