Welcome to the ALX show your premier source for DFW real estate data and insights. Let's get to it.
Hello Josh and Patrick and welcome back to another episode of the A LX Show. Today we're gonna be talking about a new asset class, a new type of real estate investment opportunity that you guys are tinkering about, thinking about. Uh, so we're gonna be talking about RV parks as investments and it's something you guys are considering looking into doing some due diligence. Tell us about that. What's up with that RV parks? Good, bad, indifferent. Why?
Yeah, like you said, it's, it's new for us. One thing that we always focus on with, with any investment we do is the people. Um, we, we typically like to be on the kind of administrative side, the financial side. Of projects and then it's, it's really important that we've got great operators. So in this case, we had, we had a couple really, really strong operators bring us the concept. And so that caused us to dig in a little bit and learn about RV parts.
And I think what we found is we like 'em. Um, you know, it's, it's still new. We still got some, some, uh, some work to do. But, uh, really what we're talking about is going out, finding land. Um, somewhat rural, but not too far away from a, a major, um, city center and developing that land into, uh, both short term and long term stay RV park, it's exactly what it sounds.
It's, it's kind of like a, what you think of as a, a, a camping ground, but it's, uh, set up for RVs with fenced in yards and you have, um, amenities. Uh, you, you've got like a, a public bathroom shower. You've got some parks on site, you get pickleball on site,
Nice. That's fun.
all, all, uh, good visibility from major highway. Uh, and then people come and stay. And, and, and another reason why I like about it's the management is pretty light. So people come and stay for, you know, short or long term. And, uh, and it's all managed electronically. You have somebody nearby that can take care of problems, you know, as, as needed, but. Uh, not, not a big management lift, which is really music to our ears. Uh,
Yeah, yeah,
from multifamily. I another big thing we like about it is it's a land play. If you buy the land at the right price and you buy it within the path of progress, then it's really minimal, uh, development as far as infrastructure. So you can operate it as an RV park. You can get up and running, uh, pretty quickly. You can operate it as an RV park, and then down the road you'd like to reposition it. Um, into single family or something else, then it's not a whole lot of work to do that.
Cool. So these, these properties are in Texas. You're looking like close to DFW or where, where are you? Where are you trying to shoot?
Yeah. The opportunities that we've seen so far in Texas, the primary one is right outside of DFW. So, uh, you know, as, as far as I've been able to observe, and this is gonna sound really intuitive. I think there's two really beneficial places that you want to be location-wise for an RV park. One is off of an interstate, uh, that's a good stopping point for somebody. Um, and if you're near a, you know, a big hub, that's a benefit to on along the interstate.
And the other one is obviously like by, um, places where you can camp. So national parks, state parks that, so someone who's going on an extended stay could stay there. Uh, that kind of thing. So, you know, that's what kind of where we've zeroed in on so far. And I mean, you talk about home affordability and, and how that's, you know, getting further and further away for a lot of people.
And, uh, and a lot of people, you know, we're also seeing a trend where people like the flexibility, where they don't have to be tied down somewhere. So if you're in an rv, um, it's, it's. Relatively inexpensive. You can get up and move around. Um, it's cheap to park it and stay, uh, for an extended period of time. And these RV parks are, are starting to pop up, um, around, like I said, major metro areas. So you could work in Dallas, have an RV parked you know, in Greenville.
and It's not, a terrible commute. It's not initially quick either, but people are willing to do it because you've got the freedom to move around when you need to. And it's, it's cheap rent. You know, you gotta buy your rv. Uh, but otherwise, it, it, it affords you a lifestyle that's a little bit less expensive and everybody, you know, everybody values their freedom. And there's, there's certainly plenty of that.
Yeah, yeah, yeah, yeah. I see a lot of, uh, um, I dunno, that seems trendy for people my age especially that are really trying to like slow down. And so they've got young kids and they're just like hustling right now, and they're just like, I need to get away. I need, you know, and RV Park is a perfect example of trying to do that. So, um, as an investor.
Thinking about these properties, how do you see the return dynamics relative to other kinds of, uh, real estate assets or especially as part of a, a larger portfolio mixture.
Yeah, I, I think a, an investment into an RV park is gonna be pretty similar to. Uh, what you'd see return wise on a commercial alternative. Um, and, uh, you know, they've, it's, it's so much less labor intensive that it's a, a little bit different of a, uh, an opportunity because the development side of it gets you in at a much lower basis than you would otherwise, so. Mm-hmm. Um, it's a lot less capital intensive so you can, um, you know.
Get into a project that's gonna generate a similar yield, but with a lot less capital to do it. So that's probably the biggest difference between an office building and an RV park, is to develop one's going to, you know, be. One, 100th of the cost. I think a difference too is you're, you're not gonna see the appreciation pop like you would on a value add, multifamily or office or other commercial space. You know?
It's just, it's, it's more once, once you've developed it and it's operating, I. Um, you're really buying into a, a cash flow with probably a kind of a limited upside for, for the next, the next group. So it's, it's a safer, I think, in investment in that way. Um, but certainly not the same, um, you know, potential upside that you would in like a big, uh, like I said, other, other commercial properties, especially like multifamily
Yeah, you said before, uh, that, uh, it's, it's like a quick to cash flow kind of opportunity, and then on the other end you've got a lot of different exit opportunities and if anything else, you have the land, but you could always repurpose it like you kinda mentioned. So it seems like it's a really, uh, I don't know if the word is like dynamic or like flexible kind of investment. That's really, really cool.
Well, it's interesting because your, your development is like, you're, you're putting in roads and parking lot like, and that's it. And then you've got like septic utilities, that kind of thing, and some lighted areas. And all that. It's a fencing. And fencing. That's a new thing now. Now, like the newer parks that, because everybody wants to bring their dog.
So the newer parks, um, you've actually got a nice fence, um, outlining your, your space so you can sit outside, have some privacy, or let your dog run around.
Huh, interesting. Uh, do you guys rv, are you anybody RV or
no, but I mean, gosh. So now obviously digging into this big. And we all knew this, but like, I hadn't really like really put numbers into my head mentally, but there's a whole, an entire ecosystem out there
Huh.
the RV world. I
Okay. Tell me about that.
well, I, there's, you know, entire trade organizations that are focused on how do we grow the mm-hmm. The RV lifestyle, you know? Um, and people that do it. I mean, a lot, a lot of people will rent one and maybe go on a vacation and do it, but there's. Tons of people who that's their life full time and they cruise the country and they stop somewhere for a month or two and then go on to the next spot.
And so, uh, one of the things that's neat about these parks is, um, different than like a hotel, which is just, unless you're in an extended stay, but just nightly, um, you know, um, rental rates, you've got a longer term option. So there's not necessarily the same risk of vacancy because you're just trying to fill something every single night. You've got an option where you can pay a daily rate at an RV park, but they've also got monthly options.
And so, um, you can lock in, uh, a, a tenant, so to speak, for a longer term than you would think when you first hear RV park and you're thinking like short term, have to manage a lot. Um, and all that, but you know, you could fill 70, 80% of your available space with people who are gonna be there for at least a month, if not two, or three or four. Um, you know, nice way to do it.
Is this something that you've seen other investors get into, either institutionally or private, you know, small, independent, like what's the trend in this kind of category? Because I, I, I don't know much about it.
I, I don't think we've seen that yet. Uh, you know, it's not real scalable I think at this point, right? If you were to get some institutional investors interested, you'd probably need several of these going at once. I mean, like, it's, it's not, it's not real capital intensive to get going. So if you've got these guys that have a ton of money and they're looking at placing it in different place in different projects. Um, RV parks, uh, one because it, it, it is kind of coming on.
It's, it's not, it's not new, but over the last, you know, I dunno, five, 10 years, it's becoming more and more popular. Um, but they're looking at, well, we've got all this money that we've got in place. We, we really don't want, you know, to, to do 2 million or, you know, two and a half million dollars in order to buy and develop one of these parks is not really a good, an efficient use of their resources or time.
Yeah.
So, and, and the returns, like I said, we're, we're not looking at re like re returns are solid, but we're not looking at, at returns that are gonna be better than, than to go at, at, you know, the, the, a great positioned multifamily or or commercial asset that will allow them to put a lot more of the resources in one place, have the upside, um, that those projects will bring. And, uh, um, and the, the scalability of being able to re repeat that.
Right, because you do have to kind of get out of your everyday analysis to like, like, like we did, to like, okay, RV parks, this is interesting. Let's, let's learn about it. You know, so I, I think for now it's, it's more gonna be small independent groups that, that go after these, even individuals, um, that maybe own some land or, or have a friend or family member that does, and they're just thinking of something that they can, that a way that they can cash flow on it.
I've, I, this is somewhat related, uh, but, uh, a few months ago I went to a wedding and they recommended the, the wedding party recommended that folks stay in this, um, it was like two or three acres and it had a bunch of tiny homes and some like little yurts, you know, like little glamping kind of situations on him. And so we went there and I'd never been to one of these before. And, uh, we drove in and there was like, um, I wanna say like eight to 10 tiny homes.
And so there's very, very small ones. And then there was like two story ones that were like, you know, a thousand square feet or 1500 square feet or something. And, uh, I just thought it was so fascinating that you could have. Let's say two acres or three acres and put this really beautiful property on and it's basically like you've got a hotel or you know, something like that just on property.
And I can't imagine it's super capital intensive to do something like that or takes forever to do that. I mean, they were very, very small homes and it was really nice. I loved it.
It is the same concept, what you're saying, like, I mean, it is obviously different. But tiny homes, you know, you see like the, um, deliverable homes, like the, just kind of the, they're not necessarily tiny, but they're super basic and simple prefab, and they, they come and they deliver 'em on site. Um, you can also like, I mean, it's been around forever trailers, right?
But, um, you can also buy the RVs if you wanted to as an investment and rent it out and just park it and, and, and rent it out if you wanna do that too, then now you've got, you know, additional assets that you've gotta manage, which is, you know, you gotta determine if you wanna do that or not, if the return's worth it. But I think it is a really, uh, yeah, it's, it's a minimal, um, mindset.
It's people kind of getting away, wanting a break maybe from like the hustle of, of, of what they're used to. Uh, it's, it's affordable.
Mm-hmm.
and it just, it allows people, I think what a lot of people are looking for is just that, that freedom and flexibility and, you know, a big thing. We'll see kind of How that How that changes now that there's a lot of people, you know, back to the office and things like that. But, um, but I still think there's always, there's going to be, uh, a steady demand for that alternative, for, for people that want a cheaper, um, more flexible way of living.
And like you said, like when you're building these, uh, you're you, everything you said, you keep in mind, you want it to be a beautiful space. You want it to incorporate the nature around you. You want to have a little pond that you can fish out of. You wanna have some walking trails, you know, you want it to really be peaceful and, um, just a fun, like nice little getaway kind of resort style feel to it,
Hmm.
Josh mentioned the affordability of it, and it triggered my mind. So if you think about like the, the downside risks to. What, um, your underlying cash flow generation of an RV park, which would be the people leasing space from you. So the, the downside risk is, you know, a difficult situation for the US consumer that peels back, um, their spending or the things that they can do. And what it, it seems attractive to me about RV parks.
Is that it's way different than a resort or an airline or like more discretionary things that are the first things to get cut from a budget when things get tight. Um, if, if you're concerned about or uncertain about your income over the next year and you want to go on a vacation, you're probably gonna cut the trip to Europe. And so like a American Airlines and. Uh, whatever resort company like those are gonna be impacted by that change in behavior.
But the RV that you can rent and go pay $700 for a month to go stay, um, and have, you know, limitless area of where you can go when you do that, like that's probably gonna be something that can remain in people's budgets. And so I don't think there's a huge change in. Like, uh, leasing, so to speak, based on consumer power or how they're feeling.
I was, I, I laugh first because you said fly to Europe. 'cause I'm flying to Europe on Tuesday and I, you know, I'm counting all the bills and the planning and all that and I'm like, okay, this is. There is a budget
you had just rented an rv.
going Yeah, I was about to say. Yeah, yeah, exactly. Yeah, no, I like where you're going with that. Where it's like, this actually is the budget option. So, uh, if you're thinking about a, you know, kind of like a downturn or changes in people's spending patterns, this actually is the better option for, you know, any kind of, um, more dismal time. So it's something to really have in your portfolio 'cause it kind of can balance out some of those other risks that you might have.
Yeah, you said that a lot better than, that's what I was trying to say. In a lot more words. Yeah. In all investments, right? Like especially alternative stuff, real estate. I, I think you want to, I don't think I know, we all know you wanna be diversified, right? So put some in apartments, um, you know, put some, uh, potentially in retail or development. And we, we, we would always say single family, like there's a lot of different ways to do that, uh, but diversify, um, in the different types.
Uh, and then, you know, some that way, you know, some will, some will hit when others don't. But typically real estate says. Pretty steady. I know we we're coming out of a difficult time, obviously we're all aware of that, but over the long run, um, it should be, you know, steadily moving in the right direction. So, uh, like this RV Park idea is not something that we'd say, Hey, you know, RV parks, that, that's it for us. We're going all in.
It's just, hey, hey, we had, uh, this is a potential, um, opportunity, something that, you know, is, might be worth, uh, pursuing. And like at the beginning when I said, and we mean it, it's for us, it's all about. Who we're working with. I mean, the concept's gotta work. Like the performer's gotta work. The underwriting has to, to make sense. There's gotta be a market for it. We've got to be able, uh, to, to go out and kind of visualize it.
But, um, also we've gotta see the real da the data, and it's gotta, uh, tell the right story.
That's right. Yeah.
but we don't even, but the ver the very first and most important thing to us is, um, who are we working with? So in this case, like I said, we got two guys. Got a ton of respect for, um, that brought the concept to us. And their vision is they just don't, they don't want to just do one of these. They want to do five or 10 of these and then package 'em up. Um, and then that, you know, that becomes, that, that becomes a pretty appealing exit.
Um, but in all investments, I think really what I'm getting at is it's about the people. It's about the people. The concept needs to make sense, like it needs to be feasible. But then you need to bring in the right people that are gonna get it done well. And then when things do, you know, get rocky, which oftentimes they will, are they gonna stick it out? Are they gonna do what they need to, to, to make it right? Are they gonna be committed, competent, and caring.
That's right.
And, and so, and these guys check those boxes. So when, when the people that you, you meet are, are gonna potentially do business with, do check those boxes, then, you know, we're willing to, to dig in, even though it's something like RVs that, uh, we don't have a ton of, um. You know, experience with, but we do have a lot of experience on, well, how can we set this deal up? Can we set the deal up well then do we have the operators to make it happen? And um, and overall there's a concept.
Is it a good one?
Yeah. Yeah. It's cool that you know, a big benefit of investing in real estate is that it does diversify a portfolio with a pretty stable. You know, kind of asset class, and what you're talking about is diversifying that diversification even more so that you're, you're finding different ways to either de-risk or find, you know, better, like cash flow opportunities even within the real estate mix, which I think is really, really cool. Um, I'm curious, uh, what your.
Go NOCO decision criteria is on something like this, like as you guys are kind of analyzing this and projecting things out and having conversations with these great people that you trust and, and working through that kind of, you know, putting the deal together, what are some things that you're looking at or maybe worried about, hopeful for? You know, what any kind of trigger points, it's like, okay, I think this is actually a really great opportunity if we can figure this, you know, part out.
Anything like that.
I think the, the biggest one is what Josh has already talked about is location. Mm-hmm. you know, are we looking for, um, do we want something that's gonna be management intensive on our side? So what I mean by that is, is it gonna be years of, uh, facilitating, you know, whether on the capital side or the asset management side before we start to, um, really see any, any return? Uh, or is it something that can be relatively short on the front end as far as getting it set up?
Um, and then handing it off to, uh, to a great operator to let it run and let it cash flow. Because if you're, if you're starting with a, just a piece of dirt and you're trying to build a hundred unit apartment, uh, you're gonna have a, a good year of, um, planning and strategy and, and, and getting, getting approval. And, and that's, that's a lot of work for everybody. And then you're gonna have, um, you know, another.
12 to 18 months of construction, you know, depending on the complexity of the job and, and before you really start to see anything, come back on those projects. And there's a lot of stuff that goes in into that from, from the administrative being the capital side, just, just getting, um, you know, money to and fro and especially when it's set up on a draw system. So there's, there's a lot of work that goes into that before you really get to see any significant return.
So I think there's a place for that. Um. You know, it just depends on where you are as a business or where you are as an investor. But like with us, with everything we got going on with, with the private credit fund and, um, you know, the, the apartment portfolio that we currently manage and, uh, and also looking at, at these projects, we, we've gotta decide, you know, what do we have the, the capacity to do?
And, you know, what are some things that, that don't turn into like two or three year intensive jobs And we can actually just do, just set it up. And then, and then pass it off. Uh, so, so that, that's a big thing for us right now, just where we are as a business. Uh, the RV park allows us to do that. Like you kind of just, you, you set it up.
There's still, you know, gonna have to manage a little bit of a draw system, but it's, uh, it's uh, you know, not nearly as, as much as if you were gonna build a building, you know, you're putting in the roads and the utilities and things like that, or, um, you know, doesn't require a whole lot of financial management on that side. Um. We like, we like that part of it. I think the other thing is, you know, we need to, we need to make sure we represent investors in all these deals.
So we need to make sure that the the current cash flow is, um, attractive and appealing, I mean, relative to the risk. So I, I don't know, something like this. Well, that, yeah, go ahead. That's it. The, the biggest financial piece is occupancy. I mean, that the, uh, I don't think that you want this. To only work at 90% occupied or higher. You know, it's not like a traditional, you want more market?
Yeah. Housing, you've gotta have a lot more, because you're gonna have a lot of seasonality in traffic and you can have change in behavior that impacts people or whatever. So I, I want something like this to work. Um, if you're a hundred percent occupied, that's great, and like, enjoy the excess cash that that's gonna spin off. But I also wanted to work at 50%
Hmm.
You know, I wanted to be able to, to perform, to account for those fluctuations, uh, which is a, like a, you know, a really different, um, vacancy factor than you'd have on any other residential type of, of investment.
So what I'm hearing is you guys are on the hunt for land, essentially land that you can develop into an RV park. Is that, is that one of the needs that. Maybe some of these guys that you're working with are, are working on, or is that the thing that you would want to communicate to investors right now, you know, or in your newsletter? Um, please sign up for the newsletter, alix realestate.com.
Uh, but if, uh, what would you, what would you want to communicate to folks out there is like, Hey, if you've got a great piece of property, or if you've got, you know, connections in the RV world and wanting to build a park or five parks, 10 parks, is that anything like that? Like, what is the need here?
Yeah. Yeah. Land is, we're always looking for great land opportunities, and it doesn't have to be just for RV parks, right? You just figure out the highest and best use for that land. I. Um, and, and a lot of it too depends on where it is, if it's within city limits and, you know, you're gonna have to, to get something approved, uh, by the city. So you have to figure, you know, talk with them and figure out what they're, um, interested in doing with it or what, what they'll allow.
Uh, but it could be RV parks, it could be storage, it could be multifamily, it could be a commercial. I mean, it could be anything, right? We've, we've got, um, so many talented people within our network, uh, that, you know, we always refer to 'em as operators. Uh, because we know our skill set is more on the administrative side and we need to work with great operators. So we, we've got great operators that could take down just about any project.
Um, so any, yeah, it, it land is always valuable, right? Land is the most valuable thing in real estate. I mean, you figure out how to ca to cash flow property on something that's really well located. That's, that's it, right? That's, um, that's the best you can do. So, or find something that you just happen. The timing's right and it appreciates like crazy. 'cause you got out in front of, you know, where things were moving. Um, but yeah, anybody that's got land or is, is, is just curious.
Uh, maybe they're not ready to do something, but just wants to know what, what are the, what are the possibilities. Um, Yeah. we're always, always open, um, to exploring that.
Cool. Yeah. If anybody listening is wanting to hear what an investment opportunity in RV parks might look like, please reach out to the team. Yeah, I think it'd be really cool.
Yeah, and we're, and like I said, we're, we're just jumping into this, I mean, but we will get to the bottom of it. We'll have
Yeah, yeah, yeah, of course.
up, right. We'll have our proforma and we'll have, we'll have all the, the we're, and we're putting that together now. But we thought it was an interesting topic, not only for RVs, um, but just, you know, looking at investments, real estate investments in general. Um, and, and being open-minded, you know, being, being willing to maybe go outside, uh, of, of what you're used to.
That works for us because we know that our core, where our core comp competency is, um, and that can translate into different project types. Um, and that's what we enjoy. We, we, we like learning about new things and, and being able to, to, uh, the, and the freedom and the flexibility, speaking up RV parks to diversify and, and potentially, uh, invest, uh, alongside great operators and. And new and exciting things.
that's cool. That's cool. What I love about you guys is, uh, that creativity, you know, it's just like, Hey, God gave us these skills. He's giving us these opportunities. Let's figure out what we can do with them, you know? And turn something into like a really positive creative, interesting. Even if it's unique, even if it's like, uh, maybe not the traditional kind of way, even though you got plenty of traditional investments as well.
But just being really open and I think that's so cool and unique about you guys.
Well, I, I will say it, just on a personal note to close this out here. When in the last several years, you know, we were very single-minded in multifamily for, what, five years? Mm-hmm. And, uh, and, and multifamily is a great asset class. Maybe, maybe the best, uh, you know, in, in real estate, arguably. Uh, but what we learned is when rates shot up and, uh, transactions turned off. Um, we were not well diversified, right?
So, so that, that dumb and it, it, it, it was a positive in that we jumped in and, and we, we learned a lot about property management, um, became much better asset managers, um, which, you know, allows us to, to get out and, and be more comfortable in doing different types of projects because, uh, we feel like we had to sharpen our skills just on, on management in general. Um, but the, the most important lesson that we learned.
And, uh, that, you know, God willing, we'll never forget, is you need to be very well diversified, uh, until you get to a certain size, right? If you get to a certain size in multiple markets, you know, there's an argument that you can really be, be focused and, and it depends on your skillset too. But for our skillset and what we enjoyed doing, um, we found that it, it was very important to one, be surrounded by, um, high character, high talented, high talent operators.
Uh, and then, and then two, be flexible. Look at all different types of asset classes. Uh, be open-minded, be really good on the underwriting, know, um, how to work a capital stack, uh, and then continue to network on the investor side so we know if we do our job and we focus on those things, then we know God will bring the, the people and the plans and uh, and we can merge together and we'll, we'll be open about it. RV parks. Yeah. We'll, we'll take a look.
Um, apartments, of course we, we, we know those. Um, but yeah, in land, we love land. I mean, land is, is such a valuable asset. They're not making, you know, god's not making more of it. So, uh, you've heard that before. Um, but, so yeah, we, we, we, we, we are always open, we land and the possibilities that, you know, come with it.
Cool. I love that. Well keep us posted on how this, uh, this. I guess, I don't know, the, uh, due diligence process, if you call it just the exploration, the curiosity, how it's going, and, uh, yeah, I'm, I'm excited to see what people might think of it.
Well, we, we'll throw some numbers out there too. Um, next time we, we go as, as we get further, uh, down, further kind of down the road here, we'll, we'll put some so people can really have some numbers to think about and compare with some of the other, um mm-hmm.
Yeah, so by the time this episode releases, it might be a week or two. And so by that time, if you've got some more numbers, let's throw it in the newsletter. Um,
Yeah, people need to hear the numbers 'cause that that's really where the rubber meets the
yeah. Cool,
we'll, we'll, we'll have, we'll have our proforma done and, and we can really kind of get into the details in the next time we meet.
Awesome. Awesome. Okay, well I'm excited to hear that and, uh, I guess we'll see you next time on the a x Show. Thanks, guys. We'll see you then.
All right. See ya.