Bungalou "Stay & Play" STR....Pig to Princess (During COVID)

[Sean Williams]

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $1,250,000
Cash invested: $2,100,000

Open as of March '22, BUNGALOU "Stay & Play" is concept that blends over-the-top accommodations with a laid-back atmosphere. Our motto "Built for Many, Great for Any"...our “Boutique Airbnb” is suitable for 31 guests in a single stay.

:: Onsite Bourbon Bar: Neat Bourbon Bar/Bottle Shop
:: 3,000 sqft Gameyard + 750 sqft Rooftop Deck
:: 6 Luxury Suites w/ 4 Package Options
:: Phase 2 will bring 4 more suites that can sleep an add'l sleep 20+ guests (next winter)

What made you interested in investing in this type of deal?

In 2019 we were BRRR'ing single family homes and were really wanting to move up to a multi-family property. We originally purchased this property to do a light rehab and keep as long-term rentals, but after getting started we had to pivot and change course to short-term rentals to ever have a legitimate chance to recoup our investment. This was due to the fact the property was in such terrible condition, we essentially had to tear it down and start over.

How did you find this deal and how did you negotiate it?

Our electrician knew we were looking for an apartment complex with 10 +/- units. He was doing some work on this property so he introduced us to the owner. At the time, the owner had had the property for 40 years and was having trouble keeping up with the property. I got her number and called her immediately...the next day we were sitting at her dining room table hammering out a deal in person. Her price was $1.5M and we were able to agree to $1.25M with no due diligence period.

How did you finance this deal?

We originally got a small commercial construction loan, but after starting we realized we needed ALOT more money. The property essentially needed to be torn down but we were in a historical district so we were forced to fix what was existing. Lucky our lender let us increase our construction draw through a refinance. We actually had to do this 3 times because COVID caused our constructions costs to skyyyyrocket. Towards the end we also implemented private financing to finish.

How did you add value to the deal?

All layouts were reworked for a modern layout, and suites can be easily combined for larger parties. Every square inch is BRAND NEW from foundations to framing to mechanicals We added top of the line finishes and furnishings, but also found the perfect tenant for our attached commercial space: a bourbon bar for our guests. We also added a 750 sqft Rooftop Deck, and a 3,000 sqft turf gameyard....all unique amenities that everyone seems to LOVE.

What was the outcome?

6 Luxury Suites that can be rented separately, or easily combined to sleep up to 31 guests. We have 4 additional suites waiting to be finished towards the end of '22 that should accommodate an additional 20 guests. Our commercial spaces have been leased to a local bourbon bar that is a great marriage for our guests. Financially, we hope to generate enough income to cover our costs year 1, and then refinance within 1-2 years while we work to creatively increase revenue and revenue sources.

Lessons learned? Challenges?

Purchased 2 months before Covid...so needless to say that was a battle all unto itself. Due to tenant eviction restrictions, we had to pay our inherited tenants to leave. Covid caused delays w/ permitting and supplies...also lumber prices quadrupled. We had major foundation issues that had to be fixed that never could have been seen without demoing the walls. We learned a great deal of persistence, resiliency and everything construction related. Plus asking the bank for more and more money!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

One of our business partners is a real estate broker - Sean Williams with Remax Premier Properties. Financing was provided by Liberty Financial.