The dos and don’ts of buying a golf course, according to experts
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What advice would you give me if I was interested in purchasing a golf course? How many rounds of golf annually do you think it takes to make a profit? — BeinSon Bracey, Atlanta, GA
If you’re a golfer, it’s easy to fall in love with the idea of owning your own golf course, but the first step is to run the numbers like any other cash-generating — but capital- and labor-intensive — business.
To that end, rounds played annually is an incomplete proxy. Do you have 40,000 rounds at $50 a round, $100 a round or $200 a round? Is it a cart course with extra revenue there or a course where golfers mostly walk? What’s the cost of the maintenance relative to the play? Do you cut and roll the greens so they’re fast — which is costly — or let the putting surfaces get a little shaggy and keep the rough high?
Golf course pros look at added issues that separate courses from other types of real estate. One owner with courses in California and Mexico — among the most expensive areas to operate a golf course, given the climate — says when he looks at a new course, he thinks what could break and need costly repairs over the next three years.
“It’s going to tell me how long my irrigation system, my tees and greens, my bunkers are going to last,” says the owner who didn’t want to draw attention to the courses he might buy in the future. “I want to understand what I’m going to put money into.”
A new irrigation system could cost $1-$3 million. And that’s before an owner thinks about the fixed costs, which can run millions of dollars a year.
While buying a golf course is a real estate transaction, golf courses aren’t like traditional real estate.
Even thinking about price per round could be wrong. A $100 tee time in the evening could be way more profitable than a $200 tee time in the middle of a time slot when a company wants to host a large and profitable corporate outing.
While buying a golf course is a real estate transaction, golf courses aren’t like traditional real estate. “Golf is a business opportunity attached to a piece of land if the land has no other use,” says Jeff Woolson, managing director of CBRE’s Golf & Resort Group.
Given the risk of operating a golf course profitably, there are not many lenders — and few traditional bank lenders — willing to finance the purchase of a golf course, particularly by a first-time owner.
Of course, if you can muster the capital, there are other reasons to buy and own course. Prestige is at the top of the list. Owning a greeting card company can be enjoyable and lucrative, but selling it and turning it into one of the premier golf resorts in America, like Mike Keiser did to create Bandon Dunes, is a lot better.
“For every Mike Keiser, there are five or 10 Keiser wannabes who build a course in the middle of nowhere,” Woolson says. “At that point, it’s about who has that passion for golf.”
And when owners go to sell their golf courses, they often go for less than what’s called replacement value — the money that would be needed to rebuild the same golf course. The reason is a large amount of revenue doesn’t always equate to profitability.
“The International, before it shut down was grossing $10 million a year but losing money,” Woolson says of the Massachusetts course that was once considered the longest in golf. It closed in 2018. When it sold during the pandemic — for roughly the price of its earnings — the new owners, Escalante Golf, kept it closed to renovate it.
There are a few exceptions. “There are two golf courses in the world that are worth more as a course than anything else,” Woolson says. “Augusta and St. Andrews. Most are rarely worth anything close. Cypress Point? Think of the homes you could put on that!”