8 Reasons why buying a hotel with no money down is not an option
Quite often, we receive requests for buying a hotel with no money down. This is usually a small or boutique hotel or a B & B in one of the beach areas of Costa Rica. That’s because we have a very nice inventory of Costa Rica hotels for sale.
Others are asking if they can rent the hotel. For the same 6 reasons, a smart seller will not rent their hotel for sale.
Believe it or not, but quite a few are looking to buy a hotel with no money down, and preferable with no interest payments for the first years.
Buying something, whatever it is, without having any money sounds like a lot of fun. For the buyer, but not for the seller. Yes, of course, in a bad market, a smart seller should think outside the box. Creative financing might be a great option.
But is selling a hotel and getting no money down a smart option? Let’s see why it’s not!
1. Don’t make an investment with no money down. Check your cookie jar first and take it from there. It’s a bad deal for the seller, no matter how positive you think it is.
2. The seller’s risk to lose their investment is too high. You’ll keep the income earned and will not invest in the necessary maintenance of the property.
3. And how would you suggest the owner keeps up with the inventory that needs replacement? The liquor inventory in the bar. The lost and broken silverware and glassware. The bedsheets and towels. Pots and pans in the kitchen, etc. etc.
4. Employees work for the owner, who will have to be fired and paid their severance pay. The new owner (you) will need to re-hire the employees. Who will take care of all those payments? Unless you have a pretty large cookie jar, this is going to be a pretty tough deal.
5. Can you run a business without working capital? Of course not. You’ll have to pay for the running expenses! That means buying restaurant inventory, pay employees, social security, insurance, advertising, and many other operating costs.
6.What about the yearly taxes? Do you have enough money to pay property tax, corporation tax, income tax?
7. How does the agent get paid for the intermediation? You’re contacting a real estate company and we charge the seller a commission.
8. Costa Rican banks don’t know who you are. They will not finance your adventure.
In other words, you cannot afford to buy a hotel with no money down in Costa Rica. That’s not an option. Renting a hotel is not an option either. No hotel owner in his/her right mind will rent the hotel, pretty much for the same reasons.
I can suggest you keep working until you’re able to save up enough money to start your adventure in Costa Rica. When you have saved up at least 60% of the sales price of the hotel for sale, we might be able to arrange owner financing for you.
If you do have money to purchase or have financing secured, feel free to check our inventory of hotels for sale.
Then we’d love to do business with you, contact us here.
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