Best way to fund a small RV park that needs a septic replacement?

Question

Looking at a small RV park, under 10 sites, low six figure price. The septic system needs to be replaced and the seller is willing to sell as-is. \

How would you structure the funding?

1. Seller financing for the property, then a separate loan for the septic?

2. A commercial bank or credit union loan?

3. Bridge or hard money, then refinance later?

Also, will lenders even look at a park with an open repair issue, or do they want it fixed first?

First RV park for me. Any experience welcome.

Ali Najjar · Answer

Lenders will look at it, but most want a known problem like a septic system fixed or funded before closing, so an as is sale with an open repair is a hard sell to a bank. The cleanest structure is a holdback, where part of the loan sits in escrow and pays for the septic, or seller financing with the septic cost taken off the price. Bridge or hard money works if you plan to fix it and refinance, but it costs more. For a small RV park, local banks and credit unions are usually the ones that will take it, since most lenders treat it as a specialty property.

Matthew Morrow · Answer

@Louis Jara We had nearly the same thing here in PA, except it was two failed systems. It ran into a municipal wall and essentially required a full replacement of both. The only fix was an investor willing to take on a huge burden for a few months to tackle the project. Many lenders won't touch it, but private money or a JV where the lender gets ownership after the reno is worth exploring. I'd lock in a real septic bid before you finalize the capital stack. What's the as-is vs. repaired value looking like?

Best way to fund a small RV park that needs a septic replacement?

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