Hotel to Apartment Conversion

[Andrea Foley]

Investment Info:

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

Purchase price: $700,000
Cash invested: $50,000

First of many hotel-to-apartment conversions. Found this gem in a small market and the demand for housing was unbelievable. The whole community is excited about the project. The local bank provided us with the funding to purchase and renovate the property. The numbers are unbelievable and we are very excited to do more like this!

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

I know affordable housing is, and will continue to be, an issue in every community. Plus, with COVID, hotels and motels are much less desirable than they were before.

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

I was specifically looking for hospitality listings, visited 4 total properties and this one was by far the best in every way. After receiving our pre-approval letter from the bank we skipped the LOI and just made an offer of $100,000 less. They countered and we came back at $50,000 off the purchase price and it was accepted.

How did you finance this deal?

Bank financing of 25%. 5 Equity partners are in at 10% each to create the down payment needed and we matched those investments for our own 10% equity. We are the GP at 40% equity as well.

How did you add value to the deal?

We are completely transforming it's purpose from hotel to apartments. Local apartments are selling at a 7% CAP. If we can sell around the same CAP rate, we will have almost tripled the value.