RV Storage Facility Site Acquisition Costs

Some Basics on Site Acquisition

Industry Trends.

Rapidly disappearing is Ma & Pa’s fenced-in dirt lot. Today’s tenants want (& will pay for) paving, covers, electrical access for trickle charging, a wash bay, access to a grey water dump and management where there’s a real person onsite. A small but pleasant customer lounge is appreciated as well.  From our experience this is true—we started offering these amenities as standard fare some 18 years ago and we have always had excellent occupancy if not “waiting list” occupancy.

This means there is some capital investment up front.

What’s the Right Size Facility?

When you put these kinds of improvements in, you have to hit the right economy of scales. Obviously you can’t support these types of improvements with a small site. We find the right sized parcel of land to be 5 to 10 acres with 10 being optimum. That’s where you’ll hit the highest and best yield on your money.

Important Site Characteristics.

A level site costs less to develop. Easy access to utilities is very important—bringing in your infrastructure if it’s “down the road a bit” can take the fun right out of it.

Pricing the Land

RV and Boat storage is a land intensive use. This means you cannot overpay for the site. Typical rental space to land ratio is about 45%. So how do you figure out what price you should pay or better stated, what’s the max you can pay because you should always pay less than that if you can!

To get a handle on this you need to reverse engineer the numbers. You have to figure out what the site will produce for a rental rate per square foot. This means: research, research, research. That’s how you come up with a rental rate. Call the competitors first. If it holds water through that process, get out there and talk to the different locations. Most managers will talk, especially if you act as a perspective tenant. When you’re there, note things like occupancy and the condition of the place and its amenities. You will learn a lot.

While doing your research make sure to compare apples with apples from a demographical point of view: different neighborhoods achieve different rental rates.

Let’s say you feel comfortable achieving .48 psf for a facility with the amenities described previously. Now let’s say the site is 10 acres so 45% of that is rentable. Now watch how we run those numbers to determine what should be the maximum land value.

  • 196,020 sf X .48 = $94,089.60 Monthly Gross Scheduled Income
  • Add 5% for processing & late fees = $98,794.10
    • Subtract out a 10% vacancy
    • Subtract out 40% operational costs.
  • Monthly Net Operating Income: $53,348.80
  • Using an 8.5% Cap Rate the property has a value of $7,531,597.30. As a general rule of thumb your land value as compared to the finished & stabilized property value should not exceed 15%.

This means you can’t pay more than $1,129,739.60 or $2.60 psf. That’s max so obviously cheaper is better.

As of this writing, we have been able to find good parcels supporting the rents described in this example for $1.50 to $2 psf. We have never paid $2.60 psf

Important Note: Each parcel of ground, each market, and each municipality greatly affects the outcome of an RV and Boat storage facility.

  • Do Your Homework
  • Do It Again
  • Do It One More Time

If you need some help, talk to us. That’s what we’re here for.

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