Considering opening a B&B, first time poster

[Movingon]

Hello everyone, first time poster, long time reader. My wife and I currently own a restaurant and have been thinking about changing businesses to a B&B. Originally we wanted to buy a resort in the Ozarks, but financially that isn't a good possiblility right now.
Ive done a lot of research, but something I just learned more recently is that we would still need a commercial loan to buy a residence to use as a B&B. We will have about $120K in cash, but our income hasn't been very high the last few years and that is what held us back from getting a loan to buy a resort.
My question is pretty basic, when you guys started did you use only cash, loans from family, or what banks did you get loans from? Did any of you use conventional mortgages to buy the residence and convert it later? We have considered that, using a traditional mortgage and paying it off as quickly as possible and then turn it into a B&B after a few years. Any problems with that path?
I have created a business plan and we have found a few properties for sale that we think would be great B&Bs. I just don't think we can get approved for a commercial loan is the problem.
We are located in Eastern Kansas, but we are not going to stay here. There just isn't any demand imo for B&Bs.

 

[Morticia]

Why not buy a fully operational B&B? Why go thru the hassle of trying to convince a bank that this house, in this location, with these renovations will bring in money? And, prior to that, convincing the folks in the house next door that opening a B&B in their backyard will not decrease their property values and bring deranged pedophiles into the neighborhood. (Not joking. These are the sorts of things that get said when homeowners have no idea what a B&B is and think it's a brothel in disguise.)
We were, as the loan officer politely put it, 'homeless and unemployed,' when we plopped down slightly more than you have for a commercial loan on a property that had been in operation for 18 years. We had financials to show, the loan officer knew the town and the prospects, and we looked like solid candidates having zero experience in operating anything related to the public.
Seriously, pick the place you want to live and look for an operational property that is for sale. You can always make changes later on, but the groundwork is done. Plus, if the place is making money, you know it's in a location that draws guests. Picking a random house means you may sit for a very long time wondering who has to go out and get a job to pay the mortgage.
:welcome:

 

[EmptyNest]

I am with Mort totally. Why start from scratch with a totally unknown? There are plenty of great places for sale out there with proven records or ones you could improve upon and make your own. Have you taken some aspiring innkeeper worshops? If not do not proceed on anything until you have. You will get answers to your questions and learn a lot which is will save you in the long run.
If you haven't read all the threads here, do so.
When we purchased a property it was already a B&B but only close to what we wanted but capable of being the lifestyle type we wanted. We paid cash. Retired after 7 years and still living in it 10 years later even though we don't need this much space. No place else we want to be.

 

[gillumhouse]

There are several listed on THIS site that are for sale. Great properties and in excellent locations. Definitely do some Aspiring.
I started from scratch in a house I bought for cask, using my own money. Ran out of money. Did get loans - BOB (Banking on Business) loan finally - but would honestly recommend buying established. The reno costs will kill you. Bathrooms - providing you can fit them in (I have 2 rooms that will always be shared because no way on GOD's green earth to get plumbing even if there WAS a way to fit one in to the room at the front of the house).
Welcome and good luck.

 

[Movingon]

Why not buy a fully operational B&B? Why go thru the hassle of trying to convince a bank that this house, in this location, with these renovations will bring in money? And, prior to that, convincing the folks in the house next door that opening a B&B in their backyard will not decrease their property values and bring deranged pedophiles into the neighborhood. (Not joking. These are the sorts of things that get said when homeowners have no idea what a B&B is and think it's a brothel in disguise.)
We were, as the loan officer politely put it, 'homeless and unemployed,' when we plopped down slightly more than you have for a commercial loan on a property that had been in operation for 18 years. We had financials to show, the loan officer knew the town and the prospects, and we looked like solid candidates having zero experience in operating anything related to the public.
Seriously, pick the place you want to live and look for an operational property that is for sale. You can always make changes later on, but the groundwork is done. Plus, if the place is making money, you know it's in a location that draws guests. Picking a random house means you may sit for a very long time wondering who has to go out and get a job to pay the mortgage.
:welcome:.

Thanks for all the replies.
I will rethink about buying an existing B&B, one of my concerns starting from scratch was the renovation costs and meeting local regulations. I've noticed many places where B&Bs are popular have strict regulations on zoning and other things that pertain to B&Bs. My sights are currently on the mid Atlantic and New England regions, a pretty big area yes. I do think we want to try to stay urban. I have little interest in maintaining a large property. Morticia, I will send you a PM if I can figure out how to.
I do like the bbteam website for searching for B&Bs for sale. Innsales gives very little information and doesn't even show prices, at least on my iPhone.
Im sure I will have many more questions. Thanks

 

[JBloggs]

Why not buy a fully operational B&B? Why go thru the hassle of trying to convince a bank that this house, in this location, with these renovations will bring in money? And, prior to that, convincing the folks in the house next door that opening a B&B in their backyard will not decrease their property values and bring deranged pedophiles into the neighborhood. (Not joking. These are the sorts of things that get said when homeowners have no idea what a B&B is and think it's a brothel in disguise.)
We were, as the loan officer politely put it, 'homeless and unemployed,' when we plopped down slightly more than you have for a commercial loan on a property that had been in operation for 18 years. We had financials to show, the loan officer knew the town and the prospects, and we looked like solid candidates having zero experience in operating anything related to the public.
Seriously, pick the place you want to live and look for an operational property that is for sale. You can always make changes later on, but the groundwork is done. Plus, if the place is making money, you know it's in a location that draws guests. Picking a random house means you may sit for a very long time wondering who has to go out and get a job to pay the mortgage.
:welcome:.

Thanks for all the replies.
I will rethink about buying an existing B&B, one of my concerns starting from scratch was the renovation costs and meeting local regulations. I've noticed many places where B&Bs are popular have strict regulations on zoning and other things that pertain to B&Bs. My sights are currently on the mid Atlantic and New England regions, a pretty big area yes. I do think we want to try to stay urban. I have little interest in maintaining a large property. Morticia, I will send you a PM if I can figure out how to.
I do like the bbteam website for searching for B&Bs for sale. Innsales gives very little information and doesn't even show prices, at least on my iPhone.
Im sure I will have many more questions. Thanks
.

B&B Team are mostly only higher end B&B's $. Try Innshopper*
You have to realize that when you are for sale you have to pay to be listed on these sites, and some only allow one photo or more, it is the limitations of the directory itself, not the inn. They are pretty lame really. There is one based in NC that is $489 every 6 mo's, and shows a tiny photo with barely any information.
*Be aware that some may show for sale that are no longer for sale, why? Because the previous owners kick up their heels and head off to vegas. (Being silly, but you get the drift) the new owners won't have access to update or remove the listing. So until the listing runs out it still shows up.

 

[Morticia]

Why not buy a fully operational B&B? Why go thru the hassle of trying to convince a bank that this house, in this location, with these renovations will bring in money? And, prior to that, convincing the folks in the house next door that opening a B&B in their backyard will not decrease their property values and bring deranged pedophiles into the neighborhood. (Not joking. These are the sorts of things that get said when homeowners have no idea what a B&B is and think it's a brothel in disguise.)
We were, as the loan officer politely put it, 'homeless and unemployed,' when we plopped down slightly more than you have for a commercial loan on a property that had been in operation for 18 years. We had financials to show, the loan officer knew the town and the prospects, and we looked like solid candidates having zero experience in operating anything related to the public.
Seriously, pick the place you want to live and look for an operational property that is for sale. You can always make changes later on, but the groundwork is done. Plus, if the place is making money, you know it's in a location that draws guests. Picking a random house means you may sit for a very long time wondering who has to go out and get a job to pay the mortgage.
:welcome:.

Thanks for all the replies.
I will rethink about buying an existing B&B, one of my concerns starting from scratch was the renovation costs and meeting local regulations. I've noticed many places where B&Bs are popular have strict regulations on zoning and other things that pertain to B&Bs. My sights are currently on the mid Atlantic and New England regions, a pretty big area yes. I do think we want to try to stay urban. I have little interest in maintaining a large property. Morticia, I will send you a PM if I can figure out how to.
I do like the bbteam website for searching for B&Bs for sale. Innsales gives very little information and doesn't even show prices, at least on my iPhone.
Im sure I will have many more questions. Thanks
.

I don't monitor the email address I used to sign up here. I'm not ignoring you. ;-)

 

[JBloggs]

I got a post card today for a B&B and house called Killahevlin Estates - - 75 miles w of DC and 3 miles from Shenandoah National Park. This really is a magnificent property!
I cant find any for sale or auction listing online, but I do see they went groupon - which may or may not have led to their demise as a B&B. Another article here, they have an excellent online reputation. I have always heard good things,and they had a pub for guests which was a huge hit. Not sure what happened, they could be down the rabbit hole with a loss of life or marriage, not sure. It happens.
MLS#WR9767965
7400 sq ft living space 2.92 tree-lined acres, 8br, 7 full bath, 3 half bath, 7 wood burning fireplaces (2 brick residences)
"Auction price is a steal for a world renowned estate that is currently assessed at over $1mm and conveyed with furniture in 2005 for $1.5mm."
Current zoning permits bed & breakfast, residential, medical, office, or educational use // Needs work. Federal and State Tax Rehabilitation Credits may be available. Current tax assessed value: $1,038,200 //
I found a link here
Opening bid $442,500
Buy now for $635,000

 

[EmptyNest]

I got a post card today for a B&B and house called Killahevlin Estates - - 75 miles w of DC and 3 miles from Shenandoah National Park. This really is a magnificent property!
I cant find any for sale or auction listing online, but I do see they went groupon - which may or may not have led to their demise as a B&B. Another article here, they have an excellent online reputation. I have always heard good things,and they had a pub for guests which was a huge hit. Not sure what happened, they could be down the rabbit hole with a loss of life or marriage, not sure. It happens.
MLS#WR9767965
7400 sq ft living space 2.92 tree-lined acres, 8br, 7 full bath, 3 half bath, 7 wood burning fireplaces (2 brick residences)
"Auction price is a steal for a world renowned estate that is currently assessed at over $1mm and conveyed with furniture in 2005 for $1.5mm."
Current zoning permits bed & breakfast, residential, medical, office, or educational use // Needs work. Federal and State Tax Rehabilitation Credits may be available. Current tax assessed value: $1,038,200 //
I found a link here
Opening bid $442,500
Buy now for $635,000.

They filed bankruptcy and the bank took it from them. I was friends with them and did their site. The place will need a lot of updating as it looked really dated and had not been kept up. There was some illness issues. They were not good business people. Those photos show it much better than in person and I had to laugh, I never saw the kitchen that clean ever!! You could never see. The countertops it was so cluttered.
this will take some big bucks.
I had heard it had already been auctioned off. Guess not.

 

[Movingon]

I got a post card today for a B&B and house called Killahevlin Estates - - 75 miles w of DC and 3 miles from Shenandoah National Park. This really is a magnificent property!
I cant find any for sale or auction listing online, but I do see they went groupon - which may or may not have led to their demise as a B&B. Another article here, they have an excellent online reputation. I have always heard good things,and they had a pub for guests which was a huge hit. Not sure what happened, they could be down the rabbit hole with a loss of life or marriage, not sure. It happens.
MLS#WR9767965
7400 sq ft living space 2.92 tree-lined acres, 8br, 7 full bath, 3 half bath, 7 wood burning fireplaces (2 brick residences)
"Auction price is a steal for a world renowned estate that is currently assessed at over $1mm and conveyed with furniture in 2005 for $1.5mm."
Current zoning permits bed & breakfast, residential, medical, office, or educational use // Needs work. Federal and State Tax Rehabilitation Credits may be available. Current tax assessed value: $1,038,200 //
I found a link here
Opening bid $442,500
Buy now for $635,000.

That's very cool. But, I'm not going to be buying a place in the next 3 days. Maybe if it's still for sale in the future. We currently have a lease for our restaurant that ends in late 2017. Early 2018 is probably the soonest we can buy a place. But that will be here before we know it.
I did see a few places I like in Southern Vermont and another place in Maine. Those areas seem to get a lot of tourism year round, is that right? Skiing in winter, fall foliage, nice summers, and I imagine spring is quite pretty. When would the slow season be in say Southern Vermont? Would Southern Maine, New Hampshire, Mass., etc have similar tourist seasons?

 

[Movingon]

Why not buy a fully operational B&B? Why go thru the hassle of trying to convince a bank that this house, in this location, with these renovations will bring in money? And, prior to that, convincing the folks in the house next door that opening a B&B in their backyard will not decrease their property values and bring deranged pedophiles into the neighborhood. (Not joking. These are the sorts of things that get said when homeowners have no idea what a B&B is and think it's a brothel in disguise.)
We were, as the loan officer politely put it, 'homeless and unemployed,' when we plopped down slightly more than you have for a commercial loan on a property that had been in operation for 18 years. We had financials to show, the loan officer knew the town and the prospects, and we looked like solid candidates having zero experience in operating anything related to the public.
Seriously, pick the place you want to live and look for an operational property that is for sale. You can always make changes later on, but the groundwork is done. Plus, if the place is making money, you know it's in a location that draws guests. Picking a random house means you may sit for a very long time wondering who has to go out and get a job to pay the mortgage.
:welcome:.

Thanks for all the replies.
I will rethink about buying an existing B&B, one of my concerns starting from scratch was the renovation costs and meeting local regulations. I've noticed many places where B&Bs are popular have strict regulations on zoning and other things that pertain to B&Bs. My sights are currently on the mid Atlantic and New England regions, a pretty big area yes. I do think we want to try to stay urban. I have little interest in maintaining a large property. Morticia, I will send you a PM if I can figure out how to.
I do like the bbteam website for searching for B&Bs for sale. Innsales gives very little information and doesn't even show prices, at least on my iPhone.
Im sure I will have many more questions. Thanks
.

B&B Team are mostly only higher end B&B's $. Try Innshopper*
You have to realize that when you are for sale you have to pay to be listed on these sites, and some only allow one photo or more, it is the limitations of the directory itself, not the inn. They are pretty lame really. There is one based in NC that is $489 every 6 mo's, and shows a tiny photo with barely any information.
*Be aware that some may show for sale that are no longer for sale, why? Because the previous owners kick up their heels and head off to vegas. (Being silly, but you get the drift) the new owners won't have access to update or remove the listing. So until the listing runs out it still shows up.
.

Thanks. Innshopper is a great website too.

 

[EmptyNest]

I got a post card today for a B&B and house called Killahevlin Estates - - 75 miles w of DC and 3 miles from Shenandoah National Park. This really is a magnificent property!
I cant find any for sale or auction listing online, but I do see they went groupon - which may or may not have led to their demise as a B&B. Another article here, they have an excellent online reputation. I have always heard good things,and they had a pub for guests which was a huge hit. Not sure what happened, they could be down the rabbit hole with a loss of life or marriage, not sure. It happens.
MLS#WR9767965
7400 sq ft living space 2.92 tree-lined acres, 8br, 7 full bath, 3 half bath, 7 wood burning fireplaces (2 brick residences)
"Auction price is a steal for a world renowned estate that is currently assessed at over $1mm and conveyed with furniture in 2005 for $1.5mm."
Current zoning permits bed & breakfast, residential, medical, office, or educational use // Needs work. Federal and State Tax Rehabilitation Credits may be available. Current tax assessed value: $1,038,200 //
I found a link here
Opening bid $442,500
Buy now for $635,000.

That's very cool. But, I'm not going to be buying a place in the next 3 days. Maybe if it's still for sale in the future. We currently have a lease for our restaurant that ends in late 2017. Early 2018 is probably the soonest we can buy a place. But that will be here before we know it.
I did see a few places I like in Southern Vermont and another place in Maine. Those areas seem to get a lot of tourism year round, is that right? Skiing in winter, fall foliage, nice summers, and I imagine spring is quite pretty. When would the slow season be in say Southern Vermont? Would Southern Maine, New Hampshire, Mass., etc have similar tourist seasons?
.

I don't anticipate it will sell for even the minimum. It still may be available not too much moving around here and it will need lots of time for updating

 

[JBloggs]

When we post things we may be posting for other than the person who started the thread. Just sayin'...I posted this for anyone who may be interested.
This is a good example of a place you can get for a song, but have to put that much more into it again. We have one of those in our town, doubled the purchase price with updating it.
Every person who has contacted us for sale says things like "we know we should do groupon..." and I laugh. You see, the experts are giving them false info. I say "Buy a licensed and approved operating inn. Step into reservations on the books, grandfathered in, no surprises." Do your homework and research. You want to be where you want to live first and foremost or you will resent and regret buying the place.

 

[Morticia]

I got a post card today for a B&B and house called Killahevlin Estates - - 75 miles w of DC and 3 miles from Shenandoah National Park. This really is a magnificent property!
I cant find any for sale or auction listing online, but I do see they went groupon - which may or may not have led to their demise as a B&B. Another article here, they have an excellent online reputation. I have always heard good things,and they had a pub for guests which was a huge hit. Not sure what happened, they could be down the rabbit hole with a loss of life or marriage, not sure. It happens.
MLS#WR9767965
7400 sq ft living space 2.92 tree-lined acres, 8br, 7 full bath, 3 half bath, 7 wood burning fireplaces (2 brick residences)
"Auction price is a steal for a world renowned estate that is currently assessed at over $1mm and conveyed with furniture in 2005 for $1.5mm."
Current zoning permits bed & breakfast, residential, medical, office, or educational use // Needs work. Federal and State Tax Rehabilitation Credits may be available. Current tax assessed value: $1,038,200 //
I found a link here
Opening bid $442,500
Buy now for $635,000.

That's very cool. But, I'm not going to be buying a place in the next 3 days. Maybe if it's still for sale in the future. We currently have a lease for our restaurant that ends in late 2017. Early 2018 is probably the soonest we can buy a place. But that will be here before we know it.
I did see a few places I like in Southern Vermont and another place in Maine. Those areas seem to get a lot of tourism year round, is that right? Skiing in winter, fall foliage, nice summers, and I imagine spring is quite pretty. When would the slow season be in say Southern Vermont? Would Southern Maine, New Hampshire, Mass., etc have similar tourist seasons?
.

Slow season in Vermont: April (too cold, but no snow), November (no snow).
Slow season in other New England States depends on what you're near. If you're near skiing, and it snows, you're good for 9 months. If it doesn't snow you better hope you saved up from summer and foliage seasons.

 

[Movingon]

When we post things we may be posting for other than the person who started the thread. Just sayin'...I posted this for anyone who may be interested.
This is a good example of a place you can get for a song, but have to put that much more into it again. We have one of those in our town, doubled the purchase price with updating it.
Every person who has contacted us for sale says things like "we know we should do groupon..." and I laugh. You see, the experts are giving them false info. I say "Buy a licensed and approved operating inn. Step into reservations on the books, grandfathered in, no surprises." Do your homework and research. You want to be where you want to live first and foremost or you will resent and regret buying the place..

I'm sure there might be some example where groupon is useful, but I hate it too. I did a local companies version of groupon one time for our restaurant and I would never do it again. We never saw a single one of the coupon using customers again. We don't do coupons at all and that was the only one we ever did.
Thanks for the great advice.

 

[Morticia]

To answer your (email) questions:
1. No, there is no PM feature, it's email. (To maintain my pseudo anonymity I am responding here rather than via email.)
2. We were required to have a 25% deposit on the property we bought. We also deemed it necessary (for our peace of mind) to have 50% of what we would need for first year operating expenses in case no one showed up at the door. (That was not a problem.) Given the numbers you stated in your original post, you can look at properties in the under $500k range, that is not chicken feed, you CAN find viable properties for that. (Some inn brokers will tell you differently.)
3. When we reviewed the P&L statements from the properties we looked at we entered all the info into a spreadsheet and tried to break the numbers. ie- how bad could it get and we would still make enough money to pay the bills. (If you look under the Resources section above you can find spreadsheets you can adapt to your needs.)
4. We used a bank in the town we where we were buying the B&B. Where I live (New England) there are a LOT of B&B's so the local banks know what they're dealing with. They do not want to own a B&B a few years down the road so they help you go over the numbers very carefully. We ended up with a bank outside our town because the rates were better.
5. Generally speaking a commercial loan has a fixed rate for 5 years, then your rate changes with the Wall Street Prime. (Our rate dropped 2% in year 6! It's going up this year. Dang.) Look at the max rate you can be charged and the max rate the interest can go up every year.
5.5 You may be able to get a loan that is for 6-7 months rather than 12 if you are in an area that does not have a thriving year round biz. This allows you to pay only in the months you're making big bucks.
6. You will need a business inspection done on the property for a commercial loan. This encompasses a regular building inspection but also includes viability of the business. This will run you about $2500-$3500. It was helpful to us to have this done as we were able to have the PO's fix some safety issues we would not have caught as we were used to owning non-commercial property. The inspector stated our room with a detached bath was 'functionally obsolete'. That was 13 years ago. It's even more obsolete now but we cannot fix it. All that to say - DON'T buy a place that does not have the majority of the bathrooms IN the room. My 'obsolete' room is busy busy in the summer as it's the cheapest room in town. But you don't want a lot of rooms like that, they don't sell easily without making compromises. Ask if the owner has had this inspection done. They may offer to let you use the numbers if you pay them (less than the original cost).
7. As part of your biz plan, include taking deposits. This keeps a (hopefully) positive cash flow in off months. (We started doing this about 6 years ago and it has made all the difference to my sanity in April when the checkbook is gasping for breath.)
8. The bank will want to know how and where you plan to market, who is your target market, what new ideas are you bringing to the property to increase revenue (which can also be increased not just by higher occupancy but by lower expenses - we lowered our water bill so much the town came out to replace our water meter!), etc.
If you keep searching this site you'll find this info and more again and again. Unlike most people who have a dream of owning a biz, you actually have some bucks to back up your plans.
Good luck!

 

[Movingon]

To answer your (email) questions:
1. No, there is no PM feature, it's email. (To maintain my pseudo anonymity I am responding here rather than via email.)
2. We were required to have a 25% deposit on the property we bought. We also deemed it necessary (for our peace of mind) to have 50% of what we would need for first year operating expenses in case no one showed up at the door. (That was not a problem.) Given the numbers you stated in your original post, you can look at properties in the under $500k range, that is not chicken feed, you CAN find viable properties for that. (Some inn brokers will tell you differently.)
3. When we reviewed the P&L statements from the properties we looked at we entered all the info into a spreadsheet and tried to break the numbers. ie- how bad could it get and we would still make enough money to pay the bills. (If you look under the Resources section above you can find spreadsheets you can adapt to your needs.)
4. We used a bank in the town we where we were buying the B&B. Where I live (New England) there are a LOT of B&B's so the local banks know what they're dealing with. They do not want to own a B&B a few years down the road so they help you go over the numbers very carefully. We ended up with a bank outside our town because the rates were better.
5. Generally speaking a commercial loan has a fixed rate for 5 years, then your rate changes with the Wall Street Prime. (Our rate dropped 2% in year 6! It's going up this year. Dang.) Look at the max rate you can be charged and the max rate the interest can go up every year.
5.5 You may be able to get a loan that is for 6-7 months rather than 12 if you are in an area that does not have a thriving year round biz. This allows you to pay only in the months you're making big bucks.
6. You will need a business inspection done on the property for a commercial loan. This encompasses a regular building inspection but also includes viability of the business. This will run you about $2500-$3500. It was helpful to us to have this done as we were able to have the PO's fix some safety issues we would not have caught as we were used to owning non-commercial property. The inspector stated our room with a detached bath was 'functionally obsolete'. That was 13 years ago. It's even more obsolete now but we cannot fix it. All that to say - DON'T buy a place that does not have the majority of the bathrooms IN the room. My 'obsolete' room is busy busy in the summer as it's the cheapest room in town. But you don't want a lot of rooms like that, they don't sell easily without making compromises. Ask if the owner has had this inspection done. They may offer to let you use the numbers if you pay them (less than the original cost).
7. As part of your biz plan, include taking deposits. This keeps a (hopefully) positive cash flow in off months. (We started doing this about 6 years ago and it has made all the difference to my sanity in April when the checkbook is gasping for breath.)
8. The bank will want to know how and where you plan to market, who is your target market, what new ideas are you bringing to the property to increase revenue (which can also be increased not just by higher occupancy but by lower expenses - we lowered our water bill so much the town came out to replace our water meter!), etc.
If you keep searching this site you'll find this info and more again and again. Unlike most people who have a dream of owning a biz, you actually have some bucks to back up your plans.
Good luck!.

Wow, thank you for taking the time for that reply. That is incredibly helpful.
I have a question about number 5., how long is your loan and what are loan rates typically going for? I thought commercial loans were typically 5-7 years.
ive found a few for sale in the $400-480K range I like in the areas I like. Some B&Bs are just in awful locations and some after googling their names I find bad reviews where people have complained about various things about the building or owners.
one of my concerns about buying a B&B is losing loyal customers. The B&B at the top of my list has been owned by the same couple for 3 decades, some of the customers have been staying their for a long time. I do worry many of those customers are more loyal to the current owners and won't continue to come after ownership change.
I do see some places where the business can be improved. Their online presence could be improved and their website is horrid. The main page is 2 pages of words with 2 small pictures. The booking system doesn't seem good and their wording on some things is very odd. They have the phone number plastered all over the website in huge red letters, so I bet most of their customers just call in a reservation.
it is right next to a ski resort and not far from a main highway. It has 7 rooms all with private baths and a seperate living quarters. Commercial kitchen and decent sized dining area. It's 4 acres with a beautiful background of the ski resort and a river. Plenty of room for a nice outdoor wedding. They don't have a lot of reviews online, but they are all good reviews, maybe 30-40 reviews, mostly 5 stars with a handful of 4 star reviews.

 

[TheBeachHouse]

To answer your (email) questions:
1. No, there is no PM feature, it's email. (To maintain my pseudo anonymity I am responding here rather than via email.)
2. We were required to have a 25% deposit on the property we bought. We also deemed it necessary (for our peace of mind) to have 50% of what we would need for first year operating expenses in case no one showed up at the door. (That was not a problem.) Given the numbers you stated in your original post, you can look at properties in the under $500k range, that is not chicken feed, you CAN find viable properties for that. (Some inn brokers will tell you differently.)
3. When we reviewed the P&L statements from the properties we looked at we entered all the info into a spreadsheet and tried to break the numbers. ie- how bad could it get and we would still make enough money to pay the bills. (If you look under the Resources section above you can find spreadsheets you can adapt to your needs.)
4. We used a bank in the town we where we were buying the B&B. Where I live (New England) there are a LOT of B&B's so the local banks know what they're dealing with. They do not want to own a B&B a few years down the road so they help you go over the numbers very carefully. We ended up with a bank outside our town because the rates were better.
5. Generally speaking a commercial loan has a fixed rate for 5 years, then your rate changes with the Wall Street Prime. (Our rate dropped 2% in year 6! It's going up this year. Dang.) Look at the max rate you can be charged and the max rate the interest can go up every year.
5.5 You may be able to get a loan that is for 6-7 months rather than 12 if you are in an area that does not have a thriving year round biz. This allows you to pay only in the months you're making big bucks.
6. You will need a business inspection done on the property for a commercial loan. This encompasses a regular building inspection but also includes viability of the business. This will run you about $2500-$3500. It was helpful to us to have this done as we were able to have the PO's fix some safety issues we would not have caught as we were used to owning non-commercial property. The inspector stated our room with a detached bath was 'functionally obsolete'. That was 13 years ago. It's even more obsolete now but we cannot fix it. All that to say - DON'T buy a place that does not have the majority of the bathrooms IN the room. My 'obsolete' room is busy busy in the summer as it's the cheapest room in town. But you don't want a lot of rooms like that, they don't sell easily without making compromises. Ask if the owner has had this inspection done. They may offer to let you use the numbers if you pay them (less than the original cost).
7. As part of your biz plan, include taking deposits. This keeps a (hopefully) positive cash flow in off months. (We started doing this about 6 years ago and it has made all the difference to my sanity in April when the checkbook is gasping for breath.)
8. The bank will want to know how and where you plan to market, who is your target market, what new ideas are you bringing to the property to increase revenue (which can also be increased not just by higher occupancy but by lower expenses - we lowered our water bill so much the town came out to replace our water meter!), etc.
If you keep searching this site you'll find this info and more again and again. Unlike most people who have a dream of owning a biz, you actually have some bucks to back up your plans.
Good luck!.

Wow, thank you for taking the time for that reply. That is incredibly helpful.
I have a question about number 5., how long is your loan and what are loan rates typically going for? I thought commercial loans were typically 5-7 years.
ive found a few for sale in the $400-480K range I like in the areas I like. Some B&Bs are just in awful locations and some after googling their names I find bad reviews where people have complained about various things about the building or owners.
one of my concerns about buying a B&B is losing loyal customers. The B&B at the top of my list has been owned by the same couple for 3 decades, some of the customers have been staying their for a long time. I do worry many of those customers are more loyal to the current owners and won't continue to come after ownership change.
I do see some places where the business can be improved. Their online presence could be improved and their website is horrid. The main page is 2 pages of words with 2 small pictures. The booking system doesn't seem good and their wording on some things is very odd. They have the phone number plastered all over the website in huge red letters, so I bet most of their customers just call in a reservation.
it is right next to a ski resort and not far from a main highway. It has 7 rooms all with private baths and a seperate living quarters. Commercial kitchen and decent sized dining area. It's 4 acres with a beautiful background of the ski resort and a river. Plenty of room for a nice outdoor wedding. They don't have a lot of reviews online, but they are all good reviews, maybe 30-40 reviews, mostly 5 stars with a handful of 4 star reviews.
.

visitor location.
views.
good kitchen.
private baths.
already a business.
Sounds pretty good to me!

 

[Tom]

To answer your (email) questions:
1. No, there is no PM feature, it's email. (To maintain my pseudo anonymity I am responding here rather than via email.)
2. We were required to have a 25% deposit on the property we bought. We also deemed it necessary (for our peace of mind) to have 50% of what we would need for first year operating expenses in case no one showed up at the door. (That was not a problem.) Given the numbers you stated in your original post, you can look at properties in the under $500k range, that is not chicken feed, you CAN find viable properties for that. (Some inn brokers will tell you differently.)
3. When we reviewed the P&L statements from the properties we looked at we entered all the info into a spreadsheet and tried to break the numbers. ie- how bad could it get and we would still make enough money to pay the bills. (If you look under the Resources section above you can find spreadsheets you can adapt to your needs.)
4. We used a bank in the town we where we were buying the B&B. Where I live (New England) there are a LOT of B&B's so the local banks know what they're dealing with. They do not want to own a B&B a few years down the road so they help you go over the numbers very carefully. We ended up with a bank outside our town because the rates were better.
5. Generally speaking a commercial loan has a fixed rate for 5 years, then your rate changes with the Wall Street Prime. (Our rate dropped 2% in year 6! It's going up this year. Dang.) Look at the max rate you can be charged and the max rate the interest can go up every year.
5.5 You may be able to get a loan that is for 6-7 months rather than 12 if you are in an area that does not have a thriving year round biz. This allows you to pay only in the months you're making big bucks.
6. You will need a business inspection done on the property for a commercial loan. This encompasses a regular building inspection but also includes viability of the business. This will run you about $2500-$3500. It was helpful to us to have this done as we were able to have the PO's fix some safety issues we would not have caught as we were used to owning non-commercial property. The inspector stated our room with a detached bath was 'functionally obsolete'. That was 13 years ago. It's even more obsolete now but we cannot fix it. All that to say - DON'T buy a place that does not have the majority of the bathrooms IN the room. My 'obsolete' room is busy busy in the summer as it's the cheapest room in town. But you don't want a lot of rooms like that, they don't sell easily without making compromises. Ask if the owner has had this inspection done. They may offer to let you use the numbers if you pay them (less than the original cost).
7. As part of your biz plan, include taking deposits. This keeps a (hopefully) positive cash flow in off months. (We started doing this about 6 years ago and it has made all the difference to my sanity in April when the checkbook is gasping for breath.)
8. The bank will want to know how and where you plan to market, who is your target market, what new ideas are you bringing to the property to increase revenue (which can also be increased not just by higher occupancy but by lower expenses - we lowered our water bill so much the town came out to replace our water meter!), etc.
If you keep searching this site you'll find this info and more again and again. Unlike most people who have a dream of owning a biz, you actually have some bucks to back up your plans.
Good luck!.

Wow, thank you for taking the time for that reply. That is incredibly helpful.
I have a question about number 5., how long is your loan and what are loan rates typically going for? I thought commercial loans were typically 5-7 years.
ive found a few for sale in the $400-480K range I like in the areas I like. Some B&Bs are just in awful locations and some after googling their names I find bad reviews where people have complained about various things about the building or owners.
one of my concerns about buying a B&B is losing loyal customers. The B&B at the top of my list has been owned by the same couple for 3 decades, some of the customers have been staying their for a long time. I do worry many of those customers are more loyal to the current owners and won't continue to come after ownership change.
I do see some places where the business can be improved. Their online presence could be improved and their website is horrid. The main page is 2 pages of words with 2 small pictures. The booking system doesn't seem good and their wording on some things is very odd. They have the phone number plastered all over the website in huge red letters, so I bet most of their customers just call in a reservation.
it is right next to a ski resort and not far from a main highway. It has 7 rooms all with private baths and a seperate living quarters. Commercial kitchen and decent sized dining area. It's 4 acres with a beautiful background of the ski resort and a river. Plenty of room for a nice outdoor wedding. They don't have a lot of reviews online, but they are all good reviews, maybe 30-40 reviews, mostly 5 stars with a handful of 4 star reviews.
.

visitor location.
views.
good kitchen.
private baths.
already a business.
Sounds pretty good to me!
.

Right!
Confucius says: Better to buy a good property with a crappy web site than a crappy property with a good web site.
Never forget that location is the strongest predictor of success. Not the only predictor -- hard work counts; some of us have less than ideal locations and we work really hard to overcome low natural traffic.

 

[Morticia]

To answer your (email) questions:
1. No, there is no PM feature, it's email. (To maintain my pseudo anonymity I am responding here rather than via email.)
2. We were required to have a 25% deposit on the property we bought. We also deemed it necessary (for our peace of mind) to have 50% of what we would need for first year operating expenses in case no one showed up at the door. (That was not a problem.) Given the numbers you stated in your original post, you can look at properties in the under $500k range, that is not chicken feed, you CAN find viable properties for that. (Some inn brokers will tell you differently.)
3. When we reviewed the P&L statements from the properties we looked at we entered all the info into a spreadsheet and tried to break the numbers. ie- how bad could it get and we would still make enough money to pay the bills. (If you look under the Resources section above you can find spreadsheets you can adapt to your needs.)
4. We used a bank in the town we where we were buying the B&B. Where I live (New England) there are a LOT of B&B's so the local banks know what they're dealing with. They do not want to own a B&B a few years down the road so they help you go over the numbers very carefully. We ended up with a bank outside our town because the rates were better.
5. Generally speaking a commercial loan has a fixed rate for 5 years, then your rate changes with the Wall Street Prime. (Our rate dropped 2% in year 6! It's going up this year. Dang.) Look at the max rate you can be charged and the max rate the interest can go up every year.
5.5 You may be able to get a loan that is for 6-7 months rather than 12 if you are in an area that does not have a thriving year round biz. This allows you to pay only in the months you're making big bucks.
6. You will need a business inspection done on the property for a commercial loan. This encompasses a regular building inspection but also includes viability of the business. This will run you about $2500-$3500. It was helpful to us to have this done as we were able to have the PO's fix some safety issues we would not have caught as we were used to owning non-commercial property. The inspector stated our room with a detached bath was 'functionally obsolete'. That was 13 years ago. It's even more obsolete now but we cannot fix it. All that to say - DON'T buy a place that does not have the majority of the bathrooms IN the room. My 'obsolete' room is busy busy in the summer as it's the cheapest room in town. But you don't want a lot of rooms like that, they don't sell easily without making compromises. Ask if the owner has had this inspection done. They may offer to let you use the numbers if you pay them (less than the original cost).
7. As part of your biz plan, include taking deposits. This keeps a (hopefully) positive cash flow in off months. (We started doing this about 6 years ago and it has made all the difference to my sanity in April when the checkbook is gasping for breath.)
8. The bank will want to know how and where you plan to market, who is your target market, what new ideas are you bringing to the property to increase revenue (which can also be increased not just by higher occupancy but by lower expenses - we lowered our water bill so much the town came out to replace our water meter!), etc.
If you keep searching this site you'll find this info and more again and again. Unlike most people who have a dream of owning a biz, you actually have some bucks to back up your plans.
Good luck!.

Wow, thank you for taking the time for that reply. That is incredibly helpful.
I have a question about number 5., how long is your loan and what are loan rates typically going for? I thought commercial loans were typically 5-7 years.
ive found a few for sale in the $400-480K range I like in the areas I like. Some B&Bs are just in awful locations and some after googling their names I find bad reviews where people have complained about various things about the building or owners.
one of my concerns about buying a B&B is losing loyal customers. The B&B at the top of my list has been owned by the same couple for 3 decades, some of the customers have been staying their for a long time. I do worry many of those customers are more loyal to the current owners and won't continue to come after ownership change.
I do see some places where the business can be improved. Their online presence could be improved and their website is horrid. The main page is 2 pages of words with 2 small pictures. The booking system doesn't seem good and their wording on some things is very odd. They have the phone number plastered all over the website in huge red letters, so I bet most of their customers just call in a reservation.
it is right next to a ski resort and not far from a main highway. It has 7 rooms all with private baths and a seperate living quarters. Commercial kitchen and decent sized dining area. It's 4 acres with a beautiful background of the ski resort and a river. Plenty of room for a nice outdoor wedding. They don't have a lot of reviews online, but they are all good reviews, maybe 30-40 reviews, mostly 5 stars with a handful of 4 star reviews.
.

#5 - our loan is for 20 years. First 5 years were at the locked in rate, that may be what you're thinking. Next 15 years are at prevailing rates unless we try to get another loan.
When we looked at properties owned by gay couples we asked the same questions of them - do you think your clientele will leave if you're not here? They were very honest with us saying if we made everyone feel welcome they would still come back.
What our experience shows - guests will leave because they liked the PO's and they don't like you. Some leave in a huff. Some just don't come back. We're the third owners of this inn and we still have guests from when it opened 30 years ago. However, many of the guests from way back when have died. This will happen to you, too, so you need a plan to bring in new biz.
My biggest suggestion in buying a place with a long standing repeat business is don't change everything at once!
We hear from new guests all the time how they used to stay at xyz inn, but they don't like the new people. I'm sure the xyz inn has a bunch of my guests, too!
Yes, fix the website, get a good booking system, keep the old phone number, make building changes to improve safety and efficiency. Don't change the décor the first year. Let the guests fall in love with you first! Once they like you, then you make big changes.
Don't double the rates first time out. Find out what deals the owners make with repeats and figure out if you can live with them. We lost a lot of repeats when we wouldn't give them the big discounts they were used to. (We're weaning our guests off discounts as they stop coming every year. If you miss a few years, you lose your frequent sleeper discount.)