"Earlier this week, for example, the study firm Research and Markets predicted that the global RV industry will expand at an average annual rate of 7 percent a year until 2025, and more than 11 percent of American households now own an RV. That all adds up to a siren call for big-money investors who never would have given the sector a second look a couple of years ago."
The above announcement came out in a market research report that caters to large portfolio-type investors, bragging about the potential in the RV park industry. However, many investors may misunderstand the message here. Here’s an interpretation of these statistics.
The RV park industry is in a great position
It should come as no surprise that RV parks have suddenly gained a lot of notice because of two main factors:
- Very positive public relations efforts crafted over the past decades positioned RVs as a luxury object that scores extremely highly in public perception.
- Sheer luck of how America has developed over time and recent megatrends including 1) the Covid-19 pandemic and its focus on outdoor, healthy activities 2) the fact that there are 10,000 Baby Boomers retiring per day in the U.S. with many buying RVs 3) the growth of the Millennials – the largest population segment in America – as strong RV buyers 4) the shift in U.S. priorities to friends and family and focusing on simple, outdoor living.
It’s hard to find a single megatrend that does not push favorably for the RV park industry.
Those who buy RV parks now should do well going forward
If RV parks have extremely good stats as to future growth in demand, then it’s a no-brainer that this should lift the value of RV parks going forward, simply through the supply and demand of more RVs on the road equals more demand for RV park spots to place them. On top of the simple supply/demand axiom, there are other factors that should fuel higher RV park values in the years ahead including:
- Inflation. We’re in for the biggest bout of it since the 1970s. Inflation is great for real estate as it pushes values higher while debt is eroded. The 1970s were one of the best decades for real estate of all time.
- Attractive debt. RV park buyers can leverage their cash with sensible, attractive debt products from sellers, banks – and even SBA lenders.
- Untapped potential. Most mom & pop RV park sellers have plenty of low-hanging fruit to harvest with better marketing and management skills.
RV parks are not a “speculation” and you don’t have to wait until the end to benefit
Another great attribute about RV parks is that they are an “income” property – as opposed to an asset speculation where you don’t make any money until the asset is sold. RV parks have monthly and daily rent coming in and, after expenses, that’s yours to put in your pocket. It’s also important to note that, as inflation soars, RV park owners have the ability to increase rents immediately to keep up with the pace of inflation (which is currently around 6% per year and growing).
But you have to understand the science of how to make money with RV parks
Every time an article comes out like the one in “Research and Markets” it gives people the false impression that they can buy just any property at any price and make money. Nothing could be farther from the truth. There is a definitive science to buying and making money with RV parks and there’s no such thing as “easy money” in any industry. You have to buy the RV park at the right price, do terrific due diligence, formulate your plan to increase the property’s profitability, and execute on your plan. If you don’t use this level of sophistication, then you are simply speculating and might as well just bet in Vegas because you have no control over the end result.
Harnessing the opportunity means buying good properties and not just any property
We have been buying and operating RV parks for nearly 30 years and over time we have seen many properties that were good deals and plenty of others that were a nightmare for any buyer with huge issues that preclude making money (or even getting your money back) including:
- Poor location.
- Poor infrastructure.
- Environmental contamination.
- Declining market.
The bottom line is that there are investment grade assets in the RV park space and then others that fail on one or more fronts to be safe for investment.
RV parks are a great investment sector, that’s 100% true. But don’t get carried away and think that a rising sea will lift all boats, as some have big holes in them that will sink you. Be enthusiastic, but temper that with good scientific knowledge. We have been distilling the science of RV park investing for nearly 30 years and would love the opportunity to show you how to avoid the pitfalls and focus on the key drivers to profitability, as well as show you the correct way to identify, evaluate, negotiate, perform due diligence on, re-negotiate, finance, turn-around and operate RV parks.