Wife and I are looking at/interested in buying and running a bed and breakfast. What advice might those of you with experience offer. Thanks.

If you're buying cash, definitely give it six months.

Airbnb/VRBO occupancy/rates has taken a hit this year compared to covid last 2 yrs. Now with increased fuel and decreased discretionary funds, I think this is not the best time to buy one unless under a very unusual circumstance.

With this said, I am closing on a STR next month b/c it was a deal I could not pass up.

Medaggie said:

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Airbnb/VRBO occupancy/rates has taken a hit this year compared to covid last 2 yrs. Now with increased fuel and decreased discretionary funds, I think this is not the best time to buy one unless under a very unusual circumstance.

With this said, I am closing on a STR next month b/c it was a deal I could not pass up.

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What about it made it a great deal for you to feel confident that all of your aforementioned concerns would not effect the investment?

I found a pre MLS listing prob 250-400K under market that may need 200K renovation to make it nicer/bigger than the place next door that is on the market for 1.6M. Last year the 1.6M would have been off the market in a week but has been sitting for a few months now as I suspect high interest rates have made the numbers not as attractive. At worse, I could flip the place next month for a 200K profit.

LMCane said:

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once in a century pandemic .... check!

highest inflation in 41 years... check!!

fuel costs highest in history...check!!

mortgage rates highest in 14 years... check!!

"now is the time, let's buy a B&B"

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I agree. You don't buy umbrellas when it's raining. Your post was tongue in cheek. But because of the factors you mentioned, this might be a good time to buy a B&B.

That said, I would hate running a B&B. Have you ever run a B&B? I'd make sure that I liked the job before I plopped down a bunch of cash.

If you view at as an expense and not an investment, then sure

another thing- you better like making chit chat all day long with dozens of strangers and listening to couples being intimate.

not my type of thing.

OP, it's perhaps better to understand your objectives and interests before offering advice.

1. Why Bed & Breakfast? Does personally entertaining out of town guests get you excited to wake up an face the new day? If the answer to this is no, don't do it. You'll be miserable.

I have stayed in some great B&Bs where the hosts were passionate about the unique property, loved meeting and mingling with guests, serving family style meals, etc. Living their best lives and good for them. If you think you'd like this, then great.

2. Financial objectives. What are you hoping this B&B will accomplish for you financially? Day job? Extra income stream?

3. The exit. How will you eventually exit owning & operating a B&B? Will you be able to get out from underneith any debt and perhaps make a small windfall when you sell it? Who are the interested buyers?

BO297 said:

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Think about what people do on their vacations and if you really want to be the one that cleans up after them.

This is one of the biggest turn offs for me. Even if you can afford a maid, they will not be there all of the time.

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You gotta find the guy who is willing to wipe down the loads.

I said this on another thread, but I think the STR ownership take the hardest hit in this recession.

It seems a lot of people jumped on the STR bandwagon the last 5 years and many require high occupancy rates to cover the mortgage. I think the high interest rates will keep the residential market in big cities fairly stable as many won't want to swap a 2.5%-3% rate for a 8%+ rate no matter what deals hit the market (if they do the math). Vacation towns will be a different story if a bad recession hits and people cut back on discretionary income.

Medaggie said:

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Airbnb/VRBO occupancy/rates has taken a hit this year compared to covid last 2 yrs. Now with increased fuel and decreased discretionary funds, I think this is not the best time to buy one unless under a very unusual circumstance.

With this said, I am closing on a STR next month b/c it was a deal I could not pass up.

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Lot of people are annoyed with Airbnb business model and bad hosts.

The Neil Armstrong house in Clear Lake was one I was considering as a full time residence when it hit the market a few years ago.I figured that after a minor restoration, the house would print money as a short term rental.

But the wife couldn't wrap her head around increasing our home size and property tax burden as we approach retirement and should be in a down sizing mode.

I would think the biggest drawback of a bed-and-breakfast is the lack of business during the workweek.

When I think of a B and B, I think of weekend getaways to a quaint locale near a winery or antique stores -- not really a vacation destination but more of a one or two night visit.

ABATTBQ11 said:

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BO297 said:

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Think about what people do on their vacations and if you really want to be the one that cleans up after them.

This is one of the biggest turn offs for me. Even if you can afford a maid, they will not be there all of the time.

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Only rent to lipstick lesbians. Problem solved.

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Good luck telling the difference between working girls and lipstick lesbians.

I have run a lot metrics/models on several interesting properties over the years. I read most of what there is to read on the topic both online and in print. I posted something similar a few years ago and got many of the same myopic germophobic prudish responses. I have scrubbed many a toilet in my day, cleaned out ratted out rentals and you know what, made money doing it.

We have an STR and while I think we won't do as well in a recession as we have done, its still driveable for a huge population. People still vacation in a recession but the people who were flying to vacation start to drive and scale back.

There is money to be made but you are likely buying a job, most struggle to make money over a good managers salary below 8-10 rooms. I would also never do a true BNB those are creepy AF. No modern traveler stays at a Bed and Breakfast, its boomers only. You want an inn. in 2022 no one wants to eat breakfast with at a communal table with a bunch of creep strangers.

The sweet spot IMO is 15-20 room, with a restaurant and bar and space to host events like weddings. This gives you several avenues from income. You also need to like people. I have worked at hotels and bars in the past and its the most enjoyable work I ever did. Most people wouldn't say that.

Knowing your core market (leisure or business, party or relax, young or old) and your competition and future competition is imperative. If you can find a place that could attract both leisure and business that is key.

Your primary cost driver 40-50% is labor. Another 30-40% of your cost will be debt service, supplies, maintenance, insurance, accounting, licensing ect. Expect to lose -7-20% of your sales to commissions from referral sites. Overall you should expect, if managed correctly to have profit margins between 30-40%

The F&B will only make 10-15% even if done right. Tt diversifies your risk but also your attention.

I still plan to do this as my 2nd career when I turn 50. We looked very seriously at an awesome place that fit the bill in Falmouth but it was just too early in our lives to do it. Ideally you find something in an area you want to live.

The Captain's House in Chatham just sold for about 3M. Revenue was approximately 1M with no restaurant but there was a commercial kitchen. So really if managed appropriately your talking about 300-400k year job but you are the boss for all the goods and bads.

I will have to have small bar in ours.

Those I know who do that enjoy it.
They mainly have older couples and it is great.
Knowing who you want as a customer might help.

Thank you each for your responses. Texags is great for this kind of thing since there are so many with such broad experiences. We were looking at a very neat, small Inn registered as a historic building in small town in Colorado. It's a small town where my wife and I met (she lived there for a decade, and I traveled to there for 20 years) where we both now lots of people. It's a place off the beaten path where mostly people come to relax and/or own a summer cabin etc. it is not a very progressive place but it isn't dying. The Inn has 5 rooms and a separate cottage. It also has an apartment that can be lived in or rented. We have reviewed some financials and simply decided it just isn't a wise investment as a business. We love it but, will pass.
The ideas, opinions, experience, and advice shared here has been truly helpful also as being that we have no experience in this business, it broadened our thinking.

Thank you again.