How to Calculate Cap Rate on an RV Park Deal in 5 Minutes

Cap rate = Net Operating Income divided by Purchase Price. For most RV parks on the market today, that number lands between 7% and 12%. If a deal is priced below 7%, you're paying for someone else's upside. If it's above 12%, ask why the seller is giving away that much cash flow.

Here's the fast version, then the details that keep you from getting fooled by a pretty pro forma.

The 5-Minute Method

• Step 1: Pull trailing 12-month gross revenue from the seller's financials, not their projections.

• Step 2: Subtract actual operating expenses (payroll, utilities, insurance, repairs, management fee, property tax). Don't subtract debt service or depreciation, those aren't part of NOI.

• Step 3: That result is your NOI.

• Step 4: Divide NOI by the asking price.

• Step 5: Multiply by 100. That's your cap rate.

Example: a 60-site park generates $480,000 in gross revenue. Expenses run $270,000. NOI is $210,000. Asking price is $2.2 million. $210,000 divided by $2,200,000 equals 9.5%. That's a solid, market-typical cap rate for outdoor hospitality right now.

Where Investors Get This Wrong

The biggest mistake is using a seller's "stabilized" or "projected" NOI instead of what the park actually produced. Sellers often show you a pro forma that assumes full occupancy every month of the year. That's not how RV parks work. Occupancy runs close to 100% during peak summer weekends and holidays, then drops sharply in shoulder and winter months depending on climate and location. If you want the full picture of why that swing happens, this breakdown of seasonal occupancy patterns explains the mechanics behind the swing.

The second mistake is baking in aggressive revenue growth. Industry data points to flat forecast growth, in the 0-1% range annually through the rest of the decade. The post-pandemic surge in RV travel was a one-time anomaly, not a new baseline. If your underwriting assumes 5% annual rent growth because that's what happened in 2021, you're modeling a market that no longer exists. Build your cap rate on trailing actuals, then treat any upside from margin improvement or value-add work as a bonus, not a given.

What to Check Beyond the Basic Formula

Cap rate is a starting point, not the whole story. Before you commit to a number, look at these:

• Revenue mix. Parks with site rentals, private lot leases, and amenity fees (laundry, propane, firewood, store sales) tend to have more resilient NOI than parks relying on transient camping alone.

• Expense ratio. RV parks typically run 40-55% of gross revenue in operating expenses. If a seller's expense ratio looks unusually low, check for deferred maintenance or understaffing that you'll inherit.

• Off-season plan. A park with a real winter strategy, whether that's long-term stays, storage revenue, or seasonal rate adjustments, holds NOI better than one that just closes gates from November to March. These off-season occupancy strategies show what separates parks that stay profitable year-round from ones that don't.

• Cap ex needs. A 9% cap rate on a park that needs $150,000 in electrical upgrades isn't really a 9% deal. Back out near-term capital needs before you compare cap rates across properties.

Why the Range Matters

The 7-12% cap rate range reflects how operationally intensive RV parks are compared to, say, a net-lease retail building. You're running a hospitality business with utilities, guest turnover, and physical infrastructure, not just collecting a check. That operational intensity is exactly why cap rates run higher than most commercial real estate. It's compensation for the work involved, and it's also why two parks with identical cap rates can have very different risk profiles depending on how much of that NOI comes from stable long-term tenants versus weekend transient traffic.

A quick cap rate calculation tells you whether a deal is worth a second look. It doesn't tell you whether the NOI is sustainable, whether the revenue mix is diversified, or whether the seller's numbers reflect reality. Those answers take more than five minutes, but they're what separate a good cap rate from a good investment.

If you want help running these numbers on a specific deal or want to see how Invest With Zac approaches RV park underwriting, reach out and start the conversation.