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.
Lisa Naples, Realtor
I'm enjoying my 18th 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!