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    9 Replies Latest reply on Aug 8, 2008 11:40 AM by JVCruz

    I'm not Psycho -- I just want to run/own a motel

    Marman Newbie
      I'm looking for someone to help me purchase a 5 room motel/house in Thorp, Wisconsin.

      We've been praying about moving to this area to be closer to family and this seems to be the answer.

      The current owner is motivated to sell because her elderly mother is terminally ill in Louisiana.

      Here are the facts as I know them --
      1. The asking price is $299,000
      2. The property includes a 2000 sq ft house and a 5 room motel
      3. It's a well established business -- one of two motels in the town and 1/2 mile off of major highway through the state.
      4. I have no debt but damaged credit due to failed business attempt 6 years ago.
      5. There is a sign on the highway but other than that very little advertising and yet the owner tells me that CC recipts are $25,000 and she keeps refering to lots of cash which she's probably not reporting.
      6. It's paying for itself and supporting the owner --
      7. I have absolutely no money for down payment.

      Here's what I need --
      1. Money for a down payment and living expenses for 1 year
      2. Advice on what specific kinds of documentation to ask for.

      Here's what I have --
      1. A strong desire to move to Wisconsin from OKC with my family
      2. Experience with designing a website to be used for Marketing purposes
      3. An existing loan application with the local bank that currently holds the note. They are waiting on an official offer to purchase which I'm waiting to fill out until I can get someone to invest the down payment or advice on other financing ideas
      4. A willingness to live on a bare minimum salary for several years until hotel business can support one.

      Here's what I don't have --

      A skeleton in a rocking chair that I call mother. :--D
        • Re: I'm not Psycho -- I just want to run/own a motel
          Tracker

          A few important things to find out before I can give you some suggestions that might help you:

          1) Is there a current appraisal on the property that supports their asking price?
          2) What is the real estate tax assessment value of the property?
          3) How much land comes with it and is any of the land frontage on a local, county or state highway?

           

          4) Is the area immediately around it commercially developed or residential ... or not developed at all?
          5) Is the local economy stable ... flat, growing or declining?
          6) Have you seen their financial records or tax returns for at least the last 3 to 5 years, that show how much income the motel produces?
          7) How long has the motel been in operation?
          8) How long has the current owner owned the property?
          9) Are their any mortgages or liens on the property? If so, what amount(s)?

          Dennis Lowery
          Adducent, Inc.
            • Re: I'm not Psycho -- I just want to run/own a motel
              Marman Newbie
              I'm awaiting a reply on a couple of these items but I have some of it:

              • The taxes for 2006 were $3653.10
              • The Lot size is 150 x 65 so very little land/yard etc. Current owner says it takes her 20 minutes/wk to maintain
              • The local economy is somewhat flat, but the hotel is 1/2 mile off of a major east/west highway across the state..
              • My wife says the hotel has been there as long as she can remember and she's over 35.
                • Re: I'm not Psycho -- I just want to run/own a motel
                  Marman Newbie
                  Also, the hotel and house is fronted by a major road. Residential behind everything.
                  • Re: I'm not Psycho -- I just want to run/own a motel
                    Tracker

                    Without some extra land that might have been carved off and sold to help you with the down-payment the only alternative I see is for you to find a local investor interested in your venture. You can search online for "angel investors" and you will find a number of resources and websites that will help you find angel investors. Most investors of that type that you find that are going to be more interested in high growth businesses and larger transactions. Your best bet may be to check locally for smaller "angel" type investors that want to put smaller amounts of money into your venture.

                    Also, if the land is "free & clear" (no mortgages or liens) and if the seller is willing to carry back a note subordinated to a new first mortgage, you may see about finding a hard money asset-based that will loan the cash you need for the deal who will take a first mortgage position. Of course you need to verify all the numbers and revenue to make sure that the motel does generate enough cash flow to pay for all of the debt.

                    You also might want to try "social lending" sites such as:

                     

                    http://www.lendingclub.com/

                     

                    https://us.zopa.com/

                     

                    http://www.prosper.com/

                    I hope the above helps you. Good luck.

                    Dennis Lowery
                    Adducent, Inc.
                    • Re: I'm not Psycho -- I just want to run/own a motel
                      JVCruz Adventurer
                      Seems like the owner has done herself wrong by not reporting. You, or any other potential buyer, will be buying the property rather than the business -- since the business doesn't show a real profit to support the asking price.

                      Do you have experience in running a motel? Do you have a plan to turn things around for this business? I would agree with a previous post and wait for another opprotunity.
                    • Re: I'm not Psycho -- I just want to run/own a motel
                      Marman Newbie
                      In addition to the previous information I neglected to mention that in 2002 I incorporated as an S corporation to become an independant wholesaler of automotive products. When my relationship ended with my supplier I basically just stopped using it (the corporation).

                      I don't know if this would make any difference with finding funding or if it's even still valid since I haven't done anything with it for 4 years.
                        • Re: I'm not Psycho -- I just want to run/own a motel
                          Tracker

                          That wouldn't help you. But even if you have not used it for 4 years, you should still have filed corporate tax returns on it for each year etc. If you do not plan to resurrect it for some use, you should check with the state you are incorporated in about how to close the corporation formally and officially, including notifying the IRS that the corporate is closed.
                      • Re: I'm not Psycho -- I just want to run/own a motel
                        DomainDiva Ranger
                        #5 in your post is haunting..(sorry for the horrid pun...)

                        Something is not right...hidden or unreported cash flow? You need to see tax returns for the last several years and have the books audited by a forensic accountant.

                        Run while you still can...there will be another opportunity...
                          • Re: I'm not Psycho -- I just want to run/own a motel
                            Milleisen Scout
                            Hiding cash is a fact of life with most small businesses and there's not much that can be done about that. The best way to determine how much cash is really running through is to go spend some time there and physically see the numbers of guests that are coming through. Many businesses that are cash based end up selling to former employees because outsiders have trouble getting their arms around the true cash flows of a business, and banks won't touch it with a 10 foot pole.

                            One of the big reasons that these business are hard to sell is that banks can't finance a business that is cash flow negative on paper. If you KNOW that it is in reality cash flow positive, there are ways to get it done without traditional bank financing.

                            I have pursued a similar opportunity for a small mom & pop motel...I'd be happy to share my experience with you offline. My contact info is on my profile if you want to chat.