March 18, 2022

JF2754: RV Resorts: The Growing Asset Class You’re Missing Out On ft. Greg Scully


Are the returns on RV resorts worth the risk? For Greg Scully, an apartment and RV resort syndicator, the numbers don’t lie: with risk comes reward. Greg divulges why the market for RV resorts has high-growth potential, and also shares how he found and value-added his RV resorts.

Greg Scully | Real Estate Background

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Slocomb Reed: Best Ever listeners, welcome to The Best Real Estate Investing Advice Ever Show. I’m Slocomb Reed and I’m here with Greg Scully. Greg is joining us from Johnson City, Tennessee. His focus is apartment syndication; he’s currently the GP on 170 units, and 226 pads in RV resorts. Greg, can you start us off with a little more about your background and what you’re currently focused on?

Greg Scully: Yeah, sure. We’re here in Johnson, Tennessee, we were 40 years in Alaska. Transitioned to real estate full-time about two and a half, three years ago. We got started five or six years ago. Ended up in Tennessee to help with a project that needed some extra hands. Most of our investments continue to be in Tennessee. At some point [unintelligible [00:04:13].27] kids are growing up, getting older, we decided to just pull up and relocate down here. Landed in Johnson City, and just continued to grow. Central and Eastern Tennessee, we don’t go too far West.

Slocomb Reed: Nice. That’s where your portfolio is currently, it’s all in Tennessee?

Greg Scully:  Yes, we have one one-off syndication in Mulvane, Kansas; we co-GP’d with some friends and partners over there. We articipated in the asset management side, but they’re handling boots on the ground.

Slocomb Reed: Nice. Tell me about your RV resorts. What got you into that?

Greg Scully: We just heard about it, thought about it in passing a little bit, and then through COVID… We are very close to Sevier County, Tennessee, which is in between Johnson City and Knoxville. The most famous things going on down there are Dollywood, Gatlinburg, and Pigeon Forge. So it’s certainly in the top five, if not the number one most visited national park in the US. We got an opportunity sent to us from a conversation. We have a partner in common that had been in that space a little bit, realized we were both looking at it together, and we decided to collaborate instead of compete. A lot of our interest just came from how good a market Sevier County is, in terms of if you’re going to crack open the window to a new asset class, you might as well do it in one of the most stable and successful markets in the nation.

Slocomb Reed:  Yeah, and take advantage of your backyard.

Greg Scully:  Yeah, exactly. Exactly.

Slocomb Reed:  Hollywood makes a lot of sense as a place to have an RV park. Given your experience with apartments syndications, how do the numbers on an RV Resort compare?

Greg Scully:  Income is income, expenses are expenses; they are chopped up a little bit differently, specific to the RV resorts. You have two models that are happening; you’ve got a daily model where your guests are saying two, three, four days at a time and then they’re leaving. Then you also have a monthly model, which you may see in markets more like Florida, where people are coming down there — they may even be leaving their RV there year-round and they’re basically just paying for the pad, which is very similar to the mobile home park we’re doing. So from the income proforma point of view, you’ve got to figure out your highest and best use within each of those potential models.

Slocomb Reed: I imagine around Dollywood that’s an area economically that’s fairly entertainment driven. Are you on a more day rate model?

Greg Scully: Yeah, absolutely. And that was one of the opportunities that we saw with one of the purchasers, is it was being completely run as a monthly model. And not only that, they were well below the market rate for what that monthly model should be. So we had two possible avenues of upside – just keeping the monthly model, running it more efficiently, and getting close to the market… It has a little bit of a development side to it, so at a minimum, we’re going to take advantage of the development side more on the daily model. But yeah, absolutely, this market is better off doing day rates, because we could be open year-round almost.

Slocomb Reed: Totally. Greg, given that you syndicate through general partnerships, what is your specialization within your partnerships?

Greg Scully: Underwriting and asset management. Those are probably the two things that I spend the most time on. Underwriting — back when we were living in Alaska and investing out of state, there was very little I was going to do, because I was nine hours away by plane. So I cut my teeth on underwriting due diligence side of it. And then moving down here, most of the deals we’re extremely active in, to the point I’m being onsite occasionally. So those two buckets are our focus.

Slocomb Reed: Do you guys manage your own properties?

Greg Scully: We did just start that. Our last two acquisitions, we took management in-house, so we’re currently managing 65 units over two properties here locally. We’re about four months into that.

Slocomb Reed: And what’s your involvement? Are you personally involved in the property management?

Greg Scully: Yup. My wife and our main partner, Darren Light, started a new management company, specifically to vertically-integrate. So we have one syndication that we’re managing, and the other one is a joint venture.

Slocomb Reed: Great. So given your background in underwriting and due diligence with these deals, I’d like to spend a little more time on the RV Resort, Greg. So you had the opportunity to go from a monthly rental model, what feels like a mobile home park, to a day rate model that may feel more like hospitality, I would imagine, except that you’re not having to change the sheets for your guests, given that they’re bringing their own sheets with them; it’s an RV. Financially speaking, explain to us how big the difference is between those two models. Is your entire park at day rate or is it split between the two? How did you make that decision?

Greg Scully: When we bought it, it was entirely monthly. If you have something that is entirely monthly, basically your labor can be significantly less, because there’s just less going on. There are fewer people coming and going, they’re going to have more familiarization with the property to begin with, so there’s less — let’s say hand-holding; that’s kind of what we call it. There’s less handles of the people coming in.

The daily rate – yeah, you’re running a little hospitality business. It’s open seven days a week, sort of 24/7, so the labor component to it is much higher. You’re going to have a lot more payroll, because there’s never a closed sign on the office, if you have an office. That’s one of the most major things, is your labor costs are significantly higher.

Slocomb Reed: I would imagine your revenue is significantly higher too though, right?

Greg Scully:  Daily versus monthly? Oh, yeah, absolutely. Gross potential rent is – yeah, significantly higher.

Slocomb Reed: How are you guys operating the park now? Is it all daily? Is it all monthly still? Is it a mix of the two?

Greg Scully: It’s a fairly new acquisition, so yeah, it’s still mostly monthly. As we’ve gone in and got closer to market, there has been some vacancy created. It’s also very specific to the layout of your park, so whether or not you have concrete pads that are fully drive-thru, and can accommodate a 35 to 40-foot piece of machinery coming in, or if it’s more back-end type pads. So it can be very specific as to even what individual pads are capable of doing on your park. It can be fairly dynamic figuring out exactly what the highest and best use is.

Slocomb Reed: Did you guys raise capital for this purchase?

Greg Scully: Yes.

Slocomb Reed: Okay. Did you underwrite to a five-year hold?

Greg Scully: Yes, we did. Two of them are in a fund, and that was basically done as a five-year hold. The other one — I believe we might have done a seven-year hold. It’s not right in front of me, but we did not go incredibly out into the future.

Slocomb Reed: Tell me, what did the numbers look like when you purchased it? How much did you buy it for? What kind of NOI are we talking about with this property with below market rents and exclusively monthly rentals?

Greg Scully: I can’t pull NOI right out of my head without having it on the spreadsheet. I can tell you that monthly rates were hovering around 200 bucks, which would have been inexpensive for a mobile home park, let alone a destination in one of the most visited tourist markets in the US, that has a pool and access everything that the Smoky Mountains have to offer. So there’s easily 300, 350, maybe even 400 bucks to market just on the lot rent alone. Just that alone, the deal was fine. So getting everything up to market… Cash on cash return are in the high teens, so that’s our anticipation when it’s fully stabilized. Yeah, a significantly different type of return profile compared to multifamily.

Break: [00:12:35][00:14:31]

Slocomb Reed: What is the return that you were projecting for your investors on a five to seven-year hold?

Greg Scully:  Oh, the IRRs were high 20s; like I said, average cash-on-cash returns mid-teens, equity multiple 2+.

Slocomb Reed: Gotcha. All of those numbers are significantly higher than people are going to expect to see with apartment investing. You’re talking about high teens cash-on-cash return to an audience that is most familiar with an eight pref. You’re talking about high 20s IRR for an audience that’s mostly familiar with a 15% to 18% IRR. The first alarm bell in my head, if I can say so, Greg, is that if you’re projecting returns this good, this must be a risky asset. Is that the case?

Greg Scully: I would say there is higher risk relative to multifamily, whereas housing is an absolute need. Dragging a box behind you and hanging out somewhere for three days and going fishing – I wouldn’t put it in the same bucket as primary housing. It’s similar to where storage was in mobile home parks were maybe a decade ago. As the industry is set up, there’s very low supply, there’s essentially not necessarily a finite number of RV parks, but there’s not a lot of them to begin with. It’s very fragmented, a lot of mom-and-pop owners, a lot of generational owners, and there’s a lot of operational efficiencies to be gained through better marketing, dynamic pricing, running it like a business, instead of a lifestyle. That’s the similarities. It wasn’t too long ago, those types of returns were also talked about for mobile home parks and storage. That asset class got found out, and lo and behold, look where we are today.

Slocomb Reed: Yeah, maybe RV parks are the next mobile home parks, or the next self-storage.

Greg Scully: I know. I don’t want to talk about it too much.

Slocomb Reed: Sure, totally. Yeah, I totally get that. But also at the same time, when you’re talking about, at least within our listenership, that is predominantly… The majority of guests that we bring on based on the nature of our podcast are involved in apartment syndication. So they’re typically offering investors projected returns that are more standard to the market and lower than what you’re talking about. You guys could underperform your business plan considerably, and still provide a similar to return to someone who could have put their capital into an apartment deal instead of yours. That’s some pretty exciting prospect. Greg, what is the most important skill you’ve developed with regards to underwriting your investment deals?

Greg Scully: I wouldn’t say it’s a skill that I have even close to mastering… It’s just the critical thinking skill of looking at things holistically and dynamically. It’ll be part of my book recommendation when we get to that. Just making sure that you’re not having too much confirmation bias, or cherry picking, and inviting people to look at your underwriting and asking them to break it, and being happy when they do. So yeah, just not getting married to your proforma, not trying to be right on trying to make good decisions.

Slocomb Reed: What is the biggest challenge you’ve had to overcome specific to a particular deal?

Greg Scully:  To a particular deal… The deal that brought me down to Johnson City was very difficult. Heavy rehab, we went 100% vacant, we had contractor problems, we had bridge debt, went from bridge to bridge debt, which apparently has never been done before… So a lesson of perseverance and just muddling through things, and “Wow, this sucks. Maybe I won’t sleep that well again tonight. But tomorrow we’ll keep plugging away at it.” It’s just that sometimes the process is not what you would like it to be, but you’ve got to get through it.

Slocomb Reed: Did you start out as a general partner on that deal?

Greg Scully: Yeah.

Slocomb Reed: When was this?

Greg Scully: 2017 through March of last year. We had it two and a half years or something like that. We did sell it, we didn’t make money on it; not a ton, but most of the returns are in our head, in the experience pocket.

Slocomb Reed: Sure. Yeah, I know some of the more distressed properties that I’ve taken over it’s been very valuable that I, being the owner operator and also the boots on the ground, being physically present to be overseeing things… But also, for my own stuff, I’m the one who’s showing apartments in some cases, but also creating the standards for our tenant base.

It’s definitely helpful to have boots on the ground on the team when you get into a situation where an asset is considerably distressed. A situation like 100% vacancy while you renovate. Especially with as difficult as it has been to find good contract labor the last several years, for sure. Well, Greg, are you ready for our Best Ever lightning round?

Greg Scully:  Yeah, sure. Absolutely.

Slocomb Reed: Awesome. What is the Best Ever book you’ve recently read?

Greg Scully: You’re About to Make a Terrible Mistake is what it’s called. The byline is how bias is decision making and what you can do to fight them. That’s something that I’m into, is how to make decision making more of a process and less of a feeling.

Slocomb Reed: Gotcha. What is your Best Ever way to give back?

Greg Scully: I just enjoy talking to “newbies”, because I’m not that far. I’m five years into this, and I remember how valuable it was when somebody came down and would spend some time with you talking about the details. A lot of this is good theory that you can learn from books and podcasts like this and everything, but things get very real when you close on one specific property, on one specific tax parcel, with its own set of inherit characteristics, we’ll call it. Just chatting when I can with somebody that’s just getting started.

Slocomb Reed: What is your Best Ever advice?

Greg Scully: Probably network. Post mortem, looking back on where we’ve come, a lot of our deal flow, a lot of our partnerships, a lot of our friendships have come through not only face to face networking, but even just getting on LinkedIn, weekly Zoom calls… If you’re going to be doing business with somebody, it’s not all about the deal, it’s very much part of who you’re working with as well. So just get out there, and put yourself out there. That was a big challenge for me, really. I’m kind of an introvert. It took me a little while to get into chat and networking. So the quicker you get into that, probably the quicker you’ll progress.

Slocomb Reed: Awesome. Greg, where can our Best Ever listeners get in touch with you?

Greg Scully: Everything about us is at From there, you can find our newsletter. We host a podcast as well called The Real Wealth Solutions Podcast. It’s got a little bio, our projects… That’s the catch-all for figuring out where to find us.

Slocomb Reed: Well, Best Ever listeners, thank you for tuning in. If you’ve gotten value from this conversation with Greg Scully, please subscribe to our podcast, leave us a five-star review. If you know someone who would get value for listening to this episode, please share it with them. Thank you and have a Best Ever day.

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