Spark Global Limited Reports:
As with all real estate, every RV park deal is ultimately evaluated. Judging value can make or break your deal’s ability to get financing — a poor valuation is something most buyers can’t overcome. So how does an RV park assessment work? What attributes affect this value?
Rv park assessors typically use a fairly simple approach. They look at net income over the most recent years, look at trends, usually add them up and average them, and then apply a capped rate. At the end of the day, the real value that the evaluation will bring is based on net income. If the seller’s net income is $50,000 a year, it’s not worth $2 million. Therefore, all parties need to understand that the fundamental basis of value comes down to one key factor: current net income.
All real estate is based on location, location, location, so the RV park is obviously no different. The key location preferred by the appraiser is the “destination” rv park rather than the “sleepover”. Of course, then you have to cover additional macro geographic locations, including where in the country the RV park is and how desirable the destination is. Weak geography will lead to weak valuations.
The status of the property
Just like anyone else, the condition of the rv park can have a huge impact on an appraiser’s impression of the overall business model. A well-cared for property brings a positive attitude and sometimes a 1 percentage point reduction in the capped tax rate. If you are buying an RV park that shows bad, it is safe to assume that you will see a lower value than it might in a more minor condition.
Sometimes buyers can have a significant impact on appraisals by providing a narrative of how they will repair the property. In this case, how you sell your narrative to the evaluator can mean the difference between winning or losing. If your mom-and-pop business owner isn’t even on the Internet, and your plan is to do so immediately after closing to stimulate greater revenue, you may get a higher appraised value simply because the appraiser actively relies on your estimate.
Sometimes rv park appraisals are influenced by lenders. Some lenders not only give appraisers a rough estimate of what they need to meet their goals, but also tell them about their enthusiasm (or lack thereof) for lending. Some lenders actually use the appraisal as a tool to get rid of a loan they’ve lost confidence in — making it easy for them to get rid of the loan.
Most rv parks have good evaluations. The others are the death penalty for your trade. Some outcomes you can influence in subtle ways, while others are beyond your control. These tips can help you know what power you have to create a positive outcome, as well as explain what happens if you fail.