Innovative thinking in real estate investment has created immense opportunities for building low-cost affordable workforce housing that can help improve the supply of affordable housing and mitigate the housing crisis that touches every American.
The trend of converting hotels is not new. Real estate investors have always tried to use distressed properties to convert them into affordable workforce housing, and the Covid19 pandemic has turned the focus much more on such conversion projects, explains Maxwell Drever.
With renewed emphasis by investors in such projects is the fallout of the economic crisis due to Covid19 that has crippled the hospitality sector.
Many hotels cannot cope with the severe blow of continued business closure, and the owners are looking for opportunities to monetize the property by offering it for conversion into affordable workforce housing.
High investments to continue in the property conversion projects
The pandemic triggered a surge in the projects related to converting hotels into affordable housing. The opportunities seem so much more lucrative than other investors in real estate are outbidding the established investors known for their interest in the hotel business.
The pandemic has forced investors to turn their attention to making alternative use of the real estate. They are pumping in so much money in hotel conversion projects that the prices have shot up incredibly by 35%.
The trend is likely to gather pace in the next 5 years as experts like Maxwell Drever feel that properties worth $25 billion to $30 billion will come under the ambit of the hotel to housing conversion projects.
The specialty of hotel conversions
Hotels are now a favorite among real estate investors who are keen to convert them into various types of accommodation, from condos to student accommodation to affordable housing and assisted living.
Hotel conversions are pretty different from other conversion projects and special too that needs an eye for evaluating the property correctly to ascertain its potential to generate a fast return on investment.
Only experienced investors conversant and experienced in similar projects can envisage the possibilities of conversion accurately by undertaking an exercise in due diligence.
Developers and investors form a team with experienced architects to carry out the property’s due diligence to ascertain how to maximize space utilization that holds the key to keeping costs low while ensuring good returns.
Complying with the rules
Besides evaluating the scope of space utilization, investors must also consider the aspect of compliance with the local building codes rules relevant to the project.
The conversion projects entail different sets of build rules than the traditional rules governing new constructions. The evaluation process must factor in various technical aspects and the kind of impact the local legislation would have on the project when trying to maximize the space.
Only by using every inch of usable space can investors hope to earn decent returns, and the skills in space utilization hold the key to profitability.
The investor’s expertise and experience in similar projects provide the credentials to attract hotel owners and acquire the property at a reasonable cost.