Convert motel to studios??

Question

My husband and I own a duplex and we'd love to buy some more real estate but don't know where to start.  I found Bigger Pockets by searching the podcasts on iTunes.  I'm hooked!  I love all the information and especially the integrity of the community.

One of the properties that we are interested in is an older 12 unit motel.  There are 3-5 people currently living there on a month to month basis which makes us wonder if we could turn the whole thing into efficiency/studio apartments.  The bankers and realtors we've talked to just want to change the subject and steer us to different properties.  Has anyone out there successfully done such a thing?  We live in a college town, the motel is near a bus stop and grocery store.  It just seems like a good idea...but we're newbies and maybe there's something we are missing here?
THANKS FOR ANY ADVICE ANYONE MAY HAVE!

Brandon Turner · Answer

hey Jessica Kochanowski welcome to the site! That's so cool you found us through the Podcast :) We love doing that each week.

I also like your idea -as long as the numbers make really good sense. However, keep one thing in mind:

Studios are ... kinda hell.

Tenants tend to move in and out quite often and are really rough on the units. Maybe not always, but generally speaking. Be sure to account for a little more repairs than you might normally plan for, as well as management.

Keep in touch!

Jessica K. · Answer

No, we never pursued the idea.

Winston Parks · Answer

@Jessica K. Are there any updates?

Andrea W. · Answer

@Jessica K. ,  Did you go forward? I'm interested in doing something similar.

@Brandon Turner, It would be nice if you could find sometime to do a blog on investing in motel properties, whether running them as motels or not.

Brandon Turner · Answer

I'd just really encourage you to run the numbers carefully - and consider posting the actual numbers here on BP (You don't have to put the address or anything.) Nothing will help you ease the fear and feel confident in your choices than when experienced investors look at it and tell you "great" or "nooooo!"  :)

Good luck!

Jessica K. · Answer

Wow!  How exciting to find so many replies this morning!  I can't wait to talk this over when Hubby gets home...we've been so discouraged so far, but now I feel a little encouraged to at least give it some more thought.  It's scary to "think outside the box" when we are so new to the world of real estate.

Matt Devincenzo · Answer

I've seen this done several times, at least the finished product. There are several apartment complexes nearby me that were obviously 10-20 unit motels back at some point in the past and are now apartments.

My buddies ex girlfriend used to rent a condo that was in what was once a very large 3 story motel, that had been converted into about 40-50 condos. On the ground floor 2-3 units were combined to make a nice large condo, and then on the upper 2 floors the 2-3 units that were directly above one another were combined and stairs added inside to make a condo.

As a civil engineer by day, the biggest "issues" that I could see you running into with this is the development process. You may need to have it rezoned or re-entitled to be able to accomplish what you want. That isn't necessarily a problem, but just something you need to know and understand going into the process.

That may also be the reason you are having lenders steer you away, the value added play can be more profitable potentially but is probably a bigger risk in their eyes because without experience you could end up with a flop and they end up having to take the property back.

I would try to find someone that has some experience in the development/construction process locally and see if they could steer you in the right direction for what you need.

Aaron Yates · Answer

Jessica Kochanowski, that sounds like an interesting idea. Just think of the people who take old commercial buildings and convert them to luxury lofts?

Someone had to come up with that idea at some point. This could be potentially a great idea in my mind.

I would suggest plans to renovate to get rid of the motel feeling though for sure. Plus keep in mind to maybe not give it the standard cheap apartment feel either.

Is your target clientelle the college students? If so, you can think of marketing strategies possibly utilizing the college itself. Speak with the admissions or the housing department ( i assume their is one but I never went to college so I don't really know).

Honestly, I think it's a great idea the more I write about it. If you have a picture in your mind of what you want to do, and if you approach it with a plan and goal, I don't see why you couldn't make it happen

Good luck and keep me posted on the development.

Tom Goans · Answer

As an old investor who seeks opportunities "outside the box", I am very interested in your idea and think it is a great one.

You may enjoy reading the book "Think and Grow Rich". It reviews the success of many of the great inovators of in U.S. history, such as Ford. They too were discouraged from what eventually became huge successes.

In the 1980s, I was part owner of a very large hotel where we sold the individual units as condos. Huge success.

An additional target market for your project could be business travelers. While some like staying in Extended Stay Hotels, many still prefer corporate suites. Along this line of thinking, many people who are relocating to the area need a place to live while they find a permanent home.

Best wishes for a long and successful investing career.

Convert motel to studios??

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