​Is owning and operating a Key West Guest House as fun as staying in one?  The foyer that is so inviting, poolside cocktails, breakfast crepes and 4PM sherry with home baked cookies. Unique and interesting bed rooms - each a character. Fresh flowers and tropical fruit. Guests from around the world. But what about the money?  Can you make a REAL living owning a Guest House in Key West? The Guest Houses below are For Sale in downtown Key West.

There has been no letdown in the tourism industry in Key West. If anything the globalization of travel has brought more travelers to Key West than ever.  Key West is no longer just a winter destination.  Travelers come here year 'round, whether from Europe, Asia or just "main land" Florida for a long weekend. While big box hotels do well, it is the Guest House that many travelers prefer.  Customized rooms, personalized service and an intimacy that reflects the character of the Conch Republic is what travelers wish to embrace.

Here are three Guest Houses that are for sale.  Others are also "For Sale", just not listed in the Multiple Listing Service (MLS).  At the end of this article please see a chart comparing Guest Houses that are For Sale, Contingent (under initial contract), have Sold or have Expired since January 2012.

La Te Da is at 1125 Duval St and has anchored fashionable "Upper Duval" since 1983. As a Guest House it has 16 stylish bedrooms and 16 transient licenses.  As a destination, there is a large private pool, an elegant, relaxing restaurant, two bars; one inside, one outside and a world reknowned cabaret. 

Using number of transient licenses as a common denominator among all Guest Houses, the cost of each of La Te Da's sixteen transient licenses ($6.5M List Price/16) is $406,250, or 37% above the average transient license sold price of $297,527.  However, cash flow from the restaurant, cabaret and bars provides revenue not received from the other guest houses. 

La Te Da has been on the market for sale for approximately 960 days and is For Sale at $6,500,000.

The Southen Cross Hotel is at 326 Duval St. It is a large property with two 3rd floor penthouses (large single rooms that sleep 5 or 6). There are 41 guest rooms with 38 transient licenses. The Southern Cross is at the foot of Duval St, only steps from Mallory Square sunsets and is an ideal location for Key West's special events like Fantasy Fest, New Year's Eve, Bike Week, Pride Week, Hemingway Days, Lobster Fest, etc. The larger rooms are equipped with kitchenettes.

The 38 transient licenses, at $313,158 per, are 5% above the average sold price of $297,527. There are no other significant revenue sources. The Southern Cross has been on the market for sale for approximately 560 days and is For Sale at $11,900,000.

Casa 325 resides appropriately enough at 325 Duval St. There are 16 guest rooms divided between two buildings. A large heated pool and spacious deck separates the two buildings. As no meals are served on premises, every room is equipped with a refrigerator, microwave, toaster and coffee maker.

Casa 325 has won Certificates of Excellence from Trip Advisor for 2012 and 2013.

The 16 transient licenses, at $316,188 per, are 5% above the average sold price of $297,527.  There are no other significant revenue sources. Casa 325 has been on the market for approximately 317 days and is For Sale at $4,995,000.

Cap rates of 8% to 10%.

At Engel & Volkers Florida Keys, we price investment property such as Guest Houses at a capitalization (cap) rate of 8% - 10%.  We believe an investor should earn approximately 8% - 10% Rate of Return on their investment. 

When you buy a Guest House you obviously are buying an in-place business with an established presence and clientele. Net Operating Income drives the price of the deal and is the only credible metric.  Upside potentials vary and are based usually on the target audience of the Buyer. Buyers should be aware of and address all existing and possible cost issues:

• Insurances - windstorm, flood, liability and loss of business.  
• Licenses - liquor, on-site food preparation
• Labor, laundry, maintenance
• Taxes

Guest House Sales and For Sale since January 1, 2012

Without any discernible purchase patterns, as shown in this chart, it is imperative that Buyers have a full service, single agency, globally focused, real estate corporation such as Engel & Volkers on their side. Each Guest House stands on its own merit and cash flow, making it very difficult to compare one Guest House to another. 

Plus, like I said, there are Guest Houses for sale not shown on the MLS.

If you have any questions or comments, please contact me here.

Thank you and Good Luck!