Why RV Parks Will Be in Demand for Years to Come
Executive Summary
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RV Parks will yield high returns over the next decade due to strong demographic demand from both Baby Boomers and Millennials
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The huge increase (39%) in RV sales has not been matched with an increase in RV Parks, leading to massive demand
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Very few developers focus on building RV Parks, ensuring long-term demand
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The "Condo-ization" of RV Parks leads to massive profits, with the price of RV lots ranging from $125K-$310K
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The rental market for RV lots is also very strong, with prices between $750-$1,150 per month, giving Park Owners flexibility to adapt to market conditions
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RV Communities are in practice the only legal place for Tiny Houses to permanently stay, giving them a captive customer base
The text below describes why RV Parks will yield high returns over the next decade, and are a sector of real estate to focus on. The main reasons are threefold: The demographic changes that will ensure demand for RV spots, the lack of supply, and the flexible nature of RV Parks to match the current market demand.
Demographic Shifts:
First, there are two big demographic trends that are culminating to make RV Parks an excellent investment. The current wave of Baby Boomers retiring is one of them. There are 10,000 Baby Boomers retiring every day, and buying an RV and traveling the country is at the top of the list of retirement goals for many of them. Baby Boomers buy RVs at high rates, and many of them plan on selling their house and traveling full-time. In fact, over a million Americans already live full-time in their RV.
The second demographic change is the growing influence of Millennials. There are now more Millennials than Baby Boomers, and they value location-freedom, Tiny-Living, working remotely, and connecting with nature. The fastest-growing segment of new campers is Gen Zers and Millennials. The rise of remote working is not disappearing with the disappearance of COVID. It is clear that many Millennials are committed to remote work, and companies that offer remote work are growing rapidly.
Millennial campers are driving the trend in RVing as a work/travel lifestyle. In 2021, 57% of millennials worked while camping. These demographic shifts have at least another decade to play out, ensuring that RV Parks will remain in high demand.
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Lack of Supply of RV Parks:
There has been a rapid rise in the number of people buying RVs in the last few years, with the number of RV sales increasing by 39% in 2021. But it is far easier to build an RV, than it is to build a RV Community. It is challenging to build new RV Parks. The challenges range from finding the right location with enough traffic, to finding the right zoning, the availability of utilities, and financing the construction of a community, which can require many million dollars of dollars to build. In addition, it can take up to 4.5 years to build a community, from the closing on the property, to the opening of the community.
However, these challenges are actually a huge advantage to RV Park developers like the Upslope Group, as this ensures that the supply of RV Parks will remain low, and RV spots will stay in high demand. As Warren Buffett puts it, “The most important thing in evaluating businesses is figuring out how big the moat is around the business”. These challenges are the “Moat” that ensures that RV Parks will remain scarce for years to come. Very few developers are focused on building RV Parks, making it an ideal niche to focus on.
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Flexibility of RV Parks:
One of the inherent advantages to RV Parks is their flexibility to adapt to changing market conditions. Currently, the strongest market demand is for RV lots that can be bought and used as a full-time vacation or living space. This is also known as the "Condo-ization" of RV Parks. These spaces are selling for over $135,000 in both Superior, MT, and Big Arm, and as high as $310K in some areas of Idaho. This is far above the roughly $64K that it takes to build these lots, resulting in a sizable profit margin. But economic conditions are challenging to predict, there is the chance interest rates could spike in the future. If this occurs, then we can easily pivot to renting the lots, there is a huge demand in Western Montana for RV lots for rent. They are currently rented for between $750-$1,150 per month in Missoula County, not including utilities. These spots are typically full and have waiting lists, showing the high demand for monthly RV rentals. This is a far more affordable rate than most people can find for a one bedroom unit in Missoula, giving RV Parks an inherent price advantage over other rental options.
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The Growing Popularity of Tiny Houses:
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One of the reasons Tiny Houses are growing in popularity is their ability to address the growing need for more diverse housing options. With housing stock lagging behind demand, and costs continuing to rise, tiny homes provide a sustainable and flexible solution that can be moved easily. They offer a "fill-in-the-gaps" approach to housing, meeting the needs of various communities, from young adults to retirees. This has led to greater awareness and interest in tiny homes, as people recognize the value they offer.
The term "tiny house" is a popular marketing term that can refer to different types of structures and dwellings. This can range from luxury tiny homes for remote workers, to Park Model RVs for seasonal use, as well as tiny homes built for permanent residence. Within the tiny home industry, a tiny house typically refers to a single dwelling unit of less than 400 square feet in area, built on a permanent or movable foundation. This is reflected in state laws, local zoning ordinances, and local residential building codes, which often include the terms "tiny house," "movable tiny house," "tiny house on wheels" (also known as THOW). Providing lots for Tiny Houses on Wheels is the focus of the Upslope Group, as there is a growing demand for these spaces, which can be built at a large profit. RV Parks are essentially the only places to legally park a Tiny House, which is why the Upslope Group is focused on building RV Parks.
Compared to larger residences, tiny houses offer several significant advantages to consumers and their local communities. For example, they have a lower purchase price, reduced construction material waste, and a smaller carbon footprint. Additionally, they have significantly lower energy consumption, with energy costs potentially as low as 7% of those for a regular house. These factors make tiny homes more sustainable and affordable.
Tiny homes also offer immense flexibility in their use. They can serve as starter homes, workforce housing, caregiver units, student housing, guest houses, disaster recovery housing, and more. This versatility has made tiny homes a popular choice for people seeking an alternative to traditional housing options.
The Upslope Group is focused on building RV Parks that are essentially Tiny Home Communities, making them a win-win-win solution for our investors, our communities, and our residents. These lots can be occupied by Tiny Homes, Park Models, or RVs, giving our buyers a variety of options. Better yet, we can choose to sell or rent the lots, to match the current demand in the market.
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