mortgage for a B&B

otleygas

Hi. I would like some information/advice on how to get finance/what finance options might possible.

I would like to sell my house and buy a larger farmhouse to renovate as a Bed and Breakfast. All in all, the purchase of the farmhouse and renovation costs would be about £500,000. I could probably get about 20% of this together through the sale of my current property. So, I would be looking at raising about £400k.

The purchase price of the property would be about £320k, and renovation costs etc about £180k. Do I need to look at a business/commercial mortgate for all of it, or just for the purchase price and get a loan for the rest… is my loan to value ratio too low?

Business wise, the property is in a good location for a B&B, near a busy airport and in an area of natural beauty. The property should be able to generate a gross income from lettings of about £2,500 pcm at a conservative estimate (based on 60% gross profit margin and 50% occupancy). I have some previous catering and hotel management experience.

Thanks for any advice etc

Thrugelmir

In the broadest sense is £2,500 gross income per month going to be sufficient to cover operating costs, service the debt, repay the capital and generate an income?

Let_Us_See

Unfortunately, for many reasons, your proposal is just not attainable. Simply, start at the beginning. You require £500k overall on a £320k valuation - not going to happen, don't waste anymore of your time.

kingstreet

I agree with LUS.

This would be a commercial mortgage with a separate business development loan. Your best best would be to approach your clearing bank for this.

However, you are unlikely to have sufficient cash to get such a proposal off the ground by the sound of it.

Your first job is a comprehensive business plan, followed by investigation of the planning requirements.

motch

For me that would be a massive gamble business wise. Going from having around £100k equity in your house/savings to taking that on with only £2.5k a month to service a £400k debt.

Is this to be your only source of income?

Also "large farmhouse" = lots of maintenance costs to me. High council tax, business rates?

I'm thinking of possible negatives first, sorry.