The concept of “retirement” is overworked and commonplace on any investing website. But their concept of “retirement” and yours may be completely different. Sure, you’ll get social security, but at $1,200 per month on average it’s less than impressive. So what’s your plan? For many investors, a good one is buying an RV park. And it only takes one if properly purchased and operated.
Modelling it out
Let’s assume you’ve saved $100,000. That’s within the range of the average American at 65, but you may have already achieved that earlier. Let’s assume you use that as a down-payment on a $500,000 RV park. At a 10% cap rate, that would mean it produces $50,000 in net income. Based on normal metrics, this purchase would yield a 10% cash-on-cash return, so you’d get around $20,000 per year back on that down-payment. But let’s also assume you are buying an RV park with potential to increase occupancy through better management. And let’s also assume that you can increase the net income by $30,000 per year in this manner (which would equate to only 4 extra occupied lots thirty days a month). Now you’re at around $50,000 per year on your $100,000 investment.
Self-managing as an option
If you choose to self-manage the RV park (become the on-site manager yourself) that means you can assign the projected manager cost to yourself. Assuming you had budgeted to pay the manager $20,000 per year, you now have effectively gained $70,000 per year in income off of your $100,000 investment. To put that into perspective, that’s a yield of 70 times the prevailing CD rate at your local bank. And that amount offers a nice, pleasant retirement to virtually anyone.
Free housing
And let’s not forget the simple fact that many RV parks come with a nice owner’s dwelling – either inside the RV park or next door. Since most RV parks are in very scenic locations, this house may be a spectacular place to live and it’s 100% free. It’s yours. That means your $70,000 per year of income also comes with free housing for life. That makes the deal even sweeter.
What could derail your dream
Although this plan seems rosy, it could also be a nightmare if you don’t do great diligence on the RV park you are buying. First of all, you need to find an RV park that has good location and infrastructure. You need to make sure that you negotiate the right price on it. Run the numbers several times to make sure you have a solid handle on performance. Find a bank that shares your vision and give you the loan. Manager the property within expectations and hit your budgeted numbers. So the key is to not only find an RV park that can offer you a good retirement, but take action to make that dream a reality.
But this is attainable and most plans are not
Most of the retirement plans you read about start off with “can you retire on $1 million in cash?” when the average American has 1/10th of that or less. Or the plan that is offered requires you to do the equivalent of running a 4-minute mile – sure it’s mathematically possible but highly unlikely. Owning an RV park is something that anyone can do and there are a ton of good deals out there for those who dig down and find them. So this is a retirement plan that actually is within the grasp of most Americans.
Conclusion
Yes, you can retire on one mobile home park. Yes, the opportunity is there. Yes, there is a well-established road map to do it. But you have to take the necessary actions to put that plan in progress and put in the work to bet the job done.