The Inn Business; News and Innsights

Article One; October 9, 2007
by: Bill Oates, Inn Consulting Partners

Mortgage Interest Rates – Up To Date

The whole sub-prime mortgage problem has caused an understandable confusion among future Innkeepers. The Inn business is after all real estate based. We need a building and land to ply our trade. Most Inn purchases involve significant leverage (a mortgage) in the early stages of our Innkeeper life; a mortgage payment looks large in our financial life.

But this latest hiccup on the national (indeed international) level actually creates positive developments in our niche business. First and foremost, interest rates have come down. Some banks still fix their commercial loan rates in reaction to prime (prime +1 or 2 points). The prime rate follows the “funds” rate, which the Federal Reserve recently lowered by ½ point (%). More banks are using U.S. Treasury 7 or 10 year bond yield rates. As funds move into Treasury Bonds the yield falls. This has recently cut about 1% from commercial interest rates. To underline the significance of that, a 1% drop becomes 14% less interest.

Finally, many banks use the LIBOR rate plus percentage. This normally approximates the 7 or 10 year Treasury Bond yield (By the way LIBOR stands for London Interbank Offered Rate.) No one seems to know how LIBOR is actually calculated but the Wall Street Journal tells us what it is.

Bottom line. Interest rates have eased. In most areas, the commercial rates will be around 7%. Banks usually offer this fixed for 5 years with a 20 year amortization.

If all this is beyond your comprehension, it is covered in detail in our periodic Future Innkeeper Seminars. Please visit our seminar description on our website. We believe information to be critical to a successful entry into the world of Innkeeping. To that end we have priced the seminar very reasonably ($195/couple, $175/person) so as not to be a barrier to your attendance.

If you have taken our seminar (or another quality one) and are ready for the next step, we have recently added three outstanding Inn candidates. Although each offers a different style, all are members of Select Registry, Distinguished Inns of North America. The (Ohio) Mid-West Full Service Inn is a 19 unit Inn with full service dining focused on house guests. Gross sales are over $1,000,000.00 and an occupancy rate approaching 60% drives a very strong cash flow. A separate three-bedroom owners’ home and 141 acres add to the attraction. This Inn is located in the Inn friendly state of Ohio.

Two New York Inns complete our current roster of new Inns. One titled Hudson Valley New York Bed & Breakfast is a 21 room Bed and Breakfast 2.5 hours from New York City and within sight of a major Catskill Mountains ski area. This property is in excellent condition. The business is strong and there is a three-bedroom, three-bath house adjacent to the main Inn.

Our other New York Inn, titled Charming Chautauqua Neighbor B&B sits on the western side of the state between Buffalo and Erie PA. This 12 room Inn operates best in its current format. The Inn serves a set menu dinner in a single seating primarily to houseguests. One of the Innkeepers is the cook, eliminating the single most expensive part of food service. Owners’ quarters are private, but modest. Important features of this property are a modest price, a good location and opportunity for growth.

Of course we have other opportunities. Visit our Inns for sale page to review outstanding Inns in Alaska, Pennsylvania, Vermont, Maine, etc.