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IronGate

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I am looking at a B&B that is for sale, but the sellers and/or their realtor refuse to provide complete financials. They have shown me gross receipts, but the expense section of the form was covered when it was copied. A separate, hand-written note shows the total for gas, electric, and water & sewer. No net income is shown, so I have no idea what total expenses are. My question is this: reasonably, what percentages of total expenses are these utilities? One quarter? One half? (From what I can gather and deduce, occupancy is currently less than 20% on a six room property.) I know there are a lot of variables, but I don't have any more information than this, and you all have a lot better handle on actual expenses than I do, so if you could give me some round numbers to work with, it will be a huge help. :)
 

EmptyNest

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20%! hmmmm lots of room for improvement there.....hope it is in a good location where you can grow the business. If you are truly serious, I find it hard ot imagine that they wouldn't provide you with this information.
But then if no "good faith" money has been put down on the place I guess it is their right NOT to give you all of their information.
So many variables come into play that it is hard to give you a %...maybe someone with this size place will be able to give more insight.
 

gillumhouse

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Another variable for you to think about - cost per unit and units used will also affect those totals.
We have 3 rooms in a 2-story 1912 house. Upstairs has no ductwork - electric baseboard heating. Downstairs (where we live - and in winter exist) has forced-air gas heat. No guests? the heat is OFF upstairs except in below 20 degree nights when I turn it on in the bathrooms. So my total utility bills does not show level of comfort costs. Also in Summer, the house does not require A/C normally unless we have guests who turn it on whether it is needed or not.
 

Morticia

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Depends on where they are located what you're looking at for utils. Northeast US is very expensive and runs high in the winter, whereas my heating expense is pretty much nil in the summer and my cooling expense is also very low. Is the building insulated? If not, it will be higher than a building that is insulated. Some areas have very low elec rates, others do not. Water- do you have a well or is it town water?
Now, another question would consumption of utils. Because you can get the rates for the property you are looking to buy. Then you'd need what is typical consumption to be able to figure what your utils might be. What I have found is that guests don't really cost me that much more in electricity and heating than just keeping the building 'warm' in the winter. In the summer they cost more because they're running everything on electricity (cooling, lighting, hair dryers, etc) and my electric rates are very high. There is also the uptick in water and sewer expenditures.
 

Samster

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Utilities are a huge variable based on cost per type of energy and location. It's really tough to take a SWAG at this. Also, water fees usually include sewer treatment (but may not) and here it includes our trash pick-up. Also depends on where the B&B is located and what type of clime. You could have HUGE fuel oil costs in the Winter in the NE or gigantic electric bills for A/C in the Southwest. As occupancy increases, utility costs increase and not necesarily in a linear fashion. Then, there are the down times with no guests if it's seasonal. Our utilities really jumped around here depending on the weather. I haven't had any A/C on this Spring at all but if we had guests that upstairs A/C would be running non-stop. We open the windows because it's glorious!
If you are located in the same general area, can you make a stab at it? Do you think that they tried to take out their personal utility costs from the total? Sorry, I don't have a suggestion here.....
 

Morticia

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The other point to bring up unrelated to utils is why won't they give you complete financials? THAT'S what would worry me more than what things might cost. If you sign a non disclosure statement, most up and up businesses will let you know what you're getting into. They won't tell you everything citing your running the business differently as they reason to leave out certain expenses (housekeeping, outside maintenance, linen supply & laundering, etc). But you have to turn the lights on, so that is a legitimate expense to provide info for.
I'd think the expenses are either astronomical or they aren't being totally honest about the occupancy and the utils are very low, much lower than if they were really operating at 20%. Or, they are lousy bookkeepers and they don't know.
We were given tax returns so we could see if the places we looked at were being open and honest. Harder to lie to Uncle Sam than to lie to me. And that is a completely legitimate request. You may not get what you want, but you can ask.
 

Innkeeper To Go

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The other point to bring up unrelated to utils is why won't they give you complete financials? THAT'S what would worry me more than what things might cost. If you sign a non disclosure statement, most up and up businesses will let you know what you're getting into. They won't tell you everything citing your running the business differently as they reason to leave out certain expenses (housekeeping, outside maintenance, linen supply & laundering, etc). But you have to turn the lights on, so that is a legitimate expense to provide info for.
I'd think the expenses are either astronomical or they aren't being totally honest about the occupancy and the utils are very low, much lower than if they were really operating at 20%. Or, they are lousy bookkeepers and they don't know.
We were given tax returns so we could see if the places we looked at were being open and honest. Harder to lie to Uncle Sam than to lie to me. And that is a completely legitimate request. You may not get what you want, but you can ask..
Agreed.
How can you seriously consider running a business that you don't have basic information about? Why would they withhold that info if they really want to convey the business to you?
Tell them you need those detailed costs. All of them.
There are just too many variables for you to reasonably deduce those costs on your own. They should be provided by the seller if they're serious.
Like Morticia, I'd be very concerned they have something to hide.
 

muirford

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The other point to bring up unrelated to utils is why won't they give you complete financials? THAT'S what would worry me more than what things might cost. If you sign a non disclosure statement, most up and up businesses will let you know what you're getting into. They won't tell you everything citing your running the business differently as they reason to leave out certain expenses (housekeeping, outside maintenance, linen supply & laundering, etc). But you have to turn the lights on, so that is a legitimate expense to provide info for.
I'd think the expenses are either astronomical or they aren't being totally honest about the occupancy and the utils are very low, much lower than if they were really operating at 20%. Or, they are lousy bookkeepers and they don't know.
We were given tax returns so we could see if the places we looked at were being open and honest. Harder to lie to Uncle Sam than to lie to me. And that is a completely legitimate request. You may not get what you want, but you can ask..
Morticia said:
We were given tax returns so we could see if the places we looked at were being open and honest. Harder to lie to Uncle Sam than to lie to me. And that is a completely legitimate request. You may not get what you want, but you can ask.
We were given false tax returns. The true records (at least in terms of revenue) were acquired from town hall, but after we settled when we realized in the first month that the run rate we were seeing didn't support the income numbers.
And I second the point that you should be considered at their lack of openness.
 

Innkeeper To Go

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The other point to bring up unrelated to utils is why won't they give you complete financials? THAT'S what would worry me more than what things might cost. If you sign a non disclosure statement, most up and up businesses will let you know what you're getting into. They won't tell you everything citing your running the business differently as they reason to leave out certain expenses (housekeeping, outside maintenance, linen supply & laundering, etc). But you have to turn the lights on, so that is a legitimate expense to provide info for.
I'd think the expenses are either astronomical or they aren't being totally honest about the occupancy and the utils are very low, much lower than if they were really operating at 20%. Or, they are lousy bookkeepers and they don't know.
We were given tax returns so we could see if the places we looked at were being open and honest. Harder to lie to Uncle Sam than to lie to me. And that is a completely legitimate request. You may not get what you want, but you can ask..
Morticia said:
We were given tax returns so we could see if the places we looked at were being open and honest. Harder to lie to Uncle Sam than to lie to me. And that is a completely legitimate request. You may not get what you want, but you can ask.
We were given false tax returns. The true records (at least in terms of revenue) were acquired from town hall, but after we settled when we realized in the first month that the run rate we were seeing didn't support the income numbers.
And I second the point that you should be considered at their lack of openness.
.
muirford said:
We were given false tax returns.
Yikes!
And folks selling today are, by and large, more desperate than they were a few years ago.
Get full info and verify, verify, verify.
 

muirford

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The other point to bring up unrelated to utils is why won't they give you complete financials? THAT'S what would worry me more than what things might cost. If you sign a non disclosure statement, most up and up businesses will let you know what you're getting into. They won't tell you everything citing your running the business differently as they reason to leave out certain expenses (housekeeping, outside maintenance, linen supply & laundering, etc). But you have to turn the lights on, so that is a legitimate expense to provide info for.
I'd think the expenses are either astronomical or they aren't being totally honest about the occupancy and the utils are very low, much lower than if they were really operating at 20%. Or, they are lousy bookkeepers and they don't know.
We were given tax returns so we could see if the places we looked at were being open and honest. Harder to lie to Uncle Sam than to lie to me. And that is a completely legitimate request. You may not get what you want, but you can ask..
Morticia said:
We were given tax returns so we could see if the places we looked at were being open and honest. Harder to lie to Uncle Sam than to lie to me. And that is a completely legitimate request. You may not get what you want, but you can ask.
We were given false tax returns. The true records (at least in terms of revenue) were acquired from town hall, but after we settled when we realized in the first month that the run rate we were seeing didn't support the income numbers.
And I second the point that you should be considered at their lack of openness.
.
muirford said:
We were given false tax returns.
Yikes!
And folks selling today are, by and large, more desperate than they were a few years ago.
Get full info and verify, verify, verify.
.
Yes, unfortunately you don't know what the person actually filed with the IRS. It's pretty easy with a tax program to create a false set of numbers. We wish we had better advice from our buyer's broker, who specializes in B&Bs, about actual verification of some numbers. The PO would have had to request the town tax records, but we could have made that part of the contract if we had been advised to do so.
 

JBloggs

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We were also given false information. We required the information and eventually were given an excel spreadsheet with it all hand typed into it. When we needed the tax return they did a joint return as a corp since they ran it under a different name than the inn name, and included a separate business into the figures.
They also used index cards to maintain their reservations (RED FLAG!) But - not all innkeepers are savvy and they think a blotter or index cards will suffice. When you require data they do not have it and cannot easily get it.
IF they are selling via a B&B broker - beware, this person SHOULD come up with accurate information for you. Our broker had a disclaimer stating they were not responsible for any figures given us, they are only there to take your money. LOL
Utlities vary from place to place and inn to inn. There is no way to speculate what it is without seeing copies of the electric bills. Ask for them! If they want to sell they will FIND THEM FOR YOU! :)
PS Trust a Realtor/Broker only as far as you can throw them....done ps.
 

Innkeeper To Go

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The other point to bring up unrelated to utils is why won't they give you complete financials? THAT'S what would worry me more than what things might cost. If you sign a non disclosure statement, most up and up businesses will let you know what you're getting into. They won't tell you everything citing your running the business differently as they reason to leave out certain expenses (housekeeping, outside maintenance, linen supply & laundering, etc). But you have to turn the lights on, so that is a legitimate expense to provide info for.
I'd think the expenses are either astronomical or they aren't being totally honest about the occupancy and the utils are very low, much lower than if they were really operating at 20%. Or, they are lousy bookkeepers and they don't know.
We were given tax returns so we could see if the places we looked at were being open and honest. Harder to lie to Uncle Sam than to lie to me. And that is a completely legitimate request. You may not get what you want, but you can ask..
Morticia said:
We were given tax returns so we could see if the places we looked at were being open and honest. Harder to lie to Uncle Sam than to lie to me. And that is a completely legitimate request. You may not get what you want, but you can ask.
We were given false tax returns. The true records (at least in terms of revenue) were acquired from town hall, but after we settled when we realized in the first month that the run rate we were seeing didn't support the income numbers.
And I second the point that you should be considered at their lack of openness.
.
muirford said:
We were given false tax returns.
Yikes!
And folks selling today are, by and large, more desperate than they were a few years ago.
Get full info and verify, verify, verify.
.
Yes, unfortunately you don't know what the person actually filed with the IRS. It's pretty easy with a tax program to create a false set of numbers. We wish we had better advice from our buyer's broker, who specializes in B&Bs, about actual verification of some numbers. The PO would have had to request the town tax records, but we could have made that part of the contract if we had been advised to do so.
.
muirford said:
The PO would have had to request the town tax records, but we could have made that part of the contract if we had been advised to do so.
Very good advice for prospective buyers.
 

Innkeeper To Go

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We were also given false information. We required the information and eventually were given an excel spreadsheet with it all hand typed into it. When we needed the tax return they did a joint return as a corp since they ran it under a different name than the inn name, and included a separate business into the figures.
They also used index cards to maintain their reservations (RED FLAG!) But - not all innkeepers are savvy and they think a blotter or index cards will suffice. When you require data they do not have it and cannot easily get it.
IF they are selling via a B&B broker - beware, this person SHOULD come up with accurate information for you. Our broker had a disclaimer stating they were not responsible for any figures given us, they are only there to take your money. LOL
Utlities vary from place to place and inn to inn. There is no way to speculate what it is without seeing copies of the electric bills. Ask for them! If they want to sell they will FIND THEM FOR YOU! :)
PS Trust a Realtor/Broker only as far as you can throw them....done ps..
Double yikes!
And yes, they can find the records if they try hard enough. In today's market, they sure ought to be motivated to provide whatever a prospective buyer needs to make a decision.
As for the brokers, it is unfortunately quite difficult to find a really good one. But the reality is that they work for the sellers not the buyers. Always useful to remember whose side they're really on in any transaction.
 

JBloggs

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We were also given false information. We required the information and eventually were given an excel spreadsheet with it all hand typed into it. When we needed the tax return they did a joint return as a corp since they ran it under a different name than the inn name, and included a separate business into the figures.
They also used index cards to maintain their reservations (RED FLAG!) But - not all innkeepers are savvy and they think a blotter or index cards will suffice. When you require data they do not have it and cannot easily get it.
IF they are selling via a B&B broker - beware, this person SHOULD come up with accurate information for you. Our broker had a disclaimer stating they were not responsible for any figures given us, they are only there to take your money. LOL
Utlities vary from place to place and inn to inn. There is no way to speculate what it is without seeing copies of the electric bills. Ask for them! If they want to sell they will FIND THEM FOR YOU! :)
PS Trust a Realtor/Broker only as far as you can throw them....done ps..
Double yikes!
And yes, they can find the records if they try hard enough. In today's market, they sure ought to be motivated to provide whatever a prospective buyer needs to make a decision.
As for the brokers, it is unfortunately quite difficult to find a really good one. But the reality is that they work for the sellers not the buyers. Always useful to remember whose side they're really on in any transaction.
.
Innkeeper To Go said:
Double yikes!
And yes, they can find the records if they try hard enough. In today's market, they sure ought to be motivated to provide whatever a prospective buyer needs to make a decision.
As for the brokers, it is unfortunately quite difficult to find a really good one. But the reality is that they work for the sellers not the buyers. Always useful to remember whose side they're really on in any transaction.
They are working for the commission so they want to sell it to you, make them do their jobs. I can have anything anyone wants at any time, ask away and it is there, from the past three or four years. I am eager for a new owner to have the correct information and much of it! We have poured our lives into this B&B we want the new owners to love it and have a fair start or carry on, as we say. Knowledge is power. But I am not your average bear...
 

EmptyNest

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We were also given false information. We required the information and eventually were given an excel spreadsheet with it all hand typed into it. When we needed the tax return they did a joint return as a corp since they ran it under a different name than the inn name, and included a separate business into the figures.
They also used index cards to maintain their reservations (RED FLAG!) But - not all innkeepers are savvy and they think a blotter or index cards will suffice. When you require data they do not have it and cannot easily get it.
IF they are selling via a B&B broker - beware, this person SHOULD come up with accurate information for you. Our broker had a disclaimer stating they were not responsible for any figures given us, they are only there to take your money. LOL
Utlities vary from place to place and inn to inn. There is no way to speculate what it is without seeing copies of the electric bills. Ask for them! If they want to sell they will FIND THEM FOR YOU! :)
PS Trust a Realtor/Broker only as far as you can throw them....done ps..
Double yikes!
And yes, they can find the records if they try hard enough. In today's market, they sure ought to be motivated to provide whatever a prospective buyer needs to make a decision.
As for the brokers, it is unfortunately quite difficult to find a really good one. But the reality is that they work for the sellers not the buyers. Always useful to remember whose side they're really on in any transaction.
.
Innkeeper To Go said:
Double yikes!
And yes, they can find the records if they try hard enough. In today's market, they sure ought to be motivated to provide whatever a prospective buyer needs to make a decision.
As for the brokers, it is unfortunately quite difficult to find a really good one. But the reality is that they work for the sellers not the buyers. Always useful to remember whose side they're really on in any transaction.
They are working for the commission so they want to sell it to you, make them do their jobs. I can have anything anyone wants at any time, ask away and it is there, from the past three or four years. I am eager for a new owner to have the correct information and much of it! We have poured our lives into this B&B we want the new owners to love it and have a fair start or carry on, as we say. Knowledge is power. But I am not your average bear...
.
No you are not the "average bear" and anyone who buys your place will be very fortunate with what you will provide for them!!!
 

Joey Camb

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I'm all with the others get copies of the Gas, Electric and Water bills also double check there aren't any other weird taxes that you have never heard of for example sales tax or business rates. Then what ever they show you or tell you double it for your forcast that way if it is less thats a bonus.
 

Samster

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Yes, HUGE red flag when you don't have good business info from the sellers. We walked away from several deals like that....in a hurry.
Or, it is just a sale for the real estate only.
 

IronGate

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Yes, HUGE red flag when you don't have good business info from the sellers. We walked away from several deals like that....in a hurry.
Or, it is just a sale for the real estate only..
Truthfully, I will be shocked if this property is NOT losing money. It is obvious the owner's heart is no longer in it. It has been run as a B&B for over 20 years; the current owner has had it for about five years, and does not live on site. As catlady said, there is room for improvement -- on many different levels.
When I first found the property, it was a FSBO listing that had not been updated. The owner had subsequently listed it with a realtor almost two hours away from the property. The realtor specializes in historic properties, but not B&B businesses. When I asked for financials/disclosures, etc., along with their confidentiality agreement, I was told that there was another couple -- upgrading from a smaller B&B in another part of the state -- also interested in it, subject to obtaining financing. My response was deafening silence. If there is another couple, they will have extreme difficulty getting financing, especially if the deal is contingent upon selling their previous place. I am not at all interested in getting into a bidding war, and in this market I see no need to.
After a few days, I suddenly got several emails including various pieces of information, but the "financials" were woefully inadequate. I know enough to verify everything, but I was hoping that I could get a quick-and-dirty, broad-brush answer that would help me determine if it was at all worth my time. I was kind of hoping Kathy K. would weigh in on the subject as she is probably the closet match as far as region and climate go, but even then there are so many variables . . .
 

Innkeeper To Go

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Yes, HUGE red flag when you don't have good business info from the sellers. We walked away from several deals like that....in a hurry.
Or, it is just a sale for the real estate only..
Truthfully, I will be shocked if this property is NOT losing money. It is obvious the owner's heart is no longer in it. It has been run as a B&B for over 20 years; the current owner has had it for about five years, and does not live on site. As catlady said, there is room for improvement -- on many different levels.
When I first found the property, it was a FSBO listing that had not been updated. The owner had subsequently listed it with a realtor almost two hours away from the property. The realtor specializes in historic properties, but not B&B businesses. When I asked for financials/disclosures, etc., along with their confidentiality agreement, I was told that there was another couple -- upgrading from a smaller B&B in another part of the state -- also interested in it, subject to obtaining financing. My response was deafening silence. If there is another couple, they will have extreme difficulty getting financing, especially if the deal is contingent upon selling their previous place. I am not at all interested in getting into a bidding war, and in this market I see no need to.
After a few days, I suddenly got several emails including various pieces of information, but the "financials" were woefully inadequate. I know enough to verify everything, but I was hoping that I could get a quick-and-dirty, broad-brush answer that would help me determine if it was at all worth my time. I was kind of hoping Kathy K. would weigh in on the subject as she is probably the closet match as far as region and climate go, but even then there are so many variables . . .
.
Even within the same region, there are just too many variables for you to ever accurately predict the utilities, especially when you're looking at historic property.
 

JBloggs

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There is always another couple interested in buying.
We looked at a house a few months ago - I mean were outside as wedrove past and were looking at it saw the for sale sign, called the realtor and they just had another couple there! Oh wow. Called the next week to ask a question - as the info was incomplete (like you are finding) and wow there was just a couple looking at it today!
As I told DH "This ain't my first rodeo" I also noticed that the realtor put it on, then off, then on, then off the MLS so it appears new all the time. Again, the rodeo thing.
There is a house (mansion) in our community for sale - very historic, big, has only three bedrooms and 2 bathrooms (one on each floor) and has slave cabins, and other historic properties on this acreage - the owner is now deceased and his widow posted on her facebook page that her utility bill was $2500 a month in winter. People talk - "Oh this would make a great B&B!" They have no clue that it would cost so much to renovate the property. Utilities are apples and oranges, keeping a house 3 degrees warmer could mean hundreds more per month.
 
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