Master Lease Hotel?

3 Replies

Hi all, my first forum post...

I am looking at pitching a master lease option on a hotel in Florida.  Apartments are easy to figure up how much to offer on the lease payment.  How do you determine what to pay in the master lease payment?  With vacancy changing daily, how do you calculate a lease payment?

Any insight is greatly appreciated!!

@Marty True

It is based on the NOI of the hotel. Look at the income.

But you are not leasing it.  You are managing the hotel, like a rent a car business.  

Customers need to lease 100% to maximize business.

I would set up a management contract for salary plus bonus.  

@Marty True 

@Bill Gulley any thoughts?

Marty, you have a lot of home work to do.

First, what do you know about the hotel business?

Yes, as Brian mentioned, you need the gross and net income from operations. That income will not be daily or divided by 365 or 360, it is usually very seasonal, sparatice cash flow.

It is seasonal,I'd think in FL whn the snow birds leave and the sun is blazing traffic would slow down.

What kind of hotel? At a resort, down town in a business district, who is the target market?

There will be the costs of the bricks and dirt, but you're valuaing a business operation not just real estate.

If you don't have a strong accountingand finance background, you need someone who does, a CPA would be versed in valuations.

What are you really trying to accomplish, buy the place, run it and manage it or turn it all over to qualified folks and increase the profitability for yourself?

I've never heard of a hotel/motel owner going for a "master lease", guess it depends on how despirite they are. Flag hotels may have management agreements along these lines, but those aren't really a master lease.

What's your experience and your goal? Did you just see a hotel for sale and thought to apply this strategy?

Good luck :) 

Thanks for the replies guys, the opinions/insights are interesting.

@Bill Gulley actually I know a lot about the hotel business. And master lease options on hotels is nothing new at all... A lot of people that are using the master lease strategy in commercial properties are applying it to hotels.

But thanks for the input, I think I got the data I was looking for.

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