IS BUYING A RV PARK WORTH THE INVESTMENT?

Do you enjoy people? Do you like being outdoors? Do you like being your own boss? If the answer is “no”, then buying an RV Park is the worst thing that you could do. If you answered “yes”, then read on and learn more about owning an RV Park.

The Financial Side of Owning an RV Park.

RV parks are a very high-yielding investment, with returns from 10% to 20%+ on your money. RV parks are among the highest-yielding of all real estate asset classes. So if your goal is to maximize the return on your money, RV parks are not a bad starting spot.

Another strength to RV parks is the fact that most are owned by moms pops – smaller owners who have no debt and, therefore, the ability to carry the financing on the transaction. When the seller carries the financing at a low interest rate, it compounds the yield you can make on your money thanks to leverage. Leverage, as long as the interest rate on the loan is lower than the cap rate of the deal, will give you an even higher return. So, even if RV parks sold at the same return level as other forms of real estate, they would still kill the competition due to seller carry.

It’s also important to note that most seller carry is does not require any kind of credit review of loan committee. If you have bad credit, you can still pull off a seller carry loan. Most moms and pops do no type of loan scrutiny, and don’t even require some third party reports like an appraisal. Additionally, most seller carry is “non-recourse” in nature; even if you default on the loan and property is sold at a loss, they note holder cannot come after you for the deficiency.

The Non-Financial Side of RV Park Ownership

To many owners, running an RV park is so much fun that they’d do it for free. While we don’t advocate that you go that far, the types of duties that owning an RV park include are very appealing.

Where else – outside of an RV park – can you devote your day to fun? And of all the duties that you inherit, they break down into three main categories:

* Giving people a wonderful experience away from home. Your customers are looking to you for guidance and support. They want to hear about things to do, things you recommend. They are your guests, and they need you to help show them where to go and how to hook up their utilities. Many just want a pleasant “how are you doing today” to re-assure them that they made the right choice in pulling into your RV park

* Fixing things on a continual basis in the out-of-doors. If you are a hands-on RV park owner, you will be forever tinkering with everything from the swimming pool to the landscape. You will be a jack-of-all-trades who needs to enjoy working with your hands outside. Even if you have a maintenance man and just ride around on a golf cart, you are always going to be multi-tasking.

* Being the boss. Every problem is going to stop with you. You have to be the decision maker. You’re the one who makes the call on if you can give a discount to the 10 snow-birds passing through as a group. You have to decide on the advertising. Everything is you, you, you. In being the boss, you also have complete freedom over your time. You set the schedule and the hours of operation.

One of the biggest non-financial benefits of owning an RV park is the quality of life upgrade. Many people love the lifestyle that owning an RV park affords. The freedom and the fun. Many RV park owners only have one regret – that they did not buy an RV park sooner.

Some Additional Considerations.

Owning an RV park can be a source of creating an estate for your heirs to enjoy. While many people fritter their savings away when they retire, an RV park owner can spend every last dime the park generates, and it just creates a new stream of cash flow the next day. So you are actually building an asset that may not only be your source of enjoyment, but provide for your heirs as well.

A successful RV park can be worth $1 million or more. It can be a multi-generational gift to many people. A way for you to create an important estate on only your down-payment and sweat equity.

Conclusion

Owning an RV park is well worth the investment. It can provide financial and quality of life benefits that far outreach any stock, bond, CD or other form of real estate.

Isn’t it worth the time to research the RV park industry more? But don’t call me – I’ll be out on my golf cart.

Frank Rolfe has been an active investor in RV parks for nearly two decades. As a result of his large collection of RV and mobile home parks, he has amassed a virtual reference book of knowledge on what makes for a successful RV park investment, as well as the potential pitfalls that destroy many investors.  www.RVParkUniversity.com.

HOW TO BUY A RV PARK

With 10,000 baby boomers retiring per day, there has never been more demand for RVs and the retirement lifestyle of traveling America in an RV. And with more RVs on the road (currently over 8 million of them), they all have to have a place to park for the night – or head for a destination. Many Americans are taking advantage of this demand by buying RV parks as an investment. But how do you successfully buy an RV park?

Normalize the numbers

When looking at the financial statements for an RV park, it is important to “normalize” these numbers through averaging. Don’t buy an RV park based on one year’s revenue. Numbers can be flawed due to unseasonably cold or warm weather, or even because of local construction projects and the price of gasoline. You need to see several years of statements to get a true handle on how much the RV park can be expected to produce in income.

Look at current performance

At the same time, you have to focus on the current numbers on the RV park. Declining revenue over several years can suggest that there are bigger problems ahead, while growing income means just the opposite trend. The most accurate reflection of reality for the RV park is what you have going on right now. So when you average the numbers, you are hoping that they support the current revenue, and that the current revenue is up from the prior year. Any other setting means that you need additional caution and probably a lower price for the property.

Evaluate based on a rate of return

Even though RV parks can appear fun and attractive, it’s still all about the money. You can’t overpay for an RV park and have a happy ending. Before you being looking at RV parks to buy, you need to determine what rate of return works for your goals. If you say to yourself “I need a 20% cash-on-cash return to feel good about this investment”, then you know that you need to buy a park at a 10% cap rate with 80% leverage in the form of a loan. Your focus should always be on the math. Where many buyers screw up is that they buy based on scenic beauty or pride of ownership, and lose sight of the big picture, which is all about the money.

Factor in capital improvements

Remember that the total cost of a project is not only the initial price, but also the cost of the improvements. Some buyers forget this simple fact, and only calculate their rate of return on the original price of the RV park, not counting any improvements. We have seen cases in which the renovations to the RV park can cost as much as 50% of the total purchase price, which can reduce a perceived 10% cap rate down to 7% — which can make the entire RV park upside down on day one.

Leave room for error

Things happen. You need to always be ready for a rainy day. Don’t put too much down on any RV park deal – leave yourself some money in the bank. In addition, don’t cut your budget too tight. If the RV park can make $5,000 per month, don’t saddle it with a $4,999 per month payment. Remember the old saying “under-promise and over-deliver”, and put in a bunch of “padding” into every number you budget. That way, if your estimates were off – or the market dips temporarily — you’re still O.K.

Perform great due diligence

Benjamin Franklin once said that “diligence is the mother of good luck” and that’s as true in RV parks as any other type of real estate. Don’t leave your investment to chance; increase your odds by performing good due diligence.

Don’t take risk without sufficient reward

If a seller is wanting you to buy an RV park with poor financial information, or declining revenues, or it’s located in a sketchy area, or the survey shows it’s in a floodplain, then the price of the park just went down substantially. You have to be compensated for greater risk by higher return. Don’t let the seller try to convince you that the perceived problem is low-odds and not worth worrying about. Every risk is real and must be accompanied by a price concession. Another way to overcome troubled deals is by having the seller carry most – if not all – of the financing on the deal. That transfers the risk back on the seller, and insulates your potential loss if the deal goes bad. It’s been said that all bad deals can be fixed with zero-down seller carry, and that’s not far off.

Conclusion

RV parks can make excellent investments, but only if you use common sense and focus on the money. There are thousands of RV parks in the United States, so don’t stretch or rush to buy the first one you see. Mitigate risk and do great diligence – and stay completely focused on the rate of return – and you should be able to find the RV park of your dreams.

 

Frank Rolfe has been an active investor in RV parks for nearly two decades. As a result of his large collection of RV and mobile home parks, he has amassed a virtual reference book of knowledge on what makes for a successful RV park investment, as well as the potential pitfalls that destroy many investors.  www.RVParkUniversity.com.