The seller told me she gave me everything I needed.
She sent over the T-12, the P&Ls, and the software reports. Three years of consistent income, clean and organized, and for about 48 hours the deal looked solid on paper.
Then I asked for the occupancy reports from her reservation software.
She said she already gave me all the income.
I explained that I did not need the income number. I needed to know how it was earned.
It took some back and forth to get those reports. And when they finally came through, the occupancy on the largest part of the portfolio was sitting at 65%. This is actually a healthy destination park that grew 22% last year, which makes the occupancy picture even more interesting to dig into, because strong revenue growth and 65% occupancy on your biggest asset tells two different stories depending on how you read it. One of them is very encouraging. The other one is a question worth asking.
That is what RV park financial due diligence actually looks like. Not a checklist you run through in a weekend. A process of rebuilding the financial picture from the ground up until the numbers tell you the truth. Every red flag I am about to walk through is something I have seen show up in real deals, and every one of them has a dollar consequence that changes the model when you find it.
Here are the 11 financial red flags I look for on every deal I underwrite, and what each one is actually telling you.
RV park financial due diligence red flag #1: the missing management fee
When I open a seller’s expense report and there is no management fee, my first question is simple: who is running this park for free?
The answer is almost always the seller. And that matters enormously in RV park financial due diligence, because the seller is leaving. Whatever they were doing to keep that park operating, whether it was managing reservations, handling maintenance calls at 9pm, running the front desk, or managing seasonal staff, that labor has a cost. It just does not show up in the financials because the seller never paid themselves a market rate for it.
When I rebuild expenses as part of underwriting, I add a management fee based on what it would actually cost to hire someone to do that job. For most parks in the $1M to $3M revenue range, that number runs somewhere between 8% and 12% of gross revenue. On a $1.2M revenue park, that is $96,000 to $144,000 of expense that the seller’s P&L is not showing you. That does not mean the deal is dead. It means your NOI just changed, and so did your cap rate, your DSCR, and your offer price.
The flip side of this red flag is equally important in RV park financial due diligence. Sometimes the management fee is suspiciously large, with multiple family members on payroll at rates that do not reflect market compensation. A seller paying a spouse $85,000 a year to handle social media and a son $72,000 a year for maintenance on a 60-site park is not the same as a legitimate management structure. Part of the underwriting process is normalizing compensation to what the market would actually pay for those roles.
RV park financial due diligence red flag #2: maintenance costs that disappear
I see this regularly. The seller’s expense report shows $2,000 in maintenance for the year. On a park with 80 sites, aging pedestals, gravel roads, and a bathhouse that runs year-round.
Two thousand dollars.
If a park has historically run $10,000 to $15,000 a year in maintenance, and the most recent year shows $2,000, one of two things happened. Either the seller deferred everything to make the financials look better before the sale, or the maintenance line got reclassified somewhere else. Either way, the cost does not disappear after closing. It comes back, usually in the first year, usually at the worst possible time.
This is a foundational principle of RV park financial due diligence: whatever cost you can see that will likely continue after closing, include it in your model, whether the seller agrees or not. If the trailing three years average $12,000 in maintenance, I use $12,000. The seller may push back. That is fine. My job is not to validate their best year. My job is to find the number that will likely continue so my client knows what they are actually buying.
RV park financial due diligence red flag #3: one-time revenue dressed as recurring
This one is subtle but expensive if you miss it.
A seller had a strong revenue year because they sold a parcel of land adjacent to the park. Or they received an insurance payout after a storm. Or they hosted a one-time regional event that brought in $25,000 in a single weekend and will not repeat. All of that shows up in gross revenue. None of it repeats after closing.
The RV park financial due diligence question here is simple: is this revenue durable? I ask for a breakdown by category, not just a total. Site fees, cabin rentals, store sales, laundry, events, storage, and any other line item. If a category spikes dramatically in one year with no explanation, I ask. And I do not include one-time revenue in my stabilized NOI calculation. For more on how to rebuild NOI from the ground up, read The $312,000 Mistake.
RV park financial due diligence red flag #4: occupancy that looks strong annually but collapses by month
This connects directly to the deal I mentioned at the top of this post.
Annual occupancy numbers can hide a lot. A park that runs 65% annual occupancy with 95% occupancy in June, July, and August and 30% occupancy in November through February looks very different on an annual basis than it does when you model the monthly cash flow. And three years of consistent income at that occupancy level tells you the park is stable, but it does not tell you how much breathing room exists in the slow months.
Fixed costs, debt service, insurance, property taxes, utilities, and minimum staffing do not take the winter off. They run all twelve months. Good RV park financial due diligence means asking for monthly occupancy going back at least two years, broken down by site type. Transient nightly, long term monthly, and any cabin or glamping revenue tracked separately. That monthly picture tells me where the cash flow pressure points are, what the working capital requirement looks like through the slow season, and whether the park can actually service its debt in the months when revenue is thin. For more on running this stress test, read How to Calculate Break-Even for Your RV Park.
RV park financial due diligence red flag #5: the expense ratio that is too clean
Well-run RV parks typically run operating expenses between 35% and 50% of gross revenue depending on size, amenity level, and staffing model. A park showing 25% expenses is not necessarily a well-run park. It may be a park where the seller has stripped out costs, deferred maintenance, and stopped replacing things that need replacing.
When I see an expense ratio below 30% the first question in RV park financial due diligence is what is missing. Is there a management fee? Is insurance current? Are property taxes current? Is maintenance being expensed or capitalized? Is payroll realistic for the size of the operation?
The goal is not to assume the seller is being dishonest. The goal is to find the real number, because the expenses that are missing today show up on your P&L in year one.
RV park financial due diligence red flag #6: permits that do not match the operation
This one has financial consequences that most buyers never think about until it is too late.
A park operating 85 sites with permits for 70 is not generating legal revenue on 15 of those sites. Those sites are a liability, not an asset. If a compliance review or a sale triggers an inspection, the unpermitted sites may need to be shut down, brought up to code, or removed entirely. The cost of that correction can range from tens of thousands to hundreds of thousands of dollars depending on the infrastructure involved.
Permit verification is a non-negotiable part of RV park financial due diligence. I confirm that the number of operating sites matches the permitted site count, and that health department permits for the pool, bathhouse, and any food service are current and transferable to a new owner. Permits that are issued to an individual rather than the property can sometimes lapse at sale, which creates a gap in operations and a cost to reinstate.
RV park financial due diligence red flag #7: OTA dependency hiding in the revenue mix
If 60% or more of a park’s bookings come through a single online travel agency, that concentration is a financial risk that needs to be priced into the deal.
OTA platforms charge commissions of 8% to 15% of the booking value. They can change their algorithms, their fee structures, and their terms at any time. A park that is heavily dependent on one platform for its occupancy is one policy change away from a revenue problem, and that risk belongs in your RV park financial due diligence analysis before you make an offer.
A healthy park has diversified booking channels and a growing direct booking percentage. A park that cannot tell you where its bookings come from has a data problem on top of the concentration risk.
RV park financial due diligence red flag #8: long term tenants at below market rates with no lease end date
Long term tenants provide revenue stability, but they can also cap your upside in ways that significantly affect valuation.
A park with 30% of its sites occupied by long term tenants paying $350 a month when market rate is $650 a month has a gap of $300 per site per month. On 25 sites, that is $7,500 a month or $90,000 a year in unrealized revenue. If those tenants have no lease end date and have been there for years, the practical reality is that rate increases will be slow, contested, and potentially damaging to occupancy if pushed too aggressively.
The RV park financial due diligence question here is how long it realistically takes to close that gap, because the timeline matters enormously for the return model. A value-add thesis built on bringing long term rents to market is valid if the math works over a realistic hold period. For more on how revenue mix affects your returns, read RV Park Return on Investment: 5 Dangerous Mistakes That Destroy Your Returns Before You Close.
RV park financial due diligence red flag #9: deferred capital expenditure hiding underneath clean financials
A park can look financially healthy on paper while sitting on $300,000 to $500,000 of deferred capital needs that will land on the new owner’s balance sheet within 24 months of closing.
Electrical pedestals at end of life cost $3,000 to $5,000 per site to replace. Roads and pads that look acceptable in photos may need resurfacing. A septic system running at or over capacity is a regulatory and operational risk. A bathhouse built in 1987 that has never been updated is not a charming vintage feature, it is a capital event waiting to happen.
Building a deferred capex estimate is one of the most important outputs of RV park financial due diligence. I use it to adjust the purchase price, negotiate a seller credit, or set a post-close capital reserve. A lender who does these loans every day will often require a capital reserve anyway, but I want my client to have their own number before the lender gets involved. For more on what lenders are actually looking at, read What a Lender Actually Looks at Before Approving an RV Park Loan.
RV park financial due diligence red flag #10: property tax exposure after sale
In some states, a property sale triggers a full reassessment at the new purchase price. If the current owner bought the park 15 years ago for $800,000 and you are buying it today for $3,200,000, your property tax bill after closing may be dramatically higher than what the seller’s financials show.
This is not a red flag in the sense that someone is hiding something. It is a financial consequence of the acquisition that belongs in your RV park financial due diligence model before you finalize your offer. I run a property tax estimate at the new purchase price for every deal, using the local mill rate and assessment ratio, and I use that number in my expense model rather than the seller’s current tax bill.
On a $3,200,000 acquisition in a state where property is assessed at 80% of purchase price and the mill rate is 20 mills, the annual property tax is approximately $51,200. If the seller was paying $18,000 a year based on their original purchase price, that is a $33,200 expense difference that goes straight to your NOI and DSCR calculations. That is not a small number and it is one that surprises buyers who skip this step in RV park financial due diligence.
RV park financial due diligence red flag #11: a cap rate and exit that have never been modeled
The last red flag in RV park financial due diligence is not something hiding in the seller’s financials. It is something missing from the buyer’s analysis.
I am always surprised by how many buyers evaluate a deal based on whether it cash flows in year one without ever modeling the exit. What is the cap rate you are buying at, and how does it compare to where comparable parks are trading? If you are buying at an 8% cap and the market compresses to 7% over your hold period, what does that do to your exit value? If you add amenities and grow NOI by 20%, what does the property sell for at year five at a stabilized cap rate?
Every deal I underwrite includes a 10-year cash flow model, a Year 5 and Year 10 exit analysis, an IRR calculation, and a cash-on-cash return for every year of the hold. That is not advanced financial modeling. That is the minimum a serious buyer should know before they make an offer. The cap rate you buy at is the foundation of the entire return, and the exit is where most of the equity is made or lost. If you have not modeled both before you sign, you are not doing RV park financial due diligence. You are guessing.
For a complete acquisition underwriting framework, my book From Offer to Operation: The Complete RV Park Investor’s Guide includes a 60-point due diligence guide and is available for immediate download on Gumroad or by searching the title on Amazon.
The bottom line on RV park financial due diligence
The seller’s job is to show you the best possible scenario. Your job is to dig to the worst, because you do not want to be 12 months in and out of cash.
RV park financial due diligence is not about finding reasons to kill a deal. The Florida portfolio I mentioned at the top of this post is still on the table. We are still negotiating. The occupancy number changed the model, it did not end the conversation.
That is what this process is for. Just truth, so you can make a real decision with real numbers.
If you want help underwriting a deal you are looking at, deal screening starts at just $99 and a full acquisition underwrite is priced depending on complexity. Reach out at PVIFinancial.com.
Related reading:
- RV Park Investing: 5 Deals on My Desk Proving This Is Not the Passive Income Play You Think It Is
- Buying a Mom and Pop RV Park: 7 Hidden Risks That Destroy First Year Cash Flow
- SBA Loan for RV Park: 7 Critical Things Every Buyer Must Know Before Applying
- RV Park SBA Loan Default: 7 Truths About Your Personal Guarantee That Can Cost You
For the full list of RV park acquisition resources, visit my RV Park Resource Library, updated daily.
~Wendi | Fractional CFO | PVIFinancial.com
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