Buying a small business may seem an exciting thing to do, but it is fraught with danger. Here are my Ten Top Tips to bear in mind when acquiring a small business. It goes without saying that you should use a good lawyer, and have an accountant examine all the financial records before you enter into any contract.
1. Think very carefully before you proceed. For example, it may seem an exciting prospect to be running your own small hotel, but if the bookings were insufficient to employ suitable staff, you and your family will have to do all the work. Running guesthouses and small hotels are notorious for long hours. 6.30am until midnight is not unusual. Do you really want to do that? Are you fit enough? Do you have the hunger and desire? Think very clearly about it. The last thing you want is to fall out of love with your new baby within the first week of ownership.
2. Analyse clearly what you expect from your new business. Are you looking for shorter hours? Greater independence? Greater Income? Whatever it is, will the business you covet, provide these things? If not, perhaps you should be looking elsewhere. Owning your own business can be an exhilarating and rewarding experience, but the wrong business may provide many headaches, and these could lead to ill health.
3. When you find a business you like, you must conduct a thorough investigation into its financial affairs. Be most particular about all liabilities. How many of these could fall on the new owners? Check out the Tax and Vat situation too. Is the business vatable? Is the vat up to date? If not, could it be demanded from you? You cannot be too careful with regard to the financial state of any business. Keep digging, until you are fully satisfied. If the business gives off a bad smell, walk away, regardless of how far down the line you are.
4. Find out why the business is for sale. Retirement is a common reason, and that is fair enough, especially if the enterprise has been in the same hands for a long time. That shows it has generated money, and it should point to decent goodwill with a pool of satisfied customers. Avoid businesses that have only been in the current owner's hands for five minutes, unless they can show true and good reasons why they are selling. It could be that the business is much harder to run than it appears, it could be that it is not making any money, worse still, it could be making a stinking loss. Only consider buying a loss making business at a real knockdown price. If you do buy a loss making business, what exactly are you paying for? You might be better starting from scratch.
5. Look out for wafflers. People who talk the hind legs off a donkey, but don't really tell you anything, and don't make a lot of sense. The kind of people who slip red herrings into every conversation, trying to deflect you from your questioning. If you don't get any straight answers, ask yourself why? It could be time to walk away. I detest dealing with people who never answer straight questions, and you should too. It tells you something, and it isn't good.
6. Check out the business's problems. All businesses have problems and headaches. If the owners say they don't have any, they are lying. What are the suppliers like? What are the sales figures running like? What does the future hold? What is the credit worthiness of the business? Does it have a "good" name? What is the competition like? Is it threatened by modern technology? Is a new competitor likely to open across the road? This could be the true reason why the owners are selling. Keep digging for information, until you are 100% satisfied.
7. Does the business have any growth potential? If it doesn't, or worse still, if the business is shrinking, this could be the true reason it is up for sale. Who wants to buy a shrinking business? Not me thanks, and not you either, unless the price is dirt cheap, and there is an obvious turnaround plan. Try to envisage the enterprise in five years time, ten year's time. Is it a rosy picture, or does your crystal ball see lots of headaches and heartache? If you can't envisage the business being successful, walk away immediately.
8. Will the current owner provide you with any training and support? Or will they make a dash for the door the moment the ink is dry on the contract? Ideally, you want as much training and support as you can get. Try to have this training clearly written into the contract. And a telephone number too where you can obtain answers for immediate problems. If the owners are not prepared to offer any training or support, or a telephone number, ask yourself why. It could be there are serious underlying problems, they are not telling you about, it could be they are looking to run a mile, or ten thousand miles, leaving you holding the mucky stick. Try to imagine how you would solve ongoing problems if the previous owners simply disappeared without trace, because they might! Satisfy yourself that this is not the case.
9. Monitor the business for as long as you can before signing. Are the same customers coming back again and again? Will they stick with you afterwards? Would it appear those customers are generating the income the current owners say? Could it be they are over-egging the cake? People sometimes do. Not everyone is honest and straight. Don't be the fool easily parted from his or her money. Remember, it is always Caveat Emptor. Buyer beware. The onus is on you to satisfy yourself that the business is a sound proposition. There's no point in crying about it afterwards.
10. Always have an exit strategy in mind. It matters not whether you are thinking of selling in a year, or ten year's time. Always have one eye on your exit from that business. After all, you don't want to go to your grave still owning it, do you? More likely, your plan will be to build it up, expand it, improve it, and then sell it for a juicy profit, and move on to better things. Think how and when and to whom you will sell the new improved business. Ask yourself this; will it be easy, difficult or impossible to sell? If it is difficult or impossible, you could be hanging a millstone around your neck you might never be able to remove, and no one would want that. There are thousands of small business owners in precisely that situation. Make sure you don't join them. Always have a clear exit strategy in your mind. That's smart, think smart.
Buying an existing business in any field can often throw up a real bargain. Particularly from people heading for retirement, or perhaps a business that has been taken over as part of a larger deal, and the new owners simply don't want this smaller enterprise. Businesses in trouble can also be bought for real bargain prices, especially if you have the expertise and resources to put it back on an even keel, but make sure you know precisely how much trouble it is in. Buying an existing business can be like staggering through a minefield. You cannot carry out too much research beforehand.
And one last thing, offer less for it. Whatever figure you had in mind, offer less. You can always increase your offer later, you can't reduce it, so offer less, and if the owners are really keen to sell that particular business, they might surprise you, and accept your offer. All the very best with your new enterprise.
You might have heard many people talk about the real estate bubble, this is used to describe when the prices of property expand very quickly. This results in an over inflated market which causes buyers to purchase property at prices above the standard value of the market. They are also scared that the bubble will burst and the property prices will fall quickly. It can be risky for people to buy in this market.
It is very difficult to actually say when there is a real estate bubble, and when it's just a hot market. It is hard to quantify a real estate bubble, this means that we have to rely on the opinions of experts. Even the experts sometimes struggle to differentiate between bubbles, and a boom. Some mortgage companies study the market and compile reports to warn buyers of potential problems.
Homeowners that buy in a bubble are putting themselves at an increased level of risk due to the financial health of the market. This is particularly important if the homeowner has very low equity in their home. Equity is the amount of your home which you own, you will have to pay off the bank until you own the whole house. If the bubble bursts then you could find yourself paying owing more money that your house is currently worth. Of course this loss will only become a noticeable problem if you come to sell your home. Property values always fluctuate on a regular basis, sometimes with quite dramatic changes in value. You can avoid losses by staying in your home until the value rise again. If you have to move before the market has risen then you could be in a negative equity situation which could affect your ability to buy a new home.
If you have a greater value of equity in your home then this will not be a serious a problem. It also won't be a major problem if you are able to absorb the loss.
If you're a person of an average financial means and want to buy a property while there is a real estate bubble then you should be very cautious. Make sure you are fully aware of any potential losses, make sure you do some homework before you buy the property. Track the fluctuation in your local market for a few months, and then use this information to decide whether the benefits outweigh the negatives.
Just practicing common sense should be enough to protect you from a bursting bubble. It is a good idea to minimize the amount you owe on any properties so that you can manage the financial burden if you have to move when the market is in a decline.
Improve the value of your home rather than splashing out on impulse buys. You should be able to recover around 80% of the costs of remodeling a kitchen or bathroom when it's time to sell. The best way to minimize the risk is to buy a house which has very good resale potential.
Peter Mason's reports can be encountered on numerous online sites related to property costa blanca spain. Sharing his passion in writings on costa blanca properties the columnist expressed his expertise in the field.
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When buying a new home (not newbuild) for peace of mind remember to check out these points.
Has any building work been carried out on the property since the current owners moved in, and if so, who was it done by, and is it still under warranty? Warranties are usually transferable and you may as well grab them if you can.
What is the average cost of the utility bills, the gas, electricity, heating, water, and local government taxes? These can vary hugely from place to place, and could make a big difference to your total outgoings. You need to know.
Does the garden or yard get sunshine, and if so at what time of the day, or is the area prone to flooding at certain times of the year? Take particular interest in this point if the property is located close to a river or the coast. Placid rivers in the summer can be torrential beasts in winter. Lapping waves can soon become giants. Imagine that, as you stare out across the shimmering blue sea.
Are there any trees planted close to the property? These can undermine foundations and cause serious damage. Never buy a thatched cottage situated below large trees. The constant dripping will quickly damage and rot the roof, and if there are trees overhanging the house, check out if there are any restrictions in pruning or removing them. A leafless tree in winter can go unnoticed, but that same tree in full leaf in high summer may make the property oppressively dark inside.
What are the neighbours like? This is not always an easy question to answer, but we have all seen programmes about impossibly awful neighbours, and believe me, you wouldn't want to pitch up next to the neighbours from hell. A little research will give you some peace of mind, and remember this is definitely not a point your legal eagles will always answer satisfactorily. It is certainly something you are best doing yourself
Is vehicle parking in the area easily and freely available for you and your visitors? If it isn't, you might find your visitors visit less, though only would know if that was a good thing.
Has the property you are buying, or indeed any of the neighbouring houses ever been robbed. Is it located in an area known for house breaking and burglaries? If the owner seems strangely reluctant to answer that, you might wonder why, and you could ask your local police sergeant.
How quickly do the owners want you to move? This might suit you, but equally it might not. Check it out for peace of mind.
How long has the property been up for sale? If it has been on the market for many months, or even years, that's a sure sign that something may not be right. Perhaps the price is too dear, perhaps the house is falling down, perhaps the neighbours are appalling. Whatever the reason, you need to know. Delve deeper.
If you have children, are there good schools close by? You don't want a twenty mile drive across the busy city, or difficult terrain every morning and afternoon. Good local schools are one of the first things families look for when buying a home.
Some people leave everything to be checked by their legal team, and are then surprised when they run into problems. Fact is, legal teams don't check all these items, so it is up to you to do so. Remember, for greater peace of mind, you can't check too many points, too thoroughly, when buying a new home.
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Important Considerations Before Buying an Overseas Vacation Home By Donovan Carter
Buying a home overseas can mean owning a small piece of vacation paradise, but it can also equal a major headache. From differing ownership and property title laws to navigating an overseas market, foreign home ownership can be complicated. If you're thinking about purchasing an international vacation home, keep reading for some tips that will help save you money.
1. Always Hire a Local Lawyer
Don't settle for just an estate agent or a lawyer that may be recommended. Instead, hire your own local real estate lawyer - local, that is, to the property. An experienced legal mind can help you understand all the title and residency requirements you'll need to know as a foreign owner and investor.
2. Consult a Local Immigration Lawyer
Having a vacation home in the south of France, for example, won't help you if you're not allowed to live in it. Before you purchase foreign property, make sure you are aware of all the residency and immigration rules, particularly if you plan to spend the majority of the year in your overseas vacation property. Regardless of which home is your primary residence, there are tax implications to take into account.
3. Hire a Property Manager
If you're purchasing an overseas vacation home that will be dormant or empty for the majority of the year, give serious consideration to hiring a property manager to take care of the grounds, opening the house during the season, keeping an eye on the property and watching for potential problems.
Alternatively, if you plan to rent out your overseas home as a vacation spot, a local property manager can help you take care of passing on keys, maintaining the property, screening potential renters, keeping an eye out for vandalism, and overseeing payments. The property manager will take a percentage of your rental profits, but a reliable person will be well worth the expense when you are perhaps thousands of miles away.
4. Be Aware of Hidden Fees
From increased transfer taxes to outrageous capital gains taxes for foreigners, every country is different. Before you buy in a particular country or area of the world, make sure you understand all the potential costs, taxes, service fees and future taxes associated with that purchase.
From real estate agent commissions to lawyer fees to closing costs, these will all vary depending on local laws. Remember, every real estate purchase should be an investment, not a surprising liability. Do your investigative homework prior to purchasing so you know your realistic income and expenses ahead of time.
5. Ask Before You Build
Before you consider building a potential overseas vacation home, make sure you understand all the coding, permit and building laws in your particular area. Also, always try to respect the local residents, whether it's neighborhood aesthetics or the impact of a major build.
In short, buying an overseas vacation home is a great way to create your own getaway, but it can also be complicated. If you hire the right help locally and stay informed throughout your purchase process, you should find that your purchase is a real benefit.
For insightful information on new home locations, see homepropertytips.com, a popular site that assists in your search for the perfect home, including Costa Rican properties, Manchester New Hampshire homes for sale, and many more!
Buying Overseas Vacation Homes � The First Question You Should Ask Yourself By Sacha Tarkovsky
Before you buy any overseas vacation home you need to ask yourself one important question before you begin and fact is many people do not and end up dissapointed. So here it is..
Do you want to immerse yourself in the local culture or do you want to have the comforts of home?
Keep in mind when you go on holiday to a destination living in a hotel is totally different to living in the wider community.
Many people don�t consider this question when they buy an overseas vacation home and end up getting a different lifestyle to what they anticipated and end up disappointed.
The local Culture
There are many new areas where you can buy overseas investment vacation homes and their cheap.
They don�t have well established foreign communities and this means that many of the comforts buyers expect are not available.
In Latin America for example Belize, Nicaragua, Honduras and the Dominican Republic are emerging. In Europe, Romania has been touted as the destination of the future.
But try these destinations and you may have a culture shock.
Street children, crime, you can�t drink the water, roads and communications that are poor and there is little to do apart from admire the scenery.
Buying Established destinations
When buying an overseas vacation home part of the fun is having access to a different culture but most people want the comforts of home as well.
They want high quality entertainment, good facilities and shops their familiar with to name but a few.
Buying an overseas vacation home in one of these established destinations gives you the best of both worlds.
For North Americans the lifestyle they can associate with most is in Panama and Costa Rica with the latter being a huge favourite. In Europe established destinations include Spain and Cyprus.
You get what you pay for
When buying an overseas vacation home in these areas you get what you pay for ( although its still normally far cheaper than buying at home ) and although you pay a bit more the growth potential ( if you are looking for a return on your investment ) is normally much better in terms of risk � reward, than an un proven emerging destination
Your preference
Of course, there are many people who buy an overseas vacation home and enjoy immersing themselves in the local culture, but most people want both comforts of home and the local culture.
If you want both look for established destinations that have large and growing foreign communities that bring the comforts of home with them.
Don�t worry, these places tend to have great risk to reward in terms of capital growth for investment simply because they are in high demand.
Keep in mind the majority of new hot spots fail becuase they cannot attract significant numbers of foreign investors to make the ammenities attractive enough for significant numbers to follow and prices tend to dive.
A good time in a hotel is not the same!
As living in the country you have been to!
If you are buying an overseas vacation home keep this in mind and before you live their.
Try living outside of a hotel in the local area to get a feel for whether you will enjoy the lifestyle or not.
One of the most popular destinations for Americans and Europeans is Costa Rica an established destination with great comforts and lifestlye but also the opportunity to make significant capital gains as well. Take a look at the facts and you will see why it is so popular.
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