171. IT'S OFFICIAL! We're Buying a Camp!!! (Just Wait Till You Hear the Numbers)

0:00Natalie Palmer:Hello, welcome, and thanks for checking in today to No Vacancy, the podcast. I'm your host, Natalie Palmer. I'm an Airbnb ambassador and 17-time superhost, and I've hosted over 1 ,000 reservations. I'm a stay-at-home mom of two and manage my eight listings remotely. My mission is to help new and experienced vacation rental hosts turn their listings into fully booked, profitable properties that can be managed from anywhere so you too can have no vacancies. If that sounds good to you, let's get right into the show.

0:52Hello, everybody, and welcome back to another episode of No Vacancy, the podcast. I'm your host, Natalie Palmer. Off the top, I just have to apologize. I know I'm super congested. Everyone was sick this week and I was the last to catch it and here we are. It wasn't supposed to be an issue because if you remember last week's episode, I finished off by telling you guys that I had a bunch of guests lined up for the coming weeks and that there were no plans to do another solo episode until I had an update for you on the summer camp sleepaway camp that we were considering buying. If you don't know what I'm talking about, go listen to last week's episode.

1:30Actually, I guess you don't need to. I'll fill you in right now. But last week, I teased you guys that we were considering buying a sleepaway camp. Literally picture like the camp from the parent Trap. So this place has like archery, fencing, a dining hall, little cabins everywhere, literally has an isolation cabin. We'll get into that. So if you know the camp from Parent Trap, picture that. So last week I told you guys that we were considering buying one, but I was so on the fence because I feel like I have just achieved the perfect work-life balance lately. And I wasn't sure I was ready for another active investment role.

2:14And like I said, I told you guys that next time you hear from me for a solo episode would be when I have an update for the camp, whether we moved forward or not. Because either way, I learned so much just from the process of analyzing this deal. So all that to say, I wasn't supposed to be recording this week. I have pre-recorded interviews that I was supposed to share but everything changed in the last seven days and we are moving forward on this camp so here you go I have to tell you guys everything so again I apologize I sound congested I thought I would be in the clear and that I didn't have to record this week but I can't wait I can't hold up another week so here we go this is what we're doing this week next week you'll get back to guest interviews okay let me tell you everything I have so much to fill you in on.

3:03So I'm going to start, I think I'm going to go through this just in chronological order of how this deal even happened and like fell into our lap. So to start, we were not actively looking for something like this, Eric and I. If anything, like I told you, I've achieved perfect work-life balance lately. And like, this is the last thing that I wanted. If you had asked me a year ago, I probably would have been all about this. But at this current phase of my life, I was not looking for a deal like this. How this happened. So many of you know, my husband is a teacher. He works at a high school. And there is another teacher there who always organizes different school trips and extracurriculars.

3:43He, I don't know if any of these people want to be named. So I'm going to make up like aliases for everybody. So let's call this teacher John. So John, he took a group of students this summer to a camp at this location. I still don't want to say exactly where it is yet. Like we're still waiting for some permits and stuff to change. So I don't want to disclose too much about location, but I will just tell you guys it's in Southern California in the mountains. It's not as high of elevation as Big bear where the other properties they manage are, which is a good thing. We'll be able to operate during the winter.

4:21We don't get as much snow, but it definitely still has like a mountain-y feel. It's a beautiful, beautiful property. So anyway, John, he took a group of students up there. And I think that this was actually the third year that he took students up for a camp there. So they've been a repeat customer for a few years at this point. And they block off like, I don't know,

4:40Natalie Palmer:five days for summer. And this year, John was talking to the owner of the camp and, you know, just said something like, hey, we've loved coming up here. Like, can I talk to you about renewing dates for next year? We want to do this again. And the owner said, well, you know, we can definitely talk about that, but I just want to let you know, you may never see me again because I'm trying to sell the camp. And John, his ears perked up and he was like, really? Okay. Like, tell me more like how much are you guys asking for uh what is what does this deal look like and he got interested and so the seller starts telling him all the details and this seller you guys will hear today more about him I feel like he's exactly who you would picture is selling a camp like this like I just he's like exactly what you would picture so like like the books non-existent.

5:40We'll get into all this, but like we've been asking this guy to like, show us the books that don't exist. Show us like this doesn't exist. Show us your marketing strategy doesn't exist. Okay. So this is setting the tone right here. So John said, you know, how many offers have you guys had so far? Like, where's it listed? Can you send me the listing for it? Like I might be interested. I'd love to take a look. And this guy just goes like, oh yeah, it's not listed anywhere. So here he is telling John, I'm actively trying to sell this place and you may never see me again. I may not be here next year when your group comes back.

6:15And then he literally just pries and says, where did you list it? Like nowhere. So I don't know how he was planning to sell it. So that just, again, paints a picture for you for the type of seller that we're dealing with. Such a nice guy, truly such a nice guy, but like not the savviest of businessmen, which is helping us in some ways and hurting us and others. Again, we'll get there. So John basically was like, okay, well, you know, send me just like, what's your asking price and maybe some like rough numbers that you have and I might actually be interested. So John gets a look at everything and John has never invested in real estate before.

6:52So I guess that he kind of looked at it and was like, well, I don't really know how to analyze this deal. This is probably too much for me to take on. So he was ready to pass on it, but he decided there is somebody who works in the administration at the school. We'll call him James. I'm going to literally have to take notes on all the fake names I'm giving these people. I just don't, I haven't asked any of them if they're like comfortable being named. So I just want to respect everyone's privacy right now. So hold on, let me literally get a sticky note, you guys. And I need to come up with code names for people.

7:24Okay, hold on. We've got John so far and now we've got James. Okay. So James has invested in real estate before. I want to say that him and his family have invested in multiple long-term rentals and still operate them to this day, manage them. So John passes on the deal to James. James looks over it and he was super interested. The initial numbers, I will tell you guys, seller was asking$550 ,000. Okay,$550 ,000. And he was telling us that the property was grossing$300 ,000 in annual revenue. So just right there, James was like, okay, hold on. Like we're onto something here. But because James's only real estate experience was with long-term rentals, he approaches Eric at school and said, hey, can I talk to you about something?

8:18I know that your wife does real estate specifically in the short-term rental space and like unique stays. Would she want to take a look at this camp that John brought to my attention? You know, the camp that he takes a bunch of seniors on every year. Well, apparently it's for sale and we're looking into it. so Eric comes home passes on the deal to me I look over and I immediately was like we're we're in on this like the numbers were so good and for context I personally probably know just from doing the podcast and you know my network I probably know eight to twelve people who have purchased maybe not exactly a sleepaway camp but RV parks campgrounds you guys have heard them like you've heard all the interviews of people have done like that.

9:06Wedding venues, we can do weddings here, so I'll get into that. But I personally know probably eight to 12 people who are operating something like this, who bought and operated something like this. And I want to say pretty much all of them told me that when they purchased the property, it was doing between 200 to 300k in gross revenue. So I knew that if he was hitting that metric, it was a healthy business, at least in that sense. But all those people I know who have done something like this, minimum, minimum their purchase price was, I would say the lowest end I've seen is a million, but like up to 2.2.

9:46More likely it's like in the 1.2 to 1.6 range. Like that's the most common that I've seen for a business that's making, for a business like this, that's producing 300k in gross revenue. So the fact that we were talking about 300k in gross revenue of a$550 ,000 purchase price, I was instantly all over this. So Eric goes back and he tells James like, hey, Natalie is in like she wants to move forward on this. You know, we need to get I gave him a whole list. I was like, I need to see operating costs. I need to see profit and loss statements. I want to see what percent of his bookings are repeat. I want to see his reviews.

10:24I already started like looking on Yelp and Google reviews and checking the social media, but Eric had taken a whole list of things to James that we needed to see. James goes back to John and said, hey, can you put me in contact with the seller because Palmers are in. John at that point was like, wait a second, I know that this is like Natalie's expertise. If she's interested, maybe me and my wife will reconsider. so John comes back in on the deal James is now the connector and me and Eric are in at that point we start to analyze how much capital we need and James starts getting a whole group of investors together and I was telling him like hey I'm doing capital raising now I can help you raise funds for this but he knew a lot of people he's been at the school for a long time he knows a lot of people like in the district and at the school that he thought would be good investors and just people he trusted.

11:17So he started going to work raising money for this. I haven't raised a single dollar for this deal. Everything James brought in.

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11:57All right, next steps we get. I forget how many people there were. Maybe 12 groups of investors, like six couples, something like that. So 12 of us go up to see the place in person. and immediately there are some red flags like there was a flood a few years ago that had washed through there and if you guys remember i mentioned that this place is like the parent trap and literally has an isolation cabin that is not by design there used to be up like up the hill from where the dining hall is there used to be four cabins there with bunks in them three of them got completely washed away in a flood a few years ago and the only one still standing is the furthest one like at the top of the hill so it's now a de facto isolation cabin again not intentional but the other three just disappeared so we now have an isolation cabin that we can send the little little fuck-ups to if they're misbehaving no i'm just kidding but not really okay so we go we tour the place and there from the flood there was a lot of debris there's a ravine or like a creek right there that has so much so many dead trees in it it's obviously the place is still functional like he is still operating and getting groups to come but the place needs a cleanup for sure there used to be a ropes course with a zip line all of that got washed away in the flood there's just kind of some junk like all over the property and it's north of that dining hall whereas which is where most of those cabins got washed away the three i just mentioned and so now when he's hosting groups he basically just reduced the quantity of people that he can host at one time and he's only filling the cabins that are below elevation of where that dining hall is so it hasn't really affected business.

13:57Like people are still able to go to the camp and they're not seeing all the debris and like tree removal and just junk from this rope course. People aren't really seeing that because it's kind of in a different area of the camp, but we just know like the property needs a good clean out. So that stood out to us, but overall it is such a beautiful property. The road to get in is a little bit tricky, but we've seen, like John said, that when they took students there, they just used a school bus and the school bus got through there fine. And so we know that it is accessible. It's not like the most comfortable.

14:39This road is so bumpy to get in and it has the likelihood to flood. So like there are some issues that we do need a fix. But basically the whole group walked the property and all of us, even though there were issues, we saw so much potential in this property. So got super excited. One guy in the group has construction experience. So he was asking all about that from the owner. I was asking him a lot about the bookings, what percent are repeat, what's his pricing strategy, is he doing dynamic pricing. I was asking him for a breakdown of like what percent of bookings are weddings, what percent are Girl Scout groups, church groups, school groups.

15:18Where is he marketing? I wanted to know all of that stuff. And then one guy that we brought in, he handles food service at the district level. So this guy's job is literally to make sure that every school in the district has enough food. So, and I think he also has owns and invested in a few restaurants. So James brought him into the deal thinking that he would be able to help because we have to feed all the kids at this camp. So food is now included and making sure the kitchen is inspected and up to code. That is completely above my pay grade. Like, I don't know the first thing about food service.

15:55This guy came in and he's been super valuable and he was asking a lot of questions about like, who's your food provider? How much are you spending per camp? So all of us kind of brought in a different expertise and started to like get a good picture of the camp. Now, one thing we learned along the way is we would not be buying the property. So originally I went into this thinking that this was a real estate deal and that we would be buying the land with all the cabins and everything and just running a business on top of it. And I was wrong. We are not allowed to purchase the land here because it is in the national forest.

16:31So how it works is that you lease the land from the forestry service. So all the camps that are in this area, there's multiple A lot of them are like Methodist camps or Lutheran camps. Like there's different Christian camps there. And those ones will like only serve their church or their denomination. But this one is considered a education camp. So we still could appeal to church groups, homeschool groups, Boy Scouts, Girl Scouts, anything like that. But this one is considered, it's classified like an educational camp. and so that's why schools were doing a lot of bookings there. So one thing we learned is that how this works with any of the camps there whether they're the private Christian ones or the education ones or whatever they're basically leasing land through the forestry and how it works is that it's on a 20-year lease and at first I was super bummed about this because like my world is real estate.

17:29I've never bought a business before. I wanted us to like own the asset, but I actually think it works out for the better because if we were going to buy the land, we would have to pay property taxes every year assessed on that entire land value. It's over 10 acres we'd be buying, and I'm pretty sure we would pay something like$30 ,000 to$40 ,000 a year in property taxes. easy. Instead, the forestry wants these leases to go out because they want people coming. They want people to enjoy the nature and the landscape. And they would rather have responsible people in the forest than just let the forest and the trees fall down and become a fire hazard and a flood hazard, which happened at this property.

18:19But the forestry is very incentivized to give these leases out. I was really nervous about that at first. I was like, are they going to be mad that we're these new owner investors coming in? But no, we have a great relationship with the forestry. John has taken the lead on calling them and exploring the lease program and all of that. And we feel really confident that forestry is on our side and is going to support us. With the lease, it basically costs$5 ,000 a year and they do them in 20-year increments. So we would be renewing a brand new lease when we take over this for 20 years. And then let's say we decide to sell in 10 years.

18:58The new buyer could either see through the existing of the remaining 10 years or they could just renew the lease and get a new 20. So there's different ways to do that. But the lease price is only$5 ,000 a year. So this actually works out in our favor. But that was kind of a new thing I had to navigate is just starting to view this more from the lens of we're buying a business than we're buying a real estate deal. Like I said earlier, purchase price$550 ,000. Originally, I had clocked in my head that that was to buy the 10 acres of land. And that is not true. We're basically just buying the business from the seller and then leasing the land for$5 ,000 a year.

19:40so the calculations do change a little bit because I told you guys that I have friends I've talked to who bought businesses that were grossing 300k a year and they bought it for like 1.2 to 1.6 in those cases I'm not sure completely in all of them but I believe they were buying the land that's not the case for us so that's one thing to note oh and I probably should tell you guys the timeline here so what John had taken that group of students in July it was like the third week of july and that's when he found out about the deal and so basically it was july august when we started negotiating all of this i'm now recording this we've accepted the offer in mid-november so i was at october november for like four and a half months that this has been in the works i was in poland in august and september so when we walked the property i think we went to go walk it like three days before I left for Poland.

20:38And then as an investor group, we had some Zoom calls while I was on my trip. So with the time change, I was joining Zoom calls at like 3 a.m. But there you go. That's the timeline. So after our initial walkthrough of the property, we basically calculated that we needed to raise$750 ,000. This guy was asking for$550 ,000 and we thought an extra 200k cushion would be helpful for some deferred maintenance and some holding costs. And that's what we got to work doing. So James was kind of plugging in all the investor players and figuring out how much each person wanted to put in to try and get to that 750 number.

21:18In the meantime, we got inspections and we kept bugging the seller like we need to see your books. We need to see exactly how much you spent in payroll. And we just could not get answers from this guy. Basically, he has hired his brother-in-law to be the on the ground, like groundskeeper. He lives there full time. And a lot of things like who was cooking the food for these groups, it's the seller. Like he was the one making trays and trays of lasagna. He's never hired like cooking. I don't want to say never, but for the most part, he tries to save money. And so he lives there and just cooks everything.

21:58So we could not even find numbers on like how much it would cost to staff this thing. Next, we're finding out that forestry requires that you have on-site staff if like the archery is going to be open or the fencing or some of these different activities. Also, there's a pool there. And if the group wants to use the pool, they have to have a lifeguard, of course. So we start learning about all these different payroll costs that are going to be adding up, but the seller has like nothing to give us. You guys, literally, I don't know how this guy was in business. Great guy, like such a nice guy. And from that perspective, I get it.

22:35Like he's good at relationships, but the least organization I've ever seen in my life. So couldn't get clear answers from him. We sent an inspector up there and the inspection report we get back scared. the shit out of me. We were thinking that we needed$200 ,000, right? Because he was asking$550 ,000. We were thinking we needed$750 ,000,$200 ,000 for deferred maintenance. When the inspection report came back, I was like, we easily need to raise a million. Like, we probably need half a million to do everything in here. And it was a little bit tricky because with inspection reports, I feel like the inspector part of their report is they have to cover their ass they have to tell you like we would recommend fixing this because if it turns out to be an issue say a roof leak if it turns out to be a major issue and they didn't tell you to fix it now the inspector is liable.

23:38And so part of me reading the report, basically the report came back and all these things that we had clocked as like, okay, that could be nicer, could be cosmetically upgraded. We could see that that might need a refresh in a couple of years. Some things were urgent, but like a lot of things we were like, okay, this could definitely wait one, two, three, even four or five years. A lot of things like that. This inspection report came back and basically said everything is extremely urgent. This camp is falling apart. I don't even know how it's understanding. Like it was bad. The report we got scared, scared the shit out of me.

24:13And I literally told Eric, like, I don't know how I feel about this at all anymore. Like even though the purchase price was good, like based on this report, we can't even operate for a year. Like there was so much work that this report said we needed to do. So much money we'd spend. We wouldn't have costs. We wouldn't have any revenue coming in. It totally scared me. And this was on top of learning that we wouldn't even own the land, which again, now I've come around to. I think that that's a good thing. But at the time, that was like a blow because I wanted to own the asset. So I started wanting to pull out and I was getting cold feet about this deal.

24:47After the inspection report, we did have a couple investors pull out. And that, of course, added to my fear. And I was telling Eric, like, look, it's not just me that's scared off by this. like other people are pulling out too so I don't know what should we do here but we regrouped and basically John and James were like hey what if we go to the seller and we counter and is there a group is there a price that the rest of the group feels good about that if we counter we're good to move forward and we landed on 250 ,000 and in my mind I was like there's no way this guy is going to go for that. I left out for you guys that we actually, he's been trying to sell this property for apparently over a year.

25:31He originally listed it at like 1.2 million, had a buyer. This buyer was getting inspections done. He asked to see the books, couldn't get answers, and he ended up pulling out. So this guy ended up lowering the asking price to like 800. A new buyer came along, got inspections done, tried to get the books, tried to get numbers, couldn't do it, and pulled out. That's when he lowered it to$550 ,000. So I believe we were the third potential buyer to come along. And he at this point has lowered the price almost$700 ,000. And so in my mind, I was like, I know he's eager to retire. I think he's almost 80.

26:08His wife has like a ranch in Montana and

26:11Natalie Palmer:she's like begging him to retire and come live on their ranch together. She's like, why are you living out here with your brother-in-law? It's like, come here, come home, sell the place, come home he is eager to leave it but i just was like to offer 250 on an asking price of 550 literally less than half and to offer that when the guy has already come down from the 1.2 he wanted like he's not going to go for it but as a group we basically said okay if he accepts 250 and then we raise the 750 as a group we feel we have the half a million to pull this off and to put into it so john and james drive up there they were like this was two weeks ago i want to say they drive up there and they were like hey you know we've strung this guy along since like july august now like it's worth having a conversation in person i don't want to just call him so they go up they take the two-hour trip and present it to him and basically the way it was presented was like we want to do this we love the property but we can't make the numbers work.

27:18Like there's just too much maintenance that needs to be done here. And also all of this, we are just going off of your word that it's bringing in 300k a year. We haven't seen any proof that it's doing it. He also was reporting about a 50 % margin. He said that he was basically taking home about 150 ,000 at the end and had 150k in operating expenses. But like I mentioned, you guys, he basically had no payroll. Like he was doing all the food himself. We were like, once we clean this up and start operating it to code and are hiring the appropriate amount of staffing and none of us want to go cook food we're gonna have to hire people like there's the whole budget so basically they went and talked to him and said here's our offer we still would love to do it but like you know i hope we're not offending you with how low this offer is but like these are our concerns unsurprisingly he said no and he turned down the 250 joanna james updated us and basically said, look, he actually took it really well and seemed very receptive to the concerns we had.

28:21I think because we were the third potential buyer to come through, he sees that people are noticing problems with this camp. We're now the third potential buyer that might pull out. It's not like we were trying to like haggle him, but it just, I think, made it clear to him like, this camp isn't as like picturesque and perfect as you feel it is and you're so attached to it. like there are major issues here so john and james basically said passed on the info that he said no but what they said is we think there's a chance that he will maybe stick around for six more months and by the time he goes through a slower winter season he's going to realize that he just doesn't want to do this anymore and he's going to come back to us maybe in march or april with a counter offer.