One of the craziest questions people ask is how they can buy a hotel or any business for that matter with no money.
The hotel business is capital intensive and requires quite a substantial amount of money to invest in. Therefore, buying one with no money may be fun for the interested party, but it isn’t to the seller.
More so, it is almost impossible.
Read on to find out why this is so. Here is a sample hotel business plan.
Lots Of Money Is Needed
Sorry to burst your bubble, but investing in, or buying a hotel requires lots of money. Buying a franchise alone (which is considered far cheaper than starting one from scratch) will cost anywhere from $195,000.
This gives you an idea of what it will take to buy one or build from scratch.
Asides buying the hotel, you’ll need to purchase equipment, make utility payments, deal with payroll demands as well as incur property taxes among other things.
Therefore, thinking about buying a hotel with no money should not even be considered.
Business Is Only Complete When Money Or Resources Exchange Hands
The seller of the hotel needs to have something of equal value exchange for their property.
In this case, money is the most accepted medium of exchange. It circulates and adds value to the seller who in turn spends or circulates the same for other products and services they consider valuable and useful.
Why It Isn’t Possible To Buy A Hotel With No Money
When a hotel owner decides to sell their business, they are in effect transferring ownership to you. Existing workers are either given their severance pay, thus ending their employment status with the hotel or some kind of arrangement is entered into with the new owner to retain their services.
In any case, you’ll be saddled with responsibilities for hiring workers as well as taking care of the payroll. This requires sufficient funds until the business starts taking care of itself and turning a profit. It is practically impossible for someone without money to either meet and maintain such demands.
Selling and buying of hotels are mostly conducted through an intermediary also known as the real estate company or agent. This intermediary facilitates the transaction and will need to be paid an agreed-upon fee.
This is known as the agent fee or commission for facilitating the sale.
Tax Fee Obligations
Hotels do pay yearly taxes. These come in the form of income tax, property tax, and corporation tax among others.
You’ll need to meet up with such obligations. Not being able to do so means you’re not qualified to operate such business.
Buying And Restocking Supplies
The reason why running a hotel business is considered capital intensive is because lots of expenses are incurred on restocking supplies as well as taking inventory of what’s damaged or needs replacement.
All of these have to do with money. You’ll need to be able to maintain the smooth functioning of the hotel only with an adequate supply of resources (cash).
Can You Source The Money Required From A Lender?
Applying for financing or loans from lenders comes with lots of conditions. The major condition has to do with having an excellent credit rating. Even so, you’re expected to make down payments before accessing the funds. All such actions involve money.
Without it, you’ll be largely limited in your ability to meet such lending obligations.
You Don’t Need To Buy A Hotel
For persons with no access to money, buying a hotel is practically impossible.
However, those in possession of some cash they’d like to channel into hotel investment can consider other alternatives. You can either begin by participating in a crowdfunded hotel investment, buy into a hospitality Real Estate Investment Trust (REIT), or invest in a hotel brand’s stock.
Let’s consider each of these;
Participating In A Crowdfunded Hotel Investment
Crowdfunding has become an increasingly popular investment vehicle where lots of investors pool their resources together to raise funding. There are multiple ways to do this. You can either begin as a real estate investor who sees a viable hotel investment opportunity.
As the deal’s sponsor who is limited by capital, you can list such investment on a crowdfunding platform to raise the required capital. Such capital is only made available after reaching an agreement for an equity interest in the project.
Under this type of investment, you as the developer are likely going to be buying an older hotel. The goal is to restore or renovate the property to sell it for a profit within a few years after its value must have increased.
On the other hand, you may not be interested in buying a hotel, but are part of a group of investors investing their capital using the crowdfunding model of investment.
Buy Into A Hospitality Real Estate Investment Trust (REIT)
This operates in a similar way to mutual funds, the only difference is that this involves properties (hotels inclusive) rather than commodities, bonds, or stocks.
To further explain this type of investment, it has to do with the pooling of funds together for portfolio investments.
You’ll need to target REIT investments that specialize in properties such as hotels. There are lots of such investment opportunities available. You only need to find them and start investing.
Investing In A Hotel’s Brand Stock
Not being able to buy a hotel without money doesn’t stop you from investing in one. A hotel’s brand stock is one area you should consider investing in. This brings us back to REITs which we earlier discussed. They either build or buy a hotel and also maintain the property.
The entire process of hotel investment is tied to money exchanging hands as we’ve seen. The closest thing to investing or buying one without money has to do with using other people’s money such as crowdfunding among other things.
So, in concluding, the answer to the question of buying a hotel without money depends on what options listed above you intend to explore.