MOTEL bank financing?

7 Replies

around 60 units in Midwest.   current 50% occupancy  --- gross income: $500K  expenses: $210K   -- price around $750K

Is it an OK deal?

For buyer, what type and term of loan to get ? how much down payment needed?  25%?  

If Gross is $500k, for last three to five years, then, the price seems right. 

Just get property inspection done dilligently for deferred maintenance.

Also get seller CPA certify the Gross sales and the expenses, at lease of last three years.

See what items of expenses are NOT included or are LOWER. Mostly wages and maintenance/repairs expenses will be lower, under reported.

What is the debt service for the year? Is mortgage assumable, or can owner hold some part of the price for five to ten years? 

25% to 35% down payment could be expected, depending upon the credit, experience in business etc.

It is commercial loan under 750k, so terms are shorter, with fixed rates for 5 to 10 years, and 20 or 25 years for amortization. Anything better is your good effort, good credit and good luck.

Check if another Hotel or Motel is going to be built in nearby area per city planners.  

See if the sales are likely to go down for any reasons.

Will the seller give Tax returns copy to verify? 

Get Non-Compete from the seller within 20 miles or so.

@Ethan Smith

Price is hard to say without more info.

As for Down payment hotels in general require a reasonable down payment. However if you get an SBA loan, you could put down as little 10% from what I remember, it may have changed to 15%. This would be your best bet, as there is not really an appetite to lend for non flagged motels. SBA guarantees a portion of the loan against default so the risk is reduced for the lender.

Originally posted by @Ethan Smith:

around 60 units in Midwest.   current 50% occupancy  --- gross income: $500K  expenses: $210K   -- price around $750K

Is it an OK deal?

For buyer, what type and term of loan to get ? how much down payment needed?  25%?  

 Who is going to manage?

Hi @Ethan Smith, do you have more information about the property such as ADR (Average Daily Rate) and RevPAR? Borrowers can get an SBA 7(a) for 25 years fully amortized, which would mean lower monthly payments. Down payment needed would be 25%-35%.