Bungalou: 12-Unit Apartment to Luxury STR Property (Sold Aug '23 for $4.7M)

[Sean Williams]

Investment Info:

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

Purchase price: $1,250,000
Cash invested: $2,100,000
Sale price: $4,773,000

After a 3 year redevelopment project in the urban core, I am happy to say we exited this property and business in August 2023 for $4.7M.

BUNGALOU "Stay & Play" is a concept we brought to life as we redeveloped a dilapidated 12-unit apartment complex from 2020 to 2023. At completion we had 10 Luxurious Airbnb-Style Suites that could sleep groups of up to 50 guests, NEAT Bourbon Bar (one of the top bourbon bars in the country), a 3,000 sqft Turf Gameyard, and a Private Rooftop Deck.

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

Initially we wanted to rehab the apartment complex into long-term rentals, but after running into major structural issues and going WAYY over budget, we decided to pivot and focus on building one of the top STR's in the country.

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

Our electrician was doing some work for the owner and caught wind that they may be considering selling. We called the owner the next day and was informed they wanted $1.5M for the property. We met the owner the next day at her house and may an offer for $1.25M which we put under contract.

How did you finance this deal?

💸 PURCHASE 💸
:: Jan 2020 for $1.25M
:: Off-market deal - referral from our electrician
:: 12 unit dilapidated apartment, zoned commercial
:: $3.5M Purchase + Construction Costs (Combination of rehab loan + private financing)

Majority was construction financing through a local credit union we had an established relationship with prior, however we did have to also bring in private money multiple times to finish the project.

How did you add value to the deal?

Everything was completed renovated top-to-bottom, but the real kicker was creating a brand identity around the property known as "Bungalou". Another contributing factor was getting a quality tenant (Bourbon Bar) that shared a special synergy with the property that really helped to attract our guests and bring in high-dollar bookings.

⭐️ FINISHED PRODUCT ⭐️
:: Onsite Bourbon Bar Neat Bourbon Bar & Bottle Shop
(best damn bourbon bar in KY!!! 🥃)
:: 3,000 sqft Gameyard
:: 750 sqft Rooftop Deck

What was the outcome?

💰 SALE 💰
:: Listed for $4,875,000 in May 2023
:: On the market for 17 days
:: Multiple offers received
:: Closed August 2023 for $4,773,000

Lessons learned? Challenges?

🔥 CHALLENGES 🔥
:: Covid (business partner nearly died) + delays w/ permitting
:: Tenant evictions (had to pay them to leave)
:: Bad contractor (had to fire and finish ourselves)
:: Major structural issues
:: Lumber going ⬆️ 4x's during framing
:: Delays w/ supplies and furnishings

Biggest thing I learned is getting out of your comfort zone, and to know there is always a solution to most challenges if you are willing to open your mind and get creative.

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

I represented our group on the purchase and sale, however my business partners had experience in real estate investing and commercial construction. Having a quality team where everyone works well together was instrumental during the most difficult of times.