Turn Small Hotel into Monthly Rentals - good idea? Bad idea?

[Anna Christie]

I am looking into a 16 unit hotel that has lots of deferred maintenance and has been renting rooms by the month. Needs roof, paint, flooring, pool is unusable. Location is great, right off freeway and has its own billboard. Besides fix up costs what hidden costs or issues should I be aware of for a old hotel? Are insurance, licensing, or city fees a problem? I have only rented out a single condo before. My intention is to fix this place up unit by unit and ideally rent to traveling professionals.

Any input/guidance is appreciated.

[Philip Cook]

@Anna Christie

I was looking into doing something similar. My original plan was to turn it into long term rentals, but the rezoning probably wouldn't have happened. The backup plan was to still add the kitchens and combine some of the units so that they were more apartment like. I found PM that liked the idea and thought they could find a keep good tenants. I was thinking about targeting traveling workers like nurses and construction with a couple of the units. My offer wasn't accepted, so that's as far as I got. 

As @Danny Randazzo mentioned, reputation is something to consider. The place I was looking at was the only rent by the hour place and also rented to the jail when there wasn't room for parolees. Overcoming the stigma can take time and effort. Or you could embrace it and be the place that will rent to anyone that has the cash. There are people that will pay $600+ a month for a hotel room with no amenities and stay for a year or more because there is nowhere else for them to go. Understand your target client and their needs/wants and make sure your business model fits. 

Also make sure you fully understand the state and local rules that come with a hotel license so that you are following them. You will have more overhead with licensing, insurance, and maybe taxes than with a regular apartment building.