Anyone have any advise for purchasing an RV Park?

Question

I have a meeting with the current owners later this afternoon and am curious if anyone has any advice on the purchase of an existing RV Park? I have never done a deal like this and would like to know what I should be looking for.

Account Closed · Answer

Location is everything. It needs to be on a route that a lot of RVs travel or it needs to be near a tourist destination. Ask for a rent roll. Proof of how many slots were rented for what length of time.

Treat it like you are buying a small apartment complex. Fuel costs, water costs, sewage costs, how much does the store make and what are the costs of running the store, coin operated washer/dryer/showers.

What are the local attractions to promote to get people to your park, and so.

Ask why they are selling.

Ask what they would do to improve profitability.

Jack Martin · Answer

@Blake Wilson As an owner of both MH and RV parks, I get a lot of investors asking me about the differences and thought it would be good to share some perspective here.

MH and RV can behave radically different, but they can also behave very similarly. It all depends on the location of the park and whether the residents live there full time or not. (or pay all year, whether they live there all year or not) Before I share the case for the RV park that behaves similarly, let's cover the main differences in a traditional sense.

MH Parks

• Inherently more stable assets, especially if all the homes are owned by the residents
• Easier to manage once the park is stabilized
• Filling vacant spaces requires moving homes, setting them up, making renovations, marketing, sales, and potentially carrying notes
• Residents tend to stay long term
• Capable of producing extremely stable cash flow, with the ability to perform through a recession

RV Parks - A traditional RV park has transient traffic that moves in and out of the park. The traffic is made up of motorhomes, 5th wheels, and travel trailers, that are often referred to as “rolling stock”.

• Inherently more volatile and behave more like a motel
• Require a lot higher degree of management than MH parks, especially if the park has daily traffic
• You can fill up an RV park way faster than a MH park (a MH park can also benefit from RVs if there are vacant spaces)
• Depending on the location, residents stay for a night, a week, month, or a season
• Capable of producing higher cash flow than a MH park, but with volatility due to seasons and market cycles.

In the traditional sense, MH parks are more stable and RV parks are more volatile. However, there is a case for RV parks that more closely mimics a MH park when the location is appropriate for a full time living solution.

The nature of RV parks can also vary across a wide spectrum. On one end of that spectrum, a park with 100% PMs (park models) can look, operate and perform similar to a mobile home park. On the other end of the spectrum, a 100% transient park with daily/weekly rental traffic, will operate and perform more like a hotel. Those are widely different investments requiring a different set of management skills, operational philosophy, and risk assessment. To take that a degree further, a 100% transient RV park in the middle of nowhere alongside a major freeway will likely always be a 100% transient RV park, where that same park in a good location in a strong MSA could be transitioned over time to a PM park where tenants call that a home. So location will be a major factor in determining the potential strategy for the park.

Let's touch briefly on the term "long term tenants". The way I would assess a long term tenant is really about two things. First, do they own their unit? In our eyes, a tenant that is simply renting the unit can gather their things and leave whenever they want, so the way to determine if they really have a vested interest in staying long term or not starts with them owning the unit. Second, is the unit permanent? RVs that can be driven away at the drop of a hat are not considered permanent, even if the tenant says they plan to stay. PMs are considered permanent and rarely move. With RV's you can quite easily see if a tenant plans to stay long term by the work they have done around their RV, so it doesn't really matter what the previous owner tells you about their intention to stay. Most long term parks require tenants to fully skirt their RV (so look for skirted units) and most tenants who really are staying long term will build an addition, deck or patio, install a storage shed, create a garden, and show other evidence that they have made this their permanent home.

With that established, you can underwrite an RV park similar to a mobile home park if the above description of long term tenants is present at the park. Your expense ratio will be higher than a MH park depending on how many transient spaces you still have, the hours of operation you keep for your onsite staff to accommodate new arrivals, and the amenities at the park that create additional expense. Also, most RV parks are master metered for electric, so that will be different than a typical mobile home park. And, don't forget that some parks will have a "peak" season, "shoulder" season, and an "off" season, all with different rental rates and historic occupancy, particularly if the park is in a location that caters to snow birds.

If the park does not have long term tenants like described above, then you have more of a "rolling stock" park and it will behave much differently. Keep in mind location will be the most significant factor in the potential for long term tenants on this kind of park. As mentioned earlier, if it is on the side of a freeway out in the middle of nowhere, you simply cannot count on there being long term tenants, even if the current owner is telling you that. Conversely, it is possible for a well located park in a major MSA to have all rolling stock RVs with no skirting or evidence of intent to make it a permanent home, yet the tenants have been there long term. Location, location, location.

All the best!

Jack

Blake Wilson · Answer

@John Farady thanks another for the feed back I will take all of that into consideration when meeting with them

Anyone have any advise for purchasing an RV Park?

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