RV parks can be an excellent investment, but only if you focus on the types of parks that succeed. Over the years, the specifics of RV parks has somewhat shifted, and it’s important that you understand what is working right now. The following is where the opportunity is in RV park investing today.
Destination not overnighterThere was a time in which RV owners were driving long distances and needed a place to stop in-between those destinations. These type of “one-night stop” RV parks are called “overnighter” and are typically located along the highway in relatively desolate areas, literally serving as a rest-stop for RV owners. This is no longer where you want to invest. Instead, focus on “destination” RV parks, which are where people want to stay for long periods of time. It’s simple economics: do you want a customer for 14 days or 1? And with the Baby Boomer and Millennial habits now well-known, it’s no competition that destination RV parks are where it’s at if you don’t want to be fighting this megatrend. Recent studies show that RV owners favorite activity is outdoor cooking not long distance driving.
Mom and pop sellersThe opportunity in RV parks has long been in buying them at low prices from mom and pop sellers. This group can not only price them affordably, but also do seller financing in many cases. Focus on this set of buyers and not more experience, professional owners, as they will probably want too much money and not be willing to help you in any way. If the seller is 70+ years old and has owned the property for decades then you’re on the right track.
3-point spreads; What separates RV parks from other real estate niches is the fact that it is still reasonable to expect to obtain a 3-point spread between the interest rate and the cap rate. Why is that so special? Because a 3-point spread (assuming 80% or so LTV) yields the 20%+ cash-on-cash return that most real estate investors seek. Most other niches can no longer deliver a spread this large due to competition, but RV parks can still attain this high level or performance.
Properties lacking internet marketing
One of the best way to spur fast and significant revenue boosts in an RV park purchase is to find a property that has been failing to harness the power of the internet. The average RV park customer today finds the property on a Google search and makes their decision based on a website and on-line reviews. Yet many older owners have no internet presence at all. This opens up an incredible opportunity to literally double sales with nothing more than a quick addition of search engine visibility and proper on-line marketing skills. Remember that RV parks have virtually no expenses on new revenue except for electricity and water/sewer, so almost all of this new found revenue falls to the bottom line.