Can I buy this Guesthouse?

A

anna707

Guest
Hi.

I'm 26 years of age and have 8 years experience in the hotel industry within Sales & Marketing, Front Office and Accounts Departments.
I'm tired of making money for other hoteliers and had ambitions to buy my own property later in life.

However, a stunning 19 bedroom 4* guesthouse has come up for sale in the area and I know (from personal experience dealing with this property and knowing the family who run it) that it does very well. Their reason for selling is they want to get out of the business (young children etc), or so they've told me.

I am extremely hard working and determined, and because the only source of income for this property is Accommodation and Breakfast, I think it would suit me perfectly as a starting point.

As I said I didn't plan on persuing this until later in life, but this property will not be on the market forever.

I don't have any capital, however I have owned my own home for the past 2 years (now worth 265k). I have no savings or other investments. The property is for sale at just under 2m.

How do I persue this & where do I start?

Can I do this or am I dreaming?

I hope I've put in enough information,
Your advice (however brutal) is much appreciated.

Thanks
 
I think you should talk to a few financial int and see how much of a deposit you need also work out how much it should take during a month and see if this would cover your re payments talk to the owners if you know them. It is always worth checking out it may or may not be worth taking on. I find if it is a large area with loads of hotels it is hard to beat their room only rate but if your location has not many hotels doing room only rate then it could work well.
 
Dont want to put a negative spin on your ambitions,but,running this type of business is no life for a young person.You are tied to a house and a phone 24/7. I relieve a friend with a similar business from time to time and believe me,its tough going.Hotels are now so competitive that its getting tougher to compete all the time.The sellers can see the writing on the wall.Guest houses are going down the same road as the bar trade.
 
You're in the business - so I assume you won't buy another business without some idea of the turnover. What does the seller say - or are they not selling as a going concern?

Raising 2m off equity of 265k seems like a stretch, but if you're in the business you will prepare a business plan and maybe win over the bank manager if the numbers look good.

However if it's just a B&B, you'll naturally be thinking about how to compete with the hotels which have sprung up everywhere, killing the B&B with better value, right?
 
Interest only on a loan would be ..what , say 6000 or 6500 euro a month or more, esp. if / when interest rates increase again next month ? Could you cover this, on top of insurance, running costs, etc ?

Fair play to you for being a hard worker and having the initiative to at least look at the possible proposal anyway. When you say the B+B " does very well", what exact profit does their accounts show ? What would be the value of the B+B building without the business goodwill ?
The lending institution will consider all this, in my humble opinion.
 
Sorry Anna

I have to be cruel to be kind, but I hope that the banks don't lend you the money. I would feel fairly sure that they won't.

B&Bs are closing down throughout the country. They just can't compete with all the budget hotels.

A 19 bedroom guesthouse for €2m seems reasonably cheap, so you might be able to get someone you know to buy it as a property investment and rent it to you. If the guesthouse does not work out, then they can always convert it into apartments or a huge family home or something.

That way you take a risk but not one that would wipe you out if it does not work out.

If you don't know anyone who might buy it, ask the auctioneer who is selling it if they know anyone. Someone might be out there thinking of buying it if only they could find someone to run it for them.

Brendan
 
Brendan said:
B&Bs are closing down throughout the country. They just can't compete with all the budget hotels.
Click to expand...

True, but a " stunning 19 bedroom 4* guesthouse " sounds more like a small budget hotel than the old fashioned B+B

It reminds me of true horror stories from 20 or 30 years ago about the owner of the B+B coughing throughout the night and keeping the guests awake in the bedroom next door , staying in B+B room which family members ( of the B+B owner ) were hurridly vacuated out of to make room etc. etc etc. The " stunning 19 bedroom 4* guesthouse " sounds as if it could be more of a custom built mini budget hotel....a small hotel but without swimming pool, bar, etc
 
Hi rabbit

Good point. But do people choose to stay in a small hotel without a bar for the same price as a larger budget hotel with a bar? I suspect not, but it's not my area of expertise.
 
Maybe you could consider taking in a partner who would help you provide extra security for the bank and so raise the cash.
Have you checked out the figures to make sure that it would make the repayments.
 
Brendan said:
But do people choose to stay in a small hotel without a bar for the same price as a larger budget hotel with a bar?
Click to expand...

Good point, overall I agree it is difficult for B+B to compete with all these new hotels and I think B+B's will become more + more a thing of the past.

People who stayed in B+B's 10 or 20 years ago now want hotels.
 
I don't know the location of this guesthouse but with all the internet sites, including airline sites, offering discounted hotels, b&b's, etc I would imagine that people are being channelled in to various destinations by the likes of Ryanair etc for short breaks. Maybe the overseas traveller is now choosing city breaks with easy access from airports etc Location has to be the key.
 
As a son of successful B&B owners I am of course biased, but I don't think that it is all doom and gloom in this sector of the tourism market.

IMHO, the b&b's that are shutting down are the ones that have not moved with the times - uncomfortable beds, cheap breakfasts with thimbles of horrible orange juice and bad decor don't cut it these days with the vast majority of potential clients especially if there is a hotel nearby for the same or a similar price.

My folks get almost all of their business off the web and most of their guests are not Irish. As shown anecdotally on this board, Irish people when the overnight in Ireland tend to prefer hotels and the facilities that come with them.

I would argue though that many of our foreign visitors do not have the same needs - they want a bed for the night and a good breakfast to set them up for a long day of visiting local attractions etc. If they can get this at a competative price in a personal environment then all the better.


Location is obviously of paramount importance - are you confident that your area can support this many guests on a nightly basis?
Does the business have an established clientele?
Can you see their books from the last few years?
Would you plan to run things as they are or make big changes?
At 19 rooms you will need several staff that the existing family may not require as they run the business as a family - have these costs been factored in?
Anyone who might give you money will want to see a business plan that details how you plan to run things and the figures involved.
 
These are all good points.

Personally, I cannot see any profit in this business, unless you can turn it into some sort of boutique hotel or guesthouse, getting big money per room for a luxurious experience. You need big rooms/suites to justify this of course.

Even then it is tough to justify. It's going to be difficult to afford to get in professional management.

You are never going to make it in the budget end of the market, or even competing with the Jury's Inns or Hiltons of this world. The hotels' costs per room are much lower.

What might justify it is if you think the value of the property will go way up.

One other thing to watch is the fire certs. You would really need to get your own fire consultant to check this out before you buy it. If you are in the game, I'm sure you know a fire guy. Planning permission is worth checking too.

Have you talked to the Travelodge master franchise for Ireland? It might not be for you, but I'd say you'd learn a lot from understanding their model. Maybe they could put you in touch with someone who wants to take in a manager? I also think the easyhotel model is really neat, although it's not everyone's cup of tea.

Maybe this is the one for you, but I would suggest looking at all the options before you get involved with this.

And there will always be other properties.

Good luck with it! We admire your get-up-and-go.
 
Many thanks to all of you for your replies.

I am meeting with a financial inst. on Friday to see if i can do this.

I don't think an opportunity will come along like this again, and if the bank manager laughs at me... he laughs at me ( and then i'll move county... :p )

There is room for a bar in this property and it's set on 1.35 acres... so I feel there is a lotof potential.

Again, thank you and i'll let you know how i get on.

Anna
 
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