The first days as motel ownwers

"It is really very simple" we were told over and over by our broker. And the sellers, once the negotiating was over all they wanted was to hand us the keys and drive into the sunset. A day or so and you will know everything that needs to done. We compromised on a week.

It is quiet simple once you have done it for awhile but the first weeks were extremely hectic. We took over in the midth of summer which is high season. With close to 100% occupancy. People are coming and going all day long. I think that we did not sit until winter descended. By that time we were so tired we fell asleep any time any place. The beauty of running a hospitality business is that is very varied, somewhat unpredictable and in the busy seasons - fast moving.

The day starts very early (usually 6:00 am) and ends at midnight. All that time you have to be ready to answer, explain, smile, listen, change lights, TV remotes, give extra blankets and even...yes, chase flies.

People expect you to be there for them, and rightly so.

Most are nice and pleasant but some even though they are not, are still your guests.

Yet, when we finally manage to stop for a minute and breath, we knew, if we mange to go through the first season, we can do it.

Is this the one?

It took us almost two years to locate a property that was close enough to what we wanted. By than we have physically visited close to 30 places.

Those 30 were chosen after collecting the information from many listings and deciding that they are "close enough" for us to take the time and go see them.

We put an offer and thus started chapter 2 of the journey. Inspection, appraisal, negotiating. Going over the fine details will always reveal things that you did not know and should have. Things that you are not happy about. Patience and caution are the name of the game. Talking through the real estate agent make the process even more complicated and time consuming so if you can communicate directly with the seller/s this might ease the process. It took us almost 4 month to complete the transaction. There were tense moments till the very end. Moments in which we thought of calling the whole thing off. I am glad now that we did not.

Ups and Downs

So you spend hours on the Internet, more hours speaking with real estate agent, many of which will not return phone calls, or send the needed information. Wondering about sellers who while putting their properties for sale cannot or will not supply any meaningful information. Finally you line up few places and make the necessary arrangements to see them. Assuming the weather is cooperative and everyone shows up you finally get to see the property.

Now comes the real part. The place does not at all look like the pictures you were shown. You detect all kind of structural problems. Rooms look old and un appealing...the list goes on and on.

There always seems to be another "story" behind and you need to have the patience and persistence to find it.

Why is the property being sold?

Why now?

What is going on in the area?

What kind of gusts does this property attracts?

What kind of routine maintenance has been done and what is going to be handed to you?

In what condition are the furniture and beds in the rooms?

Is there enough linen, and other amenities.

The list seems endless but theses items are important and some very costly.

It is very easy to get frustrated, tired, angry. We called the search off several times and took a break. But if you really want it, eventually you will line few properties that seem to have most of the characteristics that are important to you.

Searching for the right place.

So... a small motel up to 25 rooms. With asking price that will not exceed 4 times the gross income. That was a beginning of a thread. We still had no idea where we are going to look for it and how will we know that this is the right one for us.

It was time to actually look at some places and get a better feel as to what we like and what turns us off. This was a very important lesson. If at the beginning, while searching the Internet, we were looking at places all over the U.S.A, we now realized that you cannot really "see" a property without actually visiting it. So now we narrowed the search to 3 states; Maine, New Hampshire and Vermont. All within a day driving distance. We located motels "for sale" in these states that were in our price range and asked to see them.

Seeing a motel, we found out, after visiting few is really not much different than seeing any other property. Every motel has a private residence and motel rooms. You go through them and have to decide whether you like what you see (assuming that you did your preliminary work and you established that the price is right).

We decided very early in the process that if the motel does not look like a place that we as travelers will be willing to spend a night in, there is no point of thinking about it any further.

Than come the over all feeling from the location, the way the rooms look (and smell), is the private residence going to work for you and your family.

Of course, it is a business, but one you are going to be in 24 hours, 365 days. So you should at least like it.

We knew that we wanted the motel to have some land around it and yet realized that we will need to compromise. Visibility is very crucial and you cannot be very remote. People want to be close to a town and its' conveniences. We are still amazed at how important it is every day, when people check in and their first question is - "where can we go to eat".

Unless you are very unique, you need to be seen as "walk-ins" are a very big part of successful business.

So, visibility yet some land was one of our first clues for the right place.

A livable owner residence, big enough for us and convenient and PRIVATE.

A place that have tourist appeal, as we felt that we want a place that people want to come and visit.

Family oriented, a place that will lend itself to families. here again the land was important.

A small breakfast room. We are not big on cooking but believe that offering breakfast is a big appeal.

And last but not least an overall good feeling about the place. This is not something that you can explain but we are big believers in that gut feeling and it served us well in the past. Even if everything seems OK but you do not get that " good, I can live and work here" feeling, walk away.

On the search

So where and how to begin the search for a motel/B&B/campground.
When we started all we had was that vague idea that we would like to purchase a hospitality property, live there and run it. We were looking for a change. Not just the one coming from a different job or a new place to live. We were looking for a more profound change. We thought that this is the road to take.
Other than that we had no prior experience of running a motel or what does it take to buy one.
So like every other journey this one started with gathering information.
Reading...that is usually my part. Talking to real estate agents especially the ones that were nice enough to share some of their experience in this field. Sea ch engines that deal with commercial properties sometimes have also some general information.
Probably one of the best advice came from one of the real estate agents that we spoke with who made us understand the difference, very important, between purchasing a hospitality property as a hobby, or part time job, versus purchasing one as a full time livelihood.
The key has a lot to do with size. We understood pretty early in the process that to make it a livelihood we will have to go with at least 10 -11 units/rooms. So in that way we could narrow the search and this is also why very early in the process we ruled out B&Bs as most of them are small or extremly expensive.
So we decided to look for a small motel 15-25 rooms. And that how we srarted the search.

More about income.

Cannot stress enough this point. If you make a bad choice, you are going to spend your days (and nights) worrying instead of enjoying your guests. You might have to look for other sources of income outside. So again, the main question to be asked is - can this property support itself and me.

You will end up looking at a lot of numbers, do it! and if you do not feel like you know enough, hire a professional. Do not hesitate to ask questions, and than some more. Remember, once you bought it it is yours for better or worth and hospitality properties are not easy to sell.

There is no easy way to asses value but we found that going with this simple first check can rule very quickly most of the properties that will not work for us.

So...

Gross income x 4 = asking price.

Or

Net income x 10 = asking price.

These numbers should work, any asking price higher than that you should be leery of.

Any asking price lower than that look deeper to get more information, after all no one would sell a property for less than its worth.

Check expenses as a percentage of the gross income (remember, if it exceeds 50-60% ask for more info)

If all theses figures seem OK it is time to proceed.

Income part a.

Income is the by far the biggest issue when buying any new business.
We did a lot of research trying to understand the relationship between - asking price and declared income. While many sellers will justify the asking price by giving you a list of all the things that they did to improve the property, the bottom line is - can this motel/B&B/ campground actually generate enough income to make it worthwhile for you.
This point cannot be stressed enough.
For all of you who are not coming from the financial world here it is in simple terms.
The Gross income (from rental, vending machines, gift shop etc') - Expenses = Net Income
This figure should be enough to support your mortgage and any other personal expenses.
If it does not...walk away. This property will not work for you.
Does it have a future scenario? well than you will have to decide if the future will put bread on your table.
We found few more ways to look at the numbers.
In general - asking price should not exceed 4 times the gross income.
Also- watch for those expenses. They should not exceed 50% of the gross income.

Location...Location

When we started our search we opened it to the whole U.S.A. We searched in places we never ever heard of. Talked to agents all over the country. Looked at endless amount of web-sites and written materials. Then we realizes that it is not very practical. There is no way to really asses a property if you cannot physically visit it.

Pictures over the net can do a lot of justice or injustice and there is also this vague thing called feeling. You visit the place, does it make you feel good. If you do not like it, how can you convince some else?

So we narrowed our search to an area within a day travel (back and forth). We also decided that even if it is going to be a motel we are not interested in a regular "on the road" place. We want a place that people will choose as a vacation spot and optionally stay more that one night. We want vacationeres, who will come to see the area and that we can direct to the different attractions. We wanted a place that have some open land around it yet with good visibility. You might think that this is easy, none of it was. Formulating the things that were important to us took a lot of time and thought. Finding the right place took even more.

Type, location, income.

Few more thoughts on these three main questions that should be asked...and asked again whenever you go on this quest for a hospitality property.
What type...
A B&B is a very special kind of hospitality. If owning a lodging facility is a 24 hour commitment, this one seemed to us as 48 hr one!!!
I was leery of the need to do so much of the work myself, which is often the case in B&Bs. Cleaning the rooms, making breakfast, being on call at all times and having no privacy.
it seemed to us that the only way to generate income will be to have very high rates which will bring very demanding guests. Most B&Bs that we visited had a small restaurant and made more income this way. We did not want to do that.
For awhile we considered a campground. Less room cleaning. A summer crowd. A winter time off . They are usually sitting on a lot of land and a swimming pool or a lake. This seemed very promising.
We looked for a long time, we looked all over the U.S and could not locate even one that the cash flaw made any sense at all. This one is still a mystery to me.
So, we finally decided what we want is a small motel.
15-25 rooms. Some land. Good visibility but not right on a busy road. Some staff to help in the busy season. And in an area where the guests are tourists. We wanted to work with people who come for vacation and thus in a good mood and eager to learn about the area and its' attractions.
Mind you, it took us 2 years of soul searching, Internet searching and physical searching to come to this point.

Still searching

We thought that we wanted a B&B. I love big old houses and thought that this will be great, sharing a great house like that with guests. It became obvious to us after seeing few and talking to their owners that this is not the way for us. The reasons: B&Bs represent a certain type of lodging. Very elegant rooms, a lot of old furnitures, and yes....breakfast.
Also, you live in the house and there is very little privacy.
And last but not least, the money issue.
If this is your house and has been for years and now you want to convert it, that is entirely different. But purchasing a B&B that someone else built is usually an expensive deal. You pay a lot for what the owners did. Your income however is depending in most cases on very few rooms.
Remember, this is a business and as such needs to pay for all the expenses, mortgage, your living expenses and still generate some income...
In our search we encounters very few B&Bs that had such cash flow.
In most cases the house was in the family for a long time or the owners, one or two of them worked elsewhere to generate more income.