Prime Mortgage Rate Cycles
With interest rates being so low in recent years, it is easy to forget that mortgage rates fluctuate somewhat regularly. The following chart tracks this data to remind us of past cycles and that even when rates were “High” we still did business….. Best!
What should I look for when shopping for the inn of my dreams?
ANSWER: Aspiring innkeepers should attend industry conferences and aspiring innkeeper seminars to get a feel for the kind of operation that would best suit their financial and lifestyle objectives. This is fundamental to the beginning of a well-planned investment and will save time, capital, and energy. Do all that is possible to enjoy the journey […]
Owners Quarters
ANSWER: Aspiring innkeeper’s needs vary based on many factors. Moving from a single-family home into an inn may be challenging depending on the nature of the space allocated to the innkeeper and their family. Aspiring Innkeepers are getting younger, so children may be a factor in the equation. Some inns have separate residences for the […]
Location, location, location….
ANSWER: We have all heard this before. As it related to financing, hospitality properties may represent a challenge depending on the historical cash flow. In certain states, 2020 and 2021 may have seen closures due to Covid-19, so gross revenues during this period may have been compromised to some extent. Most banks understand this and […]
Are inns offered “For Sale by Owner” worth considering?
ANSWER: They could be, but it is difficult for a seller to impartially establish the value of the business and its assets without the benefit of a valuation undertaken by an industry specialist realtor or an appraiser. The asking price should be backed up with three (3) years of historical financial data and comparable sales.
How can I know how much of a loan I qualify for to purchase a B&B/inn?
ANSWER: A pre-qualification encompasses reviewing the loan application and supporting documentation. The review includes data and documentation for the buyer/s and may include a particular property of interest. The buyer/s must have adequate capital, credit, and professional credentials, and the “property in question” (PIQ) must be able to support the desired level of debt. The […]
What does a Pre-qualification accomplish?
ANSWER: The Pre-qualification process establishes a range in purchasing power a buyer/s has as it relates to identifying hospitality properties that best fit their financial qualifications and professional/personal objectives. A Pre-Qualified Buyer identifies a person or persons as having submitted, the required proofs and documentation for verification and analysis; prior to identifying or contracting to […]
How does a Pre-qualification differ from a Pre-approval?
ANSWER: A Pre-approval differs from Pre-qualification in commercial lending in that the “Pre-approval” or Term Sheet/Letter of Interest is issued after a preliminary underwriting determination has been made. The buyer’s qualifications and the data from the commercial property are combined to assess the risks versus the merits of the loan application. Ratio (DSCR) will comply […]
How do I determine a fair asking/offering price for the inn/s I am considering?
ANSWER: It is difficult to know until all financial documentation has been provided by the seller. A knowledgeable “B&B Industry Specialist Consultant/Realtor” should be consulted on matters of value. These professionals are intimately familiar with the industry and can provide time-saving advice on the viability of the business and the value of its assets. It […]
How much do I need to have for a down payment to purchase an inn?
Depending on the financial history of the B&B/Inn, buyers should have 30% to 40% of the property cost to cover the following: Down Payment – 15% to 25% Closing Costs – 3% to 6% Reserves – 6 to 12 Months Principal & Interest
Is seller financing a useful tool when financing an inn?
ANSWER: Yes, it can be used, particularly when the property has been underperforming for any number of reasons; in fact, some sellers may find it attractive to offer a seller-held second mortgage to defer some portion of a gain from the sale of the inn. If the property is free from debt, the owner may […]
How long does it take to process and close a transaction once I/we have identified a hospitality property?
ANSWER: After the contract has been negotiated and accepted, the inspections and mortgage contingency period will begin. Generally speaking, 45 days is established to obtain a mortgage commitment. Due diligence also begins in earnest with the ordering of inspections, title insurance, environmental, and survey (if needed). Once received, the mortgage processors review the title, appraisal, […]
Can I really use my retirement funds to open a business without taxes or penalties?
ANSWER: In most cases, yes. Our plans are designed to meet the IRS requirements for qualified retirement plans. IRS regulations permit the rollover of funds from qualified plans to qualified plans without taxes or penalties. Regulations also permit the investment of retirement funds in the stock of the sponsoring company. The benefits of the plan […]
What if I have more than one retirement savings account?
ANSWER: Not a problem; you can consolidate all your retirement accounts in the new retirement plan or selectively choose from them as desired.
Can I really use my retirement funds to open a business without taxes or penalty?
Answer: In most cases, yes. Our plans are designed to meet the IRS requirements for qualified retirement plans. IRS regulations permit the rollover of funds from qualified plans to qualified plans without taxes or penalties. Regulations also permit the investment of retirement funds in the stock of the sponsoring company. The benefits of the plan […]
What if my accountant (or lawyer) isn’t familiar with this type of financing plan or isn’t sure it could be done?
Answer: Retirement planning is a highly specialized field; for this reason, we recommend that you use a firm that deals only with retirement and pension fund planning and administration when dealing with your retirement or pension funds. While your accountant or attorney may not be familiar with this type of plan, we’ll be happy to […]
What if I have more than one retirement savings account?
Answer: Not a problem. You can consolidate all your retirement accounts in the new retirement plan.
Using Retirement Assets to Purchase a Bed & Breakfast or Country Inn
Few investors or entrepreneurs realize that they have the ability to self-direct their own retirement assets. Most believe the only two options are to borrow or withdraw from their account/s if they wish to invest in real estate or purchase/start up a new business. The downsides are… Borrowing from the account/s would require repayment of the […]
2021 Inn Financing Update
By Richard K. Newman, Founder – Commercial Capital Network, LLC The last time we had interest rates at present levels we were faithfully watching such great shows as Leave it to Beaver, Dennis the Menace, and I Love Lucy. By Richard K. Newman, Founder – Commercial Capital Network, LLC. Times have changed, and interest rates […]
Determine Market Value Before Marketing Your B&B or Country Inn
All Bed & Breakfasts/Inns are unique by design; in fact, it is that special and unique quality that distinguishes one Bed & Breakfast/Inn from the next. Innkeepers invest their creative energy and capital over time to create a welcoming and hospitable environment that is unique to their community and valued guests. While the charm and […]
