That´s a nice place. It´s a shame the banks act so stupidly at the moment. I´m sure less than a year ago they would have thrown any amount at you you´d ask them for.
They are in panic mode. Yesterday I have read that the HypoVereinsBank of Munich decided to wipe 18 billion Euro´s worth of mortgages off their books, i.E. cancel the credit treaties and make the lenders pay back immediately or sell these mortgages on to equity funds.
They are effectively telling 20% of their customers to get lost. Mind you, this is a healthy bank which makes enough profits, and most of these lenders are well-off Bavarian home owners and small businesses. They have always paid their rates in time and there is no sign that´s going to change. How stupid can you get?
You are $140 k in debt and the building is worth $ 230 k. Everybody expects property prices to fall, that is why they are too nervous to lend you another $ 40 k.
A few hints which could help you:
- Bankers indeed don´t know what a "hostel" is. But bankers usually have kids who go to college. Ask your bankers if they have offspring who went travelling abroad. Tell them to ask these where they stayed (hostels!) and what sort of impression they had of these places. Were they run-down ratholes or well-equipped venues apparently making enough money to keep the house in shape and buy the owner a 4WD? Exactly that did the trick in our case.
- Get another person involved as business partner. It doesn´t matter how broke that person is. The banker might be worried that you get sick and the whole business goes down the toilet. Two persons owing you $ 40 k is better then just one.
- Your business plan lacks mind-boggling spreadsheets. Make them up - the bankers are not supposed to understand them, they should just make them think you´re good at math and you have thought of everything. The more hot air, the better! ;)
- You put the break-even at 15% occupancy. That looks implausible. Include your own costs of living and the cost of one staffer in your overall costs, so that the break-even is somewhere at 50%.
- Your idea to focus on musicians is good. As a matter of fact, we have often bands staying here. The bankers will misunderstand that, though. They will think broke dudes who *think* they are undiscovered guitarists will stay for ages but never pay. Make it clear you have good contacts to concert promoters and club owners who need a cheap place to stay for bands.
- A hint about your floor plan: In my opinion, it would be better to have ALL the common space on ground floor and ALL the rooms on the upper level. The double room should have its own bathroom (and be a tad bigger) and I would split the 20-bed dorm into two or three smaller rooms.