Mike Andes breaks down a restaurant deal: $2.7M annual revenue, but the seller wants $700k for the business plus $2.7M for the real estate. Monthly rent of $10-15k could wipe out profits if you don't buy the property outright.
Over $2.7 million
$700,000
$2.7 million
$10,000–$15,000 per month
This restaurant does over $2.7 million in annual revenue. But when it comes to acquiring this business and buying it out, the first thing I'd be looking at is what is the cost of rent going to be if we don't buy the real estate? Because they're asking only $700,000 for the business. But to buy the real estate is another 2.7 million. So if I don't buy the real estate, what's my monthly rent going to be? If it's 10 or $15,000 a month just for the rent, it could very well wipe out all the profits for the business.
