Real estate news & Broker BLOG

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WHAT IS EBITDA?

EBITDA = Earnings Before Interest, Tax, Depreciation & Amortization.  EBITDA is a measure of a company's financial performance and its ability to generate cash.  

WHAT IS CALCULATING EBITDA USED FOR?

To compare the performance of a company, evaluate changes in a company's profitability over time, and assess a company's financial health and valuation.  However, EBITDA it has limitations and should be used in conjunction with other financial metrics 

HOW IS EBITDA VALUATION CALCULATED?

EBITDA = Operating Income + Depreciation + Amortization 

ARE THERE OTHER FACTORS WHICH CAN AFFECT CALCULATING EBITDA?

Usually the following can affect EBITDA: 

1. Personal Perks/Expenses:  Personal Perks taken via business expenses which are not related to the business like: Meals & Entertainment, Vehicle Leases, Cell Phones, Extended Health Benefits, Travel Expenses...etc.

2. Bad Debt:  This can often be added back with discretion.  Is the Bad Debt due to poor business management or due to a pandemic?  Is the Bad Debt a one off or recurring event?

3.  Other Expenses: Various other expenses, such as power and fuel expenses, logistics costs, and non-recurring one-off expenses may be added back into EBITDA.  An example is a company moving locations.  Those moving expenses are a one off expense and can normally be added back into the EBITDA Calculation.

4. Owners Wages:  Normalizing the Owner's Wage if wages are paid above/below market value.

5. Property Rent:  Normalizing Rent if Owner owns the property and pays above/below market rent to themselves or works from a home office and claims a portion on the home expenses through the business expenses.

6 Sales and Operating Expenses: An increase in sales and efficient management of operating expenses can drive EBITDA growth. Conversely, factors such as rising raw material costs, employee expenses, and other operating costs.

7. Capital Expenditure (Capex): EBITDA does not take into account any Capex by the company, such as expansion or purchase of plant and equipment. 

8. Interest Rates and Debt-to-Equity Ratio: High interest rates affect the purchase prices of Commercial Properties and Businesses.  Buyer's and Seller's can see increases in leases and mortgage rates across the board which cuts into business profitability and the asking price.

Its always advised for a Buyer and Seller to obtain Business Brokerage Services from a Licenced Commercial Broker and an Accountant for better guidance.  EBITDA will vary from industry to industry.  Feel free to contact Aleksandra Magee PREC anytime with any questions you may have.  

   The wood Manufacturing Business industry is considered a volatile and cyclical business due to its sensitivity to economic conditions and the inherent nature of the industry itself.   Here are a few reasons why:

1. ECONOMIC SENSITIVITY: The demand for wood products is closely tied to the health of the economy. When the economy is doing well, there tends to be more construction, housing, and furniture manufacturing, which drives demand for wood products. Conversely, when the economy is in a downturn, demand for wood products tends to decline.

2. SEASONALITY: The wood industry is also affected by seasonal changes. For example, demand for lumber tends to be higher in the spring and summer months, when construction activity is at its peak. During the winter months, demand for lumber tends to decline, which can lead to lower prices and reduced profitability for wood producers.

3. RAW MATERIAL COST: The cost of raw materials, such as timber, can be volatile and unpredictable, which can impact the profitability of wood producers. For example, a sudden increase in the price of timber can reduce profitability for wood producers, while a decrease in the price of timber can increase profitability.

4. GLOBAL COMPETITION: The wood industry is also highly competitive on a global scale, which can lead to fluctuations in demand and prices. Changes in trade policies or the availability of cheaper imports can have a significant impact on the profitability of wood producers.

There are several ways that companies in the wood industry can adapt to manage their risk effectively:

1. DIVERSITY THEIR PRODUCT LINE: Companies can mitigate risk by diversifying their product line, which can help them to weather fluctuations in demand for specific products. For example, a company that produces both lumber and plywood may be better able to manage risk than a company that only produces lumber.

2. ESTABLISH LONG-TERM CONTRACTS: Companies can also manage their risk by establishing long-term contracts with customers, which can help to stabilize demand and prices for their products. This can provide a more predictable revenue stream and reduce the impact of short-term fluctuations in the market.

3. MANAGE THEIR SUPPLY CHAIN: Companies can also manage their risk by carefully managing their supply chain. This includes maintaining good relationships with suppliers, optimizing their transportation logistics, and managing their inventory levels to ensure that they have adequate supply to meet demand.

5. MONITOR MARKET CONDITIONS: Companies can also manage their risk by closely monitoring market conditions and adapting their strategy as needed. This includes staying up to date on economic trends, trade policies, and the competitive landscape, and making adjustments to their operations and strategy to respond to changes in the market.

If you are looking for profitable businesses for sale in the wood industry feel free to reach out to Aleksandra Magee PREC for free business EBITDA valuations and Business Brokerage Services

The vacancy rate for space in the city’s warehouses has fallen below one per cent, according to data from real estate advisory Altus Group Ltd. Industrial rents are soaring and so are land values — if you can find any land to buy, that is. The average home is $1.4 million and developers are eager for new places to build.  It’s so hard for firms to find space that goods destined for Vancouver are sometimes brought in through the port and sent about 1,160 kilometres east, to Calgary, where they’re stored before being shipped back again. “Industrial space has now been infected with the same disease as houses,” said Murray Mullen, chief executive officer of one of Canada’s largest trucking and logistics firms, Mullen Group Ltd. Companies that are renewing industrial leases will, in some cases, be paying double what they were before, Mullen said.

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The combination of limited supply, growing demand, a strong economy, and limited development opportunities has created a highly competitive market for industrial properties in Greater Vancouver, resulting in low vacancy rates and rising rents.

Industrial property vacancy rate in Greater Vancouver is less than 1% and here's why rents have doubled:

1. LIMITED SUPPLY: There is a limited supply of industrial properties in Greater Vancouver due to several factors, such as land availability, zoning restrictions, and high construction costs. This limited supply has not kept pace with the growing demand for industrial space, particularly with the rise of e-commerce and the need for warehouse and distribution centers.
2. GROWING DEMAND: The demand for industrial properties in Greater Vancouver has been driven by several factors, including the growth of e-commerce, the rise of logistics and supply chain management, and the increasing popularity of "last-mile" delivery services. As a result, many businesses are looking for industrial properties to expand their operations, which has increased competition for available space.
3. STRONG ECONOMY: The Greater Vancouver region has a strong and diverse economy, which has led to the growth of many industries that require industrial space, such as technology, manufacturing, and logistics. This has contributed to the high demand for industrial properties in the region.
4. LIMITED DEVELOPMENT OPPORTUNITIES: Due to factors such as zoning restrictions and high construction costs, there are limited opportunities for new industrial development in Greater Vancouver. This has made it difficult for developers to build new industrial properties to meet the growing demand, which has contributed to the low vacancy rates and rising rents.

Its not easy to find the perfect Industrial spot for your business.  If you are looking and need assistance please contact Aleskandra Magee PREC.  There are many Exclusively Listed Properties available which Brokers are privy to. 

Investment Property Owners prefer to list their properties on Airbnb instead of renting out their properties to long-term tenants. Here's a few reasons why:

1. HIGHER RENTAL INCOME: One of the main reasons      why property investors may prefer Airbnb is that they can earn higher      rental income compared to traditional long-term rentals. This is because      Airbnb rates are typically higher than long-term rental rates, particularly      in popular tourist destinations or high-demand areas.
2. NO LONG-TERM COMMITTIONS: Airbnb does not require      property owners to make long-term commitments, such as leasing agreements      or rental contracts. This allows property owners to use their properties      for personal use or to rent them out on a short-term basis, without having      to commit to long-term rental agreements.
3. DAMAGE CONTROL & LESS      WEAR-AND-TEAR ON THE PROPERTY: Host damage protection, part of AirCover      for Hosts, provides Hosts with $3 million USD in coverage in      the rare event your place or belongings are damaged by a guest during an      Airbnb stay. Host damage protection covers you for:

• Damage to your home,      furnishings, valuables, or belongings caused by guests (or their invitees)
• Damage to parked cars,      boats, or other vehicles caused by guests (or their invitees)
• Unexpected or extra cleaning      costs needed due to the behaviour of a guest (or their invitees) during an      Airbnb stay—for example, professional carpet cleaning
• Income lost if you need to      cancel confirmed Airbnb bookings due to damage caused by a guest (or their      invitees)

If you have any questions or are looking to purchase a secondary investment property for short-term rental, please contact Aleksandra Magee PREC. With 8 short-term properties of her own she can easily guide a Buyer in the right direction. 

From a financial viewpoint, property investors may prefer to live in a rented property rather than an owned one for several reasons:

1. TAX BENEFITS ON RENTAL PROPERTIES: Depending on the investor's specific situation, there may be tax benefits associated with renting a property. For example, property investors may be able to deduct rental expenses from their taxable income, which can help to reduce their overall tax liability.
2. TAX BENEFITS FOR INVESTMENT PROPERTIES:  Renting a property can free up capital that can be invested in other assets that can generate higher returns.  Instead Property Investors prefer to purchase another investment property which would allow them to deduct mortgage interest, property taxes, utilities and expenses associated with that property that an owner would not be able to write off with a Principal Residence.
3. LOWER UP-FRONT COSTS: Renting a property typically requires a lower upfront investment compared to owning a property. Property investors can use the money they save on a down payment and closing costs to invest in other assets that can help them to grow their wealth.
4. LOWER ONGOING COSTS: Renting a property can be less expensive than owning a property over the long term, especially when factoring in the costs of maintenance, property taxes, and other expenses associated with home ownership. This can help property investors to keep their expenses low and maximize their returns.
5. GREATER LIQUIDITY: Renting a property provides greater liquidity compared to owning a property. Property investors can easily pick up and move to a new location without the financial burden of selling a home, which can be especially important in cases where the property market is uncertain or the investor needs to relocate for work or personal reasons.