motel units/rooms?? what do you think?

Hi suburbia.

I've been looking into this too.  Basically, banks don't like to loan on things that are under 50 squ. of floorspace, I assume as they feel it is more like a model room and more likely to be purpose specific, hence not easy to sell and limiting re. growth.

Also, if the property is 'managed' e.g. by the Breakaway group or another business, banks see it as a commercial property and will lend a lower proportion than for other real estate.  This means you must put in more of your own equity which affects your borrowing capacity.

I also discovered that a lot of these properties have been hit by hard times lately so their occupancy rates are much lower.  Unless you are confident that this will change soon or you can afford the shortfall, they will not be paying for themselves as they usually have very high management fees.  Lastly, you have no control over what goes on with them, so you can't do much to change any problems.

I hope this helps.

G

Usually a motelier has to buy all the rooms with a big 50% deposit, then at his own expense run the infrastructure of marketing, booking, maintaining and cleaning, and do it with commercial loan rates usually 1 – 1.5% above housing loan rates.

However it gets better when someone else , the investor, buys the rooms for him, and motelier is now a complex manager and he manages the rooms and hands over certain costs plus overides to the investor. Room cleaning costing $20 hr takes an hour is charged out at $75. Admin fees charged out, maintenance charged out, refurbish or repair or replacement charged out, leftover income after all is deducted is sent to the investor next month, operation runs well on OPM. Sounds great depending on who you are in the story. But it's still worth crunching numbers on and might suit your personal financial goals.
cheers
thecrest (motelier)