Seller Financing Options
Buy a Hotel: Can I Get Seller Financing or a Lease/Purchase Option?
If you think you may want to buy a hotel, one of the first logistics you consider is the cost. Even if you get a steal, the money to purchase a hotel is no pocket change. Sure, if you do it right, it will be making you money, but that doesn’t mean the capital to invest up front will just materialize. You have to have a plan.
Buy a Hotel With Seller Financing
You may be hoping for seller financing to buy a hotel. This would be an ideal situation for you, the buyer, but most sellers want to get out from under the property and make a clean break, not get into a situation where they are still financially liable in the event that you can’t hold up your end. Even if you come across a seller that is willing to do a lease/purchase agreement, it will likely only be for a fraction of the purchase cost. The short answer is no; seller financing is not something you’ll want to count on. You may be waiting for a long time if you do.
Buy a Hotel With Bank Financing
Most who are in the market to buy a hotel go through a conventional lender. Going through a bank may not be your ideal situation, but it does come with its own perks:
Freedom to Choose
If you were to find a rare seller that was willing to finance, you’d be limited to their hotel, no matter the condition of the property or the location. If you secure financing for a loan, you will be able to freely consider any of the hotel listings that interest you and buy a hotel that you love. The loan is good for any hotel purchase, not specific to any one like a seller lease option would be.
Build Rapport For Future Endeavors
Acquiring a loan through a bank to buy a hotel and then paying it off builds a great relationship with that bank. It also raises the chances that you will be approved for more (and bigger) loans for newer and bigger business ventures in the future.
Unfortunately, hotel loans are seldom pre-approved. Lenders want to see historical financial statements and performance metrics of a property, in addition to your personal financial strength, before approving a loan.
Once the lender’s loan committee gives preliminary approval for your purchase, they will want an appraisal, oftentimes a phase one environmental inspection and possibly an ALTA survey. They will also want to review title work before preparing the documents needed to fund and close the transaction.
The process can be complicated, which is why the help of an established hotel brokerage is invaluable. If you have questions about buying a hotel and the process of securing financing, give Southeast International Hotel Brokers a call. We have decades of experience in the hospitality industry and can help you navigate through the process to buy a hotel that is perfect for you.