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.
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.
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.
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.
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
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?
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.
How much should I be setting aside for the purchase of a RV park for closing costs, Phase 1 environmental etc.?
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.
Very detailed information, but it's better to make a paper plan for everything into consideration. Except the above income, it still has Onsite Laundry Facilities,Blue melon lamp , Showers, Fishing, Camp Store, and so on.
Sorry to hear you have given up on your campground. There is some really great information on here. When talking about owner pay there are some really great tax incentives with the law changes that were made. My recommendation would to pay yourself about 60K per year if the business can support it and the rest as owner compensation through the llc or corporation depending on how you set it up. I would love to know why you abandoned the campground and I am also free if you have any questions or need help evaluating another one. I love talking to current and potential campground owners.
Hello, my name is Ralph. I am thinking in two years when I can take money out of my 401K plan to use up to $400.000 to buy a RV park. This amount would be for the down payment and any other costs associated with buying a RV park. I currently live in Dutchess County NY and haven’t decided whether to stay in the state (Seasonal parks) or venture out (year round parks) in search of the RV park. The only experience I have with RV parks is staying in them in our RV in our travels. The longest trip from NY to Arizona we used mostly KOA campgrounds. My wife would prefer we buy a storefront type business, but that doesn’t appeal to me. I would feel confine to whatever the size of the storefront is. I would like to run the RV park with my wife and daughter. So, here are a few of the many questions going through my head. · What size park can I expect with the funds I will have available? · Is work camping on the weekends a good idea to become familiar with how a campground operates? · Should I buy a Franchise or private campground? · Can we draw two salaries? One for my daughter and one for myself. · Where can I turn to learn about the RV park business? Financials I will be 60 years old when I can begin to withdraw from my 401K, I don’t wish to continue to work for someone else (currently still working for the same company I started in 1980 when I was 18 years old). I really like the thought of living and working on the same property. And a RV park fills this nicely.
