FIX & FLIP | Method of building equity in which cash flow generation plays no role.
The Fix & Flip method is particularly interesting for many investors, as it offers the possibility of a fast exit and to achieve disproportionate profits in the short term.
In the classic marina investment, a marina is built in order to operate it in the long term (buy/build and hold). In this case, the investor plans to hold the property in his own portfolio for the concession period in order to generate a continuous cash flow through rental and further lease income. Any financing costs are usually covered by the regular income from the operating business.
The Fix & Flip method is different. Here, the aim is to generate maximum profit in the shortest possible time. However, a considerable amount of know-how and market experience is necessary for the success of such marina investments. In this scenario, the profit is generated from the difference between the purchase price of a marina with good development potential and the subsequent sale price of the restructured marina after the optimisation process has been completed, and the creation of a corresponding added value.
The following points are essential in this respect. On the one hand, the investor must find high potential and at the same time moderately priced targets in preferred locations, which are undervalued with regard to the realistically achievable market price after maximisation of turnover and enhancement of the processes. On the other hand, one should have comprehensive knowledge of the yacht and marina business in order to be able to correctly assess the condition of the property and the necessary restructuring and marketing costs. In addition, knowledge in the area of concession law is equally important and in principle indispensable.
A so-called balloon loan is suitable as financing for the purchase of the marina and, if necessary, the planned restructuring costs. In this case, the entire loan amount is only repaid at the end of the loan term (e.g. after 1 to 5 years). The shares of the corresponding MP regional company (SPV) serve as collateral for the investor. The investor concludes the corresponding loan agreement with MP Development Holding, which manages the loan and passes it on to the regional company as required. After the eventual restructuring and resale of the marina regional company, the realised profit is shared between the investor and MP Development Holding in the ratio x/y%. If the investor takes over a marina into its own portfolio, MP Development receives x% of the total volume of the transaction as a success commission.