Buying a B&B - finance Q

Toffee_3

Hi

What's the best way of financing the purchase of a B&B?

Hubby and I love the idea of running a B&B firstly to get away from grinding office jobs, secondly as a way of ending up with a great house in the countryside. We've researched the actual work that goes into running such a business and are under no illusions about the hard work involved, but the change in lifestyle is one we want to make while we're still relatively young!

We have a 2-bed victorian house in a little village now, with about 30k equity in it - barely a drop in the ocean of what's needed sadly.

So how do we go about finding the 500k-550k needed to buy the perfect property with enough space to be a great guesthouse?

Rick62

You can get bank funding for 75 to 80% of the property value. So you need about £100k to £130k equity, plus about £15k for stamp duty and all the costs.

The only way you could do it would be if, for instance, the people selling the property were willing to retain an equity stake, ie. you buy 75% financed by the bank, they keep 25% equity with potentially an option for you to buy the rest later.

This would depend on a high level of mutual trust and the vendors would probably only agree to this if they were confident that you could make it work.

MJMum

the 500k-550k needed

That's a pretty big guesthouse, unless you live in a really expensive area?

BobProperty

I'm trying to find the link (if it still exists) but I recall a Blackpool estate agent who dealt with commercial property like B&B's, Guest Houses etc., saying on their website that you need a minimum of 7-8 rooms to make the place pay, anything less than that and you should consider the business "part time" as it won't make you enough to live on and you will have to find some other part-time employment or have one of you work while the other runs the B&B.

Toffee_3

Thanks for the posts.

We are in a relatively expensive area, plus there's the need to go for a property that's pretty much ready to run as a business from the day we move in - which inevitably comes at a premium.

Interesting to read about not reaching a level of profitability unless you have 7/8 lettable rooms as we were looking at something smaller (4/5 rooms - but top end).

lifecoach_2

Generally the price of Guest Houses follow the price trend of houses, so you will find the cheapest Guest Houses in the cheapest area for property. In Blackpool for example you can still get a 7/8 bedroom Guest House for £300,000 or even less, which with your £70,000 equity is just about possible for you to buy. If you wanted a 7/8 bedroom property in a country location in the South East you would be looking at £650,000 or more.

Its not only Estate Agents that sell Guest Houses but also Business Transfer Agents. The best websites to look at are rightmove and businessesforsale if you want to research a little more.

You would need a commercial mortgage and the maximum is around 75 - 80% but the business needs to show repayment ability which on a 4/5 bedroom guest house and £70,000 mortgage, might be difficult unless you had a income source elsewhere. I.e one of you had a job outside the business to pay the bills.

https://www.vandervells.com