Hostel/Hotel In DC area - Help analyze this deal

[George Joseph]

Hi,

I am a recent RE investor with 5 rental properties.. The BP community has been one of the best things that has happened to me. Thank you all. I recently came upon an opportunity to invest in a mixed Room hotel facility in the DC downtown/Georgetown area.

The people who are promoting ( started this 4 years back) this are well established in 26 countries with hostels/hotels in 120 cities. This is their first in US.They have hired some big shot in the Choice hotel group to oversee their US expansion. I really liked the concept as I think high end hostels/private rooms for a reasonable cost is something many of millennials are looking for during travel. The plan here is to lease a office space (30k sqft) and convert it into 67 bed hostel/hotel.

This is a mixed Room hotel similar to https://staygenerator.com/host...

Attached are some numbers that the promoters put together looking at similar properties in the DC area..

Questions

1) The numbers seem too good to be true (almost 100% return on investment). Other hotels (choice hotels, comfort inn etc) margins are less than 30%. So wanted your thoughts on this. Note that they have properties in Europe, Asia which are probably giving similar returns..

2) Are the expenses listed too optimistic?

3) Occupancy (average annualized)is assumed to be 70%. Is this reasonable for this area?

4) Does the initial cost estimate ($3.1M) make sense ?

Appreciate any questions/thoughts you have..