I spent a lot of time today analyzing a potential deal that we're interested in, and thought I'd share some of the key criteria we look for in an acquisition. Obviously every deal is different, and there are a lot of variables that we consider but in general when we buy a property, we expect to hit the following targets:
>$750k gross revenue
>8% cap rate
20% IRR (10 year hold)
3-5% Year 1 cash on cash return, up to 8% by year 2, and 10%+ by years 3-4
Local draw - near a major destination (National Park, large metro area, amusement park(s), iconic/historic city, etc)
Utilities - City services or private? If private, how nasty are they and what is the contingency plan if they fail?
Value-add potential - land to expand, upgrades to existing sites, reallocation of site mix (short term vs long term) operational efficiencies, below market rates, etc
Is seller financing an option?
There's a lot more that goes into it, but these are the basics we look at for every deal. If you're interested in learning more about KCN, what we do, how we do it, or why we do it, check out our website at kcncampgrounds.com for more info or DM me and we can chat.
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3moNice job. We wish you all the best.