Junkyard property in metro area

[Keith Goodwine]

I got a unique lead today for a junkyard property in a metro area.  I am a wholesaler, and the seller responded to a postcard mailer I sent out.  The seller insists the value of the property is in the zoning, as the metro council does not approve new junkyard zoning.  This seems like a difficult property to value.  Any suggestions?

If you're interested in acquiring a junkyard property in Metro Nashville, TN, please let me know!

[Roger Poulin]

Think environmental!  If the ground is contaminated, you may face an expensive remediation project to clean it up before you do anything. Put an clause in the contract that lets you back out if there is an unsatisfactory environmental study, then hire a engineer to do a "Phase 1", that will tell you what you need to do more tests for. I can give you an engineers name if you message me.

Other than that you would value it like any business. Figure out what the net operating income is (total income - total expense except loan servicing), than figure out what cap rate you want and do the math.  If the yard nets $100K per year and you want a 10% Cap, you get a value of $1MM (100,000 / .10). I found an ad for a land lease under a metal scrap yard advertised for a 9.2% Cap which would put the value at $1.082MM (100,000 / .092).  I am not an expert at junk yards but that is my 2 cents worth.

A good  option would be to  try to partner with a person that wholesales commercial real estate.

Good luck