All Forum Posts by: Jimmy Klein

@Chris Winterhalter

Well said Chris. The hotel industry is segmented as Chris mentioned. Your $1-$2 million properties are typically exterior properties, most are independent, others have a lower economy brand under a flag such as Econo Lodge or Motel 6. Then as you move up, your playing in Choice Hotels, Hilton, Marriott, and IHG. These start from limited service hotels with no food and beverage components outside of your complementary breakfast. 

If you plan to hire a property management company, your most likely going to simply be an investor and just get passive income. Problem with management companies is that in order for them to work, you need them to manager larger properties due to scale. If you put in a management company for a smaller property, its like throwing money away. That's why most smaller hotels are run by owner-operators, some that live on site, and others that own several properties in the vicinity. Even though I live in Florida, I am investing my money with a family run operator who have a very good track record. They are getting 40%+ NOI margins on the properties they run and own. This is because they are so active in their business. My partners and I only stick to limited service as we can avoid food and beverage outlets which are typically cash drains. We run lean expenses as well. If you plan to get into the hotel industry, it is not for the faint of heart. It's better that you put your money with an experienced operator so you can understand the business or maybe invest in some REITs.

Shoot me an a PM. I currently have hotels and thats my primary business.

We are currently looking at developing or acquiring an extended stay property. The market is very good for them right now. Typically, the extended stay model is done on a weekly basis. Housekeeping is done maybe twice a week instead of daily. Front desk is not available for later hours. Studio style suites with limited amenities. Its a good business.

@Chris Winterhalter

Yes, we could pull STAR reports from the system, but I don't think lenders can simply do it based on STAR reports. I know conventional is not possible right now. We have been in discussions with a few bridge lenders, but all require 3 years tax returns and financials, the STAR report is not enough. 

We essentially need a quick loan maybe 50% of purchase price, that can close in 30 days with no docs required. Will come with personal guarantees and we don't mind the higher interest rate, but don't know anyone out there that can do this.

I know this board is mainly for SFHs, but wanted to discuss CRE auctions.

There is currently hotel in foreclosure being auctioned off soon. The hotel is being auctioned off. This is essentially a blind auction as in no documentation is provided for due diligence including financials. The property is going to auction for more than $3 million, which is my guess. It will be 30 days to close, but my concern is that there are no lenders out there that will finance a property without financials even if I give a very good personal guarantee. 

BTW, the property is worth around $6 million based on the current income it is most likely doing, but there is no information being given. Are there lenders out there that have do no document bridge loans? I know its a stretch, but keep in mind it comes with a full personal guarantee. We also own more than $10 million in existing hotels so this property is much smaller for us.

Again this all comes down to location, if this thing is in a prime spot, I mean prime to the point that its in a major city metro location with extremely high barrier to entry. You will more than likely get a tenant in there.

.2 acres is small. Some of those options thrown out would never work since the parking lots for some places alone are like .5 acres. 

Honestly, not much you can do with that land. For those saying rent them out to food trucks, that's great if in fact your market even has food trucks. The last thing you also want is to put money into it and get no interest from a tenant.

If you have right of first refusal you can let the auction house know this. They would disclose this to all interest participants. How it would work is that the winning bidder's price will be the price you have the first right to buy it at. So if for example, final bid is $10 million, then you have the first chance to buy it at $10 million. You have to notify the auctioneer immediately regarding this clause. I am pretty sure even in bankruptcy cases, the right of first refusal does not go invalid. You might get a pretty good loan in your case since you are an owner occupant and leverage can go up to 90% through the SBA.

Also, given that this is a daycare, get an insurance policy that covers negligence. If I were you, I would maybe get the tenant to baby proof the area and get a certificate saying the property is safe to operate. The last thing you want is something goes wrong and you take a hit for negligence, even if a tenant is at fault. If something happens, you can always say to a court you did everything within your powers to maintain a safe environment.

People have to be very careful when dealing with CRE in the healthcare space (I am lumping this into that). There are a lot more variables you need to consider.

@Martin Z.

While I agree with you. There is one factor you left out in your example. Yes those locations are phenomenal, but you will never be able to purchase those assets more than 4% cap. In fact I think one traded in that area for under a 3% cap. So risk is lower, and your return is much lower.