When considering a Caravan Park for Sale New South Wales, a potential investor needs to think about the financial risks and rewards of a Freehold versus a Leasehold Caravan Park for Sale. A Freehold Going Concern is where the Caravan Park business and the land is owned by the same party. A Leasehold is where you purchase the Caravan Park business while you will rent the land from the land owner. Let’s concentrate on a couple of advantages of a Freehold Going Concern.
Banks will provide a higher LVR
When financing the purchase of a Caravan Park, a Freehold Going Concern allows for a higher (LVR) Loan to Value Ratio. The LVR is the amount of the loan compared to the value of the Caravan Park. For example if the Caravan Park is worth $1,250,000 and you have a deposit of $500,000 the LVR is 40%.
Banks in Australia will give a more favourable Loan to Value Ratio for Freehold Going Concern properties and tend to lend up to 50% LVR while for a Leasehold the bank will only accommodate up to around 35%. The reason being is that the banks feel that a Caravan Park business only attracts a small number of unique buyers and there is also a risk if the business goes downhill and the owner defaults, then the bank will have difficulty selling the business. At least if the asset is a Freehold Going Concern, the bank has a piece of land which holds a value that does not fluctuate dramatically.
Caravan Parks for sale New South Wales are popular due to New South Wales having the largest population out of all states and Sydney holding the largest city population in Australia. Therefore price ranges may be on the higher side compared to the other Australian regions and having a more favourable LVR for Freehold Caravan Parks will work in a potential investor’s favour.
Another key benefit of investing in a Freehold Going Concern is the opportunity to sell to a developer down the track. Most Caravan Parks are built on Australia’s beautiful coastline and as the coastline land becomes scarcer the value increases. Developers are looking for beautiful beach front locations to snap up and develop into seaside apartments, townhouses or holiday homes. Also to note, the baby boomer generation are driving demand for more retirement accommodation options. A growing solution is Caravan Parks that are converted into retirement villages with the use of modern and comfortable portable homes.
If you are considering a Caravan Park for sale in New South Wales then a Freehold Going Concern may be the better option considering the LVR and developer potential. Contact our brokers today for a more in depth discussion regarding your options.