Author Topic: Any RV Campground Business Owners Out There?  (Read 1499 times)

SanDiegoFIhopeful

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Any RV Campground Business Owners Out There?
« on: July 27, 2020, 12:50:58 PM »
Long time lurker, relatively new poster here; apologies if this belongs somewhere else. I am wondering if any RV Campground entrepreneurs are active here that might be able to share or point me in the direction of thoughts/best practices. I am in the early stages of putting my plan together, with the hopes of buying my first property in 2H 2021 so would appreciate any and all input, especially around financing properties (if applicable), choosing a property (destination vs. stopover, how much of NW were you comfortable investing, etc), and owner-operated vs. hiring a property manager.

Michael in ABQ

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Re: Any RV Campground Business Owners Out There?
« Reply #1 on: August 30, 2020, 03:10:14 PM »
I appraised a few RV Parks in my previous career. It's been a couple of years but if you have any specific questions I can try to dredge up some information.

I did a couple that were pretty seasonal and a couple that were in the oil patch in SE New Mexico that were almost 100% full year-round. The latter operated more like a mobile home park than an RV park - though in reality it's pretty much the same business, just less turnover.

Ultimately it all comes down to income. Capitalization rates are pretty high because there's more risk and a fair amount of management involved. It's not as passive as a retail strip mall or office building. As I recall they were generally in the 10-15% range, much higher than retail, office, industrial which would typically be 6-9%. The capitalization rate is simply Net Operating Income / Value.

An RV park generating an NOI of $150,000 that sold for $1,000,000 would be at a 15% capitalization rate. Or put another way, a 6.67x Net Income Multiplier.

As far as financing, you're probably not going to get more than 70-75% loan to value. So if you want to buy that same $1,000,000 property you'll need to bring $250,000 - $300,000 in cash. For a smaller property you might be able to get seller financing with a smaller down payment but probably a higher interest rate or you'll end up paying more for the property.

Keep in mind economies of scale. A 50-pad property and a 150-pad property would both require a single property manager and maybe a second person for maintenance. On the 50-pad property that manager is going to eat up a lot more of your potential profit. On the other hand, you pretty much have to have a full-time manager living there as the problems will always occur late at night, not at 10:00 AM on a Tuesday.

SanDiegoFIhopeful

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Re: Any RV Campground Business Owners Out There?
« Reply #2 on: September 02, 2020, 03:25:12 PM »
Thanks for the input. I am a big fan of the cap rates, and I think the increased interest in camping due to Covid is more than just pulled-forward demand (mobile home parks seem attractive too but I am less interested there). I'm just trying to figure out the best way to solve for the economies of scale issue that you wisely point out. I'm not trying to sink the majority of NW into this, but seems like larger parks = better economics in most instances. The more I learn the more I think it would need to be an investment made a few years down the line when I would not be concentrating too much risk in one investment.

 

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