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The Value of Innkeeper Quarters For A B&B

November 1, 2009

by Kit Cassingham

If you want to know how to buy a bed and breakfast, or how to sell a bed and breakfast, take any of the myriad seminars available across the United States. Or hire a bed and breakfast consultant to help guide you through your collection of questions. Innkeeper quarters is one of the important issues buyers consider today.

A tent slipped into the trees along the lake, curled up in front of the stove, tucked into a large closet, or stuffed into an unfinished basement. Sounds like some interesting travel experiences, doesn't it. But it really describes various living conditions innkeepers have subjected themselves in the aim of creating a viable bed and breakfast business.

Between questions I've had recently from both aspiring innkeepers and active innkeepers (or is that perspiring innkeepers?) the topic of owner's quarters has come up a lot. I thought it should be addressed, and an Innfo article seemed like a good place to talk about it.

When I first entered the B&B world innkeepers often lived in sub-standard conditions. It was common for owners to give up their room for a guest, if that meant renting an extra room some night. More rooms means more money, and everyone scrambled for as much as they could get. Too often innkeepers spent more money on renovating the inn than they could really justify, making them cash-strapped. You know what happens when you are cash-strapped, or feeling in over your head. For starters, inadequate living conditions were tolerated.

But the inadequate living conditions started changing as marriages were threatened and selling the inn was challenged because buyers wanted something better than an unfinished basement. They wanted more than a guestroom in their own home! They needed more to attract future buyers.

Innkeepers have gotten smarter through the years, they are moving out of the inn into their own homes. Their quarters are then converted into guestrooms, usually deluxe rooms for more money than other guestrooms. Often deluxe spaces rent more often and for more money than other guestrooms, making this seem like a great idea. But is it a great idea to totally remove owner's quarters from your bed and breakfast?

Based on the business valuations I've done through the years I'm questioning that wisdom. I feel it's a bed idea, and for more reasons than the obvious.

The first concern I have about the lack of owner's quarters is that typically that means there is nobody who knows the property, or the business, on site at night. When guests sleep they are at their most vulnerable. Who is there to take care of them if they have a medical emergency, or if there is a disaster like fire, flood, or tornado? Even being five minutes away can make the difference of life and death, disaster or near-disaster.

My second concern comes from understanding most buyers need a home, and expect to live on the premises when they buy their bed and breakfast. If the inn you are selling doesn't have a place for them to live they either have to convert a guestroom into their quarters, decreasing their income potential and thus their ability to repay their loan, thus lowering the amount of money they can borrow and thus the price they are willing or able to pay for buying your inn. Or, they have to take some of their inn-buying capital and redirect it towards buying or renting a home, again decreasing their ability to repay their loan, thus lowering the amount of money they can borrow and thus the price they are willing or able to pay for buying your inn.

Another point to consider is how many potential buyers will you lose because there aren't any owner's quarters for the new owners? How long will your property languish on the market until a buyer comes along who doesn't need their own space, or has enough money to get both the inn and living quarters? Are you willing to lengthen the amount of time it typically takes to sell your bed and breakfast to make a few extra dollars "today"?

Before you convert your owner's quarters into a guestroom, or two, check with your zoning guidelines to see if it's legal for the property to be unoccupied at night. And as you calculate how much money you anticipate making from the conversion, also consider how much money you will lose when you decide to sell. And even if you don't lose money, how much longer will your property sit on the market? After analyzing all ramifications of your action you can make your move wit confidence you won't have any unpleasant surprises down the road.

Comments

great article.reminds me of an inn for sale we looked at where all guest rooms had private baths and the owner lived under the stairs in studio efficiency small quaters!! This was their retirement choice,we thought how sad.


So they chose to live like Harry Potter? People are very creative in their efforts to make a living and create a successful B&B. The element they miss, from my perspective, is that if they don't take care of themselves they won't have enough for very long to take care of their guests.





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