Hotel/ Motel Investment

Member since 2018 · 6 posts · 2 votes

Hello! My business partner and I are considering investing in a 24 room inn/motel that is for sale in our area - this is our first property outside of apartment buildings, so I am hoping to find someone with expertise in the hotel business that could help give me some insight. Is anyone out there familiar? It will just take a few minutes of your time and would be so, so appreciated!

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Member since 2020 · 984 posts · 1k+ votes

Originally posted by @Shiv Patel:

Happy to help. We've been investing in hotels for quite some time.

Wow!!! Before I saw your post I was thinking of the name 'Patel' since we have a 16-room motel 200 feet across the street from my office and the owner's last name is Patel. There must be a lot of money in the business because I am always amazed about how much money he spend on the motel and he tore down a separate house he lived in on the property and build a mansion.

As for someone investing who has no experience, I think someone who invests in a hotel or motel should understand that it is a 24-hour business that requires 100% around-the-clock employees willing to work during every major holiday even during the worst weather conditions, storms, or through whatever crises and current events are happening.

The business requires several different shifts of workers for the front desk, several shifts of room-cleaning workers since many hotels and motels have guests coming and going 24/7 and they want to re-rent rooms asap, constant room maintenance for plumbing, heating and cooling and the guests come in all shapes and sizes with all sorts of inherent problems when it comes to the things they do both on the property, in the rooms, on the bed linens and then add the dealing with drug addicts, potential prostitution, potential sex-trafficking, potential sexual abuse in general and abuse of a minor, damage to the property, out-of-control parties, lovers having fights on the property and in the rooms, damage and theft to the linens, damage to bedspreads, and damage to the flooring.

Since I am a plumbing contractor, many motels and hotels call my company to remove drug addicts' heroin needles stuck in toilet bowls.

Before making an investment into a hotel or motel an investor needs to take a serious long amount of time to look at the books to see whether or not business in the area is declining, but since the hotel and motel business is one of the greatest cash businesses' in this country you can bet that many sellers will make you well-aware that the 'real' income cannot be verified.

I did a lot of research for the past 20+ years, looked at more than 100 hotels and motels for sale and declined to purchase most of them due to the decline in sales in most areas they were located in. Many of the motels I looked at were eventually torn down and many were less than 1 mile from huge amusement parks like Disneyland and Knotts Berry Farm a fairly well-know and super busy amusement park only 7 miles from Disneyland.

So, don't let sellers fool you with words like 'lot of money in the business' because every business has some sort of inherent problems and you should want to find a business with the least number of inherent problems and the best ROI.

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Mark Zajaczkowski
Member since 2021 · 17 posts · 2 votes
3y
Quote from @Cliff Benner:

@Mark Zajaczkowski Congrats on building it up! Hoping that you are selling to move on to bigger and better! That was an awesome strategy!

Thank you! It has not been an easy decision and I know motels don't typically sell fast (We might be in for a haul, but I think our price will be very competitive especially for Colorado). We've definitely improved the property and business-My wife started her own business 2 years ago and I want to help her when I can and hopefully invest in more Real Estate where we live and maybe a 2nd home/rental somewhere warm
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Tim Debronsky
Member since 2021 · 4 posts · 1 vote
3y
@Mark Zajaczkowski We just came across a 39 room motel in my market. How long it took you to turn around the motel? Was it a difficult process? I’m a single family investor/Landlord not a motel investor. We’re considering flipping it after turn around.
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Norm Kopesky
Investor · Neenah, WI · Member since 2017 · 21 posts · 7 votes
3y
Quote from @Tim Debronsky:

@Mark Zajaczkowski We just came across a 39 room motel in my market. How long it took you to turn around the motel? Was it a difficult process? I’m a single family investor/Landlord not a motel investor. We’re considering flipping it after turn around.

standard disclaimers, market, occupancy, staffing, property condition blah blah blah..
It takes us about 3 months to scrape out the bad tenants, get a quick tune up and be cash flow positive. once winter hits here in Wisconsin we go through another round of evictions. (10%) a month till we have it truly stabilized... as those units come vacant we upgrade those to the next level of quality. this will always be a class c property though...
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Tim Debronsky
Member since 2021 · 4 posts · 1 vote
3y
Thanks! @Norm Kopesky After you stabilize do they cash flow very well? Is a 50% occupancy a conservative number to use for our pro-forma?
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Norm Kopesky
Investor · Neenah, WI · Member since 2017 · 21 posts · 7 votes
3y
Quote from @Tim Debronsky:

Thanks! @Norm Kopesky After you stabilize do they cash flow very well? Is a 50% occupancy a conservative number to use for our pro-forma?
The national average for occupancy is about 47% if memory serves, again tons of variables.

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Tim Debronsky
Member since 2021 · 4 posts · 1 vote
3y
Thanks again @Norm Kopesky!
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Calvin OzanickBusiness Member
Property Manager · Janesville, WI · Member since 2017 · 708 posts · 297 votes
3y
Quote from @Brandon Thurman:

Quote from @Norm Kopesky:

looking to restart the thread and get an update from the different members.
I currently own 4 motels in Wisconsin
1 under contract
2 in negotiations
Hoping to connect with you, Norm. Looking to acquire our first motel soon.
I would love to connect with the both of you. We operate out of Janesville, WI, but have connections in most of south central Wisconsin!
Wisconsin Property Managers4.7414 Reviews
Website View Page
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Jonathan Mueller
Real Estate Agent · Park City, UT · Member since 2016 · 113 posts · 112 votes
2y
midwest moteliers unite!! I have a motel in Menominee Michigan, base of the UP. And I have one in Western Colorado that's a bit bigger. Finding labor and talent is the hardest part of this biz. But it's great cashflow and worth the headache most of the time. @Norm Kopesky where in Wisco are you?
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Norm Kopesky
Investor · Neenah, WI · Member since 2017 · 21 posts · 7 votes
2y
HQ is Appleton, where we have our largest at 31units
Omro 24 units
Necedah 22 units
Racine 22 units
Oshkosh 12 units
Talent is an issue for us as well, I’d like to sell the Racine location just because it’s the furthest from home for us.
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Jonathan Mueller
Real Estate Agent · Park City, UT · Member since 2016 · 113 posts · 112 votes
2y
That's awesome, I have a 8 unit in Menominee MI and a 23 unit in Fruita Colorado, and just bought a 108 site RV park in southwest Michigan. I was actually looking for another motel when I found this mis labeled RV park for a good deal! Do you have onsite managers at each of your properties ?
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Elizabeth ConnellyPro Member
Member since 2023 · 2 posts · 0 votes
2y
This is all great info @Norm Kopesky and @Jonathan Mueller and @Mark Zajaczkowski. I'm just getting the motel bug recently. How to do estimate utilities for pro forma? I'm a data nerd so I try to be tight and very conservative with my numbers. Do you estimate per unit or just overall size of the property?
It's my first commercial attempt so I'm hitting hurdles I don't have on the residential side finding tax info and such.
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Norm Kopesky
Investor · Neenah, WI · Member since 2017 · 21 posts · 7 votes
2y
Quote from @Jonathan Mueller:

That's awesome, I have a 8 unit in Menominee MI and a 23 unit in Fruita Colorado, and just bought a 108 site RV park in southwest Michigan. I was actually looking for another motel when I found this mis labeled RV park for a good deal! Do you have onsite managers at each of your properties ?
I do have onsite managers, that is the key position to the whole project.
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Norm Kopesky
Investor · Neenah, WI · Member since 2017 · 21 posts · 7 votes
2y
Quote from @Elizabeth Connelly:

This is all great info @Norm Kopesky and @Jonathan Mueller and @Mark Zajaczkowski. I'm just getting the motel bug recently. How to do estimate utilities for pro forma? I'm a data nerd so I try to be tight and very conservative with my numbers. Do you estimate per unit or just overall size of the property?
It's my first commercial attempt so I'm hitting hurdles I don't have on the residential side finding tax info and such.
I would be requesting actual copies of all docs from the seller, (seller pro formas are dog crap) we have averaged 46-47% expenses at full occupancy, across 5 properties.
Depending on region, heat and AC are our biggest expenses by far. Old buildings…
we are functionally running these places as efficiency apartments to dollar tree tenants. High risk, you have to stay on top of it, we also have not found any third party management that’s interested in hiring on…
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Jonathan Mueller
Real Estate Agent · Park City, UT · Member since 2016 · 113 posts · 112 votes
2y
I agree with @Norm Kopesky, get docs and past utilities from the seller or get permission from the seller to contact utility company. This is one of our biggest expenses, without info from the past, it's really hard to come up with a number for utilities.
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