Investing in a Camping Site and Recreational Property
If you already own a decent home, you may be looking for other real estate properties to invest in. One of the most suitable investments is owning a recreational property or camping ground. Maintaining such properties for a long period of time can ultimately become a solid investment.
Despite being a safe and lucrative investment, campground and recreational facilities have their own challenges. One of the major challenges is that the income from the properties vary and the returns are quite unpredictable. Other than that, investment in such properties is relatively safer compared to other real estate investments.
Why Should You Invest in a Camping Site?
Investing in a camping site will reap several benefits in the long run. The owner of a camping site can charge for housing or vehicle parking months in advance. However, a major benefit is that an owner can ask tenants to leave within days’ notice if they don’t abide by the rules and regulations of the property.
Difference Between Tenant Types
Tenants of camping sites or recreational properties are different from those living in an apartment building. In a recreational property, such as a camping ground, the tenants are renting the property for reasons such as wanting to escape winter or spending the holiday with family.
As the tenants are using the property temporarily, perhaps for a holiday, they are less likely to cause problems like a delay in rent. Their moods are generally more pleasant than apartment tenants. Technically, tenants at a camping site are actually visitors of the property.
No Lease Payments: A Disadvantage
The one thing that makes such an investment unpredictable is that camping grounds do not require tenants to pay a lease on the property. This makes the investment and returns variable to the seasonal traffic of tourists. With the absence of a lease payment, monthly income will depend on how many tourists stay at your property. As the income is seasonal, it’s important to budget well when considering real estate properties for investment.
Many recreational properties have more of an influx of visitors in summers, hence, the income is seasonal. Since the income is seasonal, taxes must regularly be paid regardless of the income. Sometimes the influx of visitors is slow and the income is not sufficient to cover the expenses of the property.
What to Consider when Buying a recreational Property
When buying a camping ground or other recreational property, you need to check the actual income from past years. Use the past data to determine future cash inflows. If they are positive in the long term, it would be a good choice to buy the property. Look for steady yearly income with good returns on investments in the first few years when you are looking to potentially invest.
Consider the tax returns to get an idea of the entire operational side of the business. The income and expenditure records will help identify and estimate the income before any service debts. Select a suitable property and invest in it by keeping what you want for the return in mind. To get a clear picture of the investment, it’s important to subtract the profit from the total net service debt. The remaining figure will be the amount payable on the loans you take for investing in a property.
How Much Can You Pay for the Property?
Determining the amount you can pay for a camping ground or recreational property depends on the amount of down payment you make. Ensure that you know the other costs associated with the property including taxes and insurance premiums, if any. Include these costs when calculating the existing capital you already have to purchase the property.
For those interested in investing in a recreational property, it’s essential to look for properties that are priced similarly to other nearby locations. Depending on business and management skills, a parking space worth $10,000 per spot can be quiet profitable.
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.