Our idea - what do you think?

[Emily Spiers]

it's hard for me to be objective about the idea of flipping a B&B because running/owning/living in one is a passion that involves mySELF as innkeeper. if you read back through the forum about owners who are not the innkeepers, you see the struggles ... an innkeeper as overworked, disheartened and sometimes heart broken employee is very real. innkeeper/owners at least own the business. innkeeping with no or minimal staff is VERY hard work. just marketing a B&B is a big job ... especially if the place has a bad or nonexistent reputation and/or has closed.
flipping a business is a lot different from flipping a house.
just my two cents.

because running/owning/living in one is a passion that involves mySELF as innkeeper.
flipping a business is a lot different from flipping a house.

I am thinking about passion and how that translates to the B&B itself. If you are only impassive about this B&B, will that attiitude reflect on the business? Are passionate B&B owners more successful? Do unpassionate B&B owners transfer that unpassionateness to the guests? Can the guests (potential or actual) see or feel the lack of interest? If you are only in it for the buck at the end of the tunnel, does that feeling convey to the people you are trying to woo to your inn for their money for a good bottom line for a good sale??? Just thinking out loud here...

 

[Morticia]

it's hard for me to be objective about the idea of flipping a B&B because running/owning/living in one is a passion that involves mySELF as innkeeper. if you read back through the forum about owners who are not the innkeepers, you see the struggles ... an innkeeper as overworked, disheartened and sometimes heart broken employee is very real. innkeeper/owners at least own the business. innkeeping with no or minimal staff is VERY hard work. just marketing a B&B is a big job ... especially if the place has a bad or nonexistent reputation and/or has closed.
flipping a business is a lot different from flipping a house.
just my two cents.

because running/owning/living in one is a passion that involves mySELF as innkeeper.
flipping a business is a lot different from flipping a house.

I am thinking about passion and how that translates to the B&B itself. If you are only impassive about this B&B, will that attiitude reflect on the business? Are passionate B&B owners more successful? Do unpassionate B&B owners transfer that unpassionateness to the guests? Can the guests (potential or actual) see or feel the lack of interest? If you are only in it for the buck at the end of the tunnel, does that feeling convey to the people you are trying to woo to your inn for their money for a good bottom line for a good sale??? Just thinking out loud here...
.

Passion is a two-edged sword. I've seen 'passionate' innkeepers hurl themselves out of this biz so fast your head would spin. But, you need to understand what you are going to get out of the biz before you get into it.
A couple of thoughts on that:

• Are you looking at this as a party you will be hosting? Some innkeepers are passionate hosts. They love a party, love having guests over, love entertaining. You will have to run a place that allows you to do that. But keep in mind that the guests will not always be thinking along the same lines. You are not their new best friend. You are merely (and merely is operative) the 'help' at the place they are staying.
• Some innkeepers are passioante about the place they live in and want to share that with guests. For some guests you are the stop on the way to their 'real' vacation. You have to be able to handle that.
• Some innkeepers are passionate about decorating and creating a space. You have to be able to handle the guest who thinks it's trash, outdated, wrong, cheap, whatever.

These are the kind of places that your passion takes a beating. (It's a lot like being married, if you think about it!) I think what you have to be passionate about is the moment. You have to be able to forget the long list of things to do, rotten past guests, etc and focus on the person in front of you. If you can do that, no matter what your ulterior motive is, that person will feel what we're calling passion.

 

[toddburme]

it's hard for me to be objective about the idea of flipping a B&B because running/owning/living in one is a passion that involves mySELF as innkeeper. if you read back through the forum about owners who are not the innkeepers, you see the struggles ... an innkeeper as overworked, disheartened and sometimes heart broken employee is very real. innkeeper/owners at least own the business. innkeeping with no or minimal staff is VERY hard work. just marketing a B&B is a big job ... especially if the place has a bad or nonexistent reputation and/or has closed.
flipping a business is a lot different from flipping a house.
just my two cents.

it's hard for me to be objective about the idea of flipping a B&B because running/owning/living in one is a passion that involves mySELF as innkeeper. if you read back through the forum about owners who are not the innkeepers, you see the struggles ... an innkeeper as overworked, disheartened and sometimes heart broken employee is very real. innkeeper/owners at least own the business. innkeeping with no or minimal staff is VERY hard work. just marketing a B&B is a big job ... especially if the place has a bad or nonexistent reputation and/or has closed.
flipping a business is a lot different from flipping a house.
just my two cents

This is the biggest thing right there. My competition is going to mostly owners who are there 24/7 working to ensure a nice stay for their guests. Can I hire that? I am sure we have all had experiences with a bad employees whether as a customer or manager. But we have also had great experiences with employees. So I am thinking(hoping) that I can screen hard enough and get the right person.
The right employee might view this a great opportunity and resume builder. "I took a closed BnB and supervised all remodeling, refurbishing and made it into a going concern." Also I am assuming there are people who like the idea of owning a BnB but for whatever reason are not in the position to purchase. Living and running one for a few years with the idea of moving on to a new experience has it appeal.

 

[Samster]

it's hard for me to be objective about the idea of flipping a B&B because running/owning/living in one is a passion that involves mySELF as innkeeper. if you read back through the forum about owners who are not the innkeepers, you see the struggles ... an innkeeper as overworked, disheartened and sometimes heart broken employee is very real. innkeeper/owners at least own the business. innkeeping with no or minimal staff is VERY hard work. just marketing a B&B is a big job ... especially if the place has a bad or nonexistent reputation and/or has closed.
flipping a business is a lot different from flipping a house.
just my two cents.

it's hard for me to be objective about the idea of flipping a B&B because running/owning/living in one is a passion that involves mySELF as innkeeper. if you read back through the forum about owners who are not the innkeepers, you see the struggles ... an innkeeper as overworked, disheartened and sometimes heart broken employee is very real. innkeeper/owners at least own the business. innkeeping with no or minimal staff is VERY hard work. just marketing a B&B is a big job ... especially if the place has a bad or nonexistent reputation and/or has closed.
flipping a business is a lot different from flipping a house.
just my two cents

This is the biggest thing right there. My competition is going to mostly owners who are there 24/7 working to ensure a nice stay for their guests. Can I hire that? I am sure we have all had experiences with a bad employees whether as a customer or manager. But we have also had great experiences with employees. So I am thinking(hoping) that I can screen hard enough and get the right person.
The right employee might view this a great opportunity and resume builder. "I took a closed BnB and supervised all remodeling, refurbishing and made it into a going concern." Also I am assuming there are people who like the idea of owning a BnB but for whatever reason are not in the position to purchase. Living and running one for a few years with the idea of moving on to a new experience has it appeal.
.

Only if they are paid enough money to do the hard work. It's a different deal if you actually own the business.
Have you looked at the other B&Bs/inns that are for sale in the basic area of this place that you're considering re-opening? That might help you a bit.

 

[user 26]

it's hard for me to be objective about the idea of flipping a B&B because running/owning/living in one is a passion that involves mySELF as innkeeper. if you read back through the forum about owners who are not the innkeepers, you see the struggles ... an innkeeper as overworked, disheartened and sometimes heart broken employee is very real. innkeeper/owners at least own the business. innkeeping with no or minimal staff is VERY hard work. just marketing a B&B is a big job ... especially if the place has a bad or nonexistent reputation and/or has closed.
flipping a business is a lot different from flipping a house.
just my two cents.

it's hard for me to be objective about the idea of flipping a B&B because running/owning/living in one is a passion that involves mySELF as innkeeper. if you read back through the forum about owners who are not the innkeepers, you see the struggles ... an innkeeper as overworked, disheartened and sometimes heart broken employee is very real. innkeeper/owners at least own the business. innkeeping with no or minimal staff is VERY hard work. just marketing a B&B is a big job ... especially if the place has a bad or nonexistent reputation and/or has closed.
flipping a business is a lot different from flipping a house.
just my two cents

This is the biggest thing right there. My competition is going to mostly owners who are there 24/7 working to ensure a nice stay for their guests. Can I hire that? I am sure we have all had experiences with a bad employees whether as a customer or manager. But we have also had great experiences with employees. So I am thinking(hoping) that I can screen hard enough and get the right person.
The right employee might view this a great opportunity and resume builder. "I took a closed BnB and supervised all remodeling, refurbishing and made it into a going concern." Also I am assuming there are people who like the idea of owning a BnB but for whatever reason are not in the position to purchase. Living and running one for a few years with the idea of moving on to a new experience has it appeal.
.

The right employee might view this a great opportunity and resume builder. "I took a closed BnB and supervised all remodeling, refurbishing and made it into a going concern."

been there, done that, got a raw deal ..... will NEVER do it again. my own fault.

 

[Morticia]

it's hard for me to be objective about the idea of flipping a B&B because running/owning/living in one is a passion that involves mySELF as innkeeper. if you read back through the forum about owners who are not the innkeepers, you see the struggles ... an innkeeper as overworked, disheartened and sometimes heart broken employee is very real. innkeeper/owners at least own the business. innkeeping with no or minimal staff is VERY hard work. just marketing a B&B is a big job ... especially if the place has a bad or nonexistent reputation and/or has closed.
flipping a business is a lot different from flipping a house.
just my two cents.

it's hard for me to be objective about the idea of flipping a B&B because running/owning/living in one is a passion that involves mySELF as innkeeper. if you read back through the forum about owners who are not the innkeepers, you see the struggles ... an innkeeper as overworked, disheartened and sometimes heart broken employee is very real. innkeeper/owners at least own the business. innkeeping with no or minimal staff is VERY hard work. just marketing a B&B is a big job ... especially if the place has a bad or nonexistent reputation and/or has closed.
flipping a business is a lot different from flipping a house.
just my two cents

This is the biggest thing right there. My competition is going to mostly owners who are there 24/7 working to ensure a nice stay for their guests. Can I hire that? I am sure we have all had experiences with a bad employees whether as a customer or manager. But we have also had great experiences with employees. So I am thinking(hoping) that I can screen hard enough and get the right person.
The right employee might view this a great opportunity and resume builder. "I took a closed BnB and supervised all remodeling, refurbishing and made it into a going concern." Also I am assuming there are people who like the idea of owning a BnB but for whatever reason are not in the position to purchase. Living and running one for a few years with the idea of moving on to a new experience has it appeal.
.

Also I am assuming there are people who like the idea of owning a BnB but for whatever reason are not in the position to purchase. Living and running one for a few years with the idea of moving on to a new experience has it appeal.

I totally agree with this. For some people, they love the challenge but hate the day to day. These are the same people who start businesses, make them soar and then sell to start another biz.

 

[toddburme]

it's hard for me to be objective about the idea of flipping a B&B because running/owning/living in one is a passion that involves mySELF as innkeeper. if you read back through the forum about owners who are not the innkeepers, you see the struggles ... an innkeeper as overworked, disheartened and sometimes heart broken employee is very real. innkeeper/owners at least own the business. innkeeping with no or minimal staff is VERY hard work. just marketing a B&B is a big job ... especially if the place has a bad or nonexistent reputation and/or has closed.
flipping a business is a lot different from flipping a house.
just my two cents.

it's hard for me to be objective about the idea of flipping a B&B because running/owning/living in one is a passion that involves mySELF as innkeeper. if you read back through the forum about owners who are not the innkeepers, you see the struggles ... an innkeeper as overworked, disheartened and sometimes heart broken employee is very real. innkeeper/owners at least own the business. innkeeping with no or minimal staff is VERY hard work. just marketing a B&B is a big job ... especially if the place has a bad or nonexistent reputation and/or has closed.
flipping a business is a lot different from flipping a house.
just my two cents

This is the biggest thing right there. My competition is going to mostly owners who are there 24/7 working to ensure a nice stay for their guests. Can I hire that? I am sure we have all had experiences with a bad employees whether as a customer or manager. But we have also had great experiences with employees. So I am thinking(hoping) that I can screen hard enough and get the right person.
The right employee might view this a great opportunity and resume builder. "I took a closed BnB and supervised all remodeling, refurbishing and made it into a going concern." Also I am assuming there are people who like the idea of owning a BnB but for whatever reason are not in the position to purchase. Living and running one for a few years with the idea of moving on to a new experience has it appeal.
.

Only if they are paid enough money to do the hard work. It's a different deal if you actually own the business.
Have you looked at the other B&Bs/inns that are for sale in the basic area of this place that you're considering re-opening? That might help you a bit.
.

Only if they are paid enough money to do the hard work. It's a different deal if you actually own the business.
Have you looked at the other B&Bs/inns that are for sale in the basic area of this place that you're considering re-opening? That might help you a bit.

Pay will probably be my next thread sometime in the future.
Looking at other BnB's for sale is a great idea and one I will get right on!

 

[toddburme]

it's hard for me to be objective about the idea of flipping a B&B because running/owning/living in one is a passion that involves mySELF as innkeeper. if you read back through the forum about owners who are not the innkeepers, you see the struggles ... an innkeeper as overworked, disheartened and sometimes heart broken employee is very real. innkeeper/owners at least own the business. innkeeping with no or minimal staff is VERY hard work. just marketing a B&B is a big job ... especially if the place has a bad or nonexistent reputation and/or has closed.
flipping a business is a lot different from flipping a house.
just my two cents.

it's hard for me to be objective about the idea of flipping a B&B because running/owning/living in one is a passion that involves mySELF as innkeeper. if you read back through the forum about owners who are not the innkeepers, you see the struggles ... an innkeeper as overworked, disheartened and sometimes heart broken employee is very real. innkeeper/owners at least own the business. innkeeping with no or minimal staff is VERY hard work. just marketing a B&B is a big job ... especially if the place has a bad or nonexistent reputation and/or has closed.
flipping a business is a lot different from flipping a house.
just my two cents

This is the biggest thing right there. My competition is going to mostly owners who are there 24/7 working to ensure a nice stay for their guests. Can I hire that? I am sure we have all had experiences with a bad employees whether as a customer or manager. But we have also had great experiences with employees. So I am thinking(hoping) that I can screen hard enough and get the right person.
The right employee might view this a great opportunity and resume builder. "I took a closed BnB and supervised all remodeling, refurbishing and made it into a going concern." Also I am assuming there are people who like the idea of owning a BnB but for whatever reason are not in the position to purchase. Living and running one for a few years with the idea of moving on to a new experience has it appeal.
.

The right employee might view this a great opportunity and resume builder. "I took a closed BnB and supervised all remodeling, refurbishing and made it into a going concern."

been there, done that, got a raw deal ..... will NEVER do it again. my own fault.
.

The right employee might view this a great opportunity and resume builder. "I took a closed BnB and supervised all remodeling, refurbishing and made it into a going concern."

been there, done that, got a raw deal ..... will NEVER do it again. my own fault.

Sorry to hear that. I have done it with a few apartment buildings and a nice end bonus can make everyone feel a little better. Our biggest issue was that we needed more people to get it going then to run it so how do you tell a great employee that there is no longer room for them at your company. That is why I really try to make sure that they know what my plan is before they start. It doesn't remove the problem of them now looking for a new job but at least they knew it was coming way ahead of time.

 

[Breakfast Diva]

My opinion is for you not to get involved with it for several reasons.
"I know nothing of the BnB business and will probably not have time to be helpful. He and his wife who have run both of their BnB's have full time jobs"
Even if you are able to find a good manager, how will you be able to afford them/him/her? Especially in the beginning, the reputation phase is amazingly important. This would be a huge burden to place on an employee and will take an enourmous amount of the owner's time and oversite.
"I can finance it as a investment house purchase with 25% down. BUT if the new owner can't get a loan to buy it!"
To me, this is the biggest hurdle. Financing for B&Bs right now is more difficult than it has ever been. More than likely, after a couple years in business it would be considered a "lifestyle" B&B. That means that there is basically NO BUSINESS VALUE. It would need to be sold for it's property value. No bank will touch it as a business. For the new buyer to be able to get a B&B loan, the business will have to show a lot of income. Right now, the industry standard is to take the net profit and times it between 9 & 11 (depending on your area). That number is what will be the general business appraisal value which includes the property. It seems to me that even if you were able to get the occupancy rate to the 40% mark your partner achieved (highly unlikely in such a short time and in this economy), the numbers just wouldn't work to really be able to sell it as a business and have the new buyers approved for a loan.
Unless you and your partner will buy this property for next to nothing, I just don't see how it would work. Most, but not all 4-5 room B&Bs fall under the catagory of "lifestyle".
"It would take 2010 to get it running and hopefully have a 2011 year to show to a prospective buyers in spring of 2012. By 2012, hopefully we will be in a better place market wise. I doubt it will be the torrid days of yore but I only need one buyer"
If you are planning on putting it on the market in 2012, you'll be looking at the average of 2 years before you find a buyer. Are you willing to wait that long for this spec project? There is a lot of risk involved.
If the scenario were that it was a business that one of you really wanted for themselves and wanted to go for your dream, I might say "go for it", but with the parameters you've told us, I would caution you strongly to not get involved.

 

[toddburme]

My opinion is for you not to get involved with it for several reasons.
"I know nothing of the BnB business and will probably not have time to be helpful. He and his wife who have run both of their BnB's have full time jobs"
Even if you are able to find a good manager, how will you be able to afford them/him/her? Especially in the beginning, the reputation phase is amazingly important. This would be a huge burden to place on an employee and will take an enourmous amount of the owner's time and oversite.
"I can finance it as a investment house purchase with 25% down. BUT if the new owner can't get a loan to buy it!"
To me, this is the biggest hurdle. Financing for B&Bs right now is more difficult than it has ever been. More than likely, after a couple years in business it would be considered a "lifestyle" B&B. That means that there is basically NO BUSINESS VALUE. It would need to be sold for it's property value. No bank will touch it as a business. For the new buyer to be able to get a B&B loan, the business will have to show a lot of income. Right now, the industry standard is to take the net profit and times it between 9 & 11 (depending on your area). That number is what will be the general business appraisal value which includes the property. It seems to me that even if you were able to get the occupancy rate to the 40% mark your partner achieved (highly unlikely in such a short time and in this economy), the numbers just wouldn't work to really be able to sell it as a business and have the new buyers approved for a loan.
Unless you and your partner will buy this property for next to nothing, I just don't see how it would work. Most, but not all 4-5 room B&Bs fall under the catagory of "lifestyle".
"It would take 2010 to get it running and hopefully have a 2011 year to show to a prospective buyers in spring of 2012. By 2012, hopefully we will be in a better place market wise. I doubt it will be the torrid days of yore but I only need one buyer"
If you are planning on putting it on the market in 2012, you'll be looking at the average of 2 years before you find a buyer. Are you willing to wait that long for this spec project? There is a lot of risk involved.
If the scenario were that it was a business that one of you really wanted for themselves and wanted to go for your dream, I might say "go for it", but with the parameters you've told us, I would caution you strongly to not get involved..

My opinion is for you not to get involved with it for several reasons.
"I can finance it as a investment house purchase with 25% down. BUT if the new owner can't get a loan to buy it!"
To me, this is the biggest hurdle. Financing for B&Bs right now is more difficult than it has ever been. More than likely, after a couple years in business it would be considered a "lifestyle" B&B. That means that there is basically NO BUSINESS VALUE. It would need to be sold for it's property value. No bank will touch it as a business. For the new buyer to be able to get a B&B loan, the business will have to show a lot of income. Right now, the industry standard is to take the net profit and times it between 9 & 11 (depending on your area). That number is what will be the general business appraisal value which includes the property. It seems to me that even if you were able to get the occupancy rate to the 40% mark your partner achieved (highly unlikely in such a short time and in this economy), the numbers just wouldn't work to really be able to sell it as a business and have the new buyers approved for a loan.
Unless you and your partner will buy this property for next to nothing, I just don't see how it would work. Most, but not all 4-5 room B&Bs fall under the catagory of "lifestyle".

Great stuff. I sort of assumed that a BnB of this size was sort of a hobby farm in valuation terms but it is nice to see that confirmed. Our projection is a 40k net so even on that, if we could sell for 400k it would be a nice profit but could we sell for that?
Also had a big planning meeting tonight and we are adding time and money to the start up period. 50k is probably doable for a 5 BR BnB to get it all furnished if you had lots of time to do it. Get sales here, buy a good deal etc but to do it all in one month means more then once you are going to just pay retail to get the last few pieces to make it work.
Also adding a more sizable fix up budget. Seeing as it is empty, it is too tempting. We are going to redo the baths a bit.

 

[EmptyNest]

My opinion is for you not to get involved with it for several reasons.
"I know nothing of the BnB business and will probably not have time to be helpful. He and his wife who have run both of their BnB's have full time jobs"
Even if you are able to find a good manager, how will you be able to afford them/him/her? Especially in the beginning, the reputation phase is amazingly important. This would be a huge burden to place on an employee and will take an enourmous amount of the owner's time and oversite.
"I can finance it as a investment house purchase with 25% down. BUT if the new owner can't get a loan to buy it!"
To me, this is the biggest hurdle. Financing for B&Bs right now is more difficult than it has ever been. More than likely, after a couple years in business it would be considered a "lifestyle" B&B. That means that there is basically NO BUSINESS VALUE. It would need to be sold for it's property value. No bank will touch it as a business. For the new buyer to be able to get a B&B loan, the business will have to show a lot of income. Right now, the industry standard is to take the net profit and times it between 9 & 11 (depending on your area). That number is what will be the general business appraisal value which includes the property. It seems to me that even if you were able to get the occupancy rate to the 40% mark your partner achieved (highly unlikely in such a short time and in this economy), the numbers just wouldn't work to really be able to sell it as a business and have the new buyers approved for a loan.
Unless you and your partner will buy this property for next to nothing, I just don't see how it would work. Most, but not all 4-5 room B&Bs fall under the catagory of "lifestyle".
"It would take 2010 to get it running and hopefully have a 2011 year to show to a prospective buyers in spring of 2012. By 2012, hopefully we will be in a better place market wise. I doubt it will be the torrid days of yore but I only need one buyer"
If you are planning on putting it on the market in 2012, you'll be looking at the average of 2 years before you find a buyer. Are you willing to wait that long for this spec project? There is a lot of risk involved.
If the scenario were that it was a business that one of you really wanted for themselves and wanted to go for your dream, I might say "go for it", but with the parameters you've told us, I would caution you strongly to not get involved..

My opinion is for you not to get involved with it for several reasons.
"I can finance it as a investment house purchase with 25% down. BUT if the new owner can't get a loan to buy it!"
To me, this is the biggest hurdle. Financing for B&Bs right now is more difficult than it has ever been. More than likely, after a couple years in business it would be considered a "lifestyle" B&B. That means that there is basically NO BUSINESS VALUE. It would need to be sold for it's property value. No bank will touch it as a business. For the new buyer to be able to get a B&B loan, the business will have to show a lot of income. Right now, the industry standard is to take the net profit and times it between 9 & 11 (depending on your area). That number is what will be the general business appraisal value which includes the property. It seems to me that even if you were able to get the occupancy rate to the 40% mark your partner achieved (highly unlikely in such a short time and in this economy), the numbers just wouldn't work to really be able to sell it as a business and have the new buyers approved for a loan.
Unless you and your partner will buy this property for next to nothing, I just don't see how it would work. Most, but not all 4-5 room B&Bs fall under the catagory of "lifestyle".

Great stuff. I sort of assumed that a BnB of this size was sort of a hobby farm in valuation terms but it is nice to see that confirmed. Our projection is a 40k net so even on that, if we could sell for 400k it would be a nice profit but could we sell for that?
Also had a big planning meeting tonight and we are adding time and money to the start up period. 50k is probably doable for a 5 BR BnB to get it all furnished if you had lots of time to do it. Get sales here, buy a good deal etc but to do it all in one month means more then once you are going to just pay retail to get the last few pieces to make it work.
Also adding a more sizable fix up budget. Seeing as it is empty, it is too tempting. We are going to redo the baths a bit.
.

Be prepared to be in the B & B business a good while. Nothing is moving these days unless you are willing to do a lease for purchase.

 

[white pine]

My opinion is for you not to get involved with it for several reasons.
"I know nothing of the BnB business and will probably not have time to be helpful. He and his wife who have run both of their BnB's have full time jobs"
Even if you are able to find a good manager, how will you be able to afford them/him/her? Especially in the beginning, the reputation phase is amazingly important. This would be a huge burden to place on an employee and will take an enourmous amount of the owner's time and oversite.
"I can finance it as a investment house purchase with 25% down. BUT if the new owner can't get a loan to buy it!"
To me, this is the biggest hurdle. Financing for B&Bs right now is more difficult than it has ever been. More than likely, after a couple years in business it would be considered a "lifestyle" B&B. That means that there is basically NO BUSINESS VALUE. It would need to be sold for it's property value. No bank will touch it as a business. For the new buyer to be able to get a B&B loan, the business will have to show a lot of income. Right now, the industry standard is to take the net profit and times it between 9 & 11 (depending on your area). That number is what will be the general business appraisal value which includes the property. It seems to me that even if you were able to get the occupancy rate to the 40% mark your partner achieved (highly unlikely in such a short time and in this economy), the numbers just wouldn't work to really be able to sell it as a business and have the new buyers approved for a loan.
Unless you and your partner will buy this property for next to nothing, I just don't see how it would work. Most, but not all 4-5 room B&Bs fall under the catagory of "lifestyle".
"It would take 2010 to get it running and hopefully have a 2011 year to show to a prospective buyers in spring of 2012. By 2012, hopefully we will be in a better place market wise. I doubt it will be the torrid days of yore but I only need one buyer"
If you are planning on putting it on the market in 2012, you'll be looking at the average of 2 years before you find a buyer. Are you willing to wait that long for this spec project? There is a lot of risk involved.
If the scenario were that it was a business that one of you really wanted for themselves and wanted to go for your dream, I might say "go for it", but with the parameters you've told us, I would caution you strongly to not get involved..

My opinion is for you not to get involved with it for several reasons.
"I can finance it as a investment house purchase with 25% down. BUT if the new owner can't get a loan to buy it!"
To me, this is the biggest hurdle. Financing for B&Bs right now is more difficult than it has ever been. More than likely, after a couple years in business it would be considered a "lifestyle" B&B. That means that there is basically NO BUSINESS VALUE. It would need to be sold for it's property value. No bank will touch it as a business. For the new buyer to be able to get a B&B loan, the business will have to show a lot of income. Right now, the industry standard is to take the net profit and times it between 9 & 11 (depending on your area). That number is what will be the general business appraisal value which includes the property. It seems to me that even if you were able to get the occupancy rate to the 40% mark your partner achieved (highly unlikely in such a short time and in this economy), the numbers just wouldn't work to really be able to sell it as a business and have the new buyers approved for a loan.
Unless you and your partner will buy this property for next to nothing, I just don't see how it would work. Most, but not all 4-5 room B&Bs fall under the catagory of "lifestyle".

Great stuff. I sort of assumed that a BnB of this size was sort of a hobby farm in valuation terms but it is nice to see that confirmed. Our projection is a 40k net so even on that, if we could sell for 400k it would be a nice profit but could we sell for that?
Also had a big planning meeting tonight and we are adding time and money to the start up period. 50k is probably doable for a 5 BR BnB to get it all furnished if you had lots of time to do it. Get sales here, buy a good deal etc but to do it all in one month means more then once you are going to just pay retail to get the last few pieces to make it work.
Also adding a more sizable fix up budget. Seeing as it is empty, it is too tempting. We are going to redo the baths a bit.
.

I'm just a newbie here -- the lawyer is chewing thru papers--and I don't know your market but I have to say that 40k NET if you are paying for help with only a 4-5 rooms seems high to me. Also, when you sell, because you won't really have much of a track record as a business, the resale estimates should probably be based on property value.
I would say that if you think it is a good flip based on current market prices consider that rather than flipping a B&B. Why put energy into building up a business if you won't get paid back for those efforts?
The place we are looking at historically would be marketed at about 1+ million. Much of the value is the land/setting. Current market value is at 750k. Because of condition of place and that NOTHING IS SELLING we are at 400k. That is reality. We have a ten year plan and hope not to LOSE more than 10K the first several years.

 

[toddburme]

White Pine sounds like you are making the current economy work for you.
40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person. Add in the $800/month mtge payment and I am projecting a breakeven amount more or less.
We have made an offer that is less then one 1/3 of the 2006 selling price and less then half of the 2003 selling price. We also are using a projected gross about 20% less then the last full year we have in 2005. Occupancy rates in the hotel industry are at or near ten years lows right now.
I still have some time before the offer is reviewed to find a good reason not to buy.

 

[Innkeeper To Go]

White Pine sounds like you are making the current economy work for you.
40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person. Add in the $800/month mtge payment and I am projecting a breakeven amount more or less.
We have made an offer that is less then one 1/3 of the 2006 selling price and less then half of the 2003 selling price. We also are using a projected gross about 20% less then the last full year we have in 2005. Occupancy rates in the hotel industry are at or near ten years lows right now.
I still have some time before the offer is reviewed to find a good reason not to buy. .

40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person.

You want a manager to work around the clock to make your business viable and you think $2500 is a fair salary?
So around $600 per week? Seriously?

 

[toddburme]

White Pine sounds like you are making the current economy work for you.
40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person. Add in the $800/month mtge payment and I am projecting a breakeven amount more or less.
We have made an offer that is less then one 1/3 of the 2006 selling price and less then half of the 2003 selling price. We also are using a projected gross about 20% less then the last full year we have in 2005. Occupancy rates in the hotel industry are at or near ten years lows right now.
I still have some time before the offer is reviewed to find a good reason not to buy. .

40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person.

You want a manager to work around the clock to make your business viable and you think $2500 is a fair salary?
So around $600 per week? Seriously?
.

40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person.

You want a manager to work around the clock to make your business viable and you think $2500 is a fair salary?
So around $600 per week? Seriously?

Plus room and board of about 1k/month in value maybe a bit higher. But that is the idea. I have a person who runs my rental property business for me and makes just a bit more then that. He has to supervise 3 other people too.
Morticia - Yeah the price is what is even opening up this opportunity.

 

[EmptyNest]

White Pine sounds like you are making the current economy work for you.
40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person. Add in the $800/month mtge payment and I am projecting a breakeven amount more or less.
We have made an offer that is less then one 1/3 of the 2006 selling price and less then half of the 2003 selling price. We also are using a projected gross about 20% less then the last full year we have in 2005. Occupancy rates in the hotel industry are at or near ten years lows right now.
I still have some time before the offer is reviewed to find a good reason not to buy. .

40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person.

You want a manager to work around the clock to make your business viable and you think $2500 is a fair salary?
So around $600 per week? Seriously?
.

40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person.

You want a manager to work around the clock to make your business viable and you think $2500 is a fair salary?
So around $600 per week? Seriously?

Plus room and board of about 1k/month in value maybe a bit higher. But that is the idea. I have a person who runs my rental property business for me and makes just a bit more then that. He has to supervise 3 other people too.
Morticia - Yeah the price is what is even opening up this opportunity.
.

Sorry but for the privledge of dealing with the hassles that a myriad of guests bring to a B & B...that is not enough...unless you get someone who is just a warm body in there and that won't do much for the business :-(

 

[Morticia]

White Pine sounds like you are making the current economy work for you.
40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person. Add in the $800/month mtge payment and I am projecting a breakeven amount more or less.
We have made an offer that is less then one 1/3 of the 2006 selling price and less then half of the 2003 selling price. We also are using a projected gross about 20% less then the last full year we have in 2005. Occupancy rates in the hotel industry are at or near ten years lows right now.
I still have some time before the offer is reviewed to find a good reason not to buy. .

Your mortgage payment will be $800/month? Geez Louise, buy the place. That's not even enough to rent a dinky apartment around here.

 

[Breakfast Diva]

White Pine sounds like you are making the current economy work for you.
40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person. Add in the $800/month mtge payment and I am projecting a breakeven amount more or less.
We have made an offer that is less then one 1/3 of the 2006 selling price and less then half of the 2003 selling price. We also are using a projected gross about 20% less then the last full year we have in 2005. Occupancy rates in the hotel industry are at or near ten years lows right now.
I still have some time before the offer is reviewed to find a good reason not to buy. .

40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person.

You want a manager to work around the clock to make your business viable and you think $2500 is a fair salary?
So around $600 per week? Seriously?
.

40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person.

You want a manager to work around the clock to make your business viable and you think $2500 is a fair salary?
So around $600 per week? Seriously?

Plus room and board of about 1k/month in value maybe a bit higher. But that is the idea. I have a person who runs my rental property business for me and makes just a bit more then that. He has to supervise 3 other people too.
Morticia - Yeah the price is what is even opening up this opportunity.
.

"Plus room and board of about 1k/month in value maybe a bit higher. But that is the idea. I have a person who runs my rental property business for me and makes just a bit more then that. He has to supervise 3 other people too.
Morticia - Yeah the price is what is even opening up this opportunity."
There is no way you can equate an employee who runs your rental property business to the type of job this innkeeper will have to do. What the innkeeper will have to do is very specialized and never ending. In the beginning he/she won't be working a lot with guests since you'll be building the business, but since you and your partner won't really be hands on, the innkeeper will also have a major role in your marketing, PR, chamber/CVB functions, etc. What you need to find is someone with the skills to build your business, not just be there to cook and clean, and they will need to be there 24/7. Please believe me when I say that if you don't find the right person, the business will have no chance. You might consider a salary plus a $ percentage of what the B&B brings in...that would be an incentive for an employee to work harder at increasing your business.
Our forum member Innkeeper To Go really has the most experience in this area so hopefully she will give you a little more guidance with the appropriate salary.

 

[white pine]

White Pine sounds like you are making the current economy work for you.
40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person. Add in the $800/month mtge payment and I am projecting a breakeven amount more or less.
We have made an offer that is less then one 1/3 of the 2006 selling price and less then half of the 2003 selling price. We also are using a projected gross about 20% less then the last full year we have in 2005. Occupancy rates in the hotel industry are at or near ten years lows right now.
I still have some time before the offer is reviewed to find a good reason not to buy. .

40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person.

You want a manager to work around the clock to make your business viable and you think $2500 is a fair salary?
So around $600 per week? Seriously?
.

40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person.

You want a manager to work around the clock to make your business viable and you think $2500 is a fair salary?
So around $600 per week? Seriously?

Plus room and board of about 1k/month in value maybe a bit higher. But that is the idea. I have a person who runs my rental property business for me and makes just a bit more then that. He has to supervise 3 other people too.
Morticia - Yeah the price is what is even opening up this opportunity.
.

I may not be getting this-- but I would still be cautious. It is not 2003 or 2006, the point I was trying to make is that property values have taken a hit and are hard to sell. Look at what has sold there recently.
You are buying at a low price MINUS about 50k in furnishings. With payments of only 800.00 and 20% down, that indicates to me a low purchase price, so this expenditure seems to off-set that a bit?
Increasing the bookings by 40% sounds good, but you have only 4-5 rooms. Low numbers can look good statistically. Did that reflect a change to a full house or going from booking up one additional room? What is the potential for adding on if it was full up?
Help and insurance cost a lot, and if this is an older property, things break and expenses mushroom. My favorite line I read is "things are breaking as we speak".
If you are looking at a break even scenario at best, but the deal is SO good, I still don't see why you don't just flip the property instead of trying to build a "lifestyle" B&B which will be difficult to sell?
Our motivation is different. We think we would be good innkeepers and would like to try it. We aren't expecting this to be the best investment for return on the dollar. We think the only way to preserve "our" property is to make it work, and we are determined to do it. If we just wanted to make some money, this is NOT what we would do.

 

[Breakfast Diva]

White Pine sounds like you are making the current economy work for you.
40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person. Add in the $800/month mtge payment and I am projecting a breakeven amount more or less.
We have made an offer that is less then one 1/3 of the 2006 selling price and less then half of the 2003 selling price. We also are using a projected gross about 20% less then the last full year we have in 2005. Occupancy rates in the hotel industry are at or near ten years lows right now.
I still have some time before the offer is reviewed to find a good reason not to buy. .

40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person.

You want a manager to work around the clock to make your business viable and you think $2500 is a fair salary?
So around $600 per week? Seriously?
.

40k net was before the manager and i am guessing we have to give 80% away to the manager($2500/month plus room and board, too high? low?) to get a good person.

You want a manager to work around the clock to make your business viable and you think $2500 is a fair salary?
So around $600 per week? Seriously?

Plus room and board of about 1k/month in value maybe a bit higher. But that is the idea. I have a person who runs my rental property business for me and makes just a bit more then that. He has to supervise 3 other people too.
Morticia - Yeah the price is what is even opening up this opportunity.
.

I may not be getting this-- but I would still be cautious. It is not 2003 or 2006, the point I was trying to make is that property values have taken a hit and are hard to sell. Look at what has sold there recently.
You are buying at a low price MINUS about 50k in furnishings. With payments of only 800.00 and 20% down, that indicates to me a low purchase price, so this expenditure seems to off-set that a bit?
Increasing the bookings by 40% sounds good, but you have only 4-5 rooms. Low numbers can look good statistically. Did that reflect a change to a full house or going from booking up one additional room? What is the potential for adding on if it was full up?
Help and insurance cost a lot, and if this is an older property, things break and expenses mushroom. My favorite line I read is "things are breaking as we speak".
If you are looking at a break even scenario at best, but the deal is SO good, I still don't see why you don't just flip the property instead of trying to build a "lifestyle" B&B which will be difficult to sell?
Our motivation is different. We think we would be good innkeepers and would like to try it. We aren't expecting this to be the best investment for return on the dollar. We think the only way to preserve "our" property is to make it work, and we are determined to do it. If we just wanted to make some money, this is NOT what we would do.
.

I may not be getting this-- but I would still be cautious. It is not 2003 or 2006, the point I was trying to make is that property values have taken a hit and are hard to sell. Look at what has sold there recently.
You are buying at a low price MINUS about 50k in furnishings. With payments of only 800.00 and 20% down, that indicates to me a low purchase price, so this expenditure seems to off-set that a bit?
Increasing the bookings by 40% sounds good, but you have only 4-5 rooms. Low numbers can look good statistically. Did that reflect a change to a full house or going from booking up one additional room? What is the potential for adding on if it was full up?
Help and insurance cost a lot, and if this is an older property, things break and expenses mushroom. My favorite line I read is "things are breaking as we speak".
If you are looking at a break even scenario at best, but the deal is SO good, I still don't see why you don't just flip the property instead of trying to build a "lifestyle" B&B which will be difficult to sell?
Our motivation is different. We think we would be good innkeepers and would like to try it. We aren't expecting this to be the best investment for return on the dollar. We think the only way to preserve "our" property is to make it work, and we are determined to do it. If we just wanted to make some money, this is NOT what we would do.

I couldn't agree with you more.