How to Buy a Hotel: The Steps From Finding a Property to Closing

How to buy a hotel: the short answer

How do you buy a hotel? You find a property whose cash flow can support the debt, bring your own equity to the table, match the deal to the right loan type, and hand the lender a complete package, roughly in that order. There is no 100% financing for a hotel purchase. Every lender wants the borrower to have skin in the game, so the real work starts with figuring out how much of the deal you can and should fund yourself. This guide walks through that sequence for an owner-operator or someone moving into ownership from inside the industry: deciding what kind of property fits you, what a lender weighs in you as a buyer, how to find and vet a property, what buying a hotel actually costs beyond the sticker price, which loan type tends to fit which deal, the package a lender needs to start work, the path from a signed contract to closing, and what follows once you own the hotel.

Key takeaways

• Buying a hotel means acquiring an operating business, not just a piece of real estate.
• No 100% financing exists for a hotel purchase. You bring equity, even when it’s layered with seller carry or investor capital.
• Lenders underwrite total project cost, which is larger than the purchase price alone.
• Lenders weigh cash flow first, then liquidity, net worth, experience, credit, market, brand, and management.
• The order matters: property, equity, loan type, package, closing. Every transaction still plays out differently.

Decide what you are buying

Before you look at financing, decide what kind of hotel you’re actually targeting, because that choice shapes everything that follows. An independent property and a flagged, or branded, hotel get read differently by a lender: independent hotels are evaluated mostly the same way as branded ones, on a stable asset, cash flow that supports the loan, and an experienced operator, while a flagged hotel brings brand standards and often a property improvement plan (PIP) that the lender builds into the total financing request. You’ll also want to place the property on a second scale, stabilized or turnaround. A value-add property is running but underperforming its potential, while a true turnaround has deeper operational and financial problems calling for a full reset, and weak cash flow is hard for a lender to look past unless the buyer is an experienced hotelier with a credible repositioning plan. If a small property or motel is more your size, our page on financing a small hotel covers that path, and if you’re circling a property that’s clearly underperforming, financing an underperforming hotel covers what changes in that underwriting.

Independent or flagged, stabilized or turnaround

An independent hotel gets weighed on its own numbers. A lender looks at the property’s stability, its cash flow against the proposed debt, and the operator’s track record, much as it would for a branded property.

A flagged hotel adds brand standards to that review. The franchise agreement and any required property improvement plan become part of the total project cost a lender finances, not a separate expense to find later.

A stabilized hotel is judged on its actual performance history. A turnaround is judged on a plan, since current cash flow likely won’t support the loan on its own, and the lender needs to believe in both the numbers and the buyer’s ability to execute them.

What lenders weigh in a buyer

Before a lender looks closely at your target property, it’s reading you as a borrower, and that reading tends to follow a consistent order. Cash flow that can support the proposed debt comes first, because a loan only works if the business behind it can pay it back. After that, lenders like to see liquidity, meaning cash or near-cash assets beyond the down payment, followed by your overall net worth, your experience, your credit history, the strength of the local market, any brand affiliation, and the management plan for running the property. None of these are hard requirements the way a down payment is; they’re preferences that shift from lender to lender and deal to deal, and a weakness in one area is sometimes offset by strength in another. Experience carries real weight, generally ranked in this order: prior hotel ownership first, hospitality management experience second, and general business experience third. If you haven’t run a hotel before, that gap doesn’t rule you out, it usually means leaning on a partner or a hired general manager with hotel experience and letting that background carry some of the weight your own résumé can’t. One more thing worth getting right early is the ownership entity itself. A simple, transparent structure, often a single-purpose LLC or corporation where the owners and guarantors are clear, tends to move through underwriting with far less friction than a layered or ambiguous one.

How lenders weigh experience and liquidity

Of the two, experience is usually the easier gap to close. SBA lenders don’t treat prior hotel ownership as a flat requirement when the borrower has relevant experience elsewhere and the rest of the package is strong, and in practice most buyers pursuing a hotel already carry substantial hospitality background.

Liquidity doesn’t follow one fixed rule either. Lenders generally like to see enough liquid cash to cover your capital injection plus roughly 10% of the loan amount left over after closing, though this is a preference that moves with the deal rather than a bar every file must clear.

Buying with a partner

If you want to own a hotel but don’t have the full capital injection on hand, a partner who does can fill that gap, and the hotel management experience in the partnership can come from either side, you or your partner.

Every borrower and guarantor who holds 20% or more of the ownership will need to provide a personal financial statement and personal tax returns, so keep the structure simple and transparent from the start rather than adding layers a lender has to untangle later.

How to find the right property

Finding the right hotel starts well before you talk to any lender, because the property you choose determines almost everything about how financeable the deal will be. Strong, verifiable cash flow and a clear ability to service the proposed debt give a lender far more comfort than a property that merely looks appealing on paper. Experienced hotel operators tend to look for one of two things: a fair price on a hotel in a solid market with cash flow that already works, or a genuine upside opportunity, where improvements, a brand change, or better management can grow revenue and build equity over time. The single biggest mistake buyers make at this stage isn’t picking the wrong property, it’s rushing the search instead of taking the time to find the right opportunity in the first place. How you source a property, make an offer, and move through contracts, deposits, a valuation, and title work varies quite a bit from deal to deal and market to market, and there’s no single playbook that fits every transaction. Whatever the sourcing path, verify the numbers yourself before you lean on them in a lender conversation. Hotelloans.com doesn’t list hotels for sale or represent sellers; the work here starts once you have a property in mind or under contract.

Cash flow, the comp set and the STR report

Hotel lenders don’t just look at a property’s revenue in isolation, they look at how it performs against its comp set, the group of similar hotels competing for the same guests.

An STR report, a benchmarking report produced by STR, Inc. and often called a STAR report, is built exactly for this comparison. It lines up occupancy, average daily rate, and revenue per available room against the comp set and against each other, giving a lender a read on where the property actually stands.

Market conditions shape that picture too. Lenders look at the local economy, nearby demand generators, tourism patterns, and how comparable properties are performing, and since every market behaves differently, a strong report in one city doesn’t guarantee the same read somewhere else.

A turnaround must underperform for a good reason

A turnaround property is, by definition, underperforming, but a lender wants to understand why. Some SBA 7(a) lenders will underwrite a turnaround against future projections rather than historical numbers, but they’re looking for a hotelier with a track record of buying and profitably managing properties in that same situation.

Projections need to line up with what the local market can realistically support, and borrower experience tends to matter most here. A clear, specific plan for executing the turnaround carries real weight, though no lender can promise an outcome before the work is done.

How much does it cost to buy a hotel?

There’s no single number that answers how much it costs to buy a hotel, because price depends on the property’s size, location, condition, brand, and income performance. What a lender actually underwrites isn’t the purchase price alone, it’s the total project cost, which rolls in the acquisition price, any required property improvement plan, closing costs, and, on SBA financing, the SBA guarantee fee. That larger number is what sets how much equity you’ll need to bring. Typical equity varies by loan type, and these are ranges buyers should expect going in, not fixed rules:

Weak or tight cash flow is the most common reason a lender asks for more equity than these ranges suggest, since the loan amount always has to match what the property can actually support. For a closer look at how much equity lenders expect, see our guide to buying a hotel with no money down.

Total project cost and where equity can come from

Equity doesn’t have to come entirely from your own savings. Seller carry notes and gift funds are the two most common alternative sources, and both are most favorable under SBA 7(a) or SBA 504 financing.

There’s a specific rule around seller carry under SBA financing, though. It only counts toward your capital injection if the note sits on full standby for the entire term of the SBA loan and is fully subordinated to it, so a note paid down early or ranked ahead of the SBA loan won’t qualify.

SBA leverage means up to 85% of total project cost, not a loan-to-value figure. If the property’s cash flow can’t support that level of debt, the loan amount gets sized down to what it can support, and the lender looks to you for more equity to close the gap.

Steps to buying a hotel with financing: match the deal to a loan type

Once you know what kind of property you’re buying and what it will cost, the next step is matching the deal to the loan type that actually fits, since different programs serve different situations. For a closer look at how acquisition financing moves from a first conversation to the closing table, see acquisition financing from first call to closing, and for a side-by-side on the two most common paths, comparing SBA and conventional covers that ground. Here’s a quick read on how each program tends to fit, qualified the way every lender qualifies it, with words like often, can, and most commonly, because no two hotel deals are underwritten exactly the same way.

One short paragraph per loan type

SBA 7(a) and 504 financing can reach leverage up to 85% of total project cost, and 7(a) underwriting tends to be fairly flexible across buyer and property profiles. For hotel-specific detail on how the program works, see SBA hotel loans.

Conventional financing comes from a lender’s own balance sheet, and the bank or credit union weighs your whole financial picture, which tends to suit experienced operators, often ones who’ve built a relationship with that lender over several years; see conventional hotel loans for more. Bridge financing is short-term interim capital for a hotel in transition, built around a clear exit strategy rather than a long-term hold, and hotel bridge loans explains how that fits into a purchase.

The package a lender reviews

A complete, well-organized loan package matters more than most buyers expect. Personal financial statements need to be detailed, accurate, and signed, and the projections behind the deal need to hold up to scrutiny rather than just look good on paper. On a first screening call, we ask for:

• A personal financial statement from every borrower and guarantor who holds 20% or more of the ownership
• Two to three years of business tax returns for the property
• The most recent profit and loss statement
• A recent STR report
• The offering memorandum, if one exists
• The most recent appraisal, if you have it

That’s enough for us to get a real read on whether the deal is financeable before you spend time assembling everything else. We put that information into a full credit memo before it ever reaches a lender; see the credit memo for what that process involves.

Documents a purchase adds

Buying an existing property, rather than refinancing one you already own, adds a specific set of documents. Expect to gather the offering memorandum, the purchase and sale agreement, a brief history of the property, current and historical STR reports, business tax returns or profit and loss statements, and the most recent P&L through at least the latest quarter-end.

You’ll also want information on any recent capital expenditure and whatever PIP requirements come with a brand, along with a detailed description of the property.

A few things reliably slow a file down:

• Tax returns that are missing, unsigned, or don’t reconcile with the financial statements
• Financial statements that are out of date or paired with an incomplete debt schedule
• Occupancy, ADR, and RevPAR figures that don’t match across documents
• Franchise approvals or PIP scope that haven’t been finalized yet

From signed deal to closing: the five steps

Once you have a property under contract, the path to closing runs through five steps:

1. Free consultation, where we talk through your project and goals to see how we can add value.
2. Viability review, where you share initial documents and we determine whether the deal is financeable.
3. Formal engagement, when we gather the deeper detail a lender will need and build out the proposal.
4. Underwriting and matching, where we identify the loan type that fits your goals and take the project to the lenders in our network.
5. Term sheet to closing, where we stay actively engaged, though the term sheet itself comes from the lender, not from us.

Read more about our five-step process in full.

What varies from deal to deal

Beyond those five steps, a lot of the mechanics depend on the specific lender and the specific deal. Appraisals and other lender-ordered reports, the legal steps involved, title work, deposit requirements, and the exact closing sequence all move differently from one transaction to the next.

There’s no single timeline or checklist that applies across every lender.

After closing

Closing isn’t the finish line, it’s the start of running an operating business. From that point forward, the work is running the hotel day to day and meeting the terms of the loan you closed with. A refinance down the road is a separate decision with its own timing, and refinancing a hotel loan is worth a read whenever that question comes up for you.

Planning for a later refinance

The loan structure you choose at purchase has a way of resurfacing at refinance time, so it’s worth thinking past the closing date now. A deal built around rate alone can leave you boxed in later if the other terms weren’t considered just as carefully.

Term length, prepayment penalties, recourse, reserve requirements, and covenants all affect your options down the road, right alongside rate. Weighing all of them together at purchase gives you more room to maneuver when a refinance eventually makes sense.

Your next step: a free consultation

Wherever you are in this process, whether you’re still sizing up a property or you already have one under contract, the next move is the same. Call or complete the form to speak with a hotel financing expert. We will talk through your deal and review your documents at no charge, with no obligation, and you do not need to have it all organized first.

Hotelloans.com works with lender partners who fund the loans and issue the term sheets; the role here is getting your deal structured and packaged well enough to reach that table.