🏨 Motel to Apartment Conversion

15 Replies

Can anyone share their thoughts on motel/hotel to apartment conversions? I toured a vacant motel yesterday in Indiana and think this could be a decent opportunity. 
All of the units have been upgraded, new parking lot, and will have a new roof. Seems like all of the heavy lifting has been done by the owner. 
The best part is that it’s located in an A- area and is an eye sore right now. Really high traffic area and near a lot of new construction. 

We are going to get feedback from our PM on how much demand there is for studio units in the area. Any thoughts? 

I found this deal by simply driving by and stopping to talk directly to the owner 👍

Personally I think this is a great idea! Not sure if there would be demand for this but if you end up doing it I think experiment with a couple furnished apartments for airbnb or furnished finder. Also I think going up scale especially for the neighborhood is a great idea. stainless appliances, quartz countertops, higher end flooring could be huge. 

@Justin G.  This looks like it has a lot of potential! Do you know what a typical timeline is for permitting, assuming you need to obtain permits? That would be something I'd look into, because that can impact how quickly you can convert the units and start cash flowing! 

@Justin G. looks like a great opportunity, we did a condo deconversion into apartments in Indianapolis. Getting permits would be the first step for sure. It is definitely a creative way to convert something that the area or neighborhood could get excited about!

Justin,

I am a 1099 Project Manager focused on Major Rehabs/Conversions/CapEx. I have a couple of questions relative to the Physical Plant; 1. Will Y'all be converting the Units to Individual Metering…How do you allocate space for Monument Signage…How does Conversion usually affect the Existing Parking and Drive Areas currently in place…Do the Conversions typically have room to provide even minimal Yards…Is Sound a problem between Common-Wall Units? any thoughts, no matter how General would be of help. Vaya con Dios, Hijo.

Gary Bethel

@Justin G. a great idea that often has a not so great reality. 

I have toured several of these in several markets. When new, it's easy to think "holly-cow, why isn't everyone doing this" and some years into it, well, it can often turn into "ok, THIS is why nobody is really doing it". It's a tenancy class thing, you have to understand your market and build the entire operation to address that market and be prepared. My observations is it's most similar to sec8 investing, many many similarities with the 2. 

And that said, sec8 can be an amazing cash-cow, if it's ran correctly. I like to keep in mind the advice that only a fool get's angry when a cat won't fetch. Affordable housing is a polarized business, really rewarding when done right, absolutely unforgiving when done wrong. 

I tried to convert a motel that was closed into apartment units for college students and the city would not allow the conversion. In fact, since the motel was closed the city would not even let someone purchase the property and re-open the motel because the motel did not meet the city's requirements that a motel had to be on a parcel no less than 1 acre.

I was lucky because the seller was pushing me to purchase the motel for $1.25 million and I accidentally found out that the more could not be re-opened. That was about 19 years ago. The owner tore the motel down and he now owns a vacant lot where the city will probably not allow anything to be build on. Not even a parking lot.

Even if you turn an 80-room motel into apartment units I get the impression that you can't get away from having someone managing the property 24/7 exactly like a motel due to the type of people who will rent such small rooms unless you spend a fortune to somehow make the rooms into larger apartments and then you end up with less than 80 units.

Overall, if you can get the motel for a decent price it sounds like a great idea.

Thanks everyone! This deal unfortunately did not work out. Great location but the units were just too small to be converted into apartments. This was a motel and not an extended stay hotel which would have been more ideal because those would have room for kitchens. Cool learning experience though.