1. From “Why” to “How”: The Journey to Selling Your RV Park
Deciding to sell your RV park is a big step, and it’s not one that comes lightly. After all, your park likely represents years of effort, investment, and memories. But now, you’ve reached a point where you have a clear understanding of your “why.” Perhaps you’re ready to cash out and use the proceeds for retirement or other ventures. Maybe you’ve realized that you no longer have the energy to continue running the park. Health, family, or other pressing matters might require your attention. Or, it could simply be time for a change — a chance to pursue something new.
With this clarity, the next step is figuring out how to exit. You’ve likely considered multiple options. Should you pass it down to your children or family? Maybe you’ve explored more unique paths, like bringing in a manager, leasing the entire property to an operator, or partnering with a joint venture partner to handle some of the capital and operational responsibilities. Some park owners even consider converting to a cooperative, allowing campers to purchase their individual sites.
After weighing the pros and cons of these options, you’ve decided that an outright sale is the best path forward. It’s the most direct way to achieve your goals and aligns best with your “why”, along with other factors unique to your situation. With that decision made, it’s time to focus on the next steps to ensure a smooth, profitable, and successful sale.
2. RV Park Sales Are Different from Other Commercial Real Estate
Selling an RV park isn’t like selling an apartment or office building. RV parks can be viewed as a mix between a real estate asset and a hospitality business, with unique revenue streams, operational demands and seasonal patterns. This complexity means you’ll need an agent or advisor familiar with RV park sales.
The right team will understand the nuances, like how to position your park to highlight income potential, guest satisfaction, and operational efficiency. Having experts by your side ensures your park stands out to buyers in this niche market.
3. Market Valuation: Setting the Right Price
When selling an RV park, establishing a fair and competitive price is critical to attracting serious buyers. RV parks are most commonly valued using a capitalization rate (cap rate) approach. This method involves dividing the Net Operating Income (NOI) of the park by the market cap rate.
The market cap rate is influenced by several key factors, including:
- Quality of the Income: Consistency and reliability of cash flow from site rentals and other revenue streams.
- Operational Demands: Parks that require less hands-on management or operational intervention are often more attractive to buyers, thereby affecting the cap rate.
- Quality of the Park Location: Prime locations with strong demand tend to have lower cap rates, reflecting higher valuation multiples.
- Quality of the Park Itself: Well-maintained, modern parks with updated amenities are valued higher than those needing significant upgrades.
- Broader Market Fundamentals: Economic conditions, interest rates, and trends in the RV and travel industry all play a role.
- Lender’s Appetite for the Asset: The willingness of lenders to finance RV park acquisitions affects the cap rate, as buyer demand is directly linked to available financing options.
In addition to the cap rate calculation, other critical considerations come into play when setting the price of an RV park, such as:
- Expansion Land: If there is room for future development or additional revenue-generating sites, it could enhance the value.
- Rental Growth Potential: Parks with room for rental increases are more attractive to buyers looking for future cash flow growth.
- Deferred Capital Expenditures: Buyers will take into account any major repairs, replacements, or upgrades that need to be done after purchase.
Accurately pricing an RV park requires working with a team of seasoned professionals, including brokers, appraisers, and financial advisors, to conduct a detailed valuation. This process should include an in-depth analysis of your park’s NOI, seasonal revenue trends, and local market conditions. A proper valuation not only helps you set a competitive asking price but also strengthens your negotiating position, as buyers will have confidence in the deal’s value.
Pricing too high can scare off potential buyers, while pricing too low might leave money on the table. By understanding and leveraging the cap rate valuation approach, sellers can ensure they’re optimizing their return on investment while attracting serious buyers ready to close the deal.
4. Consider Offering a Vendor Take-Back Mortgage
Obtaining traditional financing from banks and credit unions remains a challenge for the RV park asset class. This can limit the pool of potential buyers, as many may be deterred by the frustration and complexity of securing a loan. Offering to hold a vendor take-back (VTB) mortgage could be a strategic way to entice buyers who would otherwise not be interested.
With a VTB, you become the lender, allowing buyers to make payments directly to you over time. This arrangement can have several benefits. First, it broadens the pool of potential buyers, increasing the likelihood of a successful sale. Second, there are potential tax advantages, such as reducing or deferring taxes on the sale (consult your accountant to understand if this is possible for you). Third, you’ll create a new income stream for yourself, which can be a great way to generate ongoing revenue after the sale.
If you’re considering this option, it’s important to structure the terms carefully. Loan amount, interest rates, mortgage term, payment schedules, and default provisions must all be agreed upon in advance. To protect your financial interests, consult with your professional team, including legal and financial advisors. They’ll ensure the terms are favorable to you and aligned with your long-term goals.
5. Choosing the Right Agent or Team
Selling an RV park is a specialized process, so choosing the right agent is crucial. Look for someone with experience in RV park sales and a proven track record. They should understand how to position your park to highlight its unique qualities, from location to amenities.
Additionally, a good agent knows how to maintain discretion if that’s a priority. A discreet sale approach can protect your business reputation and ensure operations continue smoothly during the selling process.
6. Marketing Strategy: Attracting the Right Buyers
An effective marketing strategy is vital for reaching high-quality buyers. Your agent should craft a tailored plan that includes listing your park on niche platforms, using professional photography, and highlighting its financial performance.
It’s also important to tap into networks of investors looking for RV parks specifically. These buyers understand the business model and are more likely to offer terms that align with your goals.
7. Engaging Serious Buyers
Once your park hits the market, you’ll likely receive inquiries from a range of potential buyers. Some may be first-time investors, while others are seasoned owners. Qualifying buyers is essential to avoid wasting time on parties who aren’t serious or financially capable.
A professional agent can manage this process, ensuring buyers have the funds and experience necessary to complete the sale. They can also maintain discretion during negotiations, protecting your park’s reputation.
8. Negotiating Price and Terms
Negotiation is where your team’s expertise shines. Beyond agreeing on a price, you’ll need to discuss terms such as payment structure, conditions, and whether you’ll provide post-sale support.
By staying flexible and focusing on your goals, you can structure a deal that works for both parties. Remember, favorable terms can sometimes outweigh a higher price, especially if they offer long-term benefits.
9. Managing Buyer Due Diligence
Due diligence is a critical phase in the sale process. Buyers will want to review your park’s financial records, customer data, permits, and infrastructure. Having these documents organized and readily available speeds up the process and builds buyer confidence.
An experienced agent can guide you through this step, ensuring all inquiries are handled professionally and discreetly. They’ll also work to keep the process moving smoothly, preventing delays that could jeopardize the deal.
10. Post-Sale Support: Ensuring a Smooth Transition
Many RV park buyers are new to the industry and may appreciate your guidance post-sale. Offering optional support during the transition can be a selling point and may even justify a higher price.
Whether it’s training the new owners or introducing them to key suppliers, a smooth handover ensures the continued success of the park. This also protects your legacy, especially if you’ve spent years building a reputation for quality service.
Closing Thoughts
Selling your RV park is a significant decision that requires careful planning and expert guidance. From setting the right price to finding the right buyers and navigating due diligence, every step matters. By assembling the right team and taking a strategic approach, you can achieve a successful and profitable sale while ensuring your park’s future remains bright.