REIA 296 Don Spafford: Crazy Cash Flow through RV Campgrounds!

Welcome to Real Estate Investing Abundance, the show for busy, fulfilled professionals like you to learn how to develop financial independence built on solid passive real estate investments. Now here is your host, Dr. Allen Lomax.

Hello, enlightened investors. Welcome back to the show. I'm your host, Dr. Allen Lomax. It's a delight to be with you today, and we are going to take a look at Crazy cash flow through RV campgrounds. And with us today is Don Spafford, and he is a partner with Happy Camper Capital, an outdoor hospitality investment company who specializes in RV resorts and marinas. These are purchased through syndications open to both accredited and non-accredited investors. So Don, share with us a memorable experience that may have helped you to be who you are today.

All right. Well, thanks, Alan, For having me. And, you know, going back, I want to say there are probably several that, that really led me to, to what I decided to do with my life, I guess. But I think one that kind of stands out as you ask this question is when I was probably about 15 or so, 16 maybe. So I had my very first job at 14 years old and I worked at a Dairy Queen and I went through 3 different owners of that business while I was there. And so the second one, he came in there, he was a full-on like looking for, you know, passive income cash flow type guy. He was a big Amway proponent and all those things back in the day. So, and so he was always there playing those, you know, the music with like, you know, the money, money, money song and stuff like that. So I think he was probably a bigger influence than I have previously admitted, I guess, as far as, you know, motivating me to also want to pursue that type of passive income and, you know, live the life, I guess.

Well, interesting how those young experiences can lead us in ways that are kind of unexpected. Well, you started out with a background in finance and investing in securities. Tell us, how did you go from there and how did that bridge into real estate?

So yeah, so exactly. My educational background is in finance, investment science, portfolio management. So I had planned to go down that route and become a financial advisor or at least a portfolio manager. And by the time I finished school with that, I had gone part-time for several years, but I finished in spring of 2008. So by the fall of 2008, as you know, all the financial institutions were going out of business and being laid off. So There was pretty much no jobs to be found. Luckily for me, I had a job at the time. I was already in the industry. So rather than trying to go out and find something else, I decided just to hold still and stay where I was at, at least that my job was secure. Didn't want to be the new guy at a place and be the first one to be let go. So, but that, uh, I guess circumstance made me realize that that path may not have been as secure as I had thought it was, you know, all these big companies, you know, that were been around for a century or something were now out of business, you know? So it kind of opened my eyes a bit that made me realize that, you know, I need to find something better. And so honestly, so with that, actually, you know, again, searching for jobs at the time, everything I could find was more accounting related. So I actually went back to school and got an accounting degree as well, figuring if nothing else, I'll become a CPA, you know, next best thing, I guess. But then right after that, around, I'd say 2011, at the time, our youngest of 3 kids was starting school. My wife was pregnant with her 4th, but she was wanting to find something where she could do, you know, outside the home. Like, you know, she did a stay-at-home mom the whole time, which is what our plans and goals were. But now with all the kids out of the house, you know, she wanted something she could do. And so one way or another, I suggested to her, what about becoming a realtor and working in real estate. She liked that idea. She liked that she could work with people and help people and obviously make this income on her own time. And so as soon as she got her license, she started working with investors almost immediately. It was pretty fantastic. Some of our good friends that were investors and buying through her. And that's really what kind of opened my eyes and made me see that there's an opportunity here in real estate. I mean, I saw it back in 2008, '09, but I just didn't know how. I didn't have any understanding of what to do or how to do it. So But now at this point, as we progressed a bit and these investors were buying through her, I was like, hey, we got to figure something out here to take advantage of this as well. And so I started reading books and then that's kind of really where I had my initial start in wanting to get involved with real estate. So that was probably around 2011, '12, somewhere in there. And that's kind of what set me off on that path anyway, to want to do it. I didn't actually start investing though until 2017. And part of that was there was a time there where we moved from where we lived at the time in Omaha, Nebraska. We moved to Idaho Falls, Idaho. And so I kind of put all that stuff on hold for a bit until we got settled in here and then got back into it. And then, so yeah, that At least that was what gave me more motivation to want to figure it out and find a way to make it happen. And then that's exactly what we did.

So what made you actually decide that you were going to move from finance and into real estate? What was the big deciding factor?

Well, it was more of that. So I was doing both simultaneously for quite a while, but it was more of, I saw the opportunity there to have that passive income, to have a way to reach financial freedom, financial independence at a much faster pace than what the traditional financial independence crowd goes for by building up a big retirement account or something and living off of that. For me, that was never going to happen. I did not make enough income and be able to save enough income really to be able to build up a couple million dollars in a retirement account. So I saw real estate as the shortcut to financial independence by using less money out of pocket to essentially create that income stream, which is what the whole point of having that big retirement account is for anyway, to live off the income from it. So if I could build up that income through other sources, primarily through real estate, which I know I already understood at the time early on that in time, whatever money I put into it, I could probably pull back out at some point when I refinance it and essentially recycle that money over and over again. So I saw that as a very powerful way to make that happen. And with, again, with my financial background, I could see that, I could understand it all in my head that I was like, this is the best option we have to be able to reach our goals. And a big part of that as well wasn't just for me to reach that financial freedom and stuff. It was more of, I wanted to have 2 things in place. The reason we moved from Omaha to Idaho was to help care for my mother. She was at the time dealing with MS. And we knew at some point she was going to need a lot more professional help and that's going to be quite expensive. So I want to be able to help her with that, number one, but then also know that, you know, I could help take care of my family in some way or another, even if something were to happen to me and I were to pass away, I want to have at least a steady income stream that my family could still be supported and taken care of without me. So those are kind of my 2 big motivating factors early on to have to make this work. And so that's really what got me in it.

So tell us about your start. How did you actually get started in real estate?

Again, once we moved to Idaho and that was in 2015. It took me about another year before I really got back into the swing of things to start looking for properties and things and getting figured out. And so I was active on, I'm sure most people here are aware of BiggerPockets. I was on BiggerPockets website pretty much every day, listening to their podcast and following things in the forum, asking questions and in time answering questions. But it was through there I learned a couple things. I realized something I did not know early on, and some of the books I was reading did not mention this, is that even though I did not have a lot of savings that I could use for a big down payment, I discovered that My 401 could be leveraged to invest in real estate. So I took a loan from my 401 and used that for my down payment. And on top of that, I found a local lender in my area that would do a 10% down payment on investment properties. So that was my way to make this happen is get a bit creative. And I knew that for me personally, I did not want to go after single families. The single-family rentals, even though they were probably okay, I just saw that as a higher risk. So coming from my standpoint without having a big savings account to weather the storms or whatever. I was like, if this single-family home is vacant more than a month or something, that could be pretty detrimental to me to have to try to cover that mortgage on top of my own personal mortgage. And so I went after— I saw multifamily as the better option. So I was not, I guess, capable or able to do anything like a commercial type, 5 units or above. So the biggest I could get was a fourplex. So I went for a fourplex. That could get on a standard residential loan. Got it for 10% down. I actually found it off market, sort of. It was listed on Craigslist at the time. And so, so we got this property for about $26,000 down on it. And $20,000 of that I took from my 401. My wife had just closed on a property right before that. She had a bit of a commission check and actually sold a few of my stocks I bought in 2008 to help cover the rest. So, so, so essentially I more or less came up with this property with pretty much zero technically out of pocket. Out of savings really. And so that's really got the ball rolling. This was a great property I found at the time, cash flowed decently at the time, met the 1% rule, which means 1% of the purchase price is what your rental income is. And I knew that even at that point, I knew these were under market rent so I could get them up. So I self-managed it at the time just so I could learn and obviously save on some of those expenses and things. And I still actually self-manage it today. Here we are, like 5, 5 and a half years later. And I also refinanced it. About a year ago and pulled out over $100,000 on that property. I put $26,000 down. So now I have infinite returns on that property and it still cash flows at this point about $1,200 a month. And of course I've taken that $100,000 and reinvested it into more. But yeah, that was really what got it all started. It was kind of a slow start at first. Yeah, I didn't, you know, that cash flow that it did produce early on, I didn't spend any of it. I let that try to build up, of course, to use that to help kind of COVID to pay back that 401 loan as well. But yeah, I didn't change my lifestyle.

Didn't go and buy a new car or something.

Let that build up so I could eventually buy more properties was the goal. I wanted to keep letting that cash flow recycle and use to buy more and keep buying more and let that snowball just keep growing.

Well, certainly a smart way to do that. And of course, the one thing available to real estate investors that isn't really to people in the stock market is that ability to leverage. And you alluded to that as a way that you have been able to develop and grow your wealth beyond what you ever could in the world of finance and securities. Well, so thank you for sharing with that and illustrating to us how you were able to get started with your 401 and a few other sources there that you had together. So you, you went from this first opportunity, which was a fourplex, and you have moved on into 2 triple net multi-tenant investments as well as larger multifamily. So take us on that journey and tell us where you went from that fourplex to where you are today.

Sure.

So it was definitely quite a bit of a journey. It wasn't a planned route that I intentionally was going after this path I took, but I just kind of followed the path that was presented before me, I guess. So after that first fourplex, you know, literally the day we closed, I was motivated to start buying more. I was like, let's go, let's keep building this. So I kept searching. I actually made a couple offers on some other properties here locally, backed out of a few that actually, I did get accepted offers. I backed out of a few after inspections and other things. Just because again, I couldn't take on too much risk early on. But most other ones I just kept getting outbid on. At this point, 2018, '19, more people were entering the market and it was becoming very difficult to find anything that we could actually purchase without getting way outbid. And so I started looking for other options. I made more contacts with wholesalers and brokers in other areas and kind of told them what I was looking for. I guess turn of events, I ended up getting this property sent to me. I think it was like maybe a 22-unit or something. So I pursued that one. I looked into it. I called up a local banker in that area to see if I could somehow come up with the cash to buy it. Because this was one that there was a wholesale deal. They wanted a cash buyer. It was like $300,000 or something for, again, like a 22-unit, which seems incredible now. But so I called up a local bank there to see if I did buy this house, how quickly could I refinance it? You know, if I took a hard money loan or something just to get it. And of course they said they could refinance right away. No problem. And turned out that that bank actually held the note for that same property I was looking for.

So they were very familiar with it.

They knew the owner. And this banker, his wife is actually a broker there too. So, you know, he put me in contact with her and after, you know, lots of discussions about the property itself, we wound up not pursuing it because I was told it was pretty much in pretty bad shape. This broker then presented me with a couple other fourplexes she had that were off-market, you know, pocket listings. And so, you know, I looked at those and again, using this bank in this area now did a 15% down loan for commercial property. So I was going to buy these 2 fourplexes together. So it'd be commercial. And again, just to show people that you can get properties less than 25% down, you know, so 10% my first one, 15% on the next 2 really.

And so I used that to purchase these next 2 fourplexes.

And then from there, this is what kind of happened. It was just a spiral of events, really. So not only— maybe a few months after that, this broker approached me about some land that was going to be available, some vacant commercial land that was in an area that was about to just explode with development and things that were going to go on there. So I said, let's get it under contract. And then as I went to work to try to find a partner, I was like, what have I got to lose? I've got, you know, I'm putting nothing down on it. So if I can't make it happen, well, You know, no big deal. At least I tried. So I got it under contract and I got to work trying to find a potential cash partner that could come in and help me to purchase this lot that we could then flip for a lot more. And luckily I was able to find that partner and get that happened. And then pretty much right after that, I went back, actually about a year later, I guess, went back to the same agent and asked if there were any more of those lots available in this area. And so there was a bit smaller one and this one actually personally, I wanted to build something on it. I didn't want to just flip it. And so I did the same thing. I got it under contract first, then started marketing to a few people that could be potential partners that would be interested in it and found one who agreed that we should build on it. And initially I was planning to put on some higher-end townhomes or something, but looking into the area and then this broker telling me what's going on there and the need that was there for commercial retail properties, we looked at the numbers and kind of compared it and realized that, okay, building a multi-tenant commercial property there was the better option. The returns were going to be greater. Cost actually was going to be a bit Lower, but just the overall, like, you know, the idea of having less headaches dealing with tenants, right? And you're tripling that lease profit. It's like, yeah, that sounds enticing. So we got to work on that. And, you know, again, my partner and I had no experience in development or anything, so we really didn't know what we were doing, but we just saw the opportunity and figured, yeah, we can figure it out, right? It can't be that hard. We found a great builder that was working with us and a great architect that kind of both all helped. We explained them our situation and they kind of held our hands through the whole process. It took a lot longer than expected initially just to do some issues with the bank lending for a construction loan, but we got Got through all that. We're at this point here now at the end of 2022, where the building itself should be complete by February of this next year. So a couple months. So that's exciting to look forward to that coming. And then, so from there, I got pulled into another opportunity here in my area where I'm at in Idaho Falls, Idaho. A local developer who had actually approached me several years before about investing in something they were building here. At the time I turned them down a few years ago because I was finding better deals on my own with just buying those fourplexes really. And then they approached me again about a year ago for a new development they were doing here in town that was offering a pretty high return. And so at that point, I was not finding really much better deals out there. So it looked enticing. I was like, yeah, sure, why not? This sounds like a great investment. So I'll put some money into that. And I mentioned to them at this point now, so if you look back at my social media career, we'll say, right, I was pretty much inactive on social media for years. I did not want to be on social media. You could not find me anywhere. And then it was about almost 2 years ago at this point, I guess, about February of 2021, where I realized that really to achieve what I wanted to be and to be able to really raise capital and then get on these syndication teams, things I want to do, I needed to be seen. I'm not going to be able to find the right people if people don't know who I am. So I became active on social media, on LinkedIn mostly at first, and then later Facebook as well. But I started posting there and contacting people, going to meetup events just to network and get to know people. And so again, very early on that point, just doing that. This development group contacted me about a new project they had coming up. And I mentioned to them that I've now connected with lots of other investors and syndicators, people that could be potentially interested in this as well. So if they were willing to let me work with them, I could potentially help bring capital to their deals. And they agreed at that point. And so I kind of joined up with them. That was my initial first, I guess we'll say, entry point in syndications for this large-scale build-to-rent multifamily project. And so I got involved with them and raised some capital for that deal. And then during that process, I was still trying to find other traditional value-add multifamily opportunities to either find myself and take the syndication group or even find partners that I could join up with to do those types of syndications. And then I wasn't having really good luck on either one. I started looking at other people's offerings that they were putting out there just to at least invest in somebody else's deal. And honestly, the returns that I was seeing were not getting me excited. I was I'm not overly thrilled to say, yeah, I'll put my money into this deal that gets a very low cash flow and maybe barely a 2x multiple over 5 years. That's not that enticing to me. So I just kept looking and one day I heard on another podcast, somebody else had mentioned RV campgrounds as a high cash flow option. And being where I live now, I'm like an hour and a half from Yellowstone Park. So it's a very big camping area. So I saw there was a potential opportunity there. So I wanted to look into it more. I started going to different meetup events and webinars on that topic and connecting with more people in that space. And so I eventually came across a couple of people who are now my partners at Happy Camper Capital. They had just bought their first property and were looking to grow their team and wanted to expand. And so we started talking and they were telling me about the returns they were getting. So I was first, of course, I'm like, well, I'm definitely going to invest with you guys if nothing else. This is a great deal. But they invited me to join up with them. And so I agreed. I decided, you know what, I saw this as a huge opportunity to not pass up on that I knew I would regret a few years later if I did not at least give it a try. Right. So, you know, so I kind of decided, what do we have to lose? If I, if it doesn't work out, at least I tried and I won't regret it. But if it does work out, this could be the solution I've been searching for. And so I joined up with Happy Camper Capital just a little over a year ago now at this point. And we've had an amazing year this year so far. And what's set up to happen next year is even bigger. And so I couldn't be more excited to be telling people about these opportunities because I know there's plenty of other people just like myself. I've talked to hundreds, if not thousands of investors at this point and kind of discussing what we do and then talking to people's pain points and what they're looking for. So I know I'm not the only one that felt the same way about the returns they were seeing. And so what I tell people, We can get you cash flows of about 15% plus cash on cash. That opens people's eyes. And we're, you know, in most cases, 2.5 to 3x multiples on these deals. It's like, you know, if you have a limited amount of funds to invest and you want to get the biggest return possible for that money, there's nothing else better out there that I've seen. And so I tell people, just like myself, we can help you reach that financial independence a lot faster and with a lot less money out of pocket by investing in these deals versus, you know, just about anything else out there.

Don, we just have just a few minutes left here, but you offer opportunities for accredited and non-accredited investors. So tell us just a little bit about the structure of these investments and how interested investors can get in touch with you to take advantage of this.

Sure. Yeah. So, so basically we have the non-accredited deals as they come up. Of course, the only way you can know about those is by being on our investor portal to receive those updates or talk to us directly. As of right now, we don't have any currently available, but I'm certain we will have some in the near future. For the accredited investors, currently right now we do have open a 506 fund. which is intending to hold between 5 to 8 properties in that portfolio. We just closed on our first one actually about a week ago for that fund. And, you know, we've got more in process. So if you were an accredited investor, the minimum for this fund is $100,000. It has a 10%— or sorry, it has a structured pref and IRR. So, so if it's the amount invested, you can get up to 10% pref and up to a 21% IRR. And again, those are just the pref numbers, right? So we know that the actual cash flows are going to be well above that anyway. But, you know, this helps people feel comfortable, I guess. But, and we may have some other one-off deals that we do outside of the fund as well on very unique situations. So the way people can invest with us is, you know, pretty simple. Obviously, just log onto our website at happycampercapital.com, create an investor account. You can log on there and see our current deals we have available and any future ones as they come up. And then, you know, you just simply push a button to request to invest. And it's a pretty simple process from there for those who are familiar with it. But you sign some documents and wire some money, and then you start getting quarterly distributions paid out to you as that goes along. And over time, those distributions will increase as we do our value-add on these properties to increase the income and make them even better for you.

Well, just one last question, Don. What does financial freedom mean to you?

Yeah, so I'd say this obviously is something that's changed over time, as it does for most people, but it definitely for me has always been more about The time freedom. I want to buy back my time. So I don't want to spend, you know, the, say, my golden years or whatever, the rest of my life working for somebody else, working, you know, 40+ hours per week and spending little time with my family. That's always been my main goal for me is I want to— I'm not looking to buy, you know, a Lamborghini or something like that, right? I just want my time freedom. I want to be able to spend time with my family, take care of my family, know that if You know, my mother or some other family member is sick and needs immediate help, I can help them financially and also with my time to be able to be there by their side and help them and take care of them. That's for me what it's all about.

Well, Don, thank you so much for sharing your experiences with us and sharing these investment opportunities. It's been a pleasure having you and wonderful to meet you.

Thank you, sir. I appreciate it.

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