You’ve got a large property, the children have flown the nest and now you’re just rattling around in it. Or perhaps you and your partner have inherited a house but it’s costing the earth to maintain. Wouldn’t it be great if your home could actually make money for you? Converting it into a bed and breakfast could not only enhance its value, but provide an income, offering you a completely new way of life and the means/motivation to keep the property in good condition.
It sounds like such a simple idea, maybe too good to be true, but it’s one which many people have opted for and they’ve never looked back. Here are some points to consider if you’re thinking about turning your home into a B&B.
1. Could you attract business?
The trend for ‘staycation’ holidays is not diminishing. With affordability still the biggest issue for British holidaymakers, not to mention security fears, research reveals that some 77 per cent of UK adults either went on or planned to go on a staycation in 2015. It’s looking good for 2016, too – which is good news for those that run B&Bs and guesthouses.
Before getting on to the subject of B&B finance, one big consideration and contributing factor towards your success is location. It’s vital that you are situated somewhere that would attract guests. HuffPost Travel named among its top staycation destinations the Lake District, the Norfolk Broads, Edinburgh, Cornwall and North Wales. Big towns and cities are similarly a good option. Just consider your situation – is there enough in the vicinity to attract guests?
2. Decide if running a bed and breakfast is for you
In our blog: Why owning a B&B can be a dream come true, we explore the best bits about leaving the nine-to-five and changing your life. You get to be your own boss and meet endless numbers of interesting people.
If you’re seriously considering converting your home into a B&B, ask yourself whether you’d feel happy about having other people coming and going through your home. Also, think about the lifestyle. While many B&B owners say they love their new business, it does require hard work and commitment. However, if you’re fine with all of that, let’s talk money.
3. Know what you’ll need finances for
When arranging B&B finance, in addition to paying the mortgage, remember to allocate sufficient funds for renovating the house into guest accommodation. This covers furnishings, decorations, refurbishments and countless other tasks that will need to be completed before you can open. Then there’s advertising, creating a website and potentially paying staff wages, too.
It’s pertinent you keep funds in reserve to cover all eventualities, as there will be changes in demand and economic circumstances. However, if you get the right advice and choose the best mortgage deal, you should be able to keep a tight control over your cash flow.
One of the questions we’re most often asked by people who are ‘new to trade’ is: ‘Can I get a residential mortgage on a to trade as a B&B?’ The answer is no. Running a B&B requires a commercial mortgage. In fact, using your existing residential mortgage can actually get you into trouble with your lender owing to the differences in rates between residential and commercial mortgages.
You’ll therefore need to replace your existing residential mortgage to a commercial one. As this is a business, there are many more, and different, conditions that need to be taken into account by both lenders and you. However, an advantage of commercial mortgages is that the repayments can track the season, meaning you can pay more during peak times and less when it’s quiet.
5. Get good advice
Running a bed and breakfast is a huge undertaking, so it’s important to do your research and speak to the experts. With regard to finance, contact a broker that specialises in the industry – like us at Stewart Hindley and Partners, who can identify the most appropriate solution to suit your individual situation. We can advise on other aspects of the business, too, helping you to create a business plan and secure a mortgage which allow you to realise your dream.
Another good idea is to contact other B&B owners, or read case studies, so that you can gain first hand insight into the everyday operation of such a business. Learn from their experience, take advantage of their knowledge and see your own business thrives.
Providing you satisfy all of the personal and financial criteria and are sure that this is the move for you, then there’s no reason why you can’t turn your home into a bed and breakfast, enjoying a way of life that so many others can only envy. Why not give it some thought?
If you’d like to discover more about B&B finance, we’d love to help.