RV Park analysis and insights

6 Replies

Been looking at large multi family deals close to me and closing on my first commercial project shortly. I’ve run across an RV Park recently that caught my eye. Evaluating using SFR model, it looks great on the surface. It’s a 36 unit, 27 park owned and 9 spaces, large office with residential space, pool, and built pad for laundry in future. Last rent roll for 2017 was $161450 actual and expenses were $50,700 actual. All are metered for water and electricity on city services. Located outside of nice midsized town with a college located in it. Asking 1.5M. Paperwork looks mom and pop run, and I’m sure things are missing. Further evaluation would need info from more years, but surface evaluation looks good. Owners have a family situation and want to sell to move on. The formula I found for evaluation was amount of spaces x rent x 70. Just using 27 owned properties and avg 550 rent, that is 1M. I’m thinking I should do a deeper dive as it looks good. Thoughts?

So the NOI is $110,750- does that include management expenses for the Mom & Pop owners? At $110k NOI/$1.5mm asking price = 7.4% Cap Rate. That's not a great deal unless they are owner financing at 4% or lower. We like to buy at 10% Cap Rates or higher.

The 27 owned properties - are these RVs or Mobile Homes?  Park owned units and renting is a tough business model as your maintenance costs will be very high.  What is the base lot rent not including the home rents?

I guess it all depends on financing. An owner financed 10% down 6% loan 25 amortization balloon at 7 sounds good, but does not leave much meat in the deal. What should these things cash flow? I like to analyze deals like this to get better at them and know a great deal off the jump when I see it.
Originally posted by @Belinda Lopez :

So the NOI is $110,750- does that include management expenses for the Mom & Pop owners? At $110k NOI/$1.5mm asking price = 7.4% Cap Rate. That's not a great deal unless they are owner financing at 4% or lower. We like to buy at 10% Cap Rates or higher.

The 27 owned properties - are these RVs or Mobile Homes?  Park owned units and renting is a tough business model as your maintenance costs will be very high.  What is the base lot rent not including the home rents?

I'd agree that 7.4% Cap rate is too low. From what I've heard you want to have at least a 3% spread between the interest rate and the cap rate.

I'd take the deal at $500k or less.  37 lots @ $250/month with a 50% expense ratio.  Homes are valued at $1 each. Not what they want to hear but with those financials you can't get bank financing so it's either cash or hard money.  Unless they are willing to show Tax returns that support their stated income/expenses.  Note their expenses show $0 for mowing, repairs, appliances, make ready, mgmgnt time  - Nada!  That stuff alone is a good $40-$50k.

Offer to do a Master Lease Purchase option.  You lease the property for two years, create bank ready financials and then exercise your purchase option with a sales price of $800k.  Within that time you can sell all the home via owner financing, raise lots, fill the vacancies and have a decent cash flowing property.

Send me an NDA/NC and we can talk more about some options if you'd like.  I'm interested in parks like this for the right price.

Why are they selling the park?  Do they think the $1.5mm will set them up for retirement?  do they realize what their tax bill will be on that amount?  If they owner financed or did the lease purchase option they can almost eliminate taxes and get a much higher return than if they put that money in a bank.

My thoughts exactly. Take the 27 owned homes and offer to sell to current tenants. $1000 down and 250/mo for 3 years. Loose maint costs. Keep lot rent at $250ish. Add homes to 9 vacant pads and do the same. Have a parking lot in 3 yrs that makes $250/lot. It still has a pool and 2 small homes on it I would have to keep up and rented. My numbers put me around $750k. Think that have been trying to sell for a while. After I close on my commercial auto shops in Oct, I’ll be investigating this deeper. Just listened to both of Jefferson’s podcasts about MHPs. AMAZING info.