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- The wealthy are dropping millions on B&Bs and renovating them into homes, The Wall Street Journal reported.
- Such a homebuying move is the result of a market where housing is scarce and expensive.
- It's the wealthy's version of a fixer upper.
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America's shrinking housing market is even a problem for the wealthy, who have had to get creative.
They've been snapping up B&Bs and remodeling them as some innkeepers shutter their doors following a rough pandemic year, The Wall Street Journal's E.B. Solomont reported. The trade-off is a win-win for both parties: Innkeepers are raking in millions when they need it most and homebuyers are able to bypass the housing frenzy.
From 2019 to 2020, US B&B revenue dropped by $1.3 billion, according to research firm IBISWorld. But some innkeepers say they've been turning a profit thanks to today's real estate market: One Boston property purchased for $310,000 in 1995 sold for $2.6 million, and a 7,600-square-foot B&B bought for $60,000 in 1980 is on the market for nearly $7 million.
That means homebuyers are shelling out big bucks. Solomont spoke to several couples who bought B&Bs for anywhere ranging from $1.85 million for a six-bedroom Boston B&B (plus $500,000 in renovations) to $3.35 million for a 3,700-square-foot B&B in California.
While these carry high price tags, they also offer more space than a big house with the same selling price. It's especially alluring as America sits in the middle of a housing crisis.
The wealthy's fixer upper
Record-low mortgage rates and the era of remote work kicked off hot demand for homes that collided headlong with a historic housing shortage, resulting in real estate that was nearly unattainable. Sky-high prices and fewer homes available have been no match for homebuyers, who've found themselves caught in cutthroat competition.
Even as the market begins to cool, inventory remains tight and prices are primed to stay high. There aren't enough homes to buy or rent, and the ones left are too expensive.
It's forcing homebuyers to find holes in the market. Millennials have been buying old homes and renovating them as a way to fast-track their path to homeownership, while homebuyers with more money have been transforming inns into homes. In this way, B&Bs are serving as the wealthy's version of a fixer upper.
To be sure, buyers of higher end real estate haven't faced the same problems as the overall real estate market. Though million-dollar luxury home sales have been soaring, sending luxury prices rising, buyers have met them. Sales spiked almost twice as fast as mid-priced houses, according to a Redfin report. It's the result of a variety of factors: a strong stock market that has benefitted wealthy Americans, savings growing during the pandemic, and the ability to work remotely, which mainly benefits white collar or knowledge industry workers.
But the wealthy who are buying B&Bs are finding themselve somewhere in the middle. They likely could swoop in on a mid-sized home with an all-cash offer, but it wouldn't meet their needs. Homes that do fit their criteria cost millions more, well above their budget.
The B&B, then, proves itself to be just right.
source https://www.businessinsider.com/wealthy-buying-renovating-bed-and-breakfast-into-homes-housing-crisis-2021-9