Hotel and Apartments

[Joshua Haeder]

Investment Info:

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

Purchase price: $225,000
Cash invested: $70,000

Small Hotel and apartment complex in Huron, SD.

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

The market demand for apartments and extended stay hotel rooms is in high demand in Huron. The property needed extensive clean up and a facelift.

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

We were at an auction bidding on a different hotel. When the price started to get out of control, an individual attending stated he knew someone looking to move another property that also had apartments along with the hotel. Structurally everything was in good shape, decent cash flow. We knew with some work we could update the property and increase occupancy rates. We had a ceiling price and never go above that.

How did you finance this deal?

Initially bank construction loan which turned into mortgage after initial work was completed.

How did you add value to the deal?

Our value in this type of deal was understanding the growth that was coming to town through various business expansions. There was going to be a need for affordable rooms for contractors along with increased desire for apartment living. One a side note this property is very large and near our state fair, so we added 50 camping spots with power as the fair never has enough space to meet demand. We are able to utilize that additional income during that event.

What was the outcome?

We purchased the property just below our ceiling price, we made upgrades and created relationships. Solid cash flowing property.

Lessons learned? Challenges?

Make sure you have a solid management plan and 20 percent minimum set aside for basic repairs. Things always break, you have to be prepared for that. We keep all rooms and apartments on an update plan now, so instead of doing large expensive chucks at a time we can do one or two rooms and keep our cost down. Don't get in a rush to upgrade and fix everything at one time until you have a solid handle on your income and expenses. It's easy to want to get in a hurry (which is okay on a fix and flip)

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

We worked with a local bank to finance the deal.