How much should I pay for a B&B?
Bed and breakfasts are even more difficult to value than domestic houses and there are a complex number of considerations when you are looking to buy.
For simplicity, I'm going to discuss some of the main points around buying a currently running B&B - not a closed one which has its own complications, nor a building which has yet to be turned into a B&B. After all - until you have been granted planning permission, the building as far as your business is concerned, is worthless as you can't trade from it.
The asking price of any B&B will obviously depend on things like size and area. A ten bedroom B&B in central Bath will cost more than a three bedroom B&B in rural Scotland. But there are lots of other variables you need to consider.
B&Bs are notoriously difficult to value - similar to antiques, they are only worth as much as someone is willing to pay for them. When we had our last business valued, the valuations varied by over £200,000! Luckily we sold at the upper end of the valuations and ignored the lower ones. You will often find that even with a commercial estate agent, it's the business owners who have dictated the price, often wishing to try their luck at a really high price as people often don't do their research before going into the business and end up paying far too much for their property. They will put it on the market up to three years before they want to be out and just keep reducing the price the nearer they get to their ideal moving date. If they get a buyer before then who's willing to pay the price then great. Often people move from city jobs with very expensive property prices and don't realise they're paying dearly for the property they have fallen in love with.
It's important to think clearly and look at the building with a clear head. Don't be fooled into thinking it's beautiful (even if it's 5 star and has good reviews). Check there's enough room in your own private quarters - after all, you could be spending months at a time in just this one area - is it pleasant and liveable and large enough? Is it separated from guests so that they can't disturb you all hours of the day and you don't have to see them if you pop to the loo in the middle of the night or while you're making your breakfast in your pyjamas?
Look carefully at everything - make sure you visit several times, and preferably on different days and at different times. Did you realise the train goes past every hour on weekdays or that planes fly over from 6am? Did you know parking is a nightmare on market days or that the church bells ring from 8am on a Sunday? Stay over if you can too.
By staying there you can do all the things you don't like to ask to do when being supervised by the owner (and also ask if you can look round the building on your own). It's also useful to ask if you can take lots of photos on your tour. It will help you compare places and also study them in more detail on your return home. Often you miss things when going round.
Look in detail at the inner workings - Is the water pressure good? How long does it take for hot water to come through? Do the windows open ok and are they in good condition? Are the carpets ok, the beds comfortable, the crockery chipped, the linen threadbare, do the curtains block out the light?
Anything that doesn't work properly or isn't good quality will cost money. Don't forget that everything is multiplied up in a B&B - if the TVs are out of date and need replacing, not only will you need to buy a decent size and a good reliable make, but if they cost £350 each, and you have ten bedrooms, the costs soon mount. If you realised the water pressure is poor and you want to run a high quality establishment with excellent reviews, you'll need to sort it out - another £10,000 there. If the bedroom carpets are ok, but the corridors need replacing, the two sets of stairs, landings, hallway and entrance, dining room and lounge soon add up and you're talking several more thousand. Before you know it you've spent £20,000 on day one without even blinking.
You need to assess all elements of the building and add up what needs to be done or replaced. Take this into account. If you need to spend £150,000 to bring it up to scratch then you shouldn't be paying a top price for the B&B. Can you get your money back? Will it be worth £150,000 more when you sell it? And can you command the prices in your area? Is it worth spending all that money if your core business is contractors at £30 per night?
Even if you have the cash to buy a property outright, don't just splash out on the B&B of your dreams. It may turn out to be the stuff of nightmares! A building is worth a certain amount, looking at the condition of the building itself (eg roof / windows), the interior (carpets / furniture), the integral bits and pieces (mugs / hair dryers etc), and the business (amount of repeat business / profitability).
So I'm afraid it's not a straight forward answer and there are so many aspects I discuss in more detail on my training course. Buying a B&B is a difficult process and you need to know what you're looking at. If you're new to the business you may well buy blind and regret it later. And please don't spend all your money on the property and leave nothing spare. No matter how perfect you think your new place is, I guarantee you'll find a list of things to buy as long as your arm before the first week is over!