I have on several occasions being offered and being asked on the above subject title.
" I have a birdhouse for Sale. The house is having 200 nests and is three stories high".
Today there was another one: "4 storey shop lot with 300 nests inside sell for RM 750K, worth to buy it?"
How do you value a ready made birdhouse with nests inside?
My answer is very simple. Use your thumb. I mean "Rule of THUMB" which is as follows:
Let say the house is three stories and there are 200 birdnests in it.
These are the things U need to do:
a) Check with the owner the actual cost that he build the house. If he bought the bare unit what price did he pay for it? Say the value he purchased was x = 200,000
b) Get the total cost of renovation that he invested to convert it from a normal shop lot to become a birdhouse. This will include tearing down the wall and rebuild new walls, cost of the sound system, wooden ceiling, new security doors, repainting cost and etc. Say the cost of renovation was y = 150,000
c) Check of the actual number of nests in the house ( must be half or larger in size). Any nests that is smaller then half cup shall not be considered. Say the number of nests, half cup and above is z = 200 nests.
Once that is done U apply this formula:
The opening price that U can offer is: (x + y)+ (z X 1000(royalty))
Which is: (200,000 + 150,000)+ (200 X 1000) = (350,000) + (200,000)= 550,000
This is just the rule of thumb and can be use as a guide. If U wish to add more, what we call "goodwill", it is up to U.
If U wish to ask for a discount, it is also up to U and the seller.
The 1000 where I used to multiply with z is term as "royalty" that is used as a figure which U are required to pay to the house owner. This royalty is a part of your consideration where once U already have 200 nest, it should multiply by at least 100% by next year and another 100% by the following year ( subject to how U look after the house).
I am sure there are other methods that U can used but this is considered the best that I have come across so far.
To continue this story on selling of birdhouse I would like to add this interesting story told by my SP Sifu:
He saw this row of shops in Padang Serai and at that time there was no birdhouse in this whole area.
He bought two units side by side,a corner lot of 3 stories and an intermediate lot of2 stories, at a very good price of only RM 300,000.
He then renovated it and turned these two units into one birdhouse, interconnected. He spend about RM100,000 (remember this is his cost as a contractor).
After three years, he wanted to make a kill. So he offerred the house to his friend at just about RM750,000. At that time there were about 300 nests.
So he make a clean profit of RM 350,000 after just three years. Not bad ha !
The next thing that happenned was a miserable nightmare to him (he regret until today, cannot sleep well).
The birdhouse , since it was the pioneer birdhouse in that specific area,was attracting thousands of swiftlets and the number of birds flocking in the house went up drastically.
The new owner been harvesting about RM 400,000 a year, in the fifth year. Every year he estimated that the income will increase by at least 50% year after year after year and after yyyyyyyyyyyyyyyyy ..............
So he went back to his friend, the new owner, and made an offer of RM2 million. The offer was rejected flat. The owner counter offer him by saying nothing less then RM 4 million. If you come later, I have the right to increase the cost by 10% a month.
Aai ya ya ya ya ............
Can U imagine, a house which was at one time abandone and now , after just 5 years, is worth more then RM4 million?
Rediculous but it does happen in birdnest farming industries!!!
Now let me ask you this: What other property can ascalate at this phenomenal rate?
I think twin tower in KL pun tak boleh (cannot).
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