Establish the Value of Your Campground
You have spent years building up your park as your best (and sometimes only) retirement package. Then one day you decide to sell it, let’s make sure you get the most out of it! As a WACO member – you have access to lots of tools and resources that can be used to help understand and set the value of your park. What you want for your park and what its worth – can be very different. And unless you have a cash buyer, the park can only sell for what it appraises for! So working now to improve income, reduce expenses, and increase value will help you when it comes time to sell!
Just as a generic example, let’s say you have gross income of $170,000 and expenses at $63,000.
Getting a value using NET OPERATING INCOME (NOI)
$170,000 – Gross Income
$63,000 – Expenses
$107,000 – Net Operating Income (NOI)
$107,000 X 10% Capitalization Rate (CAP RATE) =
$1,070,000 Value based on NOI
So now you know how to take your own tax return or P&L to back into the value of your park using Net Operating Income. To improve this number even more, you can look for items like these to see if they can be pulled out of your expenses:
- Personal expenses – cell phones, heat, car expenses, personal insurance premiums, etc – these can be removed from the expense category to improve value
- SDE – Sellers Discretionary Earnings spending – this is taking earnings from the park, and reinvesting them for future income. These can also be pulled out, as they will not repeat the following year!
- Large Maintenance Projects that are not traditional and won’t repeat the following year(s). Like a total bathroom renovation.
Let’s say $2,000 of your expenses were personal (cell phones, gas, etc.) – at a 10% cap rate if you back this out, it adds $20,000 of value to your park!!! Let’s also say that you spent $10,000 on a bathroom renovation that will not reoccur again. That at 10% adds a staggering $100,000 of value to the park based on NOI!
So properly categorizing expenses and backing out personal information can really help you gauge the true value of your campground. Properties Plus has a great spreadsheet that you can use to input all of your P&L and Tax info and it gives you great information that you and your bank can use for refinancing or if you just want to know what your park is worth.
As always, we will be attending the WACO convention, and would be happy to sit with you and go through all of your data – and get you a solid value and direction to increase your value. This is a totally free and confidential offering for all WACO members.
We look forward to seeing you in March!
Owner/Broker – MN & WI
(507) 450-5626 Cell
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