Sold a wholesale contract on a Phoenix retail strip in April and now somebody is pitching me a 22-key budget hotel outside Flagstaff as the next move

Your math instinct is sound. Let me explain the terms and then work through why the number keeps coming up short.

RevPAR means revenue per available room. At $48 RevPAR on 22 rooms, that property is generating roughly $48 times 22 times 365, which is about $385,000 in gross room revenue per year. Now the deductions stack up fast:

• The flag (brand) typically charges a royalty of 4 to 6 percent of room revenue, plus program fees, often another 2 to 4 percent. Call it 8 percent combined, so around $30,000 off the top.
• OTA commissions (online travel agencies like Booking.com or Expedia) typically run 15 to 25 percent of the bookings they generate. If half the revenue comes through OTAs, that is another $29,000 to $48,000.
• The management fee at 8 percent of gross is about $31,000, and you are right to wonder what is excluded. Labor, linen, maintenance, and supplies are frequently separate line items.
• FF&E reserve means furniture, fixtures, and equipment replacement. Most brands require 4 to 5 percent of revenue set aside annually. That is another $15,000 to $19,000.

You can see how $385,000 in revenue gets thin before you reach debt service or your own return.

The thing worth flagging separately: the missing month-by-month breakdown matters more here than it would in almost any other property type. Flagstaff has real winter slowdowns and Grand Canyon shoulder seasons, and a T-12 average hides which months this property actually bleeds. Three days without a response to that request is information.

I would also want to know whether the flag agreement transfers with the sale and on what terms, because some brand contracts require reapproval of a new owner, which can mean a property improvement plan (a PIP, a required renovation list) that adds significant capital you have not budgeted.

Your Columbus fourplex comparison is not irrational. What does the person pitching this say the net operating income is after all those fees?

The math is probably not missing anything. Let me work through what you already have.

At $48 RevPAR across 22 keys, gross room revenue runs around $385k annually. Strip 8% management ($30.8k), flag royalty (typically 5 to 7% of gross room revenue on budget flags, so call it $19k to $27k), OTA commissions on whatever portion books through third-party channels (15 to 20% of that channel's revenue, often 30 to 50% of a budget property's mix), and a defensible FF&E reserve (industry standard is 4 to 5% of gross revenue, so another $15k to $19k). You are below $300k in effective gross before any operating expenses, insurance, property tax, or debt service on $1.1M.

The assumption doing the most work in the seller's framing is that 61% occupancy and $48 RevPAR are stable numbers. Flagstaff is a genuine seasonal market, with Grand Canyon and ski traffic creating real swings. A budget flag outside the city core could see occupancy drop into the 30s or 40s during slow months, which is why the month-by-month T-12 matters so much. Three days without a response on that request, after you asked for it directly, is a data point.

The risk you have not named: flag agreements. Budget brands carry PIPs (property improvement plans) triggered on sale, and you need to confirm what transfer of ownership activates on this specific franchise agreement. A PIP on a 22-key property can run $200k to $600k depending on required upgrades, which restructures the acquisition cost entirely. A franchise attorney needs to review that agreement before you proceed further. That is a licensed professional question, not something to negotiate around.

Your fourplex comparison is not sentimental. It is the correct benchmark for capital allocation at your current readiness level.

What flag is on the property?

Three days on the month-by-month and no response tells you everything before the math does.

Flag royalties alone could eat another 5% of room revenue before you touch the management fee.

What does the T-12 show for January and February specifically?

Seller retiring and month-by-month withheld for three days tells you the slow season looks worse than the T-12 average.

The Columbus fourplex comparison is actually the right instinct but you are running it wrong. At $48 RevPAR on 22 keys you are looking at roughly $385k gross annually at full performance, and that is before the flag royalty which on a mid-tier brand runs 5-7% of room revenue, the management fee eating 8% of gross, OTA commissions bleeding another 15-18% off the top of every room booked through Expedia or Booking, and an FF&E reserve that any competent lender will require at 4% of gross minimum. Stack those and you are sub-$80k NOI if the property is actually performing at what the T-12 claims, which you cannot verify because the month-by-month still has not shown up. Flagstaff does real winter. January and February at a budget property outside town on a flagged brand that required a Google search can drop occupancy into the 30s. The T-12 average is hiding that.

What I would do is stop trying to make this math work and start treating the missing month-by-month as the answer. A seller who is genuinely just tired and wants out does not sit on a document request for three days, because that document costs him nothing to forward and every day of silence costs him a deal. In central Georgia I have had sellers ghost me mid-conversation on properties with title problems, code violations, zoning issues, unpermitted work. The pattern is the same. The guy at the meetup may have no idea what is wrong, he may just be getting a referral fee, but something in that T-12 looks worse broken out by month or the current owner would have sent it day one. What is the actual loan assumption situation on this, is there debt attached to the $1.1M or is he pitching all

The number is probably not there, and the structure of what you are comparing matters more than the RevPAR figure itself. A 22-key budget flag at 61% occupancy and $48 RevPAR is generating roughly $240k in gross room revenue annually, and after an 8% management fee, a flag royalty that typically runs 4 to 6% of gross, OTA commissions on whatever portion books through Expedia or Booking (often 15 to 20% of those room nights), and a defensible FF&E reserve of 4 to 6% on older limited-service product, you are looking at expense loads that can consume 35 to 45% of gross before you touch debt service, property tax, insurance, or utilities. Your fourplex comparison is not sentimental, it is the correct frame: a stabilized residential asset with low management friction and known expense behavior is a different risk-adjusted instrument than a hospitality asset where top-line revenue moves with a single highway closure or a Grand Canyon visitation dip. Where this deal could win is if the $1.1M price reflects a cap rate that already prices the operational complexity, say a true NOI somewhere around $110k to $130k after all the above, and you have a clear path to either a flag upgrade that lifts ADR or a conversion exit, but nothing in what you have described suggests the seller's framing gets you there. The month-by-month silence is the tell I would act on now: Flagstaff's shoulder season, typically November through February outside ski traffic, can cut that 61% annual occupancy down to 35 to 40% in specific months, and whoever is withholding that breakdown knows what those months look like. What is the actual asking cap rate the seller is using to justify $1.1M

What flag did you have to look up? That matters a lot because some of the smaller budget brands have PIP requirements baked into the franchise agreement that trigger the second ownership transfers, and on a $1.1M buy that could be another $150k to $200k you have not modeled yet.

8% of gross for 22 keys is also not the whole story. My brother-in-law ran a 30-key outside Sedona and the management contract excluded linen, maintenance calls, and OTA reconciliation, which added up to closer to 14% all-in when you ran the actual invoices.

Month-by-month still not there after three days on a deal this size tells you something about either the seller or the guy pitching it, and I would want to know which one is dragging their feet before I sent another email asking nicely.

The FF&E reserve is probably the line that will surprise you most. Budget flags typically require somewhere between 4% and 6% of gross room revenue set aside annually for furniture, fixtures and equipment replacement, and that comes off the top before your management fee even touches the calculation. On a property doing roughly $48 RevPAR at 61% occupancy across 22 keys, you are working with gross room revenue in the neighborhood of $385,000 annually, which means the reserve eats somewhere between $15,000 and $23,000 per year that does not show up as a cash expense in the T-12 if the current owner has been underfunding it. An underfunded FF&E reserve does not disappear; it shows up as a property improvement plan requirement the flag hands you at transfer, and those PIP costs on a budget property changing hands can run six figures depending on how long the owner has been deferring. The seller retiring and wanting out quickly is exactly the scenario where a PIP gets handed to the buyer rather than the exiting owner.

The month-by-month breakdown matters for a different reason than just seasonality confirmation. Flagstaff's Grand Canyon traffic compresses into a window that can make the T-12 aggregate look tolerable while hiding months where RevPAR drops to the low twenties and the management fee plus the flag royalty plus OTA commissions (OTA typically takes 15% to 25% of the booking value) leave you funding operations from reserves. If those slow months require capital infusions, the "passive hold" framing collapses entirely because you are now the person watching the management company whether you planned to or not. The silence on the month-by-month request after three days, on a deal this seller supposedly wants to close quickly, tells you something about what those months look like. What is

The month-by-month silence is the actual answer, not a negotiating posture, because anyone selling a clean asset with seasonal revenue hands that over before you ask. Before the math even matters, I would want the franchise disclosure document to see what the flag actually requires in PIP upgrades at sale, because a brand transfer on a budget flag can carry a mandatory property improvement plan that runs $15k to $40k per key and shows up nowhere in the T-12. After that: management contract termination terms, whether the 8% covers night audit and OTA fees or just base labor, what the FF&E reserve funding looks like versus actual capital spent in the last three years, and whether the franchise agreement transfers at all or requires a new application. At $48 RevPAR on 22 keys your gross room revenue annualizes around $386k, and once the flag royalty, management fee, OTA drag, and a real FF&E reserve come out, you are looking at a NOI that prices this closer to $700k than $1.1M at any cap rate that makes sense for a flagged budget asset with operational complexity you have never run. What brand is it, because the PIP exposure on a transfer varies enormously by flag?

The month-by-month gap is the sharpest red flag here, and the reason is not just seasonality curiosity. Flagstaff hotels commonly see occupancy crater below 40% in January and February, which means a 61% annual average is carrying a lot of weight from June through September, and a single bad summer quarter can push the annual figure into territory where debt service goes uncovered. Before anything else, a careful operator would pull the STR or CoStar market data for that submarket to benchmark the T-12 RevPAR against comparable flagged properties, verify the franchise agreement terms directly because flag royalties, marketing assessments, and PIP requirements are separate line items that the royalty percentage alone does not capture, request a trailing 24 months of P&L not just 12, and get the management contract in hand to see what that 8% excludes, because front desk labor, housekeeping, and linen replacement are commonly billed above the base fee at budget properties. The FF&E reserve question you raised is the one most buyers skip: franchise agreements on flagged properties often require a mandatory reserve of 4% of gross revenue, and if the current owner has been deferring contributions, the PIP triggered at sale could run $15,000 to $25,000 per key on a property this size. At 22 keys and $1.1M, you are at roughly $50,000 per key, which is within range for a tired budget flag outside a secondary market, but the PIP exposure could erase that apparent value immediately. What does the franchise disclosure document say about the remaining term on the flag agreement, and has the seller confirmed whether a PIP inspection has already been ordered?