Roxanne Kolbe and Becky Goldsmith operate InnMatchmakers.com, which specializes in the sale of bed and breakfasts. While the economy may not have hurt the B&B industry as severely as some sectors of the real estate market, according to Kolbe it has definitely changed the way buyers buy and innkeepers sell.
For this feature, I spoke with Kolbe who shared information that may be helpful to Aspiring Innkeepers anxious to fulfill their dream of owning an inn – and innkeepers who have already scratched that itch and are ready to move on. In future feature stories, I’ll offer space for additional views to support, clarify, or challenge Kolbe’s perspectives on the lay of the B&B land.
1. What is the difference between you and an ordinary Realtor?
Brokering inns is done very differently than selling a typical home. There’s a lot more involved in pre-qualifying the buyer and because inns are so unique a big part of what we do happens at the front end as we try to get a sense of what sort of environment an inn buyer wants to be in. We do lots of lots of work via e-mail and on the phone and actually very little showings of real estate -- which is sort of the opposite way of how regular real estate is sold.
2. How long does the process take? Weeks? Months? Years?
It depends really on the appetite of the buyer and how interested they are in doing it. Most times we are 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 an inn that most of the time you are really letting people understand they are not in a position to do it, but they don’t know don’t understand they’re not in a position to do it is because of the unique financing that’s required and the relationship between a buyer’s economic situation and the profitability of an operating inn.
So it’s an anomaly. It doesn’t work like commercial real estate since inns are not priced on cap rates typically, so there is more involved in deciding what they would fit into..
3. Has the bloom come off the Bed & Breakfast rose?
I don’t think it has from the standpoint of people thinking it would be a desirable way of life, but the reality of getting the deals done has made it tougher because really, for all intents and purposes, the only financial player in the market now is the SBA and the banks that the SBA joint venture with. There are very, very few bankers out there writing hospitality loans at this time.
Now there are some -- there are those local guys doing it from time to time -- but it is so much more difficult to obtain financing now. I think what happens, especially if an inn buyer ends up without somebody that understands how to find their financing, they get very frustrated because they will go to a traditional bank and the bank will come back and say the acquisition isn’t going to pencil without 50 percent down -- which is a rare amount to have available for an inn. So it’s a very frustrating experience for inn buyers and it’s not getting any easier because there are less and less people who understand what’s involved in getting it done.
4. What should an innkeeper know as they prepare to list their property?
The best way to handle an inn sale now is to really focus on how you are going to do some sort of structured financing for your buyers, and know that that you are going to be in it for the long haul. In my opinion, sellers are going to be tied into these properties for a decade before they come out of them because there’s no support from financial markets to make it happen.
So be aggressive about doing a structured finance program and then make sure you find a buyer who’s going to be a good enough businessperson to take over. If you’re going to be stuck with them for a decade, you don’t want to sell to just anyone. You’ve got to sell to someone who has an opportunity to take your business to the next level or, if it’s already running well, to maintain it. There’s a lot more that goes into the decision to sell than just finding someone who has some money.
5. So your overall take on the relationship between buyer and seller is…?
A lot of times when inns are listed for sale by people who don’t understand what’s involved in getting them financed, the buyer doesn’t get the information they need. Very few inns are listed by innbrokers like ourselves because innbrokers have become kind of like unicorns… There aren’t as many of us left.
For the seller -- and these are big, hard pills to swallow -- I believe you are going to be married to the buyer so I’d strongly suggest you develop a structured finance program and have that on the front end in your marketing materials. That’s one thing – be prepared. Do it on the front end; have a structured finance program available and also go out and find bankers so your buyers have some banking outlets to look at.
Thirdly, have a really good idea about how to vet your buyers really, really well. Don’t take just anyone who wanders through the door because you are going to be tied to them for a really long time. There’s pretty much no way around that unless you have an extremely productive inn that can be financed through normal channels…
And those are sort of like unicorns as well.
Related (and unrelated) Reading- •Learn the essentials of business plan visit The Seven Steps of Writing a Business Plan.
- • If a road trip inspires you to consider running an inn, there are a lot of things to learn. This feature: So You’d Like to Own a B&B will help you understand a few of the basics.