There is a 28 unit hotel near where I invest that is very interesting. Hotels seem to have lots of income potential. Before I go through the place and the run numbers I would like to hear from other investors thoughts on Hotels.
Thanks!!!
What state are you in?
Minnesota
So this hotel is probably more like a place to stay while your passing through vs. a seasonal vacation spot. I don’t own any hotels and here’s why…unpredictable vacancies, high expenses and low leveraging possibilities. This is not a deal to pursue unless you’ve got plenty of cash to support it during the months when it’s not producing and about half the purchase price to put down. The risks are much higher compared to a rental property but that’s balanced out from the cash you’ll need to put into it.
I’d be much more inclined to look into larger hotels/ resorts. Then you can create auxillary income from conventions, conferences, restaurant, room service, bars, spas, etc, etc. In that 28 unit hotel you’d probably be depending on just room rates, dirty movies, vending machines, and maybe coin-op laundry. Just my uninformed opinion.
There are other hotels in the area that are full year round. I’ve stayed at other hotels near by and it takes a week to get a reservation, good or bad hotel. So I think the rooms would be almost full year round. The hotel itself has an old fashion look inside, geared toward mid to low renters.
The two things that attract me to it is the fact the hotels in the area and surrounding area are always full (year round), and the fact the owner is almost giving the property away.
I think that I agree with you that this will need a large cash reserve to make something like this work. p.s. I don’t have big cash reserve 
I’m a residential Real Estate Agent helping someone locate a hotel in NYC for purchase. I’m interested in the responses because I want to branch into commercial real estate and investments, so I’m learning a lot about the various factors concerning profitable hotels. I would suggest that you find out exactly why the hotels in that area are usually full. What makes them successful? Location, price, amenities (laundry, continential breakfast, membership points) , pet friendly, etc.?Determine if what are the economic anchors for that location and will they remain stable in the future. In addition, if the owner is practically giving it away find out why. Of course, they may not disclose this but maybe your city planning office can give you information. See if there are some upcoming developments and how they may impact that hotel or the overall industry in the area. In spite of everything, you really have to look at THAT particular hotel because it is unique. Roadwork or construction in front of your establishment, may only hurt your business. Do your due diligence.
If I had more reserves built up I would probably be seriously looking at this place. Below is the discription.
28 rooms, 2 efficiency apts & 4 apartments (middle to low rental property). Hotel is on the National Register of Historic Places. Great business to own & operate with many other income possiblities. New sprinker & fire system in all 4 levels of building.
The building is nice, its basically a square box. They’re asking only $184,900. Its a deal no matter how you put it. The 2 eff, and 4 one bedroom apartments are almost worth that.
Good deal, bad time.
I was looking at a 120 unit hotel a year or so ago. When I was performing due diligence, I called a flag franchise (cendant) and the representative supplied me with an incredible wealth of local market information. Some of this info (occupancy rates, rack rates, etc.) can also be found at the local econ dev. office (if available). Also, hospitality of this sort varies immensely from market to market, so the more local info you have, the better. Since it is a small, historic hotel, I assume the idea would be to satisfy the upper market segment. Since this type of investment is management intensive, it might be a go idea to think of other income streams from the business that can be managed by the same employees (ie events, catering, excursions, antiques, weddings whatever). A good place to get ideas for this would be to research successful similar properties in similar markets.
good luck,
Lance W
I am scheduled to go through the hotel this Saturday. What were some of the less obvious questions you asked the owner when you went through the hotel?
The hotel rents weekly or monthly, nothing daily.
I would ask about seasonal fluctuations in occupancy (obvious question, I know). I also would ask stupid questions such as What do you not like about this property/business? or If you could do it all over again, what would you do differently? What profile are your best tenants? In any case, it looks like the price is rather low on this property (assuming there are no major repairs and the income is stabilized).
The owners have owned it for 31 years, so I am guessing they are in there upper 60’s or 70’s. I imagine they are motivated do to old age. Since they have owned it for so long I am going to pick their brain as thoroughly as they allow.
I called a few of the hotels next to it today and they are all full until next week, which seems to be the case year round for hotels in the area.
Thanks!!!
It’s also Christmas week, call in 3 weeks and see how full they are…if they are truly full yearround they will be full next week during one of the slowest travel weeks of the year.
I asked the Super 8 what their slow times of the year are. They said there is two weeks in the year (I can’t remember what month) that is a little slow, but otherwise they are always full and booked at least 3-4 days in advance.
The hotel sent me the December revenue received. I was about $9,000.
I’m going to go look at the place because it will be good experience and it will be fun.
Definitely can be a learning experience even if you don’t buy.
i have a dynamic portfolio of several property classes, with hotels making up about 10%
(also from the range) I have chosen to stay in larger markets when investing in motel/hotel properties for a variety of reasons, mainly that hotels, unlike many real estate classes as a whole, require ongoing costly renovations that need to be amortized over a short period (not for tax purposes rather marketing purposes) to consistantly attract the most profitable clientele.
another consideration in owning a hotel/motel, is that unlike many other real estate classes, lodging properties require a tremendeous amount of employee/manpower. when viewed overall, motels are more of a human business than a real estate business
having said all that, hotels are hot right now as a sector of the real estate market, even on the small side like the one you are looking at
is there land around the site that could be developed also?
It is in the City, so there is not much land near by. I went through the property last Saturday, it is a great property. It is not as you would think a hotel would be. There is no staff, the wife just spends 3-4 hours a day there. They never take calls or work on the weekend. It is a machine that they have created over the 31 years they have owned it. They make so much money on the place that there is no work needed, they have done everything. The potential to double the revenue in a matter of months is very realistic.
It is the best property I have ever gone through. Unfortunitely the day before we went through the property someone else put a bid down and they accepted. We have a back up bid submitted and can only hope that the other parties contract falls through.
I’m curious in how you came across this deal? Did you advertise for hotels? Walk in and ask if they want to sell? See a sign somewhere?