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There is an established bed & breakfast for sale. It is the first time the house/inn has been on the market for almost 20 years. The physical location can not be beat. In addition the house has an extra bonus of being owned at one point by a world famous artist. The asking price is 1.2 million.
The truth is I don't think a property like this will come available again in my lifetime. It is in an area where during the peak season rooms can often go for as much as $500/night or more. I believe the Inn has 12 rooms.
I was really thinking about taking out a business loan to purchase the Inn. Don't know if it is a good idea or not. Any suggestions?
No way to know without seeing all the financials. Unless, of course, you don't care whether or not it makes a profit. Bed and breakfast can be a lifestyle for some people.
Do you know anything about running a B & B? Anything about marketing, business, human resources, taxes, etc? How much of it will you do yourself and how much of the work will you hire out?
If you are going to do it all yourself, are you aware you need to be there virtually all the time? Also if you are going to hire it out, you will need a family member or someone you trust completely present most or all of the time
The truth is I know very little about running a B&B, though it has been a dream of mine. The location and history of the property is just icing on the cake. I believe this would be a 100% total career move, so I would devote 90-100% of my time to the operation. I will be doing my homework in the coming days, so that I can fully understand what I am getting myself into
The reason I ask is because some friends bought a B & B with no experience. They ended up hating it and they lost a ton of money. What they found:
You always have to be there. If you are not there, employees will either take things or aggravate customers. That means you are there 24 hours a day. You give up most of your privacy. You have to be nice to people and take care of them when you are in a bad mood or sick, or you broke your leg and just got back form the hospital. Employees are a hassle. You have to hire someone to handle payroll, taxes, insurance (both benefits and workers comp etc) and the like. If you don't you will get sued. You may well get sued by employees if you have to fire them anyway and insurance does not cover that. Some of your customers will be wonderful. Others will be whiny, demanding and annoying. After a while the bad ones get so annoying it becomes difficult to notice the good ones.
It is hard to make money, especially if you have employees (and especially if they sue you). Oh yeah, your guests might sue you too.
You have to set aside a bit chunk of your income for repairs, maintenance legal costs, marketing etc.
You income is sporadic. Sometimes you will be booked to overflow, other times you will have one or no rooms taken. You also have to save moeny from good times to cover bad times.
Taking care of the place and the guests and planning and making meals is only a small part of the job. You have to advertise like mad, then you need to do analysis of how well your advertising is working, which expenditures are worthwhile. You need to track expenses, even if you have an accountant, the tax issues are complicated and require daily paperwork. You will have virtaully no time for hobbies or anything for yourself. During the day, you will plan and make meals, buy supplies, clean rooms, greet guests, arrange marketing, handle reservations and billing, deal with employees, interview/hire and fire. . . at night you will sort information for taxes, plan marketing strategies, plan meals, review guest lists, try to figure out how to collect on bad payments, sort out your marketing analysis, track insurance permits and other business requirements. . . .
If you are lucky, you might get a half day off on weekends, more likely on Mondays.
I kind of wanted to do this once, but i like having a life.
Thank you for that detailed post. I've often heard that the dream can turn into a nightmare fairly quick. I will take your insight into consideration. Thank you.
I was really thinking about taking out a business loan to purchase the Inn. Don't know if it is a good idea or not. Any suggestions?
Do you have any experience in Hotels or Hospitality?
If not, it is NOT a good idea. Watch Hotel Impossible and check out the many folks who have zero experience and what happens to their dreams and their money.
You cold go work at a B & B or a hotel and get some experience. Or go to school for hotel management or whatever it is called. As popular as the idea is, I suspect there are likely entire programs out there for managing a B & B, most likely at community colleges.
There is an established bed & breakfast for sale. It is the first time the house/inn has been on the market for almost 20 years. The physical location can not be beat. In addition the house has an extra bonus of being owned at one point by a world famous artist. The asking price is 1.2 million.
The truth is I don't think a property like this will come available again in my lifetime. It is in an area where during the peak season rooms can often go for as much as $500/night or more. I believe the Inn has 12 rooms.
I was really thinking about taking out a business loan to purchase the Inn. Don't know if it is a good idea or not. Any suggestions?
Firstly I appreciate the fact that these things can seem like "once in a lifetime" situations but whether that can translate into anything that is economically viable is a whole other question.
There are some folks that do run B&B type places in resort areas and the cash flow is not negative but increasingly the competition from places being "rented out" via AirBNB and other such sites means that there is far too little opportunity to actually PROFIT in even the most premier location. Even if the place has had historic owners and such the issue comes down to the same math that one has to deal with whether you running the Bates Motel or The Plaza -- do the costs balance out against the revenue. Those "$500/night" high season rates have to be weighed against the much longer periods when it is just the owner rattling around wondering if they can pay the property taxes, the heating bill, and the repair costs for the leaky plumbing or roof. Toss in the regulatory environment that often means the local municipality will want their cut with a "room tax" and some annual courses / licenses to ensure you know how not to poison people with clotted cream that was left out too long as well as some approved "anti-bed bug laundry vendor" and the whole venture seems like more trouble than it is worth...
There are articles that try to be "balanced" -- The dream
It is not reasonable to expect either any traditional lender nor any government program to lend money to someone with no experience in such a venture; failure rates are very high and there is little upside... Financing a Bed and Breakfast - it ain't easy Getting the Green!
More sensible if you decided to live there and sold your present dwelling. You could then claim an additional deductions on taxes.
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Wrong things to be "impressed" about...
