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I’ve talked with many people who are in the process of buying a campground recently and I hear concerns near the end of the final due diligence process about contingent things that are going on. As an example, I had one guy who was trying to buy a campground and there was some contingencies based on the sewage system. He wanted to be able to expand, but the County was pushing for him to expand his sewage system and they weren’t quite sure if this was going to come to fruition or not. So in this case, it was a $50,000 difference in his decision making and that could sway him from buying the campground or not. So one of the things you can look at in buying a campground is that you don’t always have to land on a fixed price. At the end of the deal, there can be contingencies upon closing.
Now obviously risk becomes higher when there are contingent pricing things going on. And it also makes it more difficult from a legal aspect, it’s not quite as clean. But in this case, we suggested looking at negotiating a contingency in the contract. So for example, if you’re going to buy a campground for a $500,000, and you had this contingency on the sewage system, maybe there is a five-year callback on a seller finance note that if the County forces you to redo the sewer system, that there is some piece of that that reduces the initial sales price or is reduced on that seller financing piece. Now I don’t recommend contingencies where you have nothing as collateral to back that up. In this case, I always recommend like a seller finance notes so that there is some way to recapture your funds and not just a matter of trying to track down an owner who is long gone that rarely works in your favor and you’ll spend a lot of money on attorneys and may still never get anything. So when buying a campground, if there are some loose ends that you just can’t nail down to help you reduce your risk in the purchase, think about how a contingency might work and if that might be a solution to push your deal along and have a win win for both the buyer and the seller. If you have questions about how a purchase could work or some contingencies, we’re here to help. I’m Donna Bordeaux at Campgroundaccounting.com. Thank you.
Donna Bordeaux, CPA with CampgroundAccounting.com
What happens when you send two CPAs out into the relaxing outdoors to camp? You get CampgroundAccounting.com. Donna and Chad have over 50 years of combined experience as entrepreneurial CPAs. They’ve owned businesses and helped business owners exceed their wildest dreams. They camp and travel across the country every chance they get, so it’s just a natural fit that they focus their CPA skills on helping campground owners throughout the USA grow their businesses and minimize the impact of taxes. They understand the key performance indicators and specialized issued that face RV park owners every day.