Denver, CO · Member since 2015 · 2 posts · 0 votes
I wanted to hear from folks in the West Texas region regarding the RV parks vacancy and unemployment rate with the current oil price being so low. I'm evaluating at a RV Park purchase and they claim it's 100% occupied and since it is in Delaware basin it's not affected by the current oil price but won't share the current P&L until I get it under contract. So I'm interested in getting some actual feedback from the ground since I'm out of state. Thanks!
To say they are not affected by the downturn in oil prices is ridiculous. While there are still projects going on that were funded prior to the downturn, new projects are not being funded. In many cases, the oil companies have rented these lots for 1-2 years at a time and eventually those agreements will expire and occupancy will drop dramatically. I would be very very conservative in considering any project in West Texas at this time. Many of the smaller communities go up and down based on the price of oil.
To say they are not affected by the downturn in oil prices is ridiculous. While there are still projects going on that were funded prior to the downturn, new projects are not being funded. In many cases, the oil companies have rented these lots for 1-2 years at a time and eventually those agreements will expire and occupancy will drop dramatically. I would be very very conservative in considering any project in West Texas at this time. Many of the smaller communities go up and down based on the price of oil.
We've been working on several large RV park sales and none of the owners want to release full P&Ls until they are in a earnest funds contract even though the Buyers have already signed NDAs. The concern is that some of the potential "buyers" are really just competitors looking for industry info. You can write in certain contingencies or start with a small earnest funds amount and then the P&Ls are released and then more earnest funds can be asked for. One Seller was selling to someone he's known for a very long time and his words were, "He has to pay something before he gets a look up my skirt."
A seasoned buyer should be able to evaluate a deal based on general numbers and cap rate and other factors. If they want to move forward, they can expect to put up at least a 1% earnest funds and then be willing to use part of that as an option fee to the Seller to take the property off the market.
Thanks all for your response and sharing your wisdom. With the oil price still on the downward trend and with prediction from the experts that it will stay low beyond 2016, I see this as a big risk. If the companies have rented space for couple of years then it might be OK. I was hoping to hear from RV park owners in West Texas to get their take on the state of things. Thanks again!