Leasing your RV park to an operator can be a unique but potentially ideal solution for owners contemplating a transition. This arrangement works best for RV park owners who want to get out of day-to-day operations, but would like to still rely on the property’s income to sustain their lifestyle, and would prefer not to sell their park outright. It’s also an excellent option if you live on-site and wish to maintain your residence while stepping back from management responsibilities.
Additionally, leasing may suit owners who want to preserve long-term property ownership, benefit from consistent income without operational stress, or explore ways to align with a professional operator for mutual growth. Whatever the motivation, leasing creates flexibility while ensuring the property continues to deliver value.
The Basics of a Lease Agreement
At its core, leasing to an operator is similar to traditional commercial leases. These leases often involve a triple-net lease structure, meaning the tenant covers property taxes, insurance, and maintenance costs. This setup guarantees property owners a predictable income stream while minimizing operational burdens.
Lease terms can vary widely and are customizable based on the owner’s needs and what is acceptable to the tenant-operator. Typically, leases last 2-5 years, allowing flexibility to assess the arrangement’s success. These agreements may include options for renewal, predefined purchase opportunities, or shared performance metrics to enhance collaboration and growth.
Key Lease Terms: What to Expect
The following are typical terms that would need to be agreed upon between you and the tenant-operator:
1. Lease Rate & Payment Terms: The lease rate is obviously a big one. Reviewing previous years’ gross and net income is a good starting point for determining the lease rate. Alternatively, a rate per site could be an effective method for establishing a fair and predictable lease rate. Payment terms should also be agreed upon, whether monthly payments are made throughout the entire year or only during the months the RV park is open.
2. Lease Term: The lease duration typically ranges from 2-5 years, offering a balance between stability and flexibility. Renewal options can be built in to extend the arrangement if it proves successful.
3. Tenant Responsibilities: In most cases, tenants are responsible for property taxes, insurance, and maintenance, as is common in triple-net leases. This alleviates operational stress for the owner and ensures the property is well-maintained.
4. Landlord Responsibilities: Owners may retain responsibilities for major structural repairs or specific agreed-upon aspects, providing clarity and delineation of duties within the lease.
5. Security Deposit: Standard lease agreements include a security deposit, often equivalent to the first and last months’ rent. This serves as a safeguard for the owner and demonstrates the tenant’s commitment.
6. Revenue Sharing or Percentage Kicker: Some leases incorporate a revenue-sharing clause or percentage kicker, where the tenant pays an additional amount based on the property’s income. This aligns interests and ensures mutual benefit from strong performance.
7. Tenant Rights and Improvements: Clear terms should define what the tenant is allowed to do with the property. This includes specifying permissible uses, the types of improvements or modifications the tenant can make, and which changes require landlord approval. Establishing these guidelines ensures mutual understanding and prevents disputes during the lease term.
8. Standard Commercial Lease Terms: Other terms might include renewal provisions, rights to sublease, and protocols for resolving disputes, all aimed at creating a fair and balanced agreement. Some lease agreements give the tenant the right to make a first offer or a first right of refusal to buy the property if the landlord wanted to sell the property.
Benefits for RV Park Owners
1. Guaranteed Income
Leasing offers a fixed, predictable income stream, eliminating the uncertainty of fluctuating market conditions or operational challenges.
2. Hands-Off Management
For owners looking to step back, leasing creates a passive income opportunity while placing operational responsibilities in the hands of an experienced tenant.
3. Ability to Keep the Property
Leasing allows you to retain ownership of your RV park, preserving your long-term asset while benefiting from consistent income.
4. Ability to Continue Living On-Site
If you reside on the property, leasing enables you to maintain your home while stepping back from day-to-day operations.
5. Potential Upside in Property Appreciation
A successful operator may enhance the property’s value, providing you with long-term appreciation potential even while leasing.
6. Opportunity for a Partnership
Finding an operator you trust could lead to a collaborative relationship, potentially evolving into a partnership for future ventures.
7. Higher Income Potential with a Revenue Kicker
If your lease includes a revenue-sharing clause, a skilled operator could boost income, providing you with additional financial benefits.
8. Customizable Lease Terms
Leases are highly adaptable, allowing you to negotiate terms that align with your financial goals and operational preferences.
Final Thoughts: Why Leasing Might Be the Ideal Solution
Leasing your RV park to an operator offers a balanced approach that provides financial stability while reducing operational burdens. This arrangement is ideal for owners looking to step back from daily management but still benefit from a steady income stream and long-term property ownership. If you’re considering to transition out of management but don’t want to sell, leasing offers a tailored solution that preserves the value of your property. With the right operator and well thought-out lease terms, leasing can be a smart strategy for owners looking to hold onto their property, maintain control, generate income, and ideally build a lasting partnership with an experienced operator.