RV parks have been around for 100 years, but they have only been subjected to the Covid-19 pandemic for a couple months. And in just that short amount of time there are some observations that are of importance to both current owners of RV parks as well as potential buyers. So what are some of the opportunities and problems presented by Covid-19 regarding RV park investing?
Opportunity: More RV parks coming on the market.
Every recession/depression unlocks more RV parks to come on the market. This is because mom and pop owners became distressed at the uncertainty in the economy and decide that now is the time to sell. We saw this with the 2007 Great Recession, and we will see it again with Covid-19. It’s just human nature.
Opportunity: Continual low interest rates.
Recessions bring about lower interest rates thanks to “quantitative easing” – the government’s policy of artificially suppressing rates. In this case, rates were already at record lows, so Covid-19 basically ensures that these rates will stay low for probably years. And low rates will make the purchasing and financing of RV parks more profitable
Opportunity: Ability to get lower prices and seller financing.
Recessions and depressions usher in a feeling of weakness, and that extends to RV park prices. Moms and pops think that bad economic times require lower prices to get things sold. They also often remember back to the difficulties they had in getting financing to build the RV park in the first place and have little confidence that a higher price can obtain a bank loan. This can also lead the conversation to the availability of seller financing as an alternative to the perceived obstacle of banking.
Opportunity: Lower gas prices.
Covid-19 has ushered in an unusual byproduct and that’s the collapse of oil prices which, in turn, has caused gasoline prices to collapse. Low prices at the gas pump always leads to more RV usage, which creates more revenue for RV park owners. With oil currently at around $13 per barrel – down from around $60 just a few months ago – we should be seeing record low gasoline prices for quite a while.
Opportunity: RV parks as a quarantine option.
With the self-quarantine orders from Covid-19, many Americans have decided to use their RV as an option to stay far away from heavy population centers. In many RV parks there are a number of customers who plan on staying for the duration. Despite Covid-19, RV park occupancy remains on-budget as many see this as their best option with the ability to walk and enjoy nature instead of the insides of their homes.
Problem: Social distancing hurts much of the fun at an RV park.
What most RV park users like the most are the activities and socializing with others. You can’t really utilize all that an RV park has to offer at a time of social distancing. At one of our RV parks in Texas, we have had to call off a number of activities such as swimming, dancing and other favorites until the distancing measures are relaxed. This may hurt occupancy this summer as customers count on these pastimes as part of their camping experience.
Problem: Economic chaos will hurt Millennial RV buying.
One group that has been heavily hit by Covid-19 are Millennials – the youngest and largest segment of the U.S. population. The problem is that this generation has been a huge driver to RV sales, second only to Baby Boomers. While the demand will stay remain intact, Covid-19 and the many layoffs in the economy will slow RV sales and usage from this important demographic.
Problem: Many attractions are closed.
“Destination” RV parks rely on that important feature: a “destination”. However, many of these items of interest are currently closed, whether it’s a state or national park, amusement park, or museum. While many of these will be opening this summer, there may be rolling “blackouts” of these attractions until a Covid-19 vaccine can be developed, or some type of cure for those who contract it.
Conclusion
Buying an RV park is a permanent investment. Covid-19 is a temporary setback. Smart investors will use this time to find, negotiate and buy extremely attractive deals while Covid-19 temporary issues run their course. If you can buy an RV park at a great price that creates cash flow forever and endure a few months of Covid-19 setbacks along the way, then that’s a good trade.