9 years
This is a great question I wait to read some responses!! Drunk traveller I have sent you a private msg with a couple of other questions as I seem to be one step behind you and maybe you could catch me up.
Emily
Did you buy, lease or construct your building: USA and CAN Edition (although everyone is welcome to chime in).
Start a Hostel
TLDR: I just had my backside handed to me in a business startup mentoring meeting and your guidance would be appreciated. The buy/lease has been covered before, but I have specific questions. I have a plan, I don't have a building.
Here's my story, thus far:
I have the business plan. I don't have a building. I'm wading through the financials for investment. Because of permit and cost issues, we are thinking to start small (between six to twelve rooms, mix of dorm and private rooms). Here is the problem. Anything in our near downtown area for homes, will require between a $150k to $250k investment, if we buy.This is whether we buy a more finished home or convert a fixer upper and is definitely not a fixed price.. Because of permits, it would be especially difficult if we got a commercial space and converted it, although it may be worth the investment. So, I am at my crossroads on what to do and could use a different perspective. For me, the question I am ultimately answering is, start of smaller and show proof of concept (thereby growing out) or try to attempt to go big or go home with investment help.
For those who bought:
- What prompted you to buy vs lease
- How much did you spend to buy/convert (commercial or house, just looking for baselines)?
- Mortgage or did you buy outright?
For those who leased:
- What prompted you to lease?
- Did you lease a commercial property or non-commercial (ex: house/barn/etc)
- Did you lease with the intention of buying something later, and if so, did you?
- What were your lease terms?
For those who built from the ground up, why and how big did you go?
- Comments
9 years
I have been in that predicament for years! Of course it's always better to buy, but that is if you have enough money to put down. You need to read the fine print in any bank loan; the first one I got approved for said that the property could not be used for any transient lodging as part of the loan. A lease could be a good way to start, but either way you need to check zoning. Trying to find a property in the right zone has been the hard part.
9 years
I guess I am too late to join the party. This post started in June.
But I have been looking for a location to start a hostel in the last few months both in U.S. and Canada. Maybe I can share some of my experience so far.
I agree with CAPhouse. Zoning is probably the biggest challenging. One city I acquired told me outright that they did not permit hostels, period, despite a very good demand for it. It seems like many cities are focusing on protecting their existing hotel businesses and making it very difficult for alternative travel accommodation such as hostels and AirBnB to start.
I did have many years experience in finance so I think I can pitch in on the mortgage topic. I think you should get a mortgage even if you have enough money to buy the place outright. Normally you can deduct mortgage interest from your income and reduce your overall tax liability so it's definitely something you should consider. And since you don't have to put out so much of your own money, you can always use the money to do something else such as improvement of the property or ...buy another hostel. However, getting mortgage approval could also be challenging if you can not prove to the bank you have other sources of income.
9 years
These are fantastic thoughts. When you lay out the case for mortgage like that, this makes the better sense. You can always pay down a mortgage faster, one you are running full bore.
One way that I am looking to get around the zoning issue is an idea I got on a recent travels. In some circles, the word hostel creates such an adverse reaction, even though the zoning may be there, you only need one bureaucrat to stop your progress. Sometimes it is the branding. I checked out this place Sloths Backpacker Bed and Breakfast. Totally a hostel. Web domain says hostel. But, officially, it is a BnB. Ran it by some zoning guys where I have looked and once I stopped using hostel, doors were more open. I really hate to advocate not using the word "hostel", but sometimes you have to change tactics to get what you need.
Just a thought.
9 years
Hi Guys,
I am always interested to start new business, I am interested to start my own Hostel Business please guide me which area is best and which is less expensive, I not looking for big area , I want to start with medium size hostel. Also I have property in Dubai (5$ million) and after talking to one of local mortgage broker in Dubai told me that you can easily can mortgage loan on your property as an expat.
Please help me starting in my own hostel. Thanks mate.
8 years
Hi All,
I think house prices are going to top of next year. As this is a sellers market, leasing a property is good idea. Once a business has been established and you have shown good numbers, you can go for a SBA loan.
Zoning will be an issue but I like renaming the hostel as a backpackers Bed and Breakfast.
It would be good to share each others progress to keep each others inspired.
7 years
Looks like we will have to zone as a hotel where we are looking - still in the beginning of planning, but I eventually seek to propose a rent to own option on the building we would like to aquire. Will reply with results.
7 years
I am running into that same obstacle, as well. As my city ( a U.S. State) doesn't have hostel regulations, it is either BnB or Hotel.
Start one and see if you can make a change?
:-)
7 years
Talk to the alderman and zoning comittee. you can potentially have a building rezoned for special use. Alderman could help create a new lodging classification for you since you will need reduced occupancy tax. Does this city have other hostels drunk traveler?
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