RV parks

How to Underwrite an RV Park, Line by Line

An RV park has more moving parts than the rent roll shows: seasonal income, guest types with very different risk, and infrastructure aging on its own schedule. Underwriting one means rebuilding every line before you believe a price.

Start with the site mix, not the price

Before a single number, find out what kind of park this is. RV park income splits into transient guests paying nightly rates, extended stay guests paying weekly or monthly, and annual or seasonal tenants on long leases. Operators often shorten the first two to TES, transient and extended stay, and the split between TES and annual is the most important fact about the property.

Transient income is high rate and low certainty: it swings with the season, the weather, and whatever event calendar drives the market. Annual income is lower rate and far steadier, and lenders treat it that way. A park at 70% annual with a waiting list is a fundamentally different asset from a park at 90% transient next to a summer lake, even at identical NOI. Ask for the site count by type, the rate for each, and occupancy month by month. You still underwrite the park as one income stream, anchored on the rent roll with occupancy measured against gross potential income, but the mix tells you how much of that income you can lean on and how hard to stress it.

Rebuild the income lines from the T-12, not the offering memorandum

Take the trailing twelve month P&L and put every income line into one of three buckets. Core site rent is the recurring rent from all three guest types and it is the only income that reliably carries into your ownership. Ancillary income is real but softer: storage, cabins or park model rentals, laundry, propane, firewood, the store, pet fees, late fees. One-time income is anything non-recurring, and it does not belong in NOI at all.

Two mistakes are common here in both directions. Buyers strip out recurring rent because a bookkeeper labeled it something odd, like putting nightly site revenue under a heading that reads as sales, and they underprice the park. Or they leave a one-time item in, an insurance settlement, an equipment sale, a lot sale, and inherit income that never repeats. Read the T-12 line by line and classify each one on purpose. Then check what the rent roll says about occupancy, because economic occupancy, what actually got collected, is the number that matters, not how many sites had someone parked on them.

Never annualize a peak season

Seasonality is the single biggest trap in RV park underwriting. Three summer months multiplied by four fabricates income that does not exist, and three winter months does the reverse. If the park is seasonal, and most destination and resort parks are, you need a full twelve months of statements, not a partial year and a multiplier. An annual occupancy average is not enough either: 80% for the year can mean 98% for four months and 55% for the rest, and that curve changes the financing, the operating plan, and your downside.

The expenses an RV park actually carries

Rebuild the expense side on what you will pay as the owner, not what the seller paid. Four lines do most of the damage.

• Management and payroll. Most small parks are owner operated with no management fee and often no payroll for the person who mows, cleans the bathhouse, and answers the phone at 9pm. Add a market management fee and a realistic on-site labor figure, because someone will do that work and they will be paid.
• Property taxes at reassessment. In many counties the sale triggers a reassessment, so the bill you inherit is not the one on the seller's statement. Carry the bill you will actually pay.
• Insurance at today's quote. Premiums have moved hard in hail, coastal, and wildfire markets. Get a real quote for your park rather than trusting a policy priced years ago.
• Utilities and repairs. Ask for twelve months of utility bills. Water, sewer, and electric on an older park with original infrastructure are rarely as tidy as the P&L suggests, and a flat maintenance line across several years usually means deferred work you will inherit.

Once the lines are rebuilt, sanity-check the operating expense ratio against comparable parks. A ratio far below what similar properties run almost always means expenses were understated, not managed away.

Reserves are per site, not a percentage guess

Wear tracks the physical asset, not the rent, so a capital reserve belongs inside your NOI and it should be driven by what the park is made of. Roads, water and sewer lines, electrical pedestals and their amperage, the bathhouse, the pool, and any park owned cabins or park models all age on their own schedule regardless of how good this year's season was. Size the reserve per site against the age and condition of that infrastructure, and treat a park on 30 amp service with original 1970s water lines very differently from a recently built full hookup park with 50 amp pedestals. Leaving the reserve out does not make the cost disappear, it just moves it into your first surprise capital call.

Turn your NOI into a price, a loan, and a floor

With a defensible net operating income in hand, the rest follows quickly. Build it in the NOI calculator, then divide by the cap rate the market actually trades at to get the price your numbers justify with the cap rate calculator. Size the debt against it on the DSCR calculator so you know what a lender will really lend. Then find the floor: the break-even occupancy calculator tells you the occupancy at which cash flow hits zero, and the gap between that and your off-season occupancy is the whole margin of safety in a seasonal asset.

If the gap between your normalized numbers and the seller's is large, that is not a problem with your underwriting. That is your negotiation, and it is why you did the work.

Related guides

• Rebuilding the seller's NOI
• Requesting the right financials
• Stress testing a deal

Part of the RVP Underwriter guide library: practical guides to underwriting and buying income property. Browse all guides, or read the complete free guide with a full worked example.