EP 231: Building Wealth Through Outdoor Hospitality with Zander Kempf

[00:00:00] Hello, and thank you for joining us today on The Gentle Art of Crushing It Show, where we focus on learning and sharing with our listeners all there is to know about how to create success in our lives. This show stands on the shoulders of giants. Our mission is to empower and inspire our listeners to create the life of their dreams whilst having a blast in the process. Let's celebrate life together. Welcome to the show.

[00:00:28] All right. Welcome back to The Gentle Art of Crushing It podcast. My name is Randy Smith, and I'll be the host today. And I'm really excited to have Zander Kempf with us today. Zander and I are in another mastermind where we're perfecting our skills around working with investors. And he's the founder and CEO of Clear Summit Investments, which focuses on RV and glamping resorts. He's also a military veteran. So Zander, thank you so much for being on the show.

[00:00:55] Thanks for having me.

[00:00:56] Love the name of the podcast. So good, good motivational.

[00:01:00] We will gently crush things here today, for sure. So, well, very good. Well, let's jump right in with our first question that we like to start the podcast with now. So how do you see today's market conditions impacting opportunities for the passive investor?

[00:01:16] Yes, I think right now is a much more interesting time than it was a couple years ago.

[00:01:22] As we rode that wave of COVID. It was kind of that buying frenzy. It happened both in the residential market, but also happened in the syndication markets of deals were abundant.

[00:01:34] Interest rates were really low. Everybody was diving in.

[00:01:37] And what happened was a lot of operators used short-term debt that is now ballooning.

[00:01:43] And because interest rates popped, cap rates also popped.

[00:01:47] So as they're trying to refinance out, a lot of them are coming up short.

[00:01:53] And the impact to the limited partners is there's several large syndicators that have stopped distributions.

[00:02:01] And a couple unfortunate situations where they've actually lost investor capital simply because the cap rates popped so much and the funds aren't there anymore.

[00:02:09] So for the limited partner side, I think it's really focusing on syndicator track record, making sure guys have experience and probably even more so looking at long-term debt.

[00:02:26] Something that you're not relying on market conditions.

[00:02:29] Something where you're not relying on an exit in two or three years because the markets can change in that timeframe.

[00:02:37] Investments that have longer terms are much safer because if you have a 10-year investment, say, the operator could exit it at year five or year seven.

[00:02:46] There's a lot of flexibility there.

[00:02:48] But if you have a balloon note that's only 36 months, you don't have much leeway if the market changes.

[00:02:54] There's no time to ride it out and let the general growth trend of the real estate industry do its thing.

[00:03:02] Awesome.

[00:03:03] Awesome.

[00:03:03] So bad debt choices during the huge rise up combined with probably increasing values of assets really got some passive investors in some situations.

[00:03:17] So, yeah, thank you.

[00:03:18] I think that is a great summary of where we're at in the market cycle.

[00:03:22] So it'll be interesting to kind of dig in and hear how you guys are handling some of those situations today.

[00:03:29] So maybe if we can, can we back up a little bit and maybe tell the audience a little bit more about yourself, your investing experience and background, and maybe why you chose the asset class that you're in?

[00:03:41] For sure.

[00:03:42] Yes, I grew up in New Hampshire, rural town with one stoplight.

[00:03:46] Okay.

[00:03:46] I first went to college and joined the military.

[00:03:50] I did RITC, so I came out as an officer.

[00:03:53] I was a paratrooper in the Army.

[00:03:55] I went to Iraq and then was able to move over to a special forces unit and support their operations.

[00:04:02] I had some fantastic leadership experience there.

[00:04:06] And while I was in, I just passively started investing in real estate.

[00:04:10] So I just wanted something outside of the stock market.

[00:04:12] So I was looking at single-family homes, and I bought my first single-family turnkey.

[00:04:19] It was a $45,000 house.

[00:04:20] It was a 9K down payment in Oklahoma City.

[00:04:24] Renting it for $350 a night.

[00:04:27] And that was my first deal.

[00:04:30] And I saw the power of real estate and just started doing every deal larger than the last.

[00:04:34] So I grew up through first that house and then some other minor rehabs, major rehabs, moved into house flipping, but wanted to build a stable cash-flowing portfolio.

[00:04:47] So I looked at small multifamily buildings that we could do the BRRRR strategy, buy something to be distressed, full renovation, stabilize it, refinance our funds out, and roll to the next one.

[00:05:00] So we did that over and over and over, building up a larger portfolio of 23 multifamily assets and kind of tapped out that strategy in the area that I was in, which took us over into some more development style.

[00:05:16] So we did some conversion projects of old historic buildings for affordable housing using low-income tax credits, land development deals.

[00:05:29] As I transitioned out of the military, I went to work for a large developer out in Hawaii and got a great experience there doing high-rise development, industrial subdivisions, hotel, some really large projects, all the while doing projects in my free time.

[00:05:45] Worked with them and then branched off to pursue my company full-time.

[00:05:49] And so on my side, we moved into land development and then kind of got to this point where obviously land development doesn't give you anything stabilized and cash-flowing, which has really always been the goal, is to create that true financial freedom and passive income.

[00:06:03] And woke up one morning, I was actually lying in bed thinking about the equity in my multifamily portfolio as one does.

[00:06:12] Sure.

[00:06:14] And just kind of realized we were underperforming.

[00:06:18] And we had a huge equity growth from the value add that we did and got great appreciation, but the cash flow was lower just because we were in more class C areas and class C markets.

[00:06:28] So decided to liquidate the whole portfolio and search for other asset classes to focus on.

[00:06:35] At that time, I had already started one camping resort development.

[00:06:42] So we're somewhat familiar with the asset class and we looked through self-storage and mobile home because those were two that we'd looked at before, had some experience in.

[00:06:53] But both of them seemed very competitive and we were looking for something where we could have an edge and do some kind of exponential growth.

[00:07:01] Adjacent to mobile home was RV parks and the RV industry.

[00:07:05] And that's where we found opportunity.

[00:07:07] So you look at the self-storage and mobile home markets and you have a lot of cap rates that are down, you know, six, six, five, six, seven percent.

[00:07:16] Adjacent to that, we found RVs that are still nine, 10, 11, 12 percent cap rates, which is fantastic cash flow.

[00:07:24] As we dove deeper, we found that 88 percent of RV parks are still owned by mom and pops.

[00:07:30] Well, that's just self-storage and mobile home looked like five or ten years ago.

[00:07:35] And this wave of institutional interest poured over into those asset classes, compressed those cap rates down, rolled them up.

[00:07:44] So that effectively became our strategy of, well, let's go acquire these high cash flow properties.

[00:07:50] We'll be 100 percent specialized and become those market leading experts in that asset class.

[00:07:58] And we can build up a large portfolio of cash flow.

[00:08:02] And if and when institutional interest pours over, those cap rates will get compressed down and we'll be sitting there, you know, first lunch to the party.

[00:08:12] Yeah.

[00:08:13] And even if it doesn't, you've got amazingly high cash flowing assets that are that are kicking off potentially nine to 12 percent cap rate results.

[00:08:22] So that that's amazing.

[00:08:25] Are you interested in real estate investing but don't know where to get started or think you don't have the time or money?

[00:08:31] Are you stuck in your W-2 because the golden handcuffs make it hard to walk away?

[00:08:35] If this sounds like you, check out impactequity.net and schedule some time to talk with the founder, Randy Smith.

[00:08:42] Randy went from massive income to leaving his W-2 through passive income, and he can help you do the same.

[00:08:49] www.impactequity.net.

[00:08:52] It's kind of a similar path that I hear from a lot of folks.

[00:08:55] They start single family and then they evolve into some other things.

[00:08:58] And they're watching market trends and trying to, you know, what do they say?

[00:09:03] Skate to where the puck is going to be.

[00:09:05] And that's exactly what you're doing in this space.

[00:09:07] So, yeah, very interesting story.

[00:09:09] What's the portfolio look like today?

[00:09:12] So we started with two construction projects, two construction RV projects.

[00:09:18] We are in the process of raising a fund.

[00:09:21] We're actually just about to open in a couple weeks.

[00:09:23] It's our real freedom fund for this outdoor hospitality strategy.

[00:09:27] So we're raising $30 million.

[00:09:29] We have the two under construction now that we did with our own money.

[00:09:33] And we have three properties under contract.

[00:09:36] The fund will buy 15 properties total as the target.

[00:09:41] That is what that $15 million equity should be able to purchase because we're doing the midsize, you know, between $3 million purchase price.

[00:09:51] Okay.

[00:09:52] That's our sweet spot of it's big enough to put in professional management, support an on-site manager, but small enough where we're not competing with the bigger players that have already compressed cap rates.

[00:10:04] Okay.

[00:10:05] Well, and maybe so this is an asset class that we've I think I've had one other operator in this space probably two years ago that talked about this asset class.

[00:10:14] And that was really kind of cutting edge at the very beginning of when all this trend was happening.

[00:10:19] Can you talk to the audience about like, what is, what does this mean?

[00:10:22] I'm picturing a bunch of RVs with like cords plugged in and maybe a fire pit, but basically a big piece of land with some concrete or blacktop and really nothing else.

[00:10:35] Like, is that what an RV park is at this point or?

[00:10:38] Hopefully not our stuff.

[00:10:40] Okay.

[00:10:41] And so, yeah, there, there is, and thank you for asking me.

[00:10:44] There's a couple of different flavors of RV park.

[00:10:46] Um, I think traditionally, a lot of people think of what you just described of more of the mobile home trailer park type setup and those do exist.

[00:10:55] It's just a different flavor.

[00:10:57] So in RV parks, you have, uh, what we call extended stay, which is effectively a mobile home park.

[00:11:03] People living there full time.

[00:11:04] Uh, there's the overnight parks, which are typically on the side of a highway.

[00:11:09] And that's where you just pull in at eight o'clock at night while you're road tripping, plug in, crash, go to sleep, wake up, keep driving.

[00:11:19] Um, those parks typically perform the worst, uh, in the market.

[00:11:23] Um, the extended stay ones that's effectively looks like a mobile and park or an affordable housing play, uh, which is still a viable asset.

[00:11:31] It's just not the strategy that we do.

[00:11:33] Um, and the ones that we do is RV resorts.

[00:11:37] So we do destination style.

[00:11:39] Um, we generally target national parks or other like big amenities.

[00:11:44] So one that we're buying as a hot spring on it.

[00:11:46] Others outside the entrance of the grand Canyon.

[00:11:49] Um, we have one in Alaska that we're looking at, um, near Denali national park.

[00:11:54] Um, so we want a major attraction and that's a place that you would go with your significant other, with your family, uh, and stay for a long weekend.

[00:12:03] And maybe stay for two weeks and explore the area, um, our resorts are amenity rich.

[00:12:08] So we put in, uh, things like saunas, hot tubs, ice baths, dog parks, communal kitchens.

[00:12:15] Uh, we bring in high-speed wifi and have coworking spaces.

[00:12:18] So we really, that's all part of our value add package, but it's all something to make the property a place where you want to stay and spend a lot of time.

[00:12:29] And obviously that is profitable for us because now we can have additional revenue per customer.

[00:12:34] Got it.

[00:12:35] Got it.

[00:12:35] So it's kind of a midterm stay.

[00:12:38] So two to five days, two to 10 days, something like that.

[00:12:41] Um, interesting.

[00:12:43] Okay.

[00:12:43] And then, so the primary revenue stream is the pad rentals.

[00:12:48] Are there ancillary fees or other revenue streams that you can drive from this or?

[00:12:53] Yeah.

[00:12:53] And that to me is the most attractive part of this asset class is every other type of real estate.

[00:13:00] Mostly is you have a piece of property and you have your rent and you can have your expenses.

[00:13:07] And the whole thing in operations is bump your rents up as much as you can and cut your expenses as much as you can.

[00:13:14] With these RV resorts, it's more of an operating business.

[00:13:17] So yes, we rent out the pads nightly or sometimes we'll actually have accommodations like tiny homes or Airstream trailers or tents that are nightly like Airbnb style.

[00:13:27] But there's a whole slew of ancillary revenue on top of that.

[00:13:31] So if you think of an RV park, well, maybe we're selling firewood.

[00:13:34] Maybe you were selling advertising to local businesses because if a tourist is there on vacation, they're going to spend two weeks.

[00:13:42] They're probably going to spend money every day at local restaurants, local tour guides.

[00:13:46] So we can have books for those, even things like submetering electricity to build back there.

[00:13:52] And then for the destination itself, if we have things on site, you know, for example, we were looking at a hot spring property.

[00:14:00] Well, they sell day pass to the hot spring.

[00:14:02] So it doesn't have to be nightly revenue.

[00:14:04] There's also day passes.

[00:14:05] Another part of that was river tubing.

[00:14:08] So there's a whole river rafting, river tubing business on the property.

[00:14:14] Food and beverage because we're in the hospitality space.

[00:14:17] You get a liquor license, you can sell beer, you can bring on a restaurant or food trucks.

[00:14:22] So all sorts of really great ancillary revenue.

[00:14:26] But it's real estate, so it's still cap rate based.

[00:14:29] So we can bring on these businesses to add income, but it's valued on a cap rate basis, which means you can get massive value for that income.

[00:14:38] Interesting.

[00:14:39] So I'm wondering from the underwriting standpoint, are those revenue streams treated the same when it comes to NOI?

[00:14:48] Because maybe there's some more fluctuation in some of the ancillary income streams, or is it all treated the same?

[00:14:56] Does it all go into one bucket?

[00:14:57] It kind of depends on what percentage of the total revenue it is.

[00:15:02] If you're looking at a property that's 80% ancillary revenue or non-accommodation revenue, then the cap rate's naturally going to be higher because that's a big difference.

[00:15:12] That's more business than it is just real estate.

[00:15:16] But even something like a camp store, we typically budget 10% of revenue for just camp store revenue, and that's people buying little firewood and drinks and that sort of thing.

[00:15:27] And that generally doesn't affect the cap rate for those levels.

[00:15:33] Okay.

[00:15:34] And so earlier with the first question of the podcast, I asked about, or you talked about bad debt choices back in the run-up of 20 and 21 or 19 even.

[00:15:46] What does the debt look like in this space?

[00:15:48] Is this a 10-year fixed rate, or is there other options that are used in this space?

[00:15:55] Yeah.

[00:15:56] So there are similar options to other asset classes.

[00:15:59] So you can do your commercial debt.

[00:16:02] We do typically look at, I don't do anything under five-year term.

[00:16:06] I generally try not to do anything under seven-year term for those issues I described.

[00:16:11] If we want long-term debt, so we have that flexibility.

[00:16:17] CMBS is an option for RV Park.

[00:16:20] So once you get a little bit of scale, you can get the CMBS loans.

[00:16:25] But since they're businesses, we're also open to USDA and SBA loans.

[00:16:31] And that opens up quite a few opportunities for much more advantaged loan terms.

[00:16:39] Interesting.

[00:16:39] Okay.

[00:16:40] Very good.

[00:16:41] So, yeah, it sounds like the business model has been kind of a mixture of acquisitions and development.

[00:16:48] Is that kind of a go-forward plan with this new fund that you guys have?

[00:16:52] Largely, we're looking at value-add.

[00:16:54] And the reason for that is we wanted a fund that would be the most attractive.

[00:17:00] We've done a lot of syndications in the past for one-off deals or for small bundles.

[00:17:05] And we came up with the concept of the fund as an idea of having it be like the one, not to say final, but the one large project that we can really run with.

[00:17:15] So some people have a detraction from development, rightfully so, because it is more risky.

[00:17:21] We are developers.

[00:17:22] That's what we want to do.

[00:17:23] So the best strategy that we could come up with was with these properties, a lot of them, because they're owned by mom and pops, they've been owned for 20, 30 years.

[00:17:35] They're underutilized.

[00:17:36] They're often on large pieces of land that are only partially built out.

[00:17:40] So we can come into something that's high cash flow and purchase it, ride that cash flow, or give good investor returns.

[00:17:48] But then we have that undeveloped land that we can go develop on.

[00:17:52] If for some reason there's an entitlement issue or a reason why we can't develop it, it doesn't even matter because we are buying it only for that good cash flow and the development should be sitting on the cake.

[00:18:02] So that's the most risk-managed approach we could do to it, and it keeps the true development risk away from our limited partners.

[00:18:11] Yeah, no, great plan.

[00:18:13] You get all of the benefits of development without the added risks and the cash flow throughout the whole period as well, or throughout the development.

[00:18:22] So what is the exit strategy on this or the plan?

[00:18:27] Is this a five-year hold, 10-year hold, infinite hold?

[00:18:30] What is the strategy going in?

[00:18:32] Yeah, so our fund is an infinite hold model.

[00:18:35] We built it designed with something that we wanted for ourselves, was a large cash flow and portfolio that was stable, that paid us monthly income in perpetuity to go support that free lifestyle.

[00:18:49] As I mentioned with the potential institutional wave of interest coming into the space down the road, if that happens, then we could have a really large exit and produce a great payday.

[00:19:00] But our primary goal is to have stable long-term income in perpetuity.

[00:19:08] We did build it to return capital in year five.

[00:19:11] So we're buying these value-add properties.

[00:19:13] We'll value-add them.

[00:19:15] We'll expand them, and we'll roll them up.

[00:19:18] And then in year five, we'll do a large cash flow refinance across the whole portfolio.

[00:19:22] That'll return invested capital.

[00:19:24] But then investors get to stay in the fund, keep their shares and profit split, and keep getting their monthly distributions.

[00:19:31] Yes.

[00:19:32] So what does that look like?

[00:19:34] Let's say you invest 100 grand, year five, you get your 100 grand back.

[00:19:37] You've probably been getting some distributions up to that point.

[00:19:40] I suspect the distributions are all return of capital until all other capital is returned.

[00:19:45] Is that correct?

[00:19:47] No, we actually set it up to be an all-profit basis.

[00:19:53] So leading up to and afterwards, it's a cash flow return from operating.

[00:19:59] So that goes through an 8% preferred return, which we expect to be hitting in year one.

[00:20:07] And by year five, I projected to get up to around 12% returns capital in year five.

[00:20:14] And then you could either reinvest that capital to continue that same percentage growth rate.

[00:20:21] Or if capital is returned, then the prep is gone and you just get your profit split on top of it.

[00:20:28] But monthly distributions would continue.

[00:20:31] Yeah.

[00:20:31] So if things go as planned, you do the cash out refi at year five, if they pull their 100 grand out, what type of returns can they expect beyond that?

[00:20:44] So year six, even though they have technically their money back, how much are they earning?

[00:20:50] Yeah.

[00:20:50] So our split is set up to be an 8% preferred return and then a 60% to 75% split on top of that.

[00:20:58] So if your funds are back, obviously there's no prep, but you still get that 60% to 75% upside split.

[00:21:05] Okay.

[00:21:05] How we have modeled after that capital return, that's about a 6% to 8% year one.

[00:21:12] So you put in 100K, you'll get your money back in year five and then another 6% or 8K year six and continue growing from there.

[00:21:21] Yeah.

[00:21:22] That's the unicorn that I think.

[00:21:25] I actually avoided this early on in my passing investing journey, but I'm shifting more and more towards that.

[00:21:31] I want to get the money back to deploy it again.

[00:21:34] And ultimately, over the course of 10 or 15 years, you could have that same 100 grand working for you in three or four or even five different projects, all returning capital and creating significant returns.

[00:21:49] So that is really attractive.

[00:21:50] And it's tax advantaged as well, which is ultimately half your game in what we're doing here as passive investments.

[00:21:57] So that's super exciting.

[00:21:59] Exactly.

[00:22:00] Yeah.

[00:22:01] The tax side of it is perfect because you're getting those funds back and you're not paying taxes on it.

[00:22:07] If you want, you can reinvest it so you don't have to go find a place to redeploy it.

[00:22:11] So you don't have the cash drag of uninvested capital.

[00:22:14] Like you said too, you build up an asset that now is going to pay you forever and then you could reinvest it to get more, put it in another deal to do that again and let it keep growing.

[00:22:26] And like we all know in real estate, the best way to make money in real estate is to own for the long term.

[00:22:32] And that's the basis of the strategy.

[00:22:36] I love it.

[00:22:37] I love it.

[00:22:37] So that is exciting.

[00:22:39] Exciting to hear that offering.

[00:22:41] I've seen more and more folks coming into this space.

[00:22:43] It sounds though that very few have the background and experience that you and the team have been able to develop over the last handful of years.

[00:22:51] So that's exciting.

[00:22:53] Now, you said that you're trying to stay close to national parks.

[00:22:57] So that limits the options.

[00:23:01] But we're a very large country with a lot of national parks.

[00:23:04] So are there any big parks on the horizon that you're trying to target or focus or markets that might have less competition, I suspect, that you're pursuing?

[00:23:16] I'll say without revealing too much of the nitty gritty of our strategy, we're generally focused on the Rocky Mountain region.

[00:23:24] We have access to some proprietary data sources to give us insights as to occupancy of some of the local parks.

[00:23:32] So we can see what their rates are, what their occupancies are.

[00:23:35] That helps us gauge for what the market looks like.

[00:23:38] We also look at national park visitation rate data to see which are growing, which ones have more visitors and therefore obviously more potential customers.

[00:23:50] So, yeah.

[00:23:51] Yeah, it's interesting.

[00:23:52] An approach.

[00:23:54] Yeah, and I'm wondering, it seems to me like during COVID, there was probably obviously less air travel.

[00:24:00] So people were hopping in RVs and going to national parks.

[00:24:04] So we probably saw a big surge over the last four or five years, I suspect.

[00:24:07] Is that an offer of deception or am I off with that?

[00:24:11] Yeah, yeah.

[00:24:12] There was definitely a dip in 2020, 2021.

[00:24:15] But then 2022 was when everything started to open back up except international travel.

[00:24:21] So 2022 was this massive spike.

[00:24:25] 2023 kind of set from that.

[00:24:27] And then now we're back exceeding this past year, 2024, met or exceeded the 2022 level.

[00:24:34] So it's a very upward trend.

[00:24:37] But it's a very consistent growth.

[00:24:39] And that style of travel, of being in the outdoors is something that's popular.

[00:24:48] Both of the baby boomers and the millennial and Gen Z group are actually overtaking the market.

[00:24:55] But we speculate because of the remote work ability of, especially now with Starlink.

[00:25:01] My partner is almost a full-time RVer.

[00:25:06] And he's got a Starlink panel strapped to the roof of his RV.

[00:25:09] And we drive around.

[00:25:11] You can sit in the passenger seat and be on a Zoom call and have full high-speed internet.

[00:25:16] And if you have a remote job, just think of how much freedom that all of a sudden provides you.

[00:25:23] It's unbelievable.

[00:25:24] Unbelievable.

[00:25:25] And I wonder how this ties, like how this asset class does during different cycles within the economy.

[00:25:35] Depending on who you talk to, they say we might be coming into a recession here in the coming 6 to 12, 18 months or so.

[00:25:42] Or do you have data that shows how this asset class performs during downturns?

[00:25:47] Yeah.

[00:25:48] And it actually wasn't what I expected.

[00:25:51] I would have thought that.

[00:25:53] And actually, I'll differentiate it first.

[00:25:55] So we have RV and we have glamping.

[00:25:57] The glamping is more luxurious Airbnb-style stays.

[00:26:04] Those are anywhere from $200 to $500 a night stays in tiny homes or domes or teepees or yurts or that sort of thing.

[00:26:14] Those ones, like other large hospitality, is not recession-resistant.

[00:26:21] So that does come back from luxury travel.

[00:26:24] So the RV space, on the other hand, does more what affordable housing does because it is the more affordable method of traveling.

[00:26:33] Most RV sites are occupied by people that are within a 250-mile radius.

[00:26:38] That means usually it's somebody who their family piles into the RV for the weekend or the week and they drive a few hours away to have a nice getaway.

[00:26:48] Yeah.

[00:26:48] It's a very low-cost vacation as opposed to hotel rooms, getting on a plane, or anything else because you have your family of four, five, six just for $70 a night on an RV pad.

[00:27:04] So the RVs actually do perform very strongly in downturns.

[00:27:10] Yeah.

[00:27:11] It makes sense.

[00:27:13] It makes sense.

[00:27:13] It's just like affordable housing.

[00:27:15] This is affordable travel.

[00:27:16] And people will continue to travel and will have a need to travel regardless of what's going on in the economy.

[00:27:22] So it makes sense that this could be really attractive.

[00:27:24] Now, on the opposite side of that, when we see international travel increase and people starting to move around a little bit more, do you see dips as the economy is surging?

[00:27:35] Or do you see more people using these because there's more people buying RVs like we saw during COVID?

[00:27:42] Yeah.

[00:27:42] I mean, historically, it's been very consistent growth.

[00:27:46] Okay.

[00:27:47] And you think, oh, more people are going to travel internationally.

[00:27:49] Well, the same thing happens coming back in.

[00:27:52] Got it.

[00:27:53] International tourists coming here.

[00:27:55] Like I said, largely by major attractions like national parks, and that's very intentional.

[00:28:01] You know, 6 million people a year go visit the Grand Canyon.

[00:28:05] Well, those are U.S. residents.

[00:28:07] There's plenty of foreigners coming here as well, and those are all potential customers.

[00:28:12] I love it.

[00:28:13] Yeah, it makes a lot of sense.

[00:28:15] So what did we not talk about in this space?

[00:28:18] Not knowing it as well as I do multifamily or some other asset classes.

[00:28:22] Are there other areas that we should be focused on or be asking about in this asset class?

[00:28:28] I can touch on the tax piece because that's an interesting one.

[00:28:32] Yeah, definitely.

[00:28:33] Of course, PREF is not a CPA.

[00:28:35] This isn't tax advice.

[00:28:37] Of course.

[00:28:38] From my understanding and for personal views, the tax benefits of the RV parks are usually two or three times more so than you see in multifamily.

[00:28:51] And a pretty simple way to understand that is you think of a class A multifamily building.

[00:28:56] Usually that's going to be in a downtown market where you have really high land value.

[00:29:00] Well, land obviously isn't depreciable.

[00:29:02] You have a big percentage of your asset value that you can't depreciate.

[00:29:06] On top of that, also a big portion of your asset value is the structure.

[00:29:12] Your foundation and your concrete structure.

[00:29:16] That also typically is stuck over that full 39-year depreciable life.

[00:29:23] Firstly, if you look at an RV park, we're generally more rural areas where our land value is really low.

[00:29:29] And we don't have any major infrastructure like a concrete building.

[00:29:34] So almost all of the components and almost all of the value of the RV park has very short depreciable lives.

[00:29:42] That means we can get much higher tax benefits from it because we can do our cost segregation study and take a much larger part of that depreciation in those first couple of years.

[00:29:55] Because, I mean, the poor, like after you remove the land and really there's no very little structures, it's everything else is depreciable.

[00:30:06] And probably over, I'm just thinking like blacktop and yeah, not like soft goods, basically.

[00:30:14] All of that's probably going to depreciate on a five or a seven-year schedule, I would imagine.

[00:30:19] So even with bonus depreciation moving away, this is probably still a highly tax-advantaged asset class because of those reasons.

[00:30:30] That makes a lot of sense.

[00:30:31] So, of course, you can't guarantee what that's going to look like.

[00:30:35] But say you have a $100,000 investor in this space.

[00:30:39] How much depreciation losses could they expect to get in year one under today's tax law?

[00:30:46] And, of course, you're not a tax advisor.

[00:30:47] You don't make any guarantees.

[00:30:48] But based on your understanding, approximately what could an investor expect to get?

[00:30:54] Yeah.

[00:30:54] So we look at 40% to 60% of invested capital in year one, the B40-60K tax loss.

[00:31:02] Wow.

[00:31:02] Fantastic.

[00:31:03] Okay.

[00:31:04] Hard to find in multifamily these days, for sure.

[00:31:07] Okay.

[00:31:08] Well, that is kind of the icing on the top.

[00:31:10] And, you know, we always say don't let the tax dog, tax tail wag the dog or whatever that saying is.

[00:31:18] But it sounds like return – actually, we didn't talk about this.

[00:31:23] So we talked about cash on cash.

[00:31:24] But what do overall return structure looks like over the course of a five-year pro forma?

[00:31:28] Yeah.

[00:31:29] So largely we are cash on cash based because it's a perpetual hold.

[00:31:34] The IRR isn't as relevant.

[00:31:37] Sure.

[00:31:38] I calculated it because people ask.

[00:31:39] So it is the 15 to 20 IRR.

[00:31:42] But mainly we focus on our cash flow, which is 8% to 12% over those first five years.

[00:31:48] And then if you re-invote the year five, you'll hit 13% year six and grow from there.

[00:31:56] Unreal.

[00:31:57] Fantastic.

[00:31:58] So this is a great option for people that are looking for cash flow and for tax benefits.

[00:32:04] Absolutely.

[00:32:04] And the fact that you're not selling, there's not going to be – well, you will sell at some point.

[00:32:09] But there's not going to be a huge recapture incident that's going to occur in three to five years for sure.

[00:32:17] So it sounds – yeah, that sounds like a really attractive investment strategy and asset class.

[00:32:24] Yeah.

[00:32:24] Thank you.

[00:32:25] Well, very good.

[00:32:27] I'm intrigued.

[00:32:28] And, of course, we'll sign up for your – if you have newsletter, education materials.

[00:32:33] But if somebody is interested in learning more about what it is that you guys are doing, how could they find out more about it?

[00:32:39] Absolutely.

[00:32:40] So you can go to our website, clearsummitinvestments.com, or find me on social.

[00:32:44] I'm at Zander Kempf, Zander with a Z, on all platforms.

[00:32:50] Fantastic.

[00:32:51] Fantastic.

[00:32:52] Well, I do have a few final questions that I do like to ask everybody that comes on the show because we are geared towards the newer, newer passive investor, and we want to try to educate and inspire as much as we can.

[00:33:03] And so if you were to ask – or if somebody were to ask you for, like, the single most important passive investing educational resource that you're aware of, what would you refer them to?

[00:33:14] Bigger Pockets is, you know, head and shoulders above anything else that I've seen.

[00:33:19] That started my real estate investing journey.

[00:33:22] Yeah.

[00:33:22] I was doing, you know, countless hours on there, listening to their podcasts, and lucky enough now to be in a mastermind with Brandon Turner.

[00:33:32] Oh, very good.

[00:33:33] The platform's fantastic.

[00:33:35] Are you in the 50 by any chance, or is that what you're in?

[00:33:39] Yeah.

[00:33:39] Fantastic.

[00:33:40] All right.

[00:33:40] I met a few people earlier this week that are in that group.

[00:33:42] So very good.

[00:33:43] Very cool.

[00:33:44] So Bigger Pockets, it's – I mean, it's the little purple book or Bigger Pockets or a combination of the two that we hear most people suggest, and I would agree with you as well.

[00:33:53] I came through both of those myself.

[00:33:55] Very good.

[00:33:56] Well, as folks are starting to do due diligence in this space, and of course we would want everybody to come and invest with you, but if they are doing due diligence with other operators in this asset class, what type of questions should they be asking that might be unique to this asset class?

[00:34:13] I mean, even just generally speaking, it's track record and team.

[00:34:18] What is the experience in the asset class on this particular strategy?

[00:34:27] And then we fully focus on risk.

[00:34:30] So my questions would all be focused around risk.

[00:34:33] What are your cash reserves?

[00:34:34] How long are you holding debt for?

[00:34:36] How much market appreciation are you building into your pro forma?

[00:34:40] Almost every real estate deal that fails is because of the debt.

[00:34:45] The debt's too short term.

[00:34:47] They're over leveraged.

[00:34:47] They don't have enough cash to cover their debt service.

[00:34:49] So as a limited partner, that's what I would have the majority of my focus on.

[00:34:56] Yeah.

[00:34:57] Really, really good advice.

[00:34:58] Ask those questions.

[00:34:59] Know those answers.

[00:35:02] Yeah.

[00:35:02] Great advice.

[00:35:03] Thank you for that.

[00:35:05] Well, we do have a couple of fun questions here as well that aren't so direct here.

[00:35:10] But is there a bucket list item that you've recently checked off of your list or one you're hoping to in the near future?

[00:35:16] I got my paragliding license last year.

[00:35:17] So that was a fun one I always wanted to do.

[00:35:22] No kidding.

[00:35:22] I didn't even realize you had to have a license for that.

[00:35:26] So that's good to know.

[00:35:27] That's good to know.

[00:35:28] What was that process like?

[00:35:29] You just had an instructor and went to courses and practice out there, I would imagine?

[00:35:34] Yeah, I did it over in Mal.

[00:35:35] It takes about eight or nine days of doing flights.

[00:35:39] You do 35 flights and you're off on your own.

[00:35:42] So next thing I'll be doing a selfie from up there.

[00:35:47] There you go.

[00:35:48] There you go.

[00:35:48] Awesome.

[00:35:49] Well, that is a first.

[00:35:50] I've never heard anybody mention that before.

[00:35:52] So, yeah, thank you for sharing.

[00:35:54] Have fun.

[00:35:55] And then our final question, Xander, we always like to ask is if you had $100,000 that you had to invest today, but you couldn't put it in your own deal, where would you place that capital?

[00:36:04] If I had $100,000 to invest, I couldn't put it in my own asset class.

[00:36:10] Your own deal is what the specifics are.

[00:36:13] I would probably do something in the private equity space.

[00:36:18] There's a couple of guys that are putting deals together for some kind of roll-up strategies for something like paving companies or pieces like that that have really great returns.

[00:36:31] They're more speculative than real estate, but those get some really great multiples.

[00:36:35] I love it.

[00:36:37] I love it.

[00:36:37] Very good.

[00:36:38] Well, thank you so much, Xander.

[00:36:39] This has been a lot of fun.

[00:36:40] I like learning about this new asset class, and it sounds like you guys have got a great start.

[00:36:45] And we're really excited to see how this fun goes for you.

[00:36:48] So thanks so much for being on the show.

[00:36:50] Awesome.

[00:36:50] Thank you for having me.

[00:36:51] I really appreciate it.

[00:36:53] Absolutely.

[00:36:54] All right.

[00:36:55] To our listeners, as always, we encourage you to continue your education journey in the passive investing space.

[00:37:01] But more important than that, we encourage you to make the decision to invest in your first or next passive investment deal.

[00:37:07] We are convinced that once you do, you will just wish that you had started that much sooner.

[00:37:12] So thank you again for joining us today.

[00:37:14] Be sure to join us again next Thursday for another great episode.

[00:37:17] And don't forget to like and subscribe to the channel.

[00:37:21] Well, there you have it, ladies and gentlemen, another episode of The Gentle Art of Crushing It.

[00:37:26] It was an amazing episode.

[00:37:28] We know we sure learned a lot, and we hope you did as well.

[00:37:32] We want to take a second and thank you so much for viewing or listening to this episode.

[00:37:36] And please just know that we only ask for one favor, and that is to make this life magnificent.

[00:37:42] Thank you and have a wonderful day.