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Looking at a Mom and Pop Motel Inn - Part 2 | Ep 8

James and Jessi thinking about a motel inn purchase
This is episode part 2 of 2. We keep delving into the world of real estate by talking about a second motel purchase. This one is next to a river and in a quaint cottage area. We discuss in detail the pros, cons, and quirks of this property. We also examine the importance of valuations and look into possible strategies for successful remote management. By sharing our experience, we hope to offer valuable insights into the sometimes complex process of property investing.

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Show Notes

  • 00:00 Exploring Different Motel Options
  • 01:24 The Inn's Unique Features
  • 03:59 The Inn's Management History
  • 06:09 The Inn's Current State
  • 09:03 The Inn's Marketing and Customer Base
  • 11:44 Meeting the Seller and Building Relationships
  • 13:12 Exploring the SBA Loan Route
  • 15:17 Creative Financing and Seller Financing
  • 17:47 Potential Uses and Future Plans for the Property

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James: So that was one I passed. I went, I'm good. I've got another one that is technically in the works. We shall see. It's another motel,

Jessi: which now I know means the doors are all on the outside and you can park in front of them and just go in like your own

James: separate technically though. This one is called an inn.

It's a motel in, and I don't know what the difference is for that. What's the difference for that? I don't know. I haven't looked it up.

Jessi: It's an inn is just. It's in a quaint spot that looks

James: cottagish and nice. Here's the crazy part about this one. It's quaint, yeah. They're also asking 1. 2 million dollars for it, but it is not for 60 units.

There is no restaurant attached. It's 8 units plus a manager's house plus a tiny little home in the back. So 10 units. 10 units. Same price, 10 units. Huh. Yeah. So.

Jessi: Seems a little overpriced to me. Well,

James: maybe not. I don't know. I, if I'm being honest, I think that other 60 unit one's a little overpriced for what Well, for what it actually is.

Oh, I didn't mention on the other one, there's over 400, 000 worth of city fines that someone has to pay. Oh, goodness sakes. So it just gets worse. I know. Yeah. So, but, but yeah, so interesting. Both motels, both the same price, but two very different sizes of stuff. This one's kind of an interesting one. It is owned by an older couple.

They also own it free and clear. They bought it with cash. I think it was like 13 years ago is what they said. And they lived in it for most of the time and just ran it. Like this was what they did. Kind of like a

Jessi: B& B without the B.

James: Yeah. It's just, it's a mom and pop little inn, very homey. All the decorations are very, like, eclectic.

I think is how I would describe it. Yeah, yeah, I've it was nice and sunny out, so I actually brought my drone. So it's all,

Jessi: like, all the units are furnished. Yes. And they run it like a motel. Oh yeah,

James: yeah, yeah, no, it's a motel. Interesting. Eight of them are like motels. Okay.

Jessi: Yeah, yeah, yeah, yeah, yeah. The h the manager house, the, the other house

James: are not, it's right on Highway 99 Uhhuh.

And across the street is the Rogue River. Oh. Like you can see it. Oh. And they have a private dock that's there. Oh, it's also to the Rogue river. Oh, I knew. I think you told that. And it's only like a two way highway, so it's not like it's big. It's like a, it's like across the road. Oh, nice. Boom. You're in the water.

Oh, beautiful. And you can see it from the property. It's really cool, actually. Interesting. Yeah, there's a pool. That's there, which in the middle of winter is gross, but apparently they spent a significant amount of money to make sure it's a heated pool and they can get up to 80 degrees, which again, you're still going to feel cold because it's still cooler than your body temperature, but it's like you could swim in it well into fall, which is kind of cool.

I'm kind of like, how do we get that up to like. 100 degrees. It's only 20 more degrees, right? That's a lot. I know. That's a lot of water to heat up. Yeah. It is a lot of water. What was the other? So, so for the house in the back, apparently at one point in time, it was a duplex that got converted into just a single family home.

Huh. And I'll be honest, like I look at it. And I don't know how it was ever a duplex. It's a small single family home. All right. Kind of reminds me of the one we looked at today, actually. Yeah. You're like, mm, okay. Yeah, we were helping some friends move, and that's, They're converting a single family home into a duplex by converting the garage.

Now, this one also has a garage that is just storage right now. And in theory, like, that's actually what I would do. I would turn that garage into, like, probably a one unit living space as well. Because you just don't need the garage. I think. Or you just rent out the garage for 250 bucks a month. And if the tenants want to do that, cool.

Or if someone else wants to do it, cool. That's probably the easiest route to go. They are all furnished. Interestingly what we, what we learned. So we were there for a few hours talking with her. The tour doesn't take that long, but she's kind of a talker, which is totally cool. And I don't mind it at all.

I like hearing all the stories and facts and how it all happened. So they ran it for. like 13 years. I think they ran it for 11 years living on site. And then what they did was they were like, okay, we're ready for something new. They wanted to move back to their own house and, or maybe they bought a house, whatever.

They moved out and then they hired someone to manage the property for them who then moved into the manager's house and his manager's house is like a straight up. It's a three, two home, just kind of like attached or integrated into it. It's kind of a weird, It's just there and there's an upstairs and a downstairs.

It's a thing. And they did not run it very well at all. Not only were their bookings half of what they would normally do. So when they were running it in person, they were making about 200, 000 a year when they brought in these managers. They were, the revenue they were bringing in was about 100, 000 a year, like significantly less.

Yeah. And. According to her, they did a horrible job of cleaning. So, like, she would just find stuff. Like, she gave an example of, you know, like, you have, like, those fake nails stick on things. Like, she just, I just found one in the middle of the room. Ew. That shouldn't be there. Like, obviously it was not vacuumed.

Correct. They found, , what do you wanna call it? Just found a condom in the middle of the, of the, so gross. The B room as well. It was like, oh, that's gross. Dirty underwear. Yeah. That kind of stuff. We're like, how do you, which I'm, I'm kind of like, yeah, that does seem like it should be pretty obvious.

I get like, those seem like obvious things as you, you're, you forget stuff every once in a while. Like, I get it, but these were like Mm-Hmm. when she went through and inspected, like, these are the types of things that she found Yeah. In one sitting. And she was like, oh, this is just like, ah, horrible. Yeah.


Jessi: well, it's the kind of thing like. If you were to put your, if you were to put your customer hat on and you walked into a room, right, that you expected to be clean, a place to stay, that you're paying money to stay at, you would be like, what in the world? Like, this is

James: disgusting. Ew. Which apparently I asked her, how did you find these people?

And she said that they had another rental and they had rented to them for a few years and they were like, they were clean. It was always nice. And so then there's like, would you like to run this thing? Huh? And they're like, yeah, sure.

Jessi: So they were tenant. Yes. But they had, they didn't have business,

James: apparently they had managed another motel somewhere else at one point in time.

They said they, they, yes, exactly. What was super interesting is, so she's telling all this story and we're sitting in. The man, the manager's house living room and there's a there's a nice couch there. There's a heater that's like a gas fireplace. That was super nice. Actually, I hung out there most of the time she's sitting in this nice, comfortable chair.

There's a table, there's a, there's a big screen television, like a 65 inch big screen television there. I'm like, man, this is pretty nice. And we're talking to, she goes, yeah. She goes, I fired them. She goes, and they just left including all their furniture. And I went. Wait, like, this is their stuff that we're sitting on.

She goes, yeah, oh yeah, she goes, I don't live here. Like, this is all their stuff. They just left it all. When

Jessi: that place wasn't furnished when they hired these people.

James: Nope. Nope, it wasn't. Because it was like a long term rental. So weird. Yeah, they just left all their stuff. They just went, alright, I guess we're out.

And there was like a ton of food on the counter. I'm like, is that also theirs? Which this all happened, I think all this went down, I think it was like nine, ten months ago now.

I like the face you're giving me, it's like, Oh

Jessi: man, I

James: definitely use that for the thumbnail. Yeah, no, it was super interesting. Like, like what in the world, I don't know. There's, it seems like there's things

Jessi: not quite lining up in that

James: story. She's also super, super old school. Like everything is on pen and paper.

She only does phone calls, even on their website. They, they have a website, so there's that, which our son put together, and there's a huge banner that says, do not book online, only call this phone number if you want to stay there. And the way that they track all the The stay is that she has those, one of those bigger calendars like a, like a, like

Jessi: a desktop

James: desk calendar.

How big are we going to call that? It's like a two foot by two and a half foot. I don't think it's quite three foot. Yeah. Yeah. One of those big desks ones. Yeah. And she literally has eight, she puts eight lines. Going across, and then, and those are each of the rooms, and then she writes in the person's name, and then we'll do an arrow for however many days that they're staying there.

Oh my word. Which actually was super cool, because she had three years worth of them, and she just was like, She just kept them. Yeah, and she was like, here, flip through. You can see when, how full they were, because I asked her a question, I was like, well, how, like, eventually, I, essentially, I was asking her, like, what's your vacancy rate on this thing?

Because that was nowhere on the paperwork she sent me. She's like, here, I'll show you. I was like, all right. So I like bust out my phone, click, click, click. Just started taking pictures so I could actually count it and figure out the numbers later. She doesn't have it all. And you could very, and you could visually, you could very clearly see when they were managing it, what it looked like versus when the other people were there.

It looked like it was not nearly as full. You're like, okay, yeah, I see what you're saying.

Jessi: Well, I, I would imagine. Like, did they do any, did the owners do any marketing or like, how did they get people

James: to find out about it? Primarily. Yeah. That's a great question. I guess there's a Best Western nearby that would send a lot of people their way.

Like whenever they were, it was either they were full or the customer had cats or they were wanting to pay in cash. And so she said they would get all sorts of referrals from Best Western all the time. Interesting. People like that. Yeah, cause they allow pets. They actually have a pet run area in the back, which is kind of neat.

I guess pets, sure. They had ashtrays on the outside. So apparently they'll have some sort of smoking, but each of the rooms smelled fine. I didn't like, I don't walk in and go, Oh boy. Yeah. What else? It sounded like she had a lot of repeat customers, a lot of repeat customers. And so for me, I started thinking about it where I was like.

Okay, what makes this place special and unique? And, I don't know, honestly there's not much. Outside of this owner, she's the one who screens all the tenants. Or not tenants she runs the front office. And she's a personality. And I think that's the draw. She's a connector. Yeah, yeah, exactly. Yeah, she said they have a lot of repeat business people who come back year after year after year.

Like this is their thing. So I don't know. I'm so we're looking at it. I think there's some interesting possibilities from a, how you structure the deal standpoint. That could, that could potentially work for me. Obviously we're not going to move down there. This is also in grants past, by the way, we're not going to move down there.

And so the question would be like, okay, how do you run this thing remotely or at least bring in someone? You know, partner with someone who can run it where the incentives are aligned where they want to maximize and do well Yeah And I don't know because part of me says if I can figure out how to manage it remotely That means I can rent out that manager's unit in addition to that back one and just increase the revenue significantly The way that the manager's unit is split up to because there's this top and bottom level.

I actually think you could potentially Cut off that top level and turn that like add a door and entryway and just add a motel unit. Essentially it's big enough you could totally do it. It's bigger than some of the other units and you maybe have to add a kitchen area. I guess I don't know how important that is.

And then and then for the downstairs again, you could just, you can make that a nice unit. I guess there's a hot tub that apparently doesn't work. That's there. Yeah, so it's just kind of an interesting thing. So we're in active conversations. This thing has, was on the market for a very long time.

They got a lot of interest, surprisingly from a lot of people on the East coast who were interested in it. And for whatever reason, it had a bunch of looky loos. No one ever looked into it. She's had multiple other people who were very serious. But for whatever reason, they've all fallen through, all fallen through.

It's currently not on the market and she's just kind of like, I don't know what to do. And so yeah. So. We took a tour and talking with my guy who would partner with me on this. He was like, I think it would behoove us to meet her in person and actually walk through it. He's like to the point where it's like, it's not even worth making an offer unless she sees you and talks to you.

Right. She's that kind of person. Yeah. And so that was why we drove down. That was why we spent a few hours there so that I could ultimately, Hey, just see, see the place, get an idea for the condition, ask some questions, figure out how it works, but then ultimately have that relationship so that I can make an offer and try to structure it in such a way that is a win win for everybody because she's tired and she wants out.

Yeah. It's not worth 1. 2, unfortunately. So give

Jessi: me the, give me the, like, whatever, 30 second, here's how much it costs, here's how much we'd have to raise, here's how much rehab would be before we run it, here's how the revenue we would

James: expect. So, if I bought it for 1. 2, and let's presume that I can make 200, 000 a year on it, doing what she did, which I think is reasonable, because our prices are very low, I The net operating income is about 76, 000 a year.

I actually have my laptop here in case you get really specific about it. And so the question would be, how do we structure the debt in such a way that it's like half that number, it's like 40, 000 a year. That's kind of the range where this would suddenly start to make sense. Yeah. And so. I mean, one option is you go to the small business administration, the SBA, because technically it's a business and I would be occupying the property as a business and you apply for a loan there.

And then you just got to come up with a down payment and figure out whatever the repairs are and you'd raise funds for the down payment and the repairs and kind of go. So what would the SBA. Give you money for? To buy the property. Like, they'd give me a 90 percent loan, actually. Interesting. Yeah. You can get a 90 percent loan.

I didn't realize you could do that. Yeah. Yeah. Hmm. Technically, we could do that with our storage facility, by the way. Because we are running a business. Yeah. Yeah. Interesting. Yeah. Yeah. So it's kind of, it is very interesting. The problem is that she doesn't have any books. She does everything by pen and paper.

And so someone would have to go in and like spend probably at least a day, maybe spend the night at the motel. Who knows? Hey. And turn it all into, right. Turn it into an official, like here's a P and L it's structured in a way that. The SBA underwriter would understand, because I mean, I could totally tell a story like, Oh, here's a situation, here's what's going on, here's where we're going to buy it.

They still need documentation. Yeah. And the underwriter is not going to hear any of that. They purposely keep them separate from me. So I can't tell the story. I mean, in theory, I could go to a commercial bank and get just a regular commercial loan for it. That is an option and they actually would listen to the story and I could put together a business plan and show how it's all going to work and influence them that way.

Don't they, wouldn't they

Jessi: still at some point need the underwriting

James: and books? I think so. Yeah. Yeah. So that would be that route. And I would have to but they wouldn't give you 90 percent down. Probably not. Yeah. But it would be, it would just be a lot of work to get there, but you know, for the right price, which based on all my math and what I did, if I'm going down that route.

Honestly, it's worth like 800, 000, which isn't bad, I mean, for where they're at, but that's honestly what the value is. And that's the kind of thing where I'd have to communicate that to her, like, Hey, look, we can go down this path, it's going to be worth like this much because of the loans and the ratios and you know, all that stuff I got to hit, like, that's what could be, but you would get cashed out.

So you know, that's cool. You have to pay the capital gains tax on it and they don't play that game. So that's one route. There's a more creative financing route that you can go down where you can say, look, I know you want to get 1. 2. I think I'd still come back and say, honestly, it's not worth that because there's just some repairs and stuff that have to happen, but maybe it's worth a million dollars, you know, that's an extra 200, 000 and say, and tell her, what if we structure the payments in such a way that.

I'm, I'm only paying, let's say 40, 000 a year or whatever that, however that comes out to monthly and you go, what if I'm paying that? And then there's a balloon that happens in 10 years where whatever the balance is, boom, you're going to get that as, as a lump sum. And that gives me 10 years to go in, actually run the place.

Create, you know, with QuickBooks, a proper P& L that a bank would like. Figure out the operations myself. Go through, make repairs, genuinely make the place more valuable. Increase the rents on the place, cause you can, cause it's now a better property, better experience for people. And then you refinance it, 10 years from now, with an SBA loan.

Why 10 years? Oh, I don't know, just cause. Like, could you do it in 3 years? Yeah, totally, you could do it sooner, yeah. Ten years just sounds like a long time. Well, the point of ten years is in that amount of time, property values will have gone up. Period, whatever cycles are happening, it doesn't matter anymore.

If she's giving me a great rate, there's no reason for me to take that. Well, and if

Jessi: she's, if she's giving you seller financing, she's getting paid

James: each month. Yeah, exactly. It's reducing her capital gains. She's not

Jessi: managing it and dealing with it, which is

James: Yeah, that's the point. What she wants to get rid of too.

She's replaced the management with income instead of a lump sum. And that's kind of the way I would push that to her. And that gives you some time. Yeah, exactly. That's kind of the thought behind that. And that's, and I'll probably present both. Like, hey, which way do you want to go? This one is also going to be like a 120 day close because working with the SBA is just like that.

And part of that time is going to be like me sitting there going through all of your stuff, helping you create it. I have skills in making. Two numbers that are close, but don't quite mesh, meshing perfectly. That's things I used to do. So I could totally do it and I know it, assuming they have the data and knowing what their calendar is and knowing that they haven't changed their rates in five years and knowing what the final answer is supposed to be, I'm like, I could do it, figure it out.

I would just, it would take some time, but I could create a monthly P and L and figure it all out. So that's kind of my. It's kind of where I'm at. And so we'll see what they do. I don't know. We're in the middle of this one and I would love to maybe give an update eventually on how it all goes down. But anyways, question.

Yes. Quest

Jessi: away. Kind of related, but not really. Let's say you do get this motel and you're running it like a motel. Yeah. Could we use it like a motel? Sure. Yes. Well, not for us, but like, could our church use it? For like retreats and stuff and just just like we would pay we would yeah, totally block the time But you could like block out sections of time.

Yeah Knowing like yeah, yeah church is gonna regularly use this as it Be cool.

James: I suppose so. Yeah, I could totally like home

Jessi: home leader retreat

James: could happen. Yeah, I miss a three hour drive to get there It's not most convenient thing ever. But yeah, totally That's an option. Interesting. Yeah. So for me, I think I continue to run it as a motel.

That'd be the goal. In theory, like all these could turn into long term rentals if I really wanted to. That's probably how I would underwrite it and pitch it. Sure. It would turn that back house long term. But if you

Jessi: find the right person to, to run it, you could do it like the motel and it wouldn't be a big deal.

James: Yeah. I think the, I've, I don't know them personally, but my potential partner, he knows some people who run, I think it's a, I think it's an eight unit motel. And a hundred percent remote. They all live in San Diego. So like it can be done. It can be done. Yeah, exactly. And so I think there's just a learning process on how to do that.

So that's honestly how I would go about doing it. Just be remote. Cool. And then obviously you'd hire local people to clean the rooms, to check the pool, mow the lawn, do the maintenance stuff. Like all that would happen. But you, you could do it all remote and I think that's the way to go and do it. And then we go visit everyone.

That's what we're doing. So that's what we're looking at. That's the latest activity that I've had. And, yeah.

Jessi: Ugh, you just said the word activity. It made me think of rodent activity.

James: Fair enough. That's the latest, Deals. Deals. Latest. Latest deals we've been looking at. Potential deals you're looking at.

Anyways, just wanted to share a little bit of like, here's the mindset, here's what we're thinking, here's how we're processing. I like it. Going through without necessarily getting bogged down by all

Jessi: the numbers. That was helpful because I, you gave me the basics, but I need to hear things lots of times before, before I remember.

Yeah, I know. That's pretty good. Okay. What are the, can you tell me the code names for them? The code names. Yeah, yeah. Like the hotel, the motel restaurant.

James: I've been calling it the Cozy Cove property. Okay, Cozy Cove. That is not where it's located. It's in Junction, or Cove Junction, or Junction Cove. One of those two.

But I've been calling it Cozy Cove. Cozy Cove.

Jessi: Well, I know you named them so that we can keep them all separate. Because you're like, you know, the motel one. Which one's that? I'm like, there's different motel

James: ones. I know you're not going to know the answer to this, so I'm going to ask it and I'm not going to pay it off.

But, what's the name of the city that the Power Rangers live in? Do you remember that? I feel like the word cove is in there. That's something my brother would be like, I know this answer! I have no idea.

Jessi: Power Ranger City. I don't know. Cottage Grove is an actual

James: city. All right, hold on. I want you to like, somehow, I gotta look this up real quick.

I've, cause now I gotta pay it off. That's not fair for me to. Okay,

Jessi: and the other property, the one you were just telling me about, the motel by the river. What are you, you're calling

James: that one? Angel Grove. Alright.

Jessi: Really? Okay, Angel

James: Grove. There you go. That's what I keep thinking in my head when I think Cozy Cove.

Angel Grove. Alright. I'm just going to call it by its by the property name itself. Maybe just call it Bella or something like that. Bella. Okay.

Jessi: I don't know. I just, I need names to keep them all separate. Yeah. Because otherwise Just, you're like, you know, that one deal. And I'm like,

James: That one, no, the motel, which motel.

I know. Yeah. Yeah. So yeah, anyways, there it is kind of fun. And if you enjoyed this podcast, we would appreciate it. If you left a quick rating, wherever you listen to your podcasts, that would be super awesome. So with that, thanks for listening and have a great day.

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Furlo Capital Podcast

Furlo Capital
Real Estate Podcast

A conversational podcast between James and Jessi Furlo that dives into the intricacies of passive real estate investing. Our mission is to equip people to invest wisely in both property and residents so that, together, we can build wealth and improve housing.

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Let's build your wealth and improve housing, together

Passive Income

Tenants pay monthly rent, which covers expenses and generates a profit for investors. Plus, multifamilies appreciate and usually sell for a significant profit.

Consistent Above-Average Returns

Real estate is less volatile and historically outperformed the S&P 500 by routinely generating average annual returns of at least 10% after fees, inflation, and taxes.

Revitalize Local Communities

We give people a great, safe place to call home. This doesn’t hit the spreadsheet, but every property is managed and maintained with the residents as a top priority.

Extraordinary Tax Benefits

Your income is taxed much lower because of depreciation and because it’s taxed at a lower capital gains rate.

Below-Average Risk

More units mean less vacancy sensitivity. Plus, costs are distributed across a larger number of units, which also allows us to hire a professional property manager.


Unlike stocks, lenders like to finance multifamilies and the loans are tied to the property, not the person. This accelerates wealth building.