Can the Inn I love be…
“The Inn of My Dreams?”
By: Richard K. Newman, Founder – Commercial Capital Network
This is the million-dollar question…
Most aspiring innkeepers who contact me do so prior to beginning a serious search for a hospitality property. This makes sense to me, as they have been successful in some other career and have learned that “An ounce of prevention is worth a pound of cure.” They want to do their homework to narrow their search to properties they feel they can afford. Whether they are pursuing a lifelong dream as partners, or they are a single person moving on to a new challenge in a new place; they want the experience to be a positive, productive and profitable one.
The pre-qualification process identifies what assets are available, where they are invested and what the buyer/s are willing to commit to an acquisition. Credit history and professional qualifications are also important to understand so that any limitations or challenges can be addressed early on. Our most important job is to help an aspiring innkeeper identify an inn that is well suited for them based on their qualifications, and that the energy they dedicate to the search is well directed, their expectations are realistic and achievable.
Most sellers are more receptive to a buyer who has been pre-qualified, in fact, this is generally required before the seller will share or authorize their realtor to provide financial information at all. A strong buyer may be able to purchase an under-performing inn if they have adequate capital and an abundance of direct industry experience; but a strong performing inn can offset a buyer’s shortcomings or challenges in experience and or capital.
Identifying qualified properties:
The underwriting of a commercial loan combines the qualifications of the buyer with the financials of the inn. Why get excited about an inn, love the sellers, have them love you, and see yourself as the next innkeeper if the deal can’t work because the net income cannot support the desired level of debt or the asking price is unsubstantiated by is historical performance. It is in the interest of all concerned to know that the asking prices is well supported by comparable sales and three (3) years of financial data. Your offer should be substantially based on the inns historical data not what the inn is capable of producing under new management.
A knowledgeable “B&B Industry Specialist Realtor” can insightfully guide your search for available inns that match your qualifications and vision. Many of these professionals have been innkeepers themselves and are intimately familiar with inn operations and valuation methods. They can expertly compare the asking price with comparable sales, and use their own data and experience to analyze the inn’s historical performance, expenses, ADR, and occupancy rates relative to the industry considering its location and the seasonal nature (if any) of the business.
It is the mission of all who serve the next generation of innkeepers to enhance the quality of their experience and increase the likelihood they will be successful finding the “The Inn of Their Dreams.”
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