Questions on Purchasing Small Motel Outside Major National Park

[Tyler Hofer]

I've been digging on the forums for discussions around the purchase of motel properties. I am currently looking at a property that I think would be a great investment but I am looking for advice and wisdom in the area. Here are the details:

It is a small 15 room motel in a small town outside of a National Park located on a main road where thousands of cars pass it every day. I've done my research and talked to other motel owners in the town (who were surprisingly willing to be helpful!) and it seems like the town's hotels/motels book out in the summer season (May-September) and have more lean months in the winter. It looks like there is some low hanging fruit in the summer months and opportunities to build business in the winter for someone who is a go-getter and wants to break into some niche markets that come to the area for winter sports. Visited with the Chamber of Commerce people and they were excited about the opportunities that exist in the off market season, which I found encouraging.

PROPERTY DETAILS: 

The property itself is not currently operating as a motel. It has been not been in operation for a number of years and as a result is going to need some renovations before it can be opened. I have seen the property in person and the rooms definitely need some work but are not in disrepair. I imagine the property undergoing two phases. Phase one is get things updated enough to open (new beds, paint, flooring, etc.) then Phase two happens in the off season and in smaller chunks of rooms at a time to get it to where I would like it to be long term. There is also tremendous opportunity for growth on the property, which is located on a large lot, with additional units or creative ways of generating more income in the summer months. 

The motel also has a two bedroom residence attached which we would live in for the time being, but could be offered to a manager down the road. 

As I mentioned before, the property is on the main street of the town and is in a prime location for vehicle traffic. I would assume that just the land the buildings sit on is fairly valuable.

RED FLAGS:

The motel was a mom and pop operation and has ZERO financial records. It is currently in a trust that has proven difficult to work with. In early negotiations the trust's realtor was certain they would go for an owner finance option, but when we came to terms on a price they backed out on that option. 

Banks don't want to touch a property like this, especially with how 2020 has gone in the hospitality industry and with zero financial records on file. At this point we are thinking we are going to have to look into private lending as our only option. 

I realize that investing in a motel property like this is not passive income and would be a full time job. That actually excites me. I am a creative person with experience in the hospitality industry so I get excited thinking about the potential of this place and the creation of a new brand. In regards to the current market in the hospitality industry, I have been reading articles that are saying motels are actually booming during the COVID pandemic. They naturally cater to social distance with limited common spaces, doors that open to the parking lot, and private rooms without hallways or elevators. Other motel owners in the town confirmed this, saying this past summer was the best summer for business in years. With more people traveling by car in this season, it seems like motels could be a good option. How long that trend continues is yet to be seen.

We have been digging and researching this for a few months now and I would love feedback and wisdom on the topic.

What kind of financing options are out there for a property like this? We would need to get creative. 

Has anyone had any experience renovating an old motel/motor lodge and operating it? Would love to connect.