So, I Want To Start A Hostel

This small hostel (15-20 beds) would be run by myself, my partner, and other family members to cut down on operational costs.

That sounds manageable enough.

Also, my father is quite a handyman as well as some of my other close family members. I say this because we will practically have to renovate our lease to form it into a hostel.

You’re lucky to have family members with handyman skills. Contractors get expensive quickly and don’t tend to care about the quality of work nearly as much as you do.

-Can I get a rough estimate of what sort of capital I will need to start with? I have good credit, will I be able to use some cash as collateral for a loan? I have a number in my head but how do I get hard numbers???

That’s a hard question to answer because the costs vary so much from one location to the next. Try contacting other hostels in New York and ask if they would be willing to share some rough numbers with you to get an accurate ballpark for your area.

You’ll have to ask your bank what kind of collateral they require for a business loan. They would probably prefer something like a building (your home, for example) but maybe not. Ask several banks, because someone else may give you better terms.

-Would a lessor even be willing to let their property be renovated in such a manner?

Frequently yes, especially if you cover the renovation costs yourself. If you sign a long term lease with the option to buy, then the renovation probably won’t be such a big deal. On a short term basis they will probably be more hesitant to let you alter their property.

-If getting a loan for a bank is in order, how will I find viable information about the hostels potential to leverage against the loan. Any sample business plans that pertain specifically to hostels?

Check out the Budget Planning section at the bottom of the Start a Hostel wiki page. There are several spreadsheets to help you determine your costs, income, and potential profit. Sadly the Hostel Business Plan page has not been completed yet. Perhaps you can add to it as you go. Hopefully someone else on the site will have one that they would be willing to share. There is also a page about What Hostels Are and How They Benefit Local Economies that might help you explain things to a banker.

-What would be my one time costs associated with opening a hostel and what would be some of my recurring monthly fees that I might not expect (dont assume I know. I am a noob)

Some one time startup costs-

• Official: Business registration costs, legal fees
• Construction: bathrooms, windows, insulation, fire system, etc. (this list would be building-specific)
• Dormitory: Beds, mattresses, pillows, blankets, sheets, towels, lockers, mirrors, trash cans
• Kitchen: Fridge, stove, microwave, toaster, water boiler, other appliances, pots and pans, plates, cups, silverware
• Common area: Tables, chairs, couches, computer, bookshelf
• Reception: computer, printer, phone, office supplies
• Bathroom: Toilets, showers, sinks, water heaters, mirrors, hand towels
• Housekeeping: broom and dustpan, mop and bucket, vacuum cleaner
• Marketing: website design, flyers

- On a monthly basis, what could I expect to have to spend on:
Repairs
Security
Booking sites
Advertising

Some recurring monthly costs-
Rent/mortgage, taxes, utilities, commissions, insurance, laundry, cleaning supplies, accountant, staff (though not in your case?) toilet paper, internet/phone, breakfast supplies, website hosting

Both of these lists could go on and on. I’m sure others can jump in and continue with everything I’ve missed.

-Where do I even start to gather useful market information?

Try the NY State Tourism Site, or failing that, the NY State Travel & Vacation Association. If there is a local Department of Tourism in your city, try there for the most pertinent information. One or all of them may be able to give you some statistics about monthly occupancy rates and bed nights, nationalities of travelers, average room rates, average length of stay, etc. Unless there are other hostels in your city this information will probably come from what the hotels report. It’s not exactly what you need, but it could give you an idea of when you can expect big ups and downs in occupancy and give you some kind of market info to start with.

-Would the lessor automatically mandate I pay for water, electricity, or taxes?

Yes, I would imagine so. You will consume quite a bit of water, electricity, and gas, and those are part of the expenses of running a hostel. I don’t see a reason for you to pay the property taxes, though, unless you buy the building outright. Those are part of the landlord’s expenses of owning a building and being able to make money renting it out to you. your landlord may strongly disagree with me though! :)

-What particular features of a property should appeal to me?

• The more bathrooms the building already has the better.
• If the common areas are separate from sleeping areas that is a big plus.
• The bigger the dorms, the nicer they feel. The bigger the windows, the fresher the dorms will smell due to air circulation. (Avoid creating dorms with no windows)
• Private parking may not be a big issue for you, but it is certainly convenient when you need to buy supplies and carry them into the hostel.
• Any outdoor areas you can use are great (rooftop terrace, backyard, balcony).
• Proximity to public transportation, shops, restaurants, bars, and local attractions are all beneficial
• NOT sharing the building with neighbors will free you from endless headaches.

This forum is full of experts, so hopefully others will offer their advice as well.