Found a RV park lead, now what?

Question

I have found a mom and pop owned RV park that is willing to sell.  It is located near Portland, Oregon.  I don't even know where to begin.

My experience;

My wife and I managed a 16 unit apartment complex for three years.

The park;

about 50 units, 385 per space, 4 park owned homes (2 double wides, 2 single wides) most of the rest are RVs.  Long term renters, just under 10 acres of property. Located on a main road.

City water, city sewer, (don't know right now if it is all separately metered)

WIth some of the formulas I have seen thrown around

lotsxrentx12x0.7 operating expense/0.1caprate= rough ask price

50x385x12x0.7/0.1= 1,617,000

Does that seem right?

I approached my lenders, but with my lack of experience in mobile home parks, they said NO.

I didn't exactly give them the best presentation regarding the opportunity, but I thought I would post today and see what suggestions some of you may have.

Thanks,

Joe Young

Joseph Young · Answer

Curt,

Thanks for correcting the analysis, I had seen that formula in another one of your posts,

https://www.biggerpockets.com/forums/30/topics/354...

Did I read it wrong?  Or is this just a different situation?

Curt Smith · Answer

@joseph

You may have under appreciated Jay's terse comment.  Parks that have any percent RV are often not financable by banks... Why? You might ask why.  Banks (Lenders including folks like Jay) know RV is very risky, often seasonal, and at any point folks can twist their keys and drive off and maybe all at once.  So banks value parks at near zero.

Your use of 30% expense ratio is crazy low.  I'd use 70% expense ratio at best to account for vacancy.  IE multiply by 0.3 not 0.7.   Then that offer price might be too much.   Most of these kinds of deals need seller financing.  You need to convert to mobile home park as you can to have a permanent income base.

I suggest staying away from RV especially if you have never ran an RV park.   You need fun weekends with music, a pool etc etc way WAY too much work keeping folks parked and paying.

Joseph Young · Answer

My biggest interest right now with this lead is to gain some experience and make some contacts, so thanks for your input.

Jon Q. · Answer

Jay knows the Portland market.  I'd talk to him or contact me.  I know a mobile home park investor that may be interested and, if so, may offer you a referral fee.

Joseph Young · Answer

As I study the issue, I realize that the owners can make money because they own it outright.  But financing it the way I need to will not give me the profit I need.  They have let the park get bad, but don't have the energy to make it any better.  They have milked it for all they can, but also don't have the energy or vision to take it where it needs to go.  They don't want to see their life's work turn into a large apartment complex, but the market has it's demands.

Steve Moody · Answer

Every street in the city of Portland is a free RV park full of druggies, why would anyone pay to stay in one? If there's value in the land perhaps that's the play, but I wouldn't count on making money off of RV parking in Portland.

Jay Hinrichs · Answer

I just bought one like this.. its a niche.. and not financeable most likely.

if you want some help on it ping me..

John Arendsen · Answer

I'm not quite getting the formula you're demonstrating especially the cap rate part.

"lotsxrentx12x0.7 operating expense/0.1caprate= rough ask price

50x385x12x0.7/0.1= 1,617,000"

But all that aside you kinda summed it all up with great candor when you referred to the druggies. That's definitely not a very positive sign. Had you said a bunch of seniors, even if on welfare, that would have gotten some attention albeit not at that price point. At first glance that's about 32k/space which seems pretty pricey to me for an RV park the way you've laid it out.

I go along with the highest and best use and potential redevelopment. However, that would require rejoining and if Oregon is anything like Cali they covet their low income affordable housing lots and getting something like that accomplished can tie you up for years and cost so much more than the land would be worth at the end of the day. But then again that's in Cali.

Joseph Young · Answer

Jill, Thanks for the tip, I will check them out.

Jill F. · Answer

I took a class on campground/RV Park investing offered by Darrell Hess and Associates (a campground broker) out of NC. I decided not to go this route but his class was worth the money. I would suggest contacting him and buying some of his printed materials on analyzing campground/RV park deals.