The RV Park business model is based on the goal of attaining the highest occupancy and revenue possible given the existing location and structure. But not all RV Parks share the same path to achieve this noble purpose. In this RV Park Mastery podcast we’re going to explore how to expand your net income through the careful use of park models.
Episode 130: The Role Of Park Models Transcript
It is the fundamental goal of any of our RV park owner to maximize the revenue. And by maximizing your revenue and maintaining the same cost, you increase your net operating income. And all of us are in the business of making money. That's why you own an RV park. You may have other byproducts. You may enjoy the lifestyle of being an RV park owner. You may live in your RV park. But I think we would all agree that, hey, we're in this business to try and make a profit. And we are going to try and maximize that profit. And not every pathway to maximizing profit for every RV park owner is the same. And in some of those pathways, one of the best tools you can use to gain greater revenue and gain greater net income is something called the park model. This is Frank Rolfe with the RV Park Mastery podcast. We're going to explore park models, what they are, why they work, and what kinds of RV parks do they flourish in. So a park model is effectively what looks like a small mobile home, but it doesn't look like a mobile home. It looks much better. A park model is traditionally about 400 square feet and it sits on the ground.
It traditionally does not sit up in the air like a typical mobile home does because they're built that they can actually either be up in the air or they can be effectively down on the ground. And they feature full-sized appliances. They feature regular utility connections. And so they give people within the RV park a hybrid between an RV, which is typically smaller, lacking full-sized appliances, lacking permanent utility connections. It gives people this kind of intermediary between traditional housing styles of overnight staying and a recreational vehicle style. Now, why would anyone want to stick those in spaces or build areas for those in an RV park? You might say an RV park is all about RVs, right? Well, that's true. That's why they call them RV parks. The whole focus is on recreational vehicles, whether it be a motor home or a fifth wheel or a travel trailer. That is the goal. But at the same time, not everybody wants to arrive and to stay in one of those three options. So the concept of the park model was to allow people who don't want to stay in a motor home or a travel trailer or a fifth wheel, but still want the RV park experience or the RV park location.
This is the solution. Now, what kind of properties would need a park model? Well, if you have a overnight RV park along the highway, a place that people stop for just one night on the way to their destination, then probably park models are not going to work for you. Because traditionally, that overnighter location will be someplace where there's not much of civilization there, typically not a lot of stores, no health care, no jobs. So I don't know why anyone would need a park model in an overnighter format. But if you've got a destination RV park or an extended stay RV park where people go to that property and typically stay roughly 14 days on US average, now having the opportunity to have the choice to stay there in a manner different than your traditional recreational vehicle starts to have some more importance. Now, let me give you some examples of park models working for us on our properties. We have a large RV park located down on the Texas-Mexican border. And in this property, which we bought from the original mom and pop, it had a fair amount of vacancy when we bought it. And our goal was to try and turn that around.
And we found in talking to a lot of customers there, one big issue they had, this being mostly a senior property, as they got older and started having mobility issues, the RVs weren't really working for them. But you know what a park model does? You can put a wheelchair down the hallway of most park models. You can put a ramp that take you up into that park model. But you can't accomplish those things typically with your regular old travel trailer or fifth wheel or motor home. So we saw immediately on areas that are more focused on seniors and retirement, the park model had a natural niche just as a byproduct of aging. And then we found also that a lot of seniors did not want to drive their big old RV down from the north to the south because you have a lot of snowbirds down in South Texas. And this gave them the ability instead to sell that RV, buy the park model, and then just drive their car or fly down when they want to readjust their lifestyle away from the freezing cold of the north down to the south during the winter. So once again, the park model had a definite benefit to the end user because it was helping them fill a need, fill something that they needed.
They just didn't want, they love the RV park, they love staying there throughout the summer and the winter, but they did not like having the RV as the only tool for them to stay in. And then we have other RV parks that are near city centers, typically out in the suburbs and exurbs. And here we have something else. We have people who want to live there full-time, year-round. And the problem is it's really cramped living in an RV if you're going to be in it month after month for the rest of your life. But the park model, being much larger and much like a traditional single-family home, allows you to do that without getting claustrophobic. So now the park model is allowing people to live there on a full-time basis without missing out on those typical comforts of home. A lot of RV parks today, if you look around, you're going to see more park models there than you've ever seen before. That is not a condemnation of the model. That's not people saying, oh, people don't want RVs anymore. But most RV parks always had an inherent percentage of vacancy. And people are realizing that they can use those park models without sacrificing any available lots for the RVs. But they can soak up that traditional average vacancy with those park models.
Now, what do you need to know about park models if you're going to try them in your RV park? Well, the first thing you need to know is that they're not horribly expensive if you buy them on the used market. They can be very expensive on the new market. They make park models that go as much as over $100,000. That's far, far too much for most properties. But if you're a good shopper, if you shop around, really work it, look at Facebook Marketplace, just keep your eyes and ears open, you're going to find used park models that you can typically buy for as low as $10,000 and bring them into your RV park and set them up. And you may be in that thing for maybe $20,000. Now, a $20,000 park model with all the amenities of an RV park and the location of an RV park is not typically a very hard sale. If you run responsible ads, if you answer the phone and you show up to open the door, typically you will find customers. But the great thing about park models is you can start slow. You can crawl, then walk, then run.
And if the model is not working for you, you can stop. You don't have to keep going. If you bring in a park model or two and you say, well, this isn't working out like I want, well, then stop. You'll get those two sold and now you've learned a lesson. And so you may say, well, that was the best experiment I ever did. Because you'll even lose money on them. The demand is so high. And park models pretty much work throughout America. We have them in all kinds of different states and locations. So I'm not saying they only work in South Texas. They only work in the Midwest. No, these things work nationwide and they are to be found nationwide. But silently behind the scenes, they become a much larger and continually growing part of the RV park industry. And they're a wonderful tool to help you maximize your revenue and maximize your income. And again, that is everyone's primary goal. This is Frank Rolfe with the RV Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.