Do's and Don'ts When Selling
By John Grant, President of Park Brokerage Inc.
It is by far the best time to be a RV park owner during my career. Record high recreational vehicle sales, flight to the outdoors during the pandemic, and overall increased interest in outdoor hospitality are causing record occupancy and rates for almost all RV parks throughout the country. Most California RV parks have doubled their gross incomes during the last 5-7 years.
Just like what happened in mobile home parks twenty years ago, RV parks have been discovered by institutional investors and large private capital groups causing tremendous investment demand with much lower capitalization rates and surging prices. The days of individual Mom and Pop owners are rapidly ending for 100+ sites RV parks as new Mom and Pop owners are priced out and cannot compete with the institutional and large private capital RV park buyers.
Lenders have finally discovered the strength of the RV park market. They no longer call RV parks “special use”, and financing is now readily available for most RV parks. Just five years ago, the only real RV park lender was the Small Business Administration.; now, there are numerous RV park lenders to choose from and excellent interest rates in the 4% range with 25-30 years amortization periods and 5-10 year terms.
Too many Mom and Pop owners feel debt is a negative while the institutional buyers and large private capital groups use debt to tremendously increase their investment returns. They know that debt is 4% tax deductible and RV parks and improvements return 10%+, so debt is “positive leverage” increasing their investment return. Use debt to upgrade and make your RV park more valuable by adding sites, WiFi, solar, asphalt streets, concrete pads, landscaping, clubhouse and store remodels, and other improvements. Quick example: your improvements allow you to raise your rates $20, you have 50 sites, and enjoy 50% annual occupancy. Your income increases $182,500 per year, and at an 8% capitalization rate, produces an increase in value of $2,281,250. Borrowing money to make improvements just makes sense!
My recommendations on what to do and not to do when getting ready to sell your RV park:
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