Most RV park buyers spend the majority of their pre-close energy focused on revenue. What is the park generating. What could it generate. What does occupancy look like at different rate scenarios. What is the upside if you reposition the tenant mix or add a few glamping units.
That focus is not wrong. Revenue matters. But it is incomplete in a way that costs people real money in the first year of ownership, because the thing that most often kills cash flow after you close has nothing to do with revenue at all.
It is the expense side. Specifically, the expenses that did not exist under the previous owner and appear for the first time under yours.
The seller’s expense structure is not your expense structure
This is the part of the underwriting conversation that does not get enough attention. When you review a seller’s T12 and rebuild the expense side, the standard advice is to add back a management fee if the owner self-manages and normalize owner compensation if it is understated. That is correct and important.
But there is a broader issue underneath it. The seller’s entire cost structure reflects how they ran the park, not how you are going to run it. And in many cases, especially in mom-and-pop acquisitions, those two things look very different.
A seller who has owned the park for twenty years has vendor relationships, insurance rates, and operational routines that took two decades to build. Their maintenance costs are low because they know every system in the park and fix most things themselves. Their insurance premium reflects a long claims-free history with a carrier who knows them. Their accounting costs are minimal because their nephew does the books. Their marketing spend is zero because they filled the park on word of mouth and a Good Sam listing they set up in 2009.
None of that transfers to you at closing.
What the new expense lines actually look like
When you take ownership, the cost structure resets in ways that most pro formas do not fully capture.
Professional management, if you are not self-managing, adds 8 to 12 percent of gross revenue. On a park generating $400,000 a year that is $32,000 to $48,000 in annual expenses that may not exist anywhere in the seller’s numbers.
Insurance will reprice at renewal under new ownership. If the previous owner had a long claims-free history and a multi-decade relationship with their carrier, your first-year premium may be meaningfully higher than what the T12 reflects.
Bookkeeping and accounting at a professional level costs money. So does a property management software upgrade if the previous owner was running on a spreadsheet and a handshake reservation system. So does a new website if theirs was last updated during the Obama administration.
Staffing often changes. If the seller handled maintenance themselves or had a family member doing it informally, you are adding a real labor cost that did not show up in payroll records.
And then there are the vendor contracts. The landscaper who gave the previous owner a longtime-customer rate. The propane supplier with the legacy pricing agreement. The pest control company the seller’s brother-in-law owns. Those relationships do not come with the park. The rates you negotiate as a new owner may be different, and not in your favor.
The cash flow impact in year one
Individually, each of these items feels manageable. Collectively, they can add $40,000 to $80,000 or more in annual expenses to a park that the T12 made look leaner than it actually is under new ownership.
If your pro forma was built on the seller’s expense structure with a management fee added back and nothing else adjusted, you are likely looking at a year-one cash flow that is materially worse than you projected. Not because the revenue disappointed. Because the expense side was never really your expense structure to begin with.
I see this consistently when I underwrite acquisitions for buyers. The revenue holds. The occupancy holds. The cash flow does not, because nobody rebuilt the expense side from the buyer’s cost structure rather than the seller’s.
How to protect yourself before you close
The fix is not complicated but it requires intentionality. When you are building your pro forma, do not just normalize the seller’s expenses. Rebuild them from scratch using your actual cost structure.
Get insurance quotes before you close, not after. Talk to property management companies if you are not planning to self-manage and get real numbers. Price out bookkeeping, accounting, and software at professional rates. Talk to vendors in the area and understand what new-owner pricing looks like. Model staffing based on what you will actually need, not what the seller needed.
Then compare that rebuilt expense structure to the seller’s T12 line by line. The gap between those two numbers is the conversation you need to have about purchase price before you sign, not the cash flow surprise you absorb in month four.
Revenue gets the attention. Expenses win the year.
Read this next: Why Your RV Park’s Best Season Can Also Be Its Biggest Financial Risk
If you want the full framework for buying, managing, and understanding the financials on an RV park acquisition, I wrote 𝗙𝗿𝗼𝗺 𝗢𝗳𝗳𝗲𝗿 𝘁𝗼 𝗢𝗽𝗲𝗿𝗮𝘁𝗶𝗼𝗻: 𝗧𝗵𝗲 𝗖𝗼𝗺𝗽𝗹𝗲𝘁𝗲 𝗥𝗩 𝗣𝗮𝗿𝗸 𝗜𝗻𝘃𝗲𝘀𝘁𝗼𝗿’𝘀 𝗚𝘂𝗶𝗱𝗲 ($49) specifically for investors who want to get this right. You can get it direct here: https://wendipvifinancial.gumroad.com/l/kqmyb, or Amazon has it too, just search author Wendi Rook.
Leave a Reply