Originally Posted by capn_mark
I have looked in the past. It is no different than buying any business, it is all about CASH FLOW. Do the numbers, and if the cash flow is marginal if you factor in a salary for you running the place, you are just buying yourself a job. If the numbers look good with exaggerated maintenance expense, interest cost (6% not 3%), lower than expected occupancy, large contributions to a sinking fund to cover future dock replacement, as well as the inclusion of a manager salary and dock hand pay, then it's probably worth a further look. If you are paying cash, then I would seriously look at other passive options in equities for comparison in return. You can easily sustain 6% through dividends and very modest gains in a good stock portfolio. It's all about the numbers, gotta remove the emotional part of 'it would be cool to own a marina'. Good luck with your analysis!
If you have to finance one, I'd strongly recommend against. Way too many variables in ownership
for that. One storm can destroy you. Yes, you can insure but that doesn't mean you have a business left. You're subject to weather
, to environmental laws changing, to economy and boating
interest, to competition,
You are right about buying oneself a job. If that's one's dream job great. But it also is likely a 7 day a week, 16 hour days type job, during the season. And even during off season long weeks as then you can't afford a staff to do the work.
As you say, it's got to not only be positive cash flow wise but also allow enough to be set aside for capital replacements
. Docks deteriorate. Equipment
does as well, exposed to the elements as it is. Even dredging may be required. You need to earn at least 2.5 times the value of your labor after all expenses to justify self employment
in that way.
It needs to justify itself in the worst cases you can picture. Take the lowest occupancy you can picture, the least fuel
sales. Then add up all the expenses you'll incur. Now take that number, EBITDA before owner's salary. Does it leave enough to cover 2.5 times the value of your time, replacement of docks every five years or so (8-10 is likely but 5 is very possible), a 10% return on your investment (risky investments should get more than just 6%)? Then how do you feel about being a slave to the marina? Or can you afford others to run it, but true professional marina managers?
The gimmick in marinas for sale
being advertised is they always want to sell you on what it could be doing. Most say something like "Could get permits to add 40 more slips" or "Space to add a dry storage
unit" or "Fuel business could be increased 50%" or "Currently only 60% full, active owner should increase to 95%." If all those things were so easy, then why are the current
owners selling? That's really a key question. There was a rash of Florida
marinas for sale
a couple of years ago. It was because they didn't own the water
rights, but the state did, and there was talk of a huge increase in the rental rate.
Not all negative however. Many marinas are very poorly run. The owners are doing it more as a hobby than a business. So a businessman can improve things greatly. A small example. I saw one where all the monthly invoices were being hand prepared and mailed. Checks were being received as payment, no credit cards, and manually processed. They had a person full time just handling billing and collections. Nothing was being done regarding past due until months would go by. Marina operators in our area require cards or bank information on file and automatic monthly processing, everything is computerized, any payments that don't go through are immediately addressed. Many marinas do zero advertising and just a little advertising could fill them.
We've looked at a lot of marinas over the last couple of years and none of them was worth it as an investment. There is one that if we wanted a business to personally operate, might interest us. But we don't want to be stuck at the dock.