Revitalizing a hotel is an exciting way to add value to your properties. By upgrading and improving your hotel facilities, you are giving yourself a leg up on competition.
To be a successful renovationist, you must have extensive knowledge of the law and regulations related to property ownership and renovations. You must be able to fund and manage the project properly, as well as obtain appropriate insurance coverage.
Many renovation projects fail for two main reasons: cost overruns and failure to maintain attention to detail. If you are one of the few holding the keys, this opportunty can turn into gold.
How to find them
There are many ways to find Turnkey Opportunities. Some companies offer coursework and/ansasions with other companies, making it an open door for new entrants.
Owner-managed hotels are usually well-maintained and have some extra money saved up to invest in them. They are typically more expensive than free or low cost hotels, but with the extra attention, quality will always wins out in the end.
To find these properties, look for property vacancies or vacant hotels around you. If there is no one willing to take ownership, then you have found a potential property to turn into a hotel.
Some owners will offer their hotel as a way to make money off of the property alone.
Financing options
There are many ways to finance a renovation project such a bank loans, contract loans, and/or investor financing. Each has their own set of terms and guidelines for lending or investing in a renovation project.
As mentioned earlier, bank loan programs are very popular. Many local & national facilities utilize these bank loan funds to renovate historic buildings into hotel-quality spaces.
In most cases, the owner(s) assumes the debt burden to complete the project. In some cases, this can be helpful as it gives them more control over the project. Plus, it is usually easier to bring in contractors versus oneself because of the debt load!
Contractors often do a pre-vet inspection of the building to see if there are any safety concerns. If so, then they would need approval from the contractor before working in the building.
Know your market
When choosing a renovation and investment partner, there are a few key elements to consider. Luckily, we have created a list of tips to help you find the right partner for your project!
Then, determine what kind of projects your partner is interested in. Are they focused on residential or business properties?
Last, determine what each person brings to the table. Are there specific skills or attributes that make a difference? What makes them stand out? When asked what they know about renovation and investment, most partners will mention some skills but not all of them.
Choose the right partner(s)
When referring to renovating a hotel, there are several partners you must consider as you plan your project. These include:
The demolition contractor who comes in and takes care of the exterior walls and floors; and
The interior designer or developer who designs the new space within the hotel.
These three parties work together to create the new project, so it is important to be able to interface with them. If one of them is not on your team, then there are two things that happen: 1) You lose out on bid competition, or 2) You have to find a different partner who can work with those people.
Understand the contract(s)
Before you start renovating a hotel, you should understand its contract(s). The most important ones are the revenue-sharing agreement and the incentive-payment agreement.
Most revenue-sharing agreements require a minimum number of rooms and renovations before the agreement begins. In this case, it would be beneficial for you to gather more information about the hotel before signing an incentive-payment agreement.
However, there are some revenue-sharing agreements that do not require any initial rooms or renovations. These are called no-growth agreements and can be very beneficial for a landlord.
If a business does not need additional space, they can request a no-growth agreement. If they need new remodeling or construction, then the hotel owner can ask for an incentive payment.
Landlords do not want to give out incentives because they think it will help them win over prospective clients and customers.
Check the contract(s) for errors
Even if a renovation opportunity sounds too good to be true, look into the contract(s) for errors or omissions.
Some renovations require permits or contracts to be in place, which means there are errors or omissions that need to be changed. For example, a contractor missed a detail such as flooring type or brand when reviewing the opportunity.
If the opportunity requires legal documents, check those as well. Many times, these are reviewed and approved more quickly than any other part of the process.
Checking out available renovation opportunities does not mean you will find one.
Make sure you get a signed copy of the contract(s)
Even if the owner gives you a short contract, you should make sure it is signed by both of you. This will help prove your case in case there is an issue down the road.
If the owner goes out of business or changes his or her mind, the ownership can pull the plug on this project at any time. A signed contract proves that both parties were honest in their communication and that they are committed to following through on their side of the agreement.
Having a signed copy of the turnkey project can also prevent issues down the road. If one party disputes something with the other, they can hand over a copy of their agreement to prove their side of the story.
Get insurance policies
If you’re a renovation enthusiast, you should get into the insurance business. There are lots of tour-y services that will lead you through a renovation process and tell you all about the ins and outs of getting your building insured.
It is also an opportunity to make money while doing what you love. Many hard-workin’ people offer their services for between $500 and $1000 per project, which is pretty cheap of course.
If you are very experienced in the field, you can offer higher premiums to entice more insurance companies to cover your project.
