❌ Why This “RV & Boat Storage Expansion” Deal Still Misses — And How the 85/45/24 Model Fixes the Risk

Written by Jai Thompson

Intro

I manage a private equity platform deploying $13–18 million per quarter across multiple real estate asset classes. Our model is asset-based, escrow-directed, and execution-driven, allowing us to close in 23 days or less with certainty and clean title flow.

We acquire and operate across:

• Luxury estates

• Single-family residential portfolios

• Multifamily communities

• Hospitality and hotels

• Mixed-use properties

• RV parks and mobile home communities

• Golf resorts and destination assets

• Specialized housing and income portfolios

Capital is structured, operators are paid, reserves are built in, and all disbursements are controlled through escrow. We deploy with discipline, transparency, and speed—while tithing back to the communities we serve.

Let’s break down a popular RV storage expansion deal and explain why it sounds smart but still fails asset-based discipline.

The Deal Presented (Traditional Expansion Model)

Property

• 185-Unit RV & Boat Storage Facility

Purchase Price

• $2,375,000

Financing

• $1,956,000 SBA Loan

• 6.25% interest

• 25-year amortization

Down Payment

• $471,500

• Sourced from cash-out refinance of a prior deal

Value-Add Plan

• Build 117 additional units

Construction Funding

• $2,440,000 construction loan

Claimed Pro Forma

• Stabilized Value: $9,400,000

• Market Cap: 7%

Step 1: Is This a Good Deal?

Answer: NO (for us)

This deal is growth-driven, not risk-controlled.

It works only if everything expands perfectly.

Step 2: The Hidden Risk Stack

1. Layered leverage

This deal has:

• SBA permanent debt

• A large construction loan

• Recycled equity from another asset

That’s three risk layers before value exists.

2. Value does not exist today

The $9.4M value:

• Depends on construction

• Depends on lease-up

• Depends on market absorption

• Depends on exit cap stability

That’s speculation, not collateral.

3. SBA loans are personal-risk loans

SBA =

• Personal guarantees

• Liquidity tests

• Net-worth scrutiny

This violates asset-only risk doctrine.

Step 3: Traditional Deal Math (3rd-Grade Simple)

Stabilized NOI (from pro forma)

7% cap on $9,400,000:

$9,400,000 × 7% = $658,000 NOI / year

Step 4: Debt Service Reality

SBA Loan Debt Service

$1,956,000 at 6.25% (25-year AM) ≈ $155,000 / year

Construction Loan (interest only, est.)

$2,440,000 × 7% ≈ $170,800 / year

Total Debt Service

$155,000 + $170,800 = $325,800 / year

Step 5: DSCR (Looks OK — But Too Late)

$658,000 ÷ $325,800 = 2.02 DSCR

On paper, this passes.

But:

• Only after construction

• Only after lease-up

• Only after surviving expansion risk

DSCR achieved after danger, not before.

Step 6: Yield (What It Really Costs)

Cash invested:

• $471,500 down payment

• Risk carried from prior deal equity

Annual NOI:

• $658,000

Yield

$658,000 ÷ $471,500 = 139%

Looks incredible — but:

• Only after years of execution

• Only if no cost overruns

• Only if demand holds

This is outcome-based investing, not structure-based investing.

Now Let’s Run the SAME Asset Through the 85 / 45 / 24 Model

Same property.
Same future value.
Different intelligence.

Step 7: Asset-Based Pricing

Stabilized FMV

• $9,400,000

Offer (85%)

• $9,400,000 × 85% = $7,990,000

Recorded Price (45%)

• $9,400,000 × 45% = $4,230,000

Lender Position (24%)

• $9,400,000 × 24% = $2,256,000

Step 8: Seller Legacy Payoff (Always Shown)

Seller Legacy Payoff = Offer − Lender

$7,990,000 − $2,256,000 = $5,734,000

✔ Paid via escrow
✔ Title-directed
✔ No seller carry
✔ No SBA guarantees
✔ No recycled equity

Step 9: Why Lenders Prefer This Version

True LTV

$2,256,000 ÷ $9,400,000 = 24% LTV

That is elite collateral protection.

Step 10: DSCR (Day-1, Not “After We Build”)

Using same NOI:

• $658,000 / year

Debt service on $2,256,000 at 6%:

• ≈ $135,360 / year

DSCR

$658,000 ÷ $135,360 = 4.86 DSCR

That is institutional-grade safety.

Step 11: Yield (Real, Immediate, Controlled)

There is:

• No personal guarantee

• No SBA exposure

• No construction dependency for solvency

Yield is created through:

• Built-in cash back

• Buyer salary

• Reserves

• Trust allocation

Cash flow exists because the structure works — not because the expansion succeeds.

Final Verdict

Traditional RV Storage Expansion

❌ Not for us:

• Too many debt layers

• Construction-dependent value

• Personal guarantees

• Recycled risk

85 / 45 / 24 Model

✅ Yes:

• Asset carries risk

• Lender is insulated

• Seller is paid clean

• Buyer stays liquid

• Escrow controls everything

This is why banks, private lenders, and family offices favor our model — even in storage and specialty assets.

Contact

Structure over sacrifice.
Stewardship over struggle.
Every deal builds legacy.