I have been doing things like this for years and have been quite successful, albeit I have failed on more than a few occasions. I won't go into great details but my general stream of thought when looking at an investment is:
1. What are the assets worth now and with current zoning rules (consideration taken for possible future uses of property shall it be used in any other way than currently being used and if zoning can be changed).
2. Add cost of absolutely needed improvements to operate.
3. Add operational cash flow and consider how immediate you can see any returns (current, 6 months, 1 year, etc.)
4. Add all that up and choose a cap rate (reasonable rate of return on investment vs. the risk on the investment).
5. That cap rate determines the value of your investment on presumed positive cash flow expected.
With a track, I would expect a .15 cap rate. So, after asset calculations, fixed costs, variable costs, I would expect to earn 15% of my investment yearly. That is a very 30000 foot view of how I evaluate where to put my money.
They are asking 3.5M so after all is said and done and a ton of due diligence, I would expect a yearly cash flow of 15% of 3.5M minus value of assets. I would expect to make around 300K a year off of this unless land value is far more than I am assuming.
Now, that being said, if 3.5M was nothing to me, I would buy it and live there and setup a motocross track and turn it into my very own Disney Land for adrenaline junkies.
1. What are the assets worth now and with current zoning rules (consideration taken for possible future uses of property shall it be used in any other way than currently being used and if zoning can be changed).
2. Add cost of absolutely needed improvements to operate.
3. Add operational cash flow and consider how immediate you can see any returns (current, 6 months, 1 year, etc.)
4. Add all that up and choose a cap rate (reasonable rate of return on investment vs. the risk on the investment).
5. That cap rate determines the value of your investment on presumed positive cash flow expected.
With a track, I would expect a .15 cap rate. So, after asset calculations, fixed costs, variable costs, I would expect to earn 15% of my investment yearly. That is a very 30000 foot view of how I evaluate where to put my money.
They are asking 3.5M so after all is said and done and a ton of due diligence, I would expect a yearly cash flow of 15% of 3.5M minus value of assets. I would expect to make around 300K a year off of this unless land value is far more than I am assuming.
Now, that being said, if 3.5M was nothing to me, I would buy it and live there and setup a motocross track and turn it into my very own Disney Land for adrenaline junkies.