STR hotel house hack with creative financing

[Craig Jones]

Yes, it's BP buzzword bingo -- but also a real deal. We're closing in a couple weeks on a 5-room motel in the Tahoe area that also has a 4 bed / 2.5 bath / 3000 sqft SFR "manager's unit" that will be our primary residence. Year round tourist demand in Tahoe creates lots of opportunity for the guest rooms. The town treats it as a commercial lodging property so it's exempt from heavy-handed local STR restrictions.

The sellers have been open for biz only part time in their retirement.  Which created historical financials that made commercial financing pretty much impossible.  And no lender was willing to look at financing it as a residential property.  In the end we pitched seller financing, which I thought they'd never go for, but we ended up working something out on pretty favorable terms.

I'm interested to connect with others who are doing boutique hotels / STR hotels, whatever you want to call it. Especially on the software stack you are using. We use OwnerRez + PriceLabs for a traditional STR we own which I've been very happy with. But not sure it's the right fit for this property. And wondering if I should be looking at platforms like CloudBeds, ReservationKey, ResNexus, etc.

[Michael Baum]

Hey @Craig Jones! Gratz on the purchase! Very cool IMHO, especially the owner financing.

From what I have seen, a lot of smaller hotels (even larger ones) use VRBO and AirBNB.

Now this is a bit different but it is still a whole place to yourself.

A couple of questions. Are these simple hotel rooms or do they have kitchenettes? Will you be adding them? I can see an advantage to having a full service place vs a simple room.

[Craig Jones]

Kitchenettes are a great idea, but zoning won't allow it.  Current zoning would prohibit the whole setup actually, but the building and commercial use are allowed to continue as-is because they predate the town's incorporation in 1993.  It can't have any more guest rooms than it already does and the commercial use loses its legal non-conforming status if the main residence isn't occupied by the property owner or an onsite manager.  So in theory it can't be a LTR if we move out someday, but a lease naming a tenant as "manager" probably gets around that.

I've thought a bunch about how to improve the property's cash flow, and there's lots of marketing and operational low-hanging fruit before we get to capital improvements.  One idea we want to test out is a room setup that can accommodate families who would need two rooms at any other hotel.  Like families with three kids or two teens who refuse to share a full/queen.  Theme park hotels and places like Great Wolf Lodge who have rooms like that charge big bucks for them.

We could possibly add an ADU, but as LTR only.

[Sarah Kensinger]

Rich Sommers has lots of great content on boutique hotels and so does Micheal Sjogren, so make sure to check them out. I know most boutique hotel operators use Pricelabs with Cloudbeds and have been pretty happy with that set-up.  

Congrats on getting the deal worked out! Your story of "bad" financials that banks laugh at is all too common. Many many deals fall through because the owners are not willing to go the seller financing route and believe they're sitting on a gold mine.  

[Andrew Steffens]

That sounds awesome - and I am a big fan of Tahoe.  One of my favorite places in the world.

We have some MF units essentially operating as mini hotels.  Still booking mostly come from Airbnb/VRBO but also Booking.com more than our houses on there. 

[Bradley Buxton]

@Craig Jones

Congratulations on the purchase.  I'm in the Incline Village, NV area and can connect you with the owner of the Incline Lodge. They recently completed a huge remodel. I'll send you a PM.

[Jeff E.]

Congrats!!  love the Tahoe area.    Definitely look at cloudbeds & thinkreservations.com, also pricepoint.co  for pricing & akia for guest messaging/automation.