Purchasing a Caravan Park

Hi,

I’m interested to know how many times earnings would be a fair price to pay for a caravan park lease?

appreciate your help.

Cheers

 

Probably a question that you should be asking your accountant as there'd be a range of multipliers eg % of long-term vs casual leases, vacancy rate, length of headlease remaining, improvements on site etc.

 

It isn't all about current earnings.
It could run at a substantial loss for a few years until rezoned for resi development, in which case you could make a massive profit

 

IF you are purchasing a lease then the land will not be yours to benefit from in the longer term. You are purely buying the potential profits from operating the caravan park for the duration of the lease.

 

Agree! What would you consider a fair price, considering you are only leasing the land? How much income do you think is a fair trade off? Is there a way you can increase the earnings? For example, I've heard of a place that had mainly long term, lower income residents, and the park leased them things like TV's etc, for extra income. BTW, not a recommodation. Do your due dilegence.

 

Appreciate all the points made and agree.

I was just wondering if there was a rough guide for this industry.

Say the business runs 100% on annuals. Which means 100% occupancy locked in every year.

And say the business income for the last 5 years has been $500,000 per year (EBITDA)

I know there are alot of variables but would a times earnings of 5 to 10 be in the ball park for this situation?

Thanks

 

Every business is different and this question is best asked of a specialist in the sale of caravan parks.
In my main business Strata management, the sale value is 3.5 times the net annual commission. As the net commission is approximately 50% of the annual turnover and a good operator can achieve over 35-70% of net profit on turnover depending on the size of the company, you can earn the cost back very quickly.

 

i wouldnt be asking my accountant in valuing a business as the final decision, accountants are very good at working out numbers, but valuing a business is a little different

i would suggest asking people who buy and sell or a an accountant that specialises in valuing businesses

 

Anything comparable that has sold recently in the area? Comfortable that the financials (and occupancy %) stack up and will be representative moving forward?