B&B's with Lease/Purchase option?

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mona's picture
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I'm curious if lease purchase options are common in this industry?

I've always dreamt of having a B&B and am now beginning to plan on making this a reality. However, the fear I have is that I'll buy a property, the business will be unsustainable, and then I'll be unable to sell the house. I know that owning your own business requires risk- which I'm more than willing to take, but the commitment to a huge mortgage seems like its just too much. So I've been thinking of alternatives such as lease/purchase options, which would allow me a year or two to actually operate the business and determine whether a particular B&B is a viable, sustainable business option for me. By no means am I trying to get rich. I'm really not even interested in profit at all- I just would need to know that it could pay for itself. I'm 27 years old and single, so there's no pension or spouse's income that I could rely on.

Has anyone had success in buying a B&B by first leasing? Is this something seller's are open to and willing to consider? More importantly, are YOU open to this? I'd pretty much relocate anywhere to follow this dream Smiling

 

Thanks for any info!

-M

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Mona, we'd be interested in talking to you about your dream of leasing a B&B ... our B&B.  We're in North Carolina.  So many negative comments here.  Don't give up. 

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Very interested in a lease option of B&B in NC.

Jhcuster@gmail.com

7043303144

Look forward to hearing from you.

 

James

 

 

 

Silverspoon's picture
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I would remove your personal information from your post.

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Sorry but if you read the post date, this is totally out of date 

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mdinnc, click on mona's name and then click contact to send a private message to her email through this forum.  Sure hope it works out for the both of you! 

Oh, and welcome to the forum!  Hope you stick around!

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Mona,  if you are still looking and would be interested in a full time Innkeeping job (to find out if Innkeeping is for you) let me know and I can point you in that direction.

 

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gillumhouse's picture
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Here are two Seminars by some inn brokers - Inn Partners

Do you have guests who are interested in becoming innkeepers?  Please let them know about our upcoming seminars:  June 1, 2013, 9:00am to 5:00pm at the Three Mountain Inn in Jamaica, Vermont and Saturday, September 14, 2013, 9:00am to 5:00pm at the Arrowhead Inn, Durham, North Carolina.
Aspiring innkeepers can register through our site or give us a call 877-957-2360  Seminar for Future Innkeepers!

seashanty's picture
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found it!   http://www.innspiring.com/node/12789

seashanty's picture
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here's one of the threads but it's old

http://www.innspiring.com/node/11544

 

 

seashanty's picture
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hello ... welcome.

something scratching at the corner of my mind ...  i'm thinking i just recently saw a post from someone on this forum looking to hire an innkeeper for a property he/she/they own and that they might have mentioned leasing.  I'll have to do a search.  maybe you could start out as the paid innkeeper and then if you love the place see if you can work out a deal. 

  i know someone who leased and now owns.  i believe he took it over from a couple, one of the people was sick ... it started as a paid employee arrangement and then he took on more and more responsibility and it evolved from there. 

good luck

 

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05/30/2008

I've known of one individual who did a lease to purchase option that was successful, and that was structured where she bought the business part, and leased the property.  It was a very high occupancy large inn and she was able to make enough to eventually purchase the property too.  She had very little in personal assets when she embarked on the project.  However, it was when the economy was really strong, too.

Another innkeeper successfully did a lease to purchase of an under performing inn, grew the business, and sold it for a big profit.  (Again, larger inn in a very popular tourist area.)

From the seller side, I know of several folks that lease-to-purchase did not work out well for either the buyer or seller.  In one instance, the buyer paid a premium for the innkeeper's residence as part of the deal and ended up selling it in a short sale.  They had to back out of their lease-purchase agreement but still had the house.  Another innkeeper had not vetted the individuals properly, and they raided the cash from the business (and deposits for future stays) and disappeared.  I believe that the owners attempted some kind of legal action against them but don't know if it was successful. 

These type of agreements have to be written carefully, to protect both sides.  But, it's worth investigating.  Sometimes an inn broker has much more experience with them. 

Welcome and good luck. 

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birdwatcher's picture
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Im late in answering any questions, but innkeeping is more of a lifestyle and its not a "quit if i dont like it profession" if you own or lease/rent the business you want it to pay for itself thats great, but the truth is that leasing/owning a business is a commitment not a "well i'll just try it till i cant pay the bills or to see if its a viable business for me"-this statement is so immature-and yes i see youre 27, but the truth is that unless a B&B is run so effectively in a great place that is busy consistently and has no overhead or anything pertaining to maintenance of the building, employees, the economy and lets not forget what the reason that this business is  being sold or leased-if may pay for itself but without any profit how will you live?  I mean you do need some income to have a life dont you or work towards retirement?

We owned and operated a beautiful B&B and lost everything because of the economy and it was seasonal. We decided to still be Innkeepers and are working now at another B & B-its not easy to work for someone else but then its what we really love to do, the burnout is high in the B & B business whether you own it or work in one. My suggestion to you would be to get hired in a B & B and be an innkeeper first-this will give you a clue in to the REAL job of being a cook, cleaner, laundry person, dishwasher, entertainer, secretary, reservationist, baker, gardner, shopper, bookkeeper, marketer, seller, community organizer, volunteer and best of all the personal side of your life...like someone above said Innkeeping IS  NOT FOR WIMPS OR for the SOFT HEARTED. You are always ON-you carry the phone with you or forward that phone, you answer calls at all hours sometimes-you cant really be sick or get a day off-

This is the best and most honest forum you will ever be in, we are all professional Innkeepers and we will all tell each other the honest truth about everything, some of it is not so pretty trust me on this i've also been on the other side of it-but the truth sometimes hurts. All Im saying is be sure that is what you want to do , cause its not what you think it is you know what I mean. There are many semiars available out there-you may even decide that you want to volunteer in one for a couple weeks just to get the jist of this life we all have.

 

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We have offered our B&B to the couple running it. So they have first right of refusal when it goes up for sale again. The good news is I am sharing monthly statements with them so they will know if this makes sense. Also they run 90% of the day to day so if I need to carry some owner financing, I know how they will do for the most part. The biggest fear points will have been removed before a purchase. 

They had already worked at the B&B since it opened and just taken on more and more responsibilities. So it was not someone off the street. I am not sure how someone would create the comfort level with a stranger.  

The ideal might be an employee arrangement combined with an option versus a lease/option. We have a lot of owner operators on this board and no doubt that is the model that our clients are expecting so it has its benefits. 

I think that any model can work if both parties are interested in it. Just stay sensitive to the other parties wants/needs. 

white pine's picture
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Welcome Mona, this is a great place to learn... I agree with the others that you should try classes and innsitting or hire on as an innkeeper to see if it is something  that really fits you.

Seriously, I don't care what you love doing...when you HAVE to do it everyday, you can come to look at it differently.  

 Also, a prospective business should have books available to examine if it is a going concern.  Bear in mind, even if it is profitable, or even if it is not, it will be how YOU manage it that will make the difference.  That is why you need experience going in, if you don't have a second source of income, you need to know what you are doing from day one. 

If you are considering a purchase in any area you are not familiar with, be very careful to find out what the real estate prices there are like in general.  Don't compare just B&B prices, because if worst came to worst and you had to sell it not as a business, the value needs to be there.  

I don't know what your dream B&B is, or what your abilities are, but I do think you are wise to ask and learn about it before you sign on the dotted line.  Good Luck.

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muirford's picture
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There are not that many lease/purchase options out there, and the best way to find one would be to work with a B&B broker who might know which, if any, of the sellers out there would go for that.

I have heard of at least 5 or 6 deals that have gone bad, ranging from the new buyer walking away after a week to scam artists who took all the money they could out of the business and the property before walking away.  I have heard of one that worked out well for both seller and buyer.

Personally, as a seller, I would only go with a lease/purchase option if a) the buyer had enough money for a down payment equivalent to obtaining a mortgage at the purchase price and b) the buyer would qualify for a mortgage/commercial loan if they pursued one with a bank.

I have been around a lot of aspiring workshops and seminars (as has EmptyNest, BTW) and it seems like many people want the lease/purchase option because they can't meet one or both of those criteria.  They have no money to put down, or they have a bad credit history or financial problems that would keep them from qualifying.  If you are willing to treat the seller as a bank alternative, and go through the same qualification process - you may find some sellers with viable businesses out there who are willing to work with you. 

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OnTheShore's picture
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An alternative to consider might be working as innkeeper -- somebody else owns the property, you're just the hired hand to run it, with a place to live and living expenses. You wouldn't make a lot of money, but this would give you the opportunity to try out the business and perhaps learn what to look for when it comes time to shop for your own place. This kind of opportunity seems to come up more often than lease to purchase options straight from the get-go (some of innkeeping gigs sometimes turn into lease/purchase arrangements, from the stories I've read).

As for the lease/purchase option, you might think about a month's trial rather than a year-long trial. I could see somebody giving you a month to evaluate the viability of the business. That seems more realistic (in terms of the risk an owner would take in leasing the inn to you) than a whole year... Maybe I'm off my rocker, though.

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I think it would be far easier and better for you to take your time looking at properties in your price range and making sure that it is a good investment, rather than thinking of a lease/purchase agreement. What everyone has said is true, most owners don't want the risk of leasing with an option because of the long term pitfalls. If the owners ever had to take back the property, it would cost far more than the upfront option to repair the business reputation, negative reviews and possible damage to the property.

If you are looking for a b&b that pays it's bills but not much more, there are a lot out there! Find one for a great price that has the potential if run right to actually make more of a profit. Lots of older innkeepers are wanting to get out and haven't kept up with the times of marketing properly on the internet.That's the kind of place to find!

What else you'll find out there are owners who are willing to carry some or a lot of the financing (big risk for them also). There are a flood of b&bs out there right now looking to sell. Just make sure that it's a good match for you. Remember, after you buy, you'll be in the business for years and you want to make sure that the area you choose to live in and the house suits you.

mona's picture
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thank you! those are all really great points!! I definitely have to do a lot more research... 

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mona wrote:

thank you! those are all really great points!! I definitely have to do a lot more research... 

GREAT!  While Eric ripped off the Rose Glasses, hopefully you will dig in to this forum and still find it is a very rewarding business.  I love what I do (well most of itwink) and I sure hope that there are other individuals ready to jump in and love this business as well. I alos love the fact that young people find this business interesting.   We all just would like those to have given it much thought, lots of research and know that it is not all glamorous or rosy.

As Empty mentioned, a seminar is a great way to get to know just what you would be diving into if you continue on this dream path.  You may also look into doing some innsitting after the class to get a feel for the business first hand.  

When someone comes here asking questions we have no idea how deep their pockets are, where (in the world, country, etc.) they hope to pursue their dream, what they think is enough $ and on and on.....  So we can only provide basic information here.  

Stay around, snoop into the different threads and check into a seminar near you.  If you need assistance finding a seminar, post here and we can provide some choices.  Best of luck to you & see you around the forum.

 

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Every time I hear about this, I only hear horror stories. It's a lot about the skin in the game. What has worked has been mortgages with balance of sale, since the balance is paid off with the first revenues and there is a lot of skin in the game, so the person has a lot to lose. Buy unless it is a LOT of money that they can lose, there usually isn't enough skin in the game, unless it's a tried and true innkeeper who is looking to do this. 

Innkeeping isn't for wimps, it's not for "trial", it's not "I hope it works". It's more like either it works or there is nothing else. And too many people today just aren't able to just struggle though and do what has to be done. Excuse my being crude, here, but I think it has to be said in terms that aren't so rose coloured.... being an innkeeper means that you will...

  • Stoop to clean pee off the seat, under the seat, on the rim, on the floor and even on the bedsheets.
  • You will be washing makeup, blood, semen and wine out of linens.
  • You will have people disrespect you, your house and your belongings.
  • You will smile when a man from Minnesota makes snide and underhanded remarks to you and thank him for staying with you.
  • You will cook a beautiful breakfast to have someone make a comment about not liking something in breakfast a day later. Or decide in the morning that they are a gluten-free vegan who won't eat refined sugar because you can't prove that it's vegan friendly sugar.

And that's the TIP of the iceberg. It's just too easy for people who aren't ready for all this to walk away. 

 

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The only innkeepers I know who did this went bankrupt. They had several try the leasing...I assume they got a hefty down payment from them..but both of them had on "rose colored" glasses and neither lasted 2 months. One went bankrupt, the other--just left. I suspect she lost a good down payment as well.  Then, the "Owners" themselves  on  some sort of visas, were unable to make their bills, time running out..so they just threw it to the wind and hightailed it out of the country leaving all their creditors behind. Bank has the property for sale now if  you ever find some money.

Don't think you will find much around with this option. If you want to get into innkeeping take an aspiring class first and save some money. Sorry to say at 27 chances are slim to none if you don't have any income or support / health care etc from somewhere.

Take some time here and read through past threads. you will learn alot.  Everyone here speaks the truth whether people like it or not but that is they way we are...take it from the voices of experience.

 

mona's picture
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Your example is interesting- in that you've known of only one, who themselves up and left the property. I'd say that's not a typical situation and, generally, a terrible example. 

If you want to get into innkeeping take an aspiring class first and save some money. Sorry to say at 27 chances are slim to none if you don't have any income or support / health care etc from somewhere.

While I appreciate your "advice", I find you patronizing. Just because I'm 27, doesn't mean I don't have savings. 

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I may only know of one personally, but I have heard many many more stories. In fact we have a forum member here who recently lost her place.

Well you stated " a place to pay for itself" that makes me assume. Savings is a relative term. Our savings Paid cash for our B & B. If I sound patronizing it is because so many have come here asking questions and not liking the answers they get. We get tired of playing the game.

mona's picture
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Wanting to buy a business that breaks even is not abnormal and indicates nothing about my financial situation... Who would want to purchase something that is losing money? 

If you are tired of newbies like myself, you certainly didn't have to reply to my post. 

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mona wrote:

Wanting to buy a business that breaks even is not abnormal and indicates nothing about my financial situation... Who would want to purchase something that is losing money? 

If you are tired of newbies like myself, you certainly didn't have to reply to my post. 

answers given to questions are not to be taken as a personal reflection - we have no idea who or what you are. I know some 27 year olds who are set financially and mentally and some who at 40 still are not.  Your questions are not being answered at the personal YOU, they are answered at the question you asked.

I have a 3-guestroom B & B and there is no way I would consider leasing it. I built this baby from scratch and put a lot of work and sweat into building a great reputation - something that could get ruined in one month if handled wrong.

Call me snarky if you wish, but just what profession allows you to just come in and "try it on for size"? For most professions (and trust me, innkeeping is a profession) you have to go through schooling or an internship or some sort of training. The only job I know of that you just learn by doing is being a Mother - no handbook there damn it!!

So just cool your jets and start over nicely. These folks are trying to help you and you will only get backs up by being disrespectful to anyone here - because everyone here is actually (or has been) in the trenches with the toilet brush and  knows what the heck they are talking about.

We do give second chances - so ask your questions and be prepared for honest answers/

mona's picture
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I didn't take anyone else's post as a personal reflection at all. I only took her comment personally because she used my age as part of the reasoning I wouldn't succeed- which is something I find patronizing. And no, I do not apologize for that.

There are different ways to answer questions, respond to people, give advice, etc. Many people gave me fantastic advice that I've absorbed and will give a lot of thought too. I appreciate and respect them for that. 

I don't really feel a need or want of a second chance from you and I don't believe I said anything that requires me "start over nicely". But thanks for the offer... wink

Hillbilly's picture
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I really have not heard of this being a common practice. I'm sure there are some out there that are willing to do this. My guess its the properties that are not selling. Then you need to ask yourself, "why has it not sold?" This is where you need to be really careful.
People only lease their properties for 2 reasons.
1)They can't sell it.
2)They want to make money off of it.

I'm sure there are some out there that will work with you and you could succeed.
Best of luck to you. I hope your dreams come true!

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mona's picture
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Thanks, Bob.... Smiling

Hillbilly's picture
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Its nice to have you on here! This is a great time to buy. Im sure you can find something that will work. It will just take time.

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All I can say is YIKES. If you think it is risky to own it, it is even riskier leasing it out to someone who might run it into the ground and walk away. (Not you, this has happened to quite a few people). No skin in the game, is what I would call it.

The lease option may be out there for someone who had a death of a spouse or something major and needs to be out of the business immediately.  I could see that being a viable option.

Hope you get many great answers here, mine being the first.  Smiling  All the best!

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mona's picture
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Yeah, I definitely get what you are saying.... But if I'm paying an option fee- that's my skin in the game. If I walk away, it's the sellers to keep.

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mona wrote:

Yeah, I definitely get what you are saying.... But if I'm paying an option fee- that's my skin in the game. If I walk away, it's the sellers to keep.

While you are correct that you do have something to loose, for the owners (sellers) it becomes a matter of 'WHAT' they get back if it doesn't work out.  - This is NO reflection on you, not at all, this is a statement driven from those that have experienced the problem and have shared that experience.  Of course there have also been win/win situations as well.  

If a person leases a currently thriving (or even holding its own) business but does not take the care to keep the business in the current state, then walks away.  What the owner gets back is not the same business.  The name is tarnished and therefore harder to turn over again.  And if the owner returns to the business, it is again a work in progress to return it to its once thriving self. 

mona's picture
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That makes sense. I haven't considered the lease/purchase option through the seller's perspective. They do have far more at risk. It be far too much trust to put into a stranger.

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mona wrote:

Yeah, I definitely get what you are saying.... But if I'm paying an option fee- that's my skin in the game. If I walk away, it's the sellers to keep.

There are a few stories I know of, from people I know who lost everything from this option. As I said, not you, but there are bad people out there who don't care. 

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