Redevelopment of the Historic Dew Drop Inn

[Ryan Thomas]

Investment Info:

Other commercial investment investment in New Orleans.

Purchase price: $522,250
Cash invested: $233,200

14 boutique style hotel rooms, bar and restaurant, Live Performance Venue, Pool and Gift shop. Invest in our crowdfunding campaign from $100! Visit our website to learn all the details www.dewdropnola.com

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

Originally, I was simply looking for a building I could operate Airbnb units in. I accidentally found this old historic hotel driving down the same street I've drove over the past 2 years. I immediately fell in love! It had everything I was looking for, could be zoned as a hotel, qualifies for Historic Tax Credits, has lots of history, and room for 14 airbnb units! Not to mention it was big, beat up, and in terrible shape!

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

After passing by it one day, I went home and googled everything I could about it. From the stories of Ray Charles "seeing" people outside, to Little Richard playing Tutti Frutti for the very first time, this place has history! After initially seeing it, I found it in the MLS a month later and put in an offer.

How did you finance this deal?

Bridge financing from The Tulsa Real Estate Fund and Crowdfunding for the Equity portion

How did you add value to the deal?

We are implementing a $2,600,000 redevelopment plan to modernize the property and set it up for future generations.

What was the outcome?

In progress

Lessons learned? Challenges?

Never give up no matter how tough the obstacles may seem.

[Braden Smith]

I don't mean to rain on your parade, but the Dew Drop Inn is in Central City right across the street from Harmony Oaks, formerly known as the C.J. Peete Projects, or better known as the Magnolia Projects, which was one of the most dangerous projects and neighborhoods in all of New Orleans. Central City has seen some development, mostly on OC Haley, but it is still dangerous. There are still crack dealers and hookers found on the corners around there. I don't think a hotel or STRs would work here. 

See here:  https://wikitravel.org/en/New_Orleans/Central_City

Note where it says, "Although crime has gone down from mid-2009 to early-2012, Central City is still a dangerous neighborhood, not recommended for casual visitors. Projects to revive the historic O.C. Haley business strip are starting to show fruit, though it still has a long way to go. Those who decide to visit should be particularly aware of their surroundings and inquire about conditions in advance."

And here:  https://www.smartertravel.com/bad-neighborhoods-new-orleans-warnings-dangers/

Note where it says, "Gang violence has increased in the 6th District, which includes Central City, the Garden District, Hoffman Triangle, Irish Channel, Touro, and Zion City, where there have been shootings and homicides. With regard to Central City specifically, it was once a thriving immigrant stronghold, then fell into disrepair—except for the recent revival of Oretha Castle Haley (OCH) Boulevard, which is certainly worth visiting. But past dark, don’t stray past that boulevard into other parts of Central City."

And I wouldn't bank on the STRs. There is a huge backlash against STRs in NOLA. On May 24, 2018, the New Orleans City Council passed motion number M-18-195 creating an 9 month Interim Zoning District for certain types of Short Term Rental licenses in particular zoning districts. 

The New Orleans City Council will be issuing new rules and regulations for STRs in Orleans Parish very soon. The City Planning Commission last met March 12, 2019 and voted to limit short-term rentals in residential areas to owner-occupied properties, sending the proposal to the City Council for a final decision.

The plan forwarded by the council would also place some additional limits on properties in residential areas that are zoned for mixed-use, multi-family or commercial uses, treating them the same as traditional bed-and-breakfasts and making them subject to a restriction that limits them to one per side of a block.

Under the commission's recommendations, large-scale short-term rental operations would be allowed in commercial districts such as the Central Business District, the neighborhood that currently has the highest number of licenses. But operators would be limited to using no more than a quarter of their building for that purpose and might be required to provide some affordable housing units.

See here for the most recent news articles on STRs in NOLA:  

New Orleans City Planning Commission endorses stricter short-term rental rules

Short-term rental changes in New Orleans would require owners on-site

And here is the City website for more info:  https://nola.gov/short-term-rentals/