The biggest issue in all of these note purchases is diligence. “Lender’s sometimes don’t have good due diligence,” Hiser explained. Or worse, they couldn’t get much information from the borrower. And Kisielica noted that banks don’t want to operate hotels, so the ones that are losing money will go first. “They don’t want to write checks,” he said. This “fear,” he explained, gives an advantage to companies that want to grab those opportunities.

But again, the diligence is a problem. Nordahl said underwriting is key to any purchase, you undewrite the asset, underwrite the location and you get as much information as you can on the property, some of which might be incomplete or even out of date. Kisielica also called to supplement it with a good legal team to sift through the paperwork.

Hiser warned that there were all sorts of state regulations, such as a “12 month redemption period” where an owner can have a year to repurchase the property from you after defaulting. There are also issues with getting comfort letters from brands, Nordahl remarked. Brands can’t or won’t give them out, he explained. This gives them an out if they don’t feel the property will be viable for them, which can be a major hazard as a purchaser, as you are ultimately replacing the lender to get to the underlying property.

Peek laughed regarding reps and warranties, “Sometimes the best it gets is, ‘I think I own it, I think I can sell it.’” So the research is key, however there is a lot of opportunity for a long time if you can make the numbers right. There are some loopholes, so to speak. “Good receivers can be helpful,” Hiser explained. A good receiver can get more information for you and help speed the process. Howell also pointed out that even when purchasing a portfolio, you can occasionally get lenders to take a “dog” property out of a portfolio, since it actually acts as an anchor on the purchase price, but again, that comes down to due diligence. He also explains that working a deal out with the lender before the default, getting a deal in place, is advantageous to avoid dealing heavily with a receiver and accelerating the process. However, Kisielica puts it simply, “If you feel like you’re taking too much risk, don’t do the deal.”