Me and a couple buddies are going to Costa Rica and are planning on starting up a hostel. We all have college degrees, know how to do a solid business plan, but during this crazy economic crisis are pretty sure it will damn near impossible to get a loan for it. We are contemplating renting out a commercial building when we have decided on the exact location.
Is this really a good idea and has anyone taken this route of renting the facility instead of financing it or outright buying it? Thanks.
TexasTechRaider
15 years
There are a lot of hostels renting the place, including us. If it's cheap or got enough capital, you should buy it though. Bank should be open for good business plans, especially if you've got enough dough.
What's your own capital to estimate budget ratio?
15 years
We are currently in the beginning stages of this process and don't plan on doing anything for about 8-10 months, if not longers. We each hold jobs and will more than likely be able to get there when we begin with 35-40K. Yes this is a low figure and we understand that. So with this, we are questioning in the early stages if renting a place with a reasonable price would be the best route to go. For instance if we can find a place that would rent out for 2-3K and could possibly make 4-6K per month then it might be worth it. I would go more in depth with the figures but just got off work and am worn out. This is extremely broad I know, but are just unsure if having 35-40 would even begin to start a hostel.
If you do rent, how is that working out for you? Do you run into problems with landlords, etc? We would like to know if renting a place would be a route that has worked in the past and if it is even an option to consider. Thanks for the response, we want anything and everything you might have in regards to this. Thanks ya'll.
TexasTechRaider
15 years
Talk to Klaus about renting. He seems to have made an artform out of getting other people to build hostels for them and then rent them back.
15 years
I met a guy who didn't like his hostel job so he quit, rented a 4-bedroom apartment and started a hostel. I think the time it took from when he decided to open a hostel to when he opened it was somewhere between 1 and 2 months. When I stayed there it seemed to be doing well. Prices were super cheap and ratings were close to 100%.
The 200 bed hostel I worked at wasn't owned, but I think they eventually bought the property.
I think many people rent successfully. It might differ from country to country...
15 years
Talk to Klaus about renting. He seems to have made an artform out of getting other people to build hostels for them and then rent them back.
Haha!
You might have preferences, but sometimes you have no choice. If a building is rented, leased or bought does not make so much financial difference anyway. If you don´t own it, it is essential to have a good working relationship with the landlord though. If he is a jerk, your life will be hell.
15 years
We rent our building in San Jose, and it's worked out pretty well. Some things you should consider though, is that getting a "patente" for a hostel can be difficult, (we waited 3 months) and you should have some sort of clause in any contract you make with a seller or owner, that says you can get out of your lease or sale if you can't get a patente (patente is like a permit).
We're in a situation where all of our neighbors are related to our landlord, so we don't have too many problems. But, you could get into a situation where you buy a building and then, oops, the municipalidad won't give you a permit for a hostel, maybe because your neighbors don't want it next door. Now of course, being Costa Rica, land of bribes and corruption, you could open without a patente. But I know 2 hostels that tried that, and neither one is there anymore. The economic downturn makes it harder to do business this way, because local municipalities are desperate for tax revenue and are cracking down on deadbeat and unlicensed businesses.
15 years
Here is a question ;for those who rent their space, oppose to owning:
Do you have a designer come in; making it habitable? Lets face it, most commercial space don't come with; x amount of showers, kitchen, dorm rooms, water heaters, etc. Or is there a certain kind of building you look for to make an easy transition from open space to a hostel?
Marc
15 years
Well, with regards to Costa Rica, there aren't a lot of zoning laws. So really, you can score a pretty large house, ridiculously large actually (ours was 9 bedroom, 7 bathroom) and then you really don't have a lot of work to do. Maybe a shower here, toilet there. But yes, I can see the problems of renting a commercial space, and then dumping all that capital in, and then when your lease is up your landlord decides not to renew it. That would suck. Everything we have put into the hostel, we can more or less take with us if that happened. A major downside is that there are some improvements we would like to make, but won't because they would be more or less permanent improvements to the property. Our landlord doesn't need to make those improvements, so she doesn't, and then we're kind of at a stalemate because we don't want to invest our money into her property.
15 years
Do you have a designer come in; making it habitable? Lets face it, most commercial space don't come with; x amount of showers, kitchen, dorm rooms, water heaters, etc. Or is there a certain kind of building you look for to make an easy transition from open space to a hostel?
Our version is that any modification is our cost, although we have a long term contract and the investment has a backup guarantee. It is also amortized by a certain amount every year.
Klaus' recipe is to deal with the landlord to build a ready to open hostel for them. They obviously pay the price of it in their rent though...
15 years
It is also amortized by a certain amount every year.
So do you plan to buy the space from your landlord? Like a rent to own process?
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