Buying a Guest House - Financial Advice Needed!!

PasturesNew

SouthCoast wrote: »

Can you compete with Travelodge offering rooms at £19 a night in premier locations?

http://www.businesslink.gov.uk/bdotg/action/home?domain=www.businesslink.gov.uk&target=http://www.businesslink.gov.uk/

They're not all £19 all of the time though ... and usually not in good spots, but more often in obscure places or on motorways. It's a different market. As a single person, I usually look for small hotels/B&B as I know I'll get a cheaper room where I want it than trying to hunt down a Travelodge type of place.

AnnaWalker

Apparently the single rooms are used by business men/construction workers who are staying down to work on projects so there is some longevity there.

AnnaWalker

there overheadds work out to0 be between 2k and 2.5ki per month. Also the income would be after all overheads are paid and as I would be living on the premises then it would all be paid for.

poppysarah

AnnaWalker wrote: »

Iam really looking o advice on how to purchase it bearing in mind the properties we have - should we take out a loan and pay it back quickly or buy it outright by selling my house as well as my mother's?

Sell all the houses and buy it cash.

poppysarah

They are deliberately keeping the income under the VAT level maybe? Factor this in if you plan on making more money. VAT is a complete mystery to me - and I have no idca if B&B have any special dispensation.

PasturesNew

You say it's the south coast and you say it's business people/construction workers.... the longevity of that might depend on where on the South coast. e.g. if it's Weymouth then maybe those workers are part of the current Olympic restructuring and will soon be finished.

How well do you know the local area, business movements in the area, etc?

Have you stayed at the place yourself? Why not book a room for yourself for a week and snuffle about?

Blacksheep1979

AnnaWalker wrote: »

there overheadds work out to0 be between 2k and 2.5ki per month. Also the income would be after all overheads are paid and as I would be living on the premises then it would all be paid for.

Yup, so that's £24-30k from the £65k which is £35-41k. You need a reserve etc and honestly it doesn't sound an amazing proposition for £400k. Obviously there is some stability with workmen etc but is the building work going to be around for the next 5 years? Also are you going to get repeat custom/recommendations from other customers who are sharing a property with workmen who may not be the most courteous at all times/like a drink in the evening

BitterAndTwisted

Talk to an accountant after you've booked yourself for a week's stay to see whether the current clients would discourage any other potential clients.

There are potential tax-advantages to be had by owning the property outright, setting up a limited company with your sister to operate the B&B business and you, the freeholders charging the business rent. That way, should the business fail the property would not be at risk on winding-up.

elfen

This is a weird one, but if you buy it and don't get custom, you could always do emergency housing with the council. Guaranteed income then

Radiantsoul

Good luck. I feel this doesn't look like a great investment, but if it is a lifestyle choice it might well work.

You probably want some advise from a tax expert, but you will clearly want to have the interest on whatever loan you get to be an expense so that you can claim the tax back on this. You may want to consider whether to own the business as a limited company or a partnership(in which case I would get a solicitor to draw up an agreement). If you set it up as a limited company you can use then you can introduce your own capital and borrow in the name of the limited company, but the bank will assuredly demand a limited company guarantee. If you are a limited liability company you will also pay tax at corporation tax rates rather than your personal tax rate on funds retained in the business(ie that you don't withdraw for personal consumption). As your income might drift into the 40% tax band you might like to consider running the business via a company.