If you want a viable business it starts with not overpaying for it in the first place. After all, owning a lodge, camp or resort is a business decision that one makes to gain a profit.

Focus on the fact that you’re buying a business, a stream of income or potential income that you’re going to use to support your family – you don’t want to be trying to run a lodge and have to go get another job to pay the bills.

Lodges, camps & resorts are very asset heavy and as such owners ask exorbitant asking prices because when you add up all of the assets and look at the cost of construction in these remote areas it may make sense….but the income stream has to make it feasible to run a successful business.

Most owners “shoot for the stars” when trying to sell their business and are willing to wait years hoping to fluke into the right buyer. Everyone in the fishing & hunting lodge, camp and resort industry knows the story of the wealthy guest that just had to have a certain lodge and drastically over paid for it. It’s far from the norm but it does occur.

In most cases it’s the owner’s retirement fund so I understand why they go as big as possible. But basing the price you’re willing to pay on other active listings is a big mistake. Most of these types of properties sell for significantly below asking price. 25% less than listing price is common.

Fishing & hunting lodges, camps and resorts are extremely hard to value. You need to have a lot of data on them before a pattern emerges as far as sale prices.

The income capitalization approach is based on the principle that the value of a lodge, camp or resort is indicated by its net return, or what is known as the present worth of future benefits. The future benefits of income-producing properties are net income before debt service and depreciation.

As a very general rule I would apply the following to any lodge, camp or resort you’re considering buying:

Average of last 3 year’s Revenue

Minus:

– Average of last 3 years Cost of Goods Sold & Supplies

– Average of last 3 years Property Taxes, Licenses & Dues

– Average of last 3 years Professional Fees

– Average of last 3 years Repairs & Maintenance

– Average of last 3 years Utilities, Telephone & Internet

– Average of last 3 years Travel, Meals & Entertainment

– Average of last 3 years Vehicle & Guest Transportation

– Average of last 3 years Salaries, Wages & Benefits (consider adjusting this expense to 20% of revenue)

– Insurance expense

– Average of last 3 years Office expense

– Average of last 3 years Advertising & Promotion

– Average of last 3 years “Other” expenses (postage, freight, land leases, equipment rental)

= Net Income

Divide the net income by .10 if the property and business are of very good quality or .14 if the property and business need improvement. Capitalization rates for lodges, camps and resorts are generally ranging between 10% to 14% currently.

Example:

  $500,000 average annual revenue
– $350,000 expenses
  $150,000 net income divided by .12 (average quality) = $1,250,000 estimated market value

If your purchase price falls outside these parameters you had best have a strong reason for paying so much. Another potential consequence is if the price you pay is above this general guideline you will likely have difficulty obtaining conventional financing.

If a lodge, camp or resort does not have an operating business or very little operating business, I would not recommend paying over 50% of what it would cost to develop a similar property.