Agro Commodities & Agricultural Produts

Question by ???????: Can you help me figure out this business opportunity, please?
i have the chance to invest in buying a grains silos/dock property. There are 2 concrete silos with a rather large capacity. The appraiser set the value of the property in $ 250,000. There is a contract with sugar mill/farming company, which pays $ 50,000 a year, for 2 years. If i buy, i get the rights to the next 2 years of the contract, which makes a return of $ 100,000 in 2 years, plus the value of the construction (silos).

Is this a good investment? This is the first time i’m trying to do this kind of business. The contract is iron-clad, so i know they have to oblige, besides they pay forward, but how do i calculate my investment-return ratio?

THANK YOU!

Best answer:

Answer by rehman vohra
There are quite few other things to consider in evaluating an investment opportunity.

1 What other costs are involved in purchasing the property such as legal costs, registration fee, etc to get the property in your name.
2 What is the total capacity of the silos
3 How much capacity the contract will require
4 Is this a one off contract
5 What will the operating costs to be paid in cash will be such as salaries, maintenance and other admin and selling costs
6 Are there any opportunities of getting future contracts
7 Are there any competitors
On the face of it, it does not appear to be sound opportunity. Yes, you will retain the property but it will remain idle and will not earn anything. On the contrary you might be at a loss so far as maintenance, insurance and other costs.

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