Recently a client came to me telling me he has an offer on his park. He is selling this one and is purchasing another.
He has been with AOS many years. When we took over management of the park, it was a mess. It had a underperforming GM, a grounds crew that barely worked, and guests paying little to nothing in rent.
Before hiring us, he had an offer of $250,000.
Today the offer is 2 million dollars. What happened?
When we took over, AOS installed a new GM, and hired an outside grounds crew. We fixed all code violations, repaired the broken amenities, and started raising rate to match the improvements.
We installed high speed Wifi, upgraded the grounds, and improved all cabin rentals. We put the cabins on Air BB and setup a professional website with online booking.
The committed owner gave us the capital funds to make the necessary changes and the GM is a rock star. As the park took shape, rates started to match market rate, and the NOI started to climb. Cash injections were no longer needed, and NOI took off!
Today, the commitment has paid off in a cap rate that could only have been imagined a few short years ago.
If you plan to sell and you know your park is underperforming, adding value now will get you a sales price you could not have imagined today. Buyers pay off Cap Rate. Cap Rate is defined below
What Is Capitalization Rate?
“The capitalization rate (also known as cap rate) is used in the world of commercial real estate to indicate the rate of return that is expected to be generated on a real estate investment property. This measure is computed based on the net income which the property is expected to generate and is calculated by dividing net operating income by property asset value and is expressed as a percentage. It is used to estimate the investor’s potential return on their investment in the real estate market.“
If you are unsure how to get every penny out of your park, let AOS management help. When a park’s bottom line increases, its value goes up, it’s cap rate down ( a good thing) and everyone wins!