EXPANDING RV PARKS: A PRIMER By Frank Rolfe

It is estimated that there will be roughly 51,000 new sites of expansion in the U.S. among existing RV park owners. In many markets, this can be the right choice to expand your profitability and the depth of your product offerings. But is this the right choice for your RV park? Here’s a primer on the key issues to consider.

Is the demand there?

Before you would add additional lots to any RV park, you would first need a reason to do it. If you are running at less than 100% occupancy, there may be no reason to risk the capital necessary to expand until that vacancy is filled. And even if there are times when you are at 100% occupancy, are there really enough days at full capacity to justify the year-round additional vacancy of adding those new lots? So before you would even begin to think expansion, you need to do some homework on the science of your occupancy needs.

Is there land to do it (either current or can it be purchased)?

If your property is land locked (which means there is no land for sale on any of the four sides of the property) and you have no excess existing land that came with the property, then the concept of expansion is pretty much a non-issue. However, if there is land available or unused land to expand into, then you might put more thought into the concept, assuming the demand is there.

What will be the true cost of expansion?

It costs about $10,000 to $15,000 on average to expand your RV lots, plus the cost of land. This does not include engineering and any “soft costs”. If you want to add 10 lots, the typical guess would be that you are looking at around $100,000 or so to accomplish that. That being said, get a bid or two because you might be able to add those spaces at a more economic rate based on where your roads and utilities are located.

How will you pay for it?

One big problem with expanding an existing RV park is figuring out how to pay for it. You have an existing loan on your RV park in all likelihood, and you can go to your current bank to see if they would front the money, but many banks won’t do construction loans. You may be able to find a hard money lender or a specialty lender to do interim financing, but the financing of RV park expansions is complicated and has derailed many such concepts. Make sure you have a handle on this before you waste any time on a plan that can’t be funded.

Other expansion concepts

Before you build new lots, you need to see if you would be better off buying another nearby RV park that is under-managed for less than the cost of construction. You might be able to market and manage them together. You should also see if there are non-traditional ways to expand into your existing land that are outside the box, like adding park models in the land around a lake, etc. If the goal is to simply increase the potential profitability of your RV park, you need to look at all the options for your capital and see what is the most profitable path forward.

Conclusion

Expanding an RV park can be a great idea – but not in all cases. You need to do some analytics to see if it’s the right option for your property. These concepts will get you started in your diligence.

BY Frank Rolfe