RV Park NOI and Cap Rates, Explained Plainly

What net operating income actually is

Net operating income is collected revenue minus the ordinary expenses required to operate the property. It excludes your mortgage payment, depreciation, personal draws and capital improvements. Two parks with the same revenue can have NOI that differs by a third, and that difference is the whole ballgame.

Revenue typically includes site rent, utility reimbursements, storage, laundry, cabin or park-model rent, late fees and store income. Operating expenses typically include:

• Property taxes and insurance
• Utilities the park pays — electricity, water, wastewater, trash
• Payroll or contract management
• Repairs and routine maintenance
• Grounds, pest control and pumping or septic service
• Marketing, software, merchant fees and administration
• A capital reserve — commonly $150 to $300 per site per year

The adjustment that surprises owners most

If you manage the park yourself, your labor is missing from the expense line. A buyer must replace it, so a market management cost gets added — often 5% to 10% of revenue, or the real cost of an on-site manager and payroll. On a small park this single adjustment can move NOI, and therefore value, by a meaningful amount. It is not a negotiating tactic; a lender does the same thing.

What a cap rate is

A capitalization rate is simply NOI divided by price. Rearranged, value equals NOI divided by the cap rate. A park with $180,000 of NOI at a 9% cap rate is worth about $2,000,000; at 11% it is worth about $1,636,000. Same income, $364,000 difference — and the only thing that changed was perceived risk.

What pushes a Texas RV park's cap rate up or down

• Down (higher value): municipal water and sewer, individually metered electricity, documented collections, durable demand, newer infrastructure, expansion land, strong location.
• Up (lower value): septic or an aging package plant, cash rent with no records, seasonal-only occupancy, 30-amp service, remote location, unclear permitted capacity, heavy deferred maintenance.

Worked example

A 60-site park collects $32,000 per month, or $384,000 per year. The owner reports $150,000 of expenses and a $234,000 NOI. A buyer adds $30,000 for management the owner performs, $12,000 of reserves, and re-assesses property taxes upward by $9,000 — bringing NOI to roughly $183,000. At a 9.5% cap rate that is about $1.93 million, not the $2.6 million the owner's unadjusted number implied. Nothing dishonest happened on either side; the numbers simply answer different questions.

Why the range matters more than the point

Anyone quoting a single precise value from a phone conversation is guessing. A credible evaluation gives a range and explains what would move you to the top of it — usually better documentation, verified occupancy, or resolving a known utility question.