Motel for sale - what is the right price?

There is a motel for sale in Fairfax, VA. Figures are below:
100 rooms, 53% Occupancy, ADR is $72, Total yearly Revenue: 1.48 million. There is a PIP of $300,000 that needs to be completed by the new owner.
I want to put a offer in on this property, but I am unsure of how much to offer? Please help me.
In Buying Property - Asked by Amar S. - Feb 24, 2012
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Marcelo R.
Springfield, VA

it all depends on the numbers. have you checked other information on the motel "like owner tax returns" , current rent roll? based on good concise numbers, you will be able to have an idea of how much you should offer.

Feb 25, 2012
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Mike W.
Vancouver, WA

A Motel normally sells at a multiple of the gross room income. They are usually 2.5 to 5 times gross. With most weight given to the location such as: Oceanfront would be in the higher 4-5 times range with intercity locations with lot's of competion in the lower 2.5 to 3.5 group. All further depending on financing offered, Seller carry, would bring a slightly higher multiple in any catagory, also condition and improvements needed as in your situation would change the multiple. I would call a loopnet member motel broker in you area for pricing help if you need it. I would be happy to help if I knew your market. Mike Walling, owner/broker Cell 360-609-5719

Feb 26, 2012
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Steven M.
Fort Lauderdale, FL

Typically in the past motels in South Florida for instance sold in the area of 3-5 times the gross revenue. A more relevant method is to calculate the actual Net Operating Income (NOI) and divide that by your required CAP rate to determine the most you can pay for a property. You can look at recent motel sales in the area to determine what the average CAP rate is for motels. Sometimes it is not easy to get a handle on the true NOI for motels since many have cash off the books.

May 24, 2012
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k j s.
North Platte, NE

How old is the motel, what is its rating in various web sites and how accessible the property is are some of the factors not known.But most of Fairfax is considered pretty vibrant in business as such it may be a good buy at 4.5 million and depending on financing terms offered etc 5 million may also be a good deal.
Best of luck,
K J Shah

Dec 22, 2012
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Jeff R.
Lender/Mortgage Broker
Birmingham, MI

Appraisers used to use a multiplier like 3.5 times gross, but Im seeing more emphasis put on net income, then a cap rate put on that. On limited service hotels Ive seen 11 - 13% used recently.

Jun 3, 2013
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