What are the points one should keep in mind while buying a Hotel/Motel property on a short sale

Im negotiating on a property which has a huge amount of loan ,aerly apyment penality clause,must have many outstanding bills,agreements and commitments.Write your opinion and advise how to handle the purchase,please
In Buying Property - Asked by Raj G. - Nov 23, 2010
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Rob B.
Chandler, AZ

My opinion.... handle it very carefully and with good legal and accounting advice! You may be getting yourself into an ownership position that will simply suck you dry.
Just because the price seems attractive, it is only the beginning. Do you intend to operate the property yourself? Treat it like any other business. Have your accountant look over the income history and the current balance sheet. Verify what bills you are going to be responsible for in the purchase. Factor in the costs of assuming the debt and all costs for rehabilation. Determine what your breakeven point is going to be after debt service. Develop a proven marketing plan for obtaining your required occupancy from visitors. Be sure the market will support the room costs that you will need to achieve success.
There are a ton of things to consider. My advice, don't go it alone. Make sure you are willing to spend some money on good legal and accounting advice. With this approach you will either go forward with some measure of gain from your success, or you will walk away from it, and look for a simpler commercial property to invest your money into. Good Luck Raj....
Rob Baird, CA RE License #544165 (One of the oldest, active licenses in CA) 951 515-5855 Email: rob@capratecommercial.com

Nov 25, 2010
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Jim S.
Kalispell, MT

Your first thing before negotiating is a proper analysis of expected cash flow to meet any sort of debt plus profit. After you have completed that you will know the basis from which to do your negotiating. You always want to negotiate from a position of strength not weakness. The next thing you want to do is analyze the deferred maintenance and lifetime replacement costs so you can determine what other immediate expenses are you going to have other than price and what what expected costs are you going to have to prepare for in the future. Solving the immediate commitments has to be a part of that negotiation since you are not negotiating with just the lender but with other parties that have a financial interest.
Your first analysis should already be complete. That analysis is your own degree of expertise to solve the problems that someone else has not been able to do since it is a short sale position already. So the question is: Am I buying an investment problem business or am I buying an owner problem business. If you can identify between the two, make the decision that it is an owner problem not an investment problem and you have the road map for solving that problem profitably then your negotiation is always keeping the structure of the deal where it makes business sense knowing what you are up against to solve the problem.
Obviously there are other considerations but since you asked the question it makes me a little uncertain that you should try to do this on your own. In my opinion you need some real expertise to assist you.

Nov 26, 2010
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David D.
Miami, FL

Make sure to Obtain an Industry " Star" Report for the market to assess the Average Daily Rate, Occupancy Rate and Subject's Market Rating according to other Hotel is immediate market.
This will be most helpful when trying to identify the Property's Stabilized Income that will be available to cover your Lenders Debt Service Coverage Ratio if there is going to be a loan attached to the purchase.
Best of Luck.

Nov 29, 2010
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