What Is RV Park Investing?

RV park investing has become one of the most attractive opportunities for U.S. real estate investors. As a niche within the larger real estate investing landscape, RV ownership provides unique benefits, such as higher ROI than most commercial properties. Investors can expect anywhere from a 10% to 20% return on their initial investment, making it a lucrative option for those seeking to maximize their investment dollars.

Asset Classes and RV Properties

Different types of RV parks cater to various segments of the market, including:

• Transient RV Parks: These parks cater to short-term stays, usually for vacationing RV users. Amenities may include utilities, onsite laundry, and recreational facilities.
• Destination RV Parks: Designed for extended stays, destination parks offer a more resort-style experience with added amenities like swimming pools, clubhouses, and planned activities catering to the baby boomer demographic.
• Extended Stay RV Parks: Focused on long-term residents, these parks may serve as affordable housing options in certain regions, mainly for baby boomers looking to downsize their homes or maintain a mobile lifestyle.

Market Trends and Demographics

Over the years, there has been a significant increase in the demand for the RV lifestyle, influenced by several market trends and demographic shifts. Some key factors include:

#1. RV Sales Growth

 The RV industry has grown substantially, with sales topping 600,000 in 2021 compared to under 250,000 in 2010. High demand for RVs means more potential customers for RV parks.

#2. Aging Baby Boomers

The baby boomer generation is retiring and seeking alternative lifestyle options, with many opting for RV living as it offers more affordability and travel flexibility.

#3. First-Time Campers

 In 2020, the proportion of first-time campers grew at a rate of 5x compared to 2019. This trend may also increase the demand for RV park spaces in the coming years.

How To Evaluate and Acquire RV Parks

How Do You Conduct Due Diligence?

When considering an RV park investment, conducting thorough due diligence is crucial. This entails:

• Researching and understanding the local RV real estate markets, including demand and competition
• Inspecting the park’s infrastructure, amenities, and any maintenance concerns
• Analyzing historical financial data, operations, and rent performance
• Assessing existing park management and potential improvements

Additionally, investors should consider environmental concerns, local zoning, and legal issues surrounding the park’s current and future operations.

Underwriting and Cap Rate

Underwriting RV park real estate investments involve creating detailed property financial projections. This typically includes estimating expenses, vacancy rates, and potential revenue. It’s essential to base these predictions on comparable RV parks, local market data, and the property’s historical performance.

The cap rate is a widely-used metric for evaluating an RV park’s potential return on investment (ROI). It’s calculated by dividing the property’s Net Operating Income (NOI) by its current market value (or cost). The formula is as follows:

Cap Rate = (Net Operating Income / Current Market Value) x 100%

In general, RV parks offer a higher ROI than most other types of commercial properties, with investors expecting returns between 10% and 20%.

What About Financing Options and Interest Rates?

Various financing options are available to investors looking to acquire RV parks. Sources can include:

Interest rates for these loans vary depending on the borrower’s creditworthiness, the loan term, and prevailing economic conditions. As a result, investors need to shop around for the best financing option to suit their needs and situation.

How To Manage RV Parks

The RV park business model focuses on providing a safe, comfortable, and enjoyable environment for travelers or long-term renters with recreational vehicles. As an investor, it’s crucial to ensure that the park layout includes well-maintained amenities and utilities for guests, such as hook-ups for water, sewer, and electricity, as well as access to laundry facilities, restrooms, and shared spaces like picnic areas or playgrounds.

Like the hotel or short-term rental industry, customer service plays a vital role in the success of an RV park. Hiring a dependable management team that understands the importance of customer satisfaction can significantly contribute to the park’s reputation and attract repeat business.

Building solid relationships with local communities is also essential, as it can lead to partnership opportunities, such as promoting local events, attractions, and businesses within the park.

Let me give you an example of this. We recently purchased an RV park in Gulfport, MS. We partnered with the sports complex near us to market (for free) our park whenever they have tournaments. It’s a win-win for both of us!

Marketing Strategies 

Effectively marketing an RV park can significantly impact its visibility and attract more customers. A strategic marketing plan should include setting up a website with detailed information about the park’s amenities, rates, and policies and using online booking platforms to make it easy for potential guests to reserve their stay. It’s also important to establish connections with RV clubs, associations, and travel publications.

In the era of technology, social media plays a critical role in promoting the park to potential guests. Utilize platforms such as Facebook, Instagram, and Twitter to share updates, photos, and promotions, engage with customers and showcase the park’s unique features. Encouraging guests to leave reviews on popular platforms like Google, Yelp, and various RV forums can also contribute to attracting new customers.

Maximizing Profitability and Growth

Investing in RV parks can offer higher returns than traditional rental properties, especially if investors focus on maximizing property values and increasing revenue streams.

Here are a few of those strategies:

Expanding to Multiple Properties

To further enhance profitability and growth, investors in the RV park industry may consider expanding their portfolio by acquiring multiple properties. This strategy allows them to take advantage of economies of scale and tap into the various RV park markets nationwide.

With over 90% of America’s 8,000+ RV parks owned by operators with less than five properties, there is a great opportunity for new investors to enter the market and leverage their expertise to grow the business efficiently.

Expanding to multiple RV parks also helps investors diversify their risk, as each location will likely have different visitor demographics and demand patterns. As a result, diversification can protect the investor’s cash flow if one park experiences a dip in popularity or faces local challenges.

What About Risks and Challenges?

One challenge that investors may face is managing properties over long distances. RV parks are often located in remote areas, making day-to-day operations more difficult to oversee. To address this challenge, investors can consider hiring a professional property management company to handle the operations or even explore employing technology like remote monitoring systems for security and maintenance.

Additionally, maintaining clear communication with the RV park staff is crucial. This can be achieved through regular virtual meetings, periodic site visits, and providing adequate resources to employees to ensure efficient operations.

Navigating Market Factors and External Forces

It’s also essential to monitor market factors and external forces, such as housing market trends, gas prices, and RV sales. These factors can directly impact the profitability and sustainability of the investment.

• Housing market: A shift in the housing market could affect the demand for RV parks. For example, if housing becomes more affordable, the appeal of RV living may decrease. Investors should stay informed about housing market trends to anticipate any potential changes in demand for their RV park investments.
• Gas prices: The cost of fuel has a significant influence on RV usage. When gas prices are high, RV owners may be less inclined to travel, which could lead to a decline in park occupancy rates. 
• RV sales: As RV sales increase, so does the demand for RV parks.

Investor Profiles and Case Studies

Individual and passive investors are attracted to RV park investing because of its income-generating potential. These investors often look for stable assets with low maintenance, and RV parks can meet those criteria. This is one of the main reasons I also began investing in RV parks.

As a side note, if you’re an accredited investor and want to gain access to the RV parks I invest in, join the Passive Investors Circle. 

Institutional Investors

Institutional investors, such as private equity firms and real estate investment trusts (REITs), are also showing interest in RV parks due to their potential for high returns. For example, Blackstone Group, a major investment company with $881 billion AUM, has significantly invested in mobile home parks in recent years.

Such institutional investors focus on acquiring and managing professionally run, amenity-rich campgrounds and RV parks, capitalizing on the growing trend of Americans spending more time outdoors.

Investment Groups

Investment groups, like Havenpark Communities, which is based in Utah, have also been active in acquiring RV parks and mobile home communities. These investors often look for opportunities to add value by improving the facilities, increasing rental rates, and implementing more efficient management systems. By focusing on delivering a better overall experience for park residents, these investment groups can help drive higher occupancy rates and generate more income for their portfolios.