How Do I Get Investors For This?
I have this idea to start a bed and breakfast on the beach. This is going to be a very upscale B&B. This will be a new house that will be built to my specs. The construction will be such that in case this plan does fall out, (not that it will), the house can be sold as a house, not a business. (It will look and feel like a house, not a hotel.)
The approximate price to buy land, build the house, and furnish it will be about 5 to 10million dollars. (I haven't done the math yet. It's in progress.)
The house will be on a top rated beach, have 8 guest bedrooms plus a small private guest house. There will be 3 bedrooms for my family and 2 for hired help. There will be a full breakfast served every day consisting of the finest of foods (within reason). There will be 2 person spas in all the guest rooms along with a full bathroom, television, internet access, and perhaps fireplaces.
The common room will boast a pool table, a bar (which will also be accessible to the deck outside), a television, an outdoor spa, among other luxuries.
I definately will not be competing on price. Only on service and value. Service and Value!
I'm hoping to raise money for the entire cost, but at minimum, for the estimated 35% downpayment the bank will want.
How do I get investors for this?
What should I offer in return for the investment?
I was kind of thinking of returning the investment in half price stays, fully transferrable. I'm new to the finding investors strategy so I'm not sure what someone will expect in return.
If this goes bust, the money is still invested in the house and will probably still turn a profit based on real estate market and conditions.
Step 1---do research and put together a solid business plan. This seems as if it is still an idea offer in never-never land...you need to bring it out into reality and show HOW you plan to do this on paper. This is likely a very time consuming process not to mention the learning curve that is potentially involved depending on your experience.
All I can say is good luck and that if the numbers work go for it! You cannot simply expect people to hand over money to you without knowing when and how they will get it back.
Sorry if this is harsh but it is reality. Start out with some of Robert Kiyosaki's books and read all of the Rich Dads Advisor Series. Also E-Myth Revisited is very good.
5 million. 10 Million. That's a BIG difference.
You'll need a ROCK SOLID business plan for this to fly. Show comparable properties, show both up and down markets. Include construction costs, holding costs, advertising plans and costs, etc. They'll want to see the worst case scenarios and exit strategies.
Keep in mind that there are thousands of great vacation destinations. Why would people choose yours? That's what lenders, banks, and partners are going to want to see.
Why should they invest their hard earned money with you instead of someone else? Anything you can do to help them build their confidence in you is a must.
As far as a return for your investors...
If it were YOUR money (Let's say $1,000,000) would you accept a 50% off coupon as a return??? That's what you get for having a diners card or buying a $20 coupon book. They'll be staying there for FREE when they do stay there AND they'll insist on a decent return, especially if they're taking second position to a bank. Most investors will want at least a 12% return, most more like 16-30% for that type of venture.
I would consider this high risk. Upscale luxury homes and properties are the ones that take the hardest hit in a soft market.
That said, if after doing your market analysis, due dilligence, and running the numbers (erring on the pessimistic side) you find that this is a great plan, then the money and investors will be easy to find.
Great ideas are a dime a dozen. Great plans make millions.
Of course that's not being too harsh. I fully expected to need to do a business plan. I've done one before for a different business I had a few years ago.
Very good point... They will expect to stay for free. I guess I would too.
The cost of the house will depend on the projected cash flow. It's still too early to tell. I have to do a demographical survey and then have to scout the location for possible sites. Land ranges from $500,000 to $5,000,000 where I want this to be put. I have to check local zoning as well to see how many rooms will bump it from a simple B&B to a hotel. That's a cost factor as well.
What would you be offering that is not already available in South Beach, Monte Carlo or one of the MANY private islands which are the play grounds of the rich and famous?
In other words WHY would people suddenly decide to go to your place instead of their regular places?
If you are looking to do a REALLY nice place which will be a trip DESTINATION spot I believe you can plan on spending ALOT more than 10 mil.[ Edited by MrMike on Date 12/02/2003 ]
The answer would be the personal SERVICE and the VALUE for the amount of services offered.
Anyway, that will be all in the business plan. I didn't really post this here to pitch the plan. I just wanted input as to HOW to attract the investors. What can I offer them? What will they expect in return? And how quickly will they expect the investment to pay off?
You want to know how to attract investors.
That is exactly who answered your post and asked you these questions.
I GUARANTEE you the investors will want to know what are you going to offer which is not availabale already.
Impecable service is not an answer most investors will accept.
As for how long it will take that depends on how much work you do and your connections.
You also asked "What can you offer them?"
Well most investors look to the management team. They want managers who have already been successful in doing a similar thing.
From your post it appears you do not have the funds to attract the management team you will need to attract investors.
It is sort of a catch 22 for you. You sound young so your best bet in my opinon is to get a job working for a company which creates new projects and attracts investors.
Believe me a project you are talking about needs some SERIOUS heavey weights.
Ask yourself if you were older and have a million dollars to invest would you do it with an experienced team or would you do it with YOU???
I am assume you have experience and a background in projects of this magnitude. As a result of which, the bankers, accountants and RE attorneys, developers, and brokers you've worked with in the past should be chomping at the bit to jump on board with you. I've seen plans and pro forma's for projects of this magnitude, they usually spell out what someone like you would be getting. Kind of like the going rate.
If you do not have any kind of experience doing these deals, as an investor I would demand a very fat return on my equity. As a lending institution, I would kindly show you to the nearest exit, because it would be way too risky for me.[ Edited by starmand on Date 12/04/2003 ]