Finance question
Can I get finance to buy a bed and breakfast?
Often yes, and the property is what lenders look at first. A small B&B that works as an ordinary home may be assessed as a residence, while a larger or specialised one is treated as commercial property, with published limits of up to 70 per cent on a commercial freehold, subject to lender assessment.
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The short answer
A B&B is a home and a business, and lenders disagree on which matters
A bed and breakfast is priced as a property first and a business second. Asking prices on live listings run from $895,000 for a three-room freehold in the Barossa to $4.2m for a seven-room Byron Bay guesthouse, which works out at $214,000 to $600,000 a room (bed and breakfast guide). Most of that is land and buildings. Only one of the 12 listings in the guide publishes a net profit, so the lender's valuation of the building tends to matter as much as the trading figures.
How the lender classes the property sets the deposit. One published broker summary says a B&B that works as an ordinary home may borrow up to 90 per cent of the price, or 80 per cent if you rely on B&B income. A property that can only be used as a B&B is treated as commercial: up to 70 per cent for a freehold and up to 50 per cent of business value for a leasehold, with debt service cover over 1. Hiring professional staff can make it specialised and cut borrowing power. Other lenders differ, and some will say no.
Ventas is a broker across 40+ lenders, so we can test the same property against residential and commercial lenders and see which assessment suits you. There is no upfront fee; the lender pays us at settlement. If you own a home or another property, a property-backed loan against it can fund the deposit. The loan is sized off the lender's valuation, not your contract price, so paying above valuation means funding the gap yourself.
Do you qualify?
What a lender looks at on a B&B purchase.
A building that works without the business
A property a valuer can price as a home or guesthouse.
Trading history
Two to three years of financials and BAS, plus booking-platform history.
Approvals
Current planning consent and a building certificate for the real number of guests.
Debt cover
Income that covers the repayments, with a debt service cover ratio over 1.
Why property drives the deal
Two ways to be assessed
A small B&B may qualify as a home, a larger one as commercial property.
Equity can be the deposit
Your home or another property can fund the gap.
Valuation sets the loan
A building that stands without the business holds up better.
A worked example
A buyer is looking at a five-room freehold B&B asking $1,600,000. The lender treats it as commercial and advances 70 per cent, the published limit for a commercial freehold, which is $1,120,000. That leaves a $480,000 deposit before stamp duty and costs, which the buyer funds from savings plus a loan secured on their home. Illustrative only.
Common questions
Frequently asked questions
Can I get a home loan to buy a bed and breakfast?
Sometimes. One published broker summary says a B&B that works as an ordinary home may borrow up to 90 per cent of the price, or 80 per cent if you rely on B&B income. A property that works only as a B&B is treated as commercial.
What deposit do I need?
It depends on how the lender classes the property. Published broker guidance runs from about 10 per cent if it works as a home to 30 per cent for a commercial freehold and 50 per cent on a leasehold, plus duty and costs.
Does the lender use the contract price?
No. The loan is sized off the lender's valuation. If you pay above valuation, you fund the difference yourself, so check the likely value before you sign.
Can I use another property as the deposit?
Often. A property-backed loan against your home or an investment property can fund part of the deposit. The cost is that property is at risk if the business struggles.