Buying a campground can be an investment worth at least $273K a year (Outdoor Command), making it a worthwhile investment. But there are many factors to consider and knowing where to start can feel daunting.
How do you buy a campground? Where do you buy a campground? How do you finance a campground?
But while there’s a lot to consider, the process doesn’t have to be overwhelming.
Here are 9 easy tips before buying a campground.
1. Figure out what type of park you want before you shop.
If you have an idea of what you’re looking for when you’re trying to buy a campground (or design one), shopping will be much easier.
Consider the following questions before you browse:
- Where do you want your campground?
- How big of a campground do you want?
- Do you want something that’s on a waterfront?
- Do you want only RV sites? Full-hookups?
- Do you want tent sites?
- Do you want to incorporate glamping or other unique accommodations?
- Do you want overnight, weekend, or seasonal campers?
- Do you want mostly families? Retirees? Remote workers?
2. Use websites that focus on selling campgrounds.
When you’re buying a campground, it’s important to work with people who understand the industry. So, if you’re in the market for an RV park, be sure to check out these 4 sites.
1. The Campground Connection
Based out of Grandville, Michigan, Campground Connection is a “full service, voice to voice consulting and marketing company exclusive to the Campground, RV Park and Resort Industry.”
While they are the largest online marketplace for current and future RV owners, they’re also very personable. When you call, someone actually answers. One park owners said that they “above and beyond what I would expect from a marketing professional to make sure the client understands the nuances of the transaction at every juncture” (Campground Connection website).
Even if you’re just browsing the market, they have a helpful list of FAQs, to get you started on the right track.
RVParkStore is a solid option if you’re looking to buy or sell your campground. They have a large list of RV parks and marinas, as well as plenty of industry resources to get you started.
Parks and Places is a team of RV experts with “over 50 years of experience in the ownership, marketing and selling of campgrounds and resorts.” Their team has been able to sell over 100 parks and provides support every step of the way.
Campgrounds for Sale‘s site says that they’ve sold 11 parks in the last year, and 300 in total. Beyond that, they have a pretty decent list of parks for sale, as well as a number of useful articles highlighting different steps in the buying process.
3. Review profit and loss statements for the campground you’re looking at.
After you’ve found a good lead, start doing some research to see what you can learn about the campground. A good place to start would be their profit and loss (P&L) statements for the past three years. This will show you the park’s costs and revenue during a fiscal year.
Once you have some tangible numbers to work from, start thinking through how you can build the campground up even more.
- How can you maximize income?
- How can you increase reservations?
- How can you lower expenses?
- Are they adequately staffed? Have too many people on staff?
- Any major expenses coming up (like replacing septic or renovations)?
4. Calculate the cap rate.
A cap rate is a formula that shows when you will breakeven on a real estate investment, by dividing the value of the property by the net operating income (NOI).
RVParkStore says that most cap rates for campgrounds will fall between 8 and 11%. Keep in mind that cap rates will vary depending on location, so use other campgrounds in your area as a frame of reference to know what to expect.
5. Get a land survey
A property survey may or may not be required depending on the terms of the mortgage company or local regulations, however, it’s still probably a good idea to get one. A property survey will validate any legal descriptions or restrictions, show any levels of elevation or hazardous areas, and determine the boundaries of the property. Generally speaking, a land survey will last 5 to 10 years, so depending on how long it’s been since the last one, you’ll likely need one.
Here are a few ways to go about it.
1. Hire a land surveyor.
The simplest place to start is with a professional who can compare with other records and identify if property lines have shifted over time. They are experts in their field and come with professional equipment. Not to mention they serve as witnesses in any legal matters.
2. Check the property deed.
A property deed will show you a full legal history of the campground, including tax information and conditions of the property. A deed will also include previous measurements from a previous land surveyor.
3. Search any previous records of property surveys.
Previous records can be found at your local courthouses or assessor’s office. You might also be able to find records online depending on how tech-savvy the local government is. While this may require some time on your end, it’s an inexpensive way to research the property.
4. Contact the previous surveyor.
Previous land surveyors will keep their records on file, and you can reach out (for a fee). They’ll then send you a copy that you can use to compare with any of the documents on your end.
6. Understand the tenants.
As you make your way through the process, be sure that you have a good understanding of the current or previous owners. Start by checking any online reviews of the campground and see first-hand what guests have to say. Maybe even stay at the park yourself and get an idea of how they’re running the campground.
Are the tenants long-term? Are they purchasing slips or leasing? What’s the overall relationship with the current owners?
Compare your notes to what you’re looking for out of a park and get an idea of what’s compatible or what you would change.
7. Ask to shadow the park operators.
Before you start going through financial channels, make sure you understand the ins and outs of the park. Get an inside look by asking the current owners if they’ll let you shadow them for a few days or so.
Be sure to consider:
- How the campground functions over a weekend.
- How they manage reservations.
- What requires maintenance.
- What their biggest pain points are.
- Why they’re selling.
Make sure you have a realistic picture of the campground and what you’re getting yourself into.
8. Procure funding.
After you’ve done the due diligence and vetted the campground, it’ll be time to secure funding. Obviously a campground is not cheap, but the good news is that there are a ton of options to fund your park without creating a financial nightmare.
1. Seller financing.
This is a loan between the seller of the campground and the buyer. In most cases, the party purchasing the campground will make a downpayment to the previous owner, with regular payments until the park is completely paid off. In the case of seller financing, the interest rate and repayment terms are generally agreed-upon and recognized as a mortgage or deed.
2. Mortgage-backed securities and collateralized mortgage obligations.
A mortgage-backed security (MBS) is similar to bonds, where a lender issues a loan to you and multiple parties, and then bundles all of those loans together and sells them to a larger bank, which then sells the MBS to investors, who receive periodic payments in return.
Going off of that, a collateralized mortgage obligation (CMO) is a type of MBS, where mortgages are bundled together by risk and maturity dates, and investors, based on how their level of risk-aversion, will fund specific mortgages.
The main thing to understand is that investors are interested in MBS and CMOS because they can financially benefit without having to actually buy or sell a loan. Generally speaking, MBS and CMOs are financed by banks, insurers, and hedge funds.
3. Conventional loan.
A conventional loan is an uninsured mortgage loan provided by a private lender and paid back by the new campground owner. While this is one of the more straightforward options, it comes with fewer guarantees.
4. Credit union.
While they’re limited in the loans they can offer, credit unions can give you lower interest mortgages with better customer service. It’s also usually much easier to get approved through a local credit union.
5. Local banks.
Inversely, your community bank will have a wider variety of loans they can offer, but they will come with higher interest rates. That being said, local banks or community banks tend to have better service and assistance if you’re buying a campground in their area.
6. Nonbank lenders.
If you’re looking for financing, but you’re not sure you want to go with a bank, you can find a list of nonbank lenders with substantial experience in the outdoor industry via Parks and Places, as well as a mixed list of lenders from RVParkStore.
7. SBA Loans.
The Small Business Administration (SBA) is an autonomous government agency that was designed to provide assistance for small businesses like campgrounds.
As a result, SBA Loans are generous in term lengths with caps on interest rates. They also come with financing of up to 90% of the campground cost, as well as smaller requirements for down payments, making this a very flexible option for park owners.
9. Negotiate asking price.
You don’t necessarily have to take the asking price at face value.
Whether it’s the sales price, closings costs, or even closing date, you’ll find there’s room to negotiate. It’s generally helpful to have a broker or real estate agent, but regardless, here are a few tips for countering (via Money).
- Get a mortgage in principle (as sellers are more likely to work with you).
- Research the campground and what the market value should be.
- Promote yourself as a desirable buyer (a real estate agent helps here).
- Imply interest in other campgrounds.
- Start with a lower offer than what you’re even willing to pay.
- Throw in extras requests if they’re unwilling to budge on price.
Closing the Deal
With healthy research and the proper financial assistance, buying a campground can be a great investment, and the process can relatively painless.
So, to get started:
- Figure out what you want out of a campground.
- Find parks online.
- Review P&Ls.
- Calculate the cap rate.
- Get a land survey.
- Understand the tenants.
- Shadow the current owners.
- Procure funding.
- Negotiate asking price.
If you follow these tips you’re bound to find the right RV park and set yourself up for long-term success before even taking your first reservation.
If you’re buying an RV park, Campground Booking can bring in immediate revenue and increased reservations, while saving you time on the phones. Schedule a demo with us today!