The first step is to determine what you can afford to purchase. This is not the fun part, but it will make the rest of your search so much more productive. If you plan to finance your purchase of an existing bed & breakfast you will need a commercial mortgage, and the structure and terms of a commercial mortgage are very different from a residential mortgage.
First, you will need a minimum downpayment of 20% of the purchase price. Banks often have a portfolio loan product that is suitable for a B&B purchase. This means the mortgage is funded by the bank and kept in their "portfolio". The underwriting requirements can be very different from one lender to the next. Most B&B's are not generating enough income to satisfy the lender as the exclusive source of income. In reality, the B&B income can be sufficient for making the mortgage payments, but the lender may need to see additional income. Many B&B owners have an additional source of income, including retirement/pension income or from a job outside of the B&B.
Next, the typical residential mortgage is amortized over 30 years. A commercial mortgage is typically amortized over a shorter period of time with a balloon payment due after 5 or 7 years. If you have a principal balance on your mortgage when the balloon payment is due you will need to refinance the loan at that time.
Lastly, commercial interest rates are higher than those for a residential mortgage. They run approximately 1% to 2% higher than their residential counterparts. Commercial financing is higher risk for the lender so it is more expensive for the consumer.
The bottom line is when compared to a residential mortgage you will need more money down, you will have a higher interest rate and you will have a shorter amortization schedule.
For these reasons, it is best to explore your financing qualifications and costs prior to finding the "perfect inn". You will be able to evaluate prospective B&B's with greater confidence knowing your financing options up front.
Yankee Magazine has a great article from their September/October 2013 issue . The article takes the reader through a day in the life of the innkeepers at the Inn Vicotria in Chester, Vermont. It is a good snapshot of what it is really like to live the dream. Here is the article:
There are a couple of networks of experienced innkeepers in Lancaster County. These groups are exceptional resources for members, especially if you are a brand new owner-operator of a local B&B. Members offer decades of experience in the hospitality industry and can offer everything from recommendations for a reliable plumber to who is offering the best credit card processing.
One group is Authentic Bed and Breakfasts of Lancaster County, PA. This is a group of about 30 B&B's. Learn more on the website: http://www.authenticbandb.com
Another organization is Lancaster County Bed & Breakfast Inns Association. This is 14 local B&B's with more information on their website:
Lancaster City has a nice art scene, lots of great restaurants, an historic market house, a professional theater and so much more. It is great to see this article in the New York Post today that highlights many of the shops, galleries and restaurants. Read the article here: http://nyp.st/2db8hgJ
The fourth annual Lancaster City Restaurant Week is coming up, from September 19-25. There are 35 restaurants participating in this cuisine showcase, including breakfast, lunch, brunch and dinner offerings. Visit http://lancastercityrestaurantweek.com/restaurants/ to see the choices at each spot in the city. There are deals to be had, with pricing at $10, $20, $30 or $40 for a fixed menu. For example, a $30 dinner at The Stockyard Inn includes three courses with a few choices for each course. I would spend my $30 on the poached pear and goat cheese salad, then a petite filet mignon and ending with lemon citrus shortcake. Spring House Brewing Co. has a $10 dinner deal of schnitzel sushi (cabbage, apple, pork loin rolled and breaded in pretzels then deep-fried). It is located in Cabbage Hill, after all. Rachel's Creperie has a $30 "crepes and soup for two" (including 2 Nutella crepes for dessert!). Specials include local beer from Wacker Brewing Company at Pour. Or you can indulge in an all you can eat waffle and omelette buffet at The Baker's Table. Sprout of Rice & Noodles has a $10 lunch or dinner deal of 2 spring rolls or 2 egg rolls, 1 banh mi sandwich and a drink.
Take some time next week to sample the delicious food of Lancaster City. Many of the restaurants value farm-to-table locally sourced foods (John J. Jeffries) and Tellus 360 has a menu showcasing Central Market's fresh ingredients. If you can't make it next week, check out the website for a preview for your next visit.
Here are a few sample menus:
Our guests often travel to regional attractions while staying in Lancaster County. Here are a few of the popular ones:
Hershey offers more than Hershey Park, although the park is great fun and becoming large enough to spend more than one day to take it all in. Hershey's Chocolate World and ZooAmerica are open year-round. When Hershey Park is open you can seamlessly travel between the park and the zoo. ZooAmerica is 11 acres and specializes in North American animals. Take in a concert at Giant Center or catch a Hershey Bears game. The historic Hershey Theater brings broadway shows, comedians, music festivals and more to town. Indulge in a day at the Chocolate Spa at The Hotel Hershey. The Hotel Hershey has several restaurants and there are three local golf courses. Hershey Gardens includes a year-round tropical Butterfly Atrium. Best of all, it is short drive to Hershey from Lancaster.
Gettysburg is an hour and twenty minute drive from Lancaster. There are many ways to tour the battlefield. You can hire a guide, take a horseback tour, ride a Segway or take a carriage ride. There are probably more options if you look. There are several ghost tours available, as well. Besides the battlefield tours and history museums, other activities in the Gettysburg area include seasonal festivals, theaters, wineries, golf courses and much more.
Harrisburg is our state capital and is situated along the Susquehanna River. The capital city has a wide variety of dining options, performing arts centers and museums. You can visit the Pennsylvania National Fire Museum, the State Museum of Pennsylvania, Fort Hunter Mansion & Park, Susquehanna Art Museum, the National Civil War Museum and the Whitaker Center of Science and the Arts. Take in a Senators baseball game at City Island or take a riverboat cruise in the Susquehanna. Harrisburg is a short 45 minute drive from Lancaster.
LNP published an article about the recently renovated greenhouse at the Adamstown Inn & Vacation Rentals.
KIMBERLY MARSELAS | LNP Correspondent wrote on Aug 11, 2016:
One of several charming Victorian-era homes Tom and Wanda Berman own in the heart of Adamstown came with some unusual bonuses: a clay tennis court largely reclaimed by the earth and the skeletal remains of a steel-framed greenhouse.
The couple originally wanted the grounds as a gathering place for guests staying at their Amethyst Inn Bed & Breakfast — the plum-colored manse with a wrap-around porch just down Main Street.
If they stumbled into restoring and renting out cottages, as Tom Berman claims, their latest project has them sprawling headfirst into the wedding and entertainment industry.
Last year, the Bermans’ niece talked them into turning the bones of that greenhouse into a reception site, one that would, of course, be ready in time for her big day.
It’s now an open-air venue, complete with twinkling lights, nylon sails for shade and a potter’s shed turned caterer’s kitchen. That old tennis court has been worked into a lush expanse of grass, where a tent surrounded by Wanda Berman’s colorful, landscaped beds can accommodate up to 175 guests.
It’s all a quick walk up the hill from the local Evangelical Congregational Church, and the cottages can provide overnight accommodations or room for the bridal party to get ready before a ceremony.
The star of the re-do is the greenhouse itself, or what’s left of it. A previous owner once used it for a commercial geranium operation, but the building was sold years ago. Tom Berman thinks the buyer was disassembling and moving it when he came to a huge steel beam that would have been difficult (and maybe prohibitively expensive) to transport.
Even with about one-third of the roofline gone, the original footprint was still clear. The outline and remaining knee walls would shape various seating, dining and entertainment areas in the Bermans’ grand plan.
“I have never seen a greenhouse used like this,” says Wanda Berman. “The setting is gorgeous. This was something we maybe thought of doing in the future. But the incentive was our niece’s wedding.”
Their vision was timely, considering the popularity of rustic and barn-style weddings over the last several years.
Nationally, venues with greenhouses are growing in appeal. Rancho Dos Pueblos in Santa Barbara, California, boasts both a barn and a small greenhouse. The Foundry on Long Island is a brick-heavy industrial building featuring a glass roof.
During daylight hours, greenhouses put nature and sunlight on center stage; at night, it’s all about mood lighting and beautiful reflections. Either scenario makes for beautiful photos.
The Bermans began their conversion by carefully removing glass that was up to 100 years old. In some places, trees had grown through the roof. Panes that were salvageable were given new life in the potter’s shed (which now houses counters, a microwave and refrigerator).
With the help of a Bobcat, the Bermans, General Manager Taylor Greenawalt and other employees and family members, they excavated the site and poured new foundation in places. They hacked out roots that stretched for 40 feet.
They ran electricity and poured in 50 tons of stone to create seating areas, then painted the original cinder blocks a deep red.
The finished greenhouse includes an unsheltered seating area with a wood-burning fire pit created from the greenhouse’s original boiler.
The main room is divided into three parts: several picnic tables with candelabras running alongside them, a bocce ball court and a bed filled with potted plants.
Antique ladders, oil-burning candles and metal washtubs round out the vintage feel.
Though there’s no air conditioning, a small wedding was held there in July.
Since its debut last fall, the greenhouse also has been used by small groups for wedding showers and other social gatherings. It’s open to all of the Bermans’ guests, who might play bocce or Viking lawn darts or relax by a kerosene heater when it’s cool.
But after 28 years of running the Amethyst Inn and renting out properties from Lancaster County to North Carolina, the greenhouse conversion may be the Bermans’ last hurrah.
The couple is looking to sell the entire Adamstown operation — greenhouse included — so they can ease into retirement.
Here is a link to the article: lancasteronline.com/features/home_garden/the-benefits-of-revamping-old-greenhouses-are-clear/article_6e2dc08e-5f23-11e6-a9f9-4b65770456cf.html
Here are the key points:
· A 20% down payment will be needed.
· The lender will order an appraisal on the property. The lender will usually offer a 80% loan-to-value on the sales agreement (sale price stated in the agreement of sale) or if the appraisal is less than the sales agreement they go with the lesser amount; if the appraisal comes in higher than the sales agreement, then the lender does 80% off the sales agreement);
· Business plan by the purchaser;
· Contents (ie. Furniture, appliances, etc.), if the furniture, fixtures and equipment are included in the sale (which they most often are) the lender usually does a separate loan from the real estate purchase. It is important to establish a sale price for the real estate and a separate amount for the contents in the agreement of sale;
· Obtain the past 3 years of financials on the B&B being purchased and from the individuals who are looking to purchase the B&B; If the income from the B&B isn’t sufficient to cover the loan request, they will then need to see if there is outside income that can be added in (ie. wife/husband has outside employment and not just depending on the income of the B&B).
These are the key points to financing a B&B. More than half of B&B's have one partner working outside of the inn. This is normal. A B&B does not have to be making tons of money to obtain a mortgage. However, the lender will need to document another source of income to pull the loan together.
I am happy to refer you to a local lender who is experienced in financing B&B's... Just contact me.
The old adage- location, location, location- applies to B&B's just like any other form of real estate. This means the broad location, like the town, county or region, as well as the specific location. Is the B&B the destination or is the area the destination? Does the location have a seasonal business? Is it on a Main Street? Is it situated next to something undesirable?
Location is important because it is one element that you cannot change after you purchase your B&B. You can improve your marketing campaign and increase your revenue. You can paint and update the features of the inn. You can take a casual home and make it elegant. But you can't move a gorgeous home in the middle of nowhere to a booming tourism destination. You are stuck in the middle of nowhere, with few travelers willing to venture to your inn if it is not supported by a location offering other activities, sights and things to do.
Lancaster County does have a seasonal tourism business. However, visitors come to Lancaster year-round for various reasons. The busiest time of year has customarily been the fall, especially October. The summer months are also very busy, with some variation from year to year as to which summer month is the busiest. January is the quietest month, but never completely quiet. There are many attractions open during the Christmas season, bringing visitors into the area for theaters, outlet shopping and Christmas tours.
We take tourism seriously in Lancaster. It is roughly a third of the local economy and we like having so much to do within a short drive. Discover Lancaster is the visitors bureau for Lancaster County. Their annual budget for 2015 was 3.7 Million. Here is their annual report - don't' worry, it is presented like a power point with great visuals and not a snooze: http://www.discoverlancaster.com/Uploads/files/AnnualMeeting2015DL.pdf
This is the kind of marketing and monitoring of the marketplace that you will want to see for the area where you purchase your inn. A place that has a lot to offer travelers and one that successfully markets what they have to bring the visitors to town. That's where you step in and join the visitors bureau so you can benefit from their marketing campaign. Of course there are many other marketing avenues, but this one is so easy and so financially beneficial for you and "your" inn.
Lisa Naples, Realtor
I'm enjoying my 16th year of selling residential real estate in Lancaster County. In my past career I was an innkeeper for a 9 room local B&B. Now I enjoy the best of both worlds - finding new owners for Lancaster County bed & breakfasts. Please leave comments, I'd love to have your feedback!