Ground-Up RV Resort Development: Construction Loan Basics

Building a luxury RV resort from raw land is a two-year project with a real payoff. Here is how construction financing, draws, and lease-up actually work.

The Case for Building Instead of Buying

Existing RV parks in good markets now trade at compressed cap rates, and many of the available properties are older assets with obsolete infrastructure. Building from raw land lets you design for the modern market: pull-through sites long enough for a 45-foot coach with a towed vehicle, 50-amp service throughout, concrete pads, fiber internet, and the amenity package that drives premium rates.

The economics can be compelling when land is reasonably priced. Development cost per site varies enormously by region and site quality, but a well-executed project can deliver a finished asset at a basis meaningfully below what a comparable stabilized park would cost to acquire. The developer captures that spread as created value at stabilization.

The tradeoff is time and risk. From land contract to stabilized occupancy is realistically 24 to 36 months, and you are exposed to entitlement risk, construction cost inflation, utility connection delays, and a lease-up in whatever demand environment exists when you open. This is a developer’s project, not a passive investment.

Entitlement Is the First Real Hurdle

Zoning approval for a new RV park is frequently the longest and least predictable phase. Many jurisdictions require a conditional use permit with public hearings, and neighboring residents often oppose campground development. Budget six to eighteen months for entitlement and never close on land without either an approved use or a contingency period long enough to secure one.

Utility capacity determines whether the project is even feasible. Confirm available electrical service capacity with the utility early, because upgrading a distribution line to serve 200 sites at 50 amps is a substantial cost and a long lead time. Water and wastewater are equally critical: connecting to municipal sewer is ideal, but many rural sites require an engineered septic or package treatment plant with state environmental approval.

Environmental and floodplain review will also gate the project. A Phase I environmental assessment is standard for any commercial land acquisition, and wetlands delineation or floodplain mapping can eliminate a meaningful portion of your buildable acreage. Do this work during due diligence, because site count is the single input that drives your entire pro forma.

How Construction Financing Is Structured

Ground-up commercial construction loans for RV resorts typically fund 65% to 75% of total project cost, with the sponsor contributing 25% to 35% in equity, often satisfied partly by land value if the land was acquired at an attractive basis and has appreciated through entitlement. Loans are interest-only during construction, priced as a spread over a floating index, with terms of 24 to 36 months.

Funds are released through a draw process. You submit draw requests tied to completed work, an inspector verifies progress, and the lender funds against verified completion, typically with a 5% to 10% retainage held until final completion. Understanding this rhythm matters operationally, because contractors want payment and draws take one to three weeks, so you need working capital to bridge the cycle.

The SBA 504 program is worth evaluating for owner-operators. It supports ground-up construction of owner-occupied commercial property with a 10% to 15% equity injection and a long-term fixed rate on the CDC portion, which is dramatically less equity than conventional construction debt requires. Angel Funding Group evaluates both routes and, where SBA fits, coordinates the conventional first mortgage and the CDC piece as one process.

Budgeting the Real Costs

Site development is the dominant cost line and it is heavily site-dependent. Clearing, grading, roads, drainage, utility trenching and distribution, concrete pads, pedestals, and landscaping typically account for the large majority of the budget. Rock, steep topography, or poor soils can inflate these numbers dramatically, which is why a geotechnical report before land closing is money extremely well spent.

Vertical construction is smaller but not trivial: an office and check-in building, a bathhouse, a laundry, and a pool or clubhouse if the amenity package calls for it. Soft costs, including civil engineering, architecture, permits, impact fees, legal, and construction management, commonly run 10% to 15% of hard costs and are routinely underestimated by first-time developers.

Then there is the money nobody budgets: carrying costs and lease-up. Your loan accrues interest and property taxes accrue from day one, while revenue does not begin until you open and does not stabilize for twelve to eighteen months after. Build an interest reserve and a lease-up operating reserve into the loan request rather than assuming you will fund it from cash flow that does not yet exist.

The Refinance at Stabilization

The construction loan is temporary by design. Once the resort reaches stabilized occupancy, generally 80% to 85% sustained over three to six months, you refinance into permanent commercial real estate debt with a 20- to 25-year amortization at substantially better pricing. This is the moment the created value becomes real and, in many cases, returns a meaningful portion of the sponsor’s equity.

Permanent lenders will underwrite trailing income, so the operating discipline during lease-up directly determines your refinance terms. Clean monthly financials, documented occupancy and rate history by site type, a completed capital cost schedule, and evidence of a repeat-guest base all support higher leverage and a lower rate.

Model the refinance before you break ground, not after. If the stabilized NOI cannot support permanent debt at a conservative rate assumption with 1.25x coverage, the project does not work no matter how attractive the construction loan looks. Angel Funding Group underwrites the takeout alongside the construction facility so the entire capital plan is validated before the first dollar of dirt work is spent.