post

Swiftlet nests farming – Part 4

The question is: How do you come up with a fair value for the bird's house?

The question is: How do you come up with a fair market value for a bird's nest house?

Assume that you have pumped in more than RM500,000 on a bird’s nest venture. RM400,000 for an empty (most likely nearly abandoned) 3-storey building, a further RM100,000 for the renovation and adaptation of the interiors for the pleasure of the birds. Once you have cut the red ribbons for the opening ceremony, you most likely do not need to spend any more money on the building save for some yearly maintenance cost plus the monthly utility bills. Once the building started generating income (2-3 years) from the sale of bird’s nest, you will be set for life (33% possibility), provided you lived long enough to enjoy the fruit of your labor. Our discussion today is: what if you would like to cash out and go for an extended holidays in some Caribbean Islands? How do you come up with a fair market value for your bird’s house?

For today’s property, it’s Location, Location, Location. Like wise, for Bird’s house it’s Nest, Nest, Nest. Good Location with no edible bird’s nests is no good. Bad Location with plenty of edible bird’s nests is good. So how do you value a bird’s nest house (or sometimes referred to as bird’s condo) when the conventional real estate mantra is of no use to a valuation consultant?

Swiftlet chicks waiting for the return of their parents during feeding time.

Swiftlet chicks waiting for the return of their parents during feeding time.

Scenario 1 (Existing bird’s nest venture near town center, currently producing a steady monthly income)

  1. Building used: Abandoned and Unpopular commercial shop lot
  2. Cost of Building + renovation: RM500,000
  3. Expected property appreciation from investment: 20% -40% (conservative to optimistic)
  4. Estimated number of birds living in the building: ~1,000 birds
  5. Monthly bird’s nest harvest: 4kg of raw nests (3-year harvest; assuming a conservative 10% yearly increase: 48+53+58 = 159kg; assume 1kg raw nests = RM3k; 159kg = 159 x RM3k = RM477,000)
  6. If I were to list my bird’s house for sale I would price it at: Property appreciation (RM500,000 x 20%) + 3-year forward income from my venture (RM477,000) to (RM500,000 x 40%) + (RM477,000)
  7. The fair market value for the bird’s house will be from RM1,077,000 to RM1,177,000. For me, it is fair for the buyer to compensate the seller for the 3-year forward income as part of the goodwill price for the property. Furthermore the seller has taken a risk in the initial investment whereby the chances of failure is 2 out of 3 but it is a “guaranteed” chance for the investor to buy himself into this potentially lucrative business. For the buyer, even if he intended to invest in a new venture, he will have to wait for 2 to 3ย  years to confirm that he has not invested in a “lemon”. So to practically jump into a successful venture, it’s not too much to pay for such premium.
  8. In order for the buyer to appreciate the value and to verify the authenticity of the valuation from the seller, he would have to spend a day or 2 on location. First he or she would have to take stock of the number of birds living in the target building. Firstly, the buyer can spend a late afternoon on site to count the birds coming and going out of the building. It’s not a science but you have to satisfy yourself that there are really that much birds as claimed by the seller. People tends to exaggerate, so it pays to verify it for yourself since your are going to take over the running of the business. Swiftlet will return from their daily hunting and food gathering around late afternoon and they will all be in the building by sundown. Secondly, the buyers should verify the monthly harvest as claimed by the seller for at least 3 months. Buyer should be present when they are doing the actual harvesting and counting of the nests. The monthly weight will be used in our valuation method but the number of nests will tell you roughly the numbers of adult producing birds. I am advocating a 3-month due diligent study because that will provide you a more accurate monthly harvest figure. If you only do this for one month, the seller could easily fool you by skipping some nests in his last monthly harvest, therefore artificially inflating the numbers when you are there to witness the harvest. It’s not possible to fool the buyer that there are twice the number of nests if he skipped his monthly harvest because, if the nests are not harvested, the birds will reuse some of the nests therefore saving them the hassle of rebuilding a new nest. Reused nests are easy to spot as they are dirtier and tend to be yellowish. As for the estimated number of birds, it will roughly tell you the nests that you can expect form the building. If you counted about 1,000 birds, you should expect about 500 nests (give or take 10%), as swiftlets live in pairs. Each pair will have one nest. Only juvenile swiftlets will hang around at their old nests. Once they are harvested they will in turn find a partner and build a new nests. That’s how the building increase the colony of the birds and in turn increase the monthly harvest.

Scenario 2 (New bird’s nest venture near town center, currently zero harvest)

  1. Building used: Abandoned and Unpopular commercial shop lot
  2. Cost of Building + renovation: RM500,000
  3. Expected property appreciation from investment: 10% -40% (conservative to optimistic)
  4. Estimated number of birds living in the building: zero
  5. This is more of a willing buyer willing seller kind of deal. I wouldn’t waste my time in this kind of deal because there is no guarantee of success and the premium you paid is just for the effort put in by the seller in setting up the venture. If you are really desperate to purchase the building, you should asked about the people or company that the seller engaged to setup the bird’s nest house. Ask for references and visit their successful sites. There is still no guarantee of success as the location might vary but its track record will give you an indication of what to expect.

Disclaimer: The valuation method above are based on common business sense. You are welcome to use it at your own risk. The above valuation is not suitable for purpose-built bird’s nest house in a farm setting.

If you have a better way to do the above valuation please share your method with us.

Comments

  1. good culcalate, , but not sure or u can confirm every month always increse 10% for new bird house..

    • Thanks for the comment. This calculation is more of a guideline which a seller or buyer could use as the base for negotiation. As in any property transaction, it’s more to do with “willing buyer willing seller kind of deal” than plucking a figure from thin air. However for real “human habitable” property you have valuation specialist and last transaction history to refer to, but for bird’s condo….. even 2 bird’s houses next to each other could produce vastly different result. So how do you compare them? And how do you value them?

      The 10% harvest growth is a yearly figure…. not monthly. So, the assumption is quite conservative. If a bird’s house could not increase its harvest by 10% every year, you really have a serious problem on hand. It’s either the colony is not reproducing enough or you have a serious case of bird’s migration…. to your neighbor’s more comfortable home….?

      I hope my explanations make sense. ๐Ÿ™‚

  2. sebastian says:

    is it okay if the location of the bird nest building is not near a sea?

    • Sebastian,
      Yes, you could build the bird’s house anywhere, as long as it adheres to the local government regulations. It’s not necessary to be near the sea as they are not migratory in nature. You could use any existing commercial buildings, abandoned houses or even industrial lots. However if you are building it from scratch it’s best to consult an experienced consultant before hand on the best possible design as you would want to get it right the first time. There’s no point in spending more money in doing any renovations after the building has been constructed. You could refer to my earlier writing to get some idea on what is good practice. Good luck.

  3. anyone have bird house for sell in malaysia or thailand? i’m in interested. I also have brid nest house for sell too.

    BH In hadyai, thailand
    1000 nest, 2sty building (worth 2,000,000 BAHT), 4.5M X 18M
    2 – 3KG HARVEST MONTHLY, very good potential to increase to 6000 nests within 2 – 3years, best price 11,000,000 BAHT

    BH in songklha (100km from hadyai)
    only 1 year, over 200 nests, 3sty building (4.5m x 20m), 6,500,000 BAHT. email aseanbirdnest@hotmail.com

  4. chaelesbagli says:

    I love taking bird nest soup from like http://www.geocities.jp/hongkong_bird_nest/index_e.htm . It tastes really good… But now I’m more like wanting a bird as a pet!!! They are sooooo CUTE!!!!!! LOVELY~~~

    • Haha…. yes they are quite adorable….

      • Is it possible to build birdhouse near Cave if the cave also got swiftlet?
        Is “batu niah” where near Miri, Sarawak, can build a successful birdhouse?

        • Amanda,
          I am quite sure you could build a birdhouse near the cave and still attract the birds over if you could provide them with a viable alternative dwellings that mimic the cave’s ecology and habitat. So go for it, your location alone is already a winner. ๐Ÿ™‚

    • You should write something about your Company and what you do instead of leaving just the link to your blog. Continuous learning is the key to any success. ๐Ÿ™‚

  5. Just wondering, If the interior of the cave is so dark, how does the swiftlets in there know its already morning? Also if science already Genetic Engineered most things, why not do swiftlets?
    Cheaper for everybody to consume then.
    TQ

    • Swiftlets do not need their eyes to see in the dark. They are probably the only species of bird that uses a simple form of echolocation to navigate in total darkness. That is also how they locate their roost, their partner and the entrance to the cave or swiftlet condo. Swiftlet’s form of echolocation differs greatly to that of bats because human could hear swiftlet’s double clicking but we are impervious to bat’s echolocation.

      I am not too sure how they know the time of day. Most probably they have some kind of biological clock to inform them of the time or maybe they they just know based on the light shining in to their caves or entrance to their birds condo. But it is a fact that that they will leave their nests to forage for food around 7 to 9 am and they will return to their roost at around 7 to 8 pm sharp everyday. I could confirm this because we close the entrance to our bird’s house at approximately 8 pm everyday and we open up the entrance at around 7 am. They do spend quality time at home from 8 pm to 7 am everyday, much like any other living beings.

      I am not too sure about your question regarding genetic engineering. You want to genetically engineered the swiftlets to do what? Lay more eggs or produce more nests? Each pair of swiftlets produces 1 or 2 eggs every 40 days. They will only make one nest for the 1 or 2 eggs. To genetically engineered them to produce 10 nests for 1 or 2 eggs, that might be quite unnatural, unless we can program them like a robot. It is also good business practice not to temper with nature. Maybe in the near future, you might be able to walk into IKEA and purchase a bird’s nest kit whereby anyone can just set up a mobile swiftlet house in their yard and they could harvest a few bird’s nest every month from the modest setup. Until that happens, we the consumer still need to fork out a king’s ransom for a few strands of bird’s saliva. ๐Ÿ™‚

  6. Swiftlet BH says:

    I am a newbie but very interested to build a BH on my small plot of land. I wish to know if my location is reasonably good to build BH. Surrounding are oil palm plantations and fruit farms and a river nearby. About 10km away, has many successful BHs. What is the cost of building a 3 storey BH complete with sound equipment and wood planks? Which is better – cheaper sand bricks or red bricks and must the external walls be cemented?

    • Swiftlet BH,
      Based on your description, your location is ideal for swiftlet farming. The cost for a 3-story BH vary according to the build-up area (in psf) and the material used. It could range from RM150k up to 300k (or more). You would need to get a quote and advice from a BH contractor or a BH consultant. All the project that we were involved in used the more expensive red bricks and yes, you would need the external wall to be cemented. We are talking about a long term (hopefully successful) BH project and not a fly-by-night venture. ๐Ÿ™‚

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