I wouldn’t want to be the one to pour “COLD WATER” on anyone’s dreams. BUT and you knew there would be a but. A few years back I had the privilege to work as a Travelling Ambassador for a very large campground owners association. I would go and visit each of the 400 odd parks in the system and 90% of these parks where privately owned. I must say it was an eye opener for me. I have be around the camping industry for 35 or 40 years and one of the most common threads I found as an Ambassador was the number of owners that had purchase/inherited a campground that had ABSOLUTLY no business skills what so ever. Some of them had no idea what a Business Plan even was, how to establish or read a profit and loss statement. They had no idea how much each site was valued at (to set fees), How to set-up and measure each profit stream (Firewood sales, store sales, etc…) how to set goals, implement action plan, and communicate the plan with major players nor how to measure progress/failure. Running a campground is a business not a hobby unless you have unlimited wealth. I would strongly recommend that anyone thinking about such a venture needs to first take some business classes and go hire on as a Manager at a park for 2 years before you dump the family’s lifesavings and future in a whim that “sounded like fun” Not trying to discourage but as the man said; Do your homework, learn the skills and work with the success stories. Ron
If it has not already been mentioned, there are real estate agents for buying and selling parks and there is a formula. It is usually adding zeros to the number of seasonal sites as in 130 seasonal sites means $1.3 million dollars. There are often 2 sets of books and the accounting may be well-organized or very sloppy and disorganized. The owner may be paying his taxes but most are using cash transactions and other approaches to pay less than they should be. The accounting records are likely to be approximate. Infrastructure is most important when evaluating a park for purchase. There should be official drawings of the location of the electrical wires, transformers etc. and the feeds to the outlets at the trailers, the complete watersystem location of the pipes, wells, etc. and feeds to the trailers and the sewer system pipe locations and septic systems. Potential problems are inadequate water during hot periods of the summer, pool with a leaking problem, the need to import water by truck etc. You need to know whether the water system is adequate for the number of sites, when it was put in (how many sites at the time) and whether it has been maintained and expanded. Sewage systems can be "underbuilt" without the proper pipes, joints, and parts to prevent back-ups, nor a quick way to access and solve problems. Trees and roads can interfere with sewage pipes if they are not in an ideal location too. Septic systems are often subject to stuff being flushed down toilets that destroy the sump pumps as in diapers, depens, etc.. Multiple sump pumps at around $5,000 each are needed to completely guarantee NO destruction. Just covering some of the basics.
QUOTE(Kawartha @ Feb 27 2012, 04:55 PM) [snapback]28872[/snapback] If it has not already been mentioned, there are real estate agents for buying and selling parks and there is a formula. It is usually adding zeros to the number of seasonal sites as in 130 seasonal sites means $1.3 million dollars. There are often 2 sets of books and the accounting may be well-organized or very sloppy and disorganized. The owner may be paying his taxes but most are using cash transactions and other approaches to pay less than they should be. The accounting records are likely to be approximate. Infrastructure is most important when evaluating a park for purchase. There should be official drawings of the location of the electrical wires, transformers etc. and the feeds to the outlets at the trailers, the complete watersystem location of the pipes, wells, etc. and feeds to the trailers and the sewer system pipe locations and septic systems. Potential problems are inadequate water during hot periods of the summer, pool with a leaking problem, the need to import water by truck etc. You need to know whether the water system is adequate for the number of sites, when it was put in (how many sites at the time) and whether it has been maintained and expanded. Sewage systems can be "underbuilt" without the proper pipes, joints, and parts to prevent back-ups, nor a quick way to access and solve problems. Trees and roads can interfere with sewage pipes if they are not in an ideal location too. Septic systems are often subject to stuff being flushed down toilets that destroy the sump pumps as in diapers, depens, etc.. Multiple sump pumps at around $5,000 each are needed to completely guarantee NO destruction. Just covering some of the basics. Not sure where you got your premise that to arrive at a valuation you "add zeros to the number of sites". That would be about as foolish pulling a number out of a hat. Valuation is determined by profitablility, the real estate valuations, the value of the improvements etc. A professional appraisal is needed to arrive at an exact valuation, but there are many formulas and models much more accurate than adding zeros to site numbers. My bank holds a number of loans on RV parks. I know of no instance where the owners keep two sets of books, steal all the cash or otherwise cheat and deceive. Hiding cash actually hurts the valuation of a business, it is penny wise and dollar foolish. When reviewing a park's books for loan approval we give absolutely no weight to unreported income and if an applicant pushed the issue, we would decline the loan because we only wish to deal with honest people. Your points regarding water and sewer are absolutely on point and a reason why a park on city water and sewer services is often a more valuable and attractive property. Much easier to repair a pipe or snake a sewer line than replace pumps, pump holding tanks, repair leach fields or dig a new well.
QUOTE(kcmoedoe @ Feb 27 2012, 06:30 PM) [snapback]28874[/snapback] Not sure where you got your premise that to arrive at a valuation you "add zeros to the number of sites". That would be about as foolish pulling a number out of a hat. Valuation is determined by profitablility, the real estate valuations, the value of the improvements etc. A professional appraisal is needed to arrive at an exact valuation, but there are many formulas and models much more accurate than adding zeros to site numbers. My bank holds a number of loans on RV parks. I know of no instance where the owners keep two sets of books, steal all the cash or otherwise cheat and deceive. Hiding cash actually hurts the valuation of a business, it is penny wise and dollar foolish. When reviewing a park's books for loan approval we give absolutely no weight to unreported income and if an applicant pushed the issue, we would decline the loan because we only wish to deal with honest people. Your points regarding water and sewer are absolutely on point and a reason why a park on city water and sewer services is often a more valuable and attractive property. Much easier to repair a pipe or snake a sewer line than replace pumps, pump holding tanks, repair leach fields or dig a new well. The formula I mentioned is used by the corporations that buy campgrounds in my area. They in fact told an owner that his 130 site was worth 1.3 million irrespective of property, buildings etc. Irrespective of profitability, improvements etc., the bottom line is what a buyer is willing to pay. Sure a professional appraisal is needed and used but it is a buyer's market. As far as owners are concerned, you have missed a lot. The line between business expenses and personal expenses can be interpreted in a very personally convenient manner and paperwork can easily be a forgotten aspect of some transactions. "The receipt book can't be found" etc.
QUOTE(Kawartha @ Feb 27 2012, 10:04 PM) [snapback]28880[/snapback] The formula I mentioned is used by the corporations that buy campgrounds in my area. They in fact told an owner that his 130 site was worth 1.3 million irrespective of property, buildings etc. Irrespective of profitability, improvements etc., the bottom line is what a buyer is willing to pay. Sure a professional appraisal is needed and used but it is a buyer's market. As far as owners are concerned, you have missed a lot. The line between business expenses and personal expenses can be interpreted in a very personally convenient manner and paperwork can easily be a forgotten aspect of some transactions. "The receipt book can't be found" etc. Guess I just deal with a very different market and clientel. Just completed a refi deal for a park where the park appraised for $3,500,000. That particular park had 75 RV sites and 10 cabins. The cabins were not worth $2,750,000 so either the appraiser was an idiot, valuing the sites at around $40,000 a site or your rule of thumb may not apply everywhere. And again I must re-iterate, the books of the parks we have loans are impeccable. Most are professionally prepared by CPAs and we sure don't give any credence to any "off the books" income. Do business owners take personal benefits from the company's revenues? Of course. But that serves to lower the profitability shown on the income statements, not increase it. If they put their personal cell phones, the personal utilities and buy steaks for personal use out of the campground inventory, that increases the company's expenses and cost of goods sold and lowers the profitability. In the end, that will hurt the valuation of the business, not help it.
