This is not a story about one specific deal. It is a pattern that shows up in RV park acquisitions over and over again, different parks, different markets, different sellers, same mistake. A buyer does little investigation, accepts the seller’s NOI nearly at face value, makes an offer based on that number, and closes on a park that is worth significantly less than what they paid.
Here is what that pattern typically looks like, and more importantly, what to do about it before you make your next offer.
The Deal That Looks Clean
Picture a mixed use park, call it Cedar Creek RV and Mobile Home Resort. Sixty-two sites, sitting on twelve acres about twenty minutes outside a mid-size recreational market. Decent reviews, a mix of long-term monthly tenants and transient nightly guests, a motivated seller, and a broker package that looks clean.
The financials presented look like this:
Gross Revenue: $524,000 Operating Expenses: $274,000 Net Operating Income: $250,000 Asking Price: $1,875,000 Implied Cap Rate: 7.5%
On the surface that looks reasonable. A 7.5 cap in a decent market, expenses running at about 52 percent of gross. Nothing obviously wrong.
But when you rebuild NOI for a real acquisition you do not accept the surface. You go line by line.
Line by Line: Where the Numbers Change
Management Fee The seller has owned and operated this park for eleven years. He lives on the property, handles guest check-ins personally, manages all vendor relationships, and coordinates maintenance. There is no management fee in the expenses because he never paid one. He just worked.
Market rate management for a park this size runs 9 percent of gross revenue. On $524,000 that is $47,160 in annual expenses that are nowhere in the seller’s numbers. This is the single most common omission in owner-operated park financials and it is almost always significant.
Owner Labor Beyond Management Beyond the management function the seller is also performing the role of maintenance coordinator and handling all bookkeeping internally. To replace those two functions with hired help would cost approximately $28,000 per year combined. Also not in the expenses.
Utility Costs Pulling the actual utility bills and comparing them to what is in the financials reveals that the seller has been absorbing electrical costs for the long-term tenant sites without passing any of it through to tenants. The actual utility cost when you include the tenant site electrical is $18,400 higher than what is presented in the financials.
Maintenance The park has not had a significant capital expenditure in four years. The maintenance expense in the financials is running unusually low at $14,200 per year for a sixty-two site property with aging road infrastructure and bathhouses that were last renovated years ago. A normalized maintenance budget for a park this size and age runs closer to $28,000 per year. That is another $13,800 in understated expenses that will land on the new owner whether they budgeted for it or not.
Insurance The seller’s current policy is significantly underinsured for a hospitality property of this type. An independent quote at appropriate coverage levels comes in $9,600 higher than what is reflected in the financials.
The Rebuilt Numbers
Here is what the NOI actually looks like once every missing and understated expense is added back:
| Seller Presented | Rebuilt | |
|---|---|---|
| Gross Revenue | $524,000 | $524,000 |
| Management Fee | $0 | $47,160 |
| Owner Labor | $0 | $28,000 |
| Utility Expense | Understated by $18,400 | Corrected |
| Maintenance | $14,200 | $28,000 |
| Insurance | Understated by $9,600 | Corrected |
| Total Additional Expenses | $0 | $116,960 |
| Net Operating Income | $250,000 | $133,040 |
Want to run these numbers on your own deal? Use the free NOI Calculator here.
The seller presented an NOI of $250,000. The real NOI is $133,040. Not because the seller is being dishonest. Because an owner-operator presenting their own financials shows the business the way they experience it, not the way a buyer needs to evaluate it. They absorbed their own labor, let deferred costs accumulate, and presented the numbers the way they actually look from the inside.
That is not fraud. It is just the natural gap between owner financials and acquisition financials. And closing that gap is the buyer’s responsibility, not the seller’s.
What That Means for the Price
At the seller’s presented NOI of $250,000 and a 7.5 cap, the asking price of $1,875,000 is internally consistent.
At the real NOI of $133,040 and the same 7.5 cap, the supportable value drops to $1,773,867.
But there is more to it than just recalculating at the same cap rate. A park with this many normalization adjustments required carries more execution risk than a clean stabilized asset. Sophisticated buyers in this market apply a 7.5 cap to well-run stabilized parks. A park with missing management infrastructure, deferred maintenance, and understated utilities warrants a higher cap rate to reflect that risk. At an 8.5 cap the supportable value based on the real NOI is $1,565,176.
The asking price is $1,875,000. The supportable value based on verified numbers and an appropriate cap rate is approximately $1,563,000. That is a $312,000 gap between what the seller is asking and what the park is actually worth.
A buyer who catches this before making an offer has a very different negotiating conversation than a buyer who catches it after closing.
This Is Not a Rare Deal. This Is a Typical Deal.
The pattern in Cedar Creek shows up in the overwhelming majority of RV park acquisitions that get reviewed carefully. Missing management fees, understated owner labor, deferred maintenance masquerading as a lean expense structure, utility costs that do not reflect actual consumption.
The specific numbers vary. The pattern does not.
The buyers who avoid overpaying are the ones who rebuild the NOI from source documents before they make an offer. They pull three years of bank statements and tax returns. They add back what is missing. They normalize what is understated. They apply a cap rate that reflects the real risk profile of the asset. And they make their offer based on that number, not the seller’s version.
The buyers who overpay are the ones who trusted the broker package.
Do the Work Before You Make the Offer
If you are evaluating a park right now, go through the Cedar Creek checklist on your own deal before you make an offer. Is there a management fee in the expenses? Is there market-rate owner compensation reflected? Have you pulled the actual utility bills and compared them to the financials? Have you normalized the maintenance budget based on the age and condition of the property? Have you gotten an independent insurance quote?
Every one of those questions has a dollar value attached to it. And every dollar of missing expense translates directly into overstated NOI and an inflated asking price.
To make this easier, there is a free NOI calculator at PVIFinancial.com that walks through this same rebuilding process line by line. Plug in your numbers and see what the real NOI looks like on the deal you are evaluating before you commit to anything.
And if you want professional eyes on a specific deal before you make an offer, acquisition underwriting is available at PVIFinancial.com. No retainer required.
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You can get it direct here: https://wendipvifinancial.gumroad.com/l/kqmyb, or Amazon has it too, just search author Wendi Rook.
Click here to use my FREE RV Park NOI Calculator to rebuild the NOI before you make an offer.
You might want to read this next: “The Seller’s Pro Forma Is Not Your Pro Forma”
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