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How to make a lot of money really fast in a niche real estate asset class:
A thread on timing, real estate fundamentals, operations and sweet sweet cash.
And a little bit of
Let’s go
A thread on timing, real estate fundamentals, operations and sweet sweet cash.
And a little bit of
Let’s go
New owners purchased a little old country club in Athens GA in February of 2020.
320 members were paying $310 a month. It was a break even proposition after food and beverage. $1,75MM a year in revenue. Same in expenses.
15 full time employees. Equipment. Etc.
320 members were paying $310 a month. It was a break even proposition after food and beverage. $1,75MM a year in revenue. Same in expenses.
15 full time employees. Equipment. Etc.
I’m going to make a few assumptions on price using some real estate metrics so you all can get a sense for the kind of home run deal this really was.
Let’s say it was purchased with some terrible trends. It was mismanaged. Golf has been shrinking in popularity since the tiger era in the early 2000s.
Let’s assume for $5MM. Included the real estate like the clubhouse. Golf shop. Etc.
Let’s assume for $5MM. Included the real estate like the clubhouse. Golf shop. Etc.
The new owners came in and ran digital marketing programs and then covid hit.
And business started to boom.
I spoke to the GM today and we now have 950 members 11 months later.
Paying $310 each per month. Plus food and beverage.
And business started to boom.
I spoke to the GM today and we now have 950 members 11 months later.
Paying $310 each per month. Plus food and beverage.
So instead of $1.7MM in revenue we now have $4MM.
And only 20% more staff and equipment to keep up with the increase in traffic. So a hair over $2MM in expenses.
So what does that mean for the biz?
And only 20% more staff and equipment to keep up with the increase in traffic. So a hair over $2MM in expenses.
So what does that mean for the biz?
So now we have a biz with positive trends that clears $2MM a year and is valued at an 8 cap.
Or an 8% return on overall cost.
For a value of $25MM.
And they only spent $5.
Or an 8% return on overall cost.
For a value of $25MM.
And they only spent $5.
Huge return. Insanely fast.
Based on good operations and COVID adding 600+ new members and turning a break even business into a cash cow for the owners. L
Based on good operations and COVID adding 600+ new members and turning a break even business into a cash cow for the owners. L
And if you want more on how leverage and values work to get a feel for the magnitude check this thread out. https://twitter.com/sweatystartup/status/1317814151536955393
