Allow me to provide some additional detail about this program.
The next generation of innkeepers approach a new career and investment with their eyes open to be sure.
- Clients I work with generally have between $200,000 and $1,500,000 in their retirement program/s. They have been successful in their prior professional lives and are generally fairly sophisticated in knowing to seek advice from professionals before risking all or a portion of their life’s savings on a business acquisition.
- They consult with their attorney, account, and financial advisor/s and others, who assist them in preparing a due diligence list they (the professionals) will use to evaluate the investment and consult on a plan for acquisition if the planets align and all agree the investment has sound potential and that the property can handle the required level of debt relative to the cash the buyer/s have available for a down payment.
- After a buying decision is made in consultation with experts, further due diligence occurs when the interested buyer makes application for a loan. The lender may issue a Letter of Interest, but will require a full narrative commercial appraisal by a bank approved appraiser, title insurance etc. before issuing a final commitment.
- The lender uses a “bank approved” appraiser with whom they have confidence. The appraisal gives an opinion of value based on an analysis of the inns financials and comparable sales. The appraiser makes adjustments for differences in the comparable sales used in the body of their work. The inns historical financials play a significant role in the determination of value.
- At this point the lender and the buyer should have reasonable confidence in the value and all that went into determining its value at that point in time, in that market.
- The lender issues a final commitment to lend and memorializes the terms and conditions for the loan.
By this time, the buyer/s have enjoyed the benefit of a great deal of consultation and advice from qualified professionals. The risks in making an investment in a business and its assets have been substantially narrowed and a serious review by the bank underwriters have determined the property can services the requested loan amount.
Background: I introduced this program to the hospitality industry in 2005 because I observed that the sweet spot of buyers of inn/hospitality properties were of an age that they were retired but not tired, looking for a new career, needing to find a new career because they were down-sized, you name it. These folks need a job and may really need or want to work; they may have lost a bunch of equity in other investments, real estate, retirement accounts and so on, and they are tired of the lack of control they have over their financial future.
The story is all too familiar, the assets they knew they had access to, had lost value, so the capital they have available to buy B&B’s/Inns have fallen below the level required. All the while the capital they have and could use never considered because they were miss-informed that the only way to use it meant paying taxes and penalties which again reduced what power they had to change their future.
I bear witness to how this program has changed lives. Many, many of my clients can attest to its power and I am happy to have discovered its potential and I am especially pleased with how the plan has liberated capital so that aspiring innkeepers could realize their dreams of becoming innkeepers and business owners.