Seller Financing Options for Inns For Sale

Seller financing of Inns, wherein an Inn owner offers a mortgage to an Inn buyer, was rare during the last decade. Money was cheap and lenders were eager to lend. Those conditions have certainly changed and bank financing for Bed and Breakfast Inns is elusive today. Seller financing of Country Inns and Bed and Breakfasts for sale is re-emerging as an option that benefits both parties. One advantage is that the Inn buyer and the Inn seller have control over the terms of the transaction. A seller does not necessarily have to own the B&B outright in order to offer seller financing. Here three ways a seller can participate in financing:

1. Free and Clear Financing – When a seller owns a property “free and clear” there are no liens or mortgages on the property. In this situation the seller and buyer are free to make any terms they want to in order to make a deal successful. An Inn owner typically agrees to transfer title to the Inn in exchange for a note and a security interest in the property. The note is paid off like a conventional mortgage, though to the seller instead of a bank.
2. Second Position Financing – In this scenario, the Inn buyer makes a down payment, obtains new mortgage financing (paying off the seller’s existing mortgage) and the seller finances the remainder of the purchase price. Down Payment + Bank Financing + Seller Financing = Purchase Price.
3. Purchase Option – Any time the Inn buyer gives money to the Inn owner for the right to purchase the property at a given price and within a given time frame the buyer has a “purchase option”. Typically, the buyer simultaneously leases and operates the Inn. This is a form of seller financing because the seller still owns the Inn until the buyer purchases it (exercises their option to purchase) or the option expires.

As the chill on institutional lending persists, and the inventory of available Inns remains high, variations of seller financing will become more commonplace. I would be happy to discuss any of these options for financing the purchase or sale of your Bed and Breakfast for sale - contact me!

New Business Plans for the New Environment

Most Innkeepers felt the effects of the Great Recession in 2009. Continuing high unemployment numbers and waves of home foreclosures mean that consumers won’t be spending freely in 2010, either. Travel is, after all, “non-essential”. This trend is likely to last for some time. With the easy lending practices of a few years ago being replaced by Scrooge-inspired lending rules for small businesses, it’s difficult for Bed and Breakfast owners to find financing for improvements or seasonal credit. What are pressured Innkeepers to do? Now is the time to plan.

A new business plan will:
•    Force you to focus on your Inn’s strengths and weaknesses.
•    Keep you on track in the face of daily distractions.
•    Give you a sense of control.

A new business plan will also serve to tame the “marketing monster” so that your limited resources are carefully targeted.

Of course, the most important way to grow your B&B business and bring happy customers back will always be to deliver great service in a beautifully maintained Inn brimming with atmosphere and comfort. But a current business plan will help you take specific steps toward more success and reduce stess.

Offer Guests Educational and Cultural Packages

 “Today’s guests increasingly buy the experience. Witness the growth of cultural and eco-tourism, spiritual and physical wellness packages, heritage tours, culinary immersions and other unique revenue-producing programs. Successful contemporary hoteliers focus keenly on creating a home base for the modern social experience–adventure, education, or just hangin’–accompanied by up-to-date technology and décor.”

Words from a Bed and Breakfast consultant? No, this commentary is from Tom Brumleve, a columnist for the online hotel industry news site HotelNewsNow.com.

The hotel industry is in hot pursuit of Bed and Breakfast Inn customers and that is a good reason to double-down and create special programs to educate and entertain them. This is what Innkeepers have been doing for generations (remember White Christmas?) This year, more than ever, is the time to start something new and interesting at your Inn or Bed and Breakfast! 

Welcome!

Hello Innkeepers, Future Innkeepers and Friends of Innkeepers! I’ve started this blog to share ideas and thoughts about our unique industry and to stay in touch. I hope you’ll find value in the postings.
It’s March 1st and in Southeastern Pennsylvania we’ve enjoyed three major snow storms! It reminds me of winter in the Adirondacks, where we enjoyed cross country skiing when my wife and I were New York Innkeepers. We found time to slip away from our Hudson Valley Inn for skiing during our “slow” season. It was a great cure for cabin fever, and a heck of a workout. Now that we live in Kennett Square, Pennsylvania (very near Delaware and Maryland) we enjoy walking in the country lanes and fields of Chester County… but we left our skis and snow shoes in Upstate New York - so we have to wait for better weather! I’ve taken this “cooped-up” time to add some new articles to my bed and breakfast for sale website, so you should take a look.