Q: Bob, I have two houses (my wife lives in one) worth considerably less than what is owed. I don't want a foreclosure on my credit, what do you know or can advise about turning a house into a B&B (bed and breakfast) this is probably a strange request but ?? If possible please answer before the first of the year.
A: Don, sorry about the time frame. Wasn't sure if I should answer it or how? The research was very informing and interesting. I had another e-mail about the same concept, hope it helps you or someone else.
With the economy in the sad shape it is now, there are more Americans vacationing in the United States instead of abroad, opening a bed-and-breakfast can be a clever-and enjoyable-way to earn extra cash.
ESSENTIALS: You need to live in a neighborhood that attracts tourists or business people (as we do here in Southwest Florida) and have a spare bedroom (most B&Bs have two or three guest rooms). Any style of house will do. A private bath for guests is a plus, but a shared one will suffice.
B&B owners are able to deduct many expenses from their income tax, including a percentage of insurance and utility costs as well as the cost of home improvements that benefit the business.
Another advantage is the opportunity to meet interesting people from around the country and the world. One of the people (from California) that contributed to this column had hosted an ambassador from Russia, a theater critic from Washington and two doctors from Scotland. Their greatest reward has been to form lasting friendships with many of their guests.
GETTING STARTED: Strangers don't always be careful with your belongings, so you'll need sturdy bedroom furnishings-dressers, mirrors, Tvs clocks/radios, comfortable chairs and stain resistant floor coverings. You will also have to provide closet space and clean bed linens and towels. Unless you cater to business travelers, avoid putting phones in guest rooms-it is difficult to control long-distance charges. Also provide a key to each room. The cost of outfitting a few rooms-plus sprucing up the rest of the house-could be less than$5,000. In addition, innkeepers must pay for business licenses and extra liability insurance.
WHAT YOU CAN EXPECT TO EARN: New B&B owners are tempted to set low prices to attract guests, but cheap rates attract customers who damage furniture or even steal property. Most B&B owners charge $60 to $150 a night, or 40-75 percent of the nearby hotels.
Assuming that you rent out two rooms for $85 each, and each room is booked 100 days a year, your gross income would be $17,000.
TYPICAL WORKLOAD: Running a B&B isn't for everyone (this is for the two e-mails and the one letter) I received. You must get along with people very well, including finicky guests. It requires cooking and cleaning up after breakfast, cleaning guests rooms, keeping common areas of your home neat and doing laundry. You lose some privacy and freedom. Even if you give guests the keys to your home, you should be on the premises until noon to answer questions. If you're worried about security, keep your valuables in a safe. You might also keep a safe on hand for guests. I recommend a no-smoking policy to reduce the risk of fire.
BUSINESS CONSIDERATIONS: Before you spend any money, you'll need the following: An Accountant who is familiar with B&Bs. If there isn't one in our (Lee County) area retain a small-business accountant. He/she will discuss the tax ramifications of turning your house into a B&B and whether you should incorporate your business. If you need bank financing for improvements, he can recommend lenders and prepare the required business plan. To find a CPA, contact the American Institute of Certified Public Accountants (www.aicpa.org) or consult your yellow pages. I will finish this next week with knowledge of local B&B scene, Market Niche, a marketing plan, etc. Also a NEW question-yeah!
Have a real estate question? Write, call, fax or e-mail:
Bob Jeffries, Realtor,
Century 21 Birchwood Realty, Inc.
4040 Del Prado Blvd.,
Cape Coral, FL