Sunday, November 22, 2015

"How long has it been on the market?"

We hear that question frequently.

In the world of residential real estate, it's not only common, it's often relevant to the deal. But not in the lodging industry. Why? It's simple. Because buying a lodging business (or any type, really) is a discretionary purchase. Most people don't have to buy a lodging property. Many people have to buy (or rent) a house.

If the average days on market (DOM) in a residential transaction is 60 (let's just use that as a hypothetical), the average DOM for a bed and breakfast or lodging property could be 2-3 years. Big difference! But this is not a negative thing. One purchase comes from necessity, the other, desire.

Besides, there are so many things taken into consideration when buying a business, far more than  buying a house. There's location, size, style, number of rooms, owner's quarters, how much work is required to make it your own, etc. Then there's the business: the financials, projections, a business plan, researching the area (if you don't already know it) understanding your competition and your demographic. Where are your guests coming from and how are you going to get more of them? There are licensing requirements, often municipal and state. There are corporate entities to form with an attorney. There are documents to review with your accountant and attorney. This process takes time. Then there's the logistics of leaving your current job, possibly selling your current home, moving out of state (often in this industry) and transitioning into your new job and new home, which now, are one in the same.

And when you look at how many inns or lodging properties are on the market at any given time, there are enough to choose from and you may just be waiting to find the ideal one that meets the majority of your criteria check boxes. And although most do not meet those needs perfectly, some come very close, and some buyers choose what they can live with or live without.




These two may often appear similar, but they are so very different. There's a property for everyone, but in the lodging division, things just take longer! 


Sunday, November 15, 2015

Lifestyle vs Feasible vs Financially Viable...Which is Right For You?



In this industry we talk a lot about the lifestyle of being an innkeeper. But we also refer to the various types of businesses (inns/B&Bs, etc) as lifestyle, feasible or financially viable. Each of these are still a lifestyle, but there are various categories that generalize the level of revenue an inn might produce.

“Financially Viable” means inns and B&B’s that generate sufficient income to cover operating expenses, debt service (mortgage), and owner’s compensation.

“Feasible” means properties with a size and location that have the realistic potential to become financially viable. They may include unique hospitality properties that are under-performing (for health, personal or a variety of other reasons), closed, distressed, or currently used for other purposes. Often times we see inns in this category that are under-performing by the owner's choice. This might be because the owners may have additional source(s) of income (retirement or working from home or aside from the inn) and are able to operate the business leisurely for enjoyment. They might also stay open seasonally to go spend time with grandchildren in the off season (we see this a lot) when the area offers year round tourism. Staying open 10-12 months could move the inn from the feasible category to the financially viable category. We also see owner's who've kept up the physical property but not with the marketing and current technology centric times we are in. Considerable marketing, better website, social media presence, etc. might be all it takes to move an inn from feasible to financially viable.

“Lifestyle” means inns and B&B’s whose smaller size and revenues may not generate sufficient income to cover all operating expenses and debt service (mortgage). These inns are priced primarily on real estate value. These owners may have additional source(s) of income (retirement or working from home or aside from the inn) and are able to operate the business leisurely for enjoyment.

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 mortgage, utilities, food, insurance, auto expense, leisurely expenses, etc. Many of these expenses are legitimate tax write-offs to the lodging business so your personal "paycheck" requirements seem to change - it's primarily for spending money, vacation, some food, some dining out (essentially what can't be legally written off).




An example of a feasible property situation:
A 5 room inn has 3 additional units that could be converted to nightly inn rooms and increase the occupancy and ADR (average daily rate) over the current discounted long term rental rate. The inn started out small, and with 5 rooms and the innkeepers thought it seems simple enough for them to not have to deal with hiring staff and just do the work themselves. So what ends up happening is that they are spending more time working IN the business and not ON improving it. When asked why they haven't converted the 3 other units which could produce a higher revenue stream, they said they were too busy to clean more rooms, check more people in, cook for more people, etc! Every now and then they would have a room or two open but be so tired that they put the "no vacancy" sign up! The financially smart solution? Convert your rooms to larger more luxury suites, bringing you a higher ADR, hire out housekeeping help, even check-in help a couple days a week, and work on being an innkeeper, your marketing, your social media presence, etc. which will in turn, help increase occupancy and revenue. 

This situation is not uncommon. So as you are browsing online or looking for inns, keep this in mind and ask your broker questions that will help you determine if you can afford a feasible inn with the goal of creating a financially viable business under your ownership!



Saturday, November 14, 2015

Adding a 6th guest room at Clark Point Inn in Southwest Harbor, Maine

Clark Point Inn is a lovely, water view 5 room bed and breakfast in Southwest Harbor, surrounded by Acadia National Park.

The inn is typically open an extended season of about 10 months and they have a strong business for a small inn. Adding a 6th guest room would allow owners to increase revenue quite a bit. 

I was walking through during a showing and the couple looking mentioned that it would be nice to have a 6th guest room, for financial reasons. And when we thought about the layout, it became evident that it was entirely possible! And below the kitchen is the basement, so converting the kitchen's water supply and waste lines for guest room purposes shouldn't be too difficult or costly. This could potentially mean another $20k-25k in room revenue, at a fairly quick return. Make sense? I think so!

For more details and photos, visit the listing page on my website.









Snowmobiling in Maine!


Did you know that Maine has over 14,000 miles of trails? 3,500 of that is part of the ITS (the Interconnected Trail System)!

From mesnow.com:

Maine's snowmobile trails exist because people who loved to ride realized that in order to keep a winter trail system open landowner permission needed to be obtained, funds raised, brush cut, signs posted, bridges built, snow groomed, trails inspected, maps produced, grooming equipment purchased, maintained and insured, and access issues and legislative initiatives monitored. The riders willing to assume this responsibility organized into clubs, under the umbrella of the Maine Snowmobile Association. Early leadership of the MSA pushed legislation to establish a snowmobile registration system that would funnel some money through a state agency to assist the snowmobile clubs in their trail development and maintenance efforts. Decades later this registration system continues to reimburse clubs for a portion of their trail expenses. The balance of the money needed to maintain trails has always been raised through club membership dues and club fundraising activity.
Maine's snowmobile trail system now includes over 14,000 miles of trail, including 3500 miles of primary trail known as the Interconnected Trail System (ITS). The ITS trails connect across the state and with decent snow a rider may head out from anywhere on the ITS and ride to any other location that is reached by the system. We welcome all safe, responsible snowmobilers to the trails.
For over forty-five years thousands of Maine Snowmobile Association volunteers have worked to keep this trail system healthy, and they would welcome our support.


yes, that's me!























Here's the ITS map - click to see details






































Check out my listings where you can hop on the trail near or at the property...

Greenville Inn, Wilson Pond Camps, Romah Motor Inn and Briar Lea Inn!

Friday, November 13, 2015

New Price on Atlantic Birches Inn in Old Orchard Beach, Maine

The Atlantic Birches Inn is now offered at $799,000. 10 guest rooms with private baths (in two buildings, the historic John Calvin Stevens Queen Anne and a 1940s bungalow style cottage), almost an acre and just steps to the famous pier and miles of sandy beach! For more details visit the listing page on my website.

The Bungalow Cottage

The side of the Victorian house designed by John Calvin Stevens

The Front Porch

The front of the Victorian designed by John Calvin Stevens

Monday, November 9, 2015

Aspiring Innkeepers: Interested in Controlling Your Own 401K?


What if you could invest your 401k funds into your own business? It could potentially make a big difference in what you can afford to buy if your only source of downpayment had been from the equity in your home.

If you're interested in learning more about this option, and we are seeing it become increasingly appealing for inn buyers, check out R.O.B.S (Rollover as a Business Startup) or what is also referred to a Self-Directed IRA.

One of the companies we and our clients work with is Guidant Financial. Read more about it on their website. 
There are very strict compliance regulations when it comes to this type of corporate setup and it's important to work with an intermediary (such as Guidant) rather than an accountant to handle the process. The last thing anyone wants is to be faced with an IRS AUDIT! 

Would YOU like to be in control of the success of your investment?