Deal Review: Vineyard + Wedding venue

[Rahil Jain]

Hello everyone,

I am a real estate investor who currently owns several short, mid, and long-term rentals along the west coast. I also have experience in the hospitality industry and am considering purchasing a wedding venue. Currently, I am in the process of a 1031 exchange and have $600k left in the exchange.

The property I am considering is a vineyard listed at $1.65M. It spans across 10 acres and boasts roughly 4 acres of mature vineyards, a single-family residence, parking lot, pool, wine tasting room and cellar, multiple smaller structures (barn, storage, garage), and beautiful landscaping. The property has been appraised at $1.30M.

The venue generates consistent revenue of $250k ARR from weddings and wine sales, but operating costs stand at approximately $150k, not including any debt service. The current owners are retiring, but willing to assist the new owner by offering guidance and support. I have met with them and they are interested in selling to a young family they can mentor.

The property has all necessary permits and licenses in place, and the owner confirms that it took them two years and $100k to obtain them. They are transferrable, and the county has confirmed this. The property has generated significant interest, with four showings within a week of listing. According to the listing agent, some prospective buyers may be unable to bridge the gap between the appraised cost and the list price, giving us an advantage.

The list price is based on real estate value plus 1x the forward revenue (booked) and permit costs, totaling $1.65M. I would appreciate your thoughts on this evaluation structure. Is this typical, and what would be an appropriate multiplier for forward revenue for commercial real estate of this kind? Is there anything else missing from the evaluation calculation?

Thank you for any insights you can provide!

Rahil