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  • Writer's pictureLandan Dory

What Impact Do Current Commercial Mortgage Rates Have on RV Park Sales?




As the dust begins to settle from the unprecedented times of 2020-2022, RV Park owners find themselves at a crossroads. The surge in RV travel, spurred by COVID-19 stay-at-home mandates, coupled with historically low interest rates, created a seller's market that saw property values soar. However, as we peer into the horizon, it's becoming clear that the conditions of the past few years were an anomaly, unlikely to repeat in the near future.


Understanding the Shift

Recent insights, particularly those highlighted by David Frosh in his April 04, 2024, article, underscore a crucial fact: The landscape of commercial real estate (CRE), including RV parks, is undergoing a significant transformation. The Federal Funds rate, which many assumed directly influenced mortgage rates, has a more complex relationship with the rates than previously thought. As the Federal Reserve moves towards deleveraging its balance sheet, liquidity is being siphoned from the market, affecting the availability and terms of new loans.


Implications for RV Park Owners

For RV Park owners considering selling, this shift signals a need to recalibrate expectations. The high valuation peaks reached between 2020 and 2022 were buoyed by unique circumstances unlikely to recur. With commercial mortgage defaults expected to rise in the coming years, banks will become increasingly cautious, affecting their willingness to issue aggressive new loans for RV parks.


Embracing Patience or Seller Financing

Facing this new reality, owners are encouraged to consider holding onto their assets for at least another 3-5 years, allowing time for the market to stabilize. Alternatively, seller financing emerges as a viable and attractive option. Seller financing can offer several benefits, including a faster closing process, potential tax advantages through spreading out capital gains, and possibly fetching a higher sale price due to the flexibility offered to buyers in a tighter lending market.


Leveraging Expertise

Our firm has been at the forefront of valuing and selling RV parks, with over 100 parks valued in the past 12 months alone. In 2023, we successfully sold 16 parks and are currently marketing another 14. Our deep understanding of the current market conditions and trends positions us uniquely to provide RV Park owners with confident and accurate property valuations.


Conclusion

As the CRE landscape evolves, RV Park owners must navigate these changes with informed strategies and realistic expectations. While the boom of 2020-2022 may not repeat, opportunities for sustainable success and profitability remain, particularly for those open to alternatives like seller financing. For owners seeking guidance or a current market valuation of their property, our team stands ready to leverage our expertise and market insight to support your goals. Contact us today to explore how we can help you make informed decisions in this changing landscape.

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