Not what you might think;
it's another business. Not everyone's cup of tea, but I love running businesses.
Yes, I know I should be looking to buy more property, given the climate we are now in/entering, but I want the cashflow NOW. The property can wait, and this business will fund it mostly.
We've had an offer accepted to buy a local car service, tyre and brake business. I was trawling the businesses for sale section of r/e.com and saw it there; the place we take our cars to get serviced! I know the owner very well. I had the car booked in for a service already, so when I dropped it off a few days later I asked the question, and here we are.
It's been about two and a half months to get to this stage, and a fair bit of D.D and meetings with the owner. The accountant has given it his blessing, so we're off.
One owner for over 25 years who is retiring, great location, unique in the area and VERY profitable. Long-term staff and very solid figures. Customers are all cash on delivery - in other words; no accounts - only cash or credit cards. Perfect. No "tyre-kicking" customers (pardon the pun) who waste your time with rain-checks and haggling over a few dollars and want to crunch you on prices for every single thing (like golfers). I'm done with that "nickle and dime" cr@p.
Asking was $380k plus stock and equipment at valuation - another $80k approx. This works out to around 2 times the nett profit after tax as the asking price. Reasonable. We paid the asking price, but negotiated a rent reduction for the first 6 months and a few other bits of equipment thrown in - a ute as well.
5 x 5 x 5 rent lease, CPI adjustments, and first option to buy the premises. Also includes a vacant lot next door to park the cars; the existing owner of the business will be the Landlord!
All up we will pay about $460k plus costs.
Nett profit before tax is an unbelievable $300k approx average for the last 3 years, based on official tax returns.
It is actually increasing in turnover each year, and we are long-term customers for our cars' servicing, so we know first hand how busy it is. Can't get the cars in to get any work done for 2 weeks as a rule.
There's enough "padding" in it to cover the rent, the "cost of money" and a manager, and pay me a very respectable wage. Return on investment after tax is around 40% per year, and all profits will be re-invested back into the business.
What do I know about fixing cars? Bugger-all, but I'll no doubt learn a fair bit, and it'll be fun. But I'll be the administrator, book-keeper and oversee the operation, and the manager will mostly run the workshop, do repairs and supervise the staff.
The trick will be to find the right manager. Advertising for that will start after the contract becomes unconditional.
Talk about excitement! A bit of fear as well; it's an unknown, but I've done enough unknowns by now to be able to pull the trigger.
This, combined with the restaurant/reception centre business we bought earlier this year which is going well despite the D&G (people still get married) will put me out of the rat race for good - a few hours here and there to make sure things are running smoothly, but otherwise the managers and the staff cover it.
So there you go; don't just be locked into property guys. Use your property to further your investments into other investment "vehicles". Sorry.
it's another business. Not everyone's cup of tea, but I love running businesses.
Yes, I know I should be looking to buy more property, given the climate we are now in/entering, but I want the cashflow NOW. The property can wait, and this business will fund it mostly.
We've had an offer accepted to buy a local car service, tyre and brake business. I was trawling the businesses for sale section of r/e.com and saw it there; the place we take our cars to get serviced! I know the owner very well. I had the car booked in for a service already, so when I dropped it off a few days later I asked the question, and here we are.
It's been about two and a half months to get to this stage, and a fair bit of D.D and meetings with the owner. The accountant has given it his blessing, so we're off.
One owner for over 25 years who is retiring, great location, unique in the area and VERY profitable. Long-term staff and very solid figures. Customers are all cash on delivery - in other words; no accounts - only cash or credit cards. Perfect. No "tyre-kicking" customers (pardon the pun) who waste your time with rain-checks and haggling over a few dollars and want to crunch you on prices for every single thing (like golfers). I'm done with that "nickle and dime" cr@p.
Asking was $380k plus stock and equipment at valuation - another $80k approx. This works out to around 2 times the nett profit after tax as the asking price. Reasonable. We paid the asking price, but negotiated a rent reduction for the first 6 months and a few other bits of equipment thrown in - a ute as well.
5 x 5 x 5 rent lease, CPI adjustments, and first option to buy the premises. Also includes a vacant lot next door to park the cars; the existing owner of the business will be the Landlord!
All up we will pay about $460k plus costs.
Nett profit before tax is an unbelievable $300k approx average for the last 3 years, based on official tax returns.
It is actually increasing in turnover each year, and we are long-term customers for our cars' servicing, so we know first hand how busy it is. Can't get the cars in to get any work done for 2 weeks as a rule.
There's enough "padding" in it to cover the rent, the "cost of money" and a manager, and pay me a very respectable wage. Return on investment after tax is around 40% per year, and all profits will be re-invested back into the business.
What do I know about fixing cars? Bugger-all, but I'll no doubt learn a fair bit, and it'll be fun. But I'll be the administrator, book-keeper and oversee the operation, and the manager will mostly run the workshop, do repairs and supervise the staff.
The trick will be to find the right manager. Advertising for that will start after the contract becomes unconditional.
Talk about excitement! A bit of fear as well; it's an unknown, but I've done enough unknowns by now to be able to pull the trigger.
This, combined with the restaurant/reception centre business we bought earlier this year which is going well despite the D&G (people still get married) will put me out of the rat race for good - a few hours here and there to make sure things are running smoothly, but otherwise the managers and the staff cover it.
So there you go; don't just be locked into property guys. Use your property to further your investments into other investment "vehicles". Sorry.
