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An increasing number of people in the UK are turning to guest houses like bed and breakfasts for their holidays, and it might be a promising time to sell such a property if you own one. This guide offers tips on steps that you can take to increase the odds of selling your guest house and doing so quickly, along with advice on how to navigate some complications with the sale.
- Defining a guest house for the purpose of selling the property
- Preparing your guest house before trying to sell
- Questions when selling your guest house
- Tax issues to consider when trying to sell your guest house
- Four choices for how to find a buyer for your guest house
- Top queries and answers about selling a guest house
Defining a guest house for the purpose of selling the property
The term “guest house” in the UK generally refers to a freehold or leasehold property where the owner lives and people can stay in bedrooms or a detached home on the same grounds, essentially the same as a hotel but typically with a very limited number of available rooms. Guest houses can include bed and breakfast accommodation where the owners will serve a morning meal for paying guests, but food does not always have to be provided.
Guest houses differ from hotels in that they are typically residential properties that have been converted for people to pay to stay in the bedrooms for a night or two, generally not for an extended period of time like many weeks, and the owner resides on the premises. By contrast, hotels are much larger, often have dozens of rooms, and the owner doesn’t live there.
There are signs that guest houses will be in greater demand in the coming months and years, as cost of living increases and other economic uncertainties lead more people in the UK to book “staycations” where they stay at a bed and breakfast or other small guest house domestically, instead of a more expensive overseas trip.
This increasing demand from people looking to take their holidays in UK guest houses can therefore make it a great time to act if you have been thinking about selling your property, because a larger number of potential buyers might see it as a wise investment choice.
Even though guest houses can be a great way to earn some extra income, you might have many reasons, or just one, for wanting to sell the property. Perhaps you are planning for retirement and need to raise funds for it, or maybe you simply find the work has become too burdensome. Whatever the reason, the current housing market signals a good time to sell a guest house.
But before you seek any offers on your bed or breakfast or other type of guest house, there are several important steps to know about the process, which this guide will cover.
Preparing your guest house before trying to sell
Although there are certain steps involved with selling a guest house that differentiate the process from selling a conventional private residence, there are still some elements that remain the same – and this includes making the house presentable before trying to find a buyer.
A well-maintained guest house with uncluttered and tidy rooms will typically appear far more valuable to potential buyers than a property which has a messy appearance and several problems that need fixing. Spend some time to assess the inside and outside of your property to identify any issues, which could include weeds in the garden, missing roof tiles, chipping paint, torn carpet, and other examples.
Consider investing a small amount of money and time into fixing these relatively small problems, because the initial outlay should pay for itself through making your property seem more valuable, which in turn means that buyers could be willing to make a larger offer for it. The worse condition that a home appears, the less value that buyers will perceive it to have.
You could also look at whether you have the time and resources available for more extensive work to increase the value of your guest house, which can include complete renovations of the kitchen and bathrooms, installing energy efficient appliances to improve the property’s Energy Performance Certificate ranking, building an extension to create extra bedrooms, and other steps.
Although this type of improvement can help to increase the perceived value of the property, not every owner will be able to wait for many weeks or months for the work to be done, or they might not be able to afford such projects. If that’s your situation, then rest assured that you could still manage to get a competitive and speedy offer from a buyer in some situations, such as contacting a quick property buyer like LDN Properties who will never charge any fees.
Questions when selling your guest house
Once you have the guest house in a condition that will be enticing to potential buyers, you next need to ensure that you will be able to answer any questions that they might have.
You’ll find that each buyer is unique and will have their own particular concerns and issues that they want to discuss with you about owning the guest house. Below you’ll see some sample questions that you can expect buyers to ask. Look over your past guest records and more in order to immediately be able to respond with detailed answers to almost any query.
If you have to tell a buyer that you need to get back to them to research the information they are seeking, it’s possible that they might soon lose interest, especially if they want a fast sale.
By collecting all of your financial data, details on guest attendance rates and prices over the last few years, and other information relevant to owning the property, this will hopefully make you sufficiently prepared to answer queries in full, and it can make a smoother sale more likely.
Does the property require much work to fix any issues?
You need to be completely upfront and honest with buyers about any potential negative issues with your guest house, which can range from relatively small issues such as an infestation of Japanese knotweed in the garden through to much more significant problems like subsidence. A buyer can sue you for penalties if you fail to disclose any issues with the guest house and they discover them after they become owner.
How popular is the guest house with holidaymakers?
Potential buyers that are looking to purchase your guest house and keep it operating as one will want to know that they could make future profit from their ownership. You don’t have to divulge every fine detail about your finances, but it can help to secure a sale in some circumstances if you are able to offer up figures that show your guest house routinely attracts a large number of guests, and that the business is profitable.
What’s the reason behind your decision to sell?
You should also be honest with answering this question, because an evasive answer will simply make potential buyers more wary about making an offer on your property. There are many justifications for wanting to sell a guest house, such as the work becoming too stressful because you’ve gotten older or have more responsibilities. If you’re selling due to an issue with the property itself, you must also disclose to this a potential buyer.
Are there any options for expanding in the future?
Some people who might be interested in purchasing your guest house could be interested in possibly building an extension in the future, because this would allow them to offer more rooms, hopefully increasing their income. Let prospective buyers know whether the property already has planning permission for an expansion, and be direct with them about the potential growth opportunities for your guest house.
Tax issues to consider when trying to sell your guest house
Another important issue with owning and selling a bed and breakfast or other type of guest house is the fact that you might be subject to several taxes throughout the process.
Knowing your existing tax liability can be helpful when selling because it will not only assist you in more accurately planning your budget for the sale of your property, but as outlined in this guide’s previous section, you’ll also be able to quickly answer prospective buyers’ queries about this issue. If someone plans on buying your guest house and continuing to use the property for that purpose, they will want to have a clear understanding about their possible tax liabilities.
Income Tax: A guest house is a for-profit business, so any money that you take in from paying guests will be considered to be additional income. As a result, during your ownership you will likely have been paying a certain amount of tax on that income. Potential buyers are likely to want to know how much income tax you typically pay in a given year, because that will help them in calculating whether it will be a wise investment decision to buy your guest house.
Capital Gains Tax: When you sell an asset, which includes properties, you might be liable for paying this tax. It applies to the profit that you make compared to the original price you paid, and not the greater property sale price. Therefore, if you bought the guest house at £100,000 and sold it for £150,000, you may have to pay tax on the £50,000 gain. Ask an accountant for advice, because selling a property with a joint residential and commercial use is complicated.
Value Added Tax: This tax applies to many goods and services in the UK, including having people pay to use a room in your guest house. There are certain types of relief available from this tax depending on your unique situation that could reduce how much tax you owe. As always, speak with an informed accountant to get a better picture of your tax liability. They will be able to tell you what your current tax burdens are, as well as giving you details on what you can tell buyers about the various taxes they might have to pay if they buy the guest house.
Four choices for how to find a buyer for your guest house
After you have taken all of the necessary steps to prepare your guest house for sale, the next major decision you’ll have to make is which method you’ll use for finding a buyer.
Four common options available include selling via an auction, using an estate agent, selling on your own, and selling to a quick buyer like LDN Properties. There are advantages for all four approaches, but some of them also include some rather significant disadvantages.
To help inform your choice, write a budget for the sale of your guest house that includes important facts and figures like how much time you are willing to wait before finding a buyer, the amount of fees, if any, that you can accept paying, and how much profit you would like to ideally make. Compare this information against the details of the four options below, and this should help you to more easily select the method that best matches your unique situation.
Always take every step to increase your chances of selling at a profit, and try if possible to avoid a situation in which you either break even on the sale or, even worse, make a loss on it.
Selling your guest house via an auction
Using an auction to sell your guest house is a gamble, because there is no promise that it receives any bids from buyers, in which case it does not sell and you’ll have to go through the time-consuming step of having to start over with trying to find a buyer for the property.
Ideally, several people will want to buy your guest house and place ever-increased price bids during the auction, pushing the final price high and earning you a decent profit. But it’s also possible that you only receive a single bid at the reserve price, which is the lowest value at which you consent to selling your property. Make sure that you set a reserve price that will still generate a profit for you, even after you pay the auctioneer whatever fees they charge.
Auctioneers will typically impose a commission charged at 2.5 percent of whatever final sale price your guest house achieves. This fee is deducted from the sale proceeds right away, which means that you should anticipate receiving a reduced net profit. It’s possible that you might be able to shift the burden of paying some of the auctioneer’s fees on to the winning high bidder, so always check with individual companies about whether this might be a viable option.
It can take a long time to sell a property this way, because there’s a wait of at least several weeks between when you enter the home for sale and when the auction occurs. If your property sells, the buyer then has an average of 28 days to complete their required steps to finalise the sale. Some auctioneers might set a longer or shorter deadline for these final actions, so it’s always a good idea to check with individual companies to find out how long they will give.
You could be asked to select between the modern or traditional method of auction. With the modern method, the auctioneer will prepare a listing that describes your guest home and includes photographs of it, and then advertise this online, allowing people to place bids 24 hours a day, seven days a week, for as long as the listing is live. The highest bid when the auction listing expires is then deemed the winner, and it’s a binding agreement to buy your property.
Alternatively, with a traditional auction, your listing will be advertised for many weeks or longer but people won’t be able to place bids until the day that the auction takes place. Whoever places the highest bid when the auctioneer ends bidding is deemed to be the winning buyer.
Selling your guest house using an estate agent
When you use an estate agent, they will take on the burden for doing most of the work in finding a buyer. They’ll prepare the listing and then advertise it in their office, online and in local newspapers, and organise and lead viewings for potential buyers to tour the property. They will also be responsible for fielding offers and seeing any serious ones through to completion.
Yet this can be one of the slowest methods of selling, and it’s not unheard of for some homes to remain unsold for more than a full year. This is particularly true of more specialist properties that are not typical private houses or flats, and guest houses would qualify as appealing to a more limited group of buyers. The less experience that an estate agent has with selling guest houses, the harder it might be for them to know how to attract interest in your property from buyers.
You also have to consider the fact that estate agents will make you pay commission for selling your property, and this charge will be deducted from the sale proceeds immediately, which in turn will reduce your net profit. Usually, the fee that estate agents will charge ranges from 1.15 percent to 1.40 percent of whatever final sale price they can get for your guest home. Some companies may set higher or lower commission rates, so always ask what the fee will be.
Beware that some estate agents might tell you a very promising high price for selling your guest house, even if they secretly understand that you’ll only be able to attract a buyer at a much lower price. The reason they do this is to so that you use their services, and they can then charge you commission – but thankfully it’s not that difficult to avoid falling for this routine.
To prevent this outcome, start by asking multiple estate agents to give you free quotes for selling the property. Next, visit home sales websites like Rightmove or Zoopla, and write down the price of guest houses similar to yours within the same region. Then calculate the average of all these values, and that should give you a much more accurate idea of how much your property might be worth.
Selling your guest house on your own
This is by far the most personally time-consuming and stressful option, because you will be responsible for every step of the process – from the initial crafting and advertising of the property listing through to organising and hosting viewings, and fielding serious offers.
It’s only recommended if you have experience with selling properties quickly, or have a friend or family member who is willing to help for free. Otherwise it’s a major commitment that will consume most of your time, not something you can only spend a few hours on each week.
When choosing this method, you can often expect to be waiting for more than a year before you’re able to sell the guest house, because of all the extra complications involved. That’s not ideal for those owners who place the biggest priority on finding a buyer as fast as feasible.
The only noticeable benefit of selling this way is that you will not have to pay any fees to a third party like an auctioneer or estate agent, which maximises your profit. But you can get this same outcome with zero stress by selling your guest house to a no-fee fast property buyer, and it’s far more likely that this alternative approach will result in you selling on a much speedier timeline.
Selling your guest house to a quick buyer
Fast buyers, like LDN Properties, are so called because they have the financial power to immediately purchase a huge range of homes. They don’t have to wait for several weeks or months to first get approved for a mortgage to fund the sale. As a result, they’re typically able to complete the purchase of a property within just a handful of weeks, and that includes all of the important steps such as exchanging contracts and paying owners their full proceeds. This can make selling to a fast buyer a speedy way to sell a guest house.
Trustworthy fast home buyers also never charge any commission when buying properties, which means that you can count on receiving the full proceeds from the sale of your guest house. By contrast, selling via an auctioneer or estate agent will require that you pay them fees, which will be taken out of the sale proceeds immediately and therefore will leave you with less net profit.
A further benefit of using a fast buyer is that they are able to consider purchasing almost any type of property, no matter its age, condition, shape, size or type. This is especially beneficial when you’re trying to sell a more unique property like a guest house that some estate agents or auctioneers might struggled to sell because they have no experience with doing so.
For example, beyond guest houses, the lengthy list of purchases that LDN Properties has considered making in London and beyond since launching in 2003 includes houses with solar panels, flats with tenants who have very long leases remaining, properties built from concrete or some other non-typical material, storm damaged homes, flats with cladding, listed properties, homes where the owner has misplaced the title deeds or some other important documents, lock-up garages, and other examples. Whether you are selling a property near traffic lights or in the countryside, you can contact LDN Properties for a no obligation offer.
When selling to a quick buyer, you also don’t have to worry about having to host dozens of viewings where many strangers get to tour the guest house. Instead, a representative from the fast buying company will visit your property to assess it before a final offer is made, and this should be the only viewing during the entire process, which can be a relief for many sellers.
Top queries and answers about selling a guest house
Property owners thinking of selling their guest house quickly may have some questions for us, ranging from the level of repair works needed before selling through to selling the property vacant. Here are some of the popular questions we’re asked about selling a guest house:
Your top questions when selling a guest house
For the purposes of selling a guest house, the term is typically applied to those properties where the owner lives but rents out bedrooms to paying guests for a short period, usually only a few days. This can include bed and breakfast accommodations, but providing food isn’t required. Guest houses are typically much smaller than hotels, which often have hundreds of rooms.
The answer will depend on how you choose to find a buyer, because using a quick buying company like LDN Properties should only take a few weeks to complete the entire process. Selling through an auction will take at least several months from beginning to end, whilst selling via an estate agent or on your own could take a full year before you obtain a serious offer.
One simple step you can take is to improve the appearance of your property with some low-cost measures such as mowing your lawn if you have one, rearranging rooms to make them less cluttered, and repairing small problems like missing roof tiles. Another option is spending a large amount of time and money to renovate the kitchen and bathrooms, but it’s not required.
If you decide to use an estate agent or auction to sell your property, you can expect to pay commission charged as a percentage of the final sale price. But fast buyers like LDN Properties never charge any commission.
As the owner of a guest house, you’re likely already paying income tax on the profit that you make from the money guests pay to stay at your property. There’s also the chance that you’ll be liable for paying Capital Gains Tax on the sale, although it can be complicated because the property has a mixed residential and commercial use, so ask an accountant for their advice.
Legitimate quick home buying companies are registered with a third party organisation called The Property Ombudsman (TPO), which publishes rules that are crafted to protect homeowners from fraud in the speedy buying industry. It’s advised to be wary of selling your home to a company that cannot prove it belongs to TPO.
It’s relatively simple and free to check whether a fast home buyer is actually a member of TPO. Visit the organisation’s website and look for the Find a Member tab on the left side of the welcome page, and click on it, then type in the name of a specific company. If the fast buyer is truly registered with TPO, you should immediately be able to see their membership details.
