How to Write a Letter of Intent for a Hotel or Micro Resort

The Letter of Intent is where deals go from theoretical to real. It is the moment you stop analyzing and start negotiating. And for most first-time hospitality investors, it is also the moment where fear takes over and they stall.

I have watched this happen dozens of times. An investor does the market research, builds the buy box, runs the underwriting, and finds a deal that works. Then they sit on it. They want to "do more research." They want to "talk to one more person." They want to be "more ready."

That hesitation is what kills deals. Not bad underwriting. Not bad markets. Hesitation.

That is why I teach The LOI-First Method: send the LOI before you feel ready. The LOI starts the negotiation, not your confidence level. This guide walks through exactly how to write an LOI for a hotel or micro resort acquisition, what terms to include, how to structure your offer, and why sending it sooner rather than later is almost always the right move.

What Is an LOI (and What It Is Not)

A Letter of Intent is a non-binding document that outlines your proposed terms for purchasing a property. It is typically 1 to 3 pages and covers the key deal points: price, timeline, contingencies, and earnest money.

What an LOI is:

• A starting point for negotiation
• A way to signal serious intent to the seller
• A framework that both parties can negotiate from
• Non-binding (with limited exceptions for confidentiality or exclusivity clauses)

What an LOI is not:

• A binding contract (that is the PSA, which comes later)
• A final offer (it is the start of a conversation)
• A commitment to buy (you have contingencies and due diligence protections)
• Something you need to be 100% certain about before sending

This distinction matters because many first-time investors treat the LOI like a binding contract. They agonize over every term, wanting it to be perfect. But the LOI is a conversation starter. The real negotiation happens between the LOI and the PSA. Your job is to get the conversation started.

The LOI-First Method

Here is the principle: if your initial underwriting shows the deal could work, and the property fits your buy box, send the LOI. Do not wait until you have every question answered. Do not wait until your financing is 100% confirmed. Do not wait until you "feel ready."

Why? Three reasons:

1. You learn more inside the deal than outside it. Once an LOI is accepted, you gain access to detailed financials, property inspections, and seller conversations that you could never get from the outside. Due diligence is where the real analysis happens.
2. Speed wins deals. Especially off-market. If you take three weeks to send an LOI, another buyer may have already locked up the deal. Sellers remember the buyer who moved quickly and professionally.
3. Your contingencies protect you. A well-structured LOI gives you a due diligence period (typically 30 to 60 days) during which you can walk away for any reason and get your earnest money back. The risk of sending an LOI early is low. The risk of sending it late is losing the deal.

Key Terms to Include in Your LOI

Every hotel LOI should address these core terms. Miss any of them and you create ambiguity that can derail the negotiation later.

Term	What It Covers	Typical Range ($2-5M Deals)
Purchase Price	Your offered price for the property	Based on underwriting (target 8-8.5% cap on current NOI)
Earnest Money Deposit	Good-faith deposit, refundable during DD	$25,000 - $75,000 (1-2% of price)
Due Diligence Period	Time to inspect and verify everything	30-60 days (45 is standard)
Financing Contingency	Deal is contingent on securing financing	30-45 days to secure loan commitment
Closing Timeline	Target date for closing the transaction	60-90 days from LOI acceptance
Inspection Contingency	Right to inspect the physical property	Within the DD period
Exclusivity Period	Seller agrees not to negotiate with others	30-60 days (request this, not all sellers agree)
Confidentiality	Both parties keep deal terms private	Standard provision

LOI Structure: Section by Section

1. Opening and Property Identification

State who you are (or your entity name), that you are submitting a Letter of Intent, and clearly identify the property by name, address, and legal description if available. Keep this brief and professional.

2. Purchase Price and Payment Terms

State your offered price. If you are proposing seller financing or a creative structure, outline it here. For example: "$3,200,000 total purchase price, consisting of $2,240,000 in senior debt financing and $960,000 in buyer equity, with a request for $200,000 in seller carry-back financing at 5% interest, interest-only, with a 3-year balloon."

How do you arrive at your price? Your underwriting determines this. Take the current NOI and divide by your target cap rate. That gives you the value based on current performance. If you want to give the seller some credit for upside potential, you can offer slightly above this number, but never above what the deal supports at your minimum return thresholds.

3. Earnest Money Deposit

Specify the deposit amount, when it will be delivered (typically within 3 to 5 business days of LOI acceptance), where it will be held (an escrow account, usually with a title company), and the conditions under which it is refundable.

Standard language: the deposit is fully refundable during the due diligence period if the buyer elects to terminate for any reason. After the due diligence period expires, the deposit goes "hard" (non-refundable) unless a specific contingency is triggered.

4. Due Diligence Period

Request 30 to 60 days (45 is a strong middle ground) to conduct your due diligence. During this period, you will:

• Review all financial records (P&L statements, tax returns, bank statements)
• Inspect the physical property (structural, mechanical, environmental)
• Verify revenue and expense claims
• Review all contracts, leases, and vendor agreements
• Confirm zoning, permitting, and any regulatory requirements
• Complete your financing application and appraisal

Include language that gives you the right to terminate the LOI during the due diligence period for any reason, with a full refund of your earnest money deposit. This is your primary protection and the reason you can confidently send an LOI early.

5. Financing Contingency

State that the transaction is contingent on the buyer securing financing on terms acceptable to the buyer. Specify the type of financing you intend to pursue (SBA 7(a), DSCR loan, or conventional commercial) and the timeline for obtaining a loan commitment letter.

6. Closing Timeline and Conditions

Propose a closing date (typically 60 to 90 days from LOI acceptance, or 30 to 45 days after the due diligence period ends). List any conditions that must be satisfied before closing:

• Satisfactory completion of due diligence
• Financing commitment secured
• Title insurance obtained with no unacceptable exceptions
• All representations and warranties remain true at closing
• Property condition has not materially changed

7. Exclusivity and Confidentiality

Request an exclusivity period during which the seller agrees not to market the property, solicit other offers, or negotiate with other buyers. This is particularly important for off-market deals where you have invested time building the relationship. Not all sellers will agree to exclusivity, but it is always worth requesting.

Include a confidentiality provision stating that both parties will keep the terms of the LOI and all information exchanged during due diligence confidential.

8. Non-Binding Language and Signature

Include explicit language stating that the LOI is non-binding and does not create any legal obligation to complete the transaction. The only binding provisions should be confidentiality and, if included, exclusivity.

Include signature lines for both buyer and seller, with a stated expiration date for the LOI (typically 7 to 14 days). This creates urgency without being aggressive.

Negotiating Position Tips

Anchor Below Your Target

Your first offer should be below where you expect to land. If your underwriting supports a $3.2M purchase price, consider starting at $2.9M or $3.0M. This gives you room to negotiate upward and lets the seller feel they "won" something in the negotiation. The seller's counteroffer will reveal their expectations and flexibility.

Use Data, Not Opinions

When you present your price, back it up with your underwriting. "Based on the trailing 12-month NOI of $X and comparable cap rates in the submarket of 8 to 8.5%, our analysis supports a value of $Y." This is much more persuasive than "we think it is worth $Y." Data creates credibility. Opinions create arguments.

Understand Seller Psychology

Sellers care about more than price. They also care about:

• Certainty of close. Can this buyer actually get the deal done? A slightly lower offer from a buyer who appears prepared and financed often beats a higher offer from an unproven buyer.
• Timeline. Some sellers need to close quickly. Others need time to transition. Ask what timeline works for them and accommodate it if you can.
• Simplicity. The fewer contingencies and complications, the more attractive your offer. Keep the LOI clean and straightforward.
• Respect. Many small hotel owners have poured decades into their property. Acknowledge that in your communication. A personal touch goes a long way in off-market deals.

Concession Sequencing

Never give a concession without getting one in return. If the seller asks for a higher price, ask for better terms (longer due diligence, seller financing, or reduced earnest money). If they want a shorter due diligence period, ask for a lower price. Every negotiation point is a currency you can trade.

Common LOI Mistakes

Mistake 1: Waiting Too Long to Send It

This is the most common and most costly mistake. Every week you spend "preparing" is a week the seller might find another buyer, change their mind, or pull the property off the market. The LOI-First Method exists specifically to combat this tendency. Send it.

Mistake 2: Over-Engineering the LOI

An LOI is not a PSA. Keep it simple: 1 to 3 pages covering the key terms. Do not include 15 pages of legal language. That comes later in the PSA when attorneys get involved. An overcomplicated LOI signals inexperience and can intimidate sellers, especially owner-operators who are not accustomed to institutional deal processes.

Mistake 3: No Due Diligence Contingency

Never send an LOI without a due diligence contingency that allows you to terminate and recover your earnest money. This is your safety net. Without it, you are exposed to risk that no amount of pre-LOI research can mitigate.

Mistake 4: Offering at Your Maximum Price

If you offer the most you can pay in your LOI, you have no room to negotiate. Always start below your walk-away price. If the seller counters and the deal still works at the higher number, you have a deal. If it does not, you walk away knowing you did not overpay.

Mistake 5: Ignoring the Relationship

Especially in off-market deals, the LOI is part of a relationship, not a standalone transaction. Call the seller before sending the LOI to let them know it is coming. Walk them through the key terms verbally. This reduces surprise, builds rapport, and sets the stage for a productive negotiation.

The LOI to PSA Process

Here is what happens after you send the LOI:

1. Seller reviews and responds. They accept, counter, or reject. Most sellers counter. That is normal and expected.
2. Negotiation. You go back and forth on price, terms, and timeline until both parties agree. This typically takes 1 to 3 rounds over 1 to 2 weeks.
3. LOI execution. Both parties sign the agreed-upon LOI. Your earnest money deposit is delivered to escrow.
4. PSA drafting. Your attorney drafts the Purchase and Sale Agreement based on the LOI terms. This is the binding contract with full legal detail, representations, warranties, and closing conditions.
5. Due diligence begins. You have 30 to 60 days to verify everything. This is where the real work happens.
6. Closing. If due diligence is satisfactory and financing is in place, you close the transaction.

The LOI is step one. But it is the step that most aspiring investors never take. Our members inside the Incredible Hospitality Mastermind write and send LOIs as part of our weekly workflow. We review them in real time during Thursday deal review calls, and many members send their first LOI within 30 days of joining.

The 5-Day Micro Resort Buyer Challenge includes Module 4 on writing your Letter of Intent. You walk out of the challenge with a live LOI framework ready to customize and send on your next deal.

Frequently Asked Questions

What is a Letter of Intent for a hotel purchase?

A Letter of Intent (LOI) is a non-binding document that outlines the proposed terms for purchasing a hotel or micro resort. It includes the purchase price, due diligence period, earnest money deposit, financing contingencies, and closing timeline. It starts the formal negotiation process and, if accepted, leads to a binding Purchase and Sale Agreement (PSA).

Is an LOI legally binding?

No. An LOI is explicitly non-binding, meaning neither the buyer nor the seller is legally obligated to complete the transaction based on the LOI alone. It is a statement of intent and a framework for negotiation. The binding commitment comes later with the Purchase and Sale Agreement (PSA). However, certain provisions within an LOI (such as confidentiality or exclusivity clauses) may be binding, so review with your attorney.

When should I send an LOI on a hotel deal?

Send the LOI before you feel fully ready. The LOI-First Method teaches that the LOI starts the negotiation, not your confidence level. If your initial underwriting shows the deal could work and it fits your buy box, send the LOI. You will learn more about the deal during due diligence than you ever could from the outside looking in.

How much earnest money should I include in a hotel LOI?

For micro resort and boutique hotel deals in the $2M to $5M range, earnest money deposits typically range from $25,000 to $75,000 (roughly 1 to 2% of purchase price). The deposit is refundable during the due diligence period if you exercise your contingencies. It demonstrates seriousness to the seller without putting excessive capital at risk.

What is the difference between an LOI and a PSA?

An LOI is a non-binding summary of proposed deal terms (1 to 3 pages). A PSA (Purchase and Sale Agreement) is the binding legal contract that governs the transaction (typically 20 to 40 pages). The LOI comes first and establishes the framework. Once both parties agree on LOI terms, attorneys draft the PSA with full legal detail, representations, warranties, and binding obligations.