Life Choices Advice Land Purchase

[cardigancorgi]

I’m a life long horse person, I have both boarded my horses and kept them at home. I have the chance to buy 25 raw acres of land 2 miles from the Carolina Horse Park. I have a good friend who is very well known in the Southern Pines/Raeford NC area. S
ohe has an excellent reputation in the horse community as an instructor, trainer, show superintendent, etc.

She would provide sweat equity and her name to the barn. We would offer boarding, horse shows, over flow boarding for competitors at the horse park, hay for sale etc.

Should I do it? If I buy the land and develop it I would use money my mom left me (she passed almost 1 year ago). But once that money is gone it’s gone. I do not have a ‘job’ I owned a business which I sold and I have been looking for another business to buy but all of that has been put on hold due to Coronavirus.

I know boarding doesn’t make money, but it should pay for the upkeep of the farm, utilities, etc. I was hoping to make money off the ‘side hustles’ but is it really doable?

I need advice. TIA!

[clanter]

As you have noted There few people who make money providing the services you have outlined …Asking your question on a horse board is going to give you answers that may not be to your best interest.

You need a real business plan, not a dream… Really.

I suggest that you set down with an attorney and CPA who know and understand Farm/Ranch Law

As for the Carolina Horse Park you need to see what they require to be a vendor…http://www.carolinahorsepark.com/support/vendors

Contract agreements between you and this well respected trainer need to in writing, not verbal

I have know people who were once in the same place as you, had a sizable inheritance, spent that money on their dream of a horse training facility only to find that the dream turned into a nightmare then are penniless.

[four2farm]

IMHO, real estate and construction are my investment of choice. My thought would be to get the basics. A nice barn with an indoor, a good outdoor and lots of nice turnouts. If I were blessed enough to be in your situation I would start small maybe 12- 20 stalls, same number paddocks/pastures. Constructed to be expanded easily. Go middle of the road, safe, ultra functional. That leaves you tons of options, continue with current plan and grow organically or easy to lease or sell at a profit. By adding run ins you can go smaller on the stall count and still keep board income high.

Your investment needs to make money, so trainer needs to lease from you. Prime example, my business partner and I own a business. Business partner also owns our building under his property management company. Our business pays rent at current commercial rental rates to his property company. In this way he makes money off his investment. If our business fails or is sued, the property is not at risk as it is owned under the umbrella of another LLC. Now during Covid, when business was basically at a stand still our landlord offered us a rental offset until 3rd and 4th quarter of 2021. We have a nice Landlord.

So no matter the success of the business between you and your potential partner. You are receiving the facility lease income. If your business does not work out, you can explore other options as the property owner. Now as for making other income, your participation time should be paid separately on a base rate with profit sharing where applicable quarterly, biannually or yearly.

This is where the question lies…are you a person who can stick to the numbers, watch the bottom line and ruthlessly cut off employees, contractors, customers and possibly friends who are not profitable? Can you deal with someone who you despise because they are profitable Can? Can you build a facility that is streamlined toward customer desire and profit and not personal taste?

In every business there has to be a bad guy. Business partner is the money man, his brain is a calculator. I am minute man. My brain is a clock. We are both the bad guy. We have made hard decisions, we have fired people, we have told customers to take a hike, we have told suppliers off. We have dealt with people we both hate because they pay great. You said you owned a business, why did you sell?

I ask these questions because horse people are a funny lot. Most people inherently believe that horse barns are fun warm places. No, this a business, can it be that to you? If you have any doubt you would not be able to kick trainer to the curb after your first unprofitable year, invest your money elsewhere…

[2DogsFarm]

I am going to say listen to @clanter & @four2farm@gmail.com
Speaking as someone who has blown through not 1, but 3 separate windfalls (sale of house just before RE bubble burst & 2 inheritances - 1 quite hefty), while I don’t regret making the choices I did, I find myself now wishing I had set a chunk aside for “just in case”.

If you can get a legally binding contract that suits both you & your potential business partner AND does not bankrupt you, then IIWM, I’d probably take the gamble.
If you are the only financially contributing partner, tread carefully.
If trainer/friend has nothing invested much easier for her to walk away “Sorry, Not Sorry”, leaving you holding the bag & the debts that go with it.

[Redlei44]

Based on your uncertainty in income alone, no, don’t do it. Or only spend as much of the inheritance as you can comfortably do without (and don’t put yourself on the hook for loan payments instead, either).

I second the suggestion for a business plan. Is there really a market for all of the services you’re thinking of, and are you sure how much revenue you’ll get for them? As a side note, I don’t know a ton about it, but 25 acres doesn’t sound like anywhere near enough for a commercial hay operation. Also, sadly but safely, you need to assume that the working relationship with your friend will end at some point (amicably or not, and I’ve seen “not” way more often in the business). Work with lawyers to get everything in written agreements for everyone’s sake.

[Equibrit]

@cardigancorgi

I’m a life long horse person, I have both boarded my horses and kept them at home. I have the chance to buy 25 raw acres of land 2 miles from the Carolina Horse Park. I have a good friend who is very well known in the Southern Pines/Raeford NC area. S
ohe has an excellent reputation in the horse community as an instructor, trainer, show superintendent, etc.

She would provide sweat equity and her name to the barn. We would offer boarding, horse shows, over flow boarding for competitors at the horse park, hay for sale etc.

Should I do it? If I buy the land and develop it I would use money my mom left me (she passed almost 1 year ago). But once that money is gone it’s gone. I do not have a ‘job’ I owned a business which I sold and I have been looking for another business to buy but all of that has been put on hold due to Coronavirus.

I know boarding doesn’t make money, but it should pay for the upkeep of the farm, utilities, etc. I was hoping to make money off the ‘side hustles’ but is it really doable?

I need advice. TIA!

That sort of arrangement has a way of going down the toilet in a spectacular way. Be sensible - RUN AWAY.

[MLOaks]

There are so many what ifs. I would just get a nice place for yourself and a horse or two. Save that money for the business you want to invest in that will give you good returns. I don’t know anyone who makes money with horses, unless they started with even more money and can afford to keep losing.

[eightpondfarm]

if i were risking my entire inheritance, i would not throw the bank on a partner…ESPECIALLY if that partner has no skin in the game. She’d have you over a barrel. You and she could suffer a falling-out and you’d be left holding the bag…sans ‘pro’ with a name.

[ayrabz]

1st: is the acreage something you would buy anyway just for your own property? (as in, without a ‘business’ on it) if so, I’d start there. If the answer is no, you’d buy elsewhere, smaller, etc. then I would not. and I second clanter as a perfect bounce off person for ya.

[happilyretired]

So in the fall of 2016 I bought 15 acres of land in Central Florida that had been used as an equestrian facility, but was very run down. Over the course of just over a year I partnered with my trainer and his wife to develop the property into a first class dressage training facility. I put up the capital – they contributed their knowledge and years of experience – and they committed to leasing the facility and running it once it was complete. We had known and worked together for about 5 years when we embarked on this project. We were very lucky with our general contractor who had lots of experience with large equestrian facility projects in our area. We had to do a lot of site preparation – taking out dead and sick trees, taking down an old barn, taking out old fencing. We constructed a brand new barn with all the “amenities” – grooming and wash stalls, vet/farrier stalls, two tack rooms, two air conditioned feed rooms, a lounge, a covered arena, a utility shed area, all new pasture and perimeter fencing. It took us just over a year to complete and we’ve been in operation for 2+ years. The lease rate is designed to cover my out of pocket ownership costs and build up a reserve for repairs – not to provide a return on my capital. It’s working well for us but I have some words of advice. Expect to spend more than you think you will!!! This is true I think of all major construction projects. For me – the site work was the real surprise in terms of cost. And if the land you are considering is “raw land” be sure you have a good handle on the extent of site work that will be required. Second – be SURE you and your trainer partners really know and trust each other. I was comfortable because we had all known each other and worked together for a long time before we set out on this together. And, as others have said, be sure you have a contract that clearly outlines your agreement and respective responsibilities.
It can work … but it’s a major undertaking and will undoubtedly cost more than you originally think it will. So be sure you can afford it!!! I’d be happy to answer any specific questions you might have if you want to PM me.

[Displaced_Yankee]

So I am relatively local to the Carolina Horse Park (an hour drive for me, but lots of Southern Pines friends). So Pines is VERY competitive in the horse world (eventers, dressage, show jumping, hunters, driving). Raeford is not as convenient to Southern Pines proper as many people believe.

The CHP has developed a fantastic eventing series. I think the money to be had is in offering overnight stabling for their events. Their events sell out of stabling within 24 hours I have heard.

Just my local thoughts…

[anon81364900]

Write a complete, professional business plan, something you can present to a financial advisor for their review. Basically, pretend that you are going to need an investor to loan you the money, rather than using your inheritance. If, after reviewing your plan, someone would loan you the money to start this business, then you have an excellent vote of confidence that it’s a sound investment for YOUR money.

Have your trainer do some real work on this business plan-- for instance, assign to her the section on researching competition. In the local market, what is the demand for this service? How many competitors would you have, what would differentiate your place from theirs?

If you find that this trainer is not willing to put in a serious effort to the business plan, then this is not someone you want your business to depend upon.

If you find that you’re not willing to build this business plan, then you are not ready to run this business.

Here’s a good article on horse-specific biz plans and thefederal Small Business Administration has a great website with tools to help you

[Janet]

@four2farm

I would start small maybe 12- 20 stalls,

I don’t have personal experience, but my understanding is that is the WORST size.

I remember reading,a long time ago, but it stuck in my head, that the barns that make a profit (in general) are either
-Under 10 stalls (don’t need many employees)
or
-Over 20 stall.(economies of scale)

“12 - 20” puts you right in the sour spot.

[four2farm]

I have heard and read the same thing. My degree is in Stable and Farm Management, we were taught the opposite. Economy of scale would make it make sense on paper, but with the manpower required per horse, the availability of said man power. When I was in the Northern States, 30 stalls was the sweet spot, expectations of turnout where quite different, so 40 horses on 10 acres were consistently done and profitable. In the Southern States, turnout expectations are VERY different. 25 acres around here is very small, 5 acres removed for barns, arenas and other structures would give you +/- 20 acres. Southern Pines is eventing land and large turnouts are a boarder expectation. I am about 3 hours away and the barns here that successful, profitable and highly desirable are all in that size range of 12-20 stalls. They make it up with deluxe field board options. That was why I said START with 12-20 stalls and build with expansion in mind. If demand for short term event boarding were good, turnout expectations would differ as staffing needs would decrease. Short term boarding can be profitable in season but is not year long income.

The problem according to the trainer I ride with now is that labor is difficult to come by, working students always come with a horse. This barn has 18 stalls. Teaches 32 lessons a week, 6 school horses ( share 3 stalls) , 2 horses in pd training, 2 personal horses, 2 horses for sale, 1 working student horse, 8 boarders. There is also 4 field boarders. I am waiting for a winter field board spot. I joke about her expanding and her reply is that it is simply not profitable. She struggles trying to find labor to care for the 22 she has now. She makes do with herself working 6-12+ hour days, a working student, a paid employee who works 40 hours Fri-Mon and a paid stall cleaner/handy man. She is profitable but would not be as she would have to double in current stall count and also double her staff and struggles currently to maintain staff levels and care quality.

I am in the Tryon area, the barns here that I know are highly respected, have strong businesses, low turnover and most desirable are all in the 15-20 stall range. I know a couple larger, some with major name trainers do well, others never seem to run at capacity, there is so much competition in the big 3 (Southern Pines, Aiken, Tryon), they are always hiring and advertising. The mid size barns keep waiting lists. Only my humble opinion, just what I have observed and found when I ran my own barn on this area years ago.

Thanks!

[cardigancorgi]

Thank you for ALL the great input and advice! Keep it coming

Regarding the hay business, we were going to bring hay in from out of state to sell, not grow it ourselves.

For the CHP overflow stabling what do competitors want? Just a stall? Stall with attached run? Access to paddocks for individual turnout?

[SCI]

Does your trainer friend already have a barn she is working out of and managing? Is she good at horse management or is she just a successful trainer? Just because someone is a respected trainer, show organizer, etc. does not mean they will be good with the day-to-day management of people and horses.

[cardigancorgi]

Hello,

Yes she owned a boarding barn that she built from the ground up. It was very successful.

[SCI]

I would not do it unless the trainer was either renting dry stalls from you or you were getting the boarding income and she was only getting her training fees (and giving you a percentage of the income generated from your property). Even new, facilities are expensive to maintain - ring footing, pasture fertilizing, planting winter rye.
Don’t spend all your inheritance on this.

[WildLittleWren]

I am not located in the area you are at, however, I do live near Rocking Horse in Florida (a huge 3-day event farm). Most people only rent stalls. They have a few paddocks (at least, they did when I last went up there a few years ago), but most people just rent the stalls. The same for a barn I know near HITS, they rent stalls only. Most people don’t turn out. As to profitability and how to run the business, I have no knowledge of that. I do know that most of the people I know who own farms, run on a shoestring budget, and have one or two outside streams of income.