What You Should Know About Investing in a Motel
Because the travel industry will always be with us
, a motel can be a really good investment. However, if you are thinking about taking this step, be sure that the one you have chosen won't turn out to be an exception to the rule. What follows are some recommendations to help you do just that:
Since
motels for sale are pieces of real estate, a complete inspection should be done by a professional. To determine the property's market value, consider any repairs that are needed, along with fixtures, furnishings, and equipment that should be updated.
Check with governmental authorities about any roadway construction and other changes that are planned in the area. Such actions might have a negative impact on the amount of business the motel will attract in the future.
Let your real estate broker discuss the sale price with the owner after revealing the maximum you are willing to pay for the property. You will also want to know the fees that will apply when you take over the property.
If the motels for sale are part of a franchise, read the current franchise agreement, and determine if it will be transferred to you, or if you will be dealing with a new contract.
Study the competitors in the area and how that situation might change in the future. Also consider the motel's reputation, because it will be hard to change if it is unfavorable, and the property's market value will be affected as well.
Review the financial statements of the motels for sale, and verify their occupancy rates. See what room rates prevail, find out how they compare with those of nearby motels, and note the various expenses involved in running the business.
It is recommended that a potential buyer should have a 30-day "study period," as stated in the sale agreement or letter of intent. (If you are not completely satisfied, do not go forward with the sale.) Look over all contracts the present owner has with customer groups or vendors, and determine if they will still be in force once you have purchased the property. If you would like to cancel any of the existing contracts, find out if you can take that step without paying a penalty
Verify that the motels for sale are complying with all governmental regulations, have the permits and licenses they need to run the business, and all that is required to obtain those documents. Also, determine what insurance coverage they have and the related premiums. Then, do some comparison shopping to see if you can find better coverage, a lower rate, or both.
What You Should Know About Investing in a Motel
By: Peter Watson
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