I apologize for the length of this post up front. There is a lot of info to unpack, and I am really looking for some help from folks with experience in a property of this size. This is a property that I have been interested in for the last 5 years. I have a relationship with the owner, but he has been reluctant to sell because the property employs his family and has been his business and main source of income for the last 16 years. It has finally come on market.

I am quite capable of analyzing the deal using traditional metrics, but what I really need help with is any issue that a property of this size would come with, that a 3–10-unit multifamily wouldn´t. Just any observation or experience you all have had with a property of this size would be greatly appreciated.

Some info on the property:

-23 rooms (ranging from 300-650sq ft), 1 guest apartment, and 4 additional units being built on the roof. The bigger rooms have kitchenettes, all have full bath. Interiors are in really great shape. The owner owned a tile store so the flooring, bathrooms etc. have beautiful Talavera tiles throughout and a really authentic Mexican look.

-Price is $1,799,000 or roughly 75k per door. I believe this price is soft from past talks with the owner, and there is not a lot of competition for commercial properties in this market.

-They have a small kitchen on the ground floor which serves breakfast and lunch, and occupies about 550 sq ft. I am not tied to this concept, and it adds very little monthly revenue.

-Full laundry room

-Parking for 12 cars behind the property

-Excellent location downtown, safe street, walking distance to the main tourist destinations (beach and Marina)

-It has been run for the last 16 years as essentially an upscale hostel. Nightly prices are around $60. This is incredibly low for the area. For reference I have a multifamily building about 3 blocks away where our ADR is $146. The rooms are quite comparable. They are running a 59% occupancy rate YTD with little to no marketing presence and their bookings coming from the limited exposure they have on OTA´s (not any STR sites other than Booking, Expedia), and repeat guests.

-There is room for growth (already permitted) on the roof. They are in the process of adding 4 units as mentioned but there is still room to add 6-8 additional rooms or a rooftop lounge if I wanted to.

-Full time staff is currently at 4. This includes 1 cook in the kitchen who works a half day, one person at the reception desk and two maids. (One thing to consider here is that in my market you can take the cost of staff and reduce it by about 80% compared to the US/Canada. I am not really that interested in reducing staff, as the cost doesn´t make a huge impact on bottom line and some of these women have been there for 10+ years. However, I might look to change roles, depending on what automations I can put in to make the whole thing a bit more efficient.

A few key notes particular to this market:

-As mentioned, labor costs are a fraction of what you would pay in the states.

-Cost of building is comparable to median cost in US. (labor is less expensive but materials are generally more)

-Interiors of the rooms require very little cosmetic work. There are some small improvements to be made in the quality of amenities (coffee makers, some TV´s need to be replaced, fresh paint, new linens and some light fixtures and some improvements in the bathrooms) but we have worked this out to roughly $2.8k per door. Some of the rooms are in great shape and will require almost no improvement, others are in greater need. The $2,800/ door accounts for all interior costs across the 24 suites.

-I am confident in my ability either A. secure a loan or B. raise the money, so I am not as concerned with that part of the project

-I have been looking into exactly how automated a property of this size can be. There are a lot of inefficiencies with how this property has been run, not so much in the customer experience but more in the marketing, pricing and day to day operations.

- One of the real questions is what to do with the rooftop area. There is steel framing but not much else up there currently. I will attach some photos.