we are looking to buy an inn

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My wife and I have a good amount of cash saved up but we are finding out financing inns is difficult. The few we have looked st dont have thr revenue tob support the business asking price. We would be very interested in a short term lease or lease option if anyone is looking to get out of their inn. Would prefer southwest but would consider all locations from the Rockies-West.

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I love the fact that everyone here is sharing information, and this dude doesn't want it. He only posted here to find an inn to lease, and has all the answers.  You guys are too much! 

YOU ROCK!

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adavis wrote:
The few we have looked st dont have thr revenue tob support the business asking price.

Valuation is a funny thing, isn't it?

Sure, when you are buying many other types of businesses, or stock in a corporation, you might look at price to earnings ratios and such, as ultimately the value of a business is the revenue that it can bring in (based on it's reputation, customer list, good will, etc...), and perhaps that value is much greater than the value of the business's fixed assets.

However, with many small hospitality businesses, the value of the fixed assets might overwhelm the value of the business as a business. Our place, for example, would be worth a lot more with all of the existing buildings torn down and the land subdivided into several lots for sale to rich people who want to build waterfront mcmansions, than it would ever be if we tried to sell it as the humble business that it is.

I know of a large B&B further down the coast here in Maine that sold some years ago to a family who converted it into their own private vacation getaway (where they could host all their relatives and friends). Similar to our place, way more value in the real estate than as a business...

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If I had the money for a family compound I would love your property! Wow! Everyone gets their own house. Perfect!

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In addition to my post below, I wanted to add that with today's review systems like TripAdvisor, Yelp, etc. a property has to maintain a fantastic reputation to sustain itself and build it's value -- the same as at the upscale hotels that you've managed.  That's another reason that owners won't consider leasing a property to someone -- if those bad reviews start building up because the lessee isn't a great innkeeper, then the reputation suffers and therefore the value suffers.  Taking a chance like that is huge and with a property $1.5M and up to support a whole family no one is going to take that chance.   That's also why a bank is going to be looking for about $450,000 to $600,000 downpayment for those larger properties, to ensure they don't lose too much.

Good luck, I would also recommend that one of you keep (or get a local job with benefits) as I did for 5 years until this place was making money.  On that note, if you aren't keeping a job with benefits be sure that you have about $12K for the first year's medical insurance which is what I pay for a family of four.  Certainly miss corporate health insurance!!!

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adavis wrote:
My wife and I have a good amount of cash saved up but we are finding out financing inns is difficult. The few we have looked st dont have thr revenue tob support the business asking price. We would be very interested in a short term lease or lease option if anyone is looking to get out of their inn. Would prefer southwest but would consider all locations from the Rockies-West.

 

This is the kind of beginning we get here over and over. It gives us NO info to work with for advice. It tells nothing of YOUR background/knowledge. As we have had so many in the past who knew NOTHING, we start with the bare realities.

Word of advice to any lurkers - no one will bite your head off if you ask a question but we advise reading threads first. BUT if one of us gives an answer of the basic, basic realities such as costs, permits to research, etc - DO NOT come back with a huffy answer because it is going to get the back up of all the innmates. Like anyone else, we circle the wagons - and we have been known to bite. Not often, but.......

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yes

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You all are giving him more advice, oi veigh. See how it is dude! It ain't just me. cool

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Joey Bloggs wrote:

You all are giving him more advice, oi veigh. See how it is dude! It ain't just me. cool

I'm just giving information for other aspiring innkeepers. This is the reality of what it takes and the finances needed. Hopefully others will read this info and get a does of reality.

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Breakfast Diva wrote:

Joey Bloggs wrote:

You all are giving him more advice, oi veigh. See how it is dude! It ain't just me. cool

I'm just giving information for other aspiring innkeepers. This is the reality of what it takes and the finances needed. Hopefully others will read this info and get a does of reality.

That was what I was doing too. I took the time and effort to share actual costs of rooms and more, which I thought someone aspiring may appreciate. 

Right now there are 24 guests online besides those logged in. I was NEVER shown how much a B&B guest room cost, and how all these things add up, nor the value of a conveyance. NO ONE HAS EVER DONE THAT, so I thought I was actually being pretty nice there, aye.

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Joey Bloggs wrote:

That was what I was doing too. I took the time and effort to share actual costs of rooms and more, which I thought someone aspiring may appreciate. Then was told off. I thought it was pretty bloody rude. 

We've seen it here before, when advice given to be helpful is taken the wrong way. The OP's response was kind of out of the blue, and yes, bloody rude. Could have said, "Thanks, I've already looked into that but appreciate your input." Instead, chose to take it as being ridiculed and "told how its going to be".

Read his original post. He doesn't want advice; just looking for a seller.

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well, he asked for it.

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From our experience- to live entirely from B&B and be able to pay your bills and yourself, you will need at least 15+ bedrooms and that creates problems on its own:

1. to buy ready, legal and profitable property you would need $2M+ with big down payment as most of the banks can not comprehend what is B&B (most think is a rooming house or even worse). If you relocate and will have no income I think it will be short of a miracle to qualify. Where I am, you would never get the mortgage for B&B with $100K down and no job. Maybe a profitable hotel would be easier to finance, but than jet if is profitable and in good condition price will reflect that as well

2.starting new - beside zoning and regulations from the city (I think it would be almost impassible to get permit for 15+ bedrooms in residential area and what guest would want to stay in commercial/industrial setting), parking regulations, just think what opposition you will get from the neighbors. So, start small and grow slowly.

Personally, I think starting up may be your only option. Why not to start where you are. Do some research what are the B&B regulations and perhaps buy a new residential property that is suitable. It looks like you have a lot of supplies to start with and hospitality experience. Do not quit your job until you have a new property and mortgage in place and perhaps if there is 2 of you-1 should keep the current job until B&B starts bringing sufficient income. 

Good luck, you will need it. Wish you well.

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financing where I am is a nightmare - 10 bedroom up the road is currently going for $1427915 dollars and they want a minimum of 50% deposit - and who has that?

particulars state they make £79,990 profit! $134375 per year - which I am sure it does if you have no mortgage!

 

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with $1343375 per year, it better has no mortgage. after the bills and taxes - what is left?

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I think you've read the numbers wrong - that's the money in your hand after everything is paid - turnover is more than double that

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with 10 rooms? are they 100% occupancy 365 days a year?

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remember they don't have a mortgage which would be about £50,000 a year at least.

But its a 5 star BB - prices on a Weekend roughly £130 - $217 weekday prices $134

probably 70% occupancy all year round or more - low commission bill due to being in the top 10 tripadviser, good hotel guide etc - keeps costs down.

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$100,000 may seem like a lot of money to some folks, but when trying to purchase a profitable b&b that will fully support a family, it's just not enough. That's why you haven't found a property that provides enough income. Those properties that have enough income come with a price tag of 1.5 to 2 million. At that price, you wouldn't even have a 10% down payment.

I agree with Copperhead...you should consider starting a b&b from scratch.

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We bought a house where we WANTED to live and the house we wanted too live in. It also happened to be configured perfectly to be a B & B - owners quarters to one side and B & B the rest.  It depends on what you want from the B & B. I knew I was not going to be worked to death like Maddie because I #1 - do not have that many rooms and #2 - am not is a "destination". I MADE my town a destination as much as it is. I just wanted my house to support itself. Now i am greedy and I want it to produce enough for me to go to Finland (and enough to live on after DH dies until I can sell it).

Would i consider leasing? HELL NO!!!!! I worked hard to create the reputation I have and my city needs a B & B. Yes, i will sell but then it is their baby and no longer my reputation on the line.

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gillumhouse wrote:

Would i consider leasing? HELL NO!!!!! I worked hard to create the reputation I have and my city needs a B & B. Yes, i will sell but then it is their baby and no longer my reputation on the line.

To put it more specifically, it's not just your reputation on the line in a lease, but your property value. If you lease to someone who does a horrible job and kills your TA ranking and doesn't take care of property maintenance, you have much less to sell after the lease expires.

EDIT: Just noticed that happykeeper said all this, and better, in a post way at the top!

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Do you really have a good amount of money saved up?  If you have enough for a good down payment (I would say 30% but some might go as low as 20%) you may be able to find an owner who will finance the purchase.  Not a lease - you will be buying but the owner will hold the mortgage. We just sold our inn and yes, financing was challenging.  One of the B&B brokers may be able to steer you to interested owners if you really have the money in the bank to support it.

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tmi

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I have been in the hospitality industry for nearly 15 years as a general manager of upscale hotels. I know how much furnishings cost and how much websites cost. We have nearly $150,000 in cash and I have a w harehouse full of beds(box springs mattresses and headboard frames etc), linens, terry, towel racks, boxes of brand new iphone docking alarm clocks, about 2,000 pices each of soap, shampoo conditioner and lotions.

I know what it takes and what it costs. I didn't post here to be ridiculed or "told how its going to be".

I would like to hold back $50k from the $150k for operating capital meaning we have $100k to out down. The problem we are running into is finding a suitable property for our family and bussiness needs that has revenue to justify price.

We are looking to relocate so I would be without employment for a short time making financing even more difficult. I was looking here for answers from inn owners who might know of another avenue.

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Sharing this for not only you but the other aspiring out there who may be watching the forum but afraid to ask:

When we were building our B&B new 9 years ago, the bank wanted a minimum of 25% down and that was before so many properties started to go into foreclosure.  We had hospitality and management experience.  We had the money from the sale of our house for the 25% down but the bank also wanted a full year's of operating income, about $75K put into a fund to ensure we got up and going.  I closed out my 401K to get this extra money as we didn't really have any other choice at that point.  All together we had over $300K for this project, which is what both the SBA and our local bank required us to have.  So $100,000 down with $50K for operating income isn't sufficient nowadays for most higher end properties.

In the 9 years that we've been open, I know of 6 B&Bs that have been foreclosed on in our area (all within 25 minutes) and my banker recently said that they weren't looking to loan money for any more B&Bs - the banks don't want them as they lose tons of money on them.  Those that area affordable (less than $1M) don't make enough money to sustain a family of four like ours.  Those that are more than a $1M most people don't have enough downpayment.

When it comes time to end being an innkeeper, I will not consider leasing our property and here's why -- the value of our property will be considerable and part of that will be our reputation.  It's too much of a risk handing over the property to someone you have no idea what they will do with it - and I don't want a property back after someone up and leaves that has been driven into the ground.  Being an innkeeper is NOTHING LIKE running an upscale hotel property as this will now become your home and you'll have no escape like going home at night after a 10 hour day.   I've worked 10+ hour days in business as a straight commission sales person getting no paycheck and I closed huge, time-consuming, difficult deals.  That was easy compared to being an innkeeper.  So innkeepers with large expensive properties that can support a family realize that they can't just hand that over to someone and see how it goes.  It's too big a risk - you could get the property back valued at least than you handed it over for.

Buying a home may be the best way to go if you don't have a couple hundred thousand more to get going.   I agree that you should contact a hospitality broker to help in your search and they may know of alternative methods of financing.  Good luck, it isn't easy in today's market.

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That was really well said.

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adavis wrote:
I have been in the hospitality industry for nearly 15 years as a general manager of upscale hotels. I know how much furnishings cost and how much websites cost. We have nearly $150,000 in cash and I have a w harehouse full of beds(box springs mattresses and headboard frames etc), linens, terry, towel racks, boxes of brand new iphone docking alarm clocks, about 2,000 pices each of soap, shampoo conditioner and lotions. I know what it takes and what it costs. I didn't post here to be ridiculed or "told how its going to be". I would like to hold back $50k from the $150k for operating capital meaning we have $100k to out down. The problem we are running into is finding a suitable property for our family and bussiness needs that has revenue to justify price. We are looking to relocate so I would be without employment for a short time making financing even more difficult. I was looking here for answers from inn owners who might know of another avenue.

We get lots of posts here from people wanting to get into the industry but are blindly going about it.  Without any info of knowledge, etc., we are always drawn to explaining the basics.   

Since you have some of the necessary furnishings and have some capital, I would be looking at purchasing a property to turn into a new B&B.  Most B&B's for sale are looking to sell turnkey.  Good luck in your venture!

 

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Sorry to say but the only real options you have our finding an owner willing to carry a mortgage, or finding a commercial loan. You are fortunatr to have the background and a good nestegg as most who come here have no clue.

The other responses were just based on what we first read from you. 

You are going to have to find a pretty big place with a great location and a solid business built up. As most here will tell you, a small B and B is not a moneymaker.

good luck.

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adavis wrote:
I have been in the hospitality industry for nearly 15 years as a general manager of upscale hotels. I know how much furnishings cost and how much websites cost. We have nearly $150,000 in cash and I have a w harehouse full of beds(box springs mattresses and headboard frames etc), linens, terry, towel racks, boxes of brand new iphone docking alarm clocks, about 2,000 pices each of soap, shampoo conditioner and lotions. I know what it takes and what it costs. I didn't post here to be ridiculed or "told how its going to be". I would like to hold back $50k from the $150k for operating capital meaning we have $100k to out down. The problem we are running into is finding a suitable property for our family and bussiness needs that has revenue to justify price. We are looking to relocate so I would be without employment for a short time making financing even more difficult. I was looking here for answers from inn owners who might know of another avenue.

Never friggin' mind then, you posted it here and asked for replies. Seems you know everything, now to just buy a B&B you can afford...and learn how to spell. Good luck.

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Joey Bloggs wrote:

Never friggin' mind then, you posted it here and asked for replies. Seems you know everything, now to just buy a B&B you can afford...and learn how to spell. Good luck.

Ahahahahahaha!  This made me laugh so hard, and I REALLY needed that today.  Thank you Smiling

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Joey Bloggs wrote:

Never friggin' mind then, you posted it here and asked for replies. Seems you know everything, now to just buy a B&B you can afford...and learn how to spell. Good luck.

yes

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This forum has been here for a few years. We've seen aspirings come and go. Many drop a question here and never log back in.

With zero background on what you're bringing to the table you pretty much got the scattershot answer.

No one said anything to offend. If you took it that way, that's because you gave no info for anyone to give a more informed answer.

You have more resources at your disposal than most here have right now.

Given what you've got, your willingness to relocate your family and your experience you should probably work with a broker who will do the leg work for you and eliminate all the properties that don't meet your criteria.

If you're already working with a broker then it should be a short time before you find the right place.

If you have not done so, check the b&b directories. Many of them have for sale or lease pages.

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Keep looking. It took us a year to find a place. You also need to go to the bank with a very good business plan, have you written one yet?

Banks are looking for experience. Have you taken classes or done any on the job training? Have any business experience or hospitality training?

The bank does not want to own the inn down the road.

You'll have to do P&L modeling for the bank in your business plan plus show that you have cash for the first year's expenses after your down payment.

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Welcome to the forum. I will assume you have been following the forum for a while, so I imagine you have gathered in much of what folks have to say. My response is only based on how we would look at your offer if it was for our inn.

My first thought would be- there is no way- absolutely none- that we would consider turning over our business that we have worked to build over 15 years- on a short term lease.

My second thought is that there is no way that I can think of at this moment that we would consider a lease option if we decided to sell- it isn't a house- it's a business. Why would I let you lease my business, potentially ruin it, and then give it back. I gotta figure the terms would not be acceptable to the buyer.

As I said, this is only how we would see it. There are certainly innkeepers out there that would jump at the chance, but let the buyer beware. Burned out innkeepers, failed business innkeepers, bad review innkeepers, innkeepers who are going to close anyway, and innkeepers who want to sell the house and wouldn't care if you ran a brothel.

You might be better off doing the market research, finding your spot, finding the property you think will work, finding out if you can apply to be an inn, buy a residence with traditional financing, and then get approved and open a brand new place.

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happykeeper wrote:

 

You might be better off doing the market research, finding your spot, finding the property you think will work, finding out if you can apply to be an inn, buy a residence with traditional financing, and then get approved and open a brand new place.

 

We tried.   Well, we looked.  The idea of having to add 4 or 5 bathrooms always made us back away.   When we found an already set up house, we finally thought we could do this.

There is a B&B in this town that took the owners 9 years to upgrade from run down Victorian to beautiful B&B.   And it was a good idea.  We thought about it.  Great spot, beautiful house.   But couldn't imagine the 9 years.

 

To OP - Have you already looked on Bed and breakfast dot com and other similar places for classified ads?   Or, contact a realtor in the area you want to live in.  

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I was responding to whomever posted how much a website would cost, how much is costs to furnish rooms, how insolent jump into something without knowing everything, yada-yada-yada.

Dont mean to offend anyone that is giving good advice or guidance.

And sorry about spelling (to the guy really bent out of shape about it )...posting from phone with serious autocorrect issues between meetings.

So yes, situation seems tough....looking to relocate, have some cash but will have no income (2nd job) in the beginning so traditional financin is tough without that employment in hand. We have good amount of cash plus a home with decent equity we would also need to sell.

I was hoping someone might have worked with brokers in past that can assist or at the very least maybe someone worked their way into the ussiness by 1st leasing.

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So it would seem that my last statement is your answer. BD and CH say the same thing.

 

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If he wants an high income producing inn, it is going to take more than what he has to start one. And, he needs to check zoning and permits because if buying just a house, doesn't mean it can go commercial or even become a B & B. That's a big chance to take. Finding that large a house for business and family is not easy.

happykeeper's picture
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I listed seven steps- feel free to put zoning and permits under whichever one you think fits best.

It's a huge risk and it is definitely not easy.

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There are very very few who would lease a B & B business. Mostly because of the size your are looking at. Someone with a smaller say 3-4 room place maybe would consider but if you are looking a a large place as an income producer I seriously doubt any would consider it.

Google B & B real estate agent or something similar. There are a number of them around. The ones I know concentrate on the East Coast so would not be of any help to you. You may want to check some of the West Coast state B & B association's web sites many times these brokers are vendor members and their contact information is listed. They can't get you financing, but may have some insight into what others have done if you want to take on a buyer agent.

Thankful to say we paid cash for our 4 bedroom place and we saved for years and sold a previous business and house to complete the deal.

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