Thinking of buying a hotel? Don’t do anything until you’ve read our basic guide…

I want to buy a hotel, where should I be looking? Consider the location very carefully. Do you want to be on the coast, where you will probably rely on tourist trade, or in a town or city? If you are in a tourist area, it’s likely you will have to work extremely hard during the high season, but will have little or no money coming in during the low season.

That shouldn’t put you off though. Although city locations usually attract business all year round, tourist hotels may well generate the same money, concentrated into six months of the year. But remember that the bank loan and other overheads still have to be paid throughout the year. Specialist mortgage brokers can arrange seasonal repayment plans to accommodate the lack of income in the low season.

How much money will I need? First, decide how much you are prepared to invest, and then find out how much funding you can raise. Talk to your bank or a specialist mortgage company. Shop around to ensure you get the best lending deal and always seek professional advice. Consult specialist surveyors and valuers to make sure the asking price is fair and the property is in good condition. Banks and institutions will not lend you money unless they have security on a sound investment.

If the business you choose to buy is seasonal, take into account that your lender may only provide a 50% loan and expect you to invest the rest. Now you should know what price bracket you can afford to look in.

What should I ask the current owner? Make sure the business you intend to buy can provide you with both up-to-date and historic accounts. Be wary of accounts that are more than one year out of date: you need to know how the business is trading now.

Look carefully at how much money the current owners are making. It’s always a good sign if businesses can show you positive trading records for several years of operation. What are the current profit targets? Are they too low or abnormally high? Are the costs of running the business, such as staff wages, excessive?

Examine how the value of the property might fall over time, and at how much might it cost you to carry out essential repairs. What will the insurance cost? Will staffing requirements increase or decrease with your involvement? Examine where the money is being spent to find out whether there are any savings you can make.

Ask the current owners why they are selling the business. How is it being run? By the owners? By management? Or is it in receivership? If it is in receivership, be aware that although there may be an opportunity to grab a bargain, the risks may also be higher.

The hotel I want is close to a couple of other similar properties – is this bad? If you are not an experienced hotelier, think twice about whether you should buy a hotel in a highly competitive area. On the other hand, because these areas tend to be those that are popular with visitors, purchasers should enjoy a high level of trade. Wherever you are looking to buy, investigate your local competitors and weigh up the threat they pose.

What should I be asking myself when I’m viewing a property? There are a few simple questions. Is there potential to expand the premises? What improvements will you want to make and how much are these likely to cost? Have you included this in your budget? Is there a market for additional facilities, such as a bar? Is the property in good condition and has it been regularly repaired and renovated? Does it have the essential en-suite bathrooms?

Will I need to hire staff? Decide in advance what level of commitment you are prepared to make. If you are a husband and wife team, will one of you keep your job or will you both work in the business? Do you want to provide only bed-and-breakfast facilities or will you also serve dinner and have a bar? If you have a bar, you will increase your income – but are you prepared to spend time behind the bar pouring drinks?

One of you may be good at dinner parties, but will you be able to deal with 30 for breakfast and as many again at dinner? If not, you will have to consider taking on staff, and investing in training.

If there are staff in place when you take over the business, you must ask yourself whether, for instance, the reputation of the restaurant depends on the chef. Will that person be staying on when the business changes hands? Which other staff members play a major role in the business’s success and are they willing to stay on?

What kind of money can I expect to make? The level of profit for a guesthouse or small hotel is high. For example, in the South-east of England an owner could expect sales of £50,000-£100,000 a year or above, with profits as high as 50%. Small, central London hotels (with, say, 10 bedrooms) can have turnovers as high as £200,000, of which about 50% is likely to be profit. A typical small guesthouse will turn over £20,000-£40,000, with about 50% going on running costs.

Anything else to remember? Always be confident. If buyers are confident, they will be better able to persuade a bank to finance them. What banks want these days is the right buyer, of the right hotel, in the right location.

Produced by CatererSearch in association with Christie & Co