RV parks are hidden gems that even the savviest of commercial real estate investors can overlook. They are an excellent way to turn an affordable, seemingly useless tract of land into a cash cow. However, like any CRE project, it’s essential to perform your due diligence to ensure your investment is profitable.
The Difference Between RV and Mobile Home Parks
Much of the confusion around RV parks and mobile home parks lies in the nomenclature. Recreational vehicles come in a variety of styles. Some are like buses with the driver’s seat built in, and others are towed and referred to as “campers” or “trailers.”
While the terms trailers and RVs can be used interchangeably, mobile home parks and trailer parks should not be — although they often are. Mobile homes (despite the name) are generally designed to be long-term residences. Although they can be moved, doing so requires special equipment and is very costly. Think of the double-wide or triple-wide mobile homes you’ve seen transported occasionally on the freeway.
With that factor in mind, the development and business plans of RV parks and mobile home parks are inherently different. RV parks are typically intended to be high turnover, sometimes featuring amenities to draw in new guests and boost rates. An RV park usually wants to attract a mix of camping enthusiasts and road travelers.
Mobile home parks are tenancy at will (A.K.A monthly leases) or long-term leases. Some long-term mobile home parks also offer ground leases where the tenants are free to develop small plots at their own cost. Because mobile home parks are typically more permanent, development and operational costs can be lower depending on the owner’s vision.
How to Start an RV Park: 6 Steps
Starting an RV park is more than buying land and renting out spaces. There are six high-level steps to starting an RV park.
The recreational vehicle industry is unique and requires a lot of know-how to create a park that RV enthusiasts will want to patronize frequently. A knowledgeable team of advisors, including attorneys, developers and RV owners, will help you gain the critical knowledge needed. Learning the ins and out of the industry is vital for making profitable business decisions and positioning your RV park as a premium choice for road-weary travelers.
2. Business Plan
As with any business endeavor, a detailed business plan is table stakes for securing funding and ensuring future success. We’ll discuss this step in detail later on.
3. Acquire Land, Permits, and Insurance
Once you’ve acquired your funding, it’s time to purchase your land. Once you have the deed, obtaining the proper zoning permits to develop according to your business plan and insurance to protect yourself and others is critical.
4. Develop Land
Seeing your park plans come to life is one of the most satisfying parts of starting an RV park. Later, we’ll cover some expert tips on how to make your RV park a booming success.
5. Hire Personnel
Simply put, anyone can tell the difference between an understaffed RV park and one that’s not. It’s important to remember that RV parks are hospitality-focused. A well-trained staff to interact with customers, maintain the grounds, and provide security are crucial.
6. Market Your Business
Like any new business, no one will visit your RV park if they don’t know it exists. Unless you’re a marketing wiz, hiring a marketing team with proven results in the RV industry will help get customers on the grounds faster.
The 5 Parts of Creating Your RV Park Business Plan
Business plans can vary in complexity based on your industry. However, all business plans should include the following five sections. With RV parks specifically, a few unique components should also be included.
1. Financial Projections
Whether a private equity group or individual, investors in a business need assurances that their investments will see a worthwhile return.
At the very least, investors need to see accurate profit and loss, fixed cost, income statement, and balance sheet estimations to back an RV park business.
2. Competitive Analysis
A comprehensive competitive analysis within a business plan achieves two primary objectives. First, it serves as evidence that you can match your financial projections. Second, it identifies competitor weaknesses and opportunities for your business to have an advantage.
For example, say that your prospective RV park only has one main competitor within thirty miles. That RV park does not have electric and water hookups at every lot, while yours will. That shows a competitive advantage that your RV park has the potential to outperform your competitor.
3. RV Industry Statistics
Providing investors with statistics that the RV industry is stable and poised for growth is always a good idea to include in your business plan.
The campground and RV park sector took a significant hit at the beginning of the covid pandemic due to travel restrictions and fear of the unknown. The industry is progressing back upward. As of 2021, it’s valued at $6.32 billion.
4. Tenant Leasing Agreements
A unique aspect of owning an RV park is that it’s entirely up to you to determine the tenancy terms. You could operate like a hotel charging nightly or weekly rates or offer longer-term arrangements.
The more leasing options your RV park offers, the more appealing it will be to more people. Highlighting this in a business plan can spotlight recurring revenue, which is appealing to investors of all business types.
You could include this section in the financial projections, but depending on the complexity of your RV park and the lease offerings, you might want to have a separate breakdown.
Consider for a moment the target market for an RV park. It’s those that enjoy camping but want some of the amenities of home. That means the more amenities your RV park has, the more appealing it will be.
This goes beyond the standard electric/water hookups and a place to dump your septic tank. Think of things a hotel might have. Consider offering a pool, gym, onsite restaurant, a play area for kids, travel guides and cleaning service. The sky is the limit.
The more amenities your RV park offers, the more your upfront investment will be. However, you can also justify charging your guests more to stay there. Not only that, your RV park can become a must-stop destination for serious RV enthusiasts.
While your amenities could be addressed in the competitive analysis section of your business plan, dedicating an entire section to it would really make your plan stand out.
How Much Does It Cost to Start an RV Park?
Needless to say, an RV park is a massive undertaking. To avoid being unprepared for hidden costs, it’s vital to sit down and consider your unique situation. Although every RV park is different, below are some of the basic cost considerations.
RV Park Startup Costs
Your RV park startup costs will include everything you need to get the ball rolling, even before you start to build. The most notable of these expenses will be purchasing the land itself, which depending on the area, can be anywhere from $4,000 to $200,000 an acre, plus property taxes. For more info on acreage rates, AZ Big Media breaks down the costs per state.
However, don’t skimp on the other aspects of startup costs. Specifically, any tied to R&D for your business plan or fees from attorneys, consultants, or other advisors. Even if you’ve done a ton of research yourself, avoiding this step could result in many hidden costs down the road that can dramatically throw off your income projections.
RV Park Development Costs
RV development costs are similar to any other major CRE project. There are many line item expenses associated with developing an RV park, such as:
- Plotting land and drawing up blueprints
- Licensing and permitting
- Clearing land
- Essential building costs — i.e., electrical, water, sewer (septic), and building materials
Cost of Building RV Sites
Like a restaurant, the cost of building an RV site depends on what you’re willing to offer your guests. An extravagant 5-star experience will require more resources than a self-serve environment.
If you wish your RV park to be super barebones, you could probably get away with a much lower cost. But, when you start adding things like electricity, water hookups and septic systems, the cost per site goes up quickly.
The critical thing to remember is that labor and material costs scale up exponentially (for amenities like water and electricity) with the number of RV pads you want to supply.
RV Park Septic System Cost
The septic system is perhaps the most costly line item on any RV park expense report. It’s not only due to the high price tag of the system itself (which can range anywhere from $500 to $60,000 depending on the size), but also the hidden costs associated with them.
The two primary hidden costs tied to septic systems are environmental testing needed and maintenance costs.
The first thing you’ll want to do before installing a septic system is to contact your state’s Department of Health and Human Services. Septic system standards vary from state to state, and they will be able to guide you based on what’s required for your RV park based on its size and functionality. Here’s an example guideline from the North Carolina Department of Health and Human Services.
Also, check with the EPA to see if your state or municipality requires any geological testing prior to septic system installation. Some states require geotechnical testing to identify the soil type and to see if it’s strong/dense enough to support a septic system. Testing may be needed to identify other factors such as:
- Contaminations or organic materials that could be present
- Groundwater composition
- Soil compaction
- Seismic factors and designs necessary to accommodate
- Foundation design recommendations based on findings
- Contingency plans for any related issues
According to septic company Bio-Sol, a septic system can last up to 30 years if properly maintained. Septic systems require regular maintenance to ensure they are not damaged and that EPA standards are upheld. Also, if each RV site has a septic pump, you’ll want to ensure your guests follow the proper protocols. Since this can be hard to do, some RV parks levy fines on their guests for misuse of their septic systems.
RV Park Income and Expenses: Are RV Parks Profitable?
Up to now, you might be asking yourself, “Are RV parks profitable?” Especially after all the costs that we’ve touched on. The great thing about investing in an RV Park is that most of the costs are upfront, which lets any debt or investment interest be quickly and easily repaid. The primary recurring costs for an RV park are payroll, maintenance, and utility costs — which we’ll touch on some tips to minimize later.
According to RV pros, like the Jellystone Franchise, RV parks have higher cap rates and much better ROI than similar investments like mobile home parks. A primary factor in how profitable your RV park can be is to define your desired level of involvement.
Minimizing Payroll Costs
Since RV parks are hospitality-forward businesses, your park will likely be open 365 days a year. Obviously, you won’t be able to work every day, and you’ll need some staff. But if you’re there to handle the areas of the business that you excel at, whether greeting customers at the office or doing repairs on the grounds, being involved means fewer payroll costs. If you’re a hands-off owner, be prepared to spend more on management and worker salaries.
Minimizing Maintenance Costs
Maintenance costs will take up the bulk of the expenses on the balance sheet. At a basic level, groundskeeping such as trash removal and day-to-day repairs will need to be addressed. Septic maintenance will also be a significant maintenance expense. Otherwise, the other maintenance costs will depend on what other offerings you have for your customers. As mentioned above, if you’re handy and can take care of most of the grounds maintenance, the more profit you’ll be taking home annually.
Minimizing Utility Costs
While you can choose to offer fewer amenities, more successful RV parks provide electric and water hookups along with some form of septic dumping. A savvy park owner will include these costs into the overall price of the stay for the customer. This strategy will minimize overhead costs, maximizing revenues.
RV Park Zoning Regulations
Like any commercial real estate property, your RV park will need the appropriate zoning permit. Most RV parks fall under C1 or C2 zoning but can also require some residential zoning permits if long-term leases are accepted. It all depends on what your specific park will offer. Check out our zoning guide to learn more about CRE zoning.
8 Expert Tips for Starting an RV Park
Having a well-thought-out vision for your RV park is the first step to success. Here are some common tips that RV pros from around the nation emphasize.
1. Get Expert Financing
If you’ve done your homework and have a solid business plan for you’re RV park, getting a loan from the bank isn’t the only way to secure funding. RV parks can require multi-million dollar financing that can come from several sources. A top-notch debt brokerage like Lev can help you get the funding that works best for you.
2. Register Your Business with Google
When people are planning their road trips, Google is a vital tool. Registering your business with Google in your area is the easiest way to direct people to your website and online booking platform.
3. Have a Professional Website with an Online Booking Platform
An online booking platform might be costly, but it will save you a lot of time when it comes to sorting out reservations and payments. So much so that it could take the place of an employee. You’ll be surprised how much more business a professional-looking website and an instant online booking platform can get you.
4. Provide WiFi
When was the last time you stayed at a hotel without WiFi? These days, most people hold RV parks to the same standard. Wifi is a low-cost amenity that is table stakes for most hospitality businesses.
5. Get Good Insurance
RV parks attract all walks of life from all over the nation. Good liability insurance is crucial for safeguarding you from the occasional wild card that will stay at your establishment. Also, many RV parks are in areas where natural disasters are common. Make sure you also are covering all your assets at total replacement value.
6. Practice Sustainability
Just because your customers drive around in giant gas-guzzling recreational vehicles doesn’t mean they won’t want to act sustainably in other ways. Recycling, solar-powered equipment and repurposed decor are all examples of sustainable practices that can attract more clientele.
7. Provide Low-Cost Extras
There are many other ways to offer fun, low-cost extras to make your guests’ stay more memorable. Campfire rings, reservable games, grills, hammocks, bird feeders and citronella candles are all examples of guest extras that can boost an experience and make them revisit your site on the way back home.
8. Stock Traveling Essentials
Even the most prepared road warrior forgets to stock up on something every once in a while. Having a small market stocked with essentials is a good way to accommodate guests and make a little extra revenue. If you want to take it up a notch, you can have a full onsite market stocked with alcohol, food and whatever else you can think of.
The ROI of RV Parks
If you’re considering starting an RV park, chances are you are also a fan of the outdoors. RV parks can be excellent CRE investments for the less experienced real estate developer who’s passionate about nature and wants to be more hands-on. One thing is for sure; there’s a lot of affordable rural land available that could make for great RV parks. All you need is a vision, your due diligence checklist, and of course — financing.