Posted by Chris on August 30, 2005 at 23:46:15:
I’ll keep that in mind. I actually hadn’t figured in management costs, and I think you are right. Perhaps there is a little more to be made converting the hotel into either apartments or condos. I’ll have to see if local zoning allows such a development. Thanks!
Chris
Is this a sweet deal? - Posted by Chris
Posted by Chris on August 30, 2005 at 18:14:13:
Here is an interesting situation. If you have any words of advice, they would be greatly appreciated. First, a little background:
I found a 17 room privately owned motel that grosses about $79,000 annually. There are expenses of about $44,000 annually, and debt service on the existing mortgage amounts to $16,400. That leaves a net cashflow of about $18,600 yearly for the current owner, including debt service.
The property has a roof that is less than 4 years old, new bedding and mattresses. The deal includes all inventory associated with the hotel. It sits on 2 acres, which also includes an RV lot, and a 2 bed 1 bath house (with additional external guest room) and a 3 car garage.
The seller is motivated, and has agreed to a total purchase price of $195,000. There is an existing mortgage on the property for $90,000 which he is willing to let me take subject to. He would like $5,000 earnest money, leaving $100,000 to come up with for closing.
So, if an investor is into a deal for $105,000 and is netting $18,600, that is a cap rate of almost 18% including debt service! (If you calculate it w/o debt service, it jumps to 33%!) That doesn?t include the value of the house on the property either.
So I?m thinking that I should be able to find a buyer for the motel fairly easily, then have a house free and clear. Maybe let it go cheap to make a quick profit.
I don?t deal with motels, so does anyone know of anything I am missing? If you have any thoughts I?d love to hear them.
Thanks all!
Chris
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I’ll triple your “deal” - Posted by Eli
Posted by Eli on September 03, 2005 at 18:56:12:
It seems like you are a real go getter, but I think you are getting a bit carried away. Now I figure you could make $18,000 a year at McDonalds, so the question is: would you pay $105,000 to buy that job? Really think about that.
If you are really the go getter you seem to be I would be willing to triple your pay to work for me.
Now if you really have what it takes
Manager costs? - Posted by Bill Taylor
Posted by Bill Taylor on August 30, 2005 at 22:32:55:
Are you going to have to run this little operation yourself? If not you will need to hire a manger to live on the property and pay them for operating the motel. The expense may be in your 44,000 in expenses but I would doubt it. Your 18% number without a manger will pretty much be eliminated. YOu are also buying yourself a job if you don;t have a manager. Ther has to be an easier way to make money. I own a small motel and the headaches of finding the right manger will get old and you will then become a don;t wnater and possibly motiavated in the wrong direction. This little deal may cost you other deals because your time is taken up. Check things out thoroughly and beware.