Evaluating an RV Park

[Mark Turner]

Hi, looking for a way to evaluate an RV Park?  

I am familiar with evaluating SFR and MFR as I own those. Ideally, I'd like a primer (tool) to help with the financials. I want to physically look at locations, gather the right information and model them as a way to better understand the business.

[Belinda Lopez]

RV Parks are completely different than MHPs.  I classify RV Parks into either Resort or Residential.  The Resort are the higher end KOA/Good Sam Parks with lots of amenities and overhead.  Turnover is high and often seasonal.  Residential parks are very similar to MHPs.  We have some RV 'guests' who have been in their same spaces for over a decade!  Utilities are usually included but electricity is often billed back to monthly renters.  There are no "tenants" in RV Parks, they are guests so can be towed out quickly if they cause problems.  

So how do you evaluate these too often overlooked cash cows?

Same as other income properties; cap rate, cash on cash return, cash flow, IRR, whatever formula you prefer. Different investors are looking for certain things so it's never a one size fits all. If the owners are willing to finance at better than commercial rates that can make the difference in price. Most folks are looking for at least a 10% or higher cap rate, stable income with some potential upside. Is there room to expand? Is there room to raise rents? What is the clientele like? Do the owners self-manage? or pay staff? What are the neighbors like? Do they call the cops often? will they block you with the local authorities if you want to expand?

Financials are critical and many Mom & Pops are not the best bookkeepers.  RV Parks financials are all extremely similar and the only variations we see are management costs and what the owners are writing off for taxes. If they don't have CPA approved financials then it will be difficult to get bank financing.  We encounter this a great deal but it doesn't mean you can't get the property financed easily.  Local banks familiar with the property will often work with you as long as the appraisal and inspections are good.  Don't discount hard money loans to purchase a park and then you can start the refi process immediately with your books; which you will have a CPA do immediately.  

Why do you want to invest in an RV Park? What is it about the model that appeals to you over other types of investments?  It's easier than some other types of investments (apartments) yet a little more complex than single family homes.  Are you going to self-manage or hire a park manager?

Good luck!