I wonder how that works, with a "Lease to Own" option...the innkeepers just pay a monthly fee to the owners who use that either for debt service and/or income? Who pays all the insurance?.
"The Lease Option is an alternative route to Innkeeping. It has been used over the years when financing gets tight or when the Inn in question is underperforming and cannot achieve normal financing. The way it works is that the Seller/Lessor leases the Inn property and business to the Buyer/Lessee for a five year term, keeping in place the existing financing on the Inn. The Buyer/Lessee pays an option price for the option which is less than a normal deposit for a purchase.
The Lease is triple net, and the Lessee pays for all taxes, insurance, and maintenance costs. The rent is set at an amount sufficient for the Seller/Lessor to pay its mortgage on the Inn. In some cases the rent is lower at the beginning to enhance the ability of the Buyer/Lessee to improve the Inn’s business and make the Inn more capable of being financed in the future. In most cases a portion of the rent is also set aside as a credit against the ultimate option price, thus allowing the Buyer/Lessee to build up more “equity” in the Inn over the lease term.
The Seller/Lessor retains title to the Inn and all tax incidences, including depreciation. Finally, the Option Price set by the Lease is received by the Seller/Lessee, but is not taxable until either the option is exercised or it expires by time or default."
Lease Options Folly for Bed and Breakfasts
By Howard Levitan, Quantam Hospitality Group
January 8th, 2009