Friend Offered to sell me their motel, need advice - Older friend wants to sell me his 28-room motel near a summer resort area for 1.3 mil. He's operated it for 20+ years. 4 bedroom house comes with it.

Per Room Cost

|His Offer|Motels Nearby|Hotels Nearby|
|:-|:-|:-|
|46,428| 41-50,000|55-60,000|

His current yearly dedicated income is his weekly rentals. The other 14 he daily/weekend rents.

His costs he ran down were:
\- Property tax
\- Gas, electric, water, sewer, trash, cable
\- Flood, building, and liability insurance
\- Linens

|Time|Income|Expenses|
|:-|:-|:-|
|Weekly (14 rooms)|4,410|1,811|
|Yearly (14 rooms)|229,320|94,200|

​

Weekly each room earns $315/week or $16,380/year. If I focus on the weekly model only accounting for increased expenses on items that would increase due to more demand:

​

|Occupancy Rate|Yearly Income|Expenses|
|:-|:-|:-|
|50% (14/28)|229,320|94,200|
|60% (16/28)|262,080|123,960|
|70% (19/28)|311,200|128,920|
|80% (22/28)|360,360|133,880|
|90% (25/28)|409,500|138,840|
|100% (28/28)|458,640|143,800|

​

Example SBA 504 loan calc:

|Sale Price|10% Down|Loan|Rate @ 25yrs|
|:-|:-|:-|:-|
|1,300,000|130,000|1,170,000|6.808%|

​

|Monthly payment|Yearly payment|
|:-|:-|
|8,127|97,519|


Cashflow Model with SBA factored in:

|Occupancy Rate |Yearly Income|Expenses + SBA 504|Cash flow on motel only|\+48k/yr for house rental|
|:-|:-|:-|:-|:-|
|50% (14/28)|229,320|191,719|37,601|85,601|
|60% (16/28)|262,080|221,479|40,641|88,641|
|70% (19/28)|311,200|226,439|84,761|132,761|
|80% (22/28)|360,360|231,399|128,961|176,961|
|90% (25/28)|409,500|236,359|173,141|221,141|
|100% (28/28)|458,640|241,319|217,321|265,321|

I have \~200k liquid and \~600k home. No mortgages or outstanding loans. 700 credit, but bankruptcy 2014. My income is around 60k/yr before taxes. I am handy (I've renovated homes before) and I don't mind that this is like buying a job. The cash flow would allow me to purchase other properties. I think this is a good step for me, but I ask you guys.

2 simple question: your thoughts and what am I missing?

Edit: This is why I love you guys! I saw all the upside but didn’t account for every risk. I’m reading every comment at least a couple of times and weighing the options.

SBA originator said that even if the business has been active for over 20 years, me coming in with little to no experience, they treat it as a startup.

They did say though I would be qualified initially.

Yes, the price is too high for me to risk my money on this thing. I’m waiting for the books and tax returns as well. Right now, it’s a 60% no, 40% yes. If the price drops and I get details, it might sway me.

Again, everyone, thanks for your feedback!