Hospitality math and land math value the same park a third apart

Price off the income. Take comfort from the dirt. Those are different jobs and mixing them is how people overpay.

The way I'd say it numerically: your offer comes out of a cap rate applied to income you believe, at an occupancy you'd underwrite in a mediocre year. The land and infrastructure number is your downside test. If income goes to zero for a season, what could you sell the improved parcel for, and does that cover the debt. If the answer is yes, you can take more risk on the income assumption. If the answer is no, the land lens isn't a floor at all, it's a story.

One thing that would move me on your 60 site example is who else could use the dirt. Improved sites near a growing town with utilities in the ground have alternate uses. The same sites four miles from a lake and forty miles from anything have exactly one use, and then replacement cost tells you nothing about resale.

ledger has it in the right order. I'd add that the management fee line is where most of that one third gap actually lives. Owner operated parks show statements with no fee and no reserve, and the hospitality lens puts both back in. On 60 sites that can be 8 to 12 percent of revenue for management plus a real amenity reserve, and at any reasonable cap rate that swing alone explains a good chunk of the spread.

So before you conclude the two methods disagree philosophically, normalize the statements and rerun. Sometimes they converge more than you'd expect.

The two lenses answer different questions, and you'll get further by asking what each one is for.

Income capitalization prices the business. It's the method a buyer of an operating park will use, and it's the method that has to survive a lender's test, because debt service comes from site revenue rather than from acreage. In this sector that means the seasonality curve does real work in your number. A park earning 60 percent of revenue in eight weeks has more variance around the same annual NOI than one selling monthly stays year round, and variance belongs in the cap rate rather than in the revenue line.

Replacement cost and per site land value tell you about downside and about supply. They matter because they set the bar for new competition. If a developer can build a comparable site for less than you're paying per site, your pricing power is capped by that alternative in any market with available land and a willing county. Entitlement difficulty is what protects you there, and conditional use and density rules for campgrounds vary by state and county, so confirm what a competitor could actually get approved nearby rather than assuming scarcity.

sextant's point about normalization is the practical step. Add market rate management and a reserve for amenities and roads to the seller's statements before you cap anything. Owner operated books usually understate both.

One caution on the land floor. Improved RV sites are a single purpose improvement in most rural locations. Alternate use value depends on zoning and on demand for something else on that parcel, so treat the floor as a range you tested rather than a number you assumed.

The management fee point is underrated. Every seller I've talked to in this niche describes their own 60 hour weeks as "self managed" and then prices as if that labor were free.

I'd rather buy the one where both methods land close together, even if the price is higher. That usually means the income is real and the dirt is worth something, and I don't have to be right about which lens matters.

verity, that's close to how I think about land generally, though it does mean you're paying for the absence of ambiguity, and ambiguity is where the returns tend to sit.

sable, the alternate use question ledger raised is the one I'd spend a week on. I've held rural parcels long enough to know that "utilities in the ground" means something very different four miles outside a growing town than it does at the end of a county road. Same pipe, completely different exit.

Reading all of this, the number I'd never see on a listing is the reserve. Sextant, is there a rule of thumb for amenity and road reserves per site in this category, or does everyone build it from their own repair history?