How to Buy a Hotel: The 9-Month Timeline From LOI to Keys

Buying a hotel takes about nine months from a signed letter of intent (LOI) to the day you hold the keys. That is longer than most commercial real estate deals, and the reason is specific to hospitality: financing, franchise approval, and a property improvement plan run at the same time, and any one of them can reset the clock. If you are learning how to buy a hotel, the most useful reframe is this: these nine months are overlapping workstreams, not a straight line.

All-cash deals close faster. SBA financing and heavy-repositioning deals run longer. But for a financed, flagged, mid-market acquisition, nine months is the honest number. This guide walks the timeline month by month: what happens, who does it, and what kills deals at each stage. Along the way, we cover the questions owners ask most: how to get a loan to buy a hotel, how much does it cost to buy a hotel, and how to buy a hotel franchise so the flag does not stall your close.

The 9-Month Hotel Acquisition Timeline at a Glance

Here is the full arc, milestone by milestone. Each row shows the phase, the key work and who owns it, and the failure mode that most often kills deals at that stage.

The rest of this guide unpacks each phase, then goes deeper on the three questions that decide most deals: financing, cost, and the franchise flag.

Month 1: LOI and Preliminary Underwriting

The first month is about proving the deal pencils before you spend real money. You identify the target, gather the seller’s trailing 12-month operating statement (the T-12), pull the property’s STR report, and submit a non-binding LOI that fixes price and basic terms.

The T-12 and the STR report are your two anchors. The T-12 shows what the hotel actually earned over the last year. The STR report benchmarks the property against its competitive set on the three metrics lenders care about most: occupancy, average daily rate (ADR), and revenue per available room (RevPAR).

STR reports are produced by STR, founded in 1985 as Smith Travel Research and now part of CoStar Group, and they are the industry standard for hotel benchmarking. If the seller’s numbers and the STR data disagree, you have found your first negotiating point.

What kills deals here is basis. If you agree to a price the underwritten net operating income (NOI) cannot support, no lender will bridge the gap later. The other common failure is a seller who will not share financials. A hotel that cannot produce a clean T-12 is a hotel you cannot underwrite, and that is a reason to walk before you post earnest money.

Month 2: The Purchase and Sale Agreement

Month two turns the handshake into a contract. Attorneys negotiate the purchase and sale agreement (PSA), you post earnest money into escrow, and you lock in a due diligence window, usually 30 to 60 days, during which you can inspect the property and cancel without losing your deposit.

The diligence window is the single most important term you negotiate. Too short, and you will not have appraisal, environmental, and franchise answers before your money goes hard. Too long, and a motivated seller may take a different offer. Aim for a window that covers third-party reports plus a preliminary read from your lender.

Deals die here over term disputes, title clouds, and seller representations that do not survive scrutiny. If the title search turns up a lien, an easement, or a boundary problem, resolve it in the PSA rather than assuming it clears itself. Silence in the contract becomes your problem at closing.

Month 3: Due Diligence

Due diligence is where you verify that the hotel you are buying is the hotel you were shown. Three third-party reports run in parallel, and each protects a different flank.

• Appraisal. An independent valuation that your lender will require and rely on. The appraised value sets the ceiling on your loan proceeds.
• Property condition assessment (PCA). A walk-through survey of the building’s systems and physical condition, conducted to the ASTM E2018 standard. The PCA surfaces deferred maintenance and estimates near-term capital needs.
• Phase I environmental site assessment. A review of the property’s environmental history to flag contamination risk before it becomes your liability.

While the reports run, you verify revenue against the tax returns and the STR report, and you confirm the current franchise status: is the flag transferable, is the franchise agreement current, and what does the brand require of a new owner?

The failure modes in month three are the expensive ones. Deferred maintenance the PCA uncovers becomes a line item in your budget or a price reduction. An environmental issue can stop a lender cold. And revenue that will not verify against the tax returns and STR data is the fastest way to lose lender confidence and your own.

How to Get a Loan to Buy a Hotel: The Financing Month

Month 4 is where most mid-market deals live or die, and it is the stage buyers ask about most. This is when you take everything diligence produced, package it into a single data room, and put it in front of lenders to collect term sheets.

The core financing options for a mid-market hotel acquisition (roughly $10M to $75M) fall into four buckets, plus gap-filling layers:

• SBA 7(a) or 504 loans for owner-operators who will run the hotel themselves. These programs offer lower down payments in exchange for owner-occupancy and personal guarantees. In a change that matters for larger acquisitions, the SBA announced that eligible borrowers can combine the two programs for up to $10 million in total SBA financing, up from a $5 million combined cap, effective July 4, 2026. For a closer look at how the two programs compare, see our guide to SBA 7(a) versus 504 for a hotel purchase.
• Conventional bank loans for relationship borrowers with balance-sheet strength and a track record. Banks move fastest when they already know you.
• CMBS conduit loans for stabilized, flagged assets seeking non-recourse leverage. CMBS trades some flexibility for the ability to walk away from the property rather than the borrower guaranteeing repayment personally.
• Bridge or debt-fund loans for transitional or PIP-heavy deals that banks and CMBS will not touch yet. In the current market, flagged-hotel bridge financing typically prices at SOFR plus 500 to 700 basis points, reflecting the operating complexity lenders attach to hospitality. These loans buy you 12 to 24 months to execute a business plan, then you refinance into permanent debt.

When senior debt alone will not reach your total need, mezzanine debt or preferred equity can fill the space between the senior loan and your equity. C-PACE (Commercial Property Assessed Clean Energy) financing can fund qualifying improvements and often stretches the capital stack further. Together, these layers are how buyers reach their proceeds target without over-committing equity.

Debt yield: the gating test

Before leverage matters, your deal has to clear the debt yield test. Debt yield is underwritten NOI divided by the loan amount, and it tells a lender what return the property alone would produce if they had to take it back. Most hotel lenders look for a debt yield floor in the 10 to 12 percent range before they will size a loan, and for hospitality the bar often runs higher than for other property types.

As we detail in our breakdown of debt yield and hotel loan sizing, debt yield frequently becomes the binding constraint on proceeds, because unlike DSCR it cannot be improved by stretching amortization or adding an interest-only period.

This is why basis in month one matters so much. If your price implies a debt yield below the floor, the lender reduces the loan, and you make up the difference in equity or the deal does not clear.

Why one clean data room wins

The buyers who protect their timeline do one thing consistently: they submit a single, lender-ready data room to multiple lenders at once. One clean package produces competing term sheets on a comparable basis, which gives you real leverage on structure and proceeds and keeps the process from stalling while you re-package for each lender.

A disorganized submission does the opposite: it invites follow-up requests, slows underwriting, and burns days you do not have. Our hotel pro forma guide covers how to standardize the numbers lenders expect to see.

Month 5: Loan Underwriting and the Franchise Application

Months five and six run on two tracks at once, and this is where the timeline earns its reputation. On one track, your lender underwrites the deal in earnest, ordering their own review of your financials, the appraisal, and the sponsor. On the other, you apply to the brand for the flag.

Lender underwriting is where the appraisal meets reality. If the appraised value comes in below the contract price, you have an appraisal gap to close with more equity or a renegotiated price. Underwriters also scrutinize the sponsor. A buyer with no hospitality operating history can be rejected outright, or required to bring in a third-party management company or a proven general manager before the lender will proceed.

The franchise application starts in parallel because it has its own long lead time. If you are buying a branded hotel, you apply either for a new franchise agreement or for a transfer of the existing one, and the franchisor screens you on experience and financial strength. A denial here does not just cost time; it can unwind the entire deal, because the value you underwrote assumed the flag stays on the building.

How to Buy a Hotel Franchise: The Flag and the PIP

If the hotel is branded, franchise approval runs on its own track in months five and six, and it can stall everything else. Learning how to buy a hotel franchise means three things: applying to the brand, passing its screens, and absorbing the property improvement plan it hands back.

Apply for a new agreement or a transfer. You either sign a fresh franchise agreement as the new owner or take assignment of the seller’s existing one. The brand decides which paths are available and on what terms.

Pass the franchisor’s screens. Brands vet an incoming owner on hospitality experience and financial capacity. This is the same experience test your lender applies, which is why an inexperienced sponsor is a double risk: the flag and the loan can both turn on it.

Absorb and negotiate the PIP. A property improvement plan (PIP) is the brand’s list of required renovations and upgrades, with a deadline attached, that brings the property up to current brand standards. The PIP is where franchise approval and your returns model collide.

An oversized PIP is one of the most common deal-killers in hotel acquisitions, because a renovation number larger than your model assumed can erase the return that justified the purchase. Negotiate scope and timeline early, before you are committed, and price the PIP into your equity and financing plan from the start. Many buyers finance the renovation itself; our guide to PIP financing for hotels covers the structures that keep a large PIP from breaking the deal, including how C-PACE can fund qualifying scope.

The comfort letter and SNDA

Before closing, most lenders require the franchisor to sign a comfort letter (for franchised hotels) or, for brand-managed properties, an SNDA (subordination, non-disturbance, and attornment agreement). These agreements protect the lender’s ability to keep the brand on the building if they ever have to foreclose.

As law firm Goodwin explains, a comfort letter gives the lender the franchisor’s consent to the collateral assignment of the franchise agreement, notice of the owner’s defaults, and an extended period to cure them before the brand can terminate. Securing this document takes time and franchisor cooperation, so start it as soon as the franchise application is in. A closing that stalls waiting on a comfort letter is a closing that slips a month.

How Much Does It Cost to Buy a Hotel?

Beyond the purchase price, budget for the equity you must contribute and the costs to close. The total cash requirement is larger than the down payment alone, and underestimating it is a common reason equity-funded deals fall apart in month eight.

Down payment and equity vary by capital type:

• SBA 7(a): roughly a 10 to 20 percent down payment for owner-operators, with experienced buyers at the low end and first-time operators closer to 20 percent.
• SBA 504: typically 15 percent, because hotels are classified as special-purpose properties under the SBA’s guidelines. Startups may face a 20 percent requirement.
• Conventional or CMBS: typically 25 to 35 percent equity, depending on the asset, the market, and where debt yield lands.

Then layer on the costs that turn a down payment into a true all-in number:

• Closing costs of roughly 2 to 5 percent of the price, covering the appraisal, PCA, environmental report, legal fees, title, and lender fees.
• The PIP budget, which can be the largest single item on a branded acquisition.
• Franchise application and initial fees, paid to the brand.
• Working-capital reserves to fund the operational ramp, plus any interest reserve a transitional lender requires.

A realistic rule of thumb: plan for the down payment plus another 5 to 10 percent of the purchase price for closing costs, the PIP, and reserves. Building that full picture into your model in month one is what keeps the equity question from surprising you at the closing table.

Month 7: Loan Commitment

Month seven is when a term sheet becomes a real commitment. The lender’s credit committee approves the deal, issues a commitment letter, and you lock your rate and begin clearing the conditions the letter lists.

Clearing conditions is unglamorous and time-sensitive. The commitment letter names everything that must be true before funding: updated financials, the comfort letter, evidence of insurance, entity documents, and proof of your equity. Each open item is a potential delay, so work them in parallel and keep your lender supplied ahead of requests.

Deals wobble here for three reasons. Last-minute conditions can appear if underwriting surfaces something new. A move in rates between application and lock can change your economics. And a sponsor liquidity shortfall, where your provable cash is thinner than the lender modeled, can pause a commitment until you shore up reserves. None of these are fatal if you saw them coming, which is the argument for a clean file from the start.

Month 8: Closing Preparation

Month eight is logistics, and logistics is where good deals lose time. Title and survey have to clear, insurance has to bind, your acquisition entity has to be formed and in good standing, your equity has to be funded into escrow, and every party has to agree on the closing mechanics.

The recurring failure modes are concrete. A title defect that surfaced in diligence but never got cured resurfaces now. An equity shortfall, the gap between what you committed and what is actually in the account, stops a closing cold.

And if your capital stack includes mezzanine debt or preferred equity, the senior lender and the mezzanine lender have to sign an intercreditor agreement, which can add days if it was left to the last minute. Line these up in month eight, not on closing week.

Month 9: Closing and Takeover

Month nine is the close and the handover. You fund, the deed and mortgage record, licenses transfer, the flag goes up, and operations pass from the seller to you.

Two transitions deserve special attention because they run on their own government and franchisor timelines. Liquor and permit transfers often lag the real estate close; in many jurisdictions you cannot simply inherit the seller’s liquor license, and the application should have started weeks earlier.

And the staff transition, deciding who to retain, onboarding payroll, and keeping the guest experience intact, determines whether the property performs from day one or stumbles through the first weeks under new ownership.

When the wire clears and the brand’s sign is yours, the nine months are behind you. The hotels that reach this day smoothly are the ones where financing, franchise, and PIP were treated as parallel tracks from month one, not as a relay run one leg at a time.

FAQs

How long does it take to buy a hotel?

About nine months from a signed LOI to closing for a financed, flagged acquisition. All-cash purchases can close in 60 to 90 days. Deals with a large PIP, a franchise transfer, or SBA financing often run 9 to 12 months, because those workstreams run in parallel and any one of them can reset the timeline.

What financing options exist for buying a mid-market hotel?

SBA 7(a) and 504 loans for owner-operators, conventional bank loans for relationship borrowers, CMBS conduit loans for stabilized flagged assets, and bridge or debt-fund loans for transitional properties. These are often combined with mezzanine debt, preferred equity, or C-PACE to complete the capital stack and reach the borrower’s total proceeds target.

What kills most hotel acquisitions?

Three things. A debt yield that will not support the requested loan, which forces more equity or kills the deal. A PIP whose cost breaks the returns model. And due-diligence surprises, including deferred maintenance, environmental issues, or revenue that does not verify against the STR report and the tax returns.

How much equity do I need to buy a hotel?

It depends on the capital type. Expect roughly 10 to 20 percent down on an SBA 7(a) loan (experienced operators toward the low end), about 15 percent on SBA 504 for hotels, and 25 to 35 percent equity on conventional or CMBS debt. On top of the down payment, budget another 5 to 10 percent of the purchase price for closing costs, the PIP, and working-capital reserves.

Can I buy a hotel with no hospitality experience?

Often yes, but you will need to address the experience gap that both lenders and franchisors screen for. The common solution is a third-party management agreement or a proven general manager on staff. Without one, an inexperienced sponsor risks both a franchise denial and a lender rejection, since the flag and the loan can each turn on operating track record.

Line Up Your Financing Before You Sign the LOI

The nine-month timeline rewards buyers who solve financing early. The deals that close on schedule are the ones where the capital structure was tested against real underwriting before the LOI was signed, not discovered in month four.

That is what Bridge is built for. We help hotel buyers package one lender-ready data room, put it in front of the right capital sources, and compare competing term sheets on a comparable basis, so debt yield, structure, and proceeds are settled before they can stall your close. When speed matters, Bridge can also provide capital directly.

Start with the right financing. Compare your hotel financing options with Bridge.