Extended stay at $79k a key, and nothing about it reads passive

Your FF&E reserve is the number I'd fight about. 4% is a brand minimum, and it's the figure people use when they want the model to work. Exterior corridor means you own weather-facing doors, walkway railings, stair treads, and a roof that nobody defers cheaply. On an asset already staring at a PIP, I'd carry 5% and separately reserve capital outside the operating model for the license renewal, because the PIP is a capital event, not a reserve draw. If you fund the PIP out of the same 4% you're double counting the same dollars.

Also your payroll instinct is worth chasing. Ask for the actual quarterly wage filings, not a P&L line. Light payroll at 71% occupancy usually means either the owner's family worked the desk or someone was running 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 you dismiss it. 8% pref on your equity, call it $1.7M into A, is $136k a year with no PIP decision and no operator to supervise. Your A case pencils to about $212k of cash flow after debt service before any of the capital events land. So you're buying about $76k a year of extra income, minus the PIP, minus the insurance surprise you already expect, in exchange for a job. If the PIP hits $900k, the first four years of that spread are gone.

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

Since I mostly think about dirt: what is the site worth if the hotel concept fails? Interstate exit, hospital, two distribution employers, that's a parcel with alternate uses, and I'd want the zoning read and the pad size before I'd accept $79k a key as cheap. If the land plus improvements would trade to a self-storage or fast-food user at, say, $1.3M with the building down, your true downside isn't the hotel's income, it's the site. In some states you can pull assessed values and past sale prices from the county in an afternoon and in others sale prices are never published at all, so check what your county actually discloses before you build 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.

The employer mix bothers me more than the PIP. Distribution centers and a hospital give you weekday contract business, and extended stay in a small market often means one or two corporate accounts carrying thirty percent of your room nights. Ask for the top ten accounts by room nights for the trailing two years and whether any of them are on a negotiated rate that resets. If one contractor project wraps up, your 71% occupancy is a 58% occupancy and everything above breaks. That's the segment risk in a market that thin.