My husband and i are interested in purchasing a home to start a bed and breakfast in. we both love to entertain, but beyond that, my husband has previous experience in the rest. biz and i was a gm for a major retailer for 15 years. fortunately, my husband will be able to retain his current job, while still being available in the morning to cook for guests. i will not be taking a paycheck, as my husband will be working. we will use approximately $ 100,000 from the sale of our home as a down payment or for start up funds. we have prepared a profit and loss statement for the next 5 years as well as a break even point. we plan on having 4 rooms 100% occupied for approximately 140 days of the year. the average nightly rate will be $185.00. i think we have done most of our homework,but we have one major obsticle....our personal credit. due to a major illness, our credit suffered for approximately 5 years. for the past year, we having been paying on time but our current credit score is under 600(ouch!). previous to that, i had excellent credit. does this factor alone eliminate us from even starting this adventure? we would need a loan of approximately $900,000 to cover the purchase of the home(we would live in it), renovations, and start up costs. is this completely absurd???!!!

Being completely honest here:

1- $100K in down payment against $900K in debt…… Highly unlikely that you can get a lender at this level.

2- I am guessing that the season is those 140 days, and you are assuming 100% occupancy. I consider this very rosy of a forecast.

3- Your Average Daily Rate is $185.00 That is high. How do you support this in your business plan?

4- The fact that you haven’t managed a similar business is a negative.

5- This is essentially a startup. Most banks will not do a startup.

There is a deff in the type of loan you would get to rennovate a property to make it into a B&B vs buying an existing one. What do you think about buying an existing b&b for approx ~$500,000 and using the $100K as down payment with a seller holding a small 2nd mortgage?

I am in a similar situation (sort of):

What if it is an existing B&B and the value of the building was equal to the sale price. Would that make a difference?

Thanks!

What if it is an existing B&B and the value of the building was equal to the sale price. Would that make a difference?

If the existing value of the property (value determined as per appraisal) is equal to the purchase price, it dosent make a difference in terms of loan LTV. In determining the loan amount, we use the lower of the Purchase value or appraised value.

With a midscore just under 600 (575-600)
you could possibly find 60% financing on a
bed % breakfast,
If anyone knows a lender who does more
on those scres please let me know,
thanks

Question....what exactly is bringing your score down i.e. mort lates,charge off,high rev debt?
Try rapid rescore, you may be able to at least get over 600 and depending on lender it could make a difference

well....traditional Lenders that finance the real estate will not lend more that 60% as per the porperty classification. Hotels/Motels are pretty much a Tier four or class D property and this is industry wide. You may get higher LTV if you go to a local bank or private investor but most dont as brick & Mortor banks will take 30-90 days to 'kick the tires' and even then there is not gurantee that you will get financing.

We actually finance business purchases where the real estate is involved (including many bank turndowns where the client waited 45 days for a NO and now has a purchase contract expiring soon and an impatient seller on their hands). In NY, Ct, PA and FL, the way we structure it is such that we will financng 50-60% of the appraised value of the real estate and can invoke a local SBA/economic cooperative to finance the additional needed financing. This additional financing is based on the financials of the business it self and secured with a 2nd lien position. Depending on what state the property is in, there are different options you can utilize

Even if you could find a loan on your $900K purchase with only $100K down, it's not a good business decision. You need to have at least 30% down on the purchase of a B&B. And then you need to have money to buy furnishings, your marketing, utilites, and a year's worth of cushion and operating expenses.

There are formulas to help you see if the asking price of the B&B is reasonable. If you are buying a house to turn into a B&B, you've overlooked renovation costs and the three to five years it'll take to get the business to a stable income and business level.

140 days of 100% occupancy isn't a bad calculation -- if you are using that as your year's wonth of occupancy -- but I suggest you do more homework and figure out what *each* month's occupancy is atcually going to be. Whatever you find the average occupancy in your area is, figure you'll have half of that your first year.

There are lots of resources on the internet to help you. There are lots of seminars and conferences to attend as well. You need to do lots more homework before doing anything. Good luck! And have fun....

what is up with replies to posts that were made more than a year ago?