Is it worth it to sell your B&B as a business with the overwhelming ubiquity of airbnb around?

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Basil Fawlty's picture
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When we opened in '05 we envisioned selling as a business when we retired.  Now, with airbnb all around us, who would want to jump through all those county permit issues (our county is one of the worst), the WA state business license, the Health Department License, the Transient Accommodation license - when they could simply put this property on airbnb.  We are actually listed on airbnb (sorry, we couldn't beat them, so we joined them) and we rent the entire Guest Quarters out as a Vacation Rental on a couple of different platforms.

I bought a listing on INNSFORSALE.COM, but do any of these b&b sales platforms really work??  If you have experience selling your B&B, especially here in Washington State, but anywhere really, we'd appreciate your insights.

Green Cat Guest House, Poulsbo WA

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Anon Inn's picture
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Have you decided to sell as a SFH?  Your site says no more bookings will be taken.  

Lee2014's picture
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  It sold in June...

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PhineasSwann's picture
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90% occupancy? 

[drool]

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Darren
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Morticia's picture
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PhineasSwann wrote:

90% occupancy? 

[drool]

I know, right? We raised rates and summer occupancy dropped to 80%. 

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OnTheShore's picture
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When you are shopping for a house, you get to tour the property yourself usually with the real estate agent present, but you don't get to have an appraiser measure the house, a house inspector check all the systems, a water test done, etc... until you have put up some earnest money and have a signed purchase and sale agreement in hand (with appropriate contingencies, of course).

I suspect that maybe the broker who is not sharing seller's contact information with prospective buyers has been burned in the past by the sellers and buyers working out a deal themselves behind the broker's back -- which suggests that maybe he or she doesn't have a very good enforceable contract with the seller or otherwise hasn't earned the seller's full trust. Maybe you will get that contact info once you are not longer just a "prospective" buyer but a serious, committed buyer?

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I am willing to sign NDA's declaring, "thou shalt not share financial or customer activity with ... ", and including an expiration date of 5 years or whatever. Expiration could be forever as far as I am concerned.

In my business as an engineer, I sign routinely sign NDAs. Although the language of these NDAs is usually telling me that I am priveledged to obtain the business sensitive product design information for anything from 2 years to 10 (yeah right). Personnally unless I get stupid and tell that customer that I gave their design to a competitor, I think the NDA is protecting the people I am working with from their own legal department.

@JimBoone You are addressing my concerns. The run by mom & pop is typically the size of B&B that we are looking at. Forgetting my assumptions as to how the deal should go, I think a bank will want the business details if the asking price is significantly above the value of the property. We have ample down payment money, but we are not paying cash for the whole deal ... a bank will be involved and ultimately calling the shots.

I have a NDA sent by a broker that lists several b&bs for sale but the address for any particular one is not on the 1 sheet of paper. Reading what is between the 4 corners of that NDA, we basically are not allowed to even stay at a b&b that they list to ensure that there is no communication with the current owners and ourselves. And, the financial information provided by the seller is not warranted in any way. If I were a skeptical person, I would call it scam-ish.

 

JimBoone's picture
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PsiStar wrote:

The run by mom & pop is typically the size of B&B that we are looking at. 

I think a bank will want the business details if the asking price is significantly above the value of the property.

I have a NDA sent by a broker , we basically are not allowed to even stay at a b&b that they list to ensure that there is no communication with the current owners and ourselves. And, the financial information provided by the seller is not warranted in any way. If I were a skeptical person, I would call it scam-ish.

PsiStar, so that you know, we are a mom and pop motel, 8 rooms, not exactly the same, but more in common with friends here on the forum than the typical larger motel.

Years ago I was looking at a project, had all this lovely paperwork that was put together as part of a program at the local university, generally my bankers comment was show me your experience and details, I don't care about all this fluff, that also addresses the third item, a broker is only interested in making a sale and showing the positive items, I agree with your comment.

As a way of backing in to the third section, I look at what we do as a life choice, I enjoy each day, sure I expect (need) to make a profit, but that is balanced with living my dream, I don't want one day to retire to something else, this is what I enjoy doing.

Guess I'm asking where is your dream, beach, mountains, downtown, rural? If you look out the window each morning had hate what you see, you may as well keep being an engineer. My suggestion for happiness is to choose your dream, then hit the internet for BnBs for sale, visit the area and the property, does it fit you well? Consider your personal living space too. When you find that place that fits your needs, only then contact the broker (or not). 

My choice 30 years ago was a mountain town that was our vacation destination, our eventual purchase was a spot that fit our budget in a different part of the county, it took a while, but meets my desires. Welcome to message me and I'll share more through email if you have an interest.

 

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Morticia's picture
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We stayed at the place we ultimately bought. The sellers were told not to talk to us without the broker's knowledge. (So the sellers did not divulge info that would lower the offer price!)

We passed all of our questions thru the broker. The sellers were busy running the business and didn't need/want constant emails and phone calls.

When you're occupancy is 90% you've got a couple of other things on your mind. And that's what you're paying the broker $40,000 to handle.

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First, 90% occupancy says you are not charging enough ... per my accountant, "if you are too busy, charge more".

$40K demands a warranty on data provided. For what ever the reason, any cooking the books discovered later should fall back on the broker. So, no warranty equals might as well buy on craigslist. I fail to see a difference.

I am up to my ears in realtors/brokers that must think buyers were born last night. If I walk into a place behind the realtor and the place is dirty, I turn around & walk out. 

OnTheShore's picture
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I think that is probably more on point that my hypothesis. And still I think the broker is not going to let the buyer through to talk directly to the seller until there is a purchase and sale agreement in place.

Morticia's picture
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PhineasSwann wrote:

You have the right as a buyer to ask for any information you want. The seller has the right to say no. Then you have the right to decide if you're going to walk away from the potential deal.

We did just that. Walked away. Seller refused to disclose expenses associated with running the business. Refused to disclose income as well.

They were certain their price was fair. But refused to tell what it was based on.

Place was still for sale years later. They weren't serious.

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This is sort of a necro-thread response. Necro-thread means this thread possibly considered dead. But the topic hits very close to my question. My wife, professional chef and caterer, and I are interested in buying a B&B and we have doubts about dealing thru brokers that insist on NDAs demanding hands off of the owners. Seems stupid to me.

We understand the value of the business adding to the value of the property. The issue I am having a problem with is separating the two. I feel that they are 2 separate issues ... but what will a bank think? I suspect the same. And, I am pretty sure any bank will want an appraisal of the property, as I will. And, then consider the value of the business and my wife's & my ability to perform.

The value of the business, how to determine? *I* would ask for a minimum of 3 years bookings by room. I would put these details into Excel just to discover when business is up and not. As well as showing the high earners versus the others. Great data that even a business not for sale would be interested in I should think. This is the data that is worthy of a NDA as brokers demand potential buyers to sign ... but do not allow contact with the sellers.

Personally, I think that is the best way to *never* sell you business. Working thru this type of broker. I think it is obvious that BnB owners are intimently connected to their business and I want to get their understanding. To me, meeting current owners is both an education (for the buyer) as well as an interview of the current owner(s) ... that might be redundant?

My offer to current owners for turning over their data is that I would return their data, after I have massaged it, back to them for them to do with as they will. Gratis. I would not share with anyone else. Although I suspect the value of the business information given that host/customer relationship, I purport, has a very large variance versus property appraisal variance.

Opinions? Don't mince words or have concern about flaming ... just be yourself and let me know your thoughts. My wife has been the schmoozer in her business for >15 years dealing with male & female primadonnas one on one. She is made for bnb. I will need some customizing (I am the engineer).

-Jeff

JimBoone's picture
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PsiStar wrote:

brokers that insist on NDAs --- demanding hands off of the owners. 

Am I reading two different things here, [1] not disclosing financial info that is provided to you [2] not getting to discuss the operation with the present operator?  I can see a business expecting financial info to not be shared around freely and the present owner not wanting to be hounded by just lookers, yet if I were serious and making an offer on a property, then yes I'd probably have more questions for the owner.

Now that said I do see a bit of a difference in buying a hotel downtown (all business) and a mom & pop property where the personality of the owner and the business are blended into the success of the business.

Maybe it is a question of is it a business or a lifestyle, that big hotel downtown, you invest your money and get a return, I can see a business value. Mom & pop (that's us), how much am I worth beyond the value of the physical property? 

If someone came behind me and lived and ran the business in a like manner "maybe" the business part is worth something, yet if they came in with a new idea and changed things up, what would "my" business be worth to them? Just thoughts.

PhineasSwann's picture
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Having bought and sold a few businesses, let me explain that if you're not willing to sign an NDA to look at their books, you need to forget about buying any business. 

You have the right as a buyer to ask for any information you want. The seller has the right to say no. Then you have the right to decide if you're going to walk away from the potential deal. 

When you buy a B&B, you're buying three things: You're buying a house. You're buying a business. And you're buying a lifestyle. You have to evaluate properties based on each of these three components. 

TheBeachHouse's picture
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06/24/2013

When we bought, the licenses were part of the deal.   If you have a reputation as a great place, it should still be a good business sale.

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05/22/2008

I think there are still folks out there looking for b & b's but financing seems to be the biggest drawback these days. Lots want them but they have no down payment. Not one is giving them away! I see some that have been on the market 8 years or even more.

we closed ours 10 years ago thinking we would sell ... not happening even as a private home we can't get what we want so we will just stay here till they roll us out the door. Thankfully we love our home and it is well maintained and we can adapt as needed.

Morticia's picture
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I still envision selling as a viable B&B in a couple of years. I hope I'm not being overly optimistic. Our regulations aren't that onerous, but the money spent on permitting is still ridiculous compared to renting rooms out of your house.

Another inn sold as a family compound. That could happen to my house. It could be divvied up into 3 apartments.

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