Seller wants to sell the LLC that owns the STR plus reviews

[Elaine Perales]

Hi ,

I found an amazing STR for sale. DSCR ratio above 2, CoC 20%+,. Great! But the owner wants to sell the property plus the business. No seller financing no , no earn outs

What should I pay for the business 1x or 2x? It has two years work of performance and 200+ reviews avd 4.9+ stars. 

Killing me since I would have to finance over 10 years at SBA rates .. yuck.

Thoughts on better approach to this offer?

[Michael Baum]

Hey @Elaine Perales. So this is kinda weird. 

This would be common for a "normal" business like a retail store or the like, but when you are dealing with a real estate business featuring STRs, things are different.

In the end, the house is worth what the comps say it is worth. The rest of the business...hard to analyze that. There are 200+ reviews, ok, what else is there? 

Technically the reviews can't transfer and both VRBO and AirBNB might not allow it even if the LLC stays the same. The LLC will transfer to new owners so that might trigger them to force you to start over so I wouldn't rely on that at all.

IMHO, the business side is worthless. The value is in the property. If they are charging you a premium, then I would pass. There is a reason they are doing it this way. They might want more money than it is worth and know it won't appraise at the value they want. 

The bottom line is that past performance is no indication of future earnings. You aren't buying a McDonald's.

I would pass.