Getting Started in RV Park Investing
Investing in your first RV park can be an incredibly lucrative venture, but it requires a solid understanding of the unique characteristics of this commercial real estate asset class. Unlike standard multi-family properties, campgrounds are active operating businesses tied directly to hospitality and outdoor recreation.
1. Define Your Acquisition Criteria
Before browsing listings, establish your parameters:
- Budget & Capital: How much cash do you have for a down payment? Typically, commercial lenders require 20% to 30% down.
- Location: Are you looking for a destination park near a national park, a transition park near major highways, or a long-term residency park?
- Size and Utilities: How many sites? Are they on city water and sewer, or private septic and well systems?
2. Analyzing the Deal
When evaluating a campground, ask for the last three years of Profit & Loss (P&L) statements and tax returns. Look closely at:
- Average Daily Rate (ADR): Total site rental revenue divided by occupied site nights.
- Occupancy Rate: The percentage of rented sites over a given period.
- Operating Expense Ratio: Typically, well-run parks operate with expense ratios between 35% and 50%.
3. Submitting the Letter of Intent (LOI)
Once you find a suitable park, draft an LOI. This non-binding agreement outlines the purchase price, proposed financing structure, due diligence period (typically 45-60 days), and closing timeline. A clean LOI sets the stage for a smooth transaction.
