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cyclist
post Jan 15 2012, 11:16 PM
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My wife and I are both school teachers, we have a 6 year old daughter. We love camping: tent, in our pop up, primitive or at a KOA. I built our house and several shops, I am a jack of trades master of none. I love to work outside and would consider myself a hard worker. My family is a very close group we love to spend our time together whatever we are doing, work or play. I recently came up with the idea to buy an RV/campground. I have no background or previous experience. I have had this idea before but never really followed it. I have been researching for a few weeks now with little more than and understanding that campground can be very expensive to purchase. Can somebody make a living in this economy with a campground? I am looking at Colorado. It has been a dream of mine for 25 years to live there and I am determined to make it come true. When I mentioned this to my wife and daughter they both liked the idea, my daughter lit up like a christmas tree and rattled off all the things she could do to help. I could see this being a very cool family business. The campground would more than likely be seasonal. If you have 60 sites with full hook ups, a few camping cabins etc. in a very tourist driven area. How much can you expect to make? I know there is no magic formula, but do you expect 3 months of solid business and 3 months so so? Is it cheaper to build or buy. Seems that buying would be easier but you might be buying something that needs new water or electric lines. If you buy a million dollar campground do you expect about 10% net or is that low? Any books or seminars you suggest would be helpful. I am planning on reaching out to some of the campgrounds I frequent for help also. Have more campgrounds hit the market due to the economy or is it still getting better, as people are looking for cheaper vacations? If I find a campground for sale, how serious do I need to be before I can ask financial questions? Sorry for the being all over the place with this post. Thanks for your help
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HappiestCamper
post Jan 16 2012, 04:32 PM
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One thread already

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cyclist
post Jan 16 2012, 06:01 PM
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QUOTE(cyclist @ Jan 15 2012, 11:16 PM) *

My wife and I are both school teachers, we have a 6 year old daughter. We love camping: tent, in our pop up, primitive or at a KOA. I built our house and several shops, I am a jack of trades master of none. I love to work outside and would consider myself a hard worker. My family is a very close group we love to spend our time together whatever we are doing, work or play. I recently came up with the idea to buy an RV/campground. I have no background or previous experience. I have had this idea before but never really followed it. I have been researching for a few weeks now with little more than and understanding that campground can be very expensive to purchase. Can somebody make a living in this economy with a campground? I am looking at Colorado. It has been a dream of mine for 25 years to live there and I am determined to make it come true. When I mentioned this to my wife and daughter they both liked the idea, my daughter lit up like a christmas tree and rattled off all the things she could do to help. I could see this being a very cool family business. The campground would more than likely be seasonal. If you have 60 sites with full hook ups, a few camping cabins etc. in a very tourist driven area. How much can you expect to make? I know there is no magic formula, but do you expect 3 months of solid business and 3 months so so? Is it cheaper to build or buy. Seems that buying would be easier but you might be buying something that needs new water or electric lines. If you buy a million dollar campground do you expect about 10% net or is that low? Any books or seminars you suggest would be helpful. I am planning on reaching out to some of the campgrounds I frequent for help also. Have more campgrounds hit the market due to the economy or is it still getting better, as people are looking for cheaper vacations? If I find a campground for sale, how serious do I need to be before I can ask financial questions? Sorry for the being all over the place with this post. Thanks for your help

Thanks for pointing those out. I had read them already and they were at least 2 to 3 years old. So I was not sure how valid the info was. Is the campground business still paralized or holding on?
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kcmoedoe
post Jan 16 2012, 07:18 PM
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Our bank's experience is the industry is still doing well. With interest rates at record lows, valuations have risen (people's expectation for rates of return have fallen, hence they are willing to pay more for each dollar of income). The last appraisal I saw for a quality RV park was over 11 times earnings. Parks we have loans to have performed well, but there are some regional variations. Parks at destinations and close to metro areas have performed well, parks off the beaten path, that require a lot of driving to get to, have struggled. Park owners have told us they are making investments in infastructure because customers are becoming more discriminating about utilities, facilities and the like. They want quality parks. Interestingly, the owners tell us that price is not as important as what they have to offer. Remember, owners of RVs have a lot invested, a nightly site fee is a very small percentage of the overall cost of RVing. It is much less than the initial RV purchase, fuel etc.
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kcmoedoe
post Jan 16 2012, 09:23 PM
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I would only suggest buying an existing park. Unless you already own the land, building a park is generally too expensive for an individual to undertake. It will take a minimum of 5 years to build a park from inception. Things like zoning, permits etc. take way more time than it should. Construction takes time and money and there is absolutely no income. Once you open, you need to build clientel, that takes time and money for advertising and the like. Not a plan for those who don't have deep pockets. If you own the land, and want to start out with a part-time park with a few sites and build from there, maybe, but that is not what it sounds like you want to do.
Let me walk you through a typical transaction at your million dollar number.
I would look for a park that has some upside and is not in tip top shape, but is operating and profitable. You can buy a park like that for around 7 to 8 times earnings, lets use $140,000 net income with a $1,000,000 purchase price. You will need $250,000 down and finance the rest at around 7% (and yes, that is a fair rate, and what you are going to find when looking for purchase financing on a small business, it is much riskier than home mortgages, and a Million Dollar RV park isn't Exxon). Payment will be around $6,000 a month (5 year balloon on 20 year term). That leaves $68,000 cash flow from operations. Out of that $68,000 you will need to pay some personal expenses, mainly health insurance but also some items that are considered owners personal expenses but are really quite mandatory such as owner's utilities. (your housing will most likely be a home on the park property, usually some sort of manufactured housing but could be a modest single family home, if it something great, the park price will be a higher multiple). Figure a minimum of $1500 a month, so you are netting cash flow of around $50,000. Lets use a common percentage of expenses to revenues of 33%, so your $140,000 in profits is created by $210,000 in revenue. If the average site rent is $35.00 that means you have around 6000 camper nights in your park. New owner, new attitude etc. should allow you to raise prices $2.00 the first year. That will add $12,000 to your net cash flow giving you around $62,000. Now the bad news, you are going to have to re-invest at least half of that money for the first 3 or 4 years to bring the slightly run down park up to speed. That means you are going to have to pay all your personal bills on about $2500 a month, max. That has to include your food, your cars, your clothes, your credit card payments, your entertainment, furniture, everything. After that 4 years, you hopefully have improved the park enough that you now are getting 7000 camper nights at $40.00 per night, $280,000. You still run that 33% expense ratio, so your net income is now up to $188,000. Your mortgage continues to be $72,000 a year, so now you have cash flow around $116,000. Now you are making a decent living. You have also increased the value of the park up to over $1,500,000. Now you are ready to start expanding and increasing value. All this assumes you don't have any disasters, but you need to have some cash cushion in case you do, and it doesn't always go according to plan but this is a very common outcome for good owner/operators.
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cyclist
post Jan 16 2012, 10:31 PM
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QUOTE(kcmoedoe @ Jan 16 2012, 09:23 PM) *

I would only suggest buying an existing park. Unless you already own the land, building a park is generally too expensive for an individual to undertake. It will take a minimum of 5 years to build a park from inception. Things like zoning, permits etc. take way more time than it should. Construction takes time and money and there is absolutely no income. Once you open, you need to build clientel, that takes time and money for advertising and the like. Not a plan for those who don't have deep pockets. If you own the land, and want to start out with a part-time park with a few sites and build from there, maybe, but that is not what it sounds like you want to do.
Let me walk you through a typical transaction at your million dollar number.
I would look for a park that has some upside and is not in tip top shape, but is operating and profitable. You can buy a park like that for around 7 to 8 times earnings, lets use $140,000 net income with a $1,000,000 purchase price. You will need $250,000 down and finance the rest at around 7% (and yes, that is a fair rate, and what you are going to find when looking for purchase financing on a small business, it is much riskier than home mortgages, and a Million Dollar RV park isn't Exxon). Payment will be around $6,000 a month (5 year balloon on 20 year term). That leaves $68,000 cash flow from operations. Out of that $68,000 you will need to pay some personal expenses, mainly health insurance but also some items that are considered owners personal expenses but are really quite mandatory such as owner's utilities. (your housing will most likely be a home on the park property, usually some sort of manufactured housing but could be a modest single family home, if it something great, the park price will be a higher multiple). Figure a minimum of $1500 a month, so you are netting cash flow of around $50,000. Lets use a common percentage of expenses to revenues of 33%, so your $140,000 in profits is created by $210,000 in revenue. If the average site rent is $35.00 that means you have around 6000 camper nights in your park. New owner, new attitude etc. should allow you to raise prices $2.00 the first year. That will add $12,000 to your net cash flow giving you around $62,000. Now the bad news, you are going to have to re-invest at least half of that money for the first 3 or 4 years to bring the slightly run down park up to speed. That means you are going to have to pay all your personal bills on about $2500 a month, max. That has to include your food, your cars, your clothes, your credit card payments, your entertainment, furniture, everything. After that 4 years, you hopefully have improved the park enough that you now are getting 7000 camper nights at $40.00 per night, $280,000. You still run that 33% expense ratio, so your net income is now up to $188,000. Your mortgage continues to be $72,000 a year, so now you have cash flow around $116,000. Now you are making a decent living. You have also increased the value of the park up to over $1,500,000. Now you are ready to start expanding and increasing value. All this assumes you don't have any disasters, but you need to have some cash cushion in case you do, and it doesn't always go according to plan but this is a very common outcome for good owner/operators.

thanks for the information. I can do a great deal of the work on a campground myself. Is that taken into account when you mention the 1/2 reinvestment? What kind of staff is needed to run a campground of 60 sites? Does the 1500 a month take care of water electric and insurance for the campground? What does insurance look like for a place like mentioned above? Thanks again for you info. It is just what I wanted.
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Fitzjohnfan
post Jan 17 2012, 01:11 AM
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QUOTE(cyclist @ Jan 15 2012, 10:16 PM) *

I recently came up with the idea to buy an RV/campground. I have no background or I am looking at Colorado.


If you have an area in mind in Colorado, let me know and I might be able to give you some background on how viable the area is. Depending on where the park is, it could be very seasonal, e.g. April through October or it could be full time. Keep in mind that if you get a seasonal park, you may have to earn enough money to be able to survive until the weather changed and the tourists return.

If you are ambitious enough to build a new park, I personally believe there is an un-tapped market in Colorado for RV parks in ski resort areas such as Winter Park or Vail/Bever Creek. These parks could fill up in the winter with a few skiiers and the workers at the ski resorts looking for cheap accomodations. In the summers, they would fill up again with with families looking for a place to escape the heat and spend a week in the mountains.


--------------------
Chris G.
Westminster, CO
FMCA: F3508-S
1989 32' Southwind MH
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kcmoedoe
post Jan 17 2012, 01:40 PM
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QUOTE(cyclist @ Jan 16 2012, 11:31 PM) *

thanks for the information. I can do a great deal of the work on a campground myself. Is that taken into account when you mention the 1/2 reinvestment? What kind of staff is needed to run a campground of 60 sites? Does the 1500 a month take care of water electric and insurance for the campground? What does insurance look like for a place like mentioned above? Thanks again for you info. It is just what I wanted.

No, that 1/2 is just a guess since we assume you are buying a park that needs some work. Your labor is going to be free, no pay for you. Things like new power boxes, new water lines, landscaping, remodeling bathrooms, buildings etc. Things get expensive really quick. Toilets for example, they cost around $200.00 for a decent commercial grade toilet. Not too bad, but to make the bathrooms look good, you need to replace them all, so they match. 4 womens and 4 mens, that's $1600.00, and it doesn't make you an extra dime. Commercial coin operated washers and dryers $1000.00 each. Your parks utilities, insurance and the like are all covered under the park's 33% expenses. Your personal insurance such as health (very expensive for a family, do the research), your personal utilities such as cell phones, your personal car expenses, travel, and taxes all need to come out of that $2500 a month cash flow. Staff depends upon the park. I am assuming you and your spouse will work 16 hours a day 7 days a week, so you can keep the staff to a minimum. I am also assuming you don't have to hire very many professionals for things like carpentry, basic plumbing, basic electical repairs, accounting, etc. You should only need a staff of two to four people if you and your spouse cover as much as possible. If you are looking to have others do all the work, and all you want to do is manage, toss out all my numbers and figure on $0.00 profit. That $30,000 a year is what you and your spouse will earn the first few years. It is going to be a low income, high amount of sweat equity business for five or more years.
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kcmoedoe
post Jan 17 2012, 01:58 PM
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QUOTE(Fitzjohnfan @ Jan 17 2012, 02:11 AM) *

If you have an area in mind in Colorado, let me know and I might be able to give you some background on how viable the area is. Depending on where the park is, it could be very seasonal, e.g. April through October or it could be full time. Keep in mind that if you get a seasonal park, you may have to earn enough money to be able to survive until the weather changed and the tourists return.

If you are ambitious enough to build a new park, I personally believe there is an un-tapped market in Colorado for RV parks in ski resort areas such as Winter Park or Vail/Bever Creek. These parks could fill up in the winter with a few skiiers and the workers at the ski resorts looking for cheap accomodations. In the summers, they would fill up again with with families looking for a place to escape the heat and spend a week in the mountains.

While Vail would be a great place to visit in an RV, I couldn't imagine how expensive it would be to build a park there. I would think that the 5 to 10 acres of accessible land needed for a 60 site park would cost $1,000,000 or more an acre in the area. Permitting would be unbelievably difficult, I don't think Vail would relish the idea of a trailer park and that is what a park catering to employees looking for cheap accomodations would be. In the winter, keeping the water from freezing, the sewer from freezing and keeping the roads and sites clear would be a labor intensive, expensive battle. Finally, there are just not of winter RV travelers, snowbirds move to the south, and locals winterize their rigs and only take them back out in the spring.
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campergal
post Jan 17 2012, 07:33 PM
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We have a park in Canada so it's very difficult to compare expenses but one thing I have found with our park is that we make money off our transients....not our seasonals. We have 213 sites, of which 113 are seasonal...those off roaders that come in each weekend (and most of them are local people, very few out of province/country on the weekend)...when they come for the weekend they are on "vacation" so they have the extra $20 or $30 they give to the kids to spend at the canteen...they buy the tshirts, the sweatshirts, the cups etc etc etc...The seasonals...this is their summer home - they bring everything they need and extra for their neighbour. The overnighter will buy his milk, eggs, chips, pop etc from my store. So I would not go 100% seasonal but hey do give the "working capital" for the coming year.

As was suggested in a previous poster - the first 5-7 years are re-investment - we did exactly as he pointed out - bought a campground that was run down and have turned it around - we have increased revenues by six times easily since we have bought the campground (ten years). We live there and take a taxable benefit for rent/utilities etc..we do not work in the winter and get to travel a bit. We work our butts off in the summer - I do all the office work an my husband does the outside and maintenace along with security etc. We have 6 office staff, 2 maintenance and 2 security.

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cyclist
post Jan 17 2012, 08:24 PM
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Wow, thanks for all the info. Some of this is a bit tough to look at as it almost seems impossible to accomplish and still have food on your plate. But Im not detoured yet. Once the campground is established, life must get easier. I know several owners and they don't look as if they have worked 112 hours that week. I would hope that is a slight exageration: ). Would it help to buy a little more quality and not get quite the same return from your sweat equity. If you buy a campground in which the owner is making 120k and business is stable/growing, is it crazy to think you could move in and earn the same? Still putting money into improvements. Just not quite as much. We never mentioned advertising. Is that in the 33% as well? I hope I am not bothering you all. This has been huge help. thanks again.
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dalsgal
post Jan 17 2012, 09:49 PM
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I don't own a campground but manage a small one in TX (32 sites). My husband and I are the only employees here. I do the office work and help him with the outside work. We are on call 24 hrs a day 365 days a year. When we head out on Sundays I have to take the phone with me because there is someone always wanting to check in or wanting information. We live on premise and because of that everyone thinks that we should be willing to pump propane or let them purchase RV parts at any hour of the day or night. In the 3 years we have not had any vacation and the only time I have been away for more than a couple of hours was for a family emergency and my husband had to stay at the park.

If you are able to have employees you would be able to get away from time to time but at the beginning you need to expect to be pretty much on call constantly. I love this type of work but you do need to expect to be tied down until you can get enough income to hire people or to get work kampers to help.
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joez
post Jan 18 2012, 03:28 PM
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QUOTE
I recently came up with the idea to buy an RV/campground. I have no background or previous experience.


I would encourage you to continue to investigate your dream, but I would also encourage you to take some other steps before stepping off the ledge. Remember, that running a small business is, in most cases, not doing the things you know or like to do but, instead, doing the things you learn as you go. In addition to maintenance of the campground and managing its day to day activities, you will also be responsible for dealing with insurance, environmental agencies for sewer issues, tax authorities and accountants, zoning and county/state permitting agencies, purchasing supplies, and handling payroll to name just a few. Many of us who have owned businesses are amazed that so little of our time is really spent doing what we originally started the business to do. I remember when we started our first business how surprised I was when the first pieces of mail we received was a six inch thick stack of tax forms and regulations. There are monetary issues to consider, like capitalization, contingency funding, lines of credit and all the other things that you may be new to. You will need legal and regulatory help to understand local, state, and federal employment and other issues.

One suggestion would be to find a mentor to help you through part of the learning before you get too deeply off course. The Small Business Administration used to have a cadre of retired business owners who would help with these kind of things. Many universities offer business courses that may be useful. Good luck with your endeavor. I wish you success.
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Frank Henn
post Jan 18 2012, 11:04 PM
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I have just returned from Colorado, from a family emergency. The area I was in was Montrose to Ouray, All of these parks were close for the Winter, When I stayed at one in Montrose last Year all some of June all through July and a little into August There were all ways quite a few open spots going down the toad to Ouray the other two seem also to have a lot of open sites. When you went the rest of the 35 miles to Ouray there camp grounds were full. Now Tuesday driving back to Grand Junction those in that area seem to be full and open. I would guess I would like to see the books on how many sites were rented each night. Of course this might be a park that take cash or checks only, and that money has been known to disappear
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kcmoedoe
post Jan 19 2012, 11:08 AM
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[quote name='cyclist' post='28622' date='Jan 17 2012, 09:24 PM']
Wow, thanks for all the info. Some of this is a bit tough to look at as it almost seems impossible to accomplish and still have food on your plate. But Im not detoured yet. Once the campground is established, life must get easier. I know several owners and they don't look as if they have worked 112 hours that week. I would hope that is a slight exageration: ). Would it help to buy a little more quality and not get quite the same return from your sweat equity. If you buy a campground in which the owner is making 120k and business is stable/growing, is it crazy to think you could move in and earn the same? Still putting money into improvements. Just not quite as much. We never mentioned advertising. Is that in the 33% as well? I hope I am not bothering you all. This has been huge help. thanks again.
[/quote
You seem to be Having a hard time getting around the costs of buying a park. In your example, that park making the owner $120K is going to cost you somewhere around $900,000. Unless you are paying cash, much of that 120K is going to have to go towards paying off the loan. If you buy a park that doesn't need any work, and is in tip top shape, you won't have to put a lot into improvements, but the park will cost more than 7 to 8 times earnings, maybe, as I stated before, up to 11 or more times earnings. Plus you have much less upside. Yes, advertising is included in that 33% operating expenses, but if you buy a park and want to improve and expand, you will have to spend more.
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