Question on Buying Business with Real Estate

[Nate Crump]

I've seen that when buying rentals you use a cap rate. Cap rates of 6-12% seem to float around.

Then, as far as buying a business, it is common to buy in multiples of earnings, ie. 2x-5x earnings, or more or less depending on the industry.

Now, I was once looking to buy a convenience store (franchise) and it seemed as if I'd be buying around 2.5 times earnings, so higher than a 6-12% cap rate, but obviously that makes sense because it is much more work than a semi-passive apartment complex with a manager, or something along those lines. No land was going to be purchased, just the business.

OK, but here is my real question: Is there a formula of sorts for when you are buying a business that also comes with the land? We can use the same example, maybe a convenience store/gas station with the land included in the purchase? Thanks for any replies.