Any one bought a small motel?

Question

HI All,  Would love to hear from anyone who may have purchased a motel.  I am looking at a small 16 unit motel and would love any feedback on owning one, do they generally cashflow if there is enough demand?  Are they a sound investment?  Any tips on the buying process???  Thank you!!!!

Pat L. · Answer

Met a local guy who has an old run down motel that's been in the family for 30+ years. He basically turned it into a 1/2 way house for parolees & he tells me he gets $875/month from the state &/or 'socialist services', the place is a dump but a gold mine as is.

Terrell Garren · Answer

@Heather Russo I have no doubt there are very good deals and very bad deals in this space.  The only advice I can offer is something I heard on a Podcast.  A caller asked a question similar to yours but regarding a car wash.  The speaker responded that most investors desire to move to the lower right on the RK cash flow quadrant where their money works for them.  Buying a car wash (or motel) is more akin to buying yourself a job.  Best, Terrell

Account Closed · Answer

@Justin Bauer you have a wealth of knowledge on the topic that’s being discussed in this thread:) Please share concerning the topic at hand with your experience. You don’t seem to be pitching something so  your insight would be a welcome on the topic.

Account Closed · Answer

@Justin Bauer share with the public right here:)

Laura Waltz · Answer

I've been in the hotel industry for over 15 years, so here is what I would make sure you're considering based on what I've seen over all those years.

16 rooms might not be large enough to generate enough income to pay someone to manage the property for you and still make your desired profitability (it really depends on the ADR and Ocupancy for both that property but also similar properties in the market).If you don't have someone else managing the business it is going to be a full time job for you.

Extended stays limit check ins and check outs, but you still have guests who need things, maintenance issues etc. You still need staff 24/7. Plus when they do leave there is a lot more cleaning involved than in short term stays. Check local and state ordinances on extended stays. In California if a guest stays more than 30 days they get treated as tenants and then you have to go through the eviction process if they don't leave.

How good of an investment this turns out to be will also be really dependent on the condition of the property, how well it's currently being run (are there operational inefficiencies you can fix to increase profitability?), what the comp set ADR and Occupancy numbers are (is there room for growth?).

Hope that's helpful!

Justin Bauer · Answer

I Would not know where to start. I could right a book.What would you like to know?

Justin Bauer · Answer

I have a 16 unit Motel in Minnesota that I have run for 20 years and will share about our experiences with you. Message me

Heather Russo · Answer

Thank you so much Nik.S  great info!!!    I will look to the city to see if they allow extended stay , that was the direction I was going to go with them to cut down on the daily work flow.

Nik S. · Answer

@Heather Russo

You will have employee(s) who manage and or clean. It’s 24/7 business. Depending asset class / location will tell you clientele. Family has several motels. It’s definitely not too passive as you have to collect books daily etc. Is there drugs/prostitution in the area / motel? Smaller motels are generally cash oriented business with some CC usage of course.

Owner operated motels do pretty well on a CoC basis. You’d be surprised at the profit on smaller motels. I remember people mentioning that they never see cars at some of the motels owned...I laughed because they were always full, the guests didn’t have vehicles :-)

I’d recommend only buying motels where the city grants the property as “extended stay”. Meaning guests can stay longer than 30 days. I’m not sure of the guests the motel attracts however a lot of motels I am familiar with have guests that generally want to live there however it’s illegal in many cities.

Heather Russo · Answer

Thank you Terrell, I definitely do not want a job :)  I really appreciate you responding.

Any one bought a small motel?

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