Caravan Park Finance Australia

Most parks change hands as a freehold going concern, where the buyer acquires the land, improvements, cabins, plant and business together. The lender takes a first mortgage over the land and a general security agreement over the business. Major banks and non-bank lenders commonly lend 50% to 65% of the going concern valuation, with major banks often toward the lower end and some non-bank lenders prepared to go a little higher for strong parks. Terms of up to 15 years are common and some lenders offer longer, often with an interest only period in the early years.

A leasehold park is a business operating on land owned by someone else, which may be a private landlord, a council or the Crown. The security is the lease, and it loses value as the term runs down. Gearing is commonly 35% to 50%, major banks rarely lend against a leasehold alone, and the loan term cannot run past the lease. With crown and council tenure, lenders check the remaining term, renewal rights, rent review method and permitted use, and the lessor or relevant minister usually has to consent to the mortgage. Many leasehold buyers add other property as security or borrow through a business acquisition loan.

Valuation is on maintainable earnings. A specialist valuer takes two to three years of trading, adds back one-off and owner-specific costs, deducts a realistic wage for owners or managers, and capitalises the adjusted net profit at a yield supported by comparable park sales. The yield reflects location, tenure, condition, seasonality and the income mix. Revenue is broken down by cabins, powered sites, unpowered sites, annuals and permanents, because each behaves differently. The valuer also allows for capital expenditure, since cabins, amenities, roads and services all need regular reinvestment to hold occupancy and rates.

Income mix cuts both ways. Permanent residents and annual site holders pay site fees all year, which smooths cash flow and supports serviceability. Where those residents own their dwellings, the park owns only the land beneath them, and state residential park or land lease legislation governs site agreements, fee increases and termination. In New South Wales, for example, this is the Residential (Land Lease) Communities Act 2013. Some lenders therefore gear a permanent-heavy park more conservatively than a tourist park with park-owned cabins. Purpose-built land lease communities are usually assessed as a separate asset class by lenders familiar with site fee income.

Compliance is part of the security. Parks operate under state caravan park and camping ground regulations, generally administered by the local council, which set site numbers, spacing, amenities and fire safety standards. In New South Wales, for example, a park needs a council approval to operate under the Local Government (Manufactured Home Estates, Caravan Parks, Camping Grounds and Moveable Dwellings) Regulation 2021. Lenders and valuers check the approval is current and matches what is on the ground. Flood, bushfire and coastal erosion risk are assessed closely, because insurance can be costly or limited for waterfront parks. Get legal advice on approvals and tenure during due diligence.

Serviceability is tested on the park's maintainable earnings, plus other verified income, against all debt at an assessment rate above the actual rate. Lenders look at how the margin holds through the quietest months and may build in a working capital facility. Park lending is full documentation lending, so expect to provide a business plan and evidence of relevant management experience. First-time operators can be approved, usually at lower gearing or with a management plan. Stamp duty, the GST going concern exemption and the choice of purchasing entity all need accountant and legal advice before contracts are exchanged.

Existing owners refinance to release equity for new cabins, fund a second park or move from a short-term loan to a longer facility. A lender will want updated financials and a new valuation, and the process is similar to any commercial property refinance. Capital works are often funded by a separate facility drawn progressively, and cabins can sometimes be funded through equipment finance. Exit options include selling the going concern, selling the business on a new lease while keeping the freehold, or for well-located parks, a longer-term conversion to permanent sites where planning rules allow.