| Posted by: Guest_Matt Dec 18 2003, 06:02 PM |
If a motel is operated as an apartment building, will it be difficlut to get a loan, even if the numbers look very good? It's cash on cash basis with 25% down would be around 30%, an excellent return.
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| Posted by: loanuniverse Dec 18 2003, 08:56 PM |
Matt:
As you are probably aware since you are asking this question, hotels are not the most desirable types of properties to be lending money on. In the last 3 years, I have seen three requests for credit analysis involving a hotel property. Two of those requests included hotel loans in the books of the bank that were having repayment problems and my employer wanted to do a work-out situation for them. Unfortunately, the hotel industry has been hurt badly.
However, you mention that this motel is being operated as an apartment building. This changes things a bit. For starters, it does not make you reliant on tourism, and this is a good thing if the area is in a tourism slump. On the other hand, the following questions cross my mind when looking at the situation.
1- The tenants being month to month is not a good thing, but I would also like to know the turnover.
2- What is the vacancy rate? How long has this occupancy been maintained?
3- Motel units are normally very small units, how do they work as rental units? Have they been converted?
4- When I think Motel working as apartment building, I think low income. Believe it or not, this is actually a plus as Banks are looking to make loans in low income areas, and even better since it is a loan that might be used as low income housing.
5- Although the property is working as an apartment building, it is still a motel. If the bank has to take over the property, it is taking over a motel.
Hope this helps. |
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