Inn Consultants and Brokers Since 1993

Rick Wolf and Peter Scherman (that’s Rick on the left and Peter on the right) are both experienced speakers who have presented on a range of innkeeping related topics at the state, regional, and national level. They gather and analyze research for the Innkeeping industry and welcome the opportunity to share it with others. Contact Us

The B&B Team
 

Posts Tagged ‘selling an inn’

Bed and Breakfast Owner’s Quarters-The Good, the Bad and the Maybe

October 12th, 2016 by Janet Wolf

Owner's quarters-the good, the bad and the maybe

Owner’s Quarters-The Good, the Bad and the Maybe. #1 Time to de-clutter

Are you looking to own a bed and breakfast? Or getting ready to sell your inn? You have come to the right place. The B&B Team can guide you from A to Z.  A for acquisition and Z for zoning, with a lot of stuff in between. Let’s look at O…O for owner’s quarters-the good, the bad and the maybe.

Buyers

Question prospective buyers often ask; “Tell me about the owner’s quarters. How many square feet? How many bedrooms and baths”? Owner’s quarters have become increasingly more important to our buyer clients in their bed and breakfast search.

Reasons:

  • Buyers will be investing in a bed and breakfast for the business value but also for the lifestyle. A property with spacious quarters that offer privacy and a sanctuary from the business is also perceived as valuable. Even though this space does not generate income.
  • We are seeing younger couples with families as buyers. They clearly need room for themselves and their children.
  • Extended families are also looking to purchase and run bed and breakfasts together.

In the past many innkeepers were willing to sacrifice owner’s space. In other words, live in a refurbished basement or an extra bedroom. Reality… today this is rarely the case.

Sellers

  • If innkeeper seller clients have lived in a smaller space their whole innkeeping career, they may not see it as an issue. More expansive quarters may not have been a priority when they bought.
  • Sellers must realize this smaller space will possibly be a negative issue with many of today’s buyers.

But…there are exceptions. The Maybe. If the property’s location is a desirable destination location and the business is strong, buyers may be willing to sacrifice their owner’s quarter’s requirements for a period of time. They may look to build on the property (if allowed) or even move off site (if allowed).We always advise buyer’s due diligence to include researching what is allowed. Sellers too! Good to anticipate today’s buyer’s possible wants and needs when it comes to owner’s quarters.

FACT: Zoning ordinances vary tremendously from one locale to another, and are typically regulated by the city or county planning commission or planning board.

In some municipalities the zoning ordinances will require you to live on-site. In others, not. Are you allowed to have your own private kitchen or not? All good questions that many aspiring innkeepers don’t know to ask. And when they do, our answer is; “it depends’! Again, due diligence.

owner's quarters-the good, the bad and the maybe

Yes, this is a basement. The Good!

The ambiance in a bed and breakfast is relaxed, comfortable. A place for your guests to unwind and luxuriate. Why shouldn’t owner’s quarters offer the same? Innkeeper’s days are busy and full. A stress free environment is what you want and need. Clutter free, clean and if all possible, spacious. The Good.

owner's quarter-the good, the bad and the maybe

No question, The Bad. No buyer wants to see this!

The B&B Team will always advise our seller clients to de-clutter and clean up any accumulated unnecessary ‘stuff’ to avoid prospective buyers from viewing the owner’s quarters as The Bad! Even if the space is not spacious, a good cleaning out can make a small space appear larger. We cannot stress enough how important this is.

“If you don’t love it or use it, it is clutter.”

Thanks for Listening,

Janet Wolf

T is for Trust…Especially Between an Inn Seller and Buyer

January 11th, 2012 by Scott Bushnell

Just yesterday I received a call from an innkeeper with whom I have had a relationship who was considering selling his inn, a 7 room bed and breakfast inn in a nearby state.  Just what we do!  Thanks for the call!   We opened up a dialog about the inn, its size, its location, discussed the process, and then I suggested he send me a copy of his 2010 and 2011 financials.  You would have thought I was asking for his FBC (first born child).  “I just will not get into the hassles of trying to explain my financials and business with ANYBODY.  Just sell my inn!”  He was adamant and fixed in his stubbornness.

My antennae went up like a dog’s ears at suppertime.  After failing to convince him that this is an important step to understanding the revenue and net operating income of the inn (to help establish its value), we closed our conversation that perhaps the best way to sell his property is as a residence through the local MLS system since a buyer would never be able to get a commercial loan on that property without the bank seeing the financials.  He was satisfied with that…I guess.

But the point is trust.  I lost trust with him.  Was he cheating the IRS and did not want to let anybody discover it?  Were his numbers so poor that I would be trying to sell his inn only on its potential?  Does he even have records?  All kinds of distrustful thoughts went through my head.  I hope all them are wrong.  If a seller, perhaps even unwittingly, withholds information from a buyer, trust is jeopardized, and with the limited number of buyers and the huge inventory of inns for sale, buyers will look elsewhere.  Building Buyer/Seller trust is critical.  So how is it done?

Like a good Boy Scout…Be Prepared!

  • Having complete and accurate records (including taxes…they will be scrutinized during a buyer’s due diligence period)
  • Track occupancy by month from year to year.  A buyer wants to see the seasonal nature of the inn (especially to understand what happens in the slow season).
  • Have a complete Inclusion/Exclusion list of the furniture and fixtures will transfer with the property and what will go with the sellers.
  • For a smaller inn, have a property condition disclosure (available from any real estate agent) prepared.  This is required in many states anyway.
  • For larger inns, consider a Seller’s Inspection completed BEFORE a buyer’s inspector finds any defects (and they WILL find the problems!),  This inspection demonstrates full disclosure of the condition of the inn, provides a report accuracy defense in the event the buyer’s inspector overinflates the seriousness of a deficiency, and leads to a corrective plan to defuse emotions and begin negotiations.
  • Keep your gift certificate log current
  • Open and honest conversations about marketing, buyer’s opportunities, and full disclosure.

When Marilyn and I were looking for our inn long ago (the Dead Sea was only sick back then), the owner of one of our candidate inns pulled me aside and said “Don’t worry about the numbers, Scott.  I put two kids through college on this inn!”.  We left never to return.  If he was willing to cheat the IRS, he was willing to cheat us.

Innkeepers…think about the “surprises” that made YOU angry when you bought your inn.  We’ve all been there.  Think like the buyer of your inn.  What roadblocks can be removed now to build Trust and not jeopardize the chances of a timely and financially rewarding transfer.

Anybody have any trust surprises when you bought your inn?  We would love to hear about them and what could have been done differently.   Scott

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