Has anyone here done this?

A close friend and I recently came across someone who looking to sell their property that they use as a bed and breakfast. I know absolutely nothing about owning a business yet alone running a bed and breakfast but the owner has assured us they would stay involved to help the transition.

I don't know the exact numbers, but the property is very popular in its area and gets good business, they have great reviews online. I just came across this opportunity so I don't have these numbers or details yet.

I'm in my late 20s and engaged to be married in March. My fiance and I do well salary wise. She has student loans which I planned for us to pay off within a year (which was an aggressive budget), but if we went through with this B&B I could allow that to be paid over a slightly longer period of time to have more wiggle room for the mortgage.

Do you guys have any resources/literature worth reading before moving forward? Things to know before hand before purchasing? Things to keep in mind?

Feel free to berate me or tell me how dumb a decision this would be. Any insight is welcome.

Harkrider 93 said:

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The wife and I considered building one on our property, but decided against it.

The biggest reason being that a B&B would require us to be home nearly every weekend, holiday, spring break, etc.

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This. I can't imagine a worse life. The only way I could understand running a bnb is if I had the place i wanted to retire in and that I could take in the occasional border to help pay down the mortgage a little faster. But to make a commitment as a business? No way in hell.

Valid points and I agree, I wouldn't want to make that my new lifestyle. I apologize for not mentioning in the OP, yes the owner offered to help with the transition if we were to fully take over running it but she also showed interest in still being available to run it.

Obviously that brings up the question in my mind "why sell it?" which I will be sure to ask. So it might not be AS big a lifestyle change as it would if we were to fully run it ourselves.

how motivated is the current owner going to be to continue running this place after they've sold? think they're going to put in the same level of effort that they are now? what happens when they half-ass it or decide they've had enough and walk away?

I would ask what they expect in return for helping. I bet that she is willing to help for a reasonable fee, but it may eat into your profit too much.

Harkrider 93 said:

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I would ask what they expect in return for helping. I bet that she is willing to help for a reasonable fee, but it may eat into your profit too much.

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Exactly.

If you deduct mgmt fees from your expected cash flow, the deal is probably much more marginal than it is now.

The few that I have been to have been owned/operated by the wife/husband team (or wife/wife team).

To me, it seems like you are opening up your home and making it your life to have others live with you. You only get vacation days when no one comes (or you close shop). And you would make the most money by doing everything, EVERYTHING yourself (fixing drywall and plumbing to financials issues). And fixes have to be to code, as you are a business, not a home.

To me, B&B owners think restaurateurs take too much time off or their jobs are easy (most restaurant owners I've talked to work 14-16 hour days, 7 days a week).

To each their own, but not the lifestyle for me.

~egon

I would also ask for the 2016 and 2017 financials to date and have a CPA or bookkeeper look over them to make sure nothing screwy was going on. You just never know.

ColinAggie said:

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If I don't understand it, I won't invest in it.

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One of the cardinal rules of investing.

Sounds absolutely miserable

I looked extensively at the and a small BNB wasn't profitable enough to have a staff, so you don't work every weekend. Check out this site, but to me the ideal size is 15-20 room with space you can rent for events. I worked in hotels and restaurants for years before my professional life and there is money to be made but you need scale.


https://www.innsforsale.com

This site classifies them more and offers resources.

https://bbteam.com/inns-for-sale/

Quote:

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"Financially Viable" means inns and B&B's that generate sufficient income to cover operating expenses, debt service (mortgage), and owner's compensation.
"Feasible" means properties with a size and location that have the realistic potential to become financially viable. They may include unique hospitality properties that are under-performing (for health, personal or other reasons), closed, distressed, or currently used for other purposes. Read our article "F is for Feasible Inn For Sale" that explains this in more detail.
"Lifestyle" means inns and B&B's whose smaller size and revenues may not generate sufficient income to cover operating expenses and debt service (mortgage). These inns are operated by owners who wish to enjoy the lifestyle of running a bed & breakfast without totally relying upon the business's revenues.

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The also offer seminars with agendas that appear fairly robust:

https://bbteam.com/seminars/

Quote:

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• Innkeeping 101 industry overview
• Building the profile of your inn make it right for you
• Due diligence know before you buy
• Finding and acquiring the inn the process
• Inn financing what you need to know
• Inn valuation is the price right?
• Business planning your road map to success in starting a bed and breakfast
• Marketing blogging, social media, websites, print, networking
• Operations a day in the life of an Innkeeper

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There are several ways to evaluate including price per guest room, gross revenue multiplier, income capitalization and cap rate.

Some good basics are here: https://bbteam.com/wp-content/uploads/2012/01/Inn-Valuation-for-Buyers-PAII-2012.pdf

One problem would be if the current owner decided not to stay on. Then you are stuck with trying to find someone to run it since you both have jobs.

I have not been to but a few B&B's and they were all run by retired couples. My favorite one was run by a couple and I think she was wishing she had been a chef. The meals were really well done. Nice folks. I could see it might be a good deal for retired couples who were looking for something to do.

Good luck though if you decide to take the plunge!

Cleaning up 'vacation bed sheets'....


no thanks