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💰Ever wondered what kind of down payment it can take to buy a campground? 💰

Have you ever thought about what it takes to buy a campground?

Posted: May 24, 2024

The allure of owning a piece of nature, the potential for a profitable business, the chance to be your own boss - it can all seem very appealing. But, like any investment, it's not as simple as just handing over the cash. Let's dive into the process.

Buying a campground is a journey that begins with having a solid down payment roughly 30% down and having an additional 25% for working capital. This isn't a venture to jump into without a financial safety net. So before even looking at potential campgrounds, ensure you have the necessary financial backing.

Next, it's time to scrutinize the campground's financials. This means looking at Profit and Loss statements, which can be a bit like deciphering a foreign language. Not every business keeps their books the same way, and that's where things can get tricky. What you're looking for are certified financials, prepared by a certified accountant. These figures, provided by the seller's bookkeeper, give you a snapshot of the campground's financial health. But, beware of red flags. If operating costs seem unusually high, or if they're categorized strangely, it could indicate unreported cash income or even theft by management. To cross-verify, examine bank deposits and tax returns. These documents will show the minimum income and the maximum expenses, giving you a clearer picture of the campground's profitability.

Once you have the financials in hand, it's time to adjust the expenses. This means removing any operating costs that won't apply to you as the new owner. The goal here is to find the single most important number - the cash left over after all bills and operating costs are paid, excluding the mortgage. Bear in mind, interest rates can significantly impact what's left for you. With campground rates expected to more than double in the next five years due to a campsite shortage, waiting for lower interest rates could mean paying a higher price later. The prudent approach? Buy now and refinance later when rates drop.

Pricing a campground is indeed a challenge, given no two are alike and few appraisers understand the resort industry. But, there are appraisal companies that specialize in this niche, offering valuable insights based on comprehensive comparables.

Now, onto banks. They can be hesitant about resort properties. If you default on your mortgage, what are they left with? A few electrical boxes in a field? However, there are lenders who understand and accommodate this industry. Seller financing could be an option, usually with around 30% down. Call us for details. The fair price of a campground should be determined by the cash left after all bills are paid and consider the condition of the property and its assets. Be vigilant for deferred maintenance issues, whether they're underground, above ground, or in the air.

In summary, buying a campground involves securing financial backing, scrutinizing financials, adjusting expenses, considering interest rates, understanding pricing, and finding a willing lender. It's a complex process, but with careful planning and a keen eye for detail, you can navigate the journey toward owning a slice of nature's paradise.

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