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  • Writer's pictureLandan Dory

Navigating the Changing Landscape: A Guide for RV Park Owners




The commercial real estate sector is on the cusp of a significant transformation, underscored by the staggering $929 billion in commercial mortgages set to mature in 2024. For RV park owners, this signals a pivotal moment, marked by a confluence of past investment trends, shifting travel behaviors, and the daunting reality of refinancing in a more conservative lending environment.


A Look Back: The Investment Boom

Between 2020 and 2022, the RV park industry experienced an unprecedented boom. Low-interest rates, coupled with a surge in RV travel as people sought alternatives to work-from-home setups, spurred a wave of investments and development projects. This period saw RV parks achieving record revenues, bolstered by cheap debt, leading to inflated asset valuations.


The Turning Tide

However, as interest rates normalize and RV travel returns to pre-pandemic levels, the financial landscape for RV park owners has shifted. Today's valuations, though lower than the peak of 2021, align more closely with the 20-year average, illustrating the anomaly of the previous years. This adjustment period is challenging for those who acquired or developed parks during the boom, especially as loan maturities loom.


The Refinancing Hurdle

The current climate presents a stark contrast to the favorable conditions of recent years. Banks, now grappling with a 30% drop in the book values of funded assets, are tightening their belts on new commercial real estate loans. For RV park owners facing maturing debts, the options for refinancing are grim, compounded by the decreased values of their properties.


Implications and Strategies

Owners who invested during the high-water mark are now confronting a stark reality: the potential for loans to be called by banks, leading to increased bankruptcies and short sales. The market anticipates a softening in prices, driven by a wait-and-see approach from buyers eyeing distressed sales and an uptick in competition that erodes occupancy and rental rates.


Looking Forward

For RV park owners, the path forward involves difficult decisions. Selling may emerge as a viable strategy, allowing owners to capitalize on current valuations and transition to less management-intensive investments or benefit from seller-financed deals. A 1031 exchange into single tenant net lease properties offers another avenue for repositioning equity in more stable assets.


Conclusion

As the commercial real estate landscape undergoes its most significant test in decades, RV park owners must navigate with caution, strategic foresight, and an openness to adapt. The coming years will demand resilience, but also present opportunities for those ready to realign their investment strategies to the new normal.


Take Action

Our Austin, TX-based team of Mobile Home and RV Park Experts tracks the market religiously. We are in active communication with new and seasoned park owners and operators, developers, lenders and third parties - All with the singular goal to provide the best information possible to investors navigating these new waters. If we can ever be of assistance to you and your park or investment goals, please don't hesitate to reach out directly.

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