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attracting investment

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gordo started this discussion 16 years 11 months ago

i guess this is the big question for those of us looking to start our own hostel. the money.

now, obviously the amount needed is going to vary from hostel to hostel, place to place but at the end of the day somebody's gotta pay for the whole operation and i was wondering how people went about convincing the bank, or investors (or something else) to hand over the dough?

i know its a farily broad question - but thats the one sticking point i have. i've got a bit of my own money - not enough for a property, but it'd go a long way towards renovations and/or initial operating capital. obviously for established hostels that are expanding its a very different issue but for those of us at the bottom of the ladder - where would be a good place to start?

cheers
chris

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santa klaus

16 years

obviously for established hostels that are expanding its a very different issue

My favorite quote from my boss:
"It took me seven years to get the first loan and seven minutes to get the second."

I think it´s generally easier now because many hostels have proved in the last years that they actually make money. I think asking banks is not the best idea (bankers never stay in hostels, hence have no clue) - I´d rather ask potential landlords directly to invest into their property and get the cash back through the rent you´ll pay.

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uktrail

16 years

I´d rather ask potential landlords directly to invest into their property and get the cash back through the rent you´ll pay.

So, do you mean get people to invest in the hostel in the form of part ownership of the property, and they receive rent from the hostel business; as distinct from giving a loan to buy the property (ie a mortgage) and being gradually repaid their loan with interest?

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santa klaus

16 years

Um, no. Example: a landlord offers you a ramshackle flat for € 500 per month. You suggest he invests in a new heating system, new windows and new tiles for the bathroom, then you would pay € 800 per month.

Loans are pretty hard to get because when you pour all your own money into a business you haven´t got any other securities left.

So: if you have not much money, you have to options. Pay higher rent in return for landlord´s investment or leasing. Leasing may be less attractive for you as it´s usually more expensive than a mortgage, but lenders prefer it because the property stays theirs until the final instalment is paid.

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m0nkeyfire

16 years

It sounds to me like you're are saying to rent a property with the consent to run it as a hostel. Is that accurate? Would that make the landlord the owner and you the facilitator?

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