All Forum Posts by: Jimmy Klein

Attempting? If you have 20% of the money at closing, there are many conventional banks at might do 80% if the debt service coverage is there. You will need 20% at the closing table. This is also assuming you have a decent net worth to provide a guarantee. You could get seller to carry back 10%, but problem here is the location. The location is in a very rural market so unless the deal is very strong, banks won't be interested. Typically these type of properties in Texas command cap rates in the 30% range. I recently look at a Hampton Inn in a similar market in Texas that was going for a 20% cap rate. The debt service coverage on an amortizing basis for a market like this would need to be 2.5x for a bank to get interested. It may be less given that its located off I-10. I know this for a fact as I have dealt with this first hand. This property is also four hours away from your listed residence of Cypress, TX. I have been in the hotel business for 30 years and know for a fact that this is the type of property you will have to live on site for it to run smoothly.  Rule of thumb, you should be paying maximum around 2x that of the last twelve months of revenue based on this location. How much revenue has it done in the last twelve months and what is your purchase price?

How much money are you putting into the deal? As in percentage of the total transaction value?

Is it a franchise? Where is it located?

Not as great of a business as you would think. The repairs can cost an arm and a leg. If the repairs are large, the car wash will be down for maintenance, and you will lose cash flow for that period. The business is not recession proof. The business is seasonal as well depending on where it is located. Car washes in the north rarely get used during the Winter months. In addition, car companies like Toyota, Honda, Ford, etc. have promotions where if you buy a new car you get unlimited car washes for the life of that car. I personally have this on one of my cars so don't need to take it to the wash. 

In addition, car washes don't hold their land value that well because of the long term environmental impacts of the chemicals used on site. A phase 2 environmental report may show a ton of problems.

I know these things because I was about to buy a portfolio of 3 car washes. During our 60 day due diligence we found so many issues. Things that are not just specific to the ones we were buying, but to the industry as well. Also, I am good friends with someone that owns two car washes as well. He is trying to sell both. Even though they are self automated, he has to constantly keep running there when something doesn't work, which he tells me is multiple times a week.

Also keep something in mind, I looked up the property you were talking about. These type of properties are not pre-approved for financing. This means that if you win, you best make sure your group can commit X million dollars in 30 days in cash. I have bid on a couple hotels on the site. They also require a 10% deposit of the purchase price within 2 hours of you winning. In order for you to even register, you have to provide proof of actual funds on hand. So for example, if you plan to bid $3 million. You need to show bank statements verifying you have $3 million on hand to close the deal. This is the problem with auctions if they are not pre-approved for financing. Hope this helps. 

@Pat Chomyn

The Lodging Conference is great. Its huge. This years its in Arizona. Also each franchise tends to have their own conferences as well, but you would need an existing hotel.

Part of a group that owns more than 40 hotels nationally. All flagged properties. San Francisco is a great hotel market, but keep in mind SF also has restrictions on new build hotels. I would look into this and the permitting process before moving forward.

Being in the hotel business myself. This is a business where you grow faster than you can imagine or lose your shirt if you dont know what your doing. My guess is that with the property so small, typically these are owner-operator properties, where the owner lives on site and handles duties such as front desk, etc. 

Where is it located? Is the area nice? How many rooms are there? Tearing down and building on top can be expensive. What's the price? What is the market occupancy and ADR? If its good, then you might as well spend money on renovations and get this thing running. 

Seller financing portion typically requires a personal guarantee