Another considering purchasing an inn thread

[Rook217]

Hello All,
I found Innspiring a week or two ago trying to find more information online for a Inn/B&B/Boutique Hotel purchase that my wife and I are considering. This is a great online community and hopefully I will be able to contribute to it going forward. We are leaving in a week to look at some properties and any advice would be greatly appreciated.

First some basic information about us. We are both 27 and have no kids and two cats. I am currently an accountant for a large financial company and my wife is a property manager for condo and townhome associations. I currently do HR accounting and used to do payroll accounting which I would think would be helpful in running a small business. I am some what handy around the house (bathroom remodels, painting, electrical, plumbing, ect) but know when to call for help. My wife as a property manager is used to 24/7 work situations since she is somewhat frequently on call and has meetings at all hours of the day. Property managers also get to deal with some “Interesting” people. Family would be helping out with running the Inn and also the finances. My father ran his own manufacturing company for 20+ years that he sold back in 2006 so he has a lot of small business experience.

We are currently looking at several properties that locating in the US part of the Caribbean. We are looking at properties in the 10 – 17 room range. Some are more basic B&B/Inn and others are more of a boutique hotel. We would be running it as our primary source of income. We would plan on having some employees. I have been looking at some of the properties financials and the tourism departments statistics ahead of time. I have started a business plan that includes projected income statements and cash flows.

Basically any suggestions or things to consider would be helpful at this point. It is a big decision but at this point of our lives we don’t have much tying us down and would rather take a risk and have it fail then to look back 5 -10 years from now and regret not trying.

Thank you!

 

[Alibi Ike]

If family will be helping with day to day operations, on site, make sure you have enough space to get away from each other!
Given you need to support so many extra people you'll need a much larger property than 10 rooms.
Have fun looking!

 

[toddburme]

Sounds like a great adventure. That size of operation might hit a sweet spot. You are not competing with the big chains when purchasing and it is probably too big and expensive for most hobbiests. Watch out for delayed maintenance and get a good price overall. Those two things should go a long way towards cash flow. I am sure you know that the current owners will paint a rosy picture that hopefully will be half true.

 

[Rook217]

If family will be helping with day to day operations, on site, make sure you have enough space to get away from each other!
Given you need to support so many extra people you'll need a much larger property than 10 rooms.
Have fun looking!.

One of the properties we are looking at is 10 guest rooms (one is a small villa), 2 pools, small managers house, and two restaurants. My family would only come down to help during the busy time or if we want a break. So durring the busy time we would rent a house or apartment for 4 - 6 months.
I am considering changing most of the space that is restaurants into more guestrooms and just having a lounge and breakfast area. Running a restaurant would be too much risk.

 

[JBloggs]

Wow! All the best Rook, I hope your dreams come to fruition and you have an excellent adventure with this!

 

[gillumhouse]

If family will be helping with day to day operations, on site, make sure you have enough space to get away from each other!
Given you need to support so many extra people you'll need a much larger property than 10 rooms.
Have fun looking!.

One of the properties we are looking at is 10 guest rooms (one is a small villa), 2 pools, small managers house, and two restaurants. My family would only come down to help during the busy time or if we want a break. So durring the busy time we would rent a house or apartment for 4 - 6 months.
I am considering changing most of the space that is restaurants into more guestrooms and just having a lounge and breakfast area. Running a restaurant would be too much risk.
.

I am considering changing most of the space that is restaurants into more guestrooms and just having a lounge and breakfast area. Running a restaurant would be too much risk.
THAT is good thinking. The profit on booze probably beats the heck on food profits and a lot less waste. Also will take less staff & work.

 

[Joey Camb]

when you go to look (there is another thread on this that has some really good tips) take a camera as when you look later you may see something you missed first time. Look under pictures! Can you get any tourist stats for the areas? and my advice on your maintenance budget whatever you think you will need double it.

 

[Rook217]

when you go to look (there is another thread on this that has some really good tips) take a camera as when you look later you may see something you missed first time. Look under pictures! Can you get any tourist stats for the areas? and my advice on your maintenance budget whatever you think you will need double it..

I have the occupancy statistics for the area for the last 10 years from the tourism department. I am using 50% of the last 3 years average for each month for the first 6 months and then using average for each month going forward.
I am currently setting aside $5000 a month for capital improvements and repairs do you think I should plan on $10K?
I am planing on taking pictures of everything and then using graphing paper to diagram everything and then noting where the pictures were taken.

 

[Rook217]

If family will be helping with day to day operations, on site, make sure you have enough space to get away from each other!
Given you need to support so many extra people you'll need a much larger property than 10 rooms.
Have fun looking!.

One of the properties we are looking at is 10 guest rooms (one is a small villa), 2 pools, small managers house, and two restaurants. My family would only come down to help during the busy time or if we want a break. So durring the busy time we would rent a house or apartment for 4 - 6 months.
I am considering changing most of the space that is restaurants into more guestrooms and just having a lounge and breakfast area. Running a restaurant would be too much risk.
.

I am considering changing most of the space that is restaurants into more guestrooms and just having a lounge and breakfast area. Running a restaurant would be too much risk.
THAT is good thinking. The profit on booze probably beats the heck on food profits and a lot less waste. Also will take less staff & work.
.

Thats what I was thinking. Booze sales should be good around the pools during the day and then sunsets on the roof.
The only problem with the bar part is getting software for bar sales that will work with the PMS. I will need to wait and see what they are currently using. Friday can't come soon enough.

 

[Rook217]

Maybe

 

[Joey Camb]

I think 5000 will be enough though it depends on the state the property is in. But remember buying good beds costs a ruddy fortune (I am from the UK so excuse my use of slang sometimes) and what state are bathrooms in cos they will take large chunks out of budget. Comming from a woman who is having two done now. However I got a ton of stuff on ebay (brand new) and saved me about 50% on what I call the hard stuff (toilets, sinks, shower tray etc)
Also watch out when buying TV's make sure there is a way to secure them. We are putting one of those cables that you get for laptops on each one for security.

 

[Joey Camb]

I hate it to look like everything has to be locked down but I am comming to the point where it has to be.

 

[Rook217]

I hate it to look like everything has to be locked down but I am comming to the point where it has to be..

It is sad but with how light and easy to move TVs are now you have to lock them down or eventually they will walk away.
Depending on how you do things you should be able to hide the cords for the cable locks pretty easily.

 

[Don Draper]

Maybe

.

I'm trying to picture what the logistics would be for getting the supplies for your day to day operations. I know there are a ton of rental properties and b&b's there so obviously it gets done, but it seems daunting to me. Last we were in the area we rented a beautiful vacation home and brought groceries over on the ferry which was much cheaper than buying on the island, but it takes so long that way.
My other huge caution for you would be to really consider exactly how tied down you will be. My partner and I were in your exact position before purchasing our b&b and WOW, talk about lifestyle shock. From being tied to nothing to being stuck in the same 4 walls for many, many days in a row with no break. Though you definitely will have a "season", I'm sure you'd get business year round like we do, and it wears you down very quickly. Just a thought.

 

[Rook217]

Maybe

.

I'm trying to picture what the logistics would be for getting the supplies for your day to day operations. I know there are a ton of rental properties and b&b's there so obviously it gets done, but it seems daunting to me. Last we were in the area we rented a beautiful vacation home and brought groceries over on the ferry which was much cheaper than buying on the island, but it takes so long that way.
My other huge caution for you would be to really consider exactly how tied down you will be. My partner and I were in your exact position before purchasing our b&b and WOW, talk about lifestyle shock. From being tied to nothing to being stuck in the same 4 walls for many, many days in a row with no break. Though you definitely will have a "season", I'm sure you'd get business year round like we do, and it wears you down very quickly. Just a thought.
.

I sent you a private message (email?) let me know if you get it. I would really appreciate your viewpoint on things.

 

[Don Draper]

Edited to protect anonymity

 

[Rook217]

Sounds like a great adventure. That size of operation might hit a sweet spot. You are not competing with the big chains when purchasing and it is probably too big and expensive for most hobbiests. Watch out for delayed maintenance and get a good price overall. Those two things should go a long way towards cash flow. I am sure you know that the current owners will paint a rosy picture that hopefully will be half true..

I don't believe anything the PO's give me other then their tax returns and even those I am skeptical. The culture down there does not have a problem with being creative with accounting or recording cash transactions.
I am trying to set aside money for capital improvements or repairs in the numbers I use but not sure how much I should do. I was thinking maybe the same amount as the depreciation.

 

[Don Draper]

Maybe

.

I'm trying to picture what the logistics would be for getting the supplies for your day to day operations. I know there are a ton of rental properties and b&b's there so obviously it gets done, but it seems daunting to me. Last we were in the area we rented a beautiful vacation home and brought groceries over on the ferry which was much cheaper than buying on the island, but it takes so long that way.
My other huge caution for you would be to really consider exactly how tied down you will be. My partner and I were in your exact position before purchasing our b&b and WOW, talk about lifestyle shock. From being tied to nothing to being stuck in the same 4 walls for many, many days in a row with no break. Though you definitely will have a "season", I'm sure you'd get business year round like we do, and it wears you down very quickly. Just a thought.
.

I sent you a private message (email?) let me know if you get it. I would really appreciate your viewpoint on things.
.

Got it! I'm sending you an email.

 

[agoodman]

If family will be helping with day to day operations, on site, make sure you have enough space to get away from each other!
Given you need to support so many extra people you'll need a much larger property than 10 rooms.
Have fun looking!.

One of the properties we are looking at is 10 guest rooms (one is a small villa), 2 pools, small managers house, and two restaurants. My family would only come down to help during the busy time or if we want a break. So durring the busy time we would rent a house or apartment for 4 - 6 months.
I am considering changing most of the space that is restaurants into more guestrooms and just having a lounge and breakfast area. Running a restaurant would be too much risk.
.

I am considering changing most of the space that is restaurants into more guestrooms and just having a lounge and breakfast area. Running a restaurant would be too much risk.
THAT is good thinking. The profit on booze probably beats the heck on food profits and a lot less waste. Also will take less staff & work.
.

Thats what I was thinking. Booze sales should be good around the pools during the day and then sunsets on the roof.
The only problem with the bar part is getting software for bar sales that will work with the PMS. I will need to wait and see what they are currently using. Friday can't come soon enough.
.

why do you need bar software that works with PMS? For such a small property get a small Inn system and then get a small POS for the restaurant like Nurol POS, the cost of having an interface is just not feasible on such a small location and even if you had the initial outlay, the cost of mantaining the interface is very expensive. In the case the someone who is staying at the Inn wants to do a "room charge", you close out the check in the POS and then transfer the amount to the guest hotel bill.
Or, much easier, you just don't do room charges from the restaurant/ bar, it is not "required" or even expected in small locations
Having installed front office systems and the POS interfaces I think I am missing the logic/need?

 

[agoodman]

Occupancy rates are not the important thing, you can have 10% occupancy with a Revpar of $2..... which is not good, you need to look at occupancy together with ADR and most importantly REVPAR, I see Inns for sale that say they are doing 60-70% occupancy - that means nothing ...or very little unless combined with other factors .. costs for one thing. Taking on an Inn AND restaurants is a HUGE project especially with no hospitality (hotel/inn/restaurant) experience mentioned - yes of course your accounting and maintenance experience helps but with an operation of that scale that is just a little bit of it.