Camping is a popular recreational activity for millions of American Households. Six out of every ten homes have a person that regularly goes camping. With over 10 million households camping for the first time in 2020, purchasing family campgrounds sounds like a solid real estate investment.
A crucial part of successfully running a campsite business is getting your financials right. The numbers have to add up as you search for campgrounds for sale to purchase. Here are five financial tips to help you run a successful campsite or RV park.
1. Conduct Your Due Diligence Before You Buy a Campground
Most first-time campground owners fail to conduct effective background checks on the property’s financial viability before investing. Failing to understand how much it will cost you to purchase and carry out the necessary repairs can leave you in a financial wormhole. Research more about the camping resorts for sale, the major revenue streams, and the park’s profitability over the last three years.
2. Get the Correct Evaluations
Most family-owned campgrounds operate like “Mom and Pop” parks, with the owners over-evaluating their “baby.” The campgrounds for sale may have a valuation based on what they could be worth and not their current value. Finding an independent appraiser can help you get the correct price estimates and avoid overpaying on the property. The assessment should encompass current assets and the improvements required. The campground’s annual revenue is also a good indicator of the actual value of the property.
3. Determine the Largest Expenses
You may need to have a closer look at the campgrounds’ outflows to definitively determine the profit margin that you can expect. Expense ratios are an excellent way to benchmark the funds that go into running the business. The two arguably largest expenses for most campgrounds are salaries and maintenance repairs. A simple profit and loss statement can indicate the campsite’s costs and revenue for the specific year.
4. Establish Proper Reporting and Accounting Journals
One of the biggest financial errors that campgrounds often make is not having any records. You may need to have periodic accounting reports that can help provide clear forecasting for your business. Accounting software is critical to getting your numbers right. An online booking service may also allow you to get an accurate figure of future occupancy through pre-paid deposits.
5. Figure Out Your Financing Partners
Buying a campground franchise is a huge investment. You may not only have to fork out hundreds of thousands on the property but also have to carry out expensive upgrades before opening the campsites to campers. You may need to identify financing partners that can help you generate the initial and operating capital required to grow your business.
Your first stop may be the local bank. You may have to have a good credit score and a solid business plan to qualify for a loan. You can request your franchisor to link you up with their preferred lender to enjoy certain incentives such as favorable interest rates.
The financial arm of the campground business is a critical factor to the success of your real estate investment. Buying a campground franchise can provide you with the support you need while making financial decisions. For more financial guidance for your new campgrounds, reach out to Leisure Systems Innc today.