I recently called on a property owner that evicted a tenant. I found out he owned a 10 unit motel and 3 single family homes that he rents by the room. He wants to sell them all as a package deal. I am fairly new in investing and not sure how to price the motel. I have a partner that took a buyer to the property that may be interested. My thoughts are to get it under contract and to shop it and assign the contract. Suggestions.....
I have no real knowledge of hotel/motel but am looking at a similar deal and thinking through numbers / options (I came across your post searching for info on motel investing) since no one responded, I'll give my two-cents. I think you price motel as a business, or at least commercial real estate. Meaning that you figure out the net profit and calculate cost based on local cap rate.
You need all the detail on costs, and may miss a cost not knowing the motel business. My main problem with the numbers is staffing. If you have to staff a motel for check in / check out / surveillance etc. I don't think you can make it work with only 10 units. Think about a single staff person for 8 hrs. Say $15/hr (when you consider benefits / payroll costs, etc) so $120/day. This is just for 8 hours, you probably need two shifts check out and check in, or three? As near as I can tell vacancy rates for motels vary wildly, but 40% vacancy is not uncommon. $50/room/night at with 40% vacancy is really $30/room/night. So you essentially need 4 of the rooms to pay for just the staff member ignoring all other costs. I think you could price this if you asked enough of the right questions and got documentation on everything (any possible expense etc.). Maybe owner is getting $150/night, or renting at weekly rates or whatever. Maybe has some innovative check in system that does not require staffing. I am looking at an auto-checkin kiosk system to eleminate staff, but I don't know the demand with a motel with no staff (except cleaning).
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