Does anyone see anything wrong with this plan about buying hotels?

Investor · Orlando, FL · Member since 2015 · 121 posts · 3 votes

This is fast forwarding abut 5 years until I can have the down payment and qualify for a loan for a hotel. I would be looking at hotels in the $4 million dollar range. Currently, there are hotels at this price that profit about $1 million per year.

I will do this once. Then, I will use the income to save for more down payments and qualify for more loans to buy hotels that are slightly larger. I will continuously work my way up until, 30 years from now, I am buying $300 million dollar hotels.

What do you think?

I know lenders that work on stated income, so I do not need two years of tax returns to show a bank.

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Dustin Hawks

Topeka, KS · Member since 2014 · 51 posts · 29 votes

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John Farmer I loved the spirit of the original post. I hope to see Farmer international organization all over fortune some day. As for the Hotel Business, I worked in it for many years out of college & margins aren't what you think they are and it is an extremely labor intensive business. My guess is that if the property is only half occupied because they don't have the $$ to fix it up. That would lead me to believe that the stated profit margins are as about as accurate as your stated income with these lenders.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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@? no experience is going to be a rough go finding financing. line up your cash partners pay cash get a track record then refi and continue to buy
50% or more of hotels motels at those price points are owned by Patel families in the US.
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Account Closed
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Investor · Orlando, FL · Member since 2015 · 121 posts · 3 votes
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Originally posted by @Jay Hinrichs:

@? no experience is going to be a rough go finding financing. line up your cash partners pay cash get a track record then refi and continue to buy
50% or more of hotels motels at those price points are owned by Patel families in the US.
Financing is no problem. I know of stated income lenders that will lend me 60-70% if I can show them I can afford the loan. Then, it is just the matter of saving up for the down payment.
If you know where I can find some cash partners, tell me where they are!!!
It doesn't matter who currently owns it, all that matters is that it is for sale. And, yes, the one I recently looked at was owned by an Indian family.
list price = $4.5 million
most recent annual revenue $1.7 million
most recent annual profit = $1.1 million
But... it had 140 rooms and only 70 were in use. They didn't have the money (or didn't care) to fix up the other 70, so I could make it even more profitable.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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sounds like a good goal.... best of luck... americas newest inn keeper in the making.
I think you will find that commercial lenders will want to see some experience in the asset class... at least they should
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Investor · Orlando, FL · Member since 2015 · 121 posts · 3 votes
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Originally posted by @Jay Hinrichs:

sounds like a good goal.... best of luck... americas newest inn keeper in the making.
I think you will find that commercial lenders will want to see some experience in the asset class... at least they should
They sure don't. Want my lenders number? Running a hotel is easy as hell. And I would hire someone by the hour to do it. I'm not a hotel manager, I'm a real estate investor. Does Donald Trump work in the lobby of his hotels? Sure doesn't. Does Paris Hilton clean the floors? Definitely not.
Now, if you have a good name for a chain of hotels, I am all ears.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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@Account Closed OH what it is to be a dreamer .... In all regards... how easy it is to get funding how easy it is to run a hotel were you have no clue as to what your doing...
your statements are the height of naiveté but keep dreaming and one day you will be as rich as Trump.
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Investor · Orlando, FL · Member since 2015 · 121 posts · 3 votes
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Originally posted by @Jay Hinrichs:

@Account Closed OH what it is to be a dreamer .... In all regards... how easy it is to get funding how easy it is to run a hotel were you have no clue as to what your doing...
your statements are the height of naiveté but keep dreaming and one day you will be as rich as Trump.
I don't know how to run a hotel? It's pretty easy.
I don't know how to get funding? I come up with a 30% down payment, then call my lender who will loan me the rest at 11% over 30 years.
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Investor · Orlando, FL · Member since 2015 · 121 posts · 3 votes
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Originally posted by @Account Closed:

@Account Closed The idea seems good but in my experience 'fast forward 5 years' is a very very long time, and as anyone knows (including my three year old students) things can change dramatically between now and then. @Jay Hinrichs is very correct with the lending aspect, and there would be NO WAY to tell what the lending trend will be within 5 years.
I am assuming you are young, as well as I am, and just remind you that things change. Look up Pete Frates. I am sure his 5 year goal has changed.... However, keep dreaming working harder then the next person and good luck .
I have a lender I just talked to yesterday. I need 30% down payment. It's a private lender because I can't go through banks/credit unions for this because I don't have 2 years of tax returns to show them.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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11% debt on a hotel will kill you
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Investor · Orlando, FL · Member since 2015 · 121 posts · 3 votes
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Originally posted by @Jay Hinrichs:

@Account Closed OH what it is to be a dreamer .... In all regards... how easy it is to get funding how easy it is to run a hotel were you have no clue as to what your doing...
your statements are the height of naiveté but keep dreaming and one day you will be as rich as Trump.
You know nothing about the lending industry and have no idea what you are talking about. Have you ever even thought to try this? Better question... Why do I keep giving away my billion dollar ideas for free?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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@Account Closed you crack me up... I am a NMLS mortgage banker which means I lend my own money.. I fund folks in 12 states and have been doing this since the mid 80's probably before you were born... funded well over 1/4 billion in my day....
I make guys like you be able to cash in on your big dreams.. but I don't lend to anyone with no experience like you. neither do many other lenders if they actually know what they are doing... when your starting out yoiu need to raise friends and family capital get some experience then you can spout off on all your billion dollar ideas... keep at it
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Investor · Orlando, FL · Member since 2015 · 121 posts · 3 votes
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Originally posted by @Jay Hinrichs:

11% debt on a hotel will kill you
Here's an example. There's a hotel in Orlando for sale for $4,500,000 that had $1,700,000 of revenue last year and $1,100,000 of profit. An 11% loan over 30 years would add $360,000/year of expenses, dropping the total profit to $740,000/year.
$740,000/year? That's it??!?!?!
Now I can only buy TWO Lamborghini's!!! I wanted FIVE!!!!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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real movers and shakers in RE talk airplanes not car's anyone can buy car's... you will have made it when you have your airplane.. even you could probably go in and lease a lambo right now. cars are nothing airplanes are what put you in the big leagues.
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Investor · Orlando, FL · Member since 2015 · 121 posts · 3 votes
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Originally posted by @Jay Hinrichs:

@Account Closed you crack me up... I am a NMLS mortgage banker which means I lend my own money.. I fund folks in 12 states and have been doing this since the mid 80's probably before you were born... funded well over 1/4 billion in my day....
I make guys like you be able to cash in on your big dreams.. but I don't lend to anyone with no experience like you. neither do many other lenders if they actually know what they are doing... when your starting out yoiu need to raise friends and family capital get some experience then you can spout off on all your billion dollar ideas... keep at it
Well I know one who does, so good for you. And I could find 1000 more on Google in 2 hours. Google = "stated income mortgage lender," it's that easy. Or go to yellow pages.com and search similar terms.
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Account Closed
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Investor · Orlando, FL · Member since 2015 · 121 posts · 3 votes
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Originally posted by @Account Closed:

@Account Closed My bad... I swore you started this discussion saying "This is fast forward five years." I must of misread your first sentence in your original post. Congrats on getting that 3,000,000 dollar loan yesterday! Please tell me how the underwriting went, and I will love to see your hotels. I'm a couple of hours away and will love to buy you some Starbucks to hear how you CLOSED a 3,000,009 loan. Private message me and I'll be there whenever. I thought when I closed a 375,000 private loan in Ft Lauderdale was a success with no experience but that's a fraction of your accomplishments!
That's why I said in 5 years I will qualify for this loan. Maybe sooner.
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Account Closed
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Investor · Orlando, FL · Member since 2015 · 121 posts · 3 votes
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Originally posted by @Jay Hinrichs:

real movers and shakers in RE talk airplanes not car's anyone can buy car's... you will have made it when you have your airplane.. even you could probably go in and lease a lambo right now. cars are nothing airplanes are what put you in the big leagues.
It's all just a bunch of stupid junk they waste money on.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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spoken by the one who wants a lambo or 5 of them..... time machines are critical to success when you have business's in multiple states
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Dustin Hawks
Topeka, KS · Member since 2014 · 51 posts · 29 votes
11y
John Farmer I loved the spirit of the original post. I hope to see Farmer international organization all over fortune some day. As for the Hotel Business, I worked in it for many years out of college & margins aren't what you think they are and it is an extremely labor intensive business. My guess is that if the property is only half occupied because they don't have the $$ to fix it up. That would lead me to believe that the stated profit margins are as about as accurate as your stated income with these lenders.
4 Reply
Neal Collins
Developer · Portland, OR · Member since 2014 · 732 posts · 490 votes
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I can think of a couple better places to allocate $1.2m rather than a down payment for a $4m hotel.
I recommend studying up on the industry. It's tighter margins than you'd imagine with a bit more in-depth management approaches than just paying people by the hour.
The industry is changing big time right now. The major chains are starting to spin off smaller boutique brands. I'd be worried about holding the bag if a downturn comes and your occupancy halves.
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Steve Babiak
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
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Originally posted by @Account Closed:

Originally posted by @Jay Hinrichs:
@Account Closed ...
... Better question... Why do I keep giving away my billion dollar ideas for free?
I'll bite ... Because they're worth about as much as we're paying for them :)
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Joe Bertolino
Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes
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I insure several hotel guys that own 60 properties or so. It can be very profitable but it is not a hands off business and I would not consider it passive income. I don't want to discourage anybody but if it were the cash cow they were presenting in the sales packet, they wouldn't be selling it on the open market.
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Account Closed
Professional · Jacksonville, FL · Member since 2015 · 397 posts · 34 votes
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Originally posted by @Account Closed:

list price = $4.5 million
most recent annual revenue $1.7 million
most recent annual profit = $1.1 million
But... it had 140 rooms and only 70 were in use. They didn't have the money (or didn't care) to fix up the other 70, so I could make it even more profitable.
Really?
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Michael Leffelholz
Lender · Westfield, NJ · Member since 2010 · 85 posts · 23 votes
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@Account Closed you are obviously a newbie and there's nothing you can teach this individual :)
MicGael
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Investor · Orlando, FL · Member since 2015 · 121 posts · 3 votes
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Originally posted by @Michael Leffelholz:

@Account Closed with all due respect any commercial lender that knows what they are doing wouldn't lend to you with no experience. As much as there is a real estate component to hotels its is an operating business first and foremost.
I wish you the best but your plan lacks merit or forethought. @Jay Hinrichs you are obviously a newbie and there's nothing you can teach this individual :)
MicGael
Would you like my lenders phone number? What is hard about running a hotel? Nothing.
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Account Closed
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Investor · Orlando, FL · Member since 2015 · 121 posts · 3 votes
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Originally posted by @Neal Collins:

I can think of a couple better places to allocate $1.2m rather than a down payment for a $4m hotel.
I recommend studying up on the industry. It's tighter margins than you'd imagine with a bit more in-depth management approaches than just paying people by the hour.
The industry is changing big time right now. The major chains are starting to spin off smaller boutique brands. I'd be worried about holding the bag if a downturn comes and your occupancy halves.
Tell me how you would invest that $1.2 million better.
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Account Closed
OP
Investor · Orlando, FL · Member since 2015 · 121 posts · 3 votes
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Originally posted by @Joe Bertolino:
I insure several hotel guys that own 60 properties or so. It can be very profitable but it is not a hands off business and I would not consider it passive income.
I don't want to discourage anybody but if it were the cash cow they were presenting in the sales packet, they wouldn't be selling it on the open market.
Well they can't be at all 60, so why even be at one? Why not be sailing, working from home, or on vacation like they probably are.
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