How to determine a FMV for a hotel/motel?

Is there a software program that a buyer can plug in all known/ and unknown expenses & revenue to arrive at a Fair Market Value for a Hotel? I have one for apartments but not sure if you can use the same one for hotels. Thanks...
In Buying Property - Asked by Anthony B. - Apr 20, 2009
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Answer(s)

Paul S.
Broker/Agent
Glendora, CA

You should be able to do it with what you already have. At some point your software will give you some sort of a measures (such as cap rate, IRR, NPV, etc.) which you can compare to similar properties. None of those measures will give you FMV per say. What they do give you measures which allow you to compare. If for example cap rates for the type of property you are looking at have been in the 8% range and the one you are looking at is 6% it is probably overpriced?
There are a lot of things that change FMV. Maybe there has been a need for hotel rooms in the town the hotel is in and hotels have been selling at an 8 cap. However over the weekend the main employer in the area that fills a large amount of hotel space announced severe cutbacks which will reduce the need for hotel rooms. The cap may have just changed from 8 to 12, 20 ???? who knows?
Look on LoopNet to see what is being offered and maybe purchase comps from them. From what I have read hotels may be taking a big hit this year? Do your research.
Paul Sylvester,CCIM

Apr 20, 2009
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Gregory G.
Broker/Agent
San Francisco, CA

Anthony, what's your email address?

Apr 21, 2009
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John M.
Appraiser
Newton, NJ

Hotels and apartments are completely different animals. Hotel valuation is in large part a consideration of an underlying business. To value this type property you need to understand the business and contribution of the components needed in the operation (real estate, FF&E, good will). I have used excel spread sheets based on business valuation modelling successfully. My source in developing these models was course work taken through the Appraisal Institute and Steven Rushmore's books. Steve can be found at Hotel Valuation Services (HVS), or contact the Appraisal Institute for their offerings.

Apr 22, 2009
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Anthony B.
Owner/Investor
Glen Burnie, MD

Thankss for the responses. My email is reiproperty@cablespeed.com

May 14, 2009
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