Valuing a Former B&B
February 26, 2005
by Kit Cassingham
Valuing a former bed and breakfast as a bed and bed and breakfast depends on many things, like how much of the business elements are left and how long it's been out of business.
From "Ask Kit!":
Q: In valuing a former 5-BR B&B (business gracefully discontinued about 2 years ago due to owner's outside job responsibilities), is there a rule-of-thumb discount as compared to a currently operating business?
A: I'm not aware of a rule-of-thumb for such a situation. It seems to me that at this point there is no business to buy, though there may be business assets (sign, website, phone numbers, etc.) to go along with the real estate and FF&E (furniture, fixture and equipment).
I'd like to hear from the B&B Brokers and Professionals on the list. What advice to you have in this case?
Comments
Valuing a former B&B when it's only five rooms or less is pretty much a strightforward question of real estate value plus FF&E (furniture, fixtures, and equipment), as Kit says. To get a good idea of real estate value, there are only a few choices, and they're not all good. You can try to ball park the value based on real estate you see advertised, but this is a mistake, as list prices and selling prices are not the same things.
Another alternative is to hire a good real estate agent to perform a CMA, or comparative market analysis looking at the property as residential real estate (note: in some states agents can't be paid for a price opinion and may not want to work for free). This could be quite reliable if the agent is good. The last would be to hire an appraisal. This would be something you could "take to the bank," and would be reasonably reliable, though sometimes a Realtor's opinion and gut can be a very good indicator.
Once you have a good handle on the real estate value, you can estimate the value of the FF&E (make a list, try to price things individually, even guessing, then add it up. You'd be surpirsed that it's usually less than you'd think). The sum of the parts is a fair price to offer for a B&B that's been closed.
_________________
Peter Scherman
"The B&B Team"
Inn Brokerage and Consulting, From Check-in to Check-out
www.bbteam.com
434-286-4600
Posted by: Peter Scherman | April 27, 2007 3:47 PM