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  1. #1
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    Rental/lease cost for small factory

    Hi all, need some help, bit of back ground first.

    We have a legal licensed rubber factory, on zoned industrial land in rural Issan. It has it's own on site 32 KW transformer, 2 large professionally designed smoking sheds, 2 covered work areas and an office.
    Nothing grand, probably the smallest fully licensed rubber factory in Thailand.

    Wife gets a call today from a crepe rubber maker, he wants to lease/rent the place. We don't use it much, as I don't have the cash needed to buy large amounts of other peoples rubber, only process our own.

    As there is no other industrial land out here, I have no way of getting a local rate, plus as it is a company we will have to pay tax on the rental; inform the companies people of new machinery etc.

    So any idea as to the rental valve, ball park number is fine, any one renting one or looked in it.
    Thanks in advance for any advice. Jim

  2. #2
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    So he said he wants to rent it but did not give you a figure for the rental. That is strange, as if he has a business plan he knows exactly what he wants to pay in rent. Ask him first would be my advice Jim.

  3. #3
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    I think you have to look at their pain point Jim.
    If it was fully operational what would their profits be and trty to take as big a % of that as you can.

  4. #4
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    aging one, not the way things get done out this way, he is supposed to come tomorrow to talk, lots of wats, food, false smiles, while he trys to see how low I will go and I try to see how desperate he needs the place.

    N99, FIL knows the guy, he already buys rubber in this area , but has to transport it to town for processing. Buying around here is mostly done by subcontractors in pick up trucks, they drive round collecting, when they have a load go to the processor
    Can't believe any thing out here, but they say he gets about 5,000 kilos a day from this area. A lot of money. Jim

  5. #5
    Pronce. PH said so AGAIN!
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    Calculate the maximum volume he can produce in a month and ask for half of the proceeds of that per month.

    Give him a 1 year contract to start and then renegotiate near to the end of it.

  6. #6
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    Quote Originally Posted by quimbian corholla View Post
    Calculate the maximum volume he can produce in a month and ask for half of the proceeds of that per month.

    Give him a 1 year contract to start and then renegotiate near to the end of it.
    Don't think that will fly, unless you mean half the profit, which I'm not going to be told.
    If he is doing 5 tonnes a day from this area now and not local, he'll get more setting up shop here.
    5 tonnes a day is $12,500 US a day turn over, plus I don't think he will go for a 1 year lease. He will need to move machines in.
    Will find out more tomorrow if he turns up, if he does he's in a hurry, if not he will, as they round here play cool like water. Jim

  7. #7
    Pronce. PH said so AGAIN!
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    Quote Originally Posted by jamescollister
    Don't think that will fly, unless you mean half the profit, which I'm not going to be told.
    Yes, that is what I meant.

    He won't tell you the actual number which is why I suggested that you calculate what the factory could produce if it was running flat out and charge him half of that as the rental/lease fee.

    You know the selling price for processed rubber so set the bar high and negotiate from there. If your machinery is sitting idle it isn't making money for anybody and depreciating daily but that doesn't mean you should rent it out for a song.

  8. #8
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    Quote Originally Posted by quimbian corholla View Post
    Quote Originally Posted by jamescollister
    Don't think that will fly, unless you mean half the profit, which I'm not going to be told.
    Yes, that is what I meant.

    He won't tell you the actual number which is why I suggested that you calculate what the factory could produce if it was running flat out and charge him half of that as the rental/lease fee.

    You know the selling price for processed rubber so set the bar high and negotiate from there. If your machinery is sitting idle it isn't making money for anybody and depreciating daily but that doesn't mean you should rent it out for a song.
    Not my machines, he will be using a different process. we are set up for sheet, he's doing crepe.
    It's more about the license and the national industrial zoning and I have no ldea what it costs to rent industrial land.
    Personally I would give it to the guy for free, for one year, learn how it's done and who he on sells.
    Then I would have guts to go to the bank and borrow big time, but don't think he will go for that.
    By the way this is not the first time people have come to look, not only rubber related, it's 10 rai of industrial zoned land on a main road, be it in the boonies.
    I just have no idea of the rental/lease rates. Jim

  9. #9
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    I love Thailand.

    Apparently the guy is going through 5 tonnes a day. Yes a day. Over 300k baht's worth.

    Almost 10 million baht a month and he is on about renting a small factory. The people who told you that probably believe it too, that's the funny thing.

  10. #10
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    Quote Originally Posted by metisdead View Post
    I love Thailand.

    Apparently the guy is going through 5 tonnes a day. Yes a day. Over 300k baht's worth.

    Almost 10 million baht a month and he is on about renting a small factory. The people who told you that probably believe it too, that's the funny thing.
    Go buy some land in the UK, or any western country, cheaper than Thailand, nice green, do dairy or build a factory, or build a house, may be put in a small back yard pig farm and see how long you last.
    No different here if you want to be legal and Thailand land stopped issuing open rubber processing licenses about 4 years ago. ASEAN don't want those Malaysian or Singaporeans coming here to take on the big rubber houses.

    Guess you are from one of those free enterprise countries, no regulations. Jim

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    If he's going through 10,000,000 baht of produce a month in jungle borderland Issan/Lao, and he wants your factory, perhaps better to quote him cheaper than the cost of a bullet then.

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    A midsized factory will be around 10,000 THB/month upcountry
    I've seen some pictures of your factory.
    The 10,000 THB is around 3x your size and x8 workers accommodation (kitchen bathroom, etc..), But no licence and industrial estate

  13. #13
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    Quote Originally Posted by metisdead View Post
    If he's going through 10,000,000 baht of produce a month in jungle borderland Issan/Lao, and he wants your factory, perhaps better to quote him cheaper than the cost of a bullet then.
    Don't live in a city, but a jungle village, no front door or locks on the bedroom doors. No outsiders coming here to do harm and leaving, plus it's a limited company have to shot a lot of people. Jim

  14. #14
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    10,000,000 a month goes a long way in a jungle village.

  15. #15
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    Take the value of the building X 10% = annual rent
    If you don't know the market value take the cost to build plus the land add 30% = value. Hope this helps

  16. #16
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    Quote Originally Posted by Carnwadrick View Post
    Take the value of the building X 10% = annual rent
    If you don't know the market value take the cost to build plus the land add 30% = value. Hope this helps
    Thanks for that, good starting point.

    These guys are here already, 3 of them, been here 1/2 a hour rattling on in to fast Thai/Lao, but as yet no mention of renting the factory. Every time I went to ask to a question, got the keep out of it from the wife, so walked away.

    Not going to reach a long term agreement, think by the way the boss goes on he is to poor and loses money every day, but have made a deal that I am happy with.

    Not renting or leasing, no contract, he sets up his stuff, I get 1/2 Baht a kilo, we still use the factory as per normal, for the rest of the season. Next year see how it goes and make a deal, and that will be on my terms, as I will know the game and the buyer.

    Cunnig guy, as he's leaving speaks to me in very good English, knew what I was saying to the wife all the time.

    More to it than he lets on, afterwards wife gave me a run down. Think he thinks stupid farang, some thing mentioned about a big company from Krabi coming to see his operation.

    Worst comes to worst, beer money is secure for the year.
    Happy with the result. Jim

  17. #17
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    PS, thanks for the constructive replies. Jim

  18. #18
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    Hey beer money is better than a sharp stick in the eye as my old friend used to say

  19. #19
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    Made a deal in one day, not the isaan i know, were we are it takes at least 6 visits, the guy must of got a very good deal for himself.

  20. #20
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    Quote Originally Posted by Yasojack View Post
    Made a deal in one day, not the isaan i know, were we are it takes at least 6 visits, the guy must of got a very good deal for himself.
    Thinks he's made a good deal, he really want's a lease, but doesn't want to front the money encase it doesn't work.

    Bits more of the story coming out, his new 5000 kilo a day creping machine will be arriving soon, probably to heavy to pick up and move on a pick up truck.
    Seems the guy thinks he's on the edge of hitting the big time, by getting a contract from a big buyer in Krabi.

    He's a licensed rubber buyer, on the possible contract, he got together with 2 other guys, ordered the machine and formed a company.
    All good so far, stick the machine in a shed and let the rubber and money roll, no problem.

    Problem, he's not a licensed rubber processor, no license no contract, not like getting a car licence. Only issued by the rubber board and hard to get.
    You need to be on land with national industrial zoning, factoies , EPA and health and safety certified, just to apply for a license. That's me and his only hope and I'm willing to bet when these Krabi people come any deals will not be about rent, but percentage.

    Will see, until then if he can put out rubber, I'll get a few 1000 Baht a day for the use of one shed and a roofed area and no cost to me. Jim

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