This is the inspiring story of a retiree – An Amazing story of RV living, money making, and RV park investing. This intrepid baby boomer bought the RV park he was living in. With this strategy he is significantly increasing his net worth, while enjoying a lifestyle that permits him to travel, live in community, stay active, etc. 

• How I Met This Retiree and Investor
• Dave’s Background
• Living in an RV Park
• Buying the RV Park
• How is RV Park Investing a Way to Make Money, During Retirement?
• Room to Grow and Make More Money
• A Dream Come True – RV Living – Making Money – RV park Investing
• Leaving a Legacy for Future Generations
• Are There Other Similar Stories or RV Parks for Sale at a Good Price?
  • RV Park for Sale by Owner in Arizona
• RV Park Investing is Not for Everyone

How I Met This Retiree and Investor

During the past year I’ve been traveling to the Southwest region, of the United States.  This has allowed me the opportunity to visit a few mobile home parks and RV parks.  I’ve talked to owners and property managers about this fascinating real estate space. 

I know first hand that mobile home parks can be very profitable. And because of this, I am always looking for an opportunity to invest more in this space.  One of the best ways to find investment opportunities in this market is to develop relationships with park owners and park managers. 

During one of my trips to Arizona I noticed an RV park with a few mobile homes and several RVs.  The park has some nice landscape views and looks like an enjoyable place to stay at. Without much hesitation, I turned into the driveway to check it out. 

I followed the road in the direction of the “Manager” sign.  As soon as I parked, a man came out of a nice RV to meet me.  I asked if he was the owner of the park and he said yes – It is not uncommon for RV park owners to live in their parks. In this case, he is also the manager. We will call this man Dave. 

I introduced myself explaining that I am a mobile home park owner and I am very interested in mobile home parks and RV parks.  Somehow I felt sharing this information was a good way to break the ice. I asked Dave if he would be willing to answer a few questions.  He agreed, yet I wasn’t exactly sure how things would go. After I found out about his amazing story I understood his openness and willingness to share.

Dave’s Background

Although I want to jump into the making money part of the story right away, I feel it’s important to first share a bit of Dave’s background. 

As it turns out, Dave grew up in a mobile home park owned by his dad.  In fact, Dave worked in the park doing all sorts of park related work.  Consequently, he learned a lot about the mobile home park business at a very young age.

At some point in his life, Dave worked as a residential contractor.  And later in life, he ended up selling RVs.  This is something he became very successful at. It was through this experience that he began to gain an appreciation for the RV lifestyle.  Naturally, he became extremely knowledgeable on all things related to RVs. 

Eventually Dave retired from the RV business.  By this time he was living in condo he had purchased in a somewhat remote location.  This made sense to him, because he wanted peace and quiet, and a place that required little maintenance.  Among many of his traveling plans was to do some traveling. 

It didn’t take long for Dave to realize that condo living, as a retiree, was a bit of a lonely lifestyle.  Although he was within driving distance from friends, making the drive back and forth became a bit of an obstacle to him and his friends. 

Living in an RV Park

Through his experience selling RVs, Dave was well aware of the millions of retirees happily living in RV parks across the country.  RV living seemed more and more attractive for multiple reasons.  First, RV living can easily provide the sense of community many retirees long for. Second, RV living can be very inexpensive. Third, RV living provides people with good opportunities to travel.

It was at this point in retirement that Dave decided to sell his condo and pursue the RV lifestyle.  Thus, in his 70s, Dave was beginning a new adventure. 

Like many retirees, he knew he wanted to be in a place with warm weather.  After some traveling around, he settled in an RV park in Southeastern Arizona.  The particular location is an area where the combination of latitude and altitude provide very pleasant weather all year round. The exception is during the monsoon season, which actually brings immense beauty to the magnificent landscapes.

At this RV park, Dave found the communal living he longed for. His cost of living became dramatically lower. In addition, it became easy to pack up his RV and travel at his leisure. 

Buying the Park

While living in the RV park, Dave became friends with the then owner.  At some point, Dave was drawn to the possibility of owning this property. And eventually, Dave made an offer to to buy the park.  However, for some reason or another, things didn’t move forward at that time. 

Fast forward several months when a couple, visiting from California, made an offer to buy the RV park.  Soon after, the park was under new ownership.  The new owners intended to make money, while manage the park from afar.

Unfortunately for this couple, RV park investing in another state didn’t work out as planned.  After a few months of owning the park, they called the original owner and asked him if he would take the RV park back.  And this is what eventually opened the door for Dave to get into the RV park investing business. 

In the end, Dave bought the park for less than the new owner paid for it, which was $400,000.  Interestingly, this was less than what Dave had offered the original park owner months earlier. And by the way, even at $400,000 this would have been an excellent money making investment for the right investor.

Dave not only got the park at a good price, but he was also able to negotiate seller financing with very favorable terms.  In fact, he told me he has two notes.  One from the original owner and one from the current seller.  And he also told me one note was at an interest rate of 0% and the other note was at an interest rate of 2.5%. As you will see below, these truly are absolutely amazing terms!

This keen investor is now experiencing true financial freedom. Financial freedom is about cash flow, and he has plenty of it.

How is RV Park Investing a Way to Make Money, During Retirement?

Whether or not Dave bought the RV park at a bargain price or not is really a matter of the value of the park.  And value is simply a matter of numbers.   After Dave shared some basic information on the park, I went home and ran some numbers.  Below is the math.

Here is an oversimplified way of looking at RV park investing, but for our purposes, this is enough:

Annual Revenue = Number of Spaced * Monthly Rent

Or

Annual Revenue = 60 Spaces * $250/Month * 12 Months = $180,000

Calculating the Market Cap Rate of This Investment

When it comes to commercial real estate, investors are used to looking at metric called Capitalization Rate (Cap Rate).  This metric is a function of earnings as a percentage of price. The Cap Rate formula is as follows shown below. For additional information on evaluating properties, please see How to evaluate stocks vs websites vs real estate.

Cap Rate = Net Operating Income / RV Park Price

To determine the the Cap Rate of this investment, we first need to figure out a way to arrive at the Net Operating Income. I know from evaluating properties in this market that parks like this can have expense ratios of less than 50% of revenue.  Estimating the expense ratio requires some understanding of how certain large expenses (i.e. electricity are accounted for). Nevertheless, for now let’s assume 50% is a reasonable assumption. 

Thus, if annual Revenue is $180,000 and Expenses are 50% of Yearly Revenue, then the annual Net Operating Income is $90,000! 

Net Operating Income = $180,000 * 0.5 = $90,000

Now we can calculate the Market Cap for this investment by taking NOI divided by the price paid for the RV Park. In this case, the Market Cap would be $90,000 divided by $400,000. 

Market Cap = $90,000 / $400,000 = 22.5%

The higher the Cap Rate is, the better the Net Gain is as a percentage of Price.  Given the assumptions above, it appears Dave got a great deal, if he purchased the park at a Market Cap of over 22%!

What is a Good Market Cap Rate?

To be clear, Market Cap Rates vary depending on location, market condition, etc.  To give you an idea, Market Cap Rates for apartment complexes in big cities can be as low as 3%.  Market Cap Rates for RV parks that need work and are located in small cities can be as high as 20%. 

After I ran the numbers I called Dave and asked him if I could write about his story, to which he said yes.  In addition, I told him I had ran the numbers and concluded he purchased the property at a cap rate higher than 20%.  He confirmed my assumptions were correct. 

Market Cap Rates provide good information, as they can be used to compare to other investments. But by themselves, Market Cap Rates don’t tell much. This is why I like to use at something similar to return on investment. More on this below.

Calculating the Cash on Cash (COC) Return

Another important metric used by RV park investors is Cash on Cash Return. 

Cash on Cash Return is nothing more than Net Gain as a percentage of Cash out of pocket (down payment).  Below is an example, continuing with certain oversimplified assumptions.

We know that Dave has two financing notes. This means he has a financing expense, namely interest expense. Obviously, this expense will reduce the annual Net Gain. 

In this case, this interest expense should be very small because the interest Dave is paying on the notes is very small (0% for one note and 2.5% for the other note). 

Let’s examine the numbers.  If Dave’s out of pocket cash (down payment) was $100,000, then he is paying interest on the remaining $300,000.  Let’s ignore the 0% interest and work only with the 2.5% interest rate. 

In this case, Dave is paying a maximum of $7,500 of interest in year one. 

Estimated Interest Expense (Year 1) = $300,000 * 0.025 = $7,500

Therefore, instead of an annual Net Gain of $90,000, the Net Operating Income (NOI) after mortgage expense is $82,500. 

NOI (After Debt Sercice) = $90,000 – $7,500 = $82,500

Finally, Cash on Cash (COC) is NOI (After Debt Service) / Down Payment

COC = $82,500 / $100,000 = 82.5%

This computes to a COC return of 82.5%!  That’s an amazingly high number. Please don’t forget we are dealing with some assumptions, but I think you get the point. In any case, it is pretty evident that Dave has been successful at making money via RV Park Investing.

To put things in perspective, think about investments in terms of how long it takes you to double your money. Most investors would be content with a return on investment of say 6%. This means they can double their money in roughly 12 years. In contrast, given the assumptions provided here, our brave RV park investor is likely to double his money in just over one year.

The Rule of 72 – How Long Will it Take To Double Your Money?

I won’t get into this here, but a quick way to ESTIMATE how long it takes to double your money at a given interest rate is using the Rule of 72. This rule says you need to divide 72 by the interest rate. See image below.

Room to Grow and Make More Money

Increasing Rents

When we were reviewing the numbers, I was surprised to hear Dave only charges $250 per month for lot rent.  By the way, this does not include electricity, which is normally charged separately.  In my earlier calculations I simply ignored the income and expense side of electricity, which should result in a wash, as RV park owners are not allowed to profit on things like these. 

I asked Dave what the market rents are for the area and he suggested he can easily charge $300 per month.  When I asked him why he had not raised rents he said the previous owner raised rents from $200 to $250 just recently and he didn’t want to have another rent hike right away. 

But keep in mind that at 60 spaces, even a small rent increase of say $25 per month can result in additional revenue of $18,000.  And by the way, all of this additional revenue becomes pure Net Gain, because raiding rents does not result in any additional expense. 

Adding Spaces

Last, as we were speaking, Dave pointed to an area of the park where he intends to add 7 more RV spaces.  I didn’t think this was necessarily a good idea because the cost of adding the infrastructure for additional RVs can be fairly high.  However, Dave said he would do all the work himself, including operating a backhoe, which would be necessary to install new utilities. 

Obviously, if Dave can do the work and keep his costs low, then increasing the size of the park by 7 spaces can be another way to improve Revenue and Net Gain. Simply $250 * 7 Spaces * 12 Months, at a 50% ratio would result in additional net gain of $10,500.

Revenue from Added Spaces = $250/Mth * 7 Spaces * 12 Months * 0.5 = $10,500

A Dream Come True – RV Living – Making Money – RV Park Investing

I am fascinated by Dave’s story and not only from the investment side of things.  The reality is, in his 70s, Dave is living the dream. 

From a financial point of view, he has managed to create a solid income stream that far surpasses his expenses. His network just keeps on increasing every month.

From a social point of view, he is living exactly where he wants to live.  That is, in an RV community of people that share the same interests. 

The RV Park keeps him mentally and physically active in his retirement, as he is fixing things here and there.  However, if he ever wanted to get a contractor to do some work he would have no problem affording it. Or if he wanted to hire a manager to oversee some of the other park duties, he could very well do so.

His travel plans are fairly unaffected by his new investment and lifestyle.  When he travels he has plenty of people he trusts in the park that could take care of things while he is having fun. 

Leaving a Legacy for Future Generations

Another thing I asked Dave was what his plans were for the future.  Dave plans on having one of his daughters move into his RV Park in a few years.  And eventually, he would like her to take over the park. 

Years ago, after seeing firsthand the benefits of RV living, Dave convinced his two daughters to stop paying mortgages or rent on their homes and to move into RVs.  Both of which are very happy with that decision. 

Are There Other Similar Stories or RV Parks for Sale at a Good Price?

Yes, I suspect there are lots of similar stories out there of owners making money from RV park Investing. In fact, in the last month I’ve became aware of two such stories. One is a new RV park owner in Montana that recently bought the park where he was staying. I know about his situation because he called me to see if I would be interested in buying a mobile home from him.

This RV park has 42 spaces and was at 100% occupancy during the Summer. This new RV park investor tells me he only needs to keep 12 to 15 spaces occupied to make money. I don’t know how much he paid for the park, but if he only needs occupancy of about 33%, then he clearly got a good deal.

And the last story I will share with you is a story I intend to write more about. That is because this RV park owner is ready to sell his 100+ space RV park.

This seller is also retiree that bought the RV park in which he lives. However, he is ready to move on to something else. And what’s even better, he already shared with me he is willing to do seller financing. This could very well mean very favorable terms and possibly a great COC return.

If you want to look into this unique opportunity click here: RV park for sale by owner in Arizona. The owner of this park has agreed to provide owner financing. This could be an interesting opportunity for someone that wants to live there and manage the park.

RV Park Investing is Not for Everyone

As exciting as things may sound, it is always good to recognize that most investments are risky. Not everybody can be successful at RV park investing and Making Money. That’s because, it takes a certain type of knowledge to evaluate investments and/or be successful at managing a business.

Case in point is the couple from California I mentioned earlier. They found what appears to be a good deal, but were unable to manage the park in the manner they had envisioned. In the end, they ended up losing money and wasted valuable time.

Conclusion

I was inspired by Dave’s Amazing story of RV living, money making, and RV park investing.   I truly believe there are many people, that can benefit from his story.  In his 70s, he is excited about his business.  He stays mentally and physically active.  And he is leaving a legacy for future generations

The best part is that with the right knowledge, courage, some capital, you too can benefit from RV park investing and enjoy RV living and making money

If you want some help evaluating an investment deal I’d be happy to help you free of charge.

I do this because I am passionate about this space and I find that I learn a lot when I help others. In this website, I’ve created a forum dedicated to help you evaluate deals. If you prefer to send me an email, please email me at cahkeen@outlook.com.