Buying Casinos for Sale: Minimize the Gamble, Maximize the Profits
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
One of humanity's oldest forms of entertainment is, in fact, gambling, and the US gambling business is thriving: Casinos in the US pulled in a monstrous $60 billion in revenue in 2022, thanks in part to recent changes in gambling regulations.
Buying a casino for sale is just one way that investors can profit from the growing gambling industry in the US. Casinos can yield healthy profits yet also come with some notable risks and challenges unique to their industry.
Here, we'll cover the basics that investors should know when buying casinos for sale. We'll discuss how to buy and start a casino, casino operating costs, and casino profitability.
Let's get to it.
How Hard Is It to Buy a Casino for Sale?
It's fairly difficult to buy a casino for sale and start a gambling business. Casinos have high startup costs and are highly regulated compared to other types of special-purpose real estate.
Casinos are also tricky businesses to operate, as gambling revenue models depend highly on gambling activity, which can fluctuate due to broader economic forces. Some states, such as New Jersey, also have additional taxes on casino gross earnings in addition to typical business income taxes.
How Do I Start My Own Casino Business?
The best way to find a suitable property for your casino is by working with a commercial real estate broker. Real estate brokers have in-depth knowledge of real estate financials and can help negotiate sales and lease contracts. Your real estate team should also include an attorney who can help you navigate the legalities of opening your own casino.
If you don't have the budget or stomach for buying casinos for sale, you can lease casino space instead. For instance, it's likely that some hotels, restaurants, and bars might have some additional space that they can lease to your casino operation. Unlike buying, renting provides you with mobility and flexibility, and you won't have a relatively non-liquid piece of real property on your hands.
You could also look into starting an online casino, which obviates the need for a physical real estate component. However, online casinos come with their own legal headaches due to differing gambling laws across states.
#1 – Casino Startup Funding
Buying a casino for sale will cost you anywhere between $2 million and $5 million in startup costs. Startup costs for a typical casino will include:
- Property acquisition;
- Licenses & insurance;
- Equipment (e.g., slot machines, card tables, chairs, etc.);
- Technology and software; and
- Security.
Most gambling companies won't be able to finance a casino purchase with an SBA loan because the SBA considers casinos for sale to be too risky. The most viable options for buying casino property are debt financing, private equity, and selling shares.
#2 – Casino License Requirements
Gambling is one of the most heavily regulated industries in the US, and casinos must comply with a wide range of license requirements and regulations. All casinos must be registered in the state in which they operate and must pay a gaming license fee.
Casinos must also carry a sufficient amount of cash to cover payouts. Cash reserve requirements are determined by complicated formulas that take into account the type of games present, the total number of machines, and more. Suffice it to say that casinos need to keep significantly more cash on hand than banks.
How Much Does It Cost to Own a Casino?
Casino management and upkeep costs range from a few thousand a month for small operations to well over $100 million a year for large casino resorts. Employee wages and benefits comprise one of the largest operational expenses for casinos, usually taking up about 30% to 40% of operating costs.
Gaming license fees vary significantly depending on the state. For example, a casino license in Illinois can cost up to $250,000 a year.
High operating costs are one reason why online casinos have become more popular in recent years. Online casinos virtually remove all costs associated with having a physical casino location, like mortgages, physical equipment, and some staff wages.
How Do Casinos Make Money?
The basic way that casinos make money is by taking more money in bets than they pay out in winnings. More specifically, the standard casino revenue model has three main components:
- The handle is the total amount of bets made, whether winning or losing. For example, if 20 people wager $40 on a roulette spin, the total handle is $800 (20 x $40).
- The house edge is the statistical advantage the house holds over the players. House edge differs depending on the game. For example, the house edge for standard blackjack is about 2%, meaning gamblers can expect to lose $2 for every $100 they bet.
- The hold percentage is the total portion of bets that the casino keeps. If $10,000 is bet on a blackjack table over 8 hours and the house keeps $1,000, the hold percentage is 10%.
All other things being equal, a higher hold percentage means the casino is making more money. Casinos try to maximize revenue by increasing the handle, which depends on game speed, average bets, and game participation.
Do Casino Owners Make Good Money?
Yes, casino owners can make an excellent income. According to data from Comparably, the median salary for a casino owner in the US is $203,803. The top 15% of casino owners make over $1.1 million a year.
Is Buying a Casino a Good Idea?
Buying a casino for sale is usually not a good investment for a first-time buyer but can be a good idea for commercial real estate investors who have more experience and higher risk tolerance.
Casinos make more money when consumer discretionary spending is high, so their revenues can rapidly decline when discretionary spending falls.
Find & Connect With Commercial Agents & Brokers Near You for Free on MyEListing.com
MyEListing.com maintains one of the largest databases of commercial agents & brokers in the country. Use it for free to find an agent or broker near you!
Other recent articles
Article Search
Share
All Article Categories
