Purchasing a marina & RV park - may need due diligence assistance

Rental Property Investor · Scottsdale, AZ · Member since 2012 · 314 posts · 146 votes

I'm trying to acquire a boat marina/RV park and need assistance with due diligence. I've owned apartment complexes and SFRs but don't have experience with this asset class. Seeking an experienced person/investor to assist with due diligence. Thank you!

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

11y

I have done some RV stuff... not done any marina's however well located assets of these nature can do VERY well... although you need POP security systems ect.

also I guess it goes without saying if your buying in the west on a lake watch out for drought conditions... many marinas are on dry land now.

RV's will have pretty rigorous sewer system requirements if they are not public sewer... so want to watch that.

And of course on site management and a way to control the cash. its easy for management to steal in this business... so you need very good security and POP cameras etc.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
I have done some RV stuff... not done any marina's however well located assets of these nature can do VERY well... although you need POP security systems ect.
also I guess it goes without saying if your buying in the west on a lake watch out for drought conditions... many marinas are on dry land now.
RV's will have pretty rigorous sewer system requirements if they are not public sewer... so want to watch that.
And of course on site management and a way to control the cash. its easy for management to steal in this business... so you need very good security and POP cameras etc.
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Jason Hartman
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Rental Property Investor · Scottsdale, AZ · Member since 2012 · 314 posts · 146 votes
11y
Thank you @Jay Hinrichs! That's good advice!
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Belinda Lopez
Specialist · Houston, TX · Member since 2012 · 579 posts · 301 votes
11y
We have been in the process of helping sell a similar property with Boat/RV Storage, RV Park and Marina all on private well and septic. The due diligence checklist is about 20 pages long and the stack of documents provided by the owner is about 5 inches thick and we're not done yet. It includes complete financials, tax returns, insurance policies, utility bills, equipment purchases, rent rolls, Seller's Disclosure on the property, list of vendors, TCEQ (TX State dept over the well) records on the Well, etc, and we've yet to get a complete inventory of all equipment that is conveying with the property (which is why there is a delay- frankly, I don't think the Seller is quite ready to sell yet). So far, there is no Environmental Phase 1 or other needed but that may need to be done as well since there was an old gas tank for when the Marina used to sell gas, they no longer do.
This property also has a restaurant so that is another issue and more inspections. Nothing happens quickly so make sure you are giving yourself LOTS of time for proper due diligence. If the Seller balks at giving you anything you asked for in the contract, remind them that they wouldn't buy a car without test driving it and inspecting it; this is no different but much more complex. You will also want to have searches done to see if there are any active or previous lawsuits against the property and the owners. Good Luck!
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Jason Hartman
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Rental Property Investor · Scottsdale, AZ · Member since 2012 · 314 posts · 146 votes
11y
Thanks @Belinda Lopez!
Wow, that's a lot of work! Is there a way can find a checklist like that? Much appreciated!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Jason Hartman
I think the real test here is your not only buying a cash flow Asset but your buying and on going business with all sorts of moving parts.. .IE sundry shop or restaurant or pay showers or not... laundry etc etc.
Much more to these than running a flat out multi ... were the only other item maybe communial laundry.
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Jason Hartman
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Rental Property Investor · Scottsdale, AZ · Member since 2012 · 314 posts · 146 votes
11y
Good points @Jay Hinrichs!
We're not planning to run those businesses, just to be their landlord but I do agree that it's more complex than the apartment complexes we have. The creative side of this project is exciting, just hope it all goes well.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Jason Hartman
this got me to thinking a friend of mine from Monterrey buys distressed RV parks nationwide.. and most of the ones that are distressed are so because of the ancillary components. IE fun park restaurant etc etc... the park themselves usually do just fine its the other factors that make them targets for take overs as the existing management just can't run the whole show effectively.
So I guess if I was looking at it from your position I would want a good enough deal that your ground leases for these other activities leave enough room for the operator to make good money and it still works for you.
I foreclosed on one RV park I made a loan on here in Oregon and it was a nightmare taking it over.. it was on sewer and water the .. Sewer system was all but condemned because of lack of proper maintenance I was able to save the well and water system.. Then the resale as we took it over was very tough... we actually had to moth ball it because we just could not run it effectively as lenders in possession.
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Jason Hartman
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Rental Property Investor · Scottsdale, AZ · Member since 2012 · 314 posts · 146 votes
11y
Duly noted, @Jay Hinrichs
These are definitely more complex than my SFR and apartment deals but that complexity may lead to opportunity too. Thanks for the insights!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Jason Hartman
NP lets us know how you make out it sounds like a fun project...
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Jason Hartman
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Rental Property Investor · Scottsdale, AZ · Member since 2012 · 314 posts · 146 votes
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Thanks @Jay Hinrichs
I'd love to chat about your Turnkey Reviews sometime. I took a look and forwarded to some of our staff too.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
sure thing... its a pro bono adventure at this point LOL
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Belinda Lopez
Specialist · Houston, TX · Member since 2012 · 579 posts · 301 votes
11y
http://www.biggerpockets.com/renewsblog/2013/04/26...
Here's one for a MHP but applicable for RV parks as well.
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Jason Hartman
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Rental Property Investor · Scottsdale, AZ · Member since 2012 · 314 posts · 146 votes
11y
Thank you, @Belinda Lopez!
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Belinda Lopez
Specialist · Houston, TX · Member since 2012 · 579 posts · 301 votes
11y
Good point, Jay. I always say "the park takes on the personality of the owners." If the owners are good business folks,then the park will be run efficiently, maintained and cashflow well. In distressed parks, you almost always see an absentee owner or one who is treating the park like their own personal ATM, taking in as much cash, under reporting rents for tax purposes and letting the place look run down to keep property taxes low. In some cases, it's the park manager who is skimming but we've seen both. The hardest part is getting the books, the 'real' books to show the actual park income and expenses. Many owner/operators pay themselves from proceeds but don't show any actual management expenses. There is no way to track actual rents b/c they are not depositing all the rents into any one account. I swear I have one owner who must have it all piled under his mattress!
Even when we offer to have someone create proper books for a minimum of a six month period, they balk at letting anyone actually see the true financial picture of the park. You can't help them and while you can estimate, it's not a park a commercial lender will lend on for purchase. We now have banks who will refi with 2-3 months of solid books from the new owners but the purchase has to be done with owner financing or hard money at a very low LTV (55-65%). We explain upfront and over and over again that Buyers can only buy on the actual numbers, not on Pro Forma, and the pricing recommendations we set out are based on actuals. So many Sellers "feel" their park is worth more b/c of intangible things like "all the hard work they put in" or having owned it so long, or b/c nearby land values are rising so it's hard to get them to understand why the numbers are so important. I track every inquiry and offer when we market a park and I showed one owner a spreadsheet with over 100 inquiries that led to about 30 closer inquiries that then led to 4-5 site visits and all the comments were the same as to why they passed on the property. That finally did help bring the price down to a reasonable price but it took months for the owner to budge on what he 'felt' the park was worth.
Several owners have added self-storage but all say that the ROI on adding more spaces is better than any other use.
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