Finance question
Can I get finance to buy a caravan park?
Yes. How it is funded depends on whether you buy the land or only the right to run the park. A freehold park is lent against like commercial property, with indicative appetite around 70% of the lender's going-concern valuation, so plan on a deposit of roughly 30% plus costs. A leasehold is goodwill lending, where you should expect around half down. Subject to lender assessment.
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The short answer
Cabins, permanents and the lender's valuation
Caravan parks are a $3 billion revenue sector growing 7% a year, and regional parks still trade at owner-operator prices. Our guide puts regional freehold going concerns at $1.7m to $5.4m with advertised returns of roughly 10 to 16%, leasehold parks from about $900,000 plus stock at 20 to 35%, and institutional-grade freeholds from $5m plus, often by tender (caravan park guide). The two ends are different products, and lenders treat them that way.
Lenders value a park as a multiple of adjusted net profit, and the multiple follows the quality of the income. Cabin income beats powered sites. Permanent residents are an annuity, while tourist sites earn more but seasonally, so expect to supply a full year of takings split by site type, not one annual total. One Central West NSW park with 42 new cabins asked $4.35m against $704,000 of net profit, a 16% return, and sold. Expansion land is optionality the next buyer pays for, so ask the valuer how much of it they are crediting.
The rule that catches buyers is that the loan is sized off the lender's valuation, not your contract price, so paying above valuation means funding the whole gap yourself. On a leasehold the lease is the asset: you are buying the business and the right to run it, and the asset diminishes as the lease runs off, so the years remaining are what a lender examines. Equity in property you already hold can bridge the deposit on either type. Ventas is a broker across 40+ lenders with no upfront fee, and can structure the park and that equity together.
Do you qualify?
What a lender looks at on a caravan park purchase.
Income by site type
Cabins, permanents and tourist sites are assessed separately.
Freehold or lease years
On a leasehold, the years remaining are the asset.
Deposit or equity
Cash, or equity in other property, covers the share the lender does not.
Operating experience
Park or accommodation experience, or a manager who has it.
Why parks fund differently to other businesses
Land under the income
A freehold park gives the lender property security, not just goodwill.
Steady and seasonal income
Permanents provide steady income beside the tourist trade.
Equity can be the deposit
Home or investment property equity bridges the gap.
A worked example
A buyer contracts to buy a freehold park at $3.2m, but the lender's valuation comes in at $3.0m. At around 70% of the valuation the advance is $2.1m, so the gap is $1.1m, not the $960,000 that 30% of the price suggests. The $200,000 paid above valuation is never lent against. They cover the gap with $350,000 of savings and $750,000 of equity in an investment property. Illustrative only.
Common questions
Frequently asked questions
How much deposit do I need for a caravan park?
Indicatively around 30% plus costs on a freehold park and around half on a leasehold. The loan is sized off the lender's going-concern valuation, not the contract price, and equity in other property can bridge the deposit.
Is a freehold or leasehold caravan park easier to finance?
Usually freehold. The land and buildings give the lender property security, while a leasehold is goodwill lending against a lease that runs off over time. The guide describes a leasehold as roughly a third of the capital for double the percentage return.
What return does a caravan park make?
The guide shows advertised returns of roughly 10 to 16% on regional freehold going concerns, 20 to 35% on leaseholds, and 6 to 7.5% cap rates (a yield on the property, not a loan rate) on institutional-grade parks. Advertised returns are the seller's figures, so check them against the books.
Do permanent residents help me get finance?
They can. Permanents are annuity income, while tourist sites earn more but seasonally, so a lender looks at the split of income by site type over a full year.