Hotel Motel For Sale By Owner
If you are an owner and wish to sale your hotel or motel – you have indeed a great opportunity to gain some good profit on your investment. However, the enhancement of the price should be always done ethically. There are a good number of underhand tricks that people play to raise the evaluation of the property – and you should definitely not be one of those.
In case you are the one who is buying the property from the owner, be sure you know about all such cut-the-corner methods of increasing evaluation so you could avoid overpayment. For example, cutting down on repairs and heating of the place can increase the per-day income by as much as $100-150 and this computed to a yearly amount can be astronomical. If the evaluation is based on this, you will end up paying a highly inflated amount just for nothing.
Understand the minimum basics of property evaluation before you go into the nitty-gritty of the deal. Let us see how they calculate the valuation. This is usually started with the capitalization rate, which is commonly known as cap rate. Supposing the overall return on the assets built comes at about eight percent, and then the cap rate is 0.08. After the debt is deducted, the net income would be divided by this cap rate to arrive at the value of the property.
There are many ways that would enhance the value of the property in correct and legal ways. Unfortunately, for every right way to do so there are ten fraudulent ways – and you should be aware of most of these if you are planning to look for a hotel motel sale by owner. |
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- Get a building inspector look the property over and see if there are any major flaws that could be costly later on – plumbing, electrical wiring, heating system, etc that might be camouflaged superficially
- Discount the income of the vending machines from the cap rate – this is usually a grey area and would not give you an accurate estimate
- Check whether the regular repairs and maintenance have been accounted for. Often by keeping these expenses off the books or totally doing without them – would cut costs to a large extent and show a much higher profit – and hence the evaluation would be wrongly inflated. If you find that repairs figures are not there in the books for the last 6-12 months – then ask about it
- Look at the expenses in the previous years and compare it carefully to the present year and it will be easy to see if any of the figures have been doctored
With a little care and investigation, you will be able to judge accurately the cost of the hotel or motel that is up for sale – and close a great deal.
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