Quote:
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Originally Posted by partsjay
$ 3.9 Million......that's it? 
Don't know how any bait shop could pay for that rent. |
I don't see how anyone could get a reasonable return on investment with that kind of purchase price.
The largest tackle shop in my area (CT) grosses about $2 million annually (that's SALES dollars). Margins are probably thin - let's be generous and assume 25% (adjusting for product mix). After paying for merchandise, you've got $500,000 to pay for overhead like employee salaries, utilities, property taxes, repairs and maintenance, and mortgage.
Let's dissect the mortgage payment here for a second.
For a $3.9 million mortgage, you'd probably have to put 20% down ($780,000).
Let's assume we're financing
$3,120,000
over
30 years (360 months)
at
7% annual interest
Your monthly mortgage payment would be $20,637.06, which would come out to $247,644.66 per year. That's a whopper of a payment.
Getting back to your down and dirty cash flow ... gross profit of $500,000 less $248,000 annual mortgage payments = $250,000 to pay the rest of the bills. I'd hate to see the property tax bill, if assessed values are anywhere near the pro-rated purchase price, it's gonna be steep.
I dunno guys, doesn't sound like a lot of room for error here, especially when you consider how sensitive this business is to the weather, is primarily tourist-driven, and the fact that the season isn't that long.
-WW