You just heard that the stable down the street is for sale. You’ve owned a horse for years that you’ve boarded out and are thinking that it’s time you got into the “provider” end of the business. Or perhaps you’ve been teaching or training at a facility that is now on the market. You call the current stable owner to ask questions about the property and discover that the property is for sale, but might also be available to lease. Now you’re wondering: Should I buy or lease the stable?
This is a long-term decision will have a major impact on your life, so you’ll want to do a lot of homework before you make a decision. Begin by investigating into the business that operated at that facility previously. What was the reputation? Will you have to overcome the bad impression that poor management created, or are you walking into a well-run, well-thought of establishment? A bad reputation can be turned around, but it takes time. And time is money. So make your financial projections accordingly. If you’re changing the entire focus of market niche, the reputation will take less time to turn around. If the stable has a good reputation, find out what created that and be prepared to keep those qualities in place if you plan on keeping current clients.
Will this be a business for you, a home, or both? Find a few people that own stables and live there, and ask about the pro’s and con’s. There’s no commute to work, but getting a few minutes of time for yourself also becomes more difficult. Horse care is 24 hours a day, 7 days a week. Understanding this now, preparing yourself for long days, and building in even a small amount of time off and away from the property can prevent burn-out. If you choose to live off-property, how will you ensure that there is adequate horse and property supervision?
Have you owned property before? Property comes with maintenance requirements and property tax obligations. Have an evaluation done of the current status of repair, and check with the town hall to see what the taxes will be. This will assist in your financial and operational projections. What’s happening in the neighborhood? How is the property zoned? How will the local neighborhood grow and change, and how will that effect you? Are you located near open space that you plan on using for trail rides? If so, is the status of that open space likely to change? What regulations besides zoning will you be subject to?
Once you’ve given time to these issues, the next step is to do some financial planning. Run the figures for operating costs, factor in financing for the mortgage, include repair costs to get the property up to snuff (unless you’ve found a “turnkey” situation), and consider areas of future expansion. Plan for an emergency fund also. Unforeseen drastic hikes in operating costs that have had a serious impact on horse businesses in the past include hay, bedding and liability insurance. Make one year, three year, and five year projections. How long will it take to break even? How much business at what price do you need to do to make a profit? Is this amount realistic? Find an accountant to determine short and long-term differences between leasing and buying.
Buying or leasing is a major life decision. If your experience in the horse industry has been as a recreational rider or hobbyist, leasing gives you the option of trying it out for awhile first. If you’re an instructor or trainer, you have a good idea of what much of the work will be. Don’t forget that as a business manager/owner there are added responsibilities. Record keeping, bookkeeping, marketing, scheduling, and personnel are a few that may expand beyond what you’ve been used to depending on the size of operation.
No matter whether you lease or buy, you’ll want to hire an attorney. Discuss from the beginning whether you want an option to buy and what those terms might be. If you lease, build a great business, and decide to buy, it would be unfortunate to discover that the owner had changed their mind or thought the property was now worth more because of the business you built. If you buy, this may be what you’ve always wanted. Life does throw curve balls, however, and there may come a day when you decide to sell. Think a little about potential future value of the property. Realtors will tell you that this kind of property is “unique”. One of the things this means is that it will require a more specialized buyer so it may be on the market longer. In any case, doing your homework ahead of time will help you determine whether this opportunity is a dream come true or a nightmare.
Contributed By: Lisa Derby Oden