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Gingerbread Latte

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Met with the CPA today. He has no B&B experience, but his partner does accounting for 3 local ones. He just got me up to speed on general business practices. I had researched and was prepared for everything he told me except the SS/Medicaid taxes (Self-employment) That was pretty discouraging. I tried every scenario I could think of to avoid them, but, alas... the gov't gets what it wants. So that's another 13% off the top.
But he assured me I would not make a profit in the first year or so...
I understand accounting, depreciation, write offs, etc. & how they affect the bottom line. But, he could have been a bit more optimistic.
I'd appreciate input on any other unique B&B accounting situations I can be researching.
 

muirford

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Gingerbread Latte said:
So that's another 13% off the top.
You do get to deduct half of that as an expense on your income tax. But he's right - the deductions that don't affect your cash flow like depreciation will reduce your gross significantly especially in the first few years of buying the business and making your own capital expenditures. We will pay a lot more self-employment tax for the past year since my DH has picked up some part-time software work in preparation for selling the inn because there are no real deductible expenses there.
 

Breakfast Diva

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What we have done is to form a corporation (sub s). We earn a small salary from the corp which we pay both the employee & employer social security, etc. The corp then pays us a lease payment each month which is current market rate that this business really could be leased at. The lease money then is not subject to the double social security, self employment tax, etc. It has saved us a bundle of money doing it this way. If the property is not making a significant profit, then you don't have to worry about it until it does.
 

Don Draper

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What we have done is to form a corporation (sub s). We earn a small salary from the corp which we pay both the employee & employer social security, etc. The corp then pays us a lease payment each month which is current market rate that this business really could be leased at. The lease money then is not subject to the double social security, self employment tax, etc. It has saved us a bundle of money doing it this way. If the property is not making a significant profit, then you don't have to worry about it until it does..
This is our scenario as well and it has saved a bunch.
 

Gingerbread Latte

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Thanks! I'll check into the S-corp. My rentals are in an LLC, but that doesn't really equate to what I'm doing here. (It's mainly for protection)
I'm beginning to get frustrated that my atty doesn't know enough about tax law (He's the best REI atty in town, though) and my accountant can't really advise on legal issues, so I'm running back and forth. CPA did mention the S-corp, but said it was a lot of paperwork. He kept saying you have a draw a 'reasonable' salary. Then proceeded to tell me I won't be making money. I'm a tad confused, but will figure it out.
Thanks again for the insight.
 

Alibi Ike

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Thanks! I'll check into the S-corp. My rentals are in an LLC, but that doesn't really equate to what I'm doing here. (It's mainly for protection)
I'm beginning to get frustrated that my atty doesn't know enough about tax law (He's the best REI atty in town, though) and my accountant can't really advise on legal issues, so I'm running back and forth. CPA did mention the S-corp, but said it was a lot of paperwork. He kept saying you have a draw a 'reasonable' salary. Then proceeded to tell me I won't be making money. I'm a tad confused, but will figure it out.
Thanks again for the insight..
The other part about setting up as a corporation rather than a sole prop is to give yourself (you personally) a little distance from the biz. If someone sues, they sue the biz first.
We're set up as tenants in an apt owned by the biz. We need tenant's insurance, so keep that in mind.
I'll have to agree with your acct- you won't make enough money to worry about taxes.
 

Gingerbread Latte

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Thanks! I'll check into the S-corp. My rentals are in an LLC, but that doesn't really equate to what I'm doing here. (It's mainly for protection)
I'm beginning to get frustrated that my atty doesn't know enough about tax law (He's the best REI atty in town, though) and my accountant can't really advise on legal issues, so I'm running back and forth. CPA did mention the S-corp, but said it was a lot of paperwork. He kept saying you have a draw a 'reasonable' salary. Then proceeded to tell me I won't be making money. I'm a tad confused, but will figure it out.
Thanks again for the insight..
The other part about setting up as a corporation rather than a sole prop is to give yourself (you personally) a little distance from the biz. If someone sues, they sue the biz first.
We're set up as tenants in an apt owned by the biz. We need tenant's insurance, so keep that in mind.
I'll have to agree with your acct- you won't make enough money to worry about taxes.
.
Anybody.... please tell me you make SOME money.....
Haha ~ Apparently, I've committed myself to a business with no days off and no income?

(/tongue-in-cheek font)
 

One Day

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Something in the new health care law........
small business.....will be that business and personal income be combined......taxable income of the combined incomes....for many this will push some into the higher tax brackets.
doesn't matter how the business is set up......inc. or not.
This has been what I was told......
 

EmptyNest

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Thanks! I'll check into the S-corp. My rentals are in an LLC, but that doesn't really equate to what I'm doing here. (It's mainly for protection)
I'm beginning to get frustrated that my atty doesn't know enough about tax law (He's the best REI atty in town, though) and my accountant can't really advise on legal issues, so I'm running back and forth. CPA did mention the S-corp, but said it was a lot of paperwork. He kept saying you have a draw a 'reasonable' salary. Then proceeded to tell me I won't be making money. I'm a tad confused, but will figure it out.
Thanks again for the insight..
The other part about setting up as a corporation rather than a sole prop is to give yourself (you personally) a little distance from the biz. If someone sues, they sue the biz first.
We're set up as tenants in an apt owned by the biz. We need tenant's insurance, so keep that in mind.
I'll have to agree with your acct- you won't make enough money to worry about taxes.
.
Anybody.... please tell me you make SOME money.....
Haha ~ Apparently, I've committed myself to a business with no days off and no income?

(/tongue-in-cheek font)
.
Evenutally...I think we broke even about out 3rd year in business. And of course it depends on the size of your property as well and...how much business you have...lots of variables.
 

Samster

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Thanks! I'll check into the S-corp. My rentals are in an LLC, but that doesn't really equate to what I'm doing here. (It's mainly for protection)
I'm beginning to get frustrated that my atty doesn't know enough about tax law (He's the best REI atty in town, though) and my accountant can't really advise on legal issues, so I'm running back and forth. CPA did mention the S-corp, but said it was a lot of paperwork. He kept saying you have a draw a 'reasonable' salary. Then proceeded to tell me I won't be making money. I'm a tad confused, but will figure it out.
Thanks again for the insight..
The other part about setting up as a corporation rather than a sole prop is to give yourself (you personally) a little distance from the biz. If someone sues, they sue the biz first.
We're set up as tenants in an apt owned by the biz. We need tenant's insurance, so keep that in mind.
I'll have to agree with your acct- you won't make enough money to worry about taxes.
.
Anybody.... please tell me you make SOME money.....
Haha ~ Apparently, I've committed myself to a business with no days off and no income?

(/tongue-in-cheek font)
.
We were in business 2 years, became the #1 B&B here, and made no money. I never paid myself a salary. My part-time housekeeper made more money than I did. My dh was employed full-time outside the business which made it possible through the slow times. We would have probably made some profit in our 3rd year in business.
Friend of mine did a lease to purchase a very large established inn and had to put quite a bit of money into it for improvements and for City requirements (that were not enforced on the prior owners) and they had staff to pay because it was so large. They got out after a year because of a family situation. It will take them at least another year to pay off all the operating debt that they incurred in just one year (for a total of 3 years to pay of that debt with a big monthly payment). That doesn't include their initial investment that went down the tubes. The occupancy was not accurate. The inn consultants gave them bad advice. They were smart people that let their heart guide a business decision based on bad information. Not the first time that's happened in this business.
This is not meant to be a Debbie Downer post. Just some facts to help you. Make sure that the financials work for whatever situation you want to get out of it. Some people are happy to have this type of business for a myriad of reasons that don't include a large income. Just make sure that you have all your facts.
 

Alibi Ike

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Thanks! I'll check into the S-corp. My rentals are in an LLC, but that doesn't really equate to what I'm doing here. (It's mainly for protection)
I'm beginning to get frustrated that my atty doesn't know enough about tax law (He's the best REI atty in town, though) and my accountant can't really advise on legal issues, so I'm running back and forth. CPA did mention the S-corp, but said it was a lot of paperwork. He kept saying you have a draw a 'reasonable' salary. Then proceeded to tell me I won't be making money. I'm a tad confused, but will figure it out.
Thanks again for the insight..
The other part about setting up as a corporation rather than a sole prop is to give yourself (you personally) a little distance from the biz. If someone sues, they sue the biz first.
We're set up as tenants in an apt owned by the biz. We need tenant's insurance, so keep that in mind.
I'll have to agree with your acct- you won't make enough money to worry about taxes.
.
Anybody.... please tell me you make SOME money.....
Haha ~ Apparently, I've committed myself to a business with no days off and no income?

(/tongue-in-cheek font)
.
We were required to have outside income before we could get a loan to buy the business that was supposed to be our only means of support. Luckily, we have a teeny pension coming in that covers clothing, food & utilities. Otherwise? Going into the 8th year and we've never drawn a penny. (So, that's how to avoid payroll tax.)
Of course, if your expenses are low you could be making money in your first year. It's just a matter of knowing where that line is.
 

Gingerbread Latte

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Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
I, occasionally, buy a rent house knowing I'll only break-even, because I think the property is a good investment. I want to do more than break-even with a B&B, especially if I'm going to put my blood, sweat and tears into it.
I can't use the current owners bookings (for 2010) as a good guide b/c she just lived there and took bookings when they called. (She also let her sister live there, too) She didn't actively promote the business (due to personal stuff).
Fortunately, she is good at what she does and the B&Bs rep has not suffered, it just lost it's momentum.
 

muirford

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Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
I, occasionally, buy a rent house knowing I'll only break-even, because I think the property is a good investment. I want to do more than break-even with a B&B, especially if I'm going to put my blood, sweat and tears into it.
I can't use the current owners bookings (for 2010) as a good guide b/c she just lived there and took bookings when they called. (She also let her sister live there, too) She didn't actively promote the business (due to personal stuff).
Fortunately, she is good at what she does and the B&Bs rep has not suffered, it just lost it's momentum..
Gingerbread Latte said:
Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
We make a living. We'd never get rich doing it, but we live comfortably. Not trying to send kids to college, and we already have a retirement fund from our corporate lives - we are making enough to bridge the gap. Our first two years, we didn't show a profit because a) we had been lied to about the income of the inn and b) we decided to upgrade the house and amenities to build the business faster, so we had some capital expenditures. But we came into it expecting some of that and had a year's worth of operating expenses in the bank as a cushion. And I was finishing up some of my consulting contracts the first 18 months we were here, so we had some extra income.
It's not impossible to have a decent business. Our revenue is up 50% from our first year. And in this recession, we still have this job and we've had our two best years in the business. The portion of the mortgage that goes to our space is way lower than any rent I would pay to live in this town, for nice owner's quarters in a nice house. We drive nice cars but nothing fancy and both are more than 8 years old. We don't take fancy vacations but we get away. Family emergencies are always a problem - but honestly, they were when I was in the corporate world. I don't think I could ever go back to the corporate world happily.
 

Gingerbread Latte

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Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
I, occasionally, buy a rent house knowing I'll only break-even, because I think the property is a good investment. I want to do more than break-even with a B&B, especially if I'm going to put my blood, sweat and tears into it.
I can't use the current owners bookings (for 2010) as a good guide b/c she just lived there and took bookings when they called. (She also let her sister live there, too) She didn't actively promote the business (due to personal stuff).
Fortunately, she is good at what she does and the B&Bs rep has not suffered, it just lost it's momentum..
Gingerbread Latte said:
Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
We make a living. We'd never get rich doing it, but we live comfortably. Not trying to send kids to college, and we already have a retirement fund from our corporate lives - we are making enough to bridge the gap. Our first two years, we didn't show a profit because a) we had been lied to about the income of the inn and b) we decided to upgrade the house and amenities to build the business faster, so we had some capital expenditures. But we came into it expecting some of that and had a year's worth of operating expenses in the bank as a cushion. And I was finishing up some of my consulting contracts the first 18 months we were here, so we had some extra income.
It's not impossible to have a decent business. Our revenue is up 50% from our first year. And in this recession, we still have this job and we've had our two best years in the business. The portion of the mortgage that goes to our space is way lower than any rent I would pay to live in this town, for nice owner's quarters in a nice house. We drive nice cars but nothing fancy and both are more than 8 years old. We don't take fancy vacations but we get away. Family emergencies are always a problem - but honestly, they were when I was in the corporate world. I don't think I could ever go back to the corporate world happily.
.
Thank you! Thank you!
Hubs has a good job, I have a very flexible part-time job. Our 2 kids are in college (they keep changing their majors....eeekkk)
I'm not concerned with having to live completely on the B&B income, but if I'm going to do it, I want to be successful. (I also know the difference in making money and showing a profit for tax reasons, so I'm not worried about that.)
 

Samster

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Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
I, occasionally, buy a rent house knowing I'll only break-even, because I think the property is a good investment. I want to do more than break-even with a B&B, especially if I'm going to put my blood, sweat and tears into it.
I can't use the current owners bookings (for 2010) as a good guide b/c she just lived there and took bookings when they called. (She also let her sister live there, too) She didn't actively promote the business (due to personal stuff).
Fortunately, she is good at what she does and the B&Bs rep has not suffered, it just lost it's momentum..
Gingerbread Latte said:
Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
We make a living. We'd never get rich doing it, but we live comfortably. Not trying to send kids to college, and we already have a retirement fund from our corporate lives - we are making enough to bridge the gap. Our first two years, we didn't show a profit because a) we had been lied to about the income of the inn and b) we decided to upgrade the house and amenities to build the business faster, so we had some capital expenditures. But we came into it expecting some of that and had a year's worth of operating expenses in the bank as a cushion. And I was finishing up some of my consulting contracts the first 18 months we were here, so we had some extra income.
It's not impossible to have a decent business. Our revenue is up 50% from our first year. And in this recession, we still have this job and we've had our two best years in the business. The portion of the mortgage that goes to our space is way lower than any rent I would pay to live in this town, for nice owner's quarters in a nice house. We drive nice cars but nothing fancy and both are more than 8 years old. We don't take fancy vacations but we get away. Family emergencies are always a problem - but honestly, they were when I was in the corporate world. I don't think I could ever go back to the corporate world happily.
.
Thank you! Thank you!
Hubs has a good job, I have a very flexible part-time job. Our 2 kids are in college (they keep changing their majors....eeekkk)
I'm not concerned with having to live completely on the B&B income, but if I'm going to do it, I want to be successful. (I also know the difference in making money and showing a profit for tax reasons, so I'm not worried about that.)
.
I know people that have made comfortable incomes from buying turnkey B&Bs that are 6 rooms or more. I know people that have made very comfortable incomes on 10 rooms up. I also know people that have made quite a bit of money with start up properties when they sold them - most before the current economic turndown.
I know folks with small B&Bs that can pay their home's expenses from what they make on the B&B and that's pretty much it. There has to be supplemental income of some sort to get by.
If you have an impressive mortgage and no guests, you'll have problems. If the property requires more money for maintenance or improvements than anticipated, you'll have problems. Whatever you do, don't underestimate the amount of money that you need to have in reserve for emergencies or unexpected repairs.
You have to know your location and market. You have to know what's happening in the hospitality and lodging industry for your region. You have to know your competition. You have to know how to handle your own business. It's a long day's work........
 

Gingerbread Latte

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Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
I, occasionally, buy a rent house knowing I'll only break-even, because I think the property is a good investment. I want to do more than break-even with a B&B, especially if I'm going to put my blood, sweat and tears into it.
I can't use the current owners bookings (for 2010) as a good guide b/c she just lived there and took bookings when they called. (She also let her sister live there, too) She didn't actively promote the business (due to personal stuff).
Fortunately, she is good at what she does and the B&Bs rep has not suffered, it just lost it's momentum..
Gingerbread Latte said:
Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
We make a living. We'd never get rich doing it, but we live comfortably. Not trying to send kids to college, and we already have a retirement fund from our corporate lives - we are making enough to bridge the gap. Our first two years, we didn't show a profit because a) we had been lied to about the income of the inn and b) we decided to upgrade the house and amenities to build the business faster, so we had some capital expenditures. But we came into it expecting some of that and had a year's worth of operating expenses in the bank as a cushion. And I was finishing up some of my consulting contracts the first 18 months we were here, so we had some extra income.
It's not impossible to have a decent business. Our revenue is up 50% from our first year. And in this recession, we still have this job and we've had our two best years in the business. The portion of the mortgage that goes to our space is way lower than any rent I would pay to live in this town, for nice owner's quarters in a nice house. We drive nice cars but nothing fancy and both are more than 8 years old. We don't take fancy vacations but we get away. Family emergencies are always a problem - but honestly, they were when I was in the corporate world. I don't think I could ever go back to the corporate world happily.
.
Thank you! Thank you!
Hubs has a good job, I have a very flexible part-time job. Our 2 kids are in college (they keep changing their majors....eeekkk)
I'm not concerned with having to live completely on the B&B income, but if I'm going to do it, I want to be successful. (I also know the difference in making money and showing a profit for tax reasons, so I'm not worried about that.)
.
I know people that have made comfortable incomes from buying turnkey B&Bs that are 6 rooms or more. I know people that have made very comfortable incomes on 10 rooms up. I also know people that have made quite a bit of money with start up properties when they sold them - most before the current economic turndown.
I know folks with small B&Bs that can pay their home's expenses from what they make on the B&B and that's pretty much it. There has to be supplemental income of some sort to get by.
If you have an impressive mortgage and no guests, you'll have problems. If the property requires more money for maintenance or improvements than anticipated, you'll have problems. Whatever you do, don't underestimate the amount of money that you need to have in reserve for emergencies or unexpected repairs.
You have to know your location and market. You have to know what's happening in the hospitality and lodging industry for your region. You have to know your competition. You have to know how to handle your own business. It's a long day's work........
.
Thanks Samster, I think that's what's making me nervous. I know and am very comfortable with the home RENTAL market in my city. I wouldn't hesitate to buy another rent house if the price was right.
I'm having trouble getting hard facts about this industry b/c everyone operates their B&B differently (in my area.) One couple owns 3 B&Bs, markets them well and have a high occupancy rate. Others take ressies only 'on season' and don't worry about year round, they just enjoy living in their house. Obviously, I intend to market mine for profit. I've run what little numbers I have and would not be comfortable with less than 50% capacity. I don't even know if that's reasonable for my area.
 

Samster

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Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
I, occasionally, buy a rent house knowing I'll only break-even, because I think the property is a good investment. I want to do more than break-even with a B&B, especially if I'm going to put my blood, sweat and tears into it.
I can't use the current owners bookings (for 2010) as a good guide b/c she just lived there and took bookings when they called. (She also let her sister live there, too) She didn't actively promote the business (due to personal stuff).
Fortunately, she is good at what she does and the B&Bs rep has not suffered, it just lost it's momentum..
Gingerbread Latte said:
Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
We make a living. We'd never get rich doing it, but we live comfortably. Not trying to send kids to college, and we already have a retirement fund from our corporate lives - we are making enough to bridge the gap. Our first two years, we didn't show a profit because a) we had been lied to about the income of the inn and b) we decided to upgrade the house and amenities to build the business faster, so we had some capital expenditures. But we came into it expecting some of that and had a year's worth of operating expenses in the bank as a cushion. And I was finishing up some of my consulting contracts the first 18 months we were here, so we had some extra income.
It's not impossible to have a decent business. Our revenue is up 50% from our first year. And in this recession, we still have this job and we've had our two best years in the business. The portion of the mortgage that goes to our space is way lower than any rent I would pay to live in this town, for nice owner's quarters in a nice house. We drive nice cars but nothing fancy and both are more than 8 years old. We don't take fancy vacations but we get away. Family emergencies are always a problem - but honestly, they were when I was in the corporate world. I don't think I could ever go back to the corporate world happily.
.
Thank you! Thank you!
Hubs has a good job, I have a very flexible part-time job. Our 2 kids are in college (they keep changing their majors....eeekkk)
I'm not concerned with having to live completely on the B&B income, but if I'm going to do it, I want to be successful. (I also know the difference in making money and showing a profit for tax reasons, so I'm not worried about that.)
.
I know people that have made comfortable incomes from buying turnkey B&Bs that are 6 rooms or more. I know people that have made very comfortable incomes on 10 rooms up. I also know people that have made quite a bit of money with start up properties when they sold them - most before the current economic turndown.
I know folks with small B&Bs that can pay their home's expenses from what they make on the B&B and that's pretty much it. There has to be supplemental income of some sort to get by.
If you have an impressive mortgage and no guests, you'll have problems. If the property requires more money for maintenance or improvements than anticipated, you'll have problems. Whatever you do, don't underestimate the amount of money that you need to have in reserve for emergencies or unexpected repairs.
You have to know your location and market. You have to know what's happening in the hospitality and lodging industry for your region. You have to know your competition. You have to know how to handle your own business. It's a long day's work........
.
Thanks Samster, I think that's what's making me nervous. I know and am very comfortable with the home RENTAL market in my city. I wouldn't hesitate to buy another rent house if the price was right.
I'm having trouble getting hard facts about this industry b/c everyone operates their B&B differently (in my area.) One couple owns 3 B&Bs, markets them well and have a high occupancy rate. Others take ressies only 'on season' and don't worry about year round, they just enjoy living in their house. Obviously, I intend to market mine for profit. I've run what little numbers I have and would not be comfortable with less than 50% capacity. I don't even know if that's reasonable for my area.
.
It's good to be nervous...that means that you're trying to really think this through. :)
I never forgot about our hotels in the equation here either for how I had to provide amenities, market, and network. We had a 5 room urban inn (with 2 2-room suites in a city of about 200,000. Remember, you'll get different answers from the forum members here based on their experiences for their lodging property. There's a fair mix here of property types. Sometimes it's good to know what their frame of reference is as you consider their answers, although a lot of info can be universal to all B&B types, some may not be as applicable to what you're going to be doing.

 

muirford

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Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
I, occasionally, buy a rent house knowing I'll only break-even, because I think the property is a good investment. I want to do more than break-even with a B&B, especially if I'm going to put my blood, sweat and tears into it.
I can't use the current owners bookings (for 2010) as a good guide b/c she just lived there and took bookings when they called. (She also let her sister live there, too) She didn't actively promote the business (due to personal stuff).
Fortunately, she is good at what she does and the B&Bs rep has not suffered, it just lost it's momentum..
Gingerbread Latte said:
Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
We make a living. We'd never get rich doing it, but we live comfortably. Not trying to send kids to college, and we already have a retirement fund from our corporate lives - we are making enough to bridge the gap. Our first two years, we didn't show a profit because a) we had been lied to about the income of the inn and b) we decided to upgrade the house and amenities to build the business faster, so we had some capital expenditures. But we came into it expecting some of that and had a year's worth of operating expenses in the bank as a cushion. And I was finishing up some of my consulting contracts the first 18 months we were here, so we had some extra income.
It's not impossible to have a decent business. Our revenue is up 50% from our first year. And in this recession, we still have this job and we've had our two best years in the business. The portion of the mortgage that goes to our space is way lower than any rent I would pay to live in this town, for nice owner's quarters in a nice house. We drive nice cars but nothing fancy and both are more than 8 years old. We don't take fancy vacations but we get away. Family emergencies are always a problem - but honestly, they were when I was in the corporate world. I don't think I could ever go back to the corporate world happily.
.
Thank you! Thank you!
Hubs has a good job, I have a very flexible part-time job. Our 2 kids are in college (they keep changing their majors....eeekkk)
I'm not concerned with having to live completely on the B&B income, but if I'm going to do it, I want to be successful. (I also know the difference in making money and showing a profit for tax reasons, so I'm not worried about that.)
.
I know people that have made comfortable incomes from buying turnkey B&Bs that are 6 rooms or more. I know people that have made very comfortable incomes on 10 rooms up. I also know people that have made quite a bit of money with start up properties when they sold them - most before the current economic turndown.
I know folks with small B&Bs that can pay their home's expenses from what they make on the B&B and that's pretty much it. There has to be supplemental income of some sort to get by.
If you have an impressive mortgage and no guests, you'll have problems. If the property requires more money for maintenance or improvements than anticipated, you'll have problems. Whatever you do, don't underestimate the amount of money that you need to have in reserve for emergencies or unexpected repairs.
You have to know your location and market. You have to know what's happening in the hospitality and lodging industry for your region. You have to know your competition. You have to know how to handle your own business. It's a long day's work........
.
Thanks Samster, I think that's what's making me nervous. I know and am very comfortable with the home RENTAL market in my city. I wouldn't hesitate to buy another rent house if the price was right.
I'm having trouble getting hard facts about this industry b/c everyone operates their B&B differently (in my area.) One couple owns 3 B&Bs, markets them well and have a high occupancy rate. Others take ressies only 'on season' and don't worry about year round, they just enjoy living in their house. Obviously, I intend to market mine for profit. I've run what little numbers I have and would not be comfortable with less than 50% capacity. I don't even know if that's reasonable for my area.
.
Gingerbread Latte said:
I've run what little numbers I have and would not be comfortable with less than 50% capacity. I don't even know if that's reasonable for my area.
That 50% occupancy is higher than the average - I think average is about 35%. But there are huge swings depending on your location, location, location. Figuring out what you might expect to do (of course, circumstances around you can change) would be a big step in the right direction.
 

Samster

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Location
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Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
I, occasionally, buy a rent house knowing I'll only break-even, because I think the property is a good investment. I want to do more than break-even with a B&B, especially if I'm going to put my blood, sweat and tears into it.
I can't use the current owners bookings (for 2010) as a good guide b/c she just lived there and took bookings when they called. (She also let her sister live there, too) She didn't actively promote the business (due to personal stuff).
Fortunately, she is good at what she does and the B&Bs rep has not suffered, it just lost it's momentum..
Gingerbread Latte said:
Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
We make a living. We'd never get rich doing it, but we live comfortably. Not trying to send kids to college, and we already have a retirement fund from our corporate lives - we are making enough to bridge the gap. Our first two years, we didn't show a profit because a) we had been lied to about the income of the inn and b) we decided to upgrade the house and amenities to build the business faster, so we had some capital expenditures. But we came into it expecting some of that and had a year's worth of operating expenses in the bank as a cushion. And I was finishing up some of my consulting contracts the first 18 months we were here, so we had some extra income.
It's not impossible to have a decent business. Our revenue is up 50% from our first year. And in this recession, we still have this job and we've had our two best years in the business. The portion of the mortgage that goes to our space is way lower than any rent I would pay to live in this town, for nice owner's quarters in a nice house. We drive nice cars but nothing fancy and both are more than 8 years old. We don't take fancy vacations but we get away. Family emergencies are always a problem - but honestly, they were when I was in the corporate world. I don't think I could ever go back to the corporate world happily.
.
Thank you! Thank you!
Hubs has a good job, I have a very flexible part-time job. Our 2 kids are in college (they keep changing their majors....eeekkk)
I'm not concerned with having to live completely on the B&B income, but if I'm going to do it, I want to be successful. (I also know the difference in making money and showing a profit for tax reasons, so I'm not worried about that.)
.
I know people that have made comfortable incomes from buying turnkey B&Bs that are 6 rooms or more. I know people that have made very comfortable incomes on 10 rooms up. I also know people that have made quite a bit of money with start up properties when they sold them - most before the current economic turndown.
I know folks with small B&Bs that can pay their home's expenses from what they make on the B&B and that's pretty much it. There has to be supplemental income of some sort to get by.
If you have an impressive mortgage and no guests, you'll have problems. If the property requires more money for maintenance or improvements than anticipated, you'll have problems. Whatever you do, don't underestimate the amount of money that you need to have in reserve for emergencies or unexpected repairs.
You have to know your location and market. You have to know what's happening in the hospitality and lodging industry for your region. You have to know your competition. You have to know how to handle your own business. It's a long day's work........
.
Thanks Samster, I think that's what's making me nervous. I know and am very comfortable with the home RENTAL market in my city. I wouldn't hesitate to buy another rent house if the price was right.
I'm having trouble getting hard facts about this industry b/c everyone operates their B&B differently (in my area.) One couple owns 3 B&Bs, markets them well and have a high occupancy rate. Others take ressies only 'on season' and don't worry about year round, they just enjoy living in their house. Obviously, I intend to market mine for profit. I've run what little numbers I have and would not be comfortable with less than 50% capacity. I don't even know if that's reasonable for my area.
.
Gingerbread Latte said:
I've run what little numbers I have and would not be comfortable with less than 50% capacity. I don't even know if that's reasonable for my area.
That 50% occupancy is higher than the average - I think average is about 35%. But there are huge swings depending on your location, location, location. Figuring out what you might expect to do (of course, circumstances around you can change) would be a big step in the right direction.
.
Excellent advice, Muirford! I think that 35% average is what I've heard for the industry too. That's a good number for GL to know.
 

Alibi Ike

Well-known member
Staff member
Joined
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Messages
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Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
I, occasionally, buy a rent house knowing I'll only break-even, because I think the property is a good investment. I want to do more than break-even with a B&B, especially if I'm going to put my blood, sweat and tears into it.
I can't use the current owners bookings (for 2010) as a good guide b/c she just lived there and took bookings when they called. (She also let her sister live there, too) She didn't actively promote the business (due to personal stuff).
Fortunately, she is good at what she does and the B&Bs rep has not suffered, it just lost it's momentum..
Gingerbread Latte said:
Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
We make a living. We'd never get rich doing it, but we live comfortably. Not trying to send kids to college, and we already have a retirement fund from our corporate lives - we are making enough to bridge the gap. Our first two years, we didn't show a profit because a) we had been lied to about the income of the inn and b) we decided to upgrade the house and amenities to build the business faster, so we had some capital expenditures. But we came into it expecting some of that and had a year's worth of operating expenses in the bank as a cushion. And I was finishing up some of my consulting contracts the first 18 months we were here, so we had some extra income.
It's not impossible to have a decent business. Our revenue is up 50% from our first year. And in this recession, we still have this job and we've had our two best years in the business. The portion of the mortgage that goes to our space is way lower than any rent I would pay to live in this town, for nice owner's quarters in a nice house. We drive nice cars but nothing fancy and both are more than 8 years old. We don't take fancy vacations but we get away. Family emergencies are always a problem - but honestly, they were when I was in the corporate world. I don't think I could ever go back to the corporate world happily.
.
Thank you! Thank you!
Hubs has a good job, I have a very flexible part-time job. Our 2 kids are in college (they keep changing their majors....eeekkk)
I'm not concerned with having to live completely on the B&B income, but if I'm going to do it, I want to be successful. (I also know the difference in making money and showing a profit for tax reasons, so I'm not worried about that.)
.
I know people that have made comfortable incomes from buying turnkey B&Bs that are 6 rooms or more. I know people that have made very comfortable incomes on 10 rooms up. I also know people that have made quite a bit of money with start up properties when they sold them - most before the current economic turndown.
I know folks with small B&Bs that can pay their home's expenses from what they make on the B&B and that's pretty much it. There has to be supplemental income of some sort to get by.
If you have an impressive mortgage and no guests, you'll have problems. If the property requires more money for maintenance or improvements than anticipated, you'll have problems. Whatever you do, don't underestimate the amount of money that you need to have in reserve for emergencies or unexpected repairs.
You have to know your location and market. You have to know what's happening in the hospitality and lodging industry for your region. You have to know your competition. You have to know how to handle your own business. It's a long day's work........
.
Thanks Samster, I think that's what's making me nervous. I know and am very comfortable with the home RENTAL market in my city. I wouldn't hesitate to buy another rent house if the price was right.
I'm having trouble getting hard facts about this industry b/c everyone operates their B&B differently (in my area.) One couple owns 3 B&Bs, markets them well and have a high occupancy rate. Others take ressies only 'on season' and don't worry about year round, they just enjoy living in their house. Obviously, I intend to market mine for profit. I've run what little numbers I have and would not be comfortable with less than 50% capacity. I don't even know if that's reasonable for my area.
.
Gingerbread Latte said:
Thanks Samster, I think that's what's making me nervous. I know and am very comfortable with the home RENTAL market in my city. I wouldn't hesitate to buy another rent house if the price was right.
I'm having trouble getting hard facts about this industry b/c everyone operates their B&B differently (in my area.) One couple owns 3 B&Bs, markets them well and have a high occupancy rate. Others take ressies only 'on season' and don't worry about year round, they just enjoy living in their house. Obviously, I intend to market mine for profit. I've run what little numbers I have and would not be comfortable with less than 50% capacity. I don't even know if that's reasonable for my area.
Go to the state and find out what the tax revenue from lodging is from your town. Understand how many rooms are available in your town and what the rates are. If it's not spelled out anywhere else, you can do the math to figure out what the occupancy rate is. Generally speaking, occ in B&B's is far lower than hotels. Hotels are generally in the 70-75% range and B&B's are generally in the 40-45% range, to be profitable. All of it depends on location, competition and other variables.
I could be profitable if I quit making renovations!
Keep in mind that occupancy is not all. We had a very good year last year but did not have high occupancy rates. We had higher prices.
 
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