Hotel, worth 1.5m asking 1.1 - Posted by John D.

Posted by wes on July 20, 2005 at 19:44:17:

There is lending and then there is investing. It’s good to have a clear understanding of the difference in regard to where you go to seek financing for any deal

If you want a lender to provide a loan, it will be based on the actual financials of the Hotel over the past few years. There also can be other factors. For example, I recently worked on financing a Hotel in a “military town” that has seen revenues and occupancy increase dramatically since the Iraq war build-up. But due to experience with military build-up towns, there was extra scrutiny required. A determination based on the towns hotel average occupany prior to the build-up just did not justify the asking price and loan request.

If the deal looks to you to have good “investment potential” then that might be exactly how you should be approaching the issue. Find one or more investors that also agree with the potential and get them to put up funds to either purchase the property or at least put up enough to cover the shortfall you might personally have if going to a lender.

I recently read a quote to which I not only agree but find useful regarding approaching many lending sources. Something like “one should never give a seller credit for future property appreciation”.

While that certainly covers alot of ground, I certainly see the wisdom in the statement from the buyers and lenders point of view…

Sure there are others that can add much more, but thought I would throw these thought out for consideration.

Good Luck!

Hotel, worth 1.5m asking 1.1 - Posted by John D.

Posted by John D. on July 20, 2005 at 15:42:31:

I am looking into buying a hotel that sits across the street from an area that is undergoing major redevelopment. There are plans to build condo’s, townhouses, sfh’s.

The property I am looking into is a hotel and is leased by a gentleman for just under $7K.

The owner mentioned that they are willing to let it go due to health concerns for 1.1m and that as it sits it’s valued around 1.4-1.5m and with the redev across the street it could easilly be worth 3m in 3-4 years once everything is completed.

I am completely green in regards to commercial as I have been focusing on buying residential for the last 2 years.

I am not sure how to evaluate this deal and am considering bringing in a partner who would bring experience and cash to the table.

What are the most basic pieces that I should have with me when approaching someone about this deal?

I do not have it under contract by the way. The owner states they have a contract from the person leasing the property but that there is a trust issue and that the person offered less than the 1.1m the owner is seeking.