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Should I Extend My B&B to Add More Bedrooms?

By: Chris Hogan MSc - Updated: 18 Oct 2012 | comments*Discuss
B&b Extend Bedrooms Profit Business

Whether or not to extend a B&B to put more bedrooms in is a tricky question at the best of times. It's even harder in a time of economic uncertainty, particularly when banks and building societies are reluctant to lend and property values aren't rising as fast as they were, if at all.

Check With Planning First

The question is essentially a financial one although there are other business considerations too. The first thing to do is approach the local planning department for an informal conversation about whether they would look kindly on any development. If the answer is 'no' then the question is answered for you.

Assuming you get a positive response from planning, it's then time to weigh up the investment of extending the property against the extra profit it might generate. That's going to take time. Even if you cut the work to the bone and do much of it yourself you're unlikely to get away with any change from about £20,000 for adding a couple of new bedrooms. You'll need a lot of summers for the profit on the rooms alone to repay that.

Assess the Business Impact

There are wider financial considerations though. The extra bedrooms will put value on the property as a whole, from a pure house value point of view. Then they will add value to the business, as a separate issue. If your exit strategy is to sell the B&B when you no longer fancy running it, then you'll get a better return at that point, as long as the business is running successfully.

Then there is the impact on the business to consider. If you extend would the extra bedrooms put you in a different price bracket? Would it give you more flexibility and allow you to tackle a different B&B market, perhaps families or active sportspeople?

Timing Building Work

You need to consider when to do the extension work too. Remember that the spring and summer are the best times to get building work done, but they are likely to be the best times for your business too. Don't forget the add-on time, cost and disturbance of decorating other parts of the B&B to match the new extension.

Can you build the extension in the autumn and early winter if the weather turns bad? Or do you do the work in the summer and simply accept the hit on the business? People who have their rest and relaxation disturbed by building work will not be happy customers. And in these days of the internet, dissatisfaction can spread faster than measles.

Analyse the Pros and Cons

Once you've evaluated all the financial implications it's time to get the spreadsheet out and do some 'what if' analysis. Get some estimates for the building work, try and find a lender who will back you without having the shirt off your back and look at how the repayments pan out over the whole term. Then put in your expected profit increases and tinker with the figures until you can see what potential returns you can get.

Invest to Achieve the Best Returns

One more thing. Although the cheaper the extension is, the more likely it is that the figures stack up, skimping on the quality of the design and construction would be a mistake. If the new extension is considered an eyesore or leaks like a sieve you will have trouble selling on, whether it’s as a pure property sale or a businesses sale. So save money by all means, but don't spoil the overall impression of the house and the business.

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