Day 24: Making an Offer LOI Language Specific to Boat & RV Acquisitions

And welcome to day 24 of the Boat and RV 100 series. I'm Joe Downs with Storage Muggles, and today I'm walking you through the letter of intent for a boat and RV acquisition, specifically the clauses and contingencies that aren't in a standard self-storage template and that protect you if the deal isn't what it appeared to be. If you want the full LOI template with the boat and RV specific language already built in, it's at storagemuggles.ai. And members of our community are becoming storage moguls, not someday, right now. And the way we define that word matters, actually. A mogul is a sophisticated operator of inanimate assets, and that's what storage is. But it's someone who's mastered the full art from sourcing a deal to running one well. We don't just buy storage, folks. We acquire and optimize. That's not a tagline. It's a discipline, and it tends to be worth tens of thousands of dollars or more per deal. Once you understand the difference, we're, we're real people in our community. We got couples that we call couplepreneurs, solopreneurs, entrepreneurs, and, and nobody stepped off a stage years ago and is now selling you a version of success they no longer have. We're actively evaluating deals every day between $400 grand and $2 million, maybe even up to $3 million. Like I said, every day, and they're, they're financeable and digestible. They're deals that our members are using to achieve their goals, kind you can actually close and grow. So if you want everything in this series backed by a community doing the same work, that's storagemoguls.ai. You can start for free, go at your own pace. But let's get to today's LOI writing episode. As the LOI matters more in boat and RV than it actually does in self-storage for 2 reasons. There's fewer transactions that are precedents to copy from in boat and RV, and the asset-specific complexity is a little higher. Not harder, just higher. In self-storage, attorneys have seen hundreds of these. There are established templates. Buyers and sellers broadly understand what a due diligence period looks like and what contingencies are standard. In boat and RV, many sellers have never sold a commercial property before. They built their facility, operated for years, and Are now considering selling for the first time in a lot of cases. So a well-constructed LOI from a prepared buyer actually builds confidence. It tells the seller, you know what you're doing and that the process will be professional. The contingencies you're adding aren't adversarial. They're just specific to the asset, like drive-out measurements, seasonal occupancy history, environmental review, vehicle lien law. These are the things that the seller should be comfortable with. If the facility is what they say it is, and you just frame it that way. There's 7 standard LOI elements. These carry over directly from self-storage. The boat and RV-specific additions layer on top of this foundation. So your purchase price stated clearly with the financing structure noted. If you're proposing seller financing or a carry, the terms go here: rate, term, amortization, or balloon. Earnest money deposit, typically 1 to 3% of purchase price. Release conditions matter here. Make sure the earnest money is refundable during the due diligence period for the contingencies you're including. Your DD period, due diligence period, DD period, 45 to 60 days, a little longer. It's more appropriate for boat and RV given the additional complexity. So self-storage deals can run often 30 days, 30 to 45. Here we're going 45 to 60. The extra time is for seasonal data review, environmental phase 1 site measurements, and zoning confirmation. You also have other amenities you don't have in self-storage. So, and then exclusivity. This is the only binding element of most LOIs. The seller agrees not to negotiate with other buyers while you're in the due diligence process. So protect this. The seller who won't agree to exclusivity is a seller who may be running multiple buyers simultaneously, and And I question whether they're a seller, a real seller. These are the 7 boat and RV-specific contingencies. Each one exists because something specific to this asset class can materially change the deal if it's not confirmed. So drive aisle and entrance measurement, we've covered this a few times now. The class ceiling of the facility is determined by this physical geometry, so you can't confirm it from the documents. The contingency gives you the right to measure on site during due diligence and walk if the aisles don't support that tenant mix you underwrote to. 20 more months, 24 months of monthly data. Annual summaries, just not good enough. Seasonal model you built on day 23 requires monthly data. Minimum 24. I like 36. This contingency requires the seller to provide it. If you And gives you an out if they can't or won't. Environmental Phase 1 near waterway sites, get a Phase 1 as a due diligence contingency, like no matter what contamination found post-close becomes your liability. So contingency protects you from that. This contingency protects you from that. You want to get the zoning in writing. You're not relying on a verbal confirmation. The contingency requires written confirmation from the municipality that Outdoor vehicle storage is a permitted or conditional use on this parcel. So this is a contingency. If there's a waiting list, if the seller's pitch includes a waiting list, that list is a tangible asset. The contingency documents, the contingency documents it and ensures it transfers. So if they want credit for, you know, what they're selling you as a waiting list, We need documentation. So no documentation, no credit for it in the price. Um, amenity conditions. The seller represents that the air station, rinse area, gate system, security infrastructure, they're all operational at close. That's what they're going to represent. If they're not, you, you're going to have recourse. And then vehicle lien law. This gives you the right to confirm that the state-specific process for handling abandoned vehicles was handled properly before you close. And and to retain qualified counsel. Seller financing is more common in boat and RV than in almost any other commercial real estate asset class. And it happens because of who these sellers are. A 68, 78-year-old operator who built a 100-space facility on land they've owned for 30 years probably doesn't have a mortgage, but they do still need usually and want retirement income, not a lump sum that they'll have to reinvest. So a seller note at 6% interest over, you know, 7 years, call it, secured by the property they built, is often a better outcome for them than an all-cash close at a lower price. The LOI is where you introduce this, not as a last resort, as an option. Something like, we are prepared to offer X purchase price with Y down payment and a seller note for the balance at, you know, Z% over N number of years. We're flexible in the structure if the economics work for you. That's something like that is how you pitch it. Key terms to get right here. The note amount and rate are negotiable, but if the seller financing is actually— this is a difference I want to point out. If the seller financing in this case is actually a second mortgage, also known as— in fact, we prefer to call it a seller carry to keep it separate, but falls under the umbrella of seller financing. Get the subordination clause right. Your senior lender, if you're going to go get a first mortgage lender and have the seller carry some of that second, you're— or some of the equity above the first mortgage in the form of a second mortgage or a seller carry, as we call it. Your senior lender will require the seller note to be subordinate to the bank debt. So most sellers accept this when it's explained and always include the right to prepay that without Penalty. One practical note here, seller financing or seller carry in this case eliminates the lender education problem for the seller finance portion of the deal. But it's just good to have in your package anyway. You're not trying to convince a banker to underwrite seasonal cash flow in that slice. You're working directly with an owner who understands the asset better than any underwriter. So if it's— if you have no senior lender and it's all seller financing, it just, it eliminates the need to explain that. However, it's good for the package. The transition period clause is underused and undervalued by most buyers. So the current operator knows things about this facility that are not in the financials, not in the rent roll, not in any document that you're going to get during due diligence. So they know, like, for instance, which tenants call every month with a problem, which ones never need anything. They know which gate codes haven't been updated in 3 years. They know that the fall rush in this specific market starts the last week of September, not the first week. And that the last Saturday of Labor Day weekend is when the half the boats come in. None of that's going to be in a document. So request 30 days of post-close availability from the seller, not full-time. Just have requested they're available for calls and questions. Most sellers who are proud of what they build are happy to provide this. They want the transition to go well. The seller introduction to long-term tenants is particularly valuable if the vertical tenants In this vertical, if the tenants have personal relationships with operators, a letter from the new owner is fine, but an in-person introduction from the prior owner, something like, I'm handing this to someone I trust, they're going to run it well. Well, that retains tenants that a letter might not. So get all 5 of these into an LOI as negotiated terms. Some sellers will push back on the 30 days. Maybe you have to negotiate to, you know, 2 weeks or something. But the goal is access, not an employment contract. Here's your complete LOI checklist in one view. Standard elements on the left, these carry over from self-storage. The boat and RV additions are on the right. These are the ones that matter for this asset class. So 7 standard elements, 9 boat and RV-specific additions. Together they make an LOI that protects you, educates the seller, and sets up a due diligence period where you can actually confirm that The things that matter. A few notes on sequencing here. Always get the standard elements right first. A poorly constructed purchase price or an ambiguous earnest money release condition will cause more problems than a missing boat and RV contingency. Foundation first, additions second. And a note on tone. The additions are not adversarial. Frame each one to the seller as standard practice for this type of acquisition. Which increasingly it is. Frame it something like, we, we include a drive mile measurement contingency on every boat and RV deal we evaluate because it directly determines the tenant mix we can serve. That's a reasonable explanation. Most sellers will accept it. The LOI is not a formality. It's the document that establishes the due diligence framework, what you're allowed to inspect, what data you can require, what happens if you find If what you find doesn't match what you were told, and it makes the negotiation of the PSA, the purchase sale agreement contract, that much simpler and easier. They've— you're exposing in the LOI what you intend to put in the contract. You're indicating, you're foreshadowing. 7 standard elements carry over from self-storage. Like I said, the 9 boat and RV specific conditions protect you from specific ways this asset is different. Together, they make a complete and professional offer that's going to save you from some friction later. Frame the additions as standard professional practice, not as adversarial demands. The seller who responds well to a professional, well-constructed LOI is the seller you want to close with. All right, next up, day 25, the live recap of section 2. And that's the close of section 2 before we move into financing in section 3. That's tomorrow night. So please like this video if having the specific LOI language gave you something concrete you didn't have before going into your next offer. Subscribe so you don't miss live recap and share this with your networks. Make sure they know you're putting in the work to become a storage mogul. And remember, the LOI is the moment where preparation meets opportunity. The buyer who hands the seller a clean, specific, professional LOI with the right contingencies closes more deals and closes them cleaner than the buyer who submits a generic document. Folks, if you haven't registered for your seat yet, that preparation I'm talking about here, that lives at storagemuggles.ai. It's free to join. You can work at your own pace. All right. Remember, Section 2 closes live tomorrow night, so subscribe so you don't miss it. That's ring the bell on YouTube here. Section 3 opens on day 26 with the hardest conversation in this vertical: how to get a lender who's never seen this asset class to say yes. See you tomorrow night.