Are you hoping to make a home run investment with your next Hotel purchase? SBA-Capital’s Hershel Pierce shares with you his Triple Hotel Loan Strategy regarding how to purchase a hotel that is being neglected or mismanaged at a discounted price.
Up to Bat – Finding the correct hotel can be a challenge. The building must be structurally sound, have an excellent location with good ingress and egress, and you should confirm the street/highway system will remain the same to avoid a loss of business because the traffic pattern changed. Also, check for any code violations and determine what the cost will be, if any, to correct. Have a professional inspect the hotel and provide a written report identifying additional cost you may incur.
Rounding the Bases – Your lender must be familiar with all three loans and is responsible for securing the loans while you concentrate on purchasing the hotel. First, your lender will obtain a loan to purchase an outdated hotel, then a separate PIP (Property Improvement Plan) Loan for renovation and a new elevation, plus an FF&E ( Furniture, Fixtures & Equipment ) Loan for new furnishing for all rooms and the lobby. The three loans can close as one loan, or you can close the first lien loan and later close the FF&E and PIP loans. The important issue is to make sure all three loans are approved before you close the First lien loan.
Sliding into Home – First, you may purchase a hotel that needs a face-lift like the “before photo” below. The new elevation is added as shown in the “after” photo below. The end result is a “like a new hotel that will have the same features as a new ground up hotel but will cost much less creating superior earnings.”To learn more about what is included in a PIP or FF&E loan visit SBA Capital online or contact a loan specialist at SBA-Capital. If you already own an existing hotel, a PIP and FF&E loan will be all you will need. On occasion, you do not need a PIP loan because the structure is in fine conditions and you have no desire to move walls, etc. However, you may need an FF&E loan because all furnishings, carpet, and drapes may need replacement.
Which loan should I select – SBA-Capital specializes in hospitality lending and provides free consulting regarding which lending package is best for your specific property and needs. SBA-Capital will also pre-approve you for a max size loan if you would like. Once you have been pre-approved, you can more easily identify which price range hotel you hope to purchase. Also, the seller will take an offer from a buyer that has been pre-approved more seriously.
SBA was founded to help the local business person and create jobs in the U.S. The program has exceeded all expectation creating hundreds of thousands of jobs each year and total annual loans typical exceed 30 Billion dollars annually. Our objective at SBA-Capital is to make it possible for our borrowers to select and obtain the best possible loan for their financial and wealth planning.
Here’s a sneak peak at what Hershel will share next on how to renovate your hotel. In today’s competitive market, the benefits of renovation are giving hotels an edge in attracting new and returning customers. Guests expect a hotel to be well maintained and comfortable, and that means more than just replacing worn out furniture and mattresses. It is essential to keep a hotel current in atmosphere, service, and technology to meet or exceed guest expectations. Read more here
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