In the last few years the RV market in general has become very active, thanks in part to the increasing number of retiring baby boomers, snowbirds and the increased amount of disposable income for the average consumer. These increases have indirectly correlated to the number of RV sales and the values and sales of RV parks. Finally, along with this comes the increased amount of financing available for these parks.
Lenders and their bean counters have had a hard time understanding the nature of the business. Most fear that all income could be lost in a day because of the mobility of the tenant and with the limited amount of value in the land and improvements all equity could be lost in the event of foreclosure. Five years ago the number of lenders willing to finance RV parks was a quarter of what it is today. The lenders that have realized that there is stability in the income and most RV parks operate with excellent cash flows have been able to make secure loans with higher returns than they are seeing on other types of commercial property.
There are two tiers of lenders in the market, those for loans less than $1,000,000 and those above $1,000,000. Lenders making loans of $1,000,000 or less usually require personal guarantees. The majority of these loans are made by small commercial banks, local savings and loans and the SBA. Above $1,000,000, there are number of financing vehicles including, commercial lending institutions, mortgage conduits and life insurance companies. Nationwide commercial lending companies such as GE Capital have dominated the industry. However, a few smaller more regional based banks have established that RV parks even with their cyclical nature are sound investments and worthy of their portfolios. As they become more familiar with the RV park/resort market underwriting criteria should become less stringent and loans should be easier to obtain.
Above and below $1,000,000 the interest rates continue to hover around 6.5% to 10% depending on the quality and type of occupancy in the RV parks. Fixed rates are available but reserved for larger, nicer parks with more stable occupancy. Adjustable rates are usually based upon LIBOR, 11th DCOF or 1 yr treasuries, Prime rate based loans are usually that last alternative. Amortizations are usually 20-30 years with 10-15 year terms. Fees are generally less than 2 points plus appraisal, phase I survey, and legal.
Over the next few years the RV industry should become much more of a mainstream lending market. This is due to the huge numbers of consumers expected to enter the market and the increasing numbers of lenders that will follow the trend. In addition, all of the lenders in the RV industry have entered it by way of the mobile home park financing market where competition for loans has become pretty fierce. This transition has occurred because lenders are finding it harder to originate higher yielding loans due to the intense competition for mobile home park loans. As a result of this saturation it is only a matter of time before the RV industry has the number of lending sources as do other area of commercial real estate.
Vince Reynolds specializes in selling and financing Mobile Home and RV parks. He has sold and financed over 100 parks in excess of two hundred million dollars.