All Forum Posts by: Nate Crump

Thanks for the input guys. I know I keep hearing we are in a bubble, but I guess who really knows, right?

I'm wondering if some people out there have an opinion on if now is a good time to buy a personal residence, or if you feel prices could turn down soon?

Let me get the obvious answer out of the way... "Nobody really knows". Good, now that I've said that so that no one else needs to state the obvious, I'm just curious on your opinions. Thanks in advance to anyone who cares to share.

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.

Thanks guys. I wanted to ask, where does existing inventory come into play? Does it make sense to add half the at-cost value into the sales price? What about associated costs of acquiring product, such as import cost and customs fees? What if some products are better sellers you anticipate selling out of in 6 months, while a did might linger for 18 months or so?

Thanks guys, those responses were very helpful and give a good starting point. I definitely will talk to a CPA.

I know there are lots of things that go into the valuation, and those were the things I am looking for. I couldn't help but think back to something I remember my dad telling me when I was a teenager though, in reference to selling a car. "It's worth whatever price two people agree to, that makes them both happy". Any truth to that, in the end as well? To some degree to you sell at a price where both people are simply happy with the outcome, even if on paper in the end 10 different CPA's might look at it and see either that guy or this guy got the better deal?

Not RE related, but with so many smart people I wanted to try my luck. I hope this is the most reasonable forum for this.

I was hoping for just some general ideas on selling half of a business, from one 50/50 partner to the other. I'm looking at how to come up with a valuation for what we hope to be a very amicable parting between two very good friends.

I'll use some fake-ish numbers for my privacy, I'm sure the principles will hold true, and maybe you guys can help. I will get professional assistance, but want to take a look and see if this is even something I want to do.

Internet business with website selling a physical product with good margins. Not dropship; we order and store the product in bulk in a warehouse and ship via FedEx. Started in 2011.

2012: Profits were roughly $40k to split by two owners, after reinvesting to triple the amount of product we keep in stock

2013: Profits were roughly $120 to split, but again had to reinvest in order to double product on hand.

2014: Accrued 190k in debt early 2013, paid back in full this month, and no need to grow product in stock even more. Profits based on pretty darn conservative projections look to be $340k to split... with a deal in the works that's 95% done that will lower the cost of our best-selling product tremendously. If finished this month, which it should, would make the $340k more like $380k... more benefit of that deal will be shown in 2015, as the benefit this year won't kick in until August, but we do 50% of our sells in the Spring time.

There is about $150,000 in our cost of inventory in the warehouse, not sure how or if that comes into play when selling a business. No other business assets to speak of.

Is 2 times annual profits about right for this type of business, or something else?

Does the cost of getting this product imported to us come in to play?

Thanks for any help here. Again, I will be getting professional help, but just wanting to see if anyone has a ballpark idea on this.

@Jeff S. thank you very much, I'll check it out right away.

Hey there, I was wondering if there is such thing, on a website or if it could be done on a spreadsheet, as a mortgage calculator that will account for sporadic and differing extra payments.

I have one where you can "add $500 to your monthly payment" or "add $5,000 to your yearly payments", and see how soon you would pay it off... but is there any way to see try and calculate your early pay off if you add $500 here and $4,000 there, then $2,500 there, etc?

It's really just for fun, but I would appreciate any ideas! Thanks.

Bill,

Thanks for the information. To answer your questions, I mentioned the loan was going to be between 150k and 250k... and mostly is looking like it will settle right there in the middle at 200k.

The franchise is of the, um, convenience store variety :) - if that doesn't nearly give it away.

I suppose the lien holder would be in first position, as I wouldn't be borrowing from anywhere else.

I am going to sit down with my bank today, but was wondering, you don't suppose they care either way whether someone pays off the loan fast or takes the full 3 or 5 years, do you? I will have about half that amount coming to me in the summer months, so plan on not taking more than one year to pay it off, but not sure if that matters, or is even worth mentioning?

Not related to RE, but I know there are bright minds here, so I thought I'd ask.

I am looking for a business loan and was wondering if anyone can point me in a good direction toward a lender you might know of with a good reputation in that area?

It's somewhere between $150,000 and $250,000 I'll need, so not those little lenders I keep running into on Google.

It's not for some new, risky business I'm hoping is a homerun, but for a long time, well-established franchise that has already been doing great for a number of years.

The length of the loan doesn't matter too much to me, as I could throw large chunks toward this summer, and then probably be done with it by next summer, as my current business, which is massively passive, is very seasonal (Spring time).

I won't say I'm desperate, but also with the shorter nature of the loan, and proven sales, as well as the success of my other business, I would even be willing to go for higher than normal rates.

Anyway, thanks for any advice on lenders you might know of that deal in this area. My Google searches just haven't come up with what I'm looking for.