I am owning 4 Hostels (3 in Belgrade, Serbia and one in Budva, Montenegro), plus management company that is working with two small hotels, and yes i have experienced a purchase of existing hostel.
In general buying an existing hostel is usually well overpriced, due to lack of measurement for previous work, and the most important question, why would somebody sell something that is doing good job and making revenues? (not talking about buying something great for big price)
A) you HAVE to ask for writing proof for any modifications, any contracted work, price for furnishing and appliances (and count the percent of usage, amortization) In other terms people will always say they spent this and that amount on money, but can they show where the money went. For example did they purchase 4 tv sets and in the object you have only 2...
B) you do not need the lawyer for leas contracts, you just have to check if you are extending the lease with buying company, usually contracts have the clause that if somebody else is leasing the building/apartment the conditions can change. Other than that you have to check the length of this contract and the conditions, does it last long term, 5 years or more, and is the price for rent going up in next couple of years, based on profitability. The best way is to go directly to property owner and ask if he is willing to rent the object for the exact same sum of money and exact conditions (be aware that due to economy crises, rent amount is going significantly down)
C) my opinion in terms of previous work quality, you have to check their web page optimization, in other words how do they qualify in google/yahoo search. Then you have to check the reviews rate on every booking engine (hostelworld, hostelbookers, booking.com) and see for yourself how did they actually work. As i already said people tend to overprice their work...
If you need any more info, you can send me private email on [email][email protected][/email]