Frequently Asked Questions

Buying an Inn

What exactly is a Bed and Breakfast?

The term Bed and Breakfast, or B&B for short, has often been confused with other types of lodging properties, so let’s explain how it’s generally accepted within the hospitality industry:  A B&B is a professional lodging establishment where the owner or manager typically lives on-premises or close to the property. Breakfast (hence, the second “B”) is served to those guests who have stayed overnight (usually included in the room rate) and can vary in style and presentation from continental to absolute gourmet.

A B&B is licensed by the appropriate authorities in the area in which it is located and follows all necessary regulatory practices. While B&Bs can vary in the number of rooms offered for rent – sometimes just 1 or 2 rooms – they seldom exceed 15 rooms.  Most local authorities limit the number of rooms and often have other restrictions that must be followed in order to obtain an operating license as a small lodging property.

In spite of the fact that some B&Bs use the reservation system provided by Airbnb and/or other short-term rental (STR) platforms like VRBO, STRs typically do not serve breakfast, are usually run much more casually (often remotely), and until recently, were not being licensed, inspected, or taxed in the same way by local authorities as a regulated lodging facility.  While that is changing, there is usually a distinct difference in the guest experience between the two.

A Full-Service Inn (sometimes called Country Inn) is another type of B&B that typically serves other meals besides breakfast to their guests or the general public. Full-Service Inns can vary in size as well and are often managed by the owners who are the innkeepers.

How do I Start or Open a Bed and Breakfast?

Starting to run a Bed and Breakfast is not a whim or casual decision. A professionally run B&B or Inn is entered into with passion, of course, but also with good information and education. Take the time to find out what you don’t know. Educate yourself through online seminars, books, joining local, State or National Associations, and becoming a solid student in the field of hospitality and business. Passion is essential!

You have to want to get up each day and help your guests have a truly memorable experience. You will also need some business skills to manage your hospitality property and make sound financial and operational decisions. So, get some education, network with Innkeepers, and find the right people to be on your team to assist you on this journey!

Should I buy an existing bed and breakfast or convert or build a property?

There are three common paths to consider for B&B ownership: converting a non-inn property to a B&B, buying an existing B&B, and (much less often) building a new one from the ground up. There are numerous pros and cons to each, but first, you must decide which direction meets your needs. How risk-tolerant are you? What are your financial goals? Where do you want to reside? These are just a few questions in a myriad of details to consider. Generally speaking, purchasing an existing B&B should provide a clearer definition of the success of the business and how well the inn is doing both financially and with the public.

Converting a property into a B&B or purpose-building a new one may provide the ideal location for you and allow you to create the Inn of your dreams, but there are many issues to consider such as sorting through the regulatory jungle to build or convert an existing property. An important Rule of Thumb: don’t buy a residential property without knowing ahead of time if you can convert or build it into a business, and what limitations local laws will place on the business. Zoning rules are very difficult to change!

How do I finance a Bed and Breakfast?

Typically, financing a B&B is done with a commercial lender who will work with hospitality properties. A commercial loan is different from a residential loan as the loan is examined on the cash flow of the existing business or sometimes on the pro forma financials of a to-be-built business. This loan has different terms and conditions from residential and often requires a higher down payment. Generally speaking, you will need at least 30% of the purchase price of an existing Inn to move forward in order to cover the down payment, closing, and start-up expenses.

There are many local lenders who work with local small businesses that can assist with such financing or a few national lenders who can also assist. Often, many of the loans are partially or wholly guaranteed through the SBA (Small Business Administration) and other government-associated programs. And, there are a few additional options to financing, such as a 401(k) rollover, Community Development Financial Institution (CDFI), and potential owner financing.

Selling an Inn

How much is my Inn Currently Worth?

This is a really complicated question, because there are so many factors involved.  We can help determine the value of your business with an MA&V, but that’s only part of the story.  Local real estate conditions will also have a big impact on the value of your inn – and how much it can be sold for.  Often, a fully independent or investment grade business will be worth more than the real estate itself…but not always.  Local real estate market conditions vary markedly in different areas of the country, so we often consult with local experts.  Not to worry, though – we have ample experience working with other professionals who can help determine what your land and building(s) are worth, and are happy to partner with them if that’s the best course of action for your particular situation.

How long will it take to sell?

Another very complicated question!  Here are some thoughts:

• Location is everything
  • Popular locations get more attention, so they tend to sell faster
• Numbers matter
  • Most B&B shoppers pay a lot of attention to the P&L
  • Asking price needs to be consistent with valuation (business and real estate)
• Condition matters
  • Deferred maintenance or tired decor will slow down the process
  • Good marketing (especially a well-performing website) will get buyers interested
• Combine all 3 of these, and time on the market is reduced
  • Investment Grade properties (Cap Rate >13%), market cycle is often less than 6 months (we’ve even seen less than a week!)
  • Fully Independent Businesses typically take 9 – 12 months
  • 12 – 24 months is not an unreasonable expectation, especially for smaller inns and/or less popular locations.

In all cases, remember that selling price = only what a buyer is willing to pay

Who should I work with to sell my B&B?

There are many options.  Here are a few:

• For Sale By Owner (FSBO) can work, but…
  • It’s a lot of work – do you know ALL of the paperwork involved?
  • Unqualified buyers abound!
  • It’s not really free
• Regular Real Estate Agents also work, but…
  • Residential agents may not know the industry or the business aspects of innkeeping
  • Generally do not require NDAs prior to sharing financial info
  • Often focus on converting back to residential property
  • Sometimes don’t understand all the differences between B&B/Inn and AirBnB/VRBO
  • Commercial agents tend to focus on more traditional businesses (retail, hotel/motel) and generally do not understand the unique value offered by boutique lodging properties
  • Generally have a very localized approach
    • MLS/Zillow tells the whole world (including your guests!) what’s going on
  • Typically focus on having LOTS of inventory to choose from
• Specialty B&B-focused agents should
  • Have a nationwide reach
  • Utilize multiple marketing channels
  • Know the business from both buyer and seller perspectives

Why choose Marilyn Bushnell and Associates?

We have over 30 years combined experience in the industry, as both former owners and broker/advisors, which makes a real difference when working with our clients on both sides of every transaction.

Our focus is always on helping our customers succeed. Whether you are just getting into this business or have been involved with hospitality for a long time, we are committed to helping you meet or exceed your goals.

Integrity is our ONLY core business value. At the end of the day, it’s really the only thing on which we will never compromise.