Saturday, June 25, 2011
So You Want to Buy a Guest House in Key West
So You Want to Buy a Guest House in Key West! Join the crowd. There are lots of folks just like you. Folks that dream of leaving their lives up north and moving to Key West where they can live their life their way. I get it. I had the same dream.
Ever since I made my first trip to Key West many years ago I noticed there were always several guest houses for sale. I started looking at the properties for sale and gathered the financial statements so that I could compare income and expenses to see which of the properties looked the most promising. Of course, I always wanted to buy the prettiest property or the one that I thought I could magically transform into the best place in Key West. What an ego I had back then.
Eventually I decided that I wanted to buy the Cypress House at 601 Caroline Street. It is located at the corner of Simonton and Caroline Streets - only a one block walk to Duval Street. The building itself is one of the most beautiful on the island. Hands down. When I made my written offer in 1986 the owner was the estate of "the former owner" who had passed away. The property had been on the market for some time so I was in no rush to submit an offer. However, when I finally made an offer another party made submitted one at the exact same time. The executor of the estate was the brother of the former owner. He called me directly one Saturday (by-passed the real estate agent) to discuss my offer which he told me was higher than the other offer. He was concerned that I had no hotel experience, and that I would not know how to run a guest house. The estate offered to carry a new mortgage on the property. I understood his concern. The estate ultimately sold Cypress House to the lower bidder because that buyer had real life hotel management experience. The next year the new owner passed away himself, and his estate has been running the property since then. I have written about mistakes and regrets I made in Key West real estate. Not getting the Cypress House is one of the Biggies! What a property it is. The asking price back in 1986 was about $565,000 if I remember correctly. I offered $535,000 and the guy who got it paid $525,000.
The Cypress House has been on and off the market several times over the past few years. It was offered for sale at $7.8 million in May 2008. The price was later reduced to $6.9 million. Most recently it was offered at $4.6 million. And this week it went under contract. I have no idea as to the contract price. If it sells at the asking price, the buyer would pay $191,000 per room (for 22 rooms as cited in the mls). Guest house and hotel rooms are normally sold on the number of rooms offered and not a on per sq ft basis. Just as with houses in Old Town, some places are grand and some places are 'dogs'. All command high asking prices. Smart buyers today know they are buying a business first and a lifestyle second.
Long time Readers may recall that I owned Eaton Lodge (511 Eaton Street). I purchased that property at a public auction held on the property in October 1993. The second big mistake I made in Key West real estate was selling it. Guest houses can make a lot of money. I fell prey to my own greed and took a quick profit instead of staying the course and making a bunch of money over a protracted period of time. Owning a guest house can be a lot of work. It can be a lot of fun. It can be rewarding or it can be losing proposition. Owning a guest house in Key West is like life everywhere: it is what you make of it.
There are only a few guest houses on the market at this time. They include Papa's Hideaway ($1,495,000), The Victoria House ($2,295,000), the Curry House ($2,950,000), The Duval Inn ($3,199,000),and Marrero's Guest Mansion ($4,450,000). The very real and very famous Big Ruby's is offered at $5,900,000 and Pearl's Guest House is offered at $9,900,000.
I think the dead of summer is an excellent time to actually act on fulfilling your dream and buying a guest house. The American economy is still in turmoil and that uncertainty makes buyers reluctant to commit. If you are willing to commit, you may snag the opportunity while others stand on the sidelines. Whether you are a cash buyer or are financing the transaction, you will need a few months time to close the transaction. If you close a transaction in October or November, you will have a couple of easy months to learn the guest house business before season starts the day after Christmas. A well located and properly run guest houses stays packed through Easter and remain busy the rest of the year but at reduced rates.
Having a two to three month get acquainted session with a new business is the best training a new owner can have. You can learn how to make your business plan actually function, how to book rooms to maximize room revenues, and how to manage your staff.
Having a location near Duval Street is very important. Having a web presence is critical. Returning guests like be near the action. First time guests find a place to stay either by the Internet or drive-by. You would me amazed at the number of people who decide to drive to Key West without having a reservation. Knowing your market audience (gays, straights, budget travelers, or high rollers) is the key in getting new business. The lead time will enable you to work out our web presence and other marketing strategies.
If you want to buy a guest house in Key West, please consider working with me, Gary Thomas,305-766-2642 or by email at email@example.com. I am a full time Realtor at Preferred Properties Coastal Realty, Inc. in Key West. Believe in your dream. You won't regret it.
The information on this site is for discussion purposes only. Under no circumstances does this information constitute a recommendation to buy or sell securities, assets, real estate, or otherwise. Information has not been verified, is not guaranteed, and is subject to change.
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Gary Thomas in a Nutshell
- Gary Thomas
- Key West, Florida, United States
- I first read about Key West in a magazine called "After Dark" sometime in the mid 1970's. But it wasn't until March 1984 that I made my first visit to the island that would become my home. I had two weeks for a vacation and reserved a room at Colours Guesthouse (now Marrero's Guest House) for one week. I thought that if I didn't like Key West, I could always go back to Miami or Ft. Lauderdale for the rest of my trip. But after a couple of days in Key West, that was no longer a consideration. But when I wanted to extend my stay for the extra week I found there was no room at the inn. The guesthouse owner did find me a room at LaTeDa, the infamous guesthouse/restaurant. That's a story I'll write another day. But those two weeks in Key West gave me the realization that I had found Paradise. Key West has been my home since 1993 and my only regret is that it took me so long to get here. I am a full time Realtor at Preferred Properties CRI. Let me help you find your new home or business in Paradise. Living in Paradise is not a slogan, it's a way of life.