The Benefits of Owning RV Parks
RV Owning an RV park can offer significant benefits, both in short-term profits, and long-term growth. These are assets that are not top-of-mind for many investors, as they are less well known than the multifamily or industrial sector, for example. But they are a growing asset class with many advantages, ranging from the flexibility they provide, the cash flow they produce, and the growing number of RV owners.
The first advantage of RV Parks is the steady income they can produce. When people think about RV Parks, they typically think of “Overnight Parks”, which focus on people parking their RVs for one night, on the way to a destination. This is actually the least lucrative type of RV Park, and far more labor intensive. The far more lucrative and interesting type of park is one that focuses on two other sources of income: Selling the lots, and the monthly renting of sites. These are both great models for RV Parks, and are described below in greater depth, starting with selling lots.
The selling of lots is also known as “Condo-ization” of RV Parks, where individual lots are sold to buyers who want a consistent place to vacation, and ensure that they always have a spot available. In addition, some people live in these lots year round. This is increasingly important as the popularity of RV Parks has grown tremendously, making it challenging to find a spot unless it is booked months in advance. These RV lots are selling for between $125K-135K in Western Montana, with examples as high as $310K in some RV Parks North of Coeur d’Alene. And in most cases, these RV Parks are only open for half of the year, making a year-round park all the more valuable. These prices are all far above the per-lot development cost of $40-70K, which includes the clubhouse, amenities, and development costs of the park.
The other attractive source of income is monthly renting of lots, as more and more people are choosing to live in their RVs full-time. Another model is to buy a park-provided Tiny Home, and live in that full-time. The average rent per lot for Western Montana is $750-1,150 per month, plus utilities. This allows for monthly cash flow and income from the lots. The main benefit to renting lots is the consistent cash flow it provides. This has the added benefit of adding “Momentum” to the filling of the RV Park. Potential buyers see that this Park is filling fast, and there are plenty of other people living there. There are two ways to fill in the park with rentals. The first is to allow the RVs to be mixed in with our Tiny Houses. The other option is to dedicate a part of the park for Tiny Homes, and another part of the Park for RVs. A Park Owner could place all of the tiny houses in one corner of the property during phase one, and RVs in another corner. Then, as spots are filling in, they fill in towards each other. Whichever type of home is more popular, gets more dedicated space.
This built in flexibility allows Park Owners to pivot to whatever the market is calling for. If interest rates have spiked very high, and more customers want to rent, then the Park Owner can focus on renting lots. If interest rates have dropped, and customers would rather buy the lots than rent them, then the Park Owner can choose to sell additional lots and earn lump sums of cash. In addition, if there is a lingering recession and consumer savings are minimal, then a Park Owner can buy park models, place them on lots, and rent them directly to tenants.
By combining RV Parks, which have an excellent return on investment, with a multifamily model, which is one of the more stable and valuable classes of real estate, we create a superior combination of both classes of real estate. This is an inherently safe strategy, because during each of the last housing downturns, people choose to rent rather than own their home. This model of selling and renting lots on a monthly schedule allows an RV Park to profit whether the tenants are renting or owning. This allows the flexibility to pivot whenever necessary, giving this type of RV Park far more agility than the average multifamily owner.
Another benefit of owning RV Parks is that there is a huge undersupply of housing in Western Montana, that will not be fulfilled anytime in the next five years. The new housing that is being built is overwhelmingly targeted at the top of the market, because it is so hard to build new construction for Class B and C rents. By building RV Parks that provide workforce housing at an affordable price point, RV Parks that allow owning or long-term renting can carve out an unbeatable sector of the market, as stick-built construction simply cannot meet the same price point. It is impossible to build a stick-built house for $100K, which is the price of a highly quality tiny house.
The beauty of RV Parks is they provide many options for how to maximize profit. For example, a Park Owner can buy tiny homes in bulk at a discount from 1-2 manufacturers, financing them either from the manufacturer, a Tiny House-specific lender like Lightstream, or a commercial loan from a local bank. Then, these tiny homes can be rented directly to tenants. The benefit of this approach is that it still gives the Park owner the option to sell the tiny houses once the park is full, bundled with the land. If the owner wants a cash infusion, this is an ideal option.
Compared to other types of businesses, RV parks generally have low overhead costs. Once the initial investment has been made to purchase and develop the property, ongoing expenses can be relatively low, especially if utilities are charged back to tenants. In addition, depending on the size of the property, there may be opportunities to expand the RV park and increase revenue. This could include adding more RV sites, offering additional amenities or services, or even opening a store or restaurant on the property.
These options point towards one of the largest advantages of owning RV Parks, their inherent flexibility. RV Park owners have the flexibility to set their own strategy, rules, regulations, and pricing. They can choose to offer discounts, seasonal rates, or other special promotions to attract customers. Whichever path the Park owner wants to pursue, there are profitable options available to them. Overall, owning an RV park can be a fulfilling and lucrative business venture for those who are willing to put in the time and effort to make it successful.
If you are interested in learning more about the benefits of RV Parks, as well as the RV Parks that the Upslope Group is making offers on, shoot us an email at Keith@UpslopeGroup.com