how much to spend on rent/location relative to income
Hi Everyone,
I've been working on a business plan for a new hostel in Tampa. I have my locations narrowed down and a business plan in the works. Aside from employee expenses, rent is obviously a huge part of the monthly expense.
My question is, is there a good 'rule of thumb' that rent shouldn't be more than X% of your gross monthly bed income. Here's my basic #'s:
5,500 square feet
$16 per sq. feet per year
monthly rent = $7333
with 5,500 sq feet, I'm estimating 62 beds (approx 90 sq/ft per bed)
i'm estimating $25/night average (too high, too low? one other hostel in town, but it cater's a different crowd i think)
max monthly income = $46,500
That's a 15.8% ratio using the max monthly gross income
Assuming an average of 60% occupancy (in the long run):
Monthly Income: $27,900
This gives ratio of 26.3%
What does everyone think?
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