Owning a hotel
Hey, guys I don't want to be a wage slave for the rest of my life. I was thinking about saving all my money to buy a hotel. I've never ran a hotel in my life and I have zero hotel experience. But I read you can hire a hotel management company that will take care of everything. Obviously I can't afford a large hotel but maybe a small economy one. Am I delusional?
Based on the most helpful WSO content, here are some insights regarding owning and operating a hotel:
Management and Operations:
Challenges and Considerations:
Market Conditions:
Long-Term Viability:
Personal Considerations:
In summary, while hiring a management company can help, owning and operating a hotel comes with its own set of challenges and responsibilities. It's essential to thoroughly research and understand the industry before making such a significant investment. If you are committed and prepared for the potential hurdles, it could be a rewarding venture.
Sources: Lunch & Learn - Hotel Industry & Hotel Development, To my fellow Hotel friends, Lunch & Learn - Hotel Industry & Hotel Development, Hotel Crisis, Has anyone here been unemployed for 3+ months?
Yes, you are delusional. Plenty of other ways to forge a new entrepreneurial path in real estate or operating business, even with limited experience. Hotels and hospitality is not one of them.
Would mutifamily be bettter for a hands off real estate investment? I was looking into hotels instead of multifamily because the returns for apartments are so low especially if you want to hire a management company.
Yes there is a reason for this...everyone wants to do what you are dreaming ie invest in multifamily and hire a management team. Regardless, finding a multifamily at a low enough basis to support a management company and still provide a decent return is very difficult, but infinitely times more realistic than purchasing and operating a hotel
Multifamily is wildly overpriced. The only way you can make this work is if you have a time horizon that is a decade at the absolute minimum or you have a skill set that lets you turn around dumpster fires into productive assets. This requires a huge amount of capital and time.
If you want to get in to real estate right now at a relatively sane basis, I would recommend looking into industrial to small bay flex industrial conversions in secondary markets. This still requires market knowledge and a lot of capital, but it is not an insanely over capitalized market.
I work at a small commercial bank in TX where our primary niche is financing hotels. We finance mostly economy or budget hotels as the margins are significantly better than a marriott or hyatt type of hotel. The best performing hotels have management that lives on property, but if you don't want to do that you'll have to pay a management company 3-4% of revenues annually. It gets more complicated based on which flag the hotel is under (flagged as a marriot, comfort, holiday inn) as they will require property improvement plans to stay current with their standards. Not something I would be interested in doing as I think it requires constant hands-on attention, but I've only been working on credit side of financing them for several months.
There is no job out there where you can expect to make money without having to work or having capital to invest. My best advice for you is to 1.) Somehow go back in time and be born to Jeff Bezos 2.) Win the lottery 3.) take advantage of government programs (Section 8, food stamps etc...). If you don't like any of these options, then you're going to have to work either for someone or for yourself. But there will be work.
Regarding your hotel idea, go work as a hotel manager for a couple years so that you know how to run one. What happens if you hire a manager and they quit? Do you just kick all the guests out and close the hotel until you find a new manager? Also, if the hotel is cheap enough such that you are able to save enough money from your 9-5 job to purchase it...it's probably not a hotel you want to own...
"There is no job out there where you can expect to make money without having to work or having capital to invest."
I wish I heard when I was younger.Either have to build some sweat equity or get the highest paying job to be in this game. Both tough, but in different capacities.
Sometimes I still have to remind myself that LOL
Found this old thread while searching for advice on buying a small place. The "passive income" thing is mostly a myth, if you hire a management company and just walk away, they'll eat your profits. You have to keep them honest.
I use Hotel Metrics to see exactly how guests are finding my site so I know if the manager is actually doing their job or just coasting. Just make sure you have a "disaster fund" for when things break, because they will.
Investing boutique hotels is a great way to loose a lot of money - my company has/had a small portfolio an we are liquidating them all at huge loses.
Not to say you can’t make money doing but it’s more of a “I have a passion for hotels and I’ve been working in the industry for years” asset class. One does not simply buy a hotel.
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