Help Me Analyze a Apartment/Motel Opportunity

[Dan Cho]

So I recently came across a apartment/motel opportunity in upstate NY. So their are 2 properties, one is basically a building with 3 apartments inside and the other building is a 9 unit motel. So basically here are the details below:

Asking Price: $575,000

2014 Revenue: $71,000

2015 Revenue: $100,000

Jan-June 2016: $55,000

2015 Laundry Cleaning Service: $2,500

2014 Laundry Cleaning Service: $1,680

Electric 2015: $5,641 yearly

Water 2015: $990 yearly

Insurance 2015: $2800 yearly

2 Separate Buildings: 1 has 9 motel room and 1 has 3 apartments

-Owner claims that 1 apartment rented for $850 and uses 2 apartments for family. Rent on this unit is below market and I believe rents on apartments can be $900-$1,000. Also I won't be living here so I can definitely rent these units out. Motel rooms currently has 3 people living there long term and charges $250 weekly.

-Owner claims about 90% occupancy thus doesn't advertise on any of the major booking sites other than google.

-Owner claims that room cleaning, maintenance, is performed by one of the tenants who he pays about $70 on average weekly.

-Major renovations have been completed since purchase in 2012, new roof, new HVAC, new bathrooms, new pluming, new insulation, new 32'' tv, etc done on both properties.

-Owner claims to be selling due to going on to bigger project hotel up about an hour from current location.

Did my own analysis on the project and seems like I can get 13%-20% cash on cash roi, depending on how much I put for down payment. Love to get your opinion on the matter. Thank You.

[Ned Carey]

@Dan Cho

First you are using gross revenue instead of Net Operating income in your formula.

What are the other expenses? Trash, maintenance, lawn care etc. There are a LOT more expenses than listed.

It is a motel. You are not just buying real estate you are buying a business. Who is going to run the motel? Who is going to handle maid service? 

You are missing  LOT of numbers from your analysis. Perhaps the rental property calculator can help under the tools tab. But that still won't account for the business aspect of the motel.