Buying a B&B can be an important step in your life. However, before you begin the process there are some basic items you need to address. The answers will shape exactly what your correct B&B investment will look like.
Where?
For a B&B to work successfully, it has to have a location that is conducive for customers to want to stay in. The options range from a small historical town to a large city center. And there are successful B&Bs found in all parts of America from the remote north to the expansive west. So really the big question is: 1) where would you want to invest your money for maximum safety in demand and 2) where would you want to live if you are going to self-manage? Remember that B&B investing is still a part of real estate and that means the key is still location, location, location – so that’s where your journey should begin.
How big?
The general rule of thumb is that your B&B size range is roughly five times the amount your have for a down payment, as most bank financing is based on 80% LTV or so. However, that’s not always the right answer. Many B&B owners are downsizing from a large house as part of their retirement, or are wanting to start small and stress-free. So the only person who can decide how big your B&B investment should be is … YOU. Another consideration, however, is that certain parts of America have more costly real estate, and you may have to invest bigger dollars to fit in with your geography profile discussed above.
Seasonal?
This can be a major issue for some people. They want the income from a B&B but they also want some time off every year. Some parts of America have seasonal tourism – typically strong in summer and a ghost town in winter. An example is Mackinac Island in Michigan, where tourists can swell to hundreds of thousands per week in the summer and not a single visitor in the winter as the town completely shuts down when temperatures drop below freezing (there’s no way to get to the island during this period except by snowmobile). Some investors prefer these type of locations as they guarantee time off annually. Is that important to you? If not, then you may prefer warmer climates that keep things open and steady year round.
Your living quarters?
If your plan is to operate your B&B passively (hiring a manager to run it on your behalf) then this is not a big issue. But if you’re going to self-manager and live in the B&B, then exactly where is your living quarters going to be located. In some older B&Bs, that location is in the basement – but is that where you want to spend your time? Make sure that your personal space is appealing or you may grow tired of the investment fairly quickly. I know of a couple of B&B owners that sold out because they found their living area (both were in basements) depressing.
How will you measure success?
Every investment comes with initial goals and assumptions. The performance vs. these goals is the basic measure of success. So if you’re going to buy a B&B for any reason other than financial return on investment, then the basic question is what are the actual, quantifiable things you hope to occur. You need to write these goals down from the onset and then match them to the realities of the properties you are looking at buying.
Conclusion
B&B investing can be very rewarding. There are thousands of B&B owners in the U.S. who rate their satisfaction very highly. These five questions will help steer you to properties that best meet your goals and desires, which will greatly increase your odds of success.