Real Estate Agent · Tempe, AZ · Member since 2021 · 14 posts · 10 votes
Anybody have any experience running a small boutique hotel/motel? This is about 50 units - half traditional hotel rooms and half more studio/1 bedroom weekly or monthly rental. Looking for help on what percentages should be for expenses at this scale and any creative financing options?
I am wondering if you got this question answered, my wife and I are looking at a 19 bed motel in our area, we are looking for help structuring the deal, calculating expenses and potential creative finance options.
Rental Property Investor · Philadelphia, PA · Member since 2021 · 774 posts · 501 votes
3y
Chelsea - I don't have an ownership experience at the moment, but I'm currently evaluating a deal that is a 28 unit and similar dynamic with weekly/monthly rentals rather than longer term leases. Let me know if you want to connect and discuss. Thanks!
I am wondering if you got this question answered, my wife and I are looking at a 19 bed motel in our area, we are looking for help structuring the deal, calculating expenses and potential creative finance options.
Chelsea — on a 50-key limited-service property running half transient, half extended-stay, rough rule of thumb: rooms department expense runs ~25-30% of rooms revenue, and total operating expenses typically land 60-70% of total revenue before reserves, leaving a 30-40% NOI margin — but verify everything against the seller's trailing 24 months, and haircut 4% off EBITDA for the FF&E reserve before you call it NOI. Deferred capex is where motel projections go to die.
On creative financing: start with the seller. Paid-off family motels are everywhere, and our opening ask on every deal is a 25% seller note (7%, interest-only, five years, clean second position behind real equity) — no bank debt that can force a default in a soft year. If you'll owner-operate, SBA 7(a) is genuinely good paper for this asset class.
Value it at 10x verified trailing-24-month average NOI, never the broker's pro forma. If the trailing number doesn't support the price, walk.