Campground Appraisal

[Brandi]

I have searched this forum for detailed information on campground valuation and have come up with very little information.

I have an order to appraise a small 24 site campground in Central IL. The purchase price in 2006 was $350,000. The purpose of the appraisal is for a refinance. I have the income stream with expenses for the last two years of ownership and also 3 years of the previous ownership which was given to me by the lender. I have contacted several campground companies online and gathered information. My site is unique in that it offers very few amenities but has an average income stream. The comps that I can "purchase" from them will most likely not work. I have searched three different MLS systems and have came up empty! After interviewing several companies, they use an 8 times the net income to value a property. If only it was this easy for us!!! Any suggestions?????
Thanks so much!
Brandi

 

[Annelle]

Are you working with a mentor on this?

 

[Brandi]

Yes! I have a Certified General Appraiser who guides, mentors, and reviews all of my commercial work. He has done several parks but has always just done a cost approach. I thought "maybe" others might have thoughts! The lender is asking for a restricted report with all three approaches to value. I emailed the lender and explained the problem with gathering comparables. They replied that I could omit the sales comparison. This is great but I need the sales to derive the cap rate for the income! :-(

 

[The Warrior Monk]

I don't think "three approaches"...doing so for this type of assignment serves no purpose other than to confuse the valuation issue.

The simply question is "How do buyers of this property type value this property?" Chances are it's not the "three approaches."

In the market area I work in, a campground is simply an interim use. Valuing such properties typically involves

1. income stream from interim use during the subdivision period;
2. income from sale of lots;
3. costs related to subdivision; and
4. cost related to sale of lots.

A discount rate needs to be developed, and how that is derived depends on the quality of data in your market area. Then all of the above gets discounted to present value.

 

[George Hatch]

I've done a few of these over the years, and depending on your location a campground might just be a campground.

Somehow, when someone says a camground has few amenities but a steady stream of income I usually come up with a campground that allows RV parking and has some occupancy that runs on a weekly and monthly basis rather than a daily basis.

If you think about it, this type of operation is somewhat like a motel. Transient occupancy.

The Appraisal Institute used to sell a guide for appraising RV parks and similar recreational parks. I don't know if they still do or not. I bought it several years ago, but I don't know if I still have it. I remember thinking it was helpful, although I was already familiar with much of the material.

 

[Stephen J. Vertin MAI]

Brandi:

Welcome to the forum. Loopnet or RealQuest would most likely be your best bet for sales. There are few good MLS systems for commercial properties in Illinois (maybe NIMLS for apartments or smaller properties in Chicagoland). If you can not afford these services get on the phone and start calling every county assessor in at least five to ten surrounding counties (which you should be doing even if you have Loopnet or RealQuest). There have been sales but you might have to go 50 or 60 miles from your property and go back 5 years depending where you are in Illinois. Sometimes this distances scares residential people but remember if you were a buyer you would have to expand your market to buy such an existing property and you would be amazed at the homogeneity of smaller central Illinois markets (especially for special use properties). It is my opinion sales comparison is important if only to extract rates as you yourself have pointed out.

Once you have the sales call the current owners find out rents, average vacancy and expenses. Most owners will be helpful but you will always find some who are not. Always get the rental rate first. The first thing that comes out of your mouth in the interview should be "how much to rent?" After they tell you, tell them who you are and what you are doing. At least you will have a PGIM if they tell you to get bent.

My past interviews with buyers and sellers of these properties indicate most are bought on income. It is not a very sophisticated investment (similar to a mobile home park) so multipliers are the typical methodology. However, I have done direct capitalization and if you really want to get fancy and charge big bucks uses DCF as David suggest. All three income methods should obviously yield similar results. If not something is wrong. License level does not mean a lot to me. There is such a wide variety of experience in the business but if you are not comfortable with the income approach your assignment could be very challenging. Rental rates are very easy to get. Ask your owner who his/her competition is. If they tell you none. Simply expand your market.

Do not use the cost approach only. Steve S and David W may be reviewing the report:new_smile-l: It is my past experence three approach can be developed.

Unlike residential properties commercial markets sometimes cover regions or whole States. Just make sure you talk to assessors in the areas you may be blowing off (meaning in the 5 to 10 county surrounding area). There is a much larger interviewing factor in commercial work. Further it is imperative you know how sales disclosures and property record information is kept in local municipal markets. After a while you will discern patterns in record tracking (you have to know this because many of the people behind the counter have no idea how to help unless you ask the right questions). If you are not doing these basic moves you should stick to residential. I do not mean that to be funny or cruel it will just save you future heart ache. Assessors are your key in central Illinois. Good luck.

 

[Terrel L. Shields]

There used to be a campground appraiser / RE Broker who put out a guidebook in Colorado

Be cognizant that you are valuing an on-going business and the income approach will tell you what the property will sell for if it is economic. If it is performing below par, then alternative uses should be explored to see if they are a better "maximally productive" use of the property. For instance, would it be better to make the site into residential properties or a small motel, resort, etc.

If you can find campground sales, you still have a problem developing the income information on the campground for comparative purposes.

Amazon can provide you a copy of the book fastest

Guide to Appraising Recreational Vehicle Parks (Paperback)
by Robert S. Saia (Author

) $20

 

[Stephen J. Vertin MAI]

George:

We had the text also. Your right the concepts were basically a mix between a hotel/motel and mobile home park.

 

[SharperImage]

I would suggest you look in the phone book for all of the campgrounds in your area. From there, I would contact the Assessor to see if any have sold recently (recently could be as far as five years or more).
If there have been sales, then you can call the owners and ask them how many sites there are (this would give you a price per site, or go on line and see if they have a website. If they do, you could download the campground map, count the sites and use the map and this information in the Market Approach).
If there are sales that have taken place, then go to the court house and investigate further. See if there is a mortgage on the campground (s), call the bank and see who did the appraisal. Call the appraiser and see if he/she will be willing to give you multipliers and cap rates and expense ratios.

I've seen cap rates run from 5% to 12% and multipliers in the 3.5 to 6 range.
This is for not only Midwest campgrounds, but for the upper east portion of the US.

There are a lot of differences between one campground and the next. One may be a very modern up to date RV park with 50AMP metered electric, sewer, water and TV and the next may have minimal amenities.

There is no clear cut rule of thumb, there are some guidelines, but you should go into the asignment starting from the ground up. I don't see how the Cost Approach could be used alone to arrive at a value estimate. You, the appriaser should have access to at least five years of operating statements and from there you should see a pattern on the park. Is it making a profit? Is the Gross Income increasing or decreasing? Why did it increase, or decrease. What are the expenses doing?

Have the owners plowed the profits back into the campground to make it more appealing? This is a fairly common occurance and hence you'll see lower cap rates. Or for that matter, if they haven't, you may see the higher cap rates.

If your mentor has only done campgrounds based on the Cost Approach, then maybe he's not qualified to sign off on them. This is just my opinion, but when we do a campground (and we do quite a few), we start with the value of the land and work our way up. As someone posted prior, the value of the land may be higher "as if vacant" then as improved with the park, and this will result in a different conclusion.

There are sales out there, you just have to dig. And the more sales you can find the better off you'll be. Hopefully you'll be able to get rates and ratios needed to do an adequate Income Approach.

Best of luck, these can be challenging, but also very rewarding.

Sharper

 

[Artyman1200]

I would suggest you look in the phone book for all of the campgrounds in your area. From there, I would contact the Assessor to see if any have sold recently (recently could be as far as five years or more).
If there have been sales, then you can call the owners and ask them how many sites there are (this would give you a price per site, or go on line and see if they have a website. If they do, you could download the campground map, count the sites and use the map and this information in the Market Approach).
If there are sales that have taken place, then go to the court house and investigate further. See if there is a mortgage on the campground (s), call the bank and see who did the appraisal. Call the appraiser and see if he/she will be willing to give you multipliers and cap rates and expense ratios.

Without buying the data or using a site such as Loopnet this is about the only way you can find sales. I would also google the area for campgrounds because they all won't be in the phonebook and you might have to look on a statewide basis. It's a pain, but it's probably the best way to find sales. I wouldn't trust Loopnet to have all relevant campground sales in your area. We always develop the Sales Approach on a per site basis. You enter very subjective territory, but you do the best you can to compare each campground to the subject. We have purchased information from a broker once before, and I would seriously consider doing the same if it makes financial sense. Many of the campgrounds in East TN sell for $3,000 - $15,000 per site.