A Guide To Making Offers

put together a contract at an agreeable price with agreeable terms. You each have to sign it, and then the contract plus earnest money goes to the title company. And then you have an actual live deal. So the very start of that process is in fact the offer. And the key to the process, the whole reason you're going through that process is so you can control that deal.

There's still a lot more work to do after you make the offer, even once you put it under contract, you're going to be doing due diligence on it. and financing. You're gonna be looking at all kinds of things, looking at the numbers, the property, doing third party reports like phase ones, all kinds of things to do and consider. But again, without that initial offer, nothing is set in motion.

Also, remember that you have several outs in any RV park contract if you've written it properly. You only want to sign a contract that gives you the right to cancel at the end of a due diligence period. And again, if it's not going to be seller financed, there needs to be a financing contingency again, giving you the ability to get out. Now, why is that important? Well, because many people get so wrapped up, so terrified of what would happen if the seller accepts the contract.

Without acknowledging that accepting the contract is only the beginning of the process, and you still have one or two safety valves, ways to exit the deal if in fact you don't like it. So if you tie something up. Do the diligence and find that you really don't want to buy it after all, because the numbers really don't pan out or you don't like the market. You still have the freedom to do so. The offer doesn't bind you. The offer is merely the start of the process.

You can worry later about whether you want to buy it or not. You can worry later about canceling. But the key is you've got to get that offer to get it started. The bottom line is there's really no risk in tying things up as long as your contract gives you the ability to cancel during due diligence. and, if it's not seller finance, the ability to cancel during financing. As long as you have those things covered, then tying it up should not be a source necessarily of undue caution.

So that being the case, how much do you offer? If you have to make an offer to start the process, how do you make an offer? Well, the first thing you do is you've got to run some basic numbers. You've got to figure out what the revenue is of the RV park and the expenses and the net income. And based on that, by applying a cap rate, you can then derive what you feel is the fair and appropriate offer. However, remember that you're not binding yourself necessarily to that number.

So you're throwing out a number based on everything you have at hand, which is typically given to you by the seller, but you don't know for a fact if that's how things are going to pan out once you get into due diligence and really start reviewing what they have. So it's not in the case that whatever your initial offer is, that's it. You're stuck. But at the same time, you don't want to be tying things up that are clearly stupid.

If you look at the RV park, if the RV park has a net income for the past year of fifty thousand dollars, then it might be worth half a million dollars, might be worth a little more, a little less. It's sure not worth two million dollars. Right? So don't be tied up things at ridiculous cap rates, but things are within the realm of possibility. Then you can go ahead and make the offer and try and tie them up. Now let's go over how that process works.

Probably everyone is familiar with the basics of negotiation. If you're not, just turn on your TV at any time to the History Channel and watch an episode of Pond Stars or American Pickers, because that's all you see is negotiation after negotiation. People bring in products, they want to sell at the pawn shop. There's a back and forth as to the value. American Pickers is the reverse.

The antique dealers are out on the road trying to buy antiques for their store, and they see things and they make offers and they dicker back and forth with the owner until they drive the appropriate price to potentially buy it. So what do you learn if you watch the shows? Well you learn the first thing you do is you always want the seller to throw out the price if possible.

You might get lucky. The seller might not have a very good grasp of math. They might not want a whole lot for the property. They might want a whole lot less than you thought they would ask. Next, you want to start low if you have to throw out the price, and even if they throw out the price, you've got to counter at a very low price, because we all know that in negotiation the seller's gonna want to go up from your price.

That's how they feel that they had a value add. That's how they feel like they created value was by negotiating the price up. Also, throughout the process, you have to act really pained. You have to feign that it's just Just too tough to come up to that price. Gosh, you're really stretching the envelope, even if it's not true. If you think the RV park is worth a million bucks, the guy's asking seven hundred grand. You still, as you negotiate around in that

six hundred thousand dollar to seven hundred thousand dollar range. You want to act like you are paying them a fortune. Don't move quickly. Don't don't if they you threw out six hundred and they say, uh no, I want eight hundred, don't go to seven fifty. Go up a little and then tell them why. Say, gosh, I don't know, it's really concerning me because I have to cover the mortgage and the building is old and whatever the case may be.

But start low and act pained. And another alternative is you can simply cut through all the BS entirely. A standard pitch, if you just want to go straight to the doings, is to say, what would I have to do to get you to sell me this RV park? Just jump right over all of the negotiation. That's that's worked very successfully for us over the years and it works for many people.

One thing you really have to guard against in the RV park industry when you're looking at buying something is what I call paralysis by analysis. So what does that mean? Well, sometimes people just think about things too much and they become their own worst enemy because all the time they spend pondering, by the time they're done, somebody else has already bought the deal.

I once had a banker. He always wanted to buy a classic Corvette. He always had stories of the Corvette that he almost bought, but he kept thinking about it. He wasn't really sure. Was it really the color he wanted? And then at the end of every story was somebody else bought the car. I don't think the guy ever bought a Corvette. His entire life he wanted one, but he just couldn't bring himself to just get off ground zero and start making some movement.

and making offers to buy a car. He was just stuck in the mud of his own brain, pondering and pondering and thinking about it and just thinking about it until the opportunity had long passed. The key thing to remember when you're making offers is there's plenty of time for thinking. Don't do it on the front end. Remember you're racing the clock on the front end. Every minute you don't tie it up, somebody else might.

But once it's under your control, then you can uh do all of the analysis you'd ever like. Once you have it under contract, in fact, you can't really have too much analysis. It's the reverse of paralysis by analysis. Now that analysis is what's going to keep you out of trouble to make sure you've done and thought through every correct step during due diligence and financing. But you've got to get the thing under contract first. The key to it all is make lots of offers.

That's probably the most important thing that any RV park investor can do to get really good deals. You'd want to be out there making offers constantly because it's those offers that make things possible. Without those offers There's no energy. There's nothing. You'll never succeed. You'll never buy a property unless you go out there and tell people, hey, I'm interested in your RV park. What do you think about this price? Or hey, I want to buy your RV park. What would you want for it?

Get those discussions started. Find out what the prices are. What's the worst that can happen? They ask too much, you can't strike a deal. But good things happen when you start making offers. This is Frank Rolf, the RV Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.