How to price out a Lodge for purchase?

[Hans C Hormann]

Hello All,

My wife and I are try to decipher if a property could be a gold mine.  There has been a lodge / small hotel that has 10 rooms for sale for about 2 years for a ridiculous price. Now the owner has dropped it closer to a reasonable price and there might be a possibility of owner financing. That being said we are trying to study the deal to see if it makes sense and/or gain experience by analyzing this deal. We own/manage 3 cabins in the area and I am a realtor but have only really done residential sales. I have done some research and there are not books as the property has basically been a private family getaway for the past 20 years so it stopped function as a lodge back in the 90's. The property itself is in good shape. I spoke with our county and they have no current permits on the property as a lodge due to that face that its been around since the 1920's and I dont think the county was hassling with permits for this area in the 1990's. Now we would have to go get a special use permit and probably some other environmental permits to get the kitchen re certified. Our initial thoughts was to update some of the property to have more amenities to add to the guest experience and to offer it as a wedding venue. We would not want to open the old restaurant but contract with local catering companies to run the bar and food during special events and also offer corporate retreats. So far we had one person that we spoke with us give us some hypothetical numbers but I want to get possibly some other 2nd opinions before we start to think about making an offer. Thanks for any thoughts or Ideas.

[Bruce Woodruff]

You just have to project your potential income vs your expenses. The expenses should be easy to figure (purchase cost, renovations, maintenance, Capex, Taxes, Etc...), but your potential income will be an educated guess and you will have to take a leap of faith.

Good Luck....

[Leslie Anne Morris]

This won't be similar to that of managing 3 cabins.  You're buying a business.  You'll have a lot more overheard, employees, and to your point - all the licensing headaches.  I looked at a restaurant close to my cabins a few years ago and decided against it due to the additional complexity it presented.  At that time, it was better for me to take the money I was planning to invest and scale within my existing niche. 

[John Underwood]

Quote from @Bruce Woodruff:

You just have to project your potential income vs your expenses. The expenses should be easy to figure (purchase cost, renovations, maintenance, Capex, Taxes, Etc...), but your potential income will be an educated guess and you will have to take a leap of faith.

Good Luck....

 And to make it easier to decipher put all this in a spreadsheet so you change assumptions on the fly.

[Tyler Solomon]

Going to be very different then running cabins, as this is a small business. Much more CapEx and overhead associated, and will be hard to directly project performance unless there are similar lodges around the region.

[Michael Baum]

Hey @Hans C Hormann, sounds like an interesting project. I will say you can expect the city to get involved if you want to reactivate it as a lodge/business.

Before I did anything, get with the city and find out what they will require from you in order to move this forward as a working lodge with guests.

Also, you will most likely have to have the kitchen certified for use even if you just have others use it during events. It isn't like a church allowing the use of their kitchen during an event.

Any pics of the place? Love to see it!

[Hans C Hormann]

Quote from @Leslie Anne Morris:

This won't be similar to that of managing 3 cabins.  You're buying a business.  You'll have a lot more overheard, employees, and to your point - all the licensing headaches.  I looked at a restaurant close to my cabins a few years ago and decided against it due to the additional complexity it presented.  At that time, it was better for me to take the money I was planning to invest and scale within my existing niche. 

 Yeah, this is small property so staffing would be minimal since the 10 rooms are in a different building. Running the special events I am already familiar with.

[Hans C Hormann]

Quote from @Michael Baum:

Hey @Hans C Hormann, sounds like an interesting project. I will say you can expect the city to get involved if you want to reactivate it as a lodge/business.

Before I did anything, get with the city and find out what they will require from you in order to move this forward as a working lodge with guests.

Also, you will most likely have to have the kitchen certified for use even if you just have others use it during events. It isn't like a church allowing the use of their kitchen during an event.

Any pics of the place? Love to see it!

Sorry for how grainy the pic is

[Hans C Hormann]

Thanks for all the replies.... Look I get that its different then running a couple cabins, I am looking at the possibilities of streamlining things like laundry, maint and other things when buying this so that it makes it also cheaper to run my other three cabins. Aka in our remote area there are no cleaning companies, laundry services, or even property managers so we are considering that if we brought the lodge back to life we would also expand our cleaning management in the area... My biggest challenge is trying to comp the "hypothetical" revenue. I figured there would be someone on the forum that has tackled a project comparable or even analysed a similar deal.....

[Bruce Woodruff]

Quote from @John Underwood:

Quote from @Bruce Woodruff:

You just have to project your potential income vs your expenses. The expenses should be easy to figure (purchase cost, renovations, maintenance, Capex, Taxes, Etc...), but your potential income will be an educated guess and you will have to take a leap of faith.

Good Luck....

 And to make it easier to decipher put all this in a spreadsheet so you change assumptions on the fly.

Yes, I loves me a good spreadsheet! Everything I am trying to analyze goes into a spreadsheet.....

[Leslie Anne Morris]

Quote from @Hans C Hormann:

Thanks for all the replies.... Look I get that its different then running a couple cabins, I am looking at the possibilities of streamlining things like laundry, maint and other things when buying this so that it makes it also cheaper to run my other three cabins. Aka in our remote area there are no cleaning companies, laundry services, or even property managers so we are considering that if we brought the lodge back to life we would also expand our cleaning management in the area... My biggest challenge is trying to comp the "hypothetical" revenue. I figured there would be someone on the forum that has tackled a project comparable or even analysed a similar deal.....

 What's the area?  Do you have similar property types in the area and you can network with those owners?

[Hans C Hormann]

Quote from @Leslie Anne Morris:

 What's the area?  Do you have similar property types in the area and you can network with those owners?

Its close to a national park in the sierra Nevada mountains in California.  There is only one place nearby (15 miles away) that is a lodge that has a restaurant, and a store and some rooms and it does happen to be forsale.... Its not exacly apples to apples though. I have looked at the 3 rooms they have and they have decent occupancy, but not sure if we bought current property if we then would almost flood the market with the increase of hotel rooms.

[Leslie Anne Morris]

Quote from @Hans C Hormann:

Quote from @Leslie Anne Morris:

 What's the area?  Do you have similar property types in the area and you can network with those owners?

Its close to a national park in the sierra Nevada mountains in California.  There is only one place nearby (15 miles away) that is a lodge that has a restaurant, and a store and some rooms and it does happen to be forsale.... Its not exacly apples to apples though. I have looked at the 3 rooms they have and they have decent occupancy, but not sure if we bought current property if we then would almost flood the market with the increase of hotel rooms.

You'd probably really need to know the area then to estimate what guests would actually be willing to pay.  Not sure there is some sort of easy metric.

[Roi Ford]

Would it work as a short term rental?  That seems like a pretty unique property.  It may work to your benefit and be an attraction.  Just throwing out ideas.