I’ve received numerous inquiries of my listings under the $800,000 price point over the past two months. The lodging industry isn’t necessarily in sync with the rest of the real estate market. There are many factors to look at when determining why a property might have a great deal of interest or just very little:
- is the property priced based on its residential or business value?
- is the property a solid performing business?
- does the business offer a buyer room for additional growth?
- is the property in a desirable area, or destination location for a business?
- is the town proactive in economic development?
- is the property fairly priced for today’s market?
- is the property priced based on what the seller has into it?
Often the higher priced properties are priced as such for a very simple reason: they are high performing businesses or they offer something desirable such as location, reputation, incredible owner’s quarters or water frontage (and the principle of scarcity)
What you must keep in mind is that buying an inn is as much about the lifestyle as it is the business. It’s a hybrid. You can’t expect to look at the bottom line of a 6 room bed and breakfast the same as you would a 30 room hotel, or any other regular business for that matter. Your 6 room bed and breakfast should provide you a home, a job, a lifestyle and cover your mortgage and expenses to live simply, not extravagantly. And if you grow the business, keep up with technology, maintain a nice website and maintain the physical structure, you hope to make some money off your hybrid business when you sell.
When looking to buy, you might find the need to subsidize a higher end property to cover the bottom line, but the same goes for a lower priced and under performing business, until you’ve increased the revenue to support itself. And only you can decide which is right for you. Properties are moving and there’s a nice inventory out there. But what you can’t always rely on is to benefit from a slow residential economy.
To go into this with a real understanding is paramount to your success.
I’ll address this in greater detail during our October 4-6 Get INNspired Innkeeper Bootcamp!