How to Structure an Equity sale in a new RV Park

Question

Evening. I have been pouring over my numbers for over a year now and have it as dialed as I can get it. Its time to pull the trigger but I am not sure on the direction I want to go right this second.

I own the property out-right (118 acres), I have done all my market research, built my construction budget, built my pro-forma and projections and designed the whole thing. I have gotten all the variances and most of the permitting done, and practically have approval for the construction loan, I just MIGHT not have the cash to float construction for 12 months. My options are sell the whole project, bring in an equity partner, or just wait it out and hope I can prove I can float it. The bank is pretty much ready to go, I'm just cash strapped in another project.

I need some help, family. I am seriously considering doing an equity sale to someone who approached me. I have no idea how to structure this thing since everything is speculation at this point. They have asked if I would be willing to do it and I am strongly considering it. I could really use some help and guidance on how to structure this thing so that I am not giving everything up or creating a long-term problem for what is actually a short-term solution.

Any help at all would be greatly appreciated.

Henry Clark · Answer

If you're just looking for an equity partner, please disregard the following.No particular order:1. Have an RV person go over your plans.2. Re-orient all of your parking to back in on your left shoulder and not your right.3. Put your overnight or 3 day and cheapest parking up front with no amenities. Color code your lots by pricing plan for your banker or investors.4. If the above is your layout. Do you have a two-sided dump and water stations? For your long-term parking spots, put sewer and water. You're in Arkansas and the ground freezes so you have to plan accordingly, with depths and turn off/blow out valves and sections.5. Do the above in 4 phases.6. 118 acres is a lot of ground. Make sure this project does not cut off value for the rest of the land.7. If this is the only phase, move the office/utility house to the front, in the middle. Will save you on electric/sewer/water install costs. Also answers their question, where do I go.8. Interest only during construction and rent up phase. Convert to long-term financing at end of these phases. See if you can do an SBA loan, at 10% down. Make sure you factor interest into your budget during this timeframe.9. Sell your house and move into the office. This will bring funds to this property. Don't tell your banker you plan to live there.10. Based on my notes above, recommend you do a revenue and pricing plan by week for the year. Don't use % assumptions covering the full year. Understand the realities. Example: All major holidays require a Week rental. Weekend rentals require 3 day rentals. Overnight just during off season or not holidays. They pay for dump, water and laundry services, since those spots won't have them. All payments up front.11. What are the different dimensions of the parking spots. Should be different dimensions for 2 or 3 different sizes. Recommend 30 and 50 foot spots. May physically be longer. 12. The triangular sections in the middle to the right. Change to parking towards the outside. You want similar size parking spots across from each other. This makes the most money out of your driveways. Don't put a 50 foot spot across from landscaping or a 30 foot spot. This wastes the driveway cost. Also don't do any pull through parking unless you plan to charge them 50% more, your losing money.You bought the ground right. It's a matter of location next.

Mike Reynolds · Answer

Imagine that. I have been thinking about building an RV park in AR but don't have the land. I also have dirt moving guy. Shoot me a pm.

Henry Clark · Answer

Above:1. Drive around and find a neighbor that has a 40 foot or larger RV or a 30 with a Dually. Talk with them over the plans.2. Put some cones on the ground oriented one set to the left and one set to the right and park with your car. Which one is easier? Then close your right eye and do it again.3. You want product offering, not just the same product. High end, mid, low end. No matter what your product is, you want variety. Plus lower your cost to build and generate more revenue.4. I'm talking about a sewer dump station and a water station. Your putting sewer at each location, which I don't recommend. Read 3 above. Put in a Sewer dump station and water station. This will be for renters who just rent for 1 week or 3 days. Would not build your model just totally around long term stay.5. Versus building the whole thing at once, build it in phases. Unless you have a ton of money. 6. Great.7. Look at other RV parks.8. Construction other than the office should go quick, so 12 months is fine. I would ask for 18 months on the rent up phase versus 6 months. Then try to convert to an SBA refinance loan later. But you can't use an SBA loan property for future collateral on other projects, unless SBA also.9. Find two of the long term renters and give them free or partial rent for managing. Mowing grass, weeds, contracting renters, etc.10. Doesn't matter. Go through the exercise. Read 3 above. Also, when looking at other locations differentiate between week/weekend campers and long-term campers. Two different price points and amenities. You're setting up just for long term, which I think you will be losing more profit.11/12. Gave you, my recommendations. If you have the excess cash to put in, then go for it. Hard surface roads don't make money.You have a great project no matter what. Make sure there is a reason for that location.

Henry Clark · Answer

Noticed you didn't even vote for my post.

Logan Ingram · Answer

I really appreciate the reply and you have given me a lot of things to think about. I am definitely leaning toward the equity sale. 1) I don’t have personal access to anyone who has done rv park. Just banks and others who know some of the area number$ 2) why reorient if driveway is 2-way? I would think it would block the intersection. 3) all spots will have all hookups (30/50, water, sewer). Lake front lots will be the most expensive and drop in price the further away from the water they are. 4) was not planning on 2-sided. Location would be rear/middle driver-side. 5) Not sure what this means (4-phases). All construction will be done at the same time. 6) there are other entrances to the land and it will not cut any of it off. 7) thank you for this suggestion. I have struggled with it and have decided to move it per your advice. 8) bank has already agreed to $0 down (land equity covers) and 18 months interest only (12 month construction and 6 months to cash flow)9) I have zero interest and zero plans on living there. We will bring someone in. I live 15 minutes away and office 4 minutes away. 10) the numbers are based on % only because I have no access to real numbers. I have personally tracked and driven through all area parks and counted occupancy for the last 16 months. I show up on weekends, holidays and random week days to county actual occupancy. 11/12) because of the amount of room we have I am doing ALL 30x50 spots. There are a couple of pull-throughs.