Hostel opportunity - prime location - Europe - your thoughts

[Anya Swanson]

Hello friends! 

I'd LOVE to know your thoughts on this investment opportunity: 

I am currently investing in Europe. Eastern Europe - Western Ukraine, Lviv, the very center of the old town, to be very precise. This market is fantastic! I have four short term rentals here that perform really well year round. 

A few days ago I saw an interesting property for sale. I am percolating on purchasing it and thought I'd share here and maybe someone would be even interested in a partnership? 

So here are some details on the property: it is located in a prime, very central location in the old town of Lviv. The location does not get any better than this! It's on the ground level and it consists of five bedrooms. Each bedroom has two large double beds and a separate bathroom. It has its own court yard that could be used as a glass-covered atrium with a common area for people to relax. Three out of five bedrooms are ready to decorate and occupy and two need finishing (plumbing, heating, water, electric - all done. All that is needed is to finish - cleaning, floors, baseboards, decorating, etc.) 

The property can be used as a hostel with 10 double beds, sleeping 20 persons in its full capacity. A single bed in a hostel here in town runs between $11 to $20 per night, depending on the location and attractiveness of the property. Taking conservatively, $13 per person per night and 50% occupancy, indicates a potential of $3,900 per month, gross. I estimate the running cost to be around $900 per month (2 part time employees and supplies), utilities can be around $250 per month and I conservatively double it to be $500 per month for added potential repairs, etc. 

So $3,900 - $900 - $500 = $2,500 with low occupancy at a slower season. Summer and winter are full of tourists here - I Airbnb my other properties here, so I can tell that my estimates are very conservative. Even with 75% occupancy and a slightly higher price per person per night this property can generate around $7,000 per month gross. In the summer and winter holiday season this town gets trampled with tourists from all over the world, so I am even more positive on its potential. Plus, no heating needed in the summer, so utilities are minuscule. To employ a full time personnel is cheap here - $400 per month is considered a good pay for a full time position. (Sadly, but true, for now).

Another potential is to convert the property into a restaurant location and sell it right away with a profit. The asking price for this property is $170,000. If bought and sold as for a restaurant location, I think this could be sold for $200K fast, without doing anything with it. This location is very desirable and it will go fast as it is now. The owner is attempting to sell it without an agent, and it will be sold soon. These kind of properties do not come on sale often here - I have been monitoring the market here closely. 

The owner has never finished the renovation and it's been sitting idle for more than a year. I think he ran out of juice to finish it and to start operating the hostel.  By my estimate it needs about $7-$10K max to get it up and running as a hostel. The building was built in 1600' and is in a very good condition (they used to build to last). There were few movies made using the court yard. The building is located in the pedestrian zone and is protected by the UNECO as a world heritage.

I find this to be a very interesting opportunity as holding, hostel operation. Additionally, Ukraine is striving to join the EU. Personally, I am not very happy about it, but these historic properties will soar in value, when she does join.  I am considering a hard money loan to acquire it and then finding a private money loan to hold it and pay it off. Or it could be purchased in a partnership. 

Below I am attaching a few pictures of the property and the area, and a link to one of my Aibnb properties that is located in the same building. I live in So Cal and originally I am from here, from Lviv. I am fluent in Ukrainian, Russian, English, and Polish and speak some French. 

Let me know your thoughts! I think I've included everything I could think of - if you need more info, lmk! 

Thanks! Anya 

My Airbnb property in the same building