Brian,

You would be wise to have some understanding of what is involved in running a park before getting one. It will help you be more successful. There is constant maintenance - and lots of it for a park bigger than 150 sites. Do you know how to tell if there is proper infrastructure in that park? Is there room to expand it, and will the infrastructure take expansion? Things like that....that is all I was referring to.

I can appreciate that, Jack. Thanks for elaborating a bit.

The thought occured to me that we may decide to rent a space there at some point in the not so distant future, perhaps on a monthly basis. That might be a good time to become involved in helping at the park should the opportunities arrise. It might be a chance to get acquained with the owners, too, who knows, as well as a more up close and personal on how things run in the park.

I really have my doubts it'll be selling anytime soon anyway...

Thanks for all the input!

Brian

If you do a google search of RV parks for sale you will come up with several web sites that list hundreds of campgrounds and RV parks for sale. There are even people selling educational seminars and books about how to buy an RV park. I am not going to post links here. You can find plenty of your own.

I did a lot of research into the topic a couple of years ago. There are a lot of things to consider. Do not fall for the premise that these parks somehow cannot be valued like a normal business. I also used to hear that about farms and ranches. The assumption will be made that they are a life style that is somehow not subject to the laws of economics. Let me tell you something, and you can quote me on this: THE LAWS OF ECONOMICS ARE LIKE THE LAWS OF NATURE, THEY CAN NOT BE BROKEN. An enterprise must take in more money than it expends or it will fail.

I found that most of the parks have questionable financial ratios from a business standpoint. Many of the tax returns of these businesses do not accurately reflect their financial performance. Anyone considering a purchase like this needs to employ a CPA to thoroughly evaluate the books.

The cost of money is a fundamental consideration for any enterprise. If it is 8% (or whatever it is) then an enterprise must overcome that. It does not matter if all the funds used for the purchase are the owners or if he borrows most of it. The cost or value of the money still must be considered.

I cooled off to the idea of purchasing an RV park primarily because of the uncertainty created by the extraordinary increase in gasoline and diesel prices. I fear that will have a negative effect on the volume of business for most parks.

Thank you, Flying B, for your comments.

It may be that I'm looking at the idea of buying an RV park with a little different perspective than most would be.

Some of why I am looking at this particular park is unique to this particular park.

I'm not looking to make a lot of money. What I want out of it is a modest income and to pay the bills... and to provide a place for a local church group to be able to use the facilities for their church meetings, cooking schools and weekend retreats. I would consider most of that a wash money wise as I think they'd bring in about what they'd cost.

So my thoughts are no doubt quite a bit different than a typical buyer. Yes, I do care about how much the books have been cooked and what realistic numbers would be. Regardless of use, it has to be paid for, and since I'm not rich, it would have to pay for itself through revenues generated by that RV park.

Like I said before, it's been for sale for a good while now, and I doubt it's in any danger of selling any time soon. I may be able to get closer to the situation over the next 6 months or so, hopefully, close enough to see some of the more unvarnished truths about the place. We'll see. I'm in no hurry to go signing contracts!

Again, thanks for the thoughts.

Brian

With all due respect, Brian, your "perspective" worries me, unless you are independently wealthy. And can afford the tax writeoff.

You need to evaluate this strictly as a business. It either makes sense or not. Numbers do not lie - assuming you can get "real" numbers. $2M+ dollars for a "hobby" business is more than I'd be willing to risk....

Sorry if I sound harsh - I don't mean to be. But doing something for a church is not a good way to evaluate a business. The church is just one user of the park, and I would want a good contract in place before I'd even factor that in.

That does look like a nice park, though. How is it in person??

Oh Brian-Brian-Brian, I’ve been there and done that.

My situation was a little different. I was looking at buying an Ocean Front RV Park on the southern Oregon coast in an area they call the Oregon Banana Belt (less rain). It was available for $1,000,000, but needed a lot of work. My idea was to put together a consortium of 10 people @ $100,000 each to own and have a place of their own, then rent out the remaining 40 sites. What a beautiful thing. I couldn’t put it together.

Getting caught up with a Dream, an Emotional Focus, and Serving the Lord can really confuse good common sense.

Businesses are like rivers, the money never stops flowing away from you. In order to not learn to hate it you need enough income stream to gain SOME benefit (and hopefully have fun).

If you’re still with me, Please seek the counsel of a good EA and business attorney. In a case like this, they’re worth their wait in gold.

Just my 2¢, your mileage may vary.

*********************

What does the term “EA - Enrolled Agent” mean?

“Enrolled” means to be licensed to practice by the federal government, and “Agent” means authorized to appear in the place of the taxpayer at the IRS. Only Enrolled Agents, attorneys, and CPAs may represent taxpayers before the IRS. The Enrolled Agent profession dates back to 1884 when, after questionable claims had been presented for Civil War losses, Congress acted to regulate persons who represented citizens in their dealings with the U.S. Treasury Department.

Don't worry, Jack. I do realize that this is a real business. And it has to make sense as a business or none of the rest will work either.

An investment of that size would not be a hobby (at least not for me), though there may be parts of it that would be used for my own recreation, too.

The park in person...

Well, the buildings and pool are pretty nice. It's in a decent setting, close to gas/food/Walmart. The campsites themselves are typical herringbone like, mostly grass and gravel, fairly level. Looks to be pretty well picked up last time I was there, and fairly neat in appearances.

One negative is that there is no cable system in the park. So if you want tv, you have to either use your batwing or set up your own satellite dish, which some have done. It's tricky, though, as there are lots of pine trees and getting a view of the satellite(s) might not be possible from a site where you want to be.

I haven't tried out the wifi yet.

Certainly not the nicest park I've ever been in but far from the worst.

As I said, I hope to gain some further perspective on it over the next few months. Hey, I may decide I wouldn't want it if I was paid to take it! LOL!

Sincerely, I do really appreciate all of the comments here. Hopefully, I've learned some things that'll at least help to keep me from making dumb mistakes and helpt me to peel back the rose colored glasses. And I do thank you for pointing out that I must keep the mindset that it's a business and it must operate as one, for profit. You're absolutely right.

Brian

Thank you, Mike. Yes, I really did know what an EA is, though I confess I hadn't thought of using one in this situation... at least not yet.

I'm more or less in "learning mode" at this point. Seems the more I find out, the more I realize how little I know! LOL!

I PMed you, just in case you'd like to elaborate further on some things.

Thanks,

Brian

Got your PM and responded. Hope it helps.

Brian, If you buy it and want help let me know. I might be interested in some "winter" work at some point....instead of summer. Plus, if you need wifi that actually works, let me know. I can do the design for you.

Well lets see...not a bad cap rate <10. Just a couple years ago investors would fight for a cap rate <10.

What seems likely though is the numbers aren't real. It's possible, just would have to get more info. What are rates, occupancy, market demographics? Other sources of income? What about the depreciation of the improvements? what is happening in the general area that may influence future occupancy? Any lawsuits? Any EPA problems? Why is the owner selling a highly profitable business?

The property with 45 acres plus improvements is worth up to $2mil. Could be less. Hard to say unless take a look. That makes the cap rate even better.

Then you have to look at the macro economics. What is happening in the economy overall? Not to good right now. How does fuel costs affect the RV park customer? How strong is the RV market right now? Projections for next year, 5 yrs?

Do you have some real deep pockets to carry you through lean times? What about getting a group of investors together...not a bad idea.

Lots to think about. But, would take a long hard look to be sure what the real numbers are.

Mona

I happen to believe you're right about the numbers, Mona. That's been one of my issues, and the one listing the property STILL has yet to get back to me.

The problem is that the numbers are horribly skewed. Knowing what happened after hurricane Katrina, with RV parks filling quickly, expanding with FEMA trailers and taking in revenue from FEMA, operating at 100%+ capacity and a couple of other sources, an RV park was a cash cow. And when looking at figures from right after the storm (which, by the way, are the only ones provided), it gives a picture of a growing vibrant economical powerhouse.

Well, I think you and most everyone else here knows that for the msot part, using those numbers for projecting any future business plan for that property is a setup for failure from the get go.

But that said, for the right price, I think the park has the potential for being a decent business.

Economy overall? Sucks. Probably will have small waves of "a little better", but generally, I'm not looking for a lot of real good financial times in the near future.

I think in general, we'll see more of a shift from overnight travelers towards the longer term people, some because of high fuel costs, and some because it's just cheaper to live in an RV park than in a house or apartment, at least in these parts.

I think I have a pretty good idea of why the owner is trying to sell. They can still tout those inflated numbers as income for the past couple of years. Barring another hurricane, those are only going to go down for the next couple of years.

Mike's idea of an EA would probably be worth their weight in platinum to figure out some real numbers for this place and that may be a direction I'll explore as time progresses.

We may have the potential to put down a considerable down payment but I will not go into this thing with the emotions riding high or jump quickly. It's not play money we're talking about and we can't get it back again if we lose it.

So I'm taking things slow, and it may very well be 6 months or a year from now before something could potentially be happening. We'll see. A few other related things are on the back burners (so to speak) right now, too, that I won't get into here.

Again, much appreciate the thoughts and the wisdom, here and privately.

And yes, Jack, would love to have you stay with us for a while if it should all work out down the road. I have a feeling that Workampers will be a valuable asset.



Brian

Hi Brian,

This one is easy to figure out. 150spots@$2m=$13333/spot=$2667/spot/yr over 5yrs pay back= $223/mth each spot has to make just to get a ROC and that doesn't include maintance, insurance, taxes or labor and includes 100% occupancy (ya right)

Here in AZ the parks will run full for 4mths, 50% for 2mths and 10% year around occupied "if" there a top of the line park @$350mth/spot. Some can get $500mth with alot of out buildings and a pool and still stay full during the winter 4mths.

There's thousands of RV parks here. You might want to swing down here one winter just to see what I'm talking about. May thru Oct you'll be at 10%.

Now, put a pencile too those numbers and make them payback!

But they are asking $4.8mil not 2

Thanks for the figures, T-Bone! Putting pencil to paper was rather enlightening.

Using your percentages puts this park at around $450k gross. Their own numbers put gross expenses around 39% of that, which is around $175k. That leaves $225k/yr to pay for the place and pay me for my trouble. If I want (just picking a number) $80k to be able to pay me and maybe another part timer, that leaves $145k. That breaks down to a maximum payment of about $12k/month. Assuming 8% and a 15 year payoff, $1.25 million is about as far as the numbers take it from what I see. That's the end of the money.

Those are very rough shoot-from-the-hip kind of numbers, but with the lack of info I presently have, they don't mean much.

I really do appreciate the figures you sent as they add prespective.

Thanks,

Brian