How to evaluate or buy an RV Park

[Charlie Rushton]

Hi There,

I am trying to understand how best to value an RV park. What are the value add components that one should consider, like amenities. Are they a year round revenue stream or more geared towards vacation rental metrics.

Any insights hints and advice would be welcome.

Is there an RV parks forum on here. I couldn't find one

Is anyone actively buying RV parks ?

Thanks

[Frank Rolfe]

RV parks are evaluated more like a regular business than most other real estate sectors. Take the last three years' Profit and Loss statements and average them together. Compare to the tax returns for some degree of confirmation. Apply a cap rate roughly 2 points higher than mobile home parks. In diligence, compare the prior annual revenue to the reality of electrical usage (come up with a constant of power cost per day per occupied space and then take the actual power bill and see roughly how many occupied units you have).

Much of RV park and mobile home park is 100% overlap: how to find them, negotiate them, do diligence on them, renegotiate them, finance them, turn them around and operate them. The big differences are that RV parks are typically amenity rich which requires more overhead, can be seasonal in nature (but not always), require a nearby destination to work well (as opposed to employers), and use values that are typically 2 points higher in cap rate. The same loan brokers that do MH also do RV, as do the insurance companies.

We own both, and the only benefit of an RV park is that -- if you find the right one -- you can ramp up revenue faster because it costs you nothing to fill a vacant lot. If mom and pop did poor marketing and you bring in professional-grade internet SEO and other methods you could theoretically double your revenue in one year without any additional cap-x. You could never do that with a mobile home park unless you can double the rents in one year (which would be world record). To fill a vacant mobile home park lot typically requires bringing in a home and selling it, while filling a vacant RV park lot simply means somebody pulls in their motorhome or travel trailer.

Think of RV parks more like owning a restaurant (and the hands-on management that entails) while owning a mobile home park is more like owning a parking lot that rents spaces out monthly and is much more passive in management.

Some people just prefer one business model over the other.