BUDGETING YOUR LOG HOME: Creating a checklistWritten by Mercedes Hayes
If you've read my first article, BUDGETING YOUR LOG HOME: Where do you start?, you've got a very basic overview of process. However, there are still a number of questions I'd like to address. Again, many of these questions will come up if you build any custom home, but I'd venture to guess log home owners find themselves deeper in decision-making process than someone dealing with a custom builder. After all, differences become apparent immediately as owners have to find their own manufacturer.Unless you have a pocket full of cash, you're going to have to follow construction loan mindset throughout budgeting process. I plan to devote a whole article to construction loan, but this pursuit will serve as a preliminary step before going to bank. The biggest part of your budget will be purchase of land. With today's new construction market - especially in New Jersey - raw land constitutes 30%-40% of total project (of course, in other states land won't be so much but your overall costs will be less, too). It helps to purchase land first so you know how much money you're going to have left over. Then you need to figure out how much to set aside for your excavation, your driveway, and your septic system. Before you can get to this number, it helps to hire a civil engineer to draw up a survey and plot plan (you'll need survey for mortgage company anyway). This will cost you a few hundred dollars. The plot plan will diagram where house will go (and footprint of house), length of driveway, where septic and well will go. With this document, you can go to excavator for a quote. Since most log homes tend to be built in rural areas, you will probably have to install your own septic and well. The excavator who does your driveway will most likely be one who will dig your septic. The well driller will probably be a different company. These are both "wild cards", because cost of septic will depend on how well land percs (short for percolate), and you don't know how deep your well will go. Once again, engineer will design a septic plan which will have to be approved by county (in most states). The cost of your septic could range anywhere from $10,000 - $30,000. If you are setting house way back from road, you must budget for that extra-long driveway. And if your lot is heavily wooded, you will have to pay extra for tree removal; remember that you need to clear plenty of space to accommodate both house and a large area around house for machinery to maneuver. You also have to consider a space to put logs after delivery. Once location and footprint of house is determined, you may need to use a different contractor for foundation. Foundations are not provided by log home manufacturer (with rare exceptions). There are several ways to go: you can build on a slab, a crawl space, or a full basement. You can use a block foundation, a precast foundation, a poured concrete foundation (these are main choices). Poured concrete is most expensive. These days, many people choose precast foundations for log homes, because they are so accurate and don't require a footer. If you go this route, you'll have to hire a mason to pour floor after precast foundation is erected. Remember that if you choose to build on a slab, you're going to have problems routing your wiring, because this is normally done from basement.
| | WHAT’S IT WORTH?Written by Monte Zwang
Sound financial business planning means taking ongoing assessment steps looking at business from multiple perspectives including capitalization, expansion, menu concepts, cash flow and even an exit strategy. Whether you are a chef dreaming of your own restaurant, head of a family business discussing succession, an independent considering retirement or you are thinking about buying or selling, determining business market value is a necessary process for success.Adjust Cash Flow To determine profitability value a business falls into, it is necessary to determine Adjusted Cash Flow of that business. The Adjusted Cash Flow is equivalent to its earnings before interest, depreciation, and taxes (EBIDT in accounting terms), plus additions or subtractions for owner’s salary, discretionary, single occurrence, or non-cash expenses. Once a thorough analysis of financial information has been completed, and Adjusted Cash Flow determined, category of Market Value is defined. In general, a privately owned single or small (1-3) multi-unit business will fall into one of three profitability categories: Positive Cash Flow Break Even Asset Sale Positive Adjusted Cash Flow This category will generally represent highest Market Value of an on-going business. In this situation business is profitable and established. The buyer is purchasing a combination of historical cash flow, fixed assets, operational assets (trade name, concept, menu, etc.) and goodwill. The Market Value for businesses in this category is based on a multiplier of Adjusted Cash Flow, that ranges between two (2) and five (5) times Adjusted Cash Flow. A second value is determined by using a multiplier of Gross Sales (net of sales tax) between 30% and 40%. Business value is generally somewhere within range of these two numbers. A sophisticated buyer expects that price they pay would net an annual return on investment between 20% and 50%. EXAMPLE:Adjusted Cash Flow$ 65,000 x 3.75 =$243,750 Gross Sales 725,000 x 35% =$253,750 This business would have a value of approximately $250,000.
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