Is there Money in Buying Old Motels and Bringing them Back to Life?

There were a huge number of motels built in the U.S. in the 1950s through 1960s. While considered incredibly modern at the time, today they are either abandoned or in poor condition and catering to disreputable patrons. But in some markets, real estate pioneers are bringing these old time capsules back to life – and making huge profits as a result. Is there actually a business model in bringing old motels back from the dead?

Low initial cost

One of the initial attractions to buying an old motel is that you can do so at a really low price. Most owners have given up hope on these old properties and will sell them for about the value of the land itself – and sometimes less than the land because they assume you’re going to demolish it. That being said, don’t forget to add in the cost to remodel these old properties to bring them back to life, which can be considerable based on whatever is wrong with them. The good ones are structurally sound and have solid roofs and foundations but need total cosmetics, as opposed to those that need giant capital expenditures just to keep them from falling down. In some cases, the sellers will even carry the financing since they know how hard it might be to get a bank loan.

Mid-century and earlier is a hot design period right now

One big advantage to this business model right now is the fact that the era in which these motels were built is now back in vogue – tastes run in cycles and the 50s & 60s “mid-century modern” look is back in style. This means that you don’t have to do any re-styling of the facility to make it attractive, as people are already drawn to this time period. All you have to do is embrace the original styling.

It’s all about the location

Like all real estate, the true value of an old motel is all about location, location, location. A 1950s motel in a blighted neighborhood will not be worthy of bringing back to life financially, while one in a nice area may well support the cost. There are two of these projects that come to mind as highly successful but having completely different settings. One is in a small mountain town in Colorado, that is a popular tourist area. The buyer purchased the old motel for a song, and then renovated it using their own labor and stylistic impulses. The end result is true to the era, and has a special vibe that customers really like. It’s 100% occupied most of the time, as it’s really unique and inviting. The other is an old motel that was brought back to life in southern Dallas in a neighboring that was gentrifying. There are trendy bars and sushi restaurants on the same street, and the motel fit perfectly into the historical theme and pulse of the community. The owners brought back to life all the original “kitsch” of the 50’s, with turquoise and tan exterior and even the pink flamingo touches.

Marketing is essential

Another key component to the success of old motel investing is in the marketing. This is an unique product and it needs unique advertising. Rather than hide from the fact that the motel is a half-century old, you need to embrace and promote that fact. Most Americans have good feelings towards the 1950s and 1960s, and like the nostalgia this era represents. One of the biggest pluses to this form of investment is that advent of the internet, which allows you to compete against big chains effectively and to steer people who like this form of lodging to your website. But, of course, the best form of advertising is word of mouth and consumer on-line reviews, and a great concept should result in great success.

Conclusion

There is no greater feeling of accomplishment than bringing an old property back to life. And it can also usher in large financial rewards. If you find the right location and property, there’s no reason why you cannot make a huge success of renovating an old motel.

 

Frank Rolfe has been a commercial real estate investor for almost three decades, and currently holds nearly $1 billion of properties in 25 states. His books and courses on commercial property acquisitions and management are among the top-selling in the industry.