Buying Hotels and using as Studio Apartments

[Natalie Schanne]

Over the past year I have seen several deals for hotels in foreclosure on TEN-X that have seemed like home run opportunities. I’ve asked my friends to invest with me but haven’t seen anyone interested even though they are like 20% the price of a multifamily 1 bedroom apartment in the same town. WHAT AM I MISSING??

Deal 1: 350 key 100,000 sqft hotel with 30,000 sqft conference center on 10 acres. Harrisburg PA. Fully furnished. 1950 original build but recently renovated. Last loan was $15m. Auction started at $1m and ended at $4.5m. (Sold to a local apartment company). Had been a common wedding venue, meeting space. They relisted it as a hotel with $95/night rates. (Rebranded Penn Harris Hotel by Wyndham)

My idea was to rent to 350 single professionals at $800/mo x 350 = 3.36m revenue per year plus on site laundry / restaurant sales. Property was next to a hospital and many offices. Also to build a self storage on spare land.

Deal 2: 200 key extended stay hotel (rooms with small kitchens) in College Station TX near Texas A&M. 30 years old. Fully furnished.

Bidding started $1m

Deal 3: 230 key hotel in Morristown NJ, 13 acres. Fully furnished. Current Sonesta. Close to everything. Auction price starts at 4.5m. In this area, a crappy old 10 unit apartment building earning $1500x10=15000/mo rent, can sell for $1.5-2m easily.

why the hotel versus multifamily valuation is so different? Like cap rate 5% vs 10%?

Also what are the financing options and is it harder to finance a hotel than a multifamily? I’m guessing so with so many of these buildings going into foreclosure in the past 2 years since Covid shutdowns.

Anyone interested in bringing cash or expertise and partnering up on a Nj hotel outside nyc (New York city)? I have $500k cash.