Interested in buying an RV park

Discussion in 'Park Management' started by Scottam99, Apr 27, 2017.

  1. Scottam99

    Scottam99
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    Hi, my name is Scott. I'm looking into buying a campground/RV park. Hoping to meet people who can give me advice, and people I can share my experiences with.
    :)
     
  2. Texasrvers

    Texasrvers
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    Welcome to the Forum. Did you notice that there is a section in the forum that is specifically for park owners titled Park Management? You might try posting there if you have any questions about owning a park.
     
  3. westernrvparkowner

    westernrvparkowner
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    Perhaps the moderators can give this thread a new home and a new title that better defines what Scott is wanting.
    Scott, I would be glad to give you some insight, but really need to know what you are looking to do. Where and what price range are you considering, it makes a big difference? Do you want an overnight park, are you wanting a seasonal park or do you want a destination location? Are you going to run it yourself or hire management.
     
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  4. docj

    docj
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    The thread has been retitled and has been moved to the Park Management section of the forum
     
  5. westernrvparkowner

    westernrvparkowner
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    Thanks Doc. Now all we need is to hear from Scott on what he would like to find out more about.
     
  6. Blue Mesa Escape

    Blue Mesa Escape
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    I would be glad to answer questions, Scott Just tell us what you want to know.
     
  7. jimbob07

    jimbob07
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    I am a park owner....11 years. Fire away. I might even be a seller....
     
  8. Scottam99

    Scottam99
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    I am looking for a park with Seasonal base but also ability to expand. I will be running it by myself and the aid of workampers, possibly a part timer in the office/store. My price range is about $800K.
    I have a park in mind currently. I have financials that the owner provided. I will be requesting actual Tax returns shortly. Currently It seems to be at a 7.4% Net ( after Mortgage and taxes) I included $16K management for 6 months, $5K reserve for repairs, and $4k additional Taxes and Insurance, to arrive at that figure. Any thoughts? Also I have a feeling that there is other income which wasn't reported ie: Firewood, Sporting item rentals, Etc. Not sure how much I can figure in for that.
     
  9. westernrvparkowner

    westernrvparkowner
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    A $5000 budget for repairs is going to be way low unless the park is in immaculate shape. If what you are saying is the park will generate a $60,000 net profit (7.4% of purchase price) after debt servicing (assume 25% down, 600K at 5%, 20 YR amortization $48,000 per year) you have a park that makes $110,000 EBITA. That would make the cap rate around 13.75%, which is a great deal in today's market. The big unknown is how much deferred maintenance and upgrades are needed. If that amount is small, this is a great buy. If the park needs to be rebuilt, that is a different story.
    Forget about the firewood, equipment rental income etc. It will be negligible and probably more than offset by expenses not entered by the seller, if indeed they run free and loose with the operation allowing those receipts to not accounted for in the first place.
    My best advice is to double and triple check all their records. Get copies of all the utility bills, get a copy of the 1099 from the Credit Card processor (great check on actual income, cash today runs less than 15% of transactions) .
    Be sure there isn't any way the seller is hiding expenses. Paying employees under the table is the best example. That can change the financial dynamics quickly. Some parks are part of larger businesses and some of the expenses are hidden. Be sure the numbers make sense in regards to costs associated with credit card fees, insurance, advertising, accounting and reservation systems etc. Easy for a seller with a related business to just shift all those costs out of the one they are selling, which has the effect of juicing the numbers.
    Finally, be sure the numbers are not influenced by events that will not recur. A big construction project in the area, an oil boom (are you listening North Dakota Park buyers) or a one time special event can bump numbers. You need to see a multi year trend to be sure.
    If everything checks out, it actually sounds like you might have a great buy. Good Luck
     
  10. Scottam99

    Scottam99
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    I have $10,500.00 budgeted for Maint./Repairs, the $5000.00 figure is Reserves for Major repairs/improvements. This park stopped allowing credit cards ( I will allow them). Currently the owner runs the entire park by herself. She gives discounts off seasonal rates to people who help her cut the grass and do maintenance. What is a good number for owners salary to run the park?
     
  11. westernrvparkowner

    westernrvparkowner
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    I think you might find your repairs and maintenance budget is still way too low for the first few years. It is my experience that most sellers tend to put off all but the most urgent repairs. You will likely have a whole lot of things needing upgrading your first few years. Only you can tell what shape the park is in. If it is like most parks, you could easily reach 10 times your reserves.
    As for the owner's salary, that is all about what you feel you need to make to make the enterprise worthwhile. Are you looking at this as an investment, or are you looking to buy a job (nothing wrong with that, by the way). If your view is an investment, deduct what you could make at a job from the net income then deduct your interest expense and that amount is the investment return. Remember the payment includes principal reduction which is money you will hopefully recapture. Then you need to figure how much you think you can improve the property and raise the valuation. Put all those numbers together, along with your timeline and determine if it is worth it.
    When I look at a park, I try and determine if I can double the valuation in 5 years or less. Then I deduct the costs I am going to incur upgrading the park to get that valuation and then lop off 25% for your silent partners, the state and local government's capital gains tax. This income is then added to the income from operations and that determines how good a deal you have. My rough guess on your park would be $200K (25% of purchase price) in capital improvements to make it outstanding. You raise your rates, increase your occupancy and bump that bottom line up to get the park to a $1.6 Million valuation. That would give you a capital gain of $600K. Your taxes on that would be around $150K, giving you a $450K net profit, or $90K a year on top of whatever you make over and above what you would make being an employee somewhere. PS. Don't forget the benefits package when figuring what you could make as an employee. Health Insurance and retirement savings are going to eat up a bunch of your income from the park operations.
     
  12. Scottam99

    Scottam99
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    How much should I be setting aside for the purchase of a RV park for closing costs, Phase 1 environmental etc.?
     
  13. westernrvparkowner

    westernrvparkowner
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    Depends on the terms from you lender. They may roll some of the costs into the loan, or maybe not.
    On top of the down payment, you will likely need to pay for a survey ($500 to $5000+ depending upon type and property size), the phase one environmental is cheap, less than $500, a phase two maybe a few thousand, but usually not required unless there is underground tanks or wetlands involved. Most title fees are generally covered by the seller, but they are sometimes split, and can run a few thousand dollars. An appraisal on commercial property is much more expensive than residential and can be another $3,000+. Fees not included in closing would be getting all new licenses in the new business and those will vary state to state. And don't forget to transfer all the domain names, phone numbers, billboards, and the like needed to perpetuate the current clients.
     
  14. Scottam99

    Scottam99
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    Please send me location of your park, I might be interested.
    Thank you, Scott
     
  15. Scottam99

    Scottam99
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    Thank you for the information.
     

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