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campinngal
post Sep 25 2009, 09:46 PM
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My husband and I are considering purchasing a campground (or dude ranch). My husband has a steady job that he would give up. We are in our 40's. Am just beginning researching this idea and have purchased a book about buying, owning, managing, etc. Have several basic questions and was hoping to hear from campground owners. Hotel values have dropped ridiculously during the recession. My friend in commerical real estate has a resort that was assessed at 10 million, 2 years ago. It's current assessment is 1.5 million. Have the value of campgrounds dropped as well? He says that the standard right now when making an offer is to offer 20 to 30 cents on the dollar and that one cannot judge profits from the last few years in this economy. Thoughts on this (as it would apply to a campground offer)? Would a campground provide a decent living and/or retirement? If you were to have the choice of buying a campground or ranch today, would you do it? If so, would you go for a higher priced campground with a larger profit or a low priced campground with a smaller profit? A seasonal or year round? Both seem to offer the same percentage profit, it's just the numbers are different. Also, what are the benefits and/or pitfalls of going with a franchise (like KOA) vs. an independentally owned campground. Finally, if you can recommend any books, articles, websites, etc., it would be appreciated. Thank you so much. : )
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rgatijnet
post Sep 27 2009, 11:38 AM
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I would think that to some extend a campground is not much different than any other business. The value of the property, as a business, is based on the amount of income that it can generate. There are standard tables used to figure the value of a business based on income. IF the property MAY be redeveloped into something else, other than it's current use, than many other factors must come into play. For instance how much to demo the existing use structures? How much to modernize/rebuild or construct new structures for the new business? Now, you take all of those total costs, and see IF the anticipated income makes it a viable business proposition.
Down here we have many many businesses that CANNOT be sold as a profitable business. They were started when the cost of real estate was lower and the long term owners are the only employees with a small mortgage payment. Once sold, at even today's reduced real estate values, the business can no longer generate enough income to support the new larger mortgage, and the new owner's salary and other payments.
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kcmoedoe
post Sep 28 2009, 10:05 AM
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QUOTE(rgatijnet @ Sep 27 2009, 11:38 AM) *

I would think that to some extend a campground is not much different than any other business. The value of the property, as a business, is based on the amount of income that it can generate. There are standard tables used to figure the value of a business based on income. IF the property MAY be redeveloped into something else, other than it's current use, than many other factors must come into play. For instance how much to demo the existing use structures? How much to modernize/rebuild or construct new structures for the new business? Now, you take all of those total costs, and see IF the anticipated income makes it a viable business proposition.
Down here we have many many businesses that CANNOT be sold as a profitable business. They were started when the cost of real estate was lower and the long term owners are the only employees with a small mortgage payment. Once sold, at even today's reduced real estate values, the business can no longer generate enough income to support the new larger mortgage, and the new owner's salary and other payments.
You are absolutely correct on every point. I want to point out, however, that valuations of businesses based on income may not apply directly to campgrounds and other property dependent businesses. You cannot buy a hotel, an office building or a cattle ranch for example at 4 times annual earnings. A business that relies on rented space (or can be run without commercial space) is usually valued at 3 or 4 times earnings multiple PLUS equipment, inventory and possibly goodwill. A campground is closer to commercial real estate valuations. You could do the same type of calculations (3 or 4 times earnings) but then you will have to add in the market value of the real estate, the value of improvements and the value of the of the living quarters. As you explained, there are many businesses where the real estate valuations have exceeded the income valuations. That is why I have always preferred the income approach to valuation when financing a business. I wouldn't approve any loan for a business where the selling price exceeded the ability of the property to generate the income needed to pay the loans and provide free cash flow for the owner. Any difference in valuations would need to be covered by additional down payments, which usually becomes an insurmountable hurdle to the buyer. In situations where the business valuation is less that the real estate valuation, the business value is lost unless the business can be relocated or the property footprint reduced. However, there may still be value to a business that will cashflow the property allowing the owner to hold the real estate for even further appreciation.
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Posts in this topic
campinngal   Considering Purchasing A Campground   Sep 25 2009, 09:46 PM
Lindsay Richards   BE CAREFUL   Sep 26 2009, 10:13 PM
kcmoedoe   You can make any offer you wish, but be prepared t...   Sep 27 2009, 11:05 AM
abbygolden   You can make any offer you wish, but be prepared ...   Sep 27 2009, 12:53 PM
rgatijnet   I would think that to some extend a campground is ...   Sep 27 2009, 11:38 AM
kcmoedoe   I would think that to some extend a campground is...   Sep 28 2009, 10:05 AM
Lee and Fran   I know of a park for sell in Utah and the price I ...   Sep 27 2009, 07:01 PM
kcmoedoe   I hope I haven't turned too many people off of...   Sep 27 2009, 07:43 PM
campinngal   Thank you so much, particulary KCMOE for your valu...   Sep 28 2009, 12:54 AM
kcmoedoe   Thank you so much, particulary KCMOE for your val...   Sep 28 2009, 09:37 AM
pogoil   My wife and I are in our 40s and 5 years ago we bo...   Sep 28 2009, 02:38 PM
Lindsay Richards   One thing you must remember in any small business ...   Sep 28 2009, 03:01 PM
kcmoedoe   One thing you must remember in any small business...   Sep 28 2009, 03:14 PM
Gunship Guy   What a great topic. The replies were all very inf...   Sep 28 2009, 09:02 PM
pogoil   What a great topic. The replies were all very in...   Sep 29 2009, 01:36 PM
coacbcps   What a great topic. The replies were all very in...   Sep 29 2009, 03:06 PM
campinngal   Pogoil, Thanks for your insights. Am curious if y...   Sep 29 2009, 10:08 PM
pogoil   Pogoil, Thanks for your insights. Am curious i...   Sep 30 2009, 12:14 PM
Lindsay Richards   Keep in mind that if you live on the property, man...   May 14 2012, 10:48 AM
wantacampground   I would like to revive this topic as I am currentl...   Jun 13 2012, 11:36 AM
kcmoedoe   I would like to revive this topic as I am current...   Jun 13 2012, 11:55 AM
wantacampground   Best place to start is www.rvparkstore.com Many ...   Jun 13 2012, 12:01 PM
kcmoedoe   Kcmoedoe - thank you for your reply. I have read ...   Jun 13 2012, 07:25 PM
wantacampground   I am not sure you will unearth a lot of hidden ge...   Jun 14 2012, 10:11 AM
Lindsay Richards   You might consider scheduling an appointment with ...   Jun 13 2012, 01:17 PM
wantacampground   You might consider scheduling an appointment with...   Jun 13 2012, 02:40 PM
Lindsay Richards   We bought an old house in the down town of a res...   Jun 14 2012, 12:25 PM
kcmoedoe   If you are willing to wade through a bunch of dead...   Jun 14 2012, 01:34 PM
SASMITH   wantacampground, Thanks for reviving this thread, ...   Aug 4 2012, 07:39 PM
wantacampground   wantacampground, Thanks for reviving this thread,...   Aug 15 2012, 02:21 PM
SASMITH   Sorry, been out for awhile. I think it would be gr...   Aug 15 2012, 09:01 PM
Lindsay Richards   We go by there on most trips as it is about 4 or 5...   Aug 4 2012, 07:52 PM
Lindsay Richards   I was going to college in Tampa from 1962 to 1966 ...   Aug 5 2012, 09:35 AM
Texasrvers   SASMITH, We are glad that you are a member of our...   Aug 5 2012, 11:36 AM
SASMITH   SASMITH, We are glad that you are a member of ou...   Aug 10 2012, 07:44 PM
Lindsay Richards   I think a fair price is about 5 to 6 times the gro...   Aug 15 2012, 09:24 PM
kcmoedoe   I think a fair price is about 5 to 6 times the gr...   Aug 16 2012, 09:17 AM


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