An extended stay at $79k a key where nothing about the hold reads passive.

Your FF&E reserve is the number worth fighting about. 4% is a brand minimum, and it is the figure people reach for when they want the model to work. Exterior corridor means you own weather-facing doors, walkway railings, stair treads, and a roof nobody defers cheaply. On an asset already staring at a PIP, carry 5% and separately reserve capital outside the operating model for the license renewal, because a PIP is a capital event and funding it out of the same 4% double counts the same dollars. Your payroll instinct is also worth chasing. Ask for the actual quarterly wage filings rather than a P&L line. Light payroll at 71% occupancy usually means either the owner's family worked the desk or the property ran one housekeeper short, and the reviews will show it.

Have you read the guest reviews from the last eight months? Cheap payroll shows up there before it shows up in the numbers.

On the PIP range, the soft goods number is the predictable part and the envelope is where the spread between $600k and $900k lives. Exterior corridor buildings at that age tend to have walkway waterproofing that was patched instead of replaced, and once a brand inspector writes up railings you are usually into the deck coating underneath them. Get a roofer and a waterproofing contractor to walk it separately from the general contractor, priced per building, not per key. And find out whether the brand will let you phase the work across two seasons, because doing bathrooms in blocks of eight rooms instead of twenty changes your displacement a lot.

Nobody has said the word displacement in dollars yet, so: 62 keys at $73.80 RevPAR is about $4,575 of revenue per day for the whole property. Take twenty rooms out of service for six weeks and you have surrendered roughly $62k of revenue even before the contractor bills you, and that assumes the remaining rooms hold rate, which they won't while there's a scissor lift in the parking lot.

Scope creep on hotel renovation is worse than on houses because the inspector can add items mid-project. I've had a bathroom package expand because once the vanities were out the substrate under two of them was rotten, and the brand's list then included the adjacent floor tile. Whatever your general contractor's contingency is, ask what triggers it and who approves the draw.

Run the LP option honestly before dismissing it. An eight percent pref on roughly 1.7M of equity is about 136k a year with no PIP decision and no operator to supervise. The GP case in a scenario like this pencils to around 212k of cash flow after debt service before any capital events land. So the extra income from operating is about 76k a year, minus the PIP, minus the insurance surprise everyone in this position already expects, in exchange for a job. If the PIP lands at 900k, the first four years of that spread are gone.

Ask the operator what annual turnover looks like at the general manager level. That one answer predicts more than the fee does.

Since land value is the more useful lens here: what is the site worth if the hotel concept fails? An interstate exit, a hospital, and two distribution employers inside four miles is a parcel with alternate uses, and the zoning and pad size matter more than the per-key price. If land plus improvements would trade to a self-storage or fast-food user at, say, 1.3 million with the building down, the true downside isn't the hotel's income, it's the site. In some counties you can pull assessed values and past sale prices from the assessor in an afternoon, and in others sale prices are never published at all, so it pays to check what a given county actually discloses before building a comp set.

The three years left on the license is the whole clock. You are not buying a hotel at a 10.6% cap, you are buying about thirty-six months of that cap and then a capital call you don't control the size of. I'd try to get the brand's PIP scope issued to you in writing as a condition of closing, or a price reduction that covers the high end. Sellers with a short license know exactly why they're selling now.

If the deal only works with the tax break, it isn't a deal. That's the standard test to apply to any structure like this.