A common buyer concern when they don’t fully understand the tax benefits of this home based business is “that’s not nearly what I make at my current job”. And they’re right.
Let’s face it, most of us work to make money, right? And we hope that we enjoy what we do along the way. But the bottom line paycheck that an inn or lodging property affords is different than what we may make in other, more traditional jobs.
A lodging property is a hybrid business. There are numerous tax benefits from working in your home based business (inn/lodging property/B&B). Your paycheck from a more traditional job needs to cover your mortgage, utilities, food, property/liability insurance, auto expense, health insurance, repairs and maintenance, landscaping, snow removal, leisurely expenses, dining out, some travel, etc. Most of these expenses are legitimate tax write-offs to the lodging business. So your personal “paycheck” requirements will change. In the end, the cash flow, or your owner disbursement or paycheck is primarily for spending money, vacation, some personal food (that isn’t written off by the business), some dining out (only 50% of dining out can be written off on the business tax return) and of course, savings.
So can you see how your needs change? Something else that I found very true, as do other innkeepers, that you don’t ‘need’ the vacation from your job the same way you do when you are in a corporate type job or one where you don’t make your own rules. The need to escape is entirely different. I found that the need to get away to de-stress wasn’t the same as an innkeeper. My desire to travel was simply to explore, not to escape. And often exploring in my very own state, the one to which I moved because I loved spending vacations here, was enough to satisfy my travel needs.
This innkeeping ‘job’ is different. Many, more typical jobs are stressful and easy physically, but tough mentally. Innkeeping is the exact opposite: you’re on your feet and up going and doing for possibly 12-16 hours a day. But it is easy mentally. You’re dealing with people on vacation, when they are the happiest. They’re paying you. They’re hugging and thanking you after they pay you! Each day is finite, you don’t take a desk full of problems home at night. It’s an entirely different animal. And that is a big reason to consider getting into this business. Aside from being in control of your own business and investment.
So you need to think about these things when reviewing the financials before being spooked by the smaller cash flow number than you’d like.