US rental 12-units motel

I came across a guy here in Toronto selling his US property at Niagara Falls NY. It was a motel turned into a long-term rental building. 12 units total, one is occupied by manager. rent is about 400 each unit plus a $540 unit.

TOTAL Yearly at 100%

Yearly Expenses
Average per Year ($)
Water / Sewer
Property Tax
Property Insurance
Property Management

TOTAL Yearly

The owner says taking vacancy factor in, the net is about 30k a year.

The property is currently priced at $190k. But it was listed for 290k for more than 1 year without selling. There is something off about this property. If the NET is about 30k, why is it not selling? I can’t figure out, I saw the pictures, the property looks solid from outside. Currently all rented. What am I missing here and where should I start to look?

12 Units (Converted Motel)

$175,000 PRICE
<$ 38,000> DOWN PAYMENT (20%)
$152,000 BALANCE FINANCED (80%) 6%/30YR

Operating Numbers:

$ 59,060 GSI
<$ 5,906> VAC/CREDIT LOSS (10%
<$ 23,624> EXPENSES (40%)
$ 29,530 NOI (50%)

CAP RATE: 15.5%
COC: 57.7%

I think the main reason this property didn’t sell for $290 is because there was no obvious upside. The seller seemed to want both his profit, and any buyer profits.

Practically speaking, the only unit mix, that is less desirable, is rooms for rent.

I’m dubious that this guy’s vacancy factor is only 10%. Even so, the cost of turnover is higher on these types of units, simply because you’re having to do more work, more often, to maintain your marketability.

A vacancy is a vacancy is a vacancy. It matters not why.

I wouldn’t rely on any numbers you get from the seller, except what the seller reported to the IRS on his Schedule E for the past two or three years.

It may be expensive to get financing on these units if the tenants are not on long term leases.


So how about this, I reply to him say:


  1. your reported income to IRS on Schedule E, from this building for the past 2 years
  2. rental record for the past 2 years

If you do, I will submit an offer right away.

You could ask that way, but I wouldn’t.

Make those contingencies of your offer, not preconditions.

Nobody wants to gather up paperwork so that all the curiosity seekers can be satisfied. They’d be running around like chickens with their heads cut off doing that.

Make your offer, and when you get it accepted, do your due diligence.

I would offer something less than asking price simply because there’s not a lot of competition for unattractive unit mixes.

Keep in mind, whatever you pay for these, is what they’re gonna be worth for a while. And whatever DOM the seller experienced, is likely what you will, when it’s time to sell.

Meanwhile, your profit centers come from cash-flow; loan pay-down; inflation; and depreciation. And that’s it.

P.S. I would read Tony Robbins new book on “Money” to see what he says about amassing compounded interest from the cash flow of these units. Just a thought.

The red flag imo is a motel turned into long-term housing. Niagara Falls is a tourist town. Why would anyone turn a motel into a 12 unit long-term rental housing that fetches only $400 a month per unit? As a motel, it could make a hell of a lot more than $400, which leads me to think this is an undesirable ghetto neighbourhood. I would drive down there and check out the neighbourhood first before you put any offers down. If it’s a good neighbourhood, turn it back into a motel and make a lot more money. Better yet, if it looks run down, tear it down and build a new motel/hotel on the site. But, I suspect it’s not a good neighbourhood and you can’t do that. That’s probably why it’s been on the market for so long. Next.

just an update on this.

I actually did make an oral offer, and asked a PROFESSIONAL’s opinion on the property.

In the end I decided to back out because 1. the recent snowfall in buffalo

and 2. This area turns out to have 5 times higher crime rate than the state or country average.