Strategies on renovating a rundown beachfront motel

[Leon Lee]

Hi, Fellow BPers

I have a question on what strategy is the best on turning a rundown motel we recently purchased and would appreciate your inputs:

This is a 20-unit beachfront motel that has been poorly run in the past 3 years. A few examples include several units with bed bugs; moldy grouts in about half of the bathrooms. Yellow stains are everywhere on mattresses and pillows\ inserts that probably will stop 90% of travelers from sleeping there. But because of the beachfront location, the business is still ok, although it is not profitable. For example, it is still fully booked during  the spring break (although a major reason is significantly under priced nightly rates due to lack of experience and pet friendly policy)

To turn this motel, we are thinking about two strategies: the first is to incrementally improve the place, i.e., replacing all these nasty mattresses and beddings, re-caulking bathroom tiles, adding some nicer furnitures, etc.. But kitchen, bathrooms, paint and floor eventually all need to be redesigned and redone. The second strategy is to keep most of the units untouched and operate them as is, to generate some cash flows. In the mean time, we totally gut and renovate one or two units at the same time. 

So what will you experienced investors do for such situations. Since it is a long-distance investment, we do want to keep certain cash flow to reduce the risk. Are there major points that I am missing?

Thanks in advance!

Lee 

[Michael Baum]

Geez @Leon Lee, that sounds both awesome and terrible at the same time. A couple of questions:

Do you have all the funds to completely redo the whole place at once? Can you absorb the loss of revenue while that occurs? Where is it located? Are there some rooms better than others? How far away are you from the property?

Personally I would plan to do the whole thing at once if I could. Otherwise, do a minor clean up in the best rooms and go from there. i would immediately toss each and every mattress in the place and start there. Remove carpets and replace with some kind of LVP on the cheap. Take care of the obvious problems in all the rooms right away. Then pick the worst 2 and start there.

Some pics would be helpful. Good, bad and ugly.