Looking for a lease to buy B&B

[Ann & Tony]

We have been looking for a B&B in our price range for over 2 years. We are actually found one which was absolutely perfect. Everything was set to go until we tried getting the mortgage. The deposit and everything was in place. We did not realise it would not be mortgageable. We have jumps through hoops and spent a lot of time and money trying to get a mortgage or a business loan. We are now looking for a lease to buy B&B. we are working hard to build our cash pot and deposit a lot higher.



In the current market it might be an easier way to sell than to get a mortgage or business loan at the moment for B&B’s. It could be a better way for us to achieve our dream for and you to sell. Or you know somebody who wants to sell one. It’s a guaranteed sale for you or them using a lease to buy agreement.

 

[Mark T Jones]

I don't really understand your post TBH.

What is the problem with the mortgage? (Why is it bit mortgageable?)

Who have you spoken to? There are many brokers who specialise in this field.

 

[Clinton]

I agree with Mark, your post is largely gibberish! But I'm guessing that you wanted to buy the freehold on a B&B and for whatever reason the property (or more likely YOU) didn't qualify for a mortgage and so you now want to buy a leasehold B&B.

Or you know somebody who wants to sell one. It’s a guaranteed sale for you or them using a lease to buy agreement.

Guaranteed sale? You don't know the location, you don't know the price, but as long as it's a lease on a B&B you're willing to pay?

I've often seen wannabe business buyers like you so desperate to make an acquisition - especially in hospitality ie. pubs, restaurants, B&Bs - that they make the most stupid mistakes! You seem to be headed firmly, resolutely and blindly in the same direction.

Seriously, do yourself a favour and go get yourself some professional advice before you take another breath. You're looking to buy a business. That kind of move is not for amateurs like you (unless acting under adult supervision).

 

[fisicx]

@Ann & Tomy, Buying a building to run a B&B is an easy way to lose every penny.

If you own a suitable property, are mortgage free and have lots of experience running a B&B you might just make it work.

I suspect you couldn’t get a mortgage because the bank saw your business plan and decided quite rightly it was far too high a risk.

 

[Ann & Tony]

I don't really understand your post TBH.

What is the problem with the mortgage? (Why is it bit mortgageable?)

Who have you spoken to? There are many brokers who specialise in this field.

We have spoken to many brokers and because the b&b we wanted to buy is running at a loss. Like a lot of B&Bs are that are up for sale. They seen that as to high of a risk and its not mortgageable. Obviously you don’t know the current clinate.

 

[Ann & Tony]

@Ann & Tomy, Buying a building to run a B&B is an easy way to lose every penny.

If you own a suitable property, are mortgage free and have lots of experience running a B&B you might just make it work.

I suspect you couldn’t get a mortgage because the bank saw your business plan and decided quite rightly it was far too high a risk.

They won’t take our business plan into consideration as it’s a new business concept and they wouldn’t give a mortgage. As the books show ok the current B&B is not profitable. It is what we similarly do now.

 

[Ann & Tony]

I agree with Mark, your post is largely gibberish! But I'm guessing that you wanted to buy the freehold on a B&B and for whatever reason the property (or more likely YOU) didn't qualify for a mortgage and so you now want to buy a leasehold B&B.




Guaranteed sale? You don't know the location, you don't know the price, but as long as it's a lease on a B&B you're willing to pay?

I've often seen wannabe business buyers like you so desperate to make an acquisition - especially in hospitality ie. pubs, restaurants, B&Bs - that they make the most stupid mistakes! You seem to be headed firmly, resolutely and blindly in the same direction.

Seriously, do yourself a favour and go get yourself some professional advice before you take another breath. You're looking to buy a business. That kind of move is not for amateurs like you (unless acting under adult supervision).

Thank you for reading our post. We are sorry that you have decided to be so negative about our ambition to start a new type of business in Blackpool. We appreciate your advice and we will keep it in mind.

 

[Clinton]

You're welcome. But you mistake reality for negativity. I have some questions for you.

You want some external party to fund these losses while you give it a shot to turn the business around?

What happens if you can't turn it around?

What's the annual loss the business is making? What is the capital you have available? How much are you looking to fund externally? (All assuming it's a leasehold)

 

[fisicx]

They won’t take our business plan into consideration as it’s a new business concept and they wouldn’t give a mortgage. As the books show ok the current B&B is not profitable. It is what we similarly do now.

If it’s running at a loss it’s a high risk and banks don’t like risk. Would the current owners let you manage the property until it’s profitable?

 

[Ann & Tony]

You're welcome. But you mistake reality for negativity. I have some questions for you.

You want some external party to fund these losses while you give it a shot to turn the business around?

What happens if you can't turn it around?

What's the annual loss the business is making? What is the capital you have available? How much are you looking to fund externally? (All assuming it's a leasehold)

We have £200k to put down and we wanted to £100k to borrow. It is the modern way is to lease to buy is an alternative way to finance this type of business as you should be are fully aware.

 

[Mark T Jones]

We have spoken to many brokers and because the b&b we wanted to buy is running at a loss. Like a lot of B&Bs are that are up for sale. They seen that as to high of a risk and its not mortgageable. Obviously you don’t know the current clinate.

I'm very familiar with the hospitality industry, and the funding climate - Its what I do.

The big question - regardless of funding - is why/how you believe you can turn these businesses around from loss-making to profitable?

There are profitable B&Bs out there - some will be for sale. But as you have discovered the bargain basement ones will be loss.making

 

[Paul Kelly ICHYB]

Why not give the sellers the £200k and pay the £100k over 12/24/36 months?

 

[Paul Kelly ICHYB]

BTW, lease to but will have the same basic lending principles i.e. the business has to be profitable and will probably be more expensive!

 

[Mark T Jones]

Thank you for reading our post. We are sorry that you have decided to be so negative about our ambition to start a new type of business in Blackpool. We appreciate your advice and we will keep it in mind.

I wonder if your attitude on here is similar to your attitude to funders - it might be the problem.

There are lenders who specialise in this market- and they won't automatically decline a deal on historic losses - though they will be part of the response

On the face of it, LTV should stack up. The other part of the equation is your plan (yes, they will take it into consideration) - it needs to be professional, factual and properly researched, not the usual fanciful b/s

 

[Ann & Tony]

I'm very familiar with the hospitality industry, and the funding climate - Its what I do.

The big question - regardless of funding - is why/how you believe you can turn these businesses around from loss-making to profitable?

There are profitable B&Bs out there - some will be for sale. But as you have discovered the bargain basement ones will be loss.making

Because over the last 3 years we have seen a gap in the market for what we do in a very small way at the moment. All of the directors have their own businesses already and we believe now is the right time. But the prices of properties in Blackpool with the current climates. It’s not been done on an overnight whim. It’s has been researched very in depth and it’s not the usual Blackpool B&B clientele is our market. As you all will already know. Blackpool has 10 theatres. As one of the directors is closely connected to one of the Sheffield theatres. These are our main clients. This is why we know we can turn it around in Blackpool.

 

[fisicx]

Ask the directors to lend you the money

 

[Clinton]

We have £200k to put down and we wanted to £100k to borrow. It is the modern way is to lease to buy is an alternative way to finance this type of business as you should be are fully aware.

We don't need lessons on what is the "modern way". Some of us know a bit about buying / selling businesses.

That said, your £200K is not a shabby deposit on a £300K acquisition.

So how do you fund the remainder? Start by looking at who stands to gain from you taking the lease. Is it the current leaseholder, for example? If you take over the lease, they get to stem their growing-by-the-day losses. It would be in their interest to provide at least some element of seller financing (if not the full £100K) to get a deal over the line.

Your business plan to turn this ship around seems to rely heavily on a specific party / parties sending you clients. That's sounds thin and unrealible.

There is nothing holding them to sending you clients, they could very well decide to send those clients to a different B&B tomorrow. You could tie them into the deal by taking some funding from them in return for a chunk of equity. That way you protect your investment and they have skin in the game to support what's otherwise a pretty shaky 'turnaround plan'.

Put that funding together with some seller financing and, if you're just £10K or £20K short, you'll find commercial lenders more open to bridging the gap.

 

[Ann & Tony]

We don't need lessons on what is the "modern way". Some of us know a bit about buying / selling businesses.

That said, your £200K is not a shabby deposit on a £300K acquisition.

So how do you fund the remainder? Start by looking at who stands to gain from you taking the lease. Is it the current leaseholder, for example? If you take over the lease, they get to stem their growing-by-the-day losses. It would be in their interest to provide at least some element of seller financing (if not the full £100K) to get a deal over the line.

Your business plan to turn this ship around seems to rely heavily on a specific party / parties sending you clients. That's sounds thin and unrealible.

There is nothing holding them to sending you clients, they could very well decide to send those clients to a different B&B tomorrow. You could tie them into the deal by taking some funding from them in return for a chunk of equity. That way you protect your investment and they have skin in the game to support what's otherwise a pretty shaky 'turnaround plan'.

Put that funding together with some seller financing and, if you're just £10K or £20K short, you'll find commercial lenders more open to bridging the gap.

It is only £120k deposit as we need £80k to transform it round. We are needing £60k to develop the property. We either have the money to buy the B&B amd not convert it to wjat we need to. Or, we was looking to borrow the rest of it to buy the place. If we could find a property that was selling for £120k and ideal for our uses. We wouldn’t have to get a mortgage. These are clients we already have and had for a number of years. Who would like to stop for longer periods, which is not possible whith how we currently run this business. Its not a shortage of clients, its a shortage of facilities. Where we are currently based it would be far to expensive to get anywhere as big enough as we need.

 

[Ann & Tony]

Ask the directors to lend you the money

The money we have got is all 3 of us directors have got together. My partner is currently selling his business to try and find it. At the moment even a successful business is struggling to sell.

 

[FreddyG]

I have a list of businesses that fail - a sort of failure hit-parade! B&Bs are at positon six. (Resurants and fitness studios are joint-first BTW.)

I also have a list of bad places to put a business. Blackpool is number one. It is overrun with mismanaged and underfunded micro-businesses. Blackpool is also dirt-poor. When one sees a couple of 'working girls' in T-shirts and hot-pants, stood outside the transvestite theatre in January at eight in the morning, sucking on ciggies and shivering, one gets to see just how poor Blackpool really is!

The good news is that property prices in the US are heading South for the Winter and where the US goes, the UK, as a satellite economy, usually follows. The world looks as if we are at a major turning point. The US is abandoning its leadership role for the West and China will emerge to regain its former role that it once had in its 4,000-year history.

Given where the world is right now, I would keep my powder dry. If you must buy a business, buy one that caters to everyday needs.

Good luck - you'll need it!

 

[Mark T Jones]

Something doesn't quite add up. Whether it's missing detail or simply how the information is being presented, or potentially you are using the wrong broker(s)

The simple, effective litmus test for brokers is whether they ask challenging questions and collate full information, or whether they make promises and bank the deal around the market as is.

We haven't touched on personal credit history and/or the trading history of existing businesses

To some extent your application may be stigmatised by geographical location unless you can clearly demonstrate your point of difference - with the (incorrectly named) staycation bubble now fully burst, I'd suggest that marginal tourist traps may be problematic

 

[Clinton]

When one sees a couple of 'working girls' in T-shirts and hot-pants, stood outside the transvestite theatre in January at eight in the morning, sucking on ciggies and shivering, one gets to see just how poor Blackpool really is!

I've never been outside a Blackpool transvestite theatre at 8 AM, whether in January or any other month.

Gawd, I lead such a boring life!

 

[Mark T Jones]

I've never been outside a Blackpool transvestite theatre at 8 AM, whether in January or any other month.

Gawd, I lead such a boring life!

Not outside, but.....

 

[FreddyG]

I've never been outside a Blackpool transvestite theatre at 8 AM, whether in January or any other month.
Gawd, I lead such a boring life!

I was in Blackpool for a reunion dinner at some hotel further up the coast - I didn't know hotels could be so bad! The bed was an iron-framed war-time thing. The food bordered on the inedible. The entertainment was some geezer singing out of tune and accompanying himself on a Casio home keyboard.

He got as far as song number two "Only you . . ." and some burly bloke bawled at him "Shut the F-up!" and he just packed up his stuff and legged it!

I took a walk into the town the next morning to calm my shattered nerves and that's when I saw those two young ladies outside the theatre 'Funny Girls' ("Blackpool's vibrant drag extravaganza!") which is appropriately on Dickson Road. "Featuring Murphy's Midgets, now bigger and better than ever!"

I know Blackpool quite well, it is one of those towns where you don't know whether to laugh or cry. A sort of Scunthorpe-on-Sea!

"Is this place real, or have I walked into a film set where some enterprising people are remaking one of Felini's more bizarre stories?"

 

[Ann & Tony]

Something doesn't quite add up. Whether it's missing detail or simply how the information is being presented, or potentially you are using the wrong broker(s)

The simple, effective litmus test for brokers is whether they ask challenging questions and collate full information, or whether they make promises and bank the deal around the market as is.

We haven't touched on personal credit history and/or the trading history of existing businesses

To some extent your application may be stigmatised by geographical location unless you can clearly demonstrate your point of difference - with the (incorrectly named) staycation bubble now fully burst, I'd suggest that marginal tourist traps may be problematic

Most of the brokers we have spoken too tick their boxes. If we don't fit in the boxes they just reject it instantly. If it was just a mortgage on a house it would be simple. Don’t understand why it’s so hard to get a mortgage on a B&B.

 

[fisicx]

Don’t understand why it’s so hard to get a mortgage on a B&B.

Because the risk of failure and defaulting on the loan is way too high.

 

[Ann & Tony]

I wonder if your attitude on here is similar to your attitude to funders - it might be the problem.

There are lenders who specialise in this market- and they won't automatically decline a deal on historic losses - though they will be part of the response

On the face of it, LTV should stack up. The other part of the equation is your plan (yes, they will take it into consideration) - it needs to be professional, factual and properly researched, not the usual fanciful b/s

Thank you for your comment which is most helpful and enlightening. As for our business plan. You know nothing about me or the 3 directors. We will invite you to the open wing day when we get our property.

 

[DontAsk]

Don’t understand why it’s so hard to get a mortgage on a B&B.

Then perhaps you shouldn't be trying to get a mortgage on a B&B.

Any business really needs to understand their sector, otherwise it's doomed to fail.

 

[JonWhite_Adler]

We have been looking for a B&B in our price range for over 2 years. We are actually found one which was absolutely perfect. Everything was set to go until we tried getting the mortgage. The deposit and everything was in place. We did not realise it would not be mortgageable. We have jumps through hoops and spent a lot of time and money trying to get a mortgage or a business loan. We are now looking for a lease to buy B&B. we are working hard to build our cash pot and deposit a lot higher.



In the current market it might be an easier way to sell than to get a mortgage or business loan at the moment for B&B’s. It could be a better way for us to achieve our dream for and you to sell. Or you know somebody who wants to sell one. It’s a guaranteed sale for you or them using a lease to buy agreement.

Ann & Tony,

We have seen a similar issue with holiday let properties and brokering mortgages on them. Because you don't have a trading history to work from then the lender can't see a secure income for making the mortgage payments. Lenders typically want to see 2yrs trading history from different seasons before they will mortgage the business.

As someone said the best way is to buy it in cash and refiance once you have the trading history showing consistant income.

An alternative is to use another property for security and put a bridge in place for 24-30 months with the exit being a mortgage once you have the trading history.

Another option would be a private investor who is willing to work with you to build to business. You would have the business plan set as building the business to a point where it is mortgageable and you can buy out the investor for an agreed return.

Whatever you do it will be risky becuase if it doesn't work you equity in the project will be the last to be repaid, you will be taking the greatest risk.

Jon

 

[DoolallyTap]

I hope you have watched many episodes of 'The Hotel Inspector'.