3.6 Transfer of Business Assets

This is where the major differences between the purchase of residential and short-term rental investments appear.  Understanding the complexities of transferring the business assets will stand you apart from the competition and enable you to make a real impact on the success of the transaction.

Types of business assets

There are a number of business assets that may be included within the transaction, or will require to be transferred separately.  Some will be written into the purchase contract – others may be negotiated separately.

These are the most common assets you will have to consider, some of which have significant value.

• All rental listing profiles – Note that each listing company has its own policies on this issue and most will not permit reviews to be transferred
• Independent websites created by the seller
• Professional photography, video and/or virtual tours (must be licensed to the owner)
• Existing guest email list and email inquiries (will be subject to spam laws)
• Future bookings are currently in place and booked on the home
• Current management contracts in place at the time of sale
• Social media accounts – Facebook page, Pinterest, etc

Transferring of assets and bookings

Depending on how far out the bookings were made there are likely to be advanced deposits and these should be shown on the closing statement as a credit to the buyer.

If the buyer stays with a management company, nothing will happen at closing as the advanced deposits are held in escrow by the PM company.  Understanding of this may be written into the contract.

Ask the seller or seller’s agent, as a courtesy to booked guests, to send an email to them introducing the new owner.

The upside of turn-key acquisition

• Immediate rental income
• Established business with goodwill
• No downtime
• Potential of owner mentorship

And the downside….

• If the home is booked it can be difficult to fit in renovation and improvement projects in order to increase future rental revenue
• Existing reviews may not be favorable
• Property management company terms may not be favorable

Investors will want to know:

• What assets are being sold with the home?
• How does everything get transferred to me?
• What is the value of these items?
• Is the current owner willing to stay on and help me integrate everything and smooth the transition?
• Should I buy with bookings or without?
• Am I able to cancel any of the bookings?
• The terms of the current PM contract if there is one in place?