Hello People. I have just joined this community today. I am heading out now to look at 4 caravans. Does anyone have any feedback on investing in vans to rent out at a caravan park? The vans are $5,500 or less each, they earn $200 per week,the site fees are $80 per week and you have to pay power and water which I understand to be quite low.
Has anyone done this in the past and is there any advice on the possible pitfalls? I will be ordering the due dilligence templates, but haven't done so yet.
Glendafull
I would guess that there is no cap growth on the site and minimal depreciation on the caravan, so what's left?
Only the rent, and the tax deductions.
If the rent is not better than an ING account (7%) after the fees and holding costs are deducted, then why bother?
Tenants can be a headache, whereas the ING account is simple.
Hi Glendafull, welcome.
From a cashflow perspective, this looks worthy of further investigation. (200 – 80) = $120 pw * say 50 weeks = $600 per year, which on $5,500 purchase price is > 100% return. Where's the catch? Why wouldn't you do it?
ARE those rental rates are holiday season only? In which case the number of weeks per year is considerably less.
If you've got permanent residents, then you'd get more weeks per year, but I would have thought less rental, since caravan parks are generally the most 'affordable' accommodation.LA is right, in that there is no prospect of capital gain, since you are buying the caravan NOT the land it's on. I doubt you could borrow against them, so you'd be using your own cash, or borrowing against another asset. This would have an opportunity cost.
So, it comes down to what the realistic cash flow would be, and the CoCR on the cash you stump up.
Daedalus.
We are looking at this opportunity for cashflow only, not capital gains. We have been in and chatted with residents (long and short term) and had great feedback. The park is consistantly full due to workers who need to stay in the area (we have a lot of mine workers, truckies and fruit pickers)
The going rate for rent in the park is $200 p/w. We are looking at 3 vans for $9000 so after site fees and power water we will have approx $300 p/w left over. Without vacancy we would pay off the principal in approx 71/2 months. So within 12 months we could potentially have a cashflow of $300 p/w
Brilliant.
I'd be interested to find out how you got onto this opportunity.
Daedalus.
What do you know, I was going throught the paper looking for deals of interest (rental value divided by two then times by 1000) I saw a van for sale for $55,000. Instead of contacting the real estate agent I rang the park to get real numbers (as i don't want to live in the van) He quietly mentioned that there are cheaper options that bring in the same returns.
I guess the best way to get onto this would be to go to parks and see if they are interested in selling vans as I think they normally sell them to regular visitors or permanent residents, they don't get advertised very often. My only advice would be consider staying in a park for a weekend first before you make any enquiries.
look for noise, drugs, how they deal with bad behavior, and find out from the visitors how much they are paying.
Very interesting, I will give feedback on how this pans out
Interesting indeed! I look forward to hearing how it goes…
Daedalus
Hey Glendafull,
Any news? I've been making some enquiries but have not had any luck as yet…
Daedalus
Very interesting
One thing to remember Glendafull, is that you are not buying any tenure in the land. That is, the owners of the caravan park can sell the park to a developer and give you 24 hours notice to vacate the property. You will need to check that the property isn't being considered for a sale and that the park will be around for longer than the 7 1/2 months that it will take to repay the funds and get a return.
You could start by checking council records for any Development Applications (approved or submitted). It would also pay to have a title search (to check the encumbrances on the land eg may be a caveat noting the interest of the developer to purchase in 6 months pending DA, or upcoming renewal of the lease of part of the land). You will then be in a position to make an informed decision (not just based on cashflow).
Just did some quick research and found that for a park with annual fees of $4380 ($84.23 p/w), and off peak nightly rates of $60 p/n, you would only need the van to be rented out 73 nights a year to break even with the park fees, and if you managed to get the max 180 nights, then you would be getting $207 p/w.
As you can imagine, as long as you can guarantee atleast 73 nights a year, than the CoCR increases quite rapidly even if you purchase the van for $10,000. So 87 nights (at worst case $60 a night for all nights at off peak), would have CoCR of 8.4%. and the 180 nights would be 64.2% CoCR.Cheers,
DaFizSome of the challenges I've identified so far are:
- Most onsite vans/cabins for sale are for holiday use. This means you can only use them up to 150 days/year. But I haven't strayed too far from coastal areas.
- Few of the parks I've spoken to are interested in permanent residents. Where they have them, they use the park's vans.
- There is complexity around the nature of the leases. As SNM idenitified, you don't have much security. I sense that you would need to keep 'close' to the park management to increase your chances of success.
- I get the feeling that there is a bit of a taboo about a park allowing investors into their parks in this way – judging by the response to some of my early enquiries.
If your search the forum with 'caravan' you'll find a lot of history on this topic.
Daedalus
I think we have been lucky enough to stumble onto a good thing here, in that the park we are at are mostly interested in long term tenants in the vans, All 3 of the vans are rented at $200 p/w at the moment by long term people. The land is currently owned by investors who have no short term plans for the area we are in. I am happy with our results so far, but this is not something I would pursue at another park, I can see too many pitfalls, and you don't have a lot of controll even when you are keeping in close contact with the park managers
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