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hotel/motel investing?
Old 10-06-2007, 07:05 PM   #1
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hotel/motel investing?

Anyone out there try their hand at investing in hotels/motels? I have been considering different options for exchanging equity from apartment investments into other investments that may (?) offer higher cash-on-cash returns.

Hotel/motel properties tend to have higher cap rates but, of course, are management intensive (I would pay to hire professional mgt.) and, like all investment categories it seems, have been on a roll for a few years now.

Even if you haven't taken the plunge, anyone ever look into it or do some prelimiary research?

Thanks.
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Old 10-06-2007, 07:07 PM   #2
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In addition to being more management intensive, they tend to be a lot more cyclical/volatile than other types of real estate. I think the time to buy is at the bottom of the business cycle, not now when valuations reflect recent rosy history.
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Old 10-06-2007, 07:14 PM   #3
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Stick to what you know.
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Old 10-06-2007, 07:32 PM   #4
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I think you would take a quantum jump in risk. Unless you have a very large amount of money to invest, you will also be competing mostly with savvy owner operators, many named Patel. Since you would already know all there is to know about motels if you too were named Patel, I think it would be a very unwise move.

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Old 10-06-2007, 07:53 PM   #5
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I've examined a Westin property. The cost per square foot of these investments is astronomical. To break even, you would need almost 100% hotel occupancy. Definitely in the category of "alternative" investments for the megarich only......maybe if you need that occasional condo in Paris or New York?
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Old 10-06-2007, 08:03 PM   #6
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Just like renting apartments except new tenants every night. Ohoh, forgot maid service.

Not this cowboy.
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Old 10-06-2007, 10:10 PM   #7
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I think you would take a quantum jump in risk. Unless you have a very large amount of money to invest, you will also be competing mostly with savvy owner operators, many named Patel. Since you would already know all there is to know about motels if you too were named Patel, I think it would be a very unwise move.

Ha


nailed the 'patel' issue right on the head. if anyone remembers my recent vacation from hell post...there was a patel at each hotel i stayed at!
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Old 10-06-2007, 10:54 PM   #8
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Originally Posted by Meadbh View Post
I've examined a Westin property. The cost per square foot of these investments is astronomical. To break even, you would need almost 100% hotel occupancy. Definitely in the category of "alternative" investments for the megarich only......maybe if you need that occasional condo in Paris or New York?

While I have never looked at a motel/hotel's financials, I would bet that a fair percentage of people spend more by ordering room service/in-room movies/other add-ons that push their bill up (not to mention many hotels with bars/restaurants), enabling the hotel to have a lower break-even occupancy.
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"Patel Motels"
Old 10-07-2007, 03:39 AM   #9
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"Patel Motels"

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Originally Posted by thefed View Post
nailed the 'patel' issue right on the head. if anyone remembers my recent vacation from hell post...there was a patel at each hotel i stayed at!
On a recent motorcycle trip across the country, my wife, after a few days of finding only 3rd tier motels with availability, dubbed them "Patel Motels". You can tell when you are entering one by the odor of curry emanating from the door as you open it. Not that's there's anything wrong with curry, since I happen to like Indian cooking.

Jim.
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Old 10-07-2007, 07:26 PM   #10
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Had luck renting furnished apartments as "Motel Alternatives". Could hit for nearly 2 fold the non-furnished rental rate and still be a bargin to any business person, divorcee, moving couple .... who was stuck in a motel.
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Old 10-07-2007, 07:41 PM   #11
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As far as i can tell, owning apartments (or other income properties) has almost nothing in common with owning a hotel/motel. If you are looking to "exchange equity," then I'd suggest widening the scope to consider other businesses (laundromats, self-serve car washes, self-storage facilities, restaurants) and alternative investments that are not businesses.
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Old 10-07-2007, 07:41 PM   #12
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me, wife, 2 children, sister, her hushand and their kid was lost in the lancaster,PA after a hershey park trip. anyhow, we landed in a "patel" motel, it was a real bad experience that today 5 years later we still talking about it.

my point, unless u got good money saved and willing to upkeep the motel or just invest a little larger franchise hotel, u will get your hand full for a while.


enuff
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Old 10-08-2007, 09:52 PM   #13
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Mohnish Pabrai had a good 1/2 of his book The Dhando Investor concentrated on those patels and their techniques. I don't think you can compete with them in bad times unless you want to get really nitty gritty with your property.
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Old 10-09-2007, 01:36 AM   #14
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Thanks for feedback to all. Very good points raised. No doubt this would be a departure from the apartment business. I have a lot more studying to do.

Just to meander a bit from the original topic, have any of you RE investors switched specialties? Let's say, for example, from apartments to medical offices or single family homes to trailer parks? Or whatever?

Another question for you RE investors. How are you planning (or did you plan) the end game? How will you (or did you) extract the maximum stable cash flow from your built up equity? Paying off or reducing mortgage debt? Exchanging into RE of another type or of the same type but in a different region to get higher cash returns?

Thanks again for your thoughts and experiences.
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Old 10-09-2007, 07:30 AM   #15
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there was a patel at each hotel i stayed at!
I believe it. "As many as 60% of mid-sized motels and hotel properties, all over the US, are owned by people of Indian origin. Of this nearly one-third have the surname Patel - a popular one among Indian Guajaratis": BBC NEWS | South Asia | America's Patel Motels. And not just tiny, cheap motels, either. Apparently Indian immigrants now own many largish hotels, too: see Little India. Well, good for them ... they are obviously shrewd, hand-working people.

P.S. According to the New York Times [A Patel Motel Cartel? - New York Times], in addition to Indian Guajaratis dominating the motel business, "Sri Lankans ... run most porn-video stores.... the Arabs ... have a stranglehold on gas stations ... the Vietnamese ... monopolize nail salons".
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