December 2007 Newsletter

1. Finding and Evaluating RV Parks and Campground Investments, by Dave Reynolds
2. RV Park Investment Series - 20 Hours of Audio on How to Buy, Sell, Operate RV Parks & Campgrounds
3. 2007 and Looking Forward to 2008
4. RV Parks and Campgrounds For Sale
5. Featured Listing
6. RV Park and Campground Memberships For Sale
7. RV Park Employment
8. Marketing your RV Park with Signage, by Frank Rolfe
9. Tell us what you think and send us your articles!

Finding and Evaluating RV Park and Campground Investments by Dave Reynolds, RVParkStore.com

In my last article I discussed several ways to locate an RV Park to purchase.  In this article I will discuss the methods I use in evaluating an RV Park once I have found one that looks like a winner.

So how do I determine what a specific RV Park is worth?

I want to know how many lots there are, the gross income, net operating income, how many are seasonal and monthly versus daily, what the rates are, what expenses the owner is paying, and who is responsible for the water lines, sewer lines, and roads.

A good rule of thumb that I use to start with is that I take the gross income of the RV Park and multiple this by a factor of 5. (The “5” number is an arbitrary number based on my experience in evaluating deals).

For example if the park has a gross income of $100,000 per year...

Then my initial value calculation is $100,000 x 5 = $500,000.

If the park is on the market for $1 million I will probably pass.  If the park is on the market for $600,000 or less than I will probably look into it further.  Remember this simple calculation is very generic and may or may not be the true indication of the value of the RV Park.

As you will read in any appraisal handbook there are 3 basic valuation methods.  However, with RV Parks two of those methods, the cost and sales comparison methods, have some flaws that skew the results.  The cost method does not take into account the business component of the business or occupancy levels.  It would value a 100 space RV Park the same whether it has 100% occupancy or 1% occupancy.

The sales comparison method is also flawed in most cases due to the lack of quality and recent comparables to select from.  RV Parks have been increasing in value over the last few years as has other real estate.  With relatively few sales to draw from, an appraiser will typically use sales from a couple years ago and sales from markets 100 miles or more away from the subject property.  Even if there is a similar sale in the same market and in the same condition, one park can be much more attractive than the next.  Differences in expense ratios, occupancy levels, and rental rates can make one park worth 30-50% more or less per space than a similar park down the road.

Due to the flaws in the first two methods I put all my efforts into valuing an RV Park or Campground using the Income or Market Capitalization method.  Under this method I take the Net Operating Income divided by the Capitalization Rate to come up with the Value.  While this might sound like a simple process, it can be quite complex coming up with the true Net Operating Income and decided what cap rate to use in the formula.

A simple way to think about the cap rate is that it is the return you will receive year one based on the current projections if you were to pay cash for the property.  If you put $1,000,000 cash into a CD, you can expect somewhere in the 5% range for your money.  Obviously, if you were to put $1,000,000 of cash into an RV Park where there are risks and time involved in managing that investment, you will want more than a 5% return on that money.  Cap rates have been all over the place in that last few years but they are once again rising.  The parks that are selling now have cap rates in the 9.00% and higher range.  Determining the proper cap rate to use in the formula is arbitrary and will depend on what you are looking for as an investor.  One investor may be satisfied with a 7% cap and the next investor needs to buy at a 12% cap in order to justify the risk and time involved.  I do not even look at RV Parks that I can’t turn into at least a 10% cap rate.  The range of cap rates on the market today fall in the 5% to 15% range with most parks falling into the 8% to 11% range.

Another factor in determination of an acceptable cap rate has to do with the requirements of your lender as well as the interest rates on the loan you use to purchase the property.  If you are borrowing 80% at a 10% interest rate and are trying to buy the property at a 7% cap rate, you will have a large negative cash flow.   On the flip side, if you are borrowing 80% at a 4% interest rate on a 7% cap rate, you should have a positive cash flow.  So the interest rates are important to consider in the equation.

After determining what is an acceptable cap rate you need to rework the profit and loss statements you receive from the seller or broker.  I call this the “Net Operating Income Reality Check”.   Your goal in this process is to determine the actual projected income and expenses for the first year after you take over ownership.

Figuring out the actual income can be as simple as using the numbers from the Seller's income tax records (if they are reporting all the income) to extremely complex when all the income is not being reported. These issues are discussed in my book and our new audio series.

In this case we will assume the seller has been reporting everything and so we use that number. If the rates charged by the seller are way under market you might consider adding in a portion of the increase rates into the equation if you plan on increasing the rates after taking over. I will use up to 50% of this increased revenue if necessary.

The next thing to do is to come up with the anticipated expenses based not only on how the park is currently operating but also based on how the park will operate with you as the new owner.  For example, if the current owner is managing the park, then you need to plug in an amount for management and payroll taxes and workers comp.  If the park has vacancies and there is no advertising expense, then you need to plug in an amount for advertising.  And so on.

After coming up with the income that the park is currently generating and deducting from that all the anticipated operating expenses including the reserve for capital expenditures you will have what is called the Net Operating Income.

Note:  Net Operating Income does not included deductions for Mortgage Interest, Depreciation or Amortization.  If these numbers are included in the expenses you need to add them back to come up with the Net Operating Income.

If you take the Net Operating Income and divide this by the price you come up with the Capitalization Rate (Cap Rate).  Also, if you divide the Net Operating Income by the Cap Rate you come up with the price and so on.

Many RV Parks and Campgrounds will offer owner's housing and if you are looking to buy an RV Park and operate it yourself, this will also come into play when determining value.

RV Park & Campground Investment Series

We have completed the series on RV Park and Campground Investing.

Over 20 hours of audio (on CD) with Frank Rolfe and I, taking you through the process of:

• Finding RV Parks and Campgrounds To Buy
• Evaluating RV Parks and Campgrounds
• Negotiating and Buying RV Parks & Campgrounds
• RV Park & Campground Due Diligence
• Operating, Turnaround and Selling RV Parks

Is 2008 the year that you will make that leap and buy an RV Park?  If so, then this series will help assure you that you don't make common and not-so-common mistakes that can ruin your life savings.  We want you to succeed and by investing in this new series, you will have the tools to do just that... Succeed and Profit with your RV Park / Campground Investments!

Included with the audio is a hard cover copy of Dave's book on How to Buy, Sell, and Operate an RV Park.

Find out More about this new Product! 

This past year has been a busy one for myself and our family.  Our boys are growing up quickly (9, 10, & 14) and I get to look forward to my 40th birthday next year.  I am currently coaching basketball for the 9 & 10 year olds (same team) and probably enjoy this more than the kids. 

I just finished reading the book "The Secret" for the second time and enjoyed it even more this time around.  With this book as with most other inspirational or business success books, I think the key to being successful (financially, emotionally, or spiritually) is to imagine it, act on it, and repeat. 

In 2007, I added the educational and consulting side of the business on to our websites and have enjoyed all the comments and success stories thus far.  I teamed up with Frank Rolfe (another industry professional) and using our collective knowledge we have written 7 books and recorded over 50 hours of audio cds on the Mobile Home Park, RV Park, and Outdoor Advertising Industries. 

Most of us have seen the get rich quick, no money down courses on late night television.  I accumulated most of these products over the years and while many of them had some good points, the problem was that most of what they claimed does not work in the real world.  Our Mobile Home Park, RV Park, and Outdoor Advertising products were not put together with the hype of making you rich, but rather with what has worked and what hasn't worked for us based on our experiences.  Our theme is that we don't want to make you lose your entire life savings by not doing proper evaluation and due diligence. 

In 2007, I purchased 4 Mobile Home & RV Parks, my first billboards, and am in the process of starting several other websites. 

A few weeks ago, I had a disturbing phone call from none other than the ebay legal department.  They are strongly urging us to abandon some of our domain names that end in the word "bay".  MHBay.com, SelfStorageBay.com, MotelBay.com and the list goes on.  They recently won a suit against the website called PerfumeBay.com and I doubt it would be worth fighting them on this.  So, we will be looking for some new domain names in the near future to migrate the existing sites to. 

The best vacation in 2007 had to be the trip to the Green River near Vernal, Utah.  The fly fishing was awesome and the tranquility of floating down the river through the canyon would have been worth it without the added bonus of all the great trout.  This is definitely on the schedule for 2008 and beyond.

In 2008, our first goal is to work towards adding more features and automation to our websites.  I have just contracted with a company that is to begin work right after the first of the year.  This project is scheduled to be done by the first of April.  We have accumulated many suggestions over the years and hope to implement most of those in the new site layout and design.  If you have any thoughts, now would be the time to send them to us.

As far as investments, I am hoping to double the number of Mobile Home & RV Park purchases to 8 and also continue to buy or build out more Billboards.  I have seen the availability of attractive investments on the rise and look for this to continue throughout the year. 

As far as education and success stories... I hope to continue to add new products to our educational division and have the number of success stories in the hundreds this year. 

Personally, I am making it a priority to get more involved with our church and work on my relationship with God.  My younger sister and her husband and 4 children are planning to go to South Africa (Mozambique) to become missionaries this year and I plan on helping them get the support they need to make this possible.

I also am making it a priority to spend more quality time with my family.  I read an article this past year that discussed how decentralized the family has become with such things as cell phones, TV's in every room, dinner on the couch, and the list goes on.  I am looking to centralize our family once again.

On the wish list would be continued good health and the Colorado Rockies to beat the Boston Red Sox in the 2008 World Series.

RV Parks and Campgrounds For Sale

We currently have over 450 RV Parks for sale and the list is growing daily.  So far this year RVParkStore.com has helped many campground investors find their property and there are several more in the works. 

At last count, there have been over 130 confirmed sales so far this year!

If you are looking to sell your RV Park or Campground you can do so Risk FREE.  Find out more about Selling your RV Park. 

Campground For Sale in Oceola, Ohio

Price:             $549,000 (Cash)

Location:      3933 Hensing Rd, Oceala, OH

Status:           Available

Type:             Campground

Spaces:         125

125 - site campground.  Two lakes, one swimming, 47 acres.  Includes Kubota tractor, John Deere diesel mower, Kubota backhoe, equipment to operate concession stand (ice cream machine, coolers), paddle boats, ice machine, and shelter house.  Seasonal from May to October open daily.

RV Park and Campground Memberships For Sale:

This section of RVParkStore.com is picking up speed.  Memberships are being listed and sold quickly.  With about 150 memberships currently for sale, this continues to be the prime outlet to buy and sell campground memberships. 

Best of all, when you are selling your membership, we do not charge you up front to do so.  You only pay us if you are successful in finding a buyer from RVParkStore.com. 

Find out more about Selling your Campground or RV Park Membership

RV Park Employment Listings:

Are you searching for good quality employees or looking for a position with an RV Park?  Then be sure to visit our ever growing employment listing sections.

All listings in these sections are FREE!

Check out the Help Wanted Section

Check out the Work Wanted Section

Post your FREE Listing Here

MARKETING YOUR RV PARK WITH SIGNAGE

by Frank Rolfe

Marketing an RV park is tricky.  Customers come from all over and for many reasons.  But one piece of marketing that is always important for RV parks is signage on well-traveled roads and highways.

The first step in constructing a successful signage campaign is evaluating what highways or roads are important to you – where does the traffic come from?  To help you in this matter, you can normally buy a “traffic count map” from your local state right-of-way office.  This map shows how many cars per day travel on the highways and major surface roads.  This will give you a good idea of the volume of traffic.  The next step is to find out more particulars on where your customers are coming from.  The best way to achieve this step is to tape a regional map to a piece of marker-board, and either hang it on the wall or place on an easel.  Every time a customer checks in, put a dot or pin on the map where they came from.  You will soon start to see patterns on where your customers really come from and where to emphasize your resources.

Once you have determined where the signs should go, it’s time to construct a budget of what you can spend on signage.  Signage needs to be just one part of your total marketing package, which will also include listings in Woodalls, etc., as well as flyers at rest stops and other high-traffic RV oriented businesses.  Don’t bankrupt yourself – a successful marketing campaign includes consistency, and you need to be able to afford to keep this program (with modifications of course) going for years.  At the same time, remember the old adage “you have to spend money to make money”, and don’t budget nearly nothing.

These are pretty much your options for signage:

�Exit information signage on the highway right-of-way.  These normally blue signs are located right at the exits, and are owned by the state.  They are ideal and reasonable priced, and are by far your best option.  If they are available, this should be your number one options – even if it exhausts your entire signage budget.  If one is not available, contact the state to see what it would take to get one built.  Sometimes they have not built the exit signs yet due to lack of demand at certain exits – maybe you are the one client they need to build the sign.  These signs traditionally cost $50 to $100 per month.

�Billboards. These signs are much larger than the exit information signs, but are not as well located, and are very expensive.  Even in a rural market, they can cost $500 per month or more, so be sure you have a winner before you lease one.  Often, to be effective, these signs would be in tandem with the exit information signs, which means they would be located miles before your exit to lead customers in.  It is often hard to measure their effectiveness.  If you do not have a big budget, I would hold off on this until your budget gets bigger.  One option you could look at is to “share” the space with another business at that same intersection.  That would halve your cost and risk.  Of course, it also cuts in half your ad space and effectiveness.