How to analyze RV PARKS? 🚐

What are RV parks? RV stands for recreational vehicles. RV Park is where people with recreational vehicles can rent sites to stay overnight, or longer. Renters may stay for one day, weeks or even years! RV parks will have a leasing office with possibilities of having a recreational center, laundry, restrooms, dog park, playground, and more. The more the luxury of the park, the more amenities the park will have like a swimming pool!

RV Parks are great commercial asset due to being cash cows and even recession-proof within the right location. Class B and C are the best recession-proof with Class A (luxury) is the least recession-proof. What else is cheaper than buying a $5,000 RV and living on an RV PARK for $350 per month (including bills). The main competition is C/B Apartments, mobile home parks, and hotels.

Not only will you be making money, but also be able to provide affordable living to many Americans with RV parks (C/B). Wealth Inequality is real with the majority of the wealth going to 10% of the population. Big commercial players are not competing in the RV park game, so much less competition compares to mobile home parks or multifamily. Finding deals are much easier in the RV park space with higher returns.

I calculate my offer price with this equation. Click here for my blog on valuing any commercial real estate.

MAX OFFER PRICE = (.70 X VALUE) – Repairs

The max offer price will be 70% of the value of the RV park and minus any repairs.

  1. Location

No Surprise here! I always look at the location for every property. Is development occurring in the area? What are some key organizations near the station, like university, hospital, or a corporation? I love RV parks next to hospitals or a very important road. If I don’t believe in the location, such as the property is in the middle of nowhere or too hood, I won’t even continue anymore and will throw the lead away!

How many cars are passing down the road? You can check Transportation Planning Maps for the annual average daily traffic (AADT), which is the number of vehicles that go through that point on the road per day.

Texas Department of Transportation

https://www.txdot.gov/inside-txdot/division/transportation-planning/maps.html

How much is the frontage of the property?? If the land is worth a lot, then the property is at least worth the land, but there is always an exception. What are the income and house prices in the area? How much is the population increasing? I like to see a 1%+ growth per year in B and A locations.  

If I like the location, then I go much deeper into analyzing RV PARK. If location sucks, do not continue any further! Trust me. Location means everything. Some investors rather buy cheap land and cash flow with RV parks. I like to buy land plays meaning the land is worth much more than the property and may one day be bought by a developer. I do not mind paying extra money for quality land if cash flow is there! I want to own RV parks where the land is worth a lot to future developers. I believe in cash flow, but also land appreciation!

City-Data (Collects data from government/private sources)

http://www.city-data.com/

DUE DILIGENCE TIP:

You can use software like Neighborhood Scout to simplify the data and give you growth projections (on appreciation, population, job and more). I highly recommend it!

https://www.neighborhoodscout.com/

  1. Water/Waste

The #1 trickiest part of an RV park, where is the water coming from and where is the waste going? There are two types of water/waste system which is city connected or septic system/well.

Many RV park investors I know only invest in city water and sewer, meaning the city takes care of the water coming in and the waste coming out. It is much less of a hassle than using a septic system and well for your waste and water. Although the septic system and well is a hassle, RV parks can still be very profitable. You must take account of CAP ex cost of the septic system and well. Even the city utilities will have fees for the use of their system, but at least you do not have to worry about maintain it directly. That is the county’s job.

I do not care how old an RV park is. If the RV park needs a replacement for electrical, I will include it as a repair cost to my offer calculation. Although I do not care if water and sewer hook up to the city, many other investors do care due to the extra hassle involved. I would just add the extra cost to the repairs if the septic system needs to replace and maintenance costs associated as an expense.

DUE DILIGENCE TIP:

AGE hugely affects the lifespan of the water/waste system. If the septic system is much older, it may need to be replaced very soon. Age even affects city water/sewer. Are the pipes leaking? If so, water bills may be outrageously high. If the septic tank is involved, you must get an inspection from a septic tank professional. If city water and sewer, get an inspection from a licensed plumber.

ALWAYS HIRE MULTIPLE PROFESSIONAL TO INSPECT THE PROPERTY!

  1. Permits

Ask the owner, if all related permits are all active for the property. Remember, the owner could lie to you. After you have the property under contract, you must ask for proper documentation, then call the county to confirm permits. Every state, city, and county has different laws for RV Parks.

If your planning to expand the RV park, make sure to understand the limits of your current permits. You may have to request new permits to expand.

DUE DILIGENCE TIP:

Email and call the county permit office and state’s environmental agency for the permits and designs that were approved. They will be able to provide much more information!

Harris County Permit Center

https://hcpid.org/PERMITS/default.html

Texas Commission on Environmental Quality (Compliance Resources for RV PARKS in Texas)

https://www.tceq.texas.gov/assistance/industry/rvparks.html

  1. Competition

Who are your competitors and how far are they from you? Is the current rent at market value? What amenities do other competitors have compare to the one you are buying? What is the occupancy of the competition? How old are the other parks? What is the ground made of? Cement, Asphalt or Gravel?

Make sure you understand the differences. What rent price is the current owner asking for? Is it competitive for the marketplace? Can you increase it? Is the park you are buying has a significant advantage over other parks? Is it newer than most of the parks in the area?

DUE DILIGENCE TIP:

Make an excel sheet with all the competitors and compare them? Drive each comparable and record the vacancy. You might want to drive twice, once at the beginning of your due diligence and once before you close. You can also use Google Earth Pro and see vacancy rates throughout RV parks at different time periods.

  1. Demand

Demand and Competition ties with each other. Based on your competition, you will determine what type of RV Park yours is and who it will be attracting? What is the demand of the particular group you are targeting and how does your competition address that demand? Is there a huge gap in which your RV park can take advantage? Many types of RV Parks exist, like is it a Vacation RV park, Family RV Park, Short-term RV Park, Long-term RV PARK, luxury RV park, or affordable RV park? It does not have to be one type and can be a combination.

DUE DILIGENCE TIP:

How many RV units are available from all the competition and yours? Can the city population support the # of units? What about other competitors outside of RV parks such as Hotels, Apartments and Mobile Home Parks? What are the rental rates of mobile home parks or C/B apartments? 

  1. Disasters

Depending on the state, you need to understand the occurrence of disasters in the area. For example, Houston is known for flooding and hurricanes. I had an RV park property in New Mexico where tornadoes were a problem. It is okay to buy properties where disasters may strike, but you must be prepared for it especially factoring the costs in your underwriting. You should take consideration of insurance cost and if that disaster does happen, how much it will cut your net income. For example, if flooding occurred on the property, and it took 3 months to fix the property, you must take into consideration the loss of income during the 3 months and another 3 months to fill in vacancies.

FEMA Flood Map Service Center

https://msc.fema.gov/portal/home

USA.COM

http://www.usa.com/houston-tx-natural-disasters-extremes.htm

DUE DILIGENCE:

Ask local neighbors and past tenets of the past floods and disasters. Check local news and associated maps in the county or state database. Confirm the data that is being pulled by USA.com. 

  1. CAP rate

Understand the revenue and expenses coming in. Many newbie investors forget adding the salary of property management since many mom and pop are landlords themselves. You do not want to manage the property but hire a property manager. You want to buy an RV park with at least 60+ units to have a full-time property manager. If the RV park is less than 60 units, the property manager will probably take too much of the revenue. You will calculate the current CAP rate and then the add-value CAP rate. I prefer to buy at least at 10%+ Cap rate and when I add improvements, I want to hit 15%+ Cap rate.  If it is a great location with a market CAP rate of 7%, I would try to create a deal with a 10%+ Cap rate. Many exceptions exist on what CAP rate I would be happy with, but for sure, I always buy at a discount price based on the location!

Revenue includes

Monthly Rents

Weekly Rents

Daily Rents

Laundry

Vending Machine

ATM

General Expenses includes

Labor

Property taxes

Property Insurance

Property Management Software

Credit Card Fees

Hotel Tax

Water

Waste

Electricity

Landscaping

Repairs

Capital Expenditures

 

DUE DILIGENCE TIP:

While due diligence, calculate the total amount of capital expenditures it will take you to fix the property up. Get actual bids from contracts and do not guess your number. Take consideration of capital expenditures over the course you plan to own the property. If the leasing office roof needs to be replaced in 10 years, then make sure to collect the capital expenditures as a monthly expense for the replacement.

Conclusion

Always spend money to hire multiple professionals to inspect the RV park during the due diligence period. Analyzing and valuing an RV park is a valuable skill and will not be built up in 1 day. To get good at it, you must look at many RV parks and make offers. Click here for my blog on valuing any commercial real estate.

MAX OFFER PRICE = (.70 X VALUE) – Repairs

The offer price will be 70% of the value of the RV park and minus any repairs. Always ask the seller for a price before you throw a number out there. Maybe the seller will ask for a price lower than your offer (very rare). Remember, if location sucks, do not waste your time!

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