Hotel/ motel valuation

2 Replies

Need help on evaluating a deal on a motel. 

I've made a list of information to request from the agent, but want to make sure I'm not forgetting anything. Here is what I've come up with so far:

Gross income/NOI for the last 3 years, and expense breakdowns, ADR, RevPar, Average occupancy, Cap rate, any deferred maintenance.

Are there any specific tax forms I should request? What other info should I request? 

What numbers are most important? And what numbers would it take to make the deal work? 

What I know so far: 

15 rooms +managers suite, $300,000 asking price. Property tax a little over$3000 a year.Has been on the market over 6 months. It’s in a rather rural area, a little off a highway. The closest motels are 10 miles in both directions, with larger cities/motels 20 Miles in each direction. I believe the owner is out of state, as am I, but I have parents/siblings 45 minutes away.

Currently only offers bookings by phone, not even email. I feel offering online bookings would increase revenue.

The only area of concern I’ve gathered so far is the current manager. It has a 4 star rating on TripAdvisor, and 3 star on google. Most of the poor reviews are due to the manager. Multiple reviews say he is too interrogative, and yells in person and over the phone. I might’ve worried if it would be a hassle to get him off the property peacefully and train a new manager.

I want to send an email to the agent, but I want to make sure I’m asked my th right questions. Thank you for your help! 

I’ve done a deal similar to this last year. I’d be happy to offer my experience if you’d like. Feel free to Private message me. One quick tip is to get an insurance quote early in the process. If you are a new owner the rates may be quite a bit different than what the current owner is showing on their financials.

Put together a pro forma (downloadable template)

Accounts for acquisition cost, rehab and FFE (Furniture Fixtures and Equipment), professional fees, annual income, operating expenses and will help you calculate your gross, NOI and cash flow to 10+ years out.

Call local service providers and get actual costs for things like trash removal, internet service, insurance, etc. to plug into your template.