A new year brings with it new opportunities. If your goal is to buy an RV park in 2014, then it’s time to get started today. There are hundreds of RV parks available on RVParkStore.com and Loopnet.com. And there are thousands beyond that in the hands of Moms & Pops. If you truly want to buy an RV park, then it’s all about knowing the type of park you want to buy, and then pouring as many potential deals as possible through those sorting criteria. That’s how you find your “dream” RV park. The process is not hard, but it does require commitment. Joe Paterno, the famed football coach, once said “the will to win is important, but the will to prepare is vital.” That means that there is hard work involved in any successful undertaking, and those who put in the effort are the ones that win. So put your thoughts into action this year, and start that RV park hunt!
Memo From Frank & Dave
The Impact Of Rising Interest Rates On RV Park Investing
There can be no question that interest rates are going to go up in the near future – they already have gone up roughly a point in the last several months. The key question is how high they will go, and what the impact will be on buying an RV park.
Expect a 1.5% rise in the near term
The cause of the current increase in interest rates is as a result of the tapering of “quantitative easing” – the government’s $85 billion per month of purchasing of bonds to keep rates low. This program cannot go on forever, and most economists agree that the net effect of the program has been to keep rates about 1.5% below where they should naturally be. So as quantitative easing ends, expect rates to rise to roughly 7% on bank debt. That means that the interest rate on the mortgage of an RV park will be at 7% in the near future.
Thereafter, it’s going to be based on inflation
As long as inflation remains low, bank interest rates may stay at around 7%. So the future of interest rates is not contingent solely upon quantitative easing, after that first 1.5% adjustment upward. Beyond that, it’s going to be dependent on any future interest rate increases by the Federal Government, probably as a result of battling inflation.
Only buy parks with room for improvement and at a low price
If you want to be truly protected from rising interest rates, then only buy RV parks that have built-in defenses in the form of the ability to push revenues significantly and a low purchase price to support. Who gets killed in higher interest rate environments are those that have purchased RV parks with little upside and at low cap rates. For example, if you buy an RV park at a 7% cap rate, and interest rates rise to 8%, then you are upside down in your RV park, and will not be able to refinancing it or sell it until times change. However, if you bought that RV park at a 11% cap rate, and then have raised the income even higher, you are pretty much immune to interest rate damage.
Remember that real estate does extremely well in inflationary times
Since inflation is what drives interest rates, then it’s important to remember that real estate performs the best in eras of high inflation. Why? Essentially, the value of your note is reduced by the escalating rents. Banks are the ones that get destroyed in such an environment, as they cannot do a darned thing to enhance the value of their note. The real estate owner, however, can raise rents with abandon.
You do not need to live in fear of interest rates. They follow very predictable paths. The key to happiness in an era of rising rates is to make sure that the RV park you buy has the additional firepower to thrive in that environment. Only buy RV parks at cheap prices, and with plenty of room to increase the net income. Boy Scouts advocate “be prepared” – and that’s a pretty good motto to live by.
Check Out The Deals On RVTrader.com
“All this for $5,900 – you’ve got to be kidding!”
If you want to know why RV park occupancies are on the way up, just look through the listings of used RVs on RVTrader.com. Here’s an immaculate 2004 travel trailer for $5,900. As those 10,000 baby boomers who are retiring per day start to see the low prices of RVs on the used market, there’s no question that they are going to go on a buying spree. Look at photos on this site of the used RVs that are for sale. You’ll be blown away by the values offered.
Here’s A Great Show On RV's To Watch
“Celebrity Motor Homes” is a show on HGTV, in which they show the interior and exterior of some of the most expensive RV’s in the world. From Will Smith to Simon Cowell – and from one story to two stories – you’ll be amazed at how expensive some of these RV creations are. This show is a great way to learn some important conversational stories for your RV customers. And it will demonstrate the continuing elevation of the RV as a part of the American lifestyle. Check out your television guide for days and hours.
RV Park Home Study Course
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