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Frederick House back with the Harmons

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JBloggs

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[FONT= 'Times New Roman']Frederick House back with the Harmons[/FONT]
Staunton News Leader
Evy Harmon and her husband, Joe, have returned in full swing to the bed and breakfast that they've always owned. “We had a five year vacation,” Harmon said. ...

No pics of the rooms...and a 72 hour cancellation policy. This is a larger inn or hotel.
 

wendydk

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"23 guestrooms and suites within five restored 19th century structures"
That's not a B&B, it's a monster.
 

Don Draper

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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?
 

wendydk

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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
 

Don Draper

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Thanks! Sounds like a pretty sweet deal for the Lessor
 

EmptyNest

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WHAT!!!! I didn't realize Karen & Denny were even leasing the place!!!! Hmmm... The original owners are really old....I guess they will just have staff do all the work and they oversee. This is quite a surprise to me as when I spoke to them when this happened, they never let on it was not a sale but a lease
We have a leasing nightmare going on right here now....people do not do their homework!!!
Looking for a "deal" and thinking lease is a way to go...ha ha to them. They have filed bankruptcy, are out their $$$$$$ deposit, have not paid their lease in 6 months, have been evicted from the property...have bills run up all over town and now they have gone. oh yeah...Leasing is not all you think it is.
 

EmptyNest

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"23 guestrooms and suites within five restored 19th century structures"
That's not a B&B, it's a monster..
It is really a hotel that serves breakfast. Comprised of 5 different buildings. These folks have been very active with the arts over the years. A Select Registry property as well. The whole thing takes me by surprise but I guess nothing should surprise me these days.
 

happykeeper

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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
.
After reading the article, it would appear that there are several obstacles to overcome to make this method more secure. Clearly, those obstacles have been targeted but few solutions were fired. Some solution based thinking could make for a great follow up article and show how to minimize the risks. 30% risk is a lot better than 100% risk and it does keep the door open for those that see this as a way to get into the business. If some of those things had been addressed on the front end, perhaps a couple of the situations they mention could have been mitigated.
 

Innkeeper To Go

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Thanks! Sounds like a pretty sweet deal for the Lessor
.
I've seen the lease option work out very well for both parties. I know a young couple who are in their 5th year of leasing a property.
They have put over $100,000 of improvements into the property in that time and have successfully turned it around. Of course, there's nothing to stop the owners from deciding to take the inn back at the end of the lease, so the risk goes both ways. In this couple's case, though, they've made quite good incomes for themselves, built up a reputation in their area, and have turned a blighted and neglected building into a community hub.
The owner is happy, they're happy, and guests just love the place.
Still, I can't imagine doing it myself.
But for some inns out there that can't sell, leasing might be an option they'd have to look at.
And, with all things, it can work out perfectly for all or it can turn into a nightmare.
 

seashanty

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well ... back to the frederick house ... if i was on the right website, it looks really pretty to me. big ... but pretty.
their site says it's a small hotel ... i don't know if we can ever define small hotel or bed and breakfast to please everyone. it doesn't seem small to me but then i guess hotels can have hundreds of rooms.
 
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