Best Formula for Valuation?

[Don Draper]

All this real estate discussion made me wonder, what is the most common b&b valuation formula being used since the financial industry changes in recent years? I know when we purchased here we had three different formulas, we calculated ranges with each and then averaged to get our offer. Is there a "standard" formula being used yet, does it vary by location?

 

[toddburme]

For the totally clueless on this can I hear the three methods you used?

 

[EmptyNest]

You might Check Peter's site. I recall he had an article somewhere on this...here is a link to one I found..but it seems there were others there just don't have the time to look for you right now:-(
http://bbteam.com/category/financial/

 

[Don Draper]

I will have to look them up, I know one was based strictly on cash flow, I can't remember the other variables.

 

[JBloggs]

Cash flow? What is that. ha ha

 

[Rook217]

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available.

 

[Alibi Ike]

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available..

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available.

You can also look at this, altho not new: http://www.bedandbreakfastforsale.com/index.cfm?fuseaction=openresource&resourcename=valuation

 

[JBloggs]

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available..

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available.

Was an appraisel done? The bank will require them and they will have to find as close as they can for "COMPS"
I think the real estate is what is the #1 drive on these B&B's for sale right now, vs the business. Have they been able to share what the business portion is "separately" for you?

 

[Rook217]

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available..

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available.

You can also look at this, altho not new: http://www.bedandbreakfastforsale.com/index.cfm?fuseaction=openresource&resourcename=valuation
.

Thanks for the link. I think I had looked at this at one time but was unable to find it again. I have used some of these already but not all of them.
The one valuation method I find useless is the per room value. It seems worthless since rooms are going to have a big range on the rates that can be charged.

 

[Rook217]

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available..

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available.

Was an appraisel done? The bank will require them and they will have to find as close as they can for "COMPS"
I think the real estate is what is the #1 drive on these B&B's for sale right now, vs the business. Have they been able to share what the business portion is "separately" for you?
.

The bank is most likely going to use value of land plus building replacement cost while factoring remaining usefull life. The property is not in an area where there is anything to use for comps. The property is commercial property not traditional B&B property.
The business portion of the deal has no value since it hasn't been open in the past 6 months and was not run well then. The owner was last involved in running the property in 2009 and then it was leased to someone that ran it for about a year. When the owner was involved he would stop by once a year or so and the managers where making 100 to 150K a year so it was never tax return profitable.

 

[white pine]

Cash flow? What is that. ha ha.

Our cash flows very well.....out!

 

[Alibi Ike]

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available..

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available.

Was an appraisel done? The bank will require them and they will have to find as close as they can for "COMPS"
I think the real estate is what is the #1 drive on these B&B's for sale right now, vs the business. Have they been able to share what the business portion is "separately" for you?
.

The bank is most likely going to use value of land plus building replacement cost while factoring remaining usefull life. The property is not in an area where there is anything to use for comps. The property is commercial property not traditional B&B property.
The business portion of the deal has no value since it hasn't been open in the past 6 months and was not run well then. The owner was last involved in running the property in 2009 and then it was leased to someone that ran it for about a year. When the owner was involved he would stop by once a year or so and the managers where making 100 to 150K a year so it was never tax return profitable.
.

If the manager(s) were making $100-$150k (each?) then the place was a gold mine, run well or not. I doubt many places bring that in, much less pay it out.

 

[Rook217]

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available..

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available.

Was an appraisel done? The bank will require them and they will have to find as close as they can for "COMPS"
I think the real estate is what is the #1 drive on these B&B's for sale right now, vs the business. Have they been able to share what the business portion is "separately" for you?
.

The bank is most likely going to use value of land plus building replacement cost while factoring remaining usefull life. The property is not in an area where there is anything to use for comps. The property is commercial property not traditional B&B property.
The business portion of the deal has no value since it hasn't been open in the past 6 months and was not run well then. The owner was last involved in running the property in 2009 and then it was leased to someone that ran it for about a year. When the owner was involved he would stop by once a year or so and the managers where making 100 to 150K a year so it was never tax return profitable.
.

If the manager(s) were making $100-$150k (each?) then the place was a gold mine, run well or not. I doubt many places bring that in, much less pay it out.
.

However, it was losing money every year. It was a couple runing it for the owner and they got bonuses based on revenue not profit.
The property can bring in good revenue it just needs to have good cost control. The area only has three months of slow time so if priced right and ran well revenue should not be a problem.

 

[Breakfast Diva]

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available..

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available.

Was an appraisel done? The bank will require them and they will have to find as close as they can for "COMPS"
I think the real estate is what is the #1 drive on these B&B's for sale right now, vs the business. Have they been able to share what the business portion is "separately" for you?
.

The bank is most likely going to use value of land plus building replacement cost while factoring remaining usefull life. The property is not in an area where there is anything to use for comps. The property is commercial property not traditional B&B property.
The business portion of the deal has no value since it hasn't been open in the past 6 months and was not run well then. The owner was last involved in running the property in 2009 and then it was leased to someone that ran it for about a year. When the owner was involved he would stop by once a year or so and the managers where making 100 to 150K a year so it was never tax return profitable.
.

If the manager(s) were making $100-$150k (each?) then the place was a gold mine, run well or not. I doubt many places bring that in, much less pay it out.
.

However, it was losing money every year. It was a couple runing it for the owner and they got bonuses based on revenue not profit.
The property can bring in good revenue it just needs to have good cost control. The area only has three months of slow time so if priced right and ran well revenue should not be a problem.
.

How many rooms?

 

[Rook217]

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available..

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available.

Was an appraisel done? The bank will require them and they will have to find as close as they can for "COMPS"
I think the real estate is what is the #1 drive on these B&B's for sale right now, vs the business. Have they been able to share what the business portion is "separately" for you?
.

The bank is most likely going to use value of land plus building replacement cost while factoring remaining usefull life. The property is not in an area where there is anything to use for comps. The property is commercial property not traditional B&B property.
The business portion of the deal has no value since it hasn't been open in the past 6 months and was not run well then. The owner was last involved in running the property in 2009 and then it was leased to someone that ran it for about a year. When the owner was involved he would stop by once a year or so and the managers where making 100 to 150K a year so it was never tax return profitable.
.

If the manager(s) were making $100-$150k (each?) then the place was a gold mine, run well or not. I doubt many places bring that in, much less pay it out.
.

However, it was losing money every year. It was a couple runing it for the owner and they got bonuses based on revenue not profit.
The property can bring in good revenue it just needs to have good cost control. The area only has three months of slow time so if priced right and ran well revenue should not be a problem.
.

How many rooms?
.

It is 10 rooms, 2 restaurants, 2 pools, and managers house. I am going to convert one of the restaurant and dinning areas into 4 or 5 rooms.

 

[toddburme]

Under those circumstances, I doubt any of those valuation methods will work. You are going to have to get the loan on the strength of your experience and financial condition. Once it is up and running then you can see where you stand on value based on cashflow etc.

 

[EmptyNest]

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available..

I know this topic is a little old. But I am hoping someone has something to add to this.
I am looking at putting in an offer in the next week on a property and having problems setting a value of the property since comps are not available.

Was an appraisel done? The bank will require them and they will have to find as close as they can for "COMPS"
I think the real estate is what is the #1 drive on these B&B's for sale right now, vs the business. Have they been able to share what the business portion is "separately" for you?
.

The bank is most likely going to use value of land plus building replacement cost while factoring remaining usefull life. The property is not in an area where there is anything to use for comps. The property is commercial property not traditional B&B property.
The business portion of the deal has no value since it hasn't been open in the past 6 months and was not run well then. The owner was last involved in running the property in 2009 and then it was leased to someone that ran it for about a year. When the owner was involved he would stop by once a year or so and the managers where making 100 to 150K a year so it was never tax return profitable.
.

If the manager(s) were making $100-$150k (each?) then the place was a gold mine, run well or not. I doubt many places bring that in, much less pay it out.
.

However, it was losing money every year. It was a couple runing it for the owner and they got bonuses based on revenue not profit.
The property can bring in good revenue it just needs to have good cost control. The area only has three months of slow time so if priced right and ran well revenue should not be a problem.
.

How many rooms?
.

It is 10 rooms, 2 restaurants, 2 pools, and managers house. I am going to convert one of the restaurant and dinning areas into 4 or 5 rooms.
.

Do you have the $$$$$$$ to do that conversion? Or are you looking to the bank to finance it? If so...good luck..... It won't happen. Banks are not financing speculation these days...sorry to be a downer. :-(