I like coming up with real estate business models, some of which are pure fantasy.
I spent a few weeks living in the mountains of Crete while I wrote the final book in my Quantum Entity trilogy (The Successors) and I dreamed of owning a place there.
What fabulous weather!
What great scenery!
What an incredible history!
Enough already. So if I owned a place there, how would I differentiate it, animate it, make a living at it?
I solved that problem–I lived in Australia for seven years and I remembered that camel tours in Queensland and the Northern Territory are a huge deal there.
So I’d import a herd of camels (aka “ships of the desert”) and then invite ecotourists to visit and stay at my place for a week or two or four, with one, two or three days of camel safari adventure thrown in.
That ought to make me stand out from the crowd.
Camels are stronger and smarter than horses; they are less vulnerable to disease and injury. They are smoother to ride upon too.
Their only drawback? They smell like… umm, crap.
But no one will know that til they arrive. HeHeHe.
Here’s the thing about modern era business models. It almost doesn’t matter if the folks who book your place NEVER ride on a camel. I’d be just as happy if they arrive solely to watch other idiots ride a camel.
That’s sort of what Joe Kowalski did at Wilderness Tours–he added a bungee jump to his otherwise vastly successful outfitting (whitewater rafting and kayaking)
not because it really made any financial sense but because it was a great Friday and Saturday night spectacle for the 3,500 visitors who invade Beachburg (a small Ontario village of just 900 souls) every summertime weekend. Hey, watching a frightened human being launch themselves off a high platform upside down is really funny as long as it isn’t you.
So, I have another biz model in mind based on what Dr Ames (not his real name) did years ago. He’s a vet–both a veteran (of World War II) and a veterinarian. He started buying land, cheap land, decades ago as collateral for a loan to start his own pharma business (for pets).
He’d go to the “real estate store” (his phrase for a realty office) and ask a realtor to show him his worst, crappiest listings–the ones they could never sell. And he’d buy them. Sometimes for $35 an acre.
This way he amassed a real estate land portfolio of around 3,000 acres. Then he went to the money store (also known as a bank) and asked his manager for a loan showing him deeds for all his holdings.
The manager was suitably impressed that a young(ish) man had such a grand portfolio, and he was even more impressed when Dr Ames mentioned his cattle and sheep herds too.
When the manager asked to see some of his holdings, Dr Ames only hesitated for a minute before agreeing to show him around.
Of course, he then needed to procure some animals, which he did by borrowing them from a few of his clients.
Finally, Dr Ames got his loan and started his business, which evolved into a highly successful pharma distribution enterprise for animal meds.
Years later, when he retired, he sold that business for millions.
And then, as an afterthought, he contacted me to get rid of his land portfolio. Guess what?
In the three decades since he’d first bought that “crap” land, swamps had mutated into “wetlands” and people actually wanted to live there. We sold those lands for millions more.
So… I thought, hmm, there’s a business model there. Even now.
What if you bought the cheapest lots within 1 hour of where you live and then added some or all of the following:
-a tiny house
-a cabin in the woods
-a few glamping sites
-some mountain bikes
-dug a pond (I’ve dug dozens)
-a septic field
-a games area
-a council ring
-a hot tub
-an outdoor kitchen
-an ice fishing hut
or two (after seeding all his ponds with large mouth bass)
Look at this video. This 200-square foot house in the Pacific Northwest was built for less than $10,000. I am not too sure how reliable that number is but the house sure
So, what would this (fantasy) real estate investment business model look like from a financial point of view?
I took a stab at that. Here’s what I got for an Ontario version of it where winters are darned tough. The numbers would probably look better in the Carolinas but whatever… here’s the cost structure I came up with:
Here’re the revenue streams and the project’s cap rate:
Now if you could really get a cap rate north of 31%, you’d be laughing all the way to… Crete.
Bruce M Firestone, B Eng (civil), M Eng-Sci, PhD, Ottawa Senators founder, Real Estate Investment and Business coach, ROYAL LePAGE Performance Realty broker, 1-613-762-8884 firstname.lastname@example.org twitter.com/ProfBruce profbruce.tumblr.com/archive brucemfirestone.com
MAKING IMPOSSIBLE POSSIBLE
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