Buying a Turnkey vs. Starting From Scratch

[muirford]

We have several innkeepers in here who started their business from scratch and several who bought existing businesses. If anyone would care to share why they did what they did, this would be the place...

 

[wendydk]

Our original plan was to buy an existing B&B and profit from the reputation, client base and revenue stream that an existing business provides. We looked at just a few operating Inns before we came to the realization that it was just not going to be a possibility for us.
Firstly, none of the existing Inns really coincided with my vision. Not one grabbed me by the heart and said “This is It, This is THE ONE“!. I really couldn’t see myself in any of them. Either the rooms were too small or the in-room bathrooms were poorly done or they had unsatisfactory Innkeepers Quarters. Far and away the biggest reason we didn’t consider any of them? MONEY of course! Most existing Inns are horrifically expensive and almost none show revenues enough to make their own mortgage payments.
All kinds of scenarios ran through my head, all with the same hideous conclusions…mortgage payments not getting made and good credit falling by the wayside. What’s even worse is the fact that B&B’s take forever to sell. What if we hated it and decided to sell, and the Inn sat on the market forever…draining us financially and emotionally? Start-up seemed the way to go. This way we could buy a regular house, make it the type of place we wanted. As an added bonus, if it didn’t work out for any reason, we could still afford to live there by just working one job each. Hubs still works and I quit my job after year three. What a circus that was, with both of us working!
We looked at several places in our home part of the state. Most didn’t have enough bathrooms or personal space, or room to add any. Some houses were perfect, but were in areas that would not have the visitor draw we’d need.
We kept coming back again and again to this place. The house was gorgeous, needed mostly cosmetic work and had been on the market at a reasonable price for almost two years. The location seemed great, but most importantly? The house fairly screamed at me “I’m the One, I’m Perfect - Buy Me”!
We looked at the house no less than four times…with my mom, with our contractor, with anyone who would voice an opinion. Finally, the Realtor stopped coming with us and would just let the patient homeowners know we were coming AGAIN.
My mother swears that the house was on the market so long because it was waiting for us. We bought it in the summer of 2002 and opened for our first guest on Memorial Weekend of 2003. Best decision I ever made and I would not hesitate to do another start-up if I had to do it over again....and you never know!

 

[muirford]

I'll start. We bought an existing B&B. Although we had investigated both options over many years, we were far enough away from retirement that we knew we were not buying our final property, and our main source of income was going to be the inn. So we wanted a place with an income stream already in place. We really had no trouble getting financing - our own financial situation was strong, and the bank was very familiar with the property and we were approved in less than 24 hours.
It was not all roses. The previous owner misled us about her revenue from the inn, and the broker we worked with didn't really lead us to the appropriate places to verify the revenue. There was more maintenance work required to bring the inn up to our standards than we thought. We didn't suffer too much financially the first two years but we worked very hard to fix the problems of the business.
We do love the town we're in and the house itself is very much what I pictured for myself in running a B&B. The business has grown dramatically since we bought and our revenue is increased by 50%; we are holding our own in a soft economy due to the proximity to some major metropolitan areas less affected by the recession.
I'd be curious for those who did a startup if one partner worked full-time while the other got the business going.

 

[Mr.Design]

Interesting to hear both sides so far... I'll add my own short, little thoughts in here:
-Purchasing an existing- I like the idea of this because the licensing is in place as is the business. I could walk in, make the changes I want, yet not have a tremendous amount of remodeling, etc. to do.
-Creating from scratch- I like this because as Little Blue said, many inns I've seen cannot afford the mortgage payments based on the current revenue. They're overpriced.
In some areas I've looked there are no more licenses for new inns so you pretty much have to buy an existing. The good news is based off of chamber numbers, occupancy is around 80% weekends and 60% weekdays... the best part of it being, these are off season numbers. In season is steadily around 95-100% occupancy, even still in this recession. The bad news is insurance is up the kazoo as are taxes. One inn I looked in to has been on the market since 2004. The price isn't too bad; however, the current zoning now inhibits any future possibilities of growth.
As I've said, due diligence on different areas, and current inns is very time consuming.

 

[wendydk]

Just don't go into "analysis paralysis", I had a case of that for about 10 years before we jumped in. What size Inns are you looking at? You said you'll be on your own....are you ok with an outside staff or looking for something you can handle alone?

 

[Mr.Design]

Just don't go into "analysis paralysis", I had a case of that for about 10 years before we jumped in. What size Inns are you looking at? You said you'll be on your own....are you ok with an outside staff or looking for something you can handle alone?.

Love that term LOL
If I'm going in to the expensive area, "Area A" I would be looking at 20-25 rooms.
The inexpensive area, "Area B" is limited by the city to 9 rooms, so I would be 9 rooms.
I'm not 'over the hill' yet so I could handle 9 on my own. If I went higher I would need some housekeeping help.
I will be doing a continental breakfast buffet, regardless of where I end up though.

 

[wendydk]

Dude, I hate to break it to ya, but there is NO WAY you can handle 9 rooms alone, without a couple three full time staff, not and have a quality clean place that's well marketed and well maintained. Uh, uh, not even if you were Clark Kent and had a spouse helping, still no way. I don't think anyone on this forum would disagree with me.

 

[Mr.Design]

Dude, I hate to break it to ya, but there is NO WAY you can handle 9 rooms alone, without a couple three full time staff, not and have a quality clean place that's well marketed and well maintained. Uh, uh, not even if you were Clark Kent and had a spouse helping, still no way. I don't think anyone on this forum would disagree with me..

I'll just leave this part with, I have high energy

 

[happykeeper]

Great thread!
We started from Ground Zero. The land had to be cleared and we had a a workshop and an inn to build. Shoestrings and magic held our credit together long enough to get to the construction final and financing- then all the finish work.
Started in 1999, quit my job in `02? to build the main house. Lots of sweat equity. Lots of work. Great project. Built our vision and love it. Would consider doing it again, although I am ten years older now. Best thing I have ever done. We are exclusively innkeepers and have been from day one. Open for business 4 years ago.
I am scared of the money it takes to buy a turnkey and would be worried about the things you didn't know to ask about, sort of like what Muirford said, but I suppose I would be more able to do that now that we have some experience behind us- however short.

 

[Cathy]

Ours was on a whim ... we were facing a rent increase and after looking at houses for a couple of months we told our realtor that we were now looking for a property that we could open a B&B.
We invested everything (everything!) into this property in hopes that it would pay off. So far we have been blessed/lucky.
Yes, a whim, I said one day after coming back from seeing houses ... in my outside voice ... why don't we buy something that could be both our home and our business, like a B&B! and, here we are!!

 

[happykeeper]

Dude, I hate to break it to ya, but there is NO WAY you can handle 9 rooms alone, without a couple three full time staff, not and have a quality clean place that's well marketed and well maintained. Uh, uh, not even if you were Clark Kent and had a spouse helping, still no way. I don't think anyone on this forum would disagree with me..

I'll just leave this part with, I have high energy
.

...and no doubt a highly organized operation and a variety of great tips on how to make it happen. I know a few high energy folks and they dance cirlces around me.

 

[Mr.Design]

Dude, I hate to break it to ya, but there is NO WAY you can handle 9 rooms alone, without a couple three full time staff, not and have a quality clean place that's well marketed and well maintained. Uh, uh, not even if you were Clark Kent and had a spouse helping, still no way. I don't think anyone on this forum would disagree with me..

I'll just leave this part with, I have high energy
.

...and no doubt a highly organized operation and a variety of great tips on how to make it happen. I know a few high energy folks and they dance cirlces around me.
.

Absolutely. Organization and routine are the keys to getting any large amount of work done in a short period of time.

 

[hiddencove]

Well...this gives me an opportunity to tell my story, I guess. I retired in 1999 with a disability. I knew I could not afford to live the way I had been accustomed... in a single family home...so i bought a piece of land on a lakefront, zoned RM. This property is on the Oregon coast in a highly trafficed tourist area. My initial desire was to build, barrier-free, so I would have a place to "age in place". I designed a tri-plex. I had been an interior space planner for retirement centers in my young, working years; so I knew the demographics of the disabled population and I knew how to put it all together. I general-contracted the building myself in order to save on contractor costs. I saved about $40,000 and was able to qualify for the loan. I projected income from monthly rentals of two units in order to get the money.
When the building was finished...barrier-free inside and out.... to include an elevator....I began advertising in the local area for tenants. I thought the disabled and mobility-impaired would come. Not so! My tenants were those (boomers, mainly) who wanted the fabulous lakefront location and the ease of lifestyle a barrier-free building provides. So, I just rented on yearly leases and everything was peachy!
Then the real estate crunch hit! I realized right away I might have a problem renting by the month because all the beach homes that had been built in my area "all of a sudden" became monthly rentals. I put my ad out and within a few weeks I realized monthly rentals were over-populated in this county. So.........I had to think outside of the box!
I attended a "Secret" class which was all about the "law of attraction". As I listened and learned; I realized I was moving in a new direction. I immediately began the process of turning one of my units and the lower bedroom suite in my living unit into a bed and breakfast. I designed a website using Wix.com; signed up on Bed and Breakfast.com; designed my own rack cards and business cards and had them printed; started passing out my cards and telling all who would listen...I was a Bed and Breakfast. I got free listings on all the websites I could find. I called another bed and breakfast operator and took him to lunch to learn all I could. I e-mailed other Bed and Breakfasts in the area to announce my new business.
I furnished the unit in one week. Then I proceeded to gather all the "personal things" to make each unit feel like home. Games, cribbage board, a deck of cards, books (chosen for their titles about meditation, relaxation, humor, autobiographies, new ways of thinking, etc.), spices, kitchen utensils for the one bedroom unit, salt and pepper shakers, placemats, cloth napkins, and too much more to mention.
All was ready by May 1st. I had begun the process in the middle of April. My first guest arrived May 6th! I am almost completely booked for July! I took in 4 times my initial estimate in May and 6 times my estimate in July! All is well in paradise! This is fun! So far, my guests have been wonderful, appreciative, kind, and happy! They come ""stressed out and they leave with smiles from ear to ear! This endeavor has brought joy to my life. It feels so right! "The Secret" has taught me we definitely attract the energy and thoughts we put out into the universe. I am focusing on kind and loving thoughts. I am manifesting what I desire.
Just the other day I realized I needed a housekeeper. She came in the form of a friend I had met at a meeting at one of the churches I attend. When everything came together so effortlessly......I knew I was doing the right thing, at the right time, in the right place for me and the guests I serve. I have kept these quotes on my desk as I progressed building Hidden Cove from 2002-2005. "You can't eat an elephant in one bite!" "Yes you can do that which you think you cannot do....difficult does not mean impossible." "It is not the mountain that gets moved that makes the difference...it is the little steps taken one at a time." I thought building Hidden Cove was going to be difficult....and it was! Now, with the awareness I have realized by studing the principles found in "The Secret," the elephant was the size of an ant; I never allowed myself to think I could not do it, I never thought or used the word "impossible," I never visualized "a mountain", therefore..... my steps were leaps........ and Hidden Cove Bed and Breakfast jetted into existence as if by magic! All is well....and so it is!

 

[Tim_Toad_HLB]

Dude, I hate to break it to ya, but there is NO WAY you can handle 9 rooms alone, without a couple three full time staff, not and have a quality clean place that's well marketed and well maintained. Uh, uh, not even if you were Clark Kent and had a spouse helping, still no way. I don't think anyone on this forum would disagree with me..

I'll just leave this part with, I have high energy
.

"I'll just leave this part with, I have high energy

"
You could have plutonium for blood and there are still so many hours in the day. Especially those critical couple hours between after your last check out and first incoming.
Every single resource guide, book, innkeeper we've gotten mentoring from, etc... all estimate that you need between 45 minutes to an hour to effectively clean a room to decent standards. That isn't even considering the occasional deep cleaning from a really sloppy set of guests, late check outs, early arrivals, phone ringing, stain removal, etc. You gotta eat and use the restroom yourself fduring this time too! We're not robots.
Our experience in five years has bore that out almost to the minute and we're both very high energy, real organized and efficient with our time.

 

[Morticia]

Turn-key because we didn't want to try to start from scratch a business we knew nothing about in a place we knew nothing about. So far so good!

 

[Tim_Toad_HLB]

Interesting to hear both sides so far... I'll add my own short, little thoughts in here:
-Purchasing an existing- I like the idea of this because the licensing is in place as is the business. I could walk in, make the changes I want, yet not have a tremendous amount of remodeling, etc. to do.
-Creating from scratch- I like this because as Little Blue said, many inns I've seen cannot afford the mortgage payments based on the current revenue. They're overpriced.
In some areas I've looked there are no more licenses for new inns so you pretty much have to buy an existing. The good news is based off of chamber numbers, occupancy is around 80% weekends and 60% weekdays... the best part of it being, these are off season numbers. In season is steadily around 95-100% occupancy, even still in this recession. The bad news is insurance is up the kazoo as are taxes. One inn I looked in to has been on the market since 2004. The price isn't too bad; however, the current zoning now inhibits any future possibilities of growth.
As I've said, due diligence on different areas, and current inns is very time consuming..

"The good news is based off of chamber numbers, occupancy is around 80% weekends and 60% weekdays... the best part of it being, these are off season numbers."
COCs are in the business of painting a very optimistic picture of their local business climate, especially for folks inquiring about buying a business or moving in and starting one. You should only concern yourself with the overall business climate and THE individual properties you are inquiring about. And not just over a one year period, but as many as you can go back and look at.
"In season is steadily around 95-100% occupancy, even still in this recession. The bad news is insurance is up the kazoo as are taxes."
I would investigate those claims very closely and confirm them with multiple properties and as much documentation as possible.
What about hurricane risks? That is probably as influential on the high insurance costs as anything.
"One inn I looked in to has been on the market since 2004."
Either the price is way out of whack with reality, the infrastructure has major issues or the above stated occupancy is not near what you were quoted. A well priced ( and I don't mean for you, but in line with current revenues, infrastructure condition & value, good financial history and reputation, etc. ) B&B with the kind of occupancy you've described should have been snapped up by somebody in less than 5.5 years.

 

[Morticia]

Just don't go into "analysis paralysis", I had a case of that for about 10 years before we jumped in. What size Inns are you looking at? You said you'll be on your own....are you ok with an outside staff or looking for something you can handle alone?.

Love that term LOL
If I'm going in to the expensive area, "Area A" I would be looking at 20-25 rooms.
The inexpensive area, "Area B" is limited by the city to 9 rooms, so I would be 9 rooms.
I'm not 'over the hill' yet so I could handle 9 on my own. If I went higher I would need some housekeeping help.
I will be doing a continental breakfast buffet, regardless of where I end up though.
.

Love that term LOL
If I'm going in to the expensive area, "Area A" I would be looking at 20-25 rooms.
The inexpensive area, "Area B" is limited by the city to 9 rooms, so I would be 9 rooms.
I'm not 'over the hill' yet so I could handle 9 on my own. If I went higher I would need some housekeeping help.
I will be doing a continental breakfast buffet, regardless of where I end up though.

Are you saying that as one person you could manage to care for a 9 room B&B by yourself, doing all of the work? Everything by yourself?

 

[happykeeper]

Well...this gives me an opportunity to tell my story, I guess. I retired in 1999 with a disability. I knew I could not afford to live the way I had been accustomed... in a single family home...so i bought a piece of land on a lakefront, zoned RM. This property is on the Oregon coast in a highly trafficed tourist area. My initial desire was to build, barrier-free, so I would have a place to "age in place". I designed a tri-plex. I had been an interior space planner for retirement centers in my young, working years; so I knew the demographics of the disabled population and I knew how to put it all together. I general-contracted the building myself in order to save on contractor costs. I saved about $40,000 and was able to qualify for the loan. I projected income from monthly rentals of two units in order to get the money.
When the building was finished...barrier-free inside and out.... to include an elevator....I began advertising in the local area for tenants. I thought the disabled and mobility-impaired would come. Not so! My tenants were those (boomers, mainly) who wanted the fabulous lakefront location and the ease of lifestyle a barrier-free building provides. So, I just rented on yearly leases and everything was peachy!
Then the real estate crunch hit! I realized right away I might have a problem renting by the month because all the beach homes that had been built in my area "all of a sudden" became monthly rentals. I put my ad out and within a few weeks I realized monthly rentals were over-populated in this county. So.........I had to think outside of the box!
I attended a "Secret" class which was all about the "law of attraction". As I listened and learned; I realized I was moving in a new direction. I immediately began the process of turning one of my units and the lower bedroom suite in my living unit into a bed and breakfast. I designed a website using Wix.com; signed up on Bed and Breakfast.com; designed my own rack cards and business cards and had them printed; started passing out my cards and telling all who would listen...I was a Bed and Breakfast. I got free listings on all the websites I could find. I called another bed and breakfast operator and took him to lunch to learn all I could. I e-mailed other Bed and Breakfasts in the area to announce my new business.
I furnished the unit in one week. Then I proceeded to gather all the "personal things" to make each unit feel like home. Games, cribbage board, a deck of cards, books (chosen for their titles about meditation, relaxation, humor, autobiographies, new ways of thinking, etc.), spices, kitchen utensils for the one bedroom unit, salt and pepper shakers, placemats, cloth napkins, and too much more to mention.
All was ready by May 1st. I had begun the process in the middle of April. My first guest arrived May 6th! I am almost completely booked for July! I took in 4 times my initial estimate in May and 6 times my estimate in July! All is well in paradise! This is fun! So far, my guests have been wonderful, appreciative, kind, and happy! They come ""stressed out and they leave with smiles from ear to ear! This endeavor has brought joy to my life. It feels so right! "The Secret" has taught me we definitely attract the energy and thoughts we put out into the universe. I am focusing on kind and loving thoughts. I am manifesting what I desire.
Just the other day I realized I needed a housekeeper. She came in the form of a friend I had met at a meeting at one of the churches I attend. When everything came together so effortlessly......I knew I was doing the right thing, at the right time, in the right place for me and the guests I serve. I have kept these quotes on my desk as I progressed building Hidden Cove from 2002-2005. "You can't eat an elephant in one bite!" "Yes you can do that which you think you cannot do....difficult does not mean impossible." "It is not the mountain that gets moved that makes the difference...it is the little steps taken one at a time." I thought building Hidden Cove was going to be difficult....and it was! Now, with the awareness I have realized by studing the principles found in "The Secret," the elephant was the size of an ant; I never allowed myself to think I could not do it, I never thought or used the word "impossible," I never visualized "a mountain", therefore..... my steps were leaps........ and Hidden Cove Bed and Breakfast jetted into existence as if by magic! All is well....and so it is!.

I absolutely love your story. I am a big LOA fan as well. It is such a life changer. Our mantras during this time were..and still are....
Take a leap and a net will appear
It's all good!
Fear is fun in disguise
Time is our friend
Let it go!

 

[Morticia]

Dude, I hate to break it to ya, but there is NO WAY you can handle 9 rooms alone, without a couple three full time staff, not and have a quality clean place that's well marketed and well maintained. Uh, uh, not even if you were Clark Kent and had a spouse helping, still no way. I don't think anyone on this forum would disagree with me..

I'll just leave this part with, I have high energy
.

I'll just leave this part with, I have high energy

Sorry, I guess I just asked the same question everyone else did. I'm just going to make a little joke and then I won't mention this again...I would pay money to watch you do this single handedly because I don't think it's 'high energy' so much as just plain 'high'.

Hopefully you're already working in the field so you know what you're talking about.

 

[Mr.Design]

Dude, I hate to break it to ya, but there is NO WAY you can handle 9 rooms alone, without a couple three full time staff, not and have a quality clean place that's well marketed and well maintained. Uh, uh, not even if you were Clark Kent and had a spouse helping, still no way. I don't think anyone on this forum would disagree with me..

I'll just leave this part with, I have high energy
.

I'll just leave this part with, I have high energy

Sorry, I guess I just asked the same question everyone else did. I'm just going to make a little joke and then I won't mention this again...I would pay money to watch you do this single handedly because I don't think it's 'high energy' so much as just plain 'high'.

Hopefully you're already working in the field so you know what you're talking about.
.

I guess all people are different and that's what makes the world go round. You think I'm crazy for thinking I can do 9 rooms, I think you're slow because you can't

Everyone is different and my thoughts are neither better or worse than anyone elses.