Advice on buying a Guest House, Lodge, Wine Estate or Hotel in South Africa

Buying an Hotel, Guesthouse or B&B may be the answer you’re looking for. It can be an immensely pleasurable and rewarding lifestyle. You will meet incredible people and make friends from all over the world. It can be financially rewarding too.

Running a Guest House, Lodge, Game Park, Wine Estate or Hotel in South Africa is more than just a job or career, it’s a lifestyle. It takes special people to blend their working, family and social lives together. Make sure you understand the demands that your new lifestyle will make on you and your family.

Do you have the necessary skills?

Are you a people person? Do you like people and can you get on with people from all walks of life?

Do you have the necessary marketing skills to put your property on the "map"?

Do you have bookkeeping and administration skills?

Do you have an eye for detail?

Do you have handyman skills? Things can go wrong at the most unfortunate times.

Who will run the operation on a daily basis?

How will you learn the business?

How will you finance your new business? How much can you afford to spend on your new lifestyle?

How much income will you require to cover repayments to your financial institution and for your own salary?

Non-residents should consult the relevant government department, embassy or an Immigration Consultant before considering purchasing property in a foreign country.

Locating Properties For Sale
Once you’ve decided that Innkeeping is the life for you, you need to find your perfect property. This may not be as easy as it sounds. You will probably have some idea of where you want to live. Maybe you’ve fallen in love with a little village by the sea, or you’re attracted to the fresh mountain air or you may even like the buzz of a big city. These choices, and many more, are yours.

The great thing about the tourism industry is that people need accommodation almost everywhere you can think of. Whether they are travelling for business or recreational purposes, people need somewhere to stay. Obviously your choice of location will affect demand for accommodation and peak periods. A city centre establishment may be busy during the week and quiet on weekends and holidays, while a resort property may be quite the opposite. Some cities offer the best of both worlds, being business centres and tourism resorts.

Depending on what type of establishment you are interested in, you may have various options on where to look: -

Newspapers and Magazines - Hospitality properties are often advertised in the classified ads of local and national newspapers under the "businesses for sale" section. There is now a multitude of property magazines available in South Africa.

Estate Agents and Business Brokers in the area you are looking in may sometimes have B&Bs and Guest Houses for sale. Check out their websites, call them direct or look out for their ads in the local property papers.

Inn Brokers or Hotel Brokers specialize in the sale hospitality properties. A couple of the larger estate agents have divisions dealing with hospitality products and there are a few independent brokers in South Africa.

A broker or agent may have suitable properties on their books or may be able to source the right business for you. Some businesses may never be advertised because the broker will have a list of interested buyers ready to buy them as they come on the market. Register your requirements with a broker and they will keep you up-to-date with new properties that meet your specifications coming onto the market.

Approach an Owner Direct. You never know, it may be your lucky day, and the owner is getting ready to sell. Sellers of hospitality products are unlikely to put a "for sale" sign up on their front door as it may affect their business. Make sure you speak to the owner direct and not in front of his employees. If the property is not for sale, the owner may well know of one in the area that is.

Evaluating Your Dream Property
Location, location, location - need we say more?

Check the condition of buildings, equipment, furniture etc. If you have any doubts ask an expert to help. What repairs need to be made and how much will they cost?

Don’t let your love for a property take over from good business sense.

If accurate accounts are kept, ask your accountant to have a look at them. It is possible (even probable) that the owners are putting some personal expenditure through the business or hiding cash sales from the taxman. Try and establish the true financial position of the business by looking at bookings (past and future), monthly expenses, VAT payments etc.

Check the potential for improving the business in future. Would you be allowed to open a restaurant or bar in terms of the zoning of the property? Could you add more bedrooms?

Find out how long the property has been on the market and why the owners are selling.

How long have the owners had the property and what improvements have been made in recent years?

What type of customer does the establishment attract? Would you need to, or be able to, diversify from that market?

How do the present owners market the property? How will you change this and what costs will be involved?

Are there any plans afoot in the local area that will affect the business in either a positive or negative way?

How many staff does the establishment employ? What qualities do they have? Have they had any training? Will you need more or less staff and how will that affect your monthly expenses?

Who is the competition? Can you offer a better service or higher standards? Can you work together with the competition for mutual benefit?

Will the present owners train you in the operation of the Inn and introduce you to suppliers? Will they consider seller financing?

Have your lawyer study the contract of sale and explain the material provisions. Make sure that any moveable assets included in the sale are detailed in the contract.

Consider the cash required for operations, buying stock and for necessary improvements. Suppliers are unlikely to offer credit when you first take over your new business.

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