Hi Adam. I have experience in both real estate (running PE funds for the past 10 years) and have been an angel investor in multiple tech companies here in California. The EBITDA multiples you are talking about are more applicable to service related businesses without many "real" assets. Real Estate generally trades at a CAP Rate (NOI/PurchasePrice). We own a couple of MHPs in Phenix City, AL and have looked at Alabama generally. I would expect a small park like you are describing to trade for something in the 8-10% CAP rate range. Interestingly, a 10 CAP on what you describe is almost identical value: about $340k ($103k business valuation / 3 = $34k in NOI). However, I would need to look at the expenses to see if that valuation is correct. I typically evaluate the expense ratios under current operation to what we achieve (30-40% expense ratio range). You are correct, you don't want to pay for upside (that's why you are buying it). Also, the valuation can shift based on other factors such as: 1) private vs public utilities 2) location [all sorts of factors here such as median home prices, population, job market, potential for redevelopment, etc] 3) size [larger parks provide better management scale and thus usually trade for a lower CAP]. It would be interesting if you can share the financial information you have received and we can start a dialogue on the forum for analyzing it. Good luck!
Here is how I evaluate the MHPs.
Total Gross Rent= Avg Lot rent * No. of lots
Net Rent = (.6 to .7) * Total Gross Rent ( depends on vaious factors like utilities, management etc)
Use a CAP rate of 6 to 15 (depending on various factors)
Add the value of trailers owned by the park
33 pads park, Avg lot rent = $300 per lot , total 30 occupied lots , 10 park owned homes
Gross rent = 300*30*12= $108,000.00
Net Rent = .65*Gross Rent= $70200
Value at 10 cap = $702000
3 trailers= $30k ( assuming 10k shell value for each trailer)
Total Value = $732,000
@Adam Philpot , interesting that you estimate the price by a multiplier. I've never seen anyone do this for a MHP. Not that it's wrong, I just haven't experienced this. I own 7 parks and analyze deals for myself and others all the time. My first number I look at when analyzing a deal is the price per lot. Your evaluation comes out to $10k a lot, which is typically an incredible deal if over 50% of the lots are filled with paying tenants. If you keep losing deals, it's probably because you are trying to pay too little.
I would echo @Sam Hales on the CAP rate, and I usually see them offered at a 8% to 10% CAP. That being said, I have paid around a 4 to 5% CAP knowing that I can raise it to a 20 to 30% CAP by raising rents, cutting expenses, and filling empty lots.