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| © Country Inns Realty, Inc. - 2435 Main Street - P.O. Box 102, South Chatham, MA 02659 |
1.) In terms of Financial Readiness, you should have access to reserve money and/or provide evidence to the bank of a second income source, since some B&B's will not be self-sustaining during the first two years of new ownership while business is being increased to accommodate a higher mortgage. Remember, most B&B's will require a 30% down payment, but the greater the down payment, the smaller your monthly mortgage will be. Banks look for assurance that should events occur that interfere with anticipated, normal business income (snow-less winter in a ski area, rainy summer, sudden illness, etc.) that you have back-up money to survive this downturn & will be able to continue to make timely mortgage payments.
2.) Since your Credit History and present Financial Status will be verified by the bank, it may be advantageous for you to Request a Self-Credit Check and clear up any mistakes and/or offer explanations for any defaults ahead of time.
3.) Because you are purchasing a business, Banks will require you to Write a 3-Year Business Plan to show how you will manage the business, increase revenue, account for maintenance and repairs, etc. B&B realtors may offer assistance with this, as will books and B&B Seminars. Also, the current owners may have had to provide a business plan for their bank, so you can access & build upon that document.
4.) For those Buying a Restaurant with the inn, there is an additional process for Obtaining Licenses Specific to providing Food Service to the public. Ask us for details.
5.) For your knowledge in researching your inn & deciding how to make an appropriate offer, remember that Assessed Value (recorded in the town records) reflects a property value for tax purposes, and may lag behind current sales by up to six months. Appraised Value or Market Value is based on comparing the selected property to other similar properties that are sold or are on the market. This takes into account the value of the land, buildings & financials & should be fairly close to the Listing Price. Often times the owner will be able to tell you the Insurable Value which will indicate the value of the buildings only in terms of replacement cost. You can add this to the value of the land to have a better understanding of the value of the entire property. Inns as well as other types of Hospitality/Investment Properties, such as Restaurants, Campgrounds, Hotels/Motels, Resorts, etc. will also have list price determined by ratios of gross income, net and expenses using specific formulas (Income Verification).
6.) Lastly, take a Seminar for Aspiring Innkeepers. It will answer many of your questions, prepare you for the purchasing process, and will familiarize you with inn-operating procedures, accounting and tax information, legalities, and bank requirements and procedures. It will cover the process thoroughly from beginning to end, including resale of your property and problem solving. Having taken this course will also give you credibility with the bank in terms of your education and ability to successfully operate a Hospitality Property.