Financing a B&B Business Purchase
Discussion
Just thinking about the very first steps to a career change and thinking about doing a b&b business and decided to share my thoughts with the combined knowledge of the PH community!
Does anybody have any idea about how I would go about financing this? Would it be just a regular mortgage for the property, or some kind of business loan, or a combination of the two.
I know the answer will probably be 'it depends'.
Would you get a mortgage for the portion of the property you use as your residence and a business loan of some kind to fund the purchase of the portion which is for b&b use? I really have no idea!
I guess I'm also trying to figure out how we could service the loan. Could we both switch 100% to running a b&b or should one of us be looking to stay working in our current profession as well to provide a certain level of guaranteed income to provide comfort to lenders?
Does anybody have any idea about how I would go about financing this? Would it be just a regular mortgage for the property, or some kind of business loan, or a combination of the two.
I know the answer will probably be 'it depends'.
Would you get a mortgage for the portion of the property you use as your residence and a business loan of some kind to fund the purchase of the portion which is for b&b use? I really have no idea!
I guess I'm also trying to figure out how we could service the loan. Could we both switch 100% to running a b&b or should one of us be looking to stay working in our current profession as well to provide a certain level of guaranteed income to provide comfort to lenders?
Smartboy said:
Just thinking about the very first steps to a career change and thinking about doing a b&b business and decided to share my thoughts with the combined knowledge of the PH community!
Does anybody have any idea about how I would go about financing this? Would it be just a regular mortgage for the property, or some kind of business loan, or a combination of the two.
I know the answer will probably be 'it depends'.
Would you get a mortgage for the portion of the property you use as your residence and a business loan of some kind to fund the purchase of the portion which is for b&b use? I really have no idea!
I guess I'm also trying to figure out how we could service the loan. Could we both switch 100% to running a b&b or should one of us be looking to stay working in our current profession as well to provide a certain level of guaranteed income to provide comfort to lenders?
There are various routes depending on the number of rooms but a part-commercial mortgage is a likely solution. Commercial finance is different to a conventional mortgage in that the rate will usually be informed by the risk associated with the specific venture. i.e. if you've both been train drivers for 30 years and are going to be giving it up start a new venture with no relevant experience the loan will be low Loan-to-Value and the rate higher. If one employed income wil be maintained this will generally be viewed positively, but only if it is realistic for the other party to run the B&B solo.Does anybody have any idea about how I would go about financing this? Would it be just a regular mortgage for the property, or some kind of business loan, or a combination of the two.
I know the answer will probably be 'it depends'.
Would you get a mortgage for the portion of the property you use as your residence and a business loan of some kind to fund the purchase of the portion which is for b&b use? I really have no idea!
I guess I'm also trying to figure out how we could service the loan. Could we both switch 100% to running a b&b or should one of us be looking to stay working in our current profession as well to provide a certain level of guaranteed income to provide comfort to lenders?
It depends on LOTS of things, age/experience/equity/income/expenditure/location/business plan...
Good luck!!
From experience I would advise that one of you maintains some form of additional income outside of the B&B especially in the first year. This will help convince the bank and support you both just incase the accounts aren't as accurate as you would hope.
Good luck and keep us updated on progress and location especially location, I would seek out a B&B owned by a fellow car nut over a travel lodge.
Good luck and keep us updated on progress and location especially location, I would seek out a B&B owned by a fellow car nut over a travel lodge.
Thanks for the initial thoughts everybody.
I think I would probably need 70% LTV on the kind of properties I've been browsing, so thinking this might all be a bit of a stretch at the moment.
Our 'grand plans' might not be completely aligned with reality yet, but it's still something that we will persue further.
Decent car-parking would be a must for any potential B&B, and so would a location with good local driving roads... thinking Wales maybe.... but if I have to sell my RS 6 to help finance all of this lot, pootling around in a diesel Ford Focus might not be the greatest way to pop to the shops!
I think I would probably need 70% LTV on the kind of properties I've been browsing, so thinking this might all be a bit of a stretch at the moment.
Our 'grand plans' might not be completely aligned with reality yet, but it's still something that we will persue further.
Decent car-parking would be a must for any potential B&B, and so would a location with good local driving roads... thinking Wales maybe.... but if I have to sell my RS 6 to help finance all of this lot, pootling around in a diesel Ford Focus might not be the greatest way to pop to the shops!
I have a friend who owns and runs a successful small hotel, has been for 30 years. I don't see his accounts but it is high end, and every indication is that he does well out of it. When he looked at buying another property about a year ago he was struggling to get much above 50% LTV. Obviously I don't know any detail and maybe things are easier now but maybe even 60% is at the top end.
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