Selling a water well – appraisals, brokers, negotiations, process and taxes, there are also many questions when selling a water well. Is now the right time for you to sell? And if so, what is the most effective way to sell? Water is a scarce resource. Even though over 71% of our planet’s surface is water, there are fewer and fewer productive, clean water sources. Low supply, high demand: don’t just think regional buyers, think mutual funds and yes, food companies too. You’ll need a realtor with an exclusive network for that. Water wells are not sold on real estate portals, but off market, directly to investors of various kinds. This little guide is for those facing selling for the first time. Whether you are a sole owner or a water cooperative, learn here about the matter of selling.
Property & Source: Target Groups on Sale
Water sources are a sought-after commodity, so that’s one advantage you have as a seller.
Quality water as a raw material: marketing
Water is the raw material of the future. Already today, the scarcity of resources is so extreme that cities like Cape Town are without a steady water supply for weeks in summer. Countries in Europe and parts of the USA are also affected by water shortages. A good time to sell. Because at the same time, water is the ultimate food. Virtually every other form of food contains this basic ingredient. Water is available in every supermarket, every gas station, every restaurant.
Springs do not dry up. In contrast to other raw material sources, no matter whether iron ore, coal or oil, water sources regenerate relatively quickly through the mechanisms of nature. This also plays a role in the valuation, or value determination. But more about this later, in the example calculation.
Valuation: Determine value
First of all: We cannot describe the value of a water source with a simple formula. However, we want to give you an insight into how the property itself, but more importantly, the potential of the spring is valued, for those who have inherited such a water source and have come into possession quite unexpectedly (said inheritance, divorce, donation and other design options).
Also important: The expert opinion is prepared by an expert. More about this in a moment.
Now for the question, how do you calculate the value of a water source?
How to calculate the value of a water source?
For a first approximation of the assessment, the yield of the source should usually be used in conjunction with the quality.
Yield of the source + quality of soil / water + transport accessibility
Of course, many more factors play a role, for example the famous location, location! Location always plays a role in the real estate industry, of course also here when it comes to transport links, i.e. infrastructure and proximity to sales markets.
Calculation: Determine potential (bid price)
A high-yield source is of course always a good selling point. That is why capacity is also considered a key value factor.
If a water source in the calculation example yields 1.2 billion litres per year and these are calculated at 40 cents per litre, one is already moving towards a foreseeable turnover of 300 million.
Annual potential + development
Annual potential as a basis:
- Annual yield: 1.2 billion
- Price per liter: 40 cents
- Turnover: 300 million
If one now compares the valuation with the possible potential, an important factor for investing in real estate, just as with commercial real estate or hotel sales, one would apply a value factor of 5, for example.
Value factor x5 = 5 years
Water Source Assessment:
- Annual turnover: 300 million
- Value factor: x5
- Offer price: 1.5 billion
A quite realistic offer price would now be 1.5 billion. This can be justified by the current evidence of the production volumes, as well as the water quality and the forecast for the development of the area.
Offer price: 1.5 billion
Water source buyers: Creditworthiness, experience
States, investment funds but also the big food giants are looking for good sources of water. So the timing is just right! Expertise in sales and an exclusive, international buyer network are important. Therefore, here is the hint once again:
Who can you sell water wells to?
As previously mentioned, the circle of buyers of such a special object, extremely small. Firstly, you need to find the person who brings the necessary capital and at the same time has an interest in being able to have access to fresh water itself.
Off Market: Discreet, anonymous and direct
Therefore, the sale of such sources usually takes place through specialized brokers in off market area. Here, only personal, these contacts are informed.
Advantages: Confirmation of financing is available, personal network, discretion and anonymity, fast process to KV and notary.
This task is not performed by traditional brokers, but by very specialized ones with direct access to family offices, investment funds and other institutions.
At this high price point, even 5% variation is a big gamble for you, the seller. If you go into the sale without expertise, you will probably be eaten up in the negotiations – simply put. Then we are no longer talking about 5%, but 10%, 15% or even 20%.
Selling procedure: broker, appraisal, negotiations
What is the procedure in the sale? The sales phase can best be compared to the sale of a property.
When selling land, it is not the development that is important, but the possible development, i.e. the potential, as previously described in the valuation. At the same time, special investigations have a very special value for buyers of water sources, for example, soil surveys.
But before we get to topics like soil surveys, you need to start with step 1.
Broadly speaking, selling a water well is about 3 phases: Preparation, “marketing” and the closing of the sale at the notary.
Step 1 is therefore the preparation in the sale. Step 2 is then the source marketing phase, although don’t misunderstand the word “marketing” here. After all, 99% of the time you are selling off market. Step 3 is then the sales processing.
Mistakes can be made in all three fields. The earlier a mistake is in the process, the greater the impact. You’ve probably heard the famous quote about the “flap of the butterfly’s wings”.
If you want to know more about the subject of selling land, for example, because you have never had to deal with the subject of selling land, or land with springs, then you will find the basic procedure here, explained simply and in detail:
As a rule, we also always give you information here about the taxes incurred when selling real estate. For example, if you want to sell a typical condominium in Berlin. Already knew: Profits are tax-free if you have lived in the ETW yourself for 2 years… but it is not that simple with a water source!
The parameters for the sale of a water source are clearly more individual. Here it is no longer “just” about a plot of land of 1,000 square meters that lies fallow. Therefore, we would like to refer you to our general article on the subject.
If you need precise tax information, please contact us.