Buying an rv park and rv park investing
Realtor · San Antonio, TX · Member since 2018 · 4 posts · 3 votes
I want to buy an rv park. I want to find investors. I want to know how to assess it, fund it, recruit investors and how to split proceeds etc. Please share your knowledge! I want to learn!
The intrinsics, behavior, and performance of RV parks can vary across a wide spectrum. On one end of the spectrum, a 100% transient park with daily/weekly rental traffic, will operate and perform more like a hotel. On the other end of the spectrum, a park with 100% park models can look, operate and perform similar to a mobile home park. Those are widely different investments requiring a different set of management skills, operational philosophy, and risk assessment. To take that a degree further, a 100% transient RV park in the middle of nowhere alongside a major freeway will likely always be a 100% transient RV park, where that same park in a good location in a strong MSA could be transitioned over time to a permanent living solution where tenants call that a home. So location will be a major factor in determining the potential strategy for the park.
A traditional RV park has transient traffic that moves in an out of the park and these kind of RV parks are often referred to as "transient RV parks". The traffic is made up of motorhomes, 5th wheels, and travel trailers, that are often referred to as “rolling stock” or "transient" residents, since they can come and go quite easily and tend to do so. The advantages of this kind of RV park are that the ability fill the park way faster than a permanent park or a mobile home park, and if the economy is booming, you can create a much higher degree of cash flow. The downside and risk with these kind of RV parks are that they are inherently more volatile and behave more like a motel, so when the economy is shrinking they tend to have high vacancy. Also, they will require a lot higher degree of management than a park with permanent residents or mobile home parks, especially if the park has daily traffic and a lot of amenities.
RV parks that are designed as a permanent living solution and behave more like a mobile home park are much more stable assets. They have long-term tenants that pay the monthly lot rent whether they are there or not, simply because they have their unit parked on the lot and it never leaves. The advantages of this kind of RV parks is the stability of cash flow and the intrinsic recession resistant behavior, along with less intensive management and monthly leases. The downsides with a long-term RV park are they take more time to fill up and involve sales and the related marketing and licensing requirements.
Let's touch briefly on the term "long-term tenants". If you are not experienced in RV parks, you may have an owner or broker tell you all the tenants are long-term. The way to assess a long term RV tenant is really about two things. First, do they own their unit? A tenant that is simply renting the unit can gather their things and leave whenever they want just like an apartment, so the way to determine if they really have a vested interest in staying long term or not starts with them owning the unit. Second, is the unit permanent? Park model units are considered permanent and rarely move, but RVs that can be driven away at the drop of a hat are not considered permanent, even if the tenant says they plan to stay. With that said, you can quite easily see if a tenant plans to stay long term by the work they have done around their RV. Most long term parks require tenants to fully skirt their RV and most tenants who really are staying long term will build an addition, deck or patio, install a storage shed, create a garden, and show other evidence that they have made this their permanent home. If the park does not have long term tenants, then you have more of a transient park.
IMPORTANT: location will be the most significant factor in the potential for long term tenants for RV parks. As mentioned earlier, if the park is on the side of a freeway out in the middle of nowhere, you simply cannot count on demand from long term tenants. Conversely, it is possible for a well located park in a major MSA to have all rolling stock RVs with no skirting or evidence of intent to make it a permanent home, yet the tenants have been there long term. Location, location, location.
All the best!
Jack
@Katie Morneau I’ll share what I know.
RV parks are assessed like all commercial real estate, so understanding cap rates is important. However, there are many nuances to assessing value, so cap rates won’t tell you enough to guide your decisions.
Funding RV parks can typically be done with bank debt. If you buy a nice, large park, then that opens up more debt options. Owner financing is also fairly common in this market, which is a huge advantage in my opinion.
Earning the trust of investors in commercial real estate often takes time and track record. A typical deal might be structured with a 6-10% preferred return and 20-40% carried interest. Again, there are many nuances to structuring deals and you would be wise to have a savvy business lawyer help with structuring.
I know this response lacks detail, so let me know where your questions are leading and I’ll share more details.
@Austin Neal
Thanks for the detailed information. I too would like to learn and get involved In this niche area.
Best of luck in all your endeavors.
@Katie Morneau There are different types of RV parks based on their location. Those that are closer into the cities tend to be catered towards long-term residents (many are on social security in these areas) and people passing by (some rent per night). Those that are farther away from the city tend to cater towards the seasonal crowd. These are folks who get away for awhile and travel to these remote areas. If you're looking into this business, it's best to see which type you prefer and study it. Hope that helps!
The intrinsics, behavior, and performance of RV parks can vary across a wide spectrum. On one end of the spectrum, a 100% transient park with daily/weekly rental traffic, will operate and perform more like a hotel. On the other end of the spectrum, a park with 100% park models can look, operate and perform similar to a mobile home park. Those are widely different investments requiring a different set of management skills, operational philosophy, and risk assessment. To take that a degree further, a 100% transient RV park in the middle of nowhere alongside a major freeway will likely always be a 100% transient RV park, where that same park in a good location in a strong MSA could be transitioned over time to a permanent living solution where tenants call that a home. So location will be a major factor in determining the potential strategy for the park.
A traditional RV park has transient traffic that moves in an out of the park and these kind of RV parks are often referred to as "transient RV parks". The traffic is made up of motorhomes, 5th wheels, and travel trailers, that are often referred to as “rolling stock” or "transient" residents, since they can come and go quite easily and tend to do so. The advantages of this kind of RV park are that the ability fill the park way faster than a permanent park or a mobile home park, and if the economy is booming, you can create a much higher degree of cash flow. The downside and risk with these kind of RV parks are that they are inherently more volatile and behave more like a motel, so when the economy is shrinking they tend to have high vacancy. Also, they will require a lot higher degree of management than a park with permanent residents or mobile home parks, especially if the park has daily traffic and a lot of amenities.
RV parks that are designed as a permanent living solution and behave more like a mobile home park are much more stable assets. They have long-term tenants that pay the monthly lot rent whether they are there or not, simply because they have their unit parked on the lot and it never leaves. The advantages of this kind of RV parks is the stability of cash flow and the intrinsic recession resistant behavior, along with less intensive management and monthly leases. The downsides with a long-term RV park are they take more time to fill up and involve sales and the related marketing and licensing requirements.
Let's touch briefly on the term "long-term tenants". If you are not experienced in RV parks, you may have an owner or broker tell you all the tenants are long-term. The way to assess a long term RV tenant is really about two things. First, do they own their unit? A tenant that is simply renting the unit can gather their things and leave whenever they want just like an apartment, so the way to determine if they really have a vested interest in staying long term or not starts with them owning the unit. Second, is the unit permanent? Park model units are considered permanent and rarely move, but RVs that can be driven away at the drop of a hat are not considered permanent, even if the tenant says they plan to stay. With that said, you can quite easily see if a tenant plans to stay long term by the work they have done around their RV. Most long term parks require tenants to fully skirt their RV and most tenants who really are staying long term will build an addition, deck or patio, install a storage shed, create a garden, and show other evidence that they have made this their permanent home. If the park does not have long term tenants, then you have more of a transient park.
IMPORTANT: location will be the most significant factor in the potential for long term tenants for RV parks. As mentioned earlier, if the park is on the side of a freeway out in the middle of nowhere, you simply cannot count on demand from long term tenants. Conversely, it is possible for a well located park in a major MSA to have all rolling stock RVs with no skirting or evidence of intent to make it a permanent home, yet the tenants have been there long term. Location, location, location.
All the best!
Jack
I’m looking for RV park financing.
I have the a beautiful 30 acre tract with a 10 acre lake in the middle under contract.
I’ve hired a engineer to design a 200 space park.
I have met all of the preliminary governmental requirements and set for final approval in April.
I’m looking for RV park financing.
I have the a beautiful 30 acre tract with a 10 acre lake in the middle under contract.
I’ve hired a engineer to design a 200 space park.
I have met all of the preliminary governmental requirements and set for final approval in April.
Make sure the local water company has enough water pressure.
I just purchased a park that had been out of operation for 10 years and I'm trying to fill it right now (2022). I'm struggling with all the things people are talking about in this thread. I bought the park because 1. it was priced right, 2. it was in a decent MSA (Shreveport is pretty gross and has some red-ish flags in terms of unemployment, household incomes, avg property prices) but I'm in a nicer little town on the outskirts, 3. there is year round demand for RV Parks in the area, 4. I feel good about the industry.
I had a mentor and while I had no RV Park deals under my belt I thought I had done my homework, but it's been very hard. Local politics and personalities apear to be more involved than I would have guessed. I liked the long post by @Jack Martin and agree with the big decision of focusing on short or long term campers. In theory I like the idea of having a short-term park that is convertable into long term living if the economy tanks. Long-term RV Parks, if managed well, can avoid some of the riff raff of mobile home parks, yet still provide one of the most affordable housing options. Right now I have mostly long-term infrastructure but since I can't fill the pads and now I'm trying to decide when I should consider finding the money to put in enough stuff (pool, better pads, clubhouse, etc.) to get vacationers. So my two cents is don't underestimate the work it will take to fill an empty park.
On a separate note, if you are reading this thread and already have a long-term RV Park I'm working on a hardware/software to automate billing campers for electricity. My limited experience as an RV Park owner has shown me that electricity is the biggest variable expense you will have. I have campers that spend $20 and others that spend $200 in the same month. I think the trend should be towards more sub-metering and billing so the campers pay for that variability. It makes valuation and cash flow difficult if you don't know what you as the owner are going to spend on electricity. I know some park owners, myself included, get worried that by not including electricity in the monthly pad fee we're going to lose business. I think that's the wrong mentality, and even if you think you still want to give the perception of having a flat rate with everything (water, electric, sewer) included you should do something to start influencing behavior so that you can smooth out cash flow. Start providing a monthly notice to campers that shows their electric usage relative to the average, or have a flat rate that includes up to XXX kWh (even though that's the same as sub-metering it might give the perception that it's still a flat rate). If you can put the variability of electricity back on the campers it helps the cash flow a lot, both in volume and consistency.