“That Campground Is Overpriced.” Compared to What?

A park with similar acreage? Similar site count? A property in another state? A sale from a different market cycle? A campground with different utilities, income, labor and condition?

Price alone tells you very little.

A buyer should first ask what the property produces and what they are receiving. Review adjusted earnings. Understand the capital improvements. Study the infrastructure. Identify demand generators. Determine whether the operation is stable, improving or declining. Look at realistic expansion and revenue opportunities.

Then consider the price in relation to the business.

The same is true of cap rates. A cap rate is not a universal answer that makes every campground comparable. Risk, condition, management needs, location, financing and income stability all influence how a buyer should think about return.

Calling something overpriced before understanding it can cause a buyer to miss an opportunity. On the other hand, falling in love with a property and ignoring the financial reality can be equally dangerous.

The answer is informed analysis.

At Campground Marketplace, Harold Goehring often asks buyers a simple question when they reach a fast conclusion about price: Have you looked at the property and the business?

That question should come before the verdict.