Buying a B&B

lissa.g

Hello all!

I have a question and I wonder if anyone knows the answer!

Hypothetically,if somebody wanted to buy a Band B without having a full time job but were planning on paying back the mortgage on what was made from running the Band B would it be possible to buy the house in the first place?

Im speaking on behalf of my friend who thinks that it is possible.

What would happen with regards to a deposit?Do you have to put a deposit down when you buy a house.?

Does anyone know about buying in other countries?
Thanks -if anyone can help,:)
Melissa JC student

lissa.g

Can anyone help me with my question?

Thanks a mill!!!!
Melissa JC student:o

irishguy

lissa.g wrote: »

Can anyone help me with my question?

Thanks a mill!!!!
Melissa JC student:o

Can you explain your question and what the hell is a band b?

Napiergen

lissa.g wrote: »

Can anyone help me with my question?

Thanks a mill!!!!
Melissa JC student:o

I lived in Swansea and we had council tax that was measured in Band A, B, C etc.


What are you referring to exactly?

Victor

Do you mean a "B&B" - a bed and breakfast?

I imagine it would be quite difficult in the current market. Tourism is down and people are taking fewer weekend breaks and business has less money to spend.

Banks often impose stricter conditions on business loans than on standard residential mortgages.

Given the current risk of further property price falls, banks are insisting on deposits - they want to make sure that X years down the line that if there are arrears they can sell the property for more money than they are owed. Deposits transfer much of the risk to the buyer and away from the bank.

Duckjob

Current competition within the hospitality sector is savage- I know of several B&Bs whose business has all but dried up in the last 18 mths due to fierce competition from the local hotels.

Unless you had a) a rock solid business plan, and b) plenty of capital available to inject or a large deposit to dilute the risk substantially for the lender, I would say the chances of getting a business loan or a mortgage or based on that plan that would be slim to none.

lissa.g

Mmmm interesting! Thank you everyone for your replies.:DI am only a Junior Cert student but my friend's brothers friend bought a B and B in Killarney last year by himself and had only been working for over a year and left his job to look after the B and B.I don't know how he did this especially with the recession!

But from what your saying this must have been impossible,right?

And he's booked out every night!He works it by lowering his prices every day and he gets a lot of bookings on the actual day-he also works by saying that he guarantees the lowest prices around.

But what I want to know is how he actually got a mortgage in the first place as he was only working a year.

Can the credit union give you a mortgage?Does everyone have to pay a deposit when they buy a house?

Thanks,
from Lissa.g

lissa.g

I am only a Junior Cert student but I really want to learn about this stuff!

You know we don't learn about buying houses at all in Business class.

How much is a deposit usually and as I said in the last post do you HAVE to pay a deposit on a house or does it depend on your circumstances?

Its so weird how he was able to get a mortgage-I think he had a little help from his parents but not much-I don't get it.:rolleyes:

I welcome your thoughts on this!:p

Eglinton

lissa.g wrote: »

I am only a Junior Cert student but I really want to learn about this stuff!

You know we don't learn about buying houses at all in Business class.

Buying a house shouldn't be categorised as 'Business'. That's where this country came a cropper. It's a shame to think that the new generation of school goers are now thinking this way.

lissa.g

Eglinton wrote: »

Buying a house shouldn't be categorised as 'Business'. That's where this country came a cropper. It's a shame to think that the new generation of school goers are now thinking this way.

Yeah I agree I never thought that you could actually get a business loan to buy a B and B or you could just take out a mortgage by just clicking your fingers and pay it back by running the B and B like this guy does and he doesn't have any other source of income.

How do you think he was able to do this?

Victor

lissa.g wrote: »

Mmmm interesting! Thank you everyone for your replies.:DI am only a Junior Cert student but my friend's brothers friend bought a B and B in Killarney last year by himself and had only been working for over a year and left his job to look after the B and B.I don't know how he did this especially with the recession!

It is possible that he had help. It is also generally easier to keep an existing business going than start a new one. When a business has a high fixed cost, it is better to have high occupancy at a low price than to have a low occupancy at a high price.

Let us say the B&B has 10 bedrooms and no external staff.

If one person is staying at €30/night then the total income is €30/night. Marginal costs will essentially be the cost of laundry, breakfast ingredients and electricity - let us say €5. Contribution to overheads €25. Overheads are essentially his own wages / profit and repaying the capital costs.

Compare this to if ten people are staying at €15/night then the total income is €150/night. Marginal costs will be €50. Contribution to overheads €100.

This pattern repeats across the service industry. Manufacturing and certain retail sales are quite different. If you are selling cars for €20,000 that costs you €18,000 to buy from the manufacturer / distributor, you must sell for at least €18,000, anything less and you are losing money. For manufacturing, it is important to keep your machines running, but you need to keep an eye on the cost of your suppliers.

lissa.g wrote: »

But from what your saying this must have been impossible,right?

Not impossible, but very difficult in the current climate.

But what I want to know is how he actually got a mortgage in the first place as he was only working a year.

We don't know. It is possible that he had money saved or his parents guaranteed the loan. He may also have a silent partner.

Can the credit union give you a mortgage?

Generally no. CUs tend to only give much smaller loans - perhaps €25,000 depending on the Cu's own rules.

Does everyone have to pay a deposit when they buy a house?

At the moment yes, however, in recent years some people got 100% mortgages while in the UK in the late 1980s many people were getting mortgages of 110-120% of the price of the property. This was unsustainable as it encourages people to pay more for their property and not to seek value.

lissa.g wrote: »

How much is a deposit usually

On current mortgages about 20%. However, the lower the bank's share of the risk, the better interest rate the borrower will get. Banks like it when you have more than a 50% deposit or high equity in another property that you are selling.

do you HAVE to pay a deposit on a house or does it depend on your circumstances?

In the current market, I imagine the banks are insisting on deposits from anyone, but note the above.

Now one things. There are different meanings for "deposit" - it can mean:
* an amount of money that you have on deposit in a bank or other account.
* an amount of money that you have spent, e.g. if you are building your own house and have already paid for the land, the bank may treat that as a deposit as you will only be borrowing for the actual construction cost.
* in the actual purchase of a property, a seller or their estate agent will normally insist ona booking deposit to show a certain amount of intent and to cut down on time wasters (well, at least time wasters that don't have money). This money is usually refundable to the buyer if they decide not to proceed. Then, when the contract is signed, it is usual for the buyer to pay 10% (less the booking deposit). If the buyer doesn't fulfill their contract after this, they are likely to lose most of this deposit in estate agent and legal fees

Its so weird how he was able to get a mortgage-I think he had a little help from his parents but not much-I don't get it.:rolleyes:

You may not know all the details. People tend to treat such things as private.

lissa.g

Thanks so much for answering all my questions!


I just have one more.What it looks like it seems therefore is You don't have to be working therfore for any amount of time to buy a house if you say you want to turn it into a business eg a B and B.??????????OH MY GOD THIS COUNTRY IS CRAZY!!!!!!:eek:

Because in all honesty this is what he did from what my friend told me.

It wasn't an existing B and B that he bought I know that.He turned it into one!!!!!!!!!!

I won't be going into the B and B business anyway I like music and play piano and flute -I want to compose music for films!Original dont you think?And I dont think there is that much competition either.Im 15 in February -Im doing Grade 8 in flute and piano this year-started when I was 6.Want to concentrate on piano scores though -flute is way harder,wish I hadnt taken it up,,violin would have suited better:(sigh but at least I am still quite good at it ALOT of practice and I love piano :)hope i am really successful.If anyone wants to know some really fab scores and sheet music from the best films just let me know:o

Anyway Victor thanks!!!!!!!!If you could answer my very last question it would be great!

lissa.g

Something that I believe and I don't want to sound nasty here but as somebody who is trying to be a proper musician I have very little respect for a lot of pop stars.

This is because I don't think they really know music-well they can't read it and I don't think they should be allowed to sing if they can't read music in the first place.Shows like X Factor I dont like -I wish they had a music composition talent show!

Its easy to have a good singing voice -most people will after only a handful of lessons .I don't think singing is a big deal -you should hear how instruments sound -they are so much better.

You will see if you listen to famous scores for John Barry Out of Africa ,Somewhere in Time or Maurice Jarre Theme for Ghost -what I will be doing for my Junior Cert practical-you can listen to them on youtube.Much better than the sound of people singing songs-much more moving.

ALSO I DISLIKE MICHAEL BUBLE

Victor

lissa.g wrote: »

I just have one more.What it looks like it seems therefore is You don't have to be working therfore for any amount of time to buy a house if you say you want to turn it into a business eg a B and B.??????????OH MY GOD THIS COUNTRY IS CRAZY!!!!!!:eek:

Well , if you have a working business plan, banks will consider it. However, they are being very strict with all lending, so I imagine the bank only invested part.

It wasn't an existing B and B that he bought I know that.He turned it into one!!!!!!!!!!

I hope he has done it properly - if a B&B has more than, I think, 3 guest bedrooms planning permission is needed.

lissa.g

Okay thanks for answering my questions.I must seem pretty dumb :cool:

Thanks