Posted by Noor Ahmed on June 11, 2003 at 15:15:41:
May I know What’s your name and your background. How can you send this information
Motel Financing - Posted by Tantoon
Posted by Tantoon on November 16, 2002 at 21:57:31:
Dear Colleagues,
I would like to help my uncle obtain financing for his property he has owned since 1977. Here are the details. My question is the best lender I should approach to get the deal done.
Motel built in 1961, Purchased for $405K, Current value $800K, Current Mortgage amount $428K (rate is 11.875% ARM tied to 11th district cost of funds), 25 units , 1Br units, located near disneyland in California so values are increasing. Rent ADR (average daily rate) around $35 per day.2001 GI is $130K, monthly payment is $4966, Operating expenses not including mortgage interest is $68K so he breaks even.
Would like advise from pros. I thank all of you so very much.My goal is to help him lower his rate by a few points to reduce his monthly mortgage (PI only) to $3500. All closing costs would be rolled into the total financing amount.
Andrew Patel
Re: Motel Financing - Posted by ray@lcorn
Posted by ray@lcorn on November 17, 2002 at 10:41:16:
Andrew,
I’m not in the finance business, however I am in the hotel business and can sympathize with your uncle’s problem. That note is a crusher in today’s market. Unfortunately it is on an independent, small motel, and that is a tough property to place with a lender. The loan size is too small for the national lenders, and the property type is not one that local banks are open armed with, especially one running 40% occupancy. (Why so low?)
However there are some options. My first impulse would be to renegotiate the note with the current lender. If it is a bank, they may rather keep a performing note than to be paid off. Just changing the rate to 7% (still high in today’s environment) would lower the payment to what you’re looking for with fifteen year amortization.
If it is an individual, which small motels are often seller financed, then the tax consequences of being paid off may affect their decision and they could see that renegotiating the loan is better for them than being paid off.
Renegotiating the existing note would have minimal expense. Paying to have the document drawn up and recorded would be about it.
If that’s not possible, then the next step is to approach a local bank. Does your uncle have a relationship with a bank where he deposits the receipts of the motel? That is often a good place to start if it is the right kind of bank. The best bet is a small local bank, but some of the larger banks do have community business lending programs. The trick is to start in the commercial department of the bank. The local branch officer may or may not be aware of their offerings.
I would sit down with your uncle and put together a loan proposal that highlights the strengths of his operation… the length of time in business, the value of the property, and any strengths he has in the way of other assets, cash, etc. If you search the archives over on the commercial forum there have been a number of posts about loan proposals and business plans that would be helpful.
This would also be a good time to evaluate the operation and see if there are ways that the business could be grown. Running 40% occupancy and a $35 ADR yields a RevPAR (Revenue per available room) of $14.25, which is terribly low. The Anaheim market is pretty robust. I was there a few months ago and was impressed with how deep that market has grown, and its not all Disney by a long shot. (How 'bout those Angels!) Ask what the potential is for the property. Is it a candidate for a franchise? Is there room for expansion? How about the current marketing efforts? Is anyone actively asking for business? Are there groups (workers, sales people, start up trainers for chain businesses) that would rent rooms on a contract basis? How about tourism partnerships? Surely there is something that can increase business. Find it and put together a plan for capturing new business. Fold that into the need for refinancing. It shows that there is commitment and enthusiasm behind the business. That helps to sell the deal to anyone that is going to look.
If the local bank isn’t interested, your best bet will be to find a bank that works with the SBA. There is an SBA program tailored for small motels, though the number of the program escapes me right now. You can take a look at the overview of programs on their website at www.sba.gov. They also have a template and outline for business plans because they do require them for any loan application. The local bank has to attest that they could not make the loan on reasonable terms without the guaranty in order to qualify for the SBA loan guarantees, so you have to go through the process of applying with the bank first anyway, so it is good to start with one that does SBA deals.
If none of those avenues are workable, then what is left is private investors. Unless there is a way to goose the performance of the motel then it is going to be tough to make the deal attractive for a private investor unless there is a personal relationship.
ray
Re: Motel Financing - Posted by Tantoon
Posted by Tantoon on November 18, 2002 at 09:40:51:
Ray,
Thank you very much for the advise. I really appreciate you taking time. I am going to follow your steps as you have outlined and see where I end up. I am also going to take a look at SBA.
Andrew Patel
Re: Motel Financing - Posted by nOOR ahmed
Posted by nOOR ahmed on June 11, 2003 at 14:49:36:
I need $875,000. One motel is asking for $375,000 down and the other is asking for $500,000 down and the rest is seller financing. I cannot get a bank loan. These motels are run by a management company in a major metro intersate area. Please help me. How can I get financing. Please do respond.
Re: Motel Financing - Posted by NICK
Posted by NICK on August 15, 2003 at 16:31:26:
DEPNDING ON ROOM REVEUNUES LENDERS WILL ASK , DO YOU HAVE MOTEL EXPERIENCE
Re: Motel Financing - Posted by Tantoon
Posted by Tantoon on June 11, 2003 at 14:51:39:
Please send me the requirements and information about the property and your phone numbers. I would be happy to help you out ASAP. This is not an impossible situation.
Re: Motel Financing - Posted by Noor Ahmed
Posted by Noor Ahmed on August 15, 2003 at 18:39:21:
Yes, I do have motel experience since the past 6 years.
Re: Motel Financing - Posted by Noor Ahmed
Posted by Noor Ahmed on June 13, 2003 at 14:56:45:
I need $200,000 for a 84 unit motel costing $1.5 M.
The rest is seller financing. I do not have good credit. I’m only asking for $200,000 for downpayment.
Re: Motel Financing - Posted by Noor Ahmed
Posted by Noor Ahmed on June 11, 2003 at 15:23:20:
You can call me now at
574-514-3880