HOTEL vs apartment complex

7 Replies

Many apt owners in my area are using airbnb to make more money from short term rentals --- and most local governments are banning airbnb.  But to apt owners will take risks and they can make more by renting by the day. 

Many hotels, especially small ones, will have long-term guests/tenants; so some rooms operate like apt rentals.   Another trend is wework in hotels.

The point is these 2 categories are blending in.

Trying to acquire 1st hotel/motel with 50-100 rooms. I see many comes with restaurant and big lobby.  Pretty attractive asset.    And will try SBA loan. 

Anyone bought hospitality assets recently?  how's your insight and experience?    market is still in a upward trend.    Maybe buying during recession is best timing.   When is the next recession?

I placed an order for the next recession back in 2016, but Amazon keeps telling me it's on backorder. They'll let me know when it ships... :D

Ok. Sarcasm aside. Have you ever run a hotel before or managed a hotel staff? Without that experience it would be extremely stressful to jump into a 50-100 unit hotel. How many housekeepers do you need to accommodate guests? What is RevPAR and where does yours currently stand? Who's managing that restaurant? The hotel or are you leasing it out? How many maintenance guys are on staff? Is the roof still good? When were the sheets last purchased and when does new furniture need to be purchased? Why are people going to stay at your hotel and not the next one? How many rooms do you need to book to break even? How much do you need to charge? Basically, what's your business plan?

If you can answer all of these questions then maybe you are ready to purchase your first hotel. If not, I would look for a night auditor job on craigslist. Then you will learn how to deal with most aspects and costs of hoteling in a short order. 

Hotels are my passion.   Apt buildings is boring   

 Gave myself one year to study and acquire the first one. 

Will use a manger to operate.  Plan to rent  some rooms to long term tenants. 

Try to connect to someone who bought a hotel recently.  

@Ethan Smith I second @Emilio Ramirez that the learning curve is steep. I am a10 yr multifamily owner and am also looking at hotels. If you know how to look there are deals. I had a 100 unit extended stay under contract recently with SBA financing in place. It was a submarket where I am already in business and own 100+ units. I've underwritten several deals and know owners that are turnaround specialists. There is extreme value add opportunities and many a motivated seller. My deal ultimately did not work out but I am still actively working with brokers and underwriting deals in very specific marketts

Originally posted by @Ethan Smith:

Many apt owners in my area are using airbnb to make more money from short term rentals --- and most local governments are banning airbnb.  But to apt owners will take risks and they can make more by renting by the day. 

Many hotels, especially small ones, will have long-term guests/tenants; so some rooms operate like apt rentals.   Another trend is wework in hotels.

The point is these 2 categories are blending in.

Trying to acquire 1st hotel/motel with 50-100 rooms. I see many comes with restaurant and big lobby.  Pretty attractive asset.    And will try SBA loan. 

Anyone bought hospitality assets recently?  how's your insight and experience?    market is still in a upward trend.    Maybe buying during recession is best timing.   When is the next recession?

 I do a lot of work in this area, I don't agree with most as in 51% of US local governments. Do you mean in New Jersey?

@Ethan Smith

You could always try to find a somewhat distressed hotel and turn it into an apartment business. This way you would have the amenities of a hotel, a solid unit mix, wont have to worry about the business and management side of a hotel and having to worry about mass turnover of rooms. This would be a good value add opportunity.

Just a thought for you. 

Will keep looking for an opportunity in east coast.    Maybe some hotel/apts mix type.  Or airbnb.   

I work with hotel owners in securing financing, primarily through the SBA. The SBA is looking very closely at hotel deals recently and has put an emphasis on management experience. You may be able to substitute an experienced manager/management company but you will need to have similar business experience.

If the last recession was any indication of the next downturn, the hotel industry will be hit hard. There is a lot of new product going up across the US. In an economic downturn, one of the first areas to get hit is leisure/travel spending for consumers and business travel. If there is a downturn I would also expect financing to get much tougher. Lending on hospitality is already getting more difficult.