Buying a motel for grandparents?

Question

My grandparents are selling their 5 room hotel (they fully own it). This motel has a one bedroom house (Maine residence with office for motel) and a two bedroom mobile home on the property renting for $200/week. It is also sitting on nearly 6 acres which only about half used. They have told me that in 2017 they made a profit of nearly $30k after doing extensive renovations (new deck, floors, showers, etc..) this is where they live and they do all of the work.

I want to buy the motel from them, but I have a day job which pays much more. So I could hire someone to run it during the days but with that and mortgage that pretty well soaks up the profit.

I have already considered ways of increasing profit:

-Update systems for online reservation

-look into marketing to bring more attention to the motel

- and currently they are not doing well health wise so they haven't been trying to get any more business than necessary.

But I am looking for ideas on how I could manage to make this property profitable for me. Any thoughts? Thanks!

Jimmy Klein · Answer

As Greg said, at 5 rooms it wouldn't be worth it to hire someone to run it, it would eat up all your cash flow.

Justin Bearce · Answer

Thanks everyone for the input! I have come up with a potential solution. To verify it's ability to succeed I am going to sit down with them and go over their numbers (didn't want to bother them until I had a solution). If I know it can stay afloat my remaining problem is financing it.

I have been trying to find an option where I pay no money down. Or at least low money down. Does anyone have some advice on that?

Ronald Rohde · Answer

Airbnb or other STR are nearly a full-time job. Furnished rentals could make it worth it for onsite PM though.

Colleen F. · Answer

You have to run the numbers. Get their occupancy and expenses ect and see what sort of occupancy those numbers are based on.  If it is an extended stay motel or a B and B type it makes a difference.   As a hospitality short term rental you likely have to have someone on site daily. If you went to more long term rentals you would not  need a daily check in ect. Although Airbnb people do check in without humans with key boxes.  On the other hand that may decrease your rate.  You still have to figure a cleaning person and some one for fix it even with longer term rentals.

Pat L. · Answer

We have a few small nondescript ones around here that cater to half way housing/early release demands. They make a killing as its state subsidized & they behave or else.

Greg H. · Answer

Typically these type of properties only work for an owner operator. If 2017 was a typical year, you are more likely looking at a negative cash flow situation

Buying a motel for grandparents?

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