If you have located a motel that is currently being sold, you might be tempted to buy it and take over management, or hire another property management company. While this can be tempting to jump into, it should be well thought out, just like any other commercial real estate investment. Here are some tips for buying a motel.
Have the Property Inspected
Before you do anything else, have the entire property inspected. You never know what could be lurking inside the basement of the motel or in the rooms themselves. Even if it has been fairly busy and highly-rated, you don't want to be surprised by pests or mold. Every inch of the motel should be inspected, including having a pest control company inspect it for cockroaches, termites, rodents, and other pests. Also have the plumbing and electrical inspected to ensure it is safe and sound for the guests. If it is in an older building, you might also want to have the motel tested for asbestos, just to be on the safe side.
Create a Long-Term Business Plan
You also need to develop a business plan for the motel from the beginning, which helps you to determine if this would be a good investment. Do you want to leave the motel as it is and simply take over ownership, or would you like to make some improvements? Do you have improvements in mind that would help the business overall and make it more enticing to others? If you make improvements, do you need to raise the price of the rooms, or would the guests prefer the lower price for the motel? These are all important considerations when working out the business plan.
Research the Area's Tourist Appeal
Take a look at the history of the motel, including how busy it gets and the average check-ins during the day and over the weekends. Find out if the neighborhood has any tourist appeal, such as theme parks, popular restaurants, or major metro areas. Are there other hotels and motels in the vicinity that would be your competition? Are you close to attractions where people would like to stay at your motel for convenience? This research not only lets you know if the motel would be profitable enough, but if improvements would be worth it in the end.
Dig Deeper Into the Finances
Take a closer look at the finances of the motel, looking at their tax and profit records. Look at the property's value and what the cash flow statements have looked like over the past few years. Pay close attention to the change in profit, looking to see if it has gone up or down more recently. Also have a financial adviser working with you to determine if this would be a good investment for you. Even if it hasn't been successful, you might be able to turn it around and make a good profit, so keep that in mind.
Hi, my name is Molly. I have been a property owner since my grandma died when I was eighteen, and I inherited a rental property. Over the years, I have managed that property very successfully, and about ten years ago, I started adding to my collection. While I would definitely say that the investment property game is not a get-rich-quick scheme, it can make lucrative money. To help others who are interested in getting into the game, I have decided to start a blog. Here, I am going to share insider tips, experiences and ideas. Get comfortable and feel free to explore!