After the feedback on the lonely post from last week (and the “rhythm” post from last month), I had to check this one out. Should you setup your own local MMM headquarters? This idea, suggested in the various post comments (I even got emails about it!), was one that we also thought about. But is it also financially feasible? What other benefits do you get? Is it worth it? Let’s find out!
Should you setup your own local MMM headquarters?
The idea by Pete was fun, and based on his latest post about it, also rewarding. Now Pete is only slightly more successful than we are (understatement of the year), and has more money to play with. If we do something like this, it has to make financial sense! Something tells me that charging just $50 (about €43) per month is not going happen.
I can have all the fun in the world, but there will be bills to pay each month. As we still like to become FI at some point, our money needs to work for us. Not the other way around! In short, let’s see if we can do something similar here in the Netherlands!
Property & Prices
Peter bought the place for $230.000 (~€200.000), or at least that was the asking price. For this he got a plot of about 700m² of land with a 220m² building (in need of some serious TLC). Well, trying to find this in western part of the Netherlands is like waiting until hell freeze over. Ain’t happening any time soon.
However, I did find a combo property located in a city in the western part of the Netherlands. It costs around €300.000-€310.000 (including fees, renovations and office supplies/setup) and has both a rental unit upstairs and office space downstairs. For this you get no yard, but you do get 100m² of office space and 80m² of living space.
How many people can you squeeze into 100m². Based on this Dutch post about offices, you need around 4m² per person. But you also need space for a kitchenette, toilet, meeting room(s) and reception/relaxing area. Let’s assume we can create about 20 creative spaces here. As not everyone will be here at the same time, you might be able to accommodate up to 30 people in terms of revenue.
How much is the building going to cost you (total expenses). I’m going to ignore cash-flow here for now, but that should be somewhat similar (lower cash-flow expense on maintenance side but higher on the mortgage payments). Numbers are based on local real estate and financial knowledge from Mrs. CF based on her office expenses.
Total yearly operating expenses:
- Utilities: €1.800 (“green” energy) – office only
- Wifi/internet: €1.200 – office only
- Coffee/Tea/Snacks: €3.600 – office only
- Insurances: €900 (entire building)
- Property tax, garbage, other: €1.800 (entire building)
- Office cleaning: €5.280
- Small items: €600
- Property maintenance and reservations (3%): €9.000
- Write off inventory office (10 years): €1.655
- Property manager residential unit (yearly): €600
- Property manager tenant selection (residential unit): €514
- Interest (3.5% @ €160.000): €5.600
Total yearly damage: €32,549…… ouch. The assumption is here that you don’t have a reception, as people can enter the building via a badge. Reception of clients has to be done by yourself in this case.
So what do you need in operational income to make this work? The residential property should be able to be rented out for about €850/month = €10.200 year (excluding any vacancy periods).
If you want to break even, you need the office space to provide you with about €22.500 in yearly revenue. Assuming that you can find 30 people to share this space with, the monthly fees need to be around €62.50. In itself that is not a lot of money for a co-working space!
Based on some market research I found most charge around €125-150 per month, but do come with reception/parking/etc. That being said, as a starting entrepreneur with little income, that is still a considerable amount of money!
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All the above is assuming you put €150.000 of your own money into this project. This is what we should have next week once we sell one of our investment properties to family. As noted, at €62.5 you break even assuming 30 people actually participate.
If you jack up the prices to €75, which seems very acceptable still, you could make up to €4.500 per year. This is a ROI of 3% (maximum!) on your own money. You would have to charge €90 to make about €10.000 profit (or 6.6%), which is a very reasonable ROI. However, you need a full house for this. That might be hard in the first couple of years, if at all! As with €90 per month, you are getting awfully close to professional places with better amenities and an actual manned reception. I’m also not called MMM, which is not helping my cause here either. To put “Cheesy Headquarters” on the front door is probably also not a great idea….
What if you can only fill the 20 actual physical spots (assuming all people show up every day). You would need to charge about €95 per month to break even, which might still be possible but financially very risky! Also keep in mind that this is all including the residential tenant(s) in place and no vacancy.
The one thing not included is any increases in property value! That could potentially add a couple percent per year over the longer term.
Other “revenue” & opportunities?
Let’s assume you break even on finances, should you still do this? Should you setup your own local MMM headquarters? Are there any other opportunities to make money?
The idea behind these questions is that I would also be able to use the space myself for my side hustle. It would save money and provide me with space that I can use in the weekends and evenings for training and coaching sessions.
Other benefits obviously include social interaction (as noted in the lonely posts) and potential business development. Perhaps you find other people that you like to collaborate with, develop new projects with or just have fun with.
The idea is very interesting! But we (as I have discussed this with Mrs CF obviously) are not so sure about the financial aspect of this. We also have not been to the property in question, could be that it needs far more work done to make it work. Also the exit strategy is not formulated yet!
Lot’s to think about…… perhaps we should crowdfund this together??