[QUOTE=AmarachAcres;8280914]
A farm is for sale near me.
500k
30 stalls, indoor arena, heated tack, hot water wash stalls, turn out, access to hundreds of acres of trail. 55 acres.
It also has two homes and a shop on the property.
It estimates the mortgage at $1,844/mo.
Seriously, I pay that for my place.
Shavings, let’s say at 5 a bag and two bags a week per stall, worst case all year round: 1500 a month.
A 60# bale feeds 3 horses per day. I can get those if I buy early at 4/5 a bale. So we will go with 5. So for 30 horses that is 10 bales a day, 300 a month: 1500
Monthly cost of the tractor/bush hog + fuel: 450
Spreader is about 3k for a good one, to spread that horse poo on your fields. That would be paid off quick but we will add it on that first year. So monthly you are talking 250.00
This one even has a second home, so you can rent that out in exchange for labor. Many many farms have that.
Most farms and this one have well water. Electricity is say 200.00 a month.
Then you have farm/liability insurance: This varies a ton. I’m going to go with 2k a year. 416.67 a month.
We are currently at: 5960.67
Now, these are average set costs per month. Not including repairs for stalls, fencing, etc… Let’s tack on 500 a month for that stuff.
Now we are at 6460.67
Leaving off feed. To me, feed is so personal per horse that I just will, for our hypothetical, leave that to the owners.
So what is 6460.67 divided by 30 horses? (we will pretend you don’t have your own horse stalled)
215.35.
So even if we had in another 2k of costs I’m not thinking of, PER MONTH: that is 66 extra per horse. So now 275.35. Toss on that profit margin and bump it up 100, or 150. (Again, your house and utilities are already being paid for, which are the reasons most people work in the first place)
$425.00
This number is how a lot of boarding owners I know go with the magical $500.00 and up. You should be allowed to make profit and have have money left over. So an extra 150 per horse on top of costs is 4500.00 extra per month.
Now, this farm price is NOT average but there were plenty of stables in the midwest for sale around that price when I lived there. I have friends who own boarding barns and do just fine financially while taking great care of their property.
That isn’t even counting the profit of lessons, trainers leasing, people paying to haul in, etc…
It also doesn’t include labor. So let’s do that. Even if you pay someone 2k a month that raises the board another 66. That is NO WHERE near 1k.
Tell me how you get to 1 K for the boarders with this farm or others that I KNOW exist in the same price point in the midwest. (non east coasters.)
http://www.zillow.com/homedetails/29303-NE-Timmen-Rd-Ridgefield-WA-98642/23323995_zpid/[/QUOTE]
Assuming the property is being bought and treated as a business and not a principle residence and running a “hobby” operation on the side.
IMO based on real life experience of running a farm as my sole business your “Pro-forma” is based on idealistic numbers. Regardless of location.
Your estimates for the necessary equipment and the cost of is way low. Sure a person can get by with a cheap basic tractor, and other basic stuff. Basic equipment will get a person by but will require a lot more manual labor. The cost of labor has to be factored in.
The number one thing I keep seeing when these discussions come up it the fact that people WAY under estimate the value of THEIR time. Way under value their “quality of life”. Have free time to smell the roses.
If the owner/operator want to have a bare minimum quality of life a 30 stalled horses will need a minimum of an additional 2 full time workers. Plus a part time person to cover for when one of those is a day off once a week.
2 full time employees @ $10 per hours that is the minimum pay if you want to keep them interested. Expect to have a high turnover at that pay level. Assuming they work 6 days, 48 hrs not counting employer taxes, $50,000.
Workman’s comp is expensive for a horse operation. Minimum of 10% of payroll. $5,000. Most insurance companies that offer Workman’s Comp have a minimum which can be a lot higher than $5,000
The average semi-skilled worker in the US makes $50,000. The owner operator has to factor in their pay also.
So right there is another $100,000 minimum. Divided by 30 horses is $277 per horse.
Your hypothetical number of $215 fixed cost for a farm of that size with 30 stalled horses excluding labor is regardless of location is not realistic. Add at least 50%
A somewhat realistic number for fixed cost $320.
Labor expense $277
So the brake even point is $597. Even if the owner/operator is will to work for free 7 days a week, the breakeven point drops to just under $500.
An owner operator should expect to pay themselves and have a “quality of life” also. And should expect to earn a return on investment called “profit”. If the fixed costs are $500 per month, $180,000 per year income on 30 horses. That’s without paying yourself a dime.
If the owner wants a 10% profit margin, $18,000. $50 per horse per month, or $1,66 per horse per day. Is it really worth all of the worry and aggravation at times to make $1.66 per horse? Think about that when you have to go down to the barn every night at 11 for 2 weeks to give meds. Or doing double time because an employee didn’t show up and or quite. Fat chance finding someone to fill that job in short order. And these numbers are based on the owner/operator not being paid a salary let alone a living wage.
$18,000 profit will barely cover the interest being paid to service the mortgage debt. Factor in the cost for a line of credit. Every business needs a line of credit. Especially a horse business.
A profit margin should be based on over all investment. In this case, $500,000, factor in the cost of a 30 year mortgage at 5% an additional $275,000. Loss of use on the $100,000 down payment. On average over a 10 year period $100,000 invested in the stock market will realize a return of 7%. So over 30 years that would be $210,000. Factor in inflation when the property is sold in 30 years, it will need to be worth over $1 million to basically “break even” all things being equal.
The above is assuming that the business will fill all 30 stalls in short order and they will ALWAYS be filled. Fat chance on both accounts. Sure there are other profit centers to be had by giving lessons and selling horses. I can’t speak for other parts of the country but prefer to pay proper money for lesson from someone with a “name”. It takes a number of lean years before getting that “name”.
Selling horses is a total PITA especially inexpensive ones. And you still have to have operating capital to purchase them. Invest time and money in getting them salable above what they cost.
If the sale of horses is being factored in as a profit center what exactly is the profit margin? If the operator is relatively unknown people aren’t exactly going to be throwing horses at them to sell. Most likely horses that others couldn’t sell for the asking price.
If the operator is going to buy green horses for resale and each horse cost say $4,000. They will need at least 5 horses, $20,000. Those 5 horses may need a couple of stalls reducing the boarding stalls. Sure they can live out 24/7 but they will look like they live out 24/7. IME buyers for $3,000 want it to look like a shiny new penny as much if not more than a person buying a $20,000 horse. Those 5 horses could take several months to more than a year to find new homes. Depending on re-sale price. So if the owner is doing all of the riding, training and carrying all of the expenses for say 6 months those $20,000 horses could easily have an additional $6-8,000 in expenses in a best case scenario. Each horse is now $6,000 and in all likelihood worth on average $8-10,000 with little to no “show experience”. Even at $10,000 each and all sell quickly that is only $20,000 in profit for a heck of a lot of work and a lot of risk. Re-selling horses is a numbers game. The more there are the better chance of hitting a homerun with one or two depending on the numbers. Good chance at least 25%+ will lose money.
I am friends with a lot of the “names” in the sport horse world. They will be the first to tell you selling inexpensive horses is rarely profitable to the point of justifying the exercise. There are some people who do make a good living at it. But they are by far the exception.
All of the above are REAL numbers. But very basic “real numbers”. I only add 50% to your number 100% would be more realistic. This is not guess work on my part.