Income is the by far the biggest issue when buying any new business.
We did a lot of research trying to understand the relationship between - asking price and declared income. While many sellers will justify the asking price by giving you a list of all the things that they did to improve the property, the bottom line is - can this motel/B&B/ campground actually generate enough income to make it worthwhile for you.
This point cannot be stressed enough.
For all of you who are not coming from the financial world here it is in simple terms.
The Gross income (from rental, vending machines, gift shop etc') - Expenses = Net Income
This figure should be enough to support your mortgage and any other personal expenses.
If it does not...walk away. This property will not work for you.
Does it have a future scenario? well than you will have to decide if the future will put bread on your table.
We found few more ways to look at the numbers.
In general - asking price should not exceed 4 times the gross income.
Also- watch for those expenses. They should not exceed 50% of the gross income.
We did a lot of research trying to understand the relationship between - asking price and declared income. While many sellers will justify the asking price by giving you a list of all the things that they did to improve the property, the bottom line is - can this motel/B&B/ campground actually generate enough income to make it worthwhile for you.
This point cannot be stressed enough.
For all of you who are not coming from the financial world here it is in simple terms.
The Gross income (from rental, vending machines, gift shop etc') - Expenses = Net Income
This figure should be enough to support your mortgage and any other personal expenses.
If it does not...walk away. This property will not work for you.
Does it have a future scenario? well than you will have to decide if the future will put bread on your table.
We found few more ways to look at the numbers.
In general - asking price should not exceed 4 times the gross income.
Also- watch for those expenses. They should not exceed 50% of the gross income.
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