Why does it take so long for a bed & breakfast to sell
Why does it take so long for a bed and breakfast to sell?
At any given time there are approximately 15 - 20 bed and breakfasts for sale in the Niagara Region. Every January people think about changing their lives (January resolutions) one of the ideas is to run a Bed and breakfast. Each New Year I am very busy with people coming down talking about how to run a bed and breakfast. However in reality they are just in the starting stages. There are a number of hurdles, financing, owners quarters and now the sale of their property.
How long does the process take? Months? Years?
It depends on what stage the buyer is at and how interested they are in running a bed and breakfast. Most times I am dealing with people who are just starting to research what’s involved, and of course there are so few people who can actually qualify to purchase a bed and breakfast to their liking, most of the time I am really letting people understand they are not in a position to do it, but they don’t understand they’re not in a position to buy because of the unique financing that’s required and the relationship between a buyer’s economic situation and the profitability of an operating a bed and breakfast. I try and have this conversation before showing properties to save the sellers from the anxiety of having people through their house.
So it’s an anomaly. It doesn’t work like commercial real estate since bed and breakfasts are not commercial but residentially zoned, so there is more involved mortgaging a Bed and breakfast. Most banks will not mortgage a bed and breakfast. For more on how to mortgage a bed and breakfast.
The second issue is where will they live in the house? The Buyer believes that they are buying a wonderful big house with lots of space, then find out they must share it with strangers. That is what a bed and breakfast is all about!!
The last issue is the sale of the buyer’s house, in 2012; more than 6 of my buyers were not able to sell their property, located in various towns/cities across Canada. So, to answer the question, the process can take 4 to 24 months from when I first meet potential buyers to when they purchase.
Has the tide receded for the Bed & Breakfast industry?
Not based on how many people come looking at bed and breakfasts. People believe that it would be a desirable way of life (and I concur) but the reality of getting the deals done has made it tougher because really, for all intents and purposes, people have to have approximately 35% down for financing and really the only financial player in the market now is Meridian Trust.
The other issue is, the real estate industry has continued to increase in price (that’s good/bad news) however the revenues from Bed and breakfasts have either remained steady or increased marginally. Tourism has never truly recovered from the hay days of the late 90’s. So whereas in 2004 a typical B&B may sell for $500K and generate $70K a year, now the same property is $850K and generating $72K.
Bed and breakfasts continue to grow in North America, the goal is to find the right buyer with the right property - what do I need....patience. :) what does the seller need.. patience
The informaition on this web page concerning bed and breakfasts is based on knowledge concerning properties in Niagara on the Lake, Niagara Falls, Niagara Region. No warranties or representation concerning properties for other parts of Canada.