Property Manager Buys Motel to Grow Rental Business

“Honey, I bought a motel.”

No, we’re not talking about a new kids’ B movie. Instead this is the story of Travis Martinez, a property manager and REALTOR® who rescued a failing motel, spruced it up, and turned it into a pipeline for new business.

In 2013 Martinez bought the Bitterroot Motel in Hamilton, Montana and added it to the portfolio of Greener Mountain Properties, the company he owns and runs with his wife, Kristyn, who holds a property management license and manages the company’s operations.

Martinez, a former staff sergeant in the United States Army Special Operations who served in Iraq and the Republic of Korea, teaches real estate classes throughout Montana and is the state director for the Bitterroot Valley Board of Realtors, for which he will serve as president-elect in 2015 and president in 2016.

To find out why he decided to manage a motel and what that can do for the entrepreneurial real estate pro and property manager, I interviewed Martinez over the phone while he traveled to a meeting in his native Bitterroot Valley.

This interview has been edited and condensed.

You began your career as a real estate broker. Why did you get into property management?

The real estate brokerage was and still is my main business. During the recession, I bought some rental properties. I liked the residual income that property management can provide, outside of the “big check” (after brokering a sale to a client). Property management marries the opportunities of sales with the consistency of traditional wealth (building).

Wealth building through predictable income…

Exactly.

Why did you buy the motel?

I bought the motel with a couple of other investors in 2013. Initially we were looking at renovating the units and renting them as apartments. The city zoning board told us that wasn’t possible though. The city inspector said the reason was because the motel is on Highway 93, and the city didn’t like the idea of renting units as residential apartments on a highway.

So we began looking at our other options. Eventually we decided on marketing the building as an extended stay motel. When we talked to the city about that plan, they told us they had no problem with it.

How is the motel working out for you as an investment?

We advertise the property as a motel with reasonable rates but with drastic discounts for people who stay weekly or monthly. We’re able to stay 100 percent full almost all year round.

Why a motel versus, say, an apartment building?

The answer is two-fold. I like doing things that feed each other. As much as property management can feed real estate sales, the motel can feed my property management business. Additionally, I have the opportunity to find people homes whom I might not consider for a regular rental.

The motel gives me the opportunity to evaluate them as traditional renters. These are people I wouldn’t have known about before had they not stayed at the motel. Plus, it lets me consider candidates other companies probably wouldn’t.

It sounds like you place a high priority on building great tenant relationships…

Yes. When an opportunity (for an open unit or property sale) arises, it’s great to help good tenants move to the next level. If they leave the motel because they still can’t afford to rent one of my properties and go to another property, perhaps they’ll come back later to me when they’re ready to rent or buy.

I do a lot of things nobody else wants to do. That’s my business model. A lot of brokers don’t want to deal with property management, so I get a lot of referrals from them, which is great for me.

The motel is very similar. A lot of people don’t want to deal with candidates who have no other living options. Most brokers—and property managers—just don’t want to deal with that. But by dealing with these situations, not only do I make money for my business and my partners, but I help someone find a place to live too.

What are the biggest differences between managing a motel and a traditional rental?

When you manage a motel, there are a lot of phone calls to return, a lot of leg work, especially getting up to speed. Managing a motel is as different from property management as property management is as different from selling real estate. Unlike real estate, where there are associations to help get you up to speed, you don’t have anything like that (for motels).

One big difference is that with motels, you don’t have to deal with evictions. But if you do need to get someone out, be prepared for your options. Approach an opportunity to manage a motel or hotel with the knowledge that it’s a whole separate world. It’s almost like you have to start over from square one.

What’s your best advice to someone who’s considering managing a motel?

Maintenance is the biggest consideration when buying any property. When we bought the motel, it was in foreclosure, and a lot of money had to go into it first (to renovate it for rental). If you’re going to purchase a project to fix it up and rent it, first look at what needs to be done in terms of maintenance and what it’s going to cost.

For example, if the property is a pre-1978 home, the new 2010 Environmental Protection Agency (EPA) regulations state you have to hire an EPA-certified renovator to do anything on that home, and that certainly will cost you a lot more money. Information like that is not necessarily readily available, but you have to be able to caution a partner or investor about something like that, that there are requirements you have to meet.

So my biggest advice is stay up on current laws and regulations. Every state is different, and lot of those requirements are in place to protect both tenant and landlord. And always have a great attorney you can call.

A Pew research study found that 86 percent of adults say a person needs a secure job to be considered part of the middle class, but just 45 percent say the same about owning a home. With more people living in motels, do you think the American Dream of homeownership is fading away?

No, I think that version of the dream is still very much alive. Media articles promoting the death of that dream are a bit misguided. Sure, a lot of people today are frustrated. But at the end of day, there’s nothing like being able to paint your bedroom any color you want or get that dog you like.

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