How do you price an Inn?

[SweetShoppe]

Hi, I am looking at purchasing an inn and am wondering when you bought yours, how you priced it to know how much to offer? Right now I think it is crazy overpriced with its past revenue and lack of maintenance. They seem to have priced it as if it was a residential home. With 15 bedrooms, it is classified as commercial. Any advice on how to value an inn business?

 

[GoodScout]

The old rule of thumb used to be $100,000 per room, but with so many inns including restaurants, spas, wedding venues, it's just a jumping off point.

For example, mine's worth the same price as a 15-room B&B, but we only have 10 rooms!

 

[JimBoone]

Hi, I am looking at purchasing an inn and am wondering when you bought yours, how you priced it to know how much to offer?

I suppose I didn’t know enough at that point to make a lower offer.

I went at at my choice of place based on money available to me and the income I hoped I could generate from the business

 

[SweetShoppe]

Thanks for the input. This bnb has 15 bedrooms total, but one is an owners appt. It was build in 1901 and I’m not sure it has been updated since. It needs updated heating, updated electrical, updated plumbing. But it is priced like it has no issues.

 

[GoodScout]

I think an investment in an appraisal may be in order. In the end, you'll have to figure out what you're going to have to put into the place, what you have on hand, and thus what you have left to actually spend on the business.

 

[Sam]

You might also want to get a commercial building inspection done. A bit pricey but well worth the investment if you are seriously considering purchasing. Also, it might be tough to get financing in the current economic climate. Before spending money on appraisal and building inspection make sure you can obtain financing.

 

[gillumhouse]

Have you verified the zoning to know for certain it is zoned to be a B & B and was not a waiver that goes away if & when it is sold? Our zoning happened AFTERI opened. I was grandfathered in - but in my case I am in a mixed use zone so the grandfather would not matter. Sometimes grandfather dies with the sale. Get it in writing about ANY Codes - Zoning, Building, Fire......

 

[SweetShoppe]

Have you verified the zoning to know for certain it is zoned to be a B & B and was not a waiver that goes away if & when it is sold? Our zoning happened AFTERI opened. I was grandfathered in - but in my case I am in a mixed use zone so the grandfather would not matter. Sometimes grandfather dies with the sale. Get it in writing about ANY Codes - Zoning, Building, Fire......

Everything I see says it is zoned commercial. It has been a bnb since the 1950s.

 

[Eugee]

As a starting point, what I’ve heard before is if gross revenues can pay for the B&B within ten years..

 

[ramonalea]

As a starting point, what I’ve heard before is if gross revenues can pay for the B&B within ten years..

That is what we put in our Business Plan...

 

[Tom]

I suggest looking at the area's trend in private short term rentals -- Air and Vrbo -- that can shift the market that past revenue depended on and can change numbers for the future. I know some venerable B&B in areas with a lot of nice second homes have been hammered when owners put them on a STR program. A factor you can introduce in negotiations. Covid might go away, but Air won't (different kind of plague).

 

[GoodScout]

That was the one mistake I think I made in developing my business plan. Back in 2012, I saw the other inns, B&Bs and resorts as my competitors. I missed the giant freight train of AirBnB about to come down the tracks.

 

[Tamelon]

I was recently told by a B&B broker that the price should generally be 5x annual revenue.

 

[GoodScout]

I was recently told by a B&B broker that the price should generally be 5x annual revenue.

I would be quite OK with that number!

 

[ramonalea]

I was recently told by a B&B broker that the price should generally be 5x annual revenue.

We received 4.7x the annual revenue...with covid going on we were happy to even sell.