Hotels are a cost-effective way to keep yourself socially and economically secure. They are also a great place to make money off of as multi-family real estate investments.
For example, a home owned by several people can be rented out and profitable as an investment. Each person pays their fair share of fees and charges, which totals out to a profit.
The problem is, it takes time to look into this property and make an offer. You need good relations with the property owner in order to represent your company well enough for an offer to be made.
Home sales are not very legal, so if you are buying in an area that has recently sold or been bought and lived, then you can legally do it.
Lure customers with amenities
Hotels have always gone a step beyond the typical run of business establishment in providing amenities.
A resort or hotel has more than just the usual meeting spaces, the fitness center and the poolside lounge, as well as a cafe and bars. Many offer an amenity focused neighborhood or community feel.
This is an area where savvy developers use their property to their advantage by creating a luxury neighborhood with a hotel at its core.
Many people go into a hotel because of its high quality experience compared to other lodging options. From food to service, everything about a hotel is better than what you will find at most other sites.
If you can find enough people who like your luxury neighborhood, you will be successful in driving traffic and investment into your property.
Great locations are key
When looking at locations, there are some important things to consider. Location is one of the profitable intersections of hotels and multi-family real estate investments.
Because of this, it is important to know what areas are good places to locate a hotel. There are two main ways hotels acquire a location: purchase and develop, or partnership and development.
Both methods involve buying a vacant or underutilized property and renovating it into a hotel, though partnership properties can go through develop mode as well. Through this process, the developer gains ownership but not yet a lease on their property.
If acquired before renovation occurs, the developer can go through purchase mode to get their property.
Maximize rent payments
When a property is being used as a occupy-at-least-the-front apartment, it can be difficult to maximize the payments that it generates.
typically requires a license to operate, and may not always be available throughout the year. This can create difficulty in obtaining positive cashflow even though it may increase the value of the property.
However, when combined with multi-family real estate investments, this can be an added bonus. For example, in conjunction with a condo or apartment complex, the occupants can use the front entrance as their publicfacing businessentity’s address instead of both properties having just been landlords.
Use tax deductions to reduce taxes
Hotels and other commercial buildings are often qualified for tax deductions, which can reduce taxes by up to 50% or more. This is great for properties that have valuable commercial space such as a bank or store!
The annual tax deduction for a property like a hotel is $10,000 per year, $100,000 for the year. That’s a powerful tax deduction worth pursuing.
Unfortunately, not all interior spaces at hotels are subject to taxation. If you have an apartment or another type of housing that gets used less than the hotel does with its large commercial space, you may be able to combine your two deductions and save considerable money in the process.
Additionally, many large downtowns and tourist destinations have historic district zoning that encases valuable architecture making them eligible for these tax deductions.
Implement a holding company
Having a holding company can help you avoid multiple payments from the seller, as he or she will only have to pay the charges for one property at a time.
There are a few reasons to have a holding company. First, it can help you avoid paying taxes on your investment properties. Second, it can help you avoid double-taxation laws, as your profits will be reclassified as business investments instead of personal income.
As an example, let’s say you own two rental homes. One home is worth $500,000 and the other is worth $200,000. You would report the second home as an add-on property that you purchased for $20,000. The first home would be valued at $200,000 and your tax bill would be $50,000 (50% of its market value).
Choose the right partner
When choosing a partner for multi-family real estate investment, there are a few key elements to consider.
Parallel 4- and 5-story buildings that can be combined into a single unit or leased as a united property is called an intersectional property.
It is unique in the community it calls itself, and when combined with another property, it can generate significant income. In addition to owning the majority of the units, your partners must agree on common goals and strategies for dealing with issues such as vacancy, maintenance, capital investment, etc.
When one partner leaves the property or dies, other members of the group may not want to take on any new obligations. This can turn what should be an extremely profitable investment into an Argumenty-Fabey situation where nobody wants to be involved because they had to leave something behind.
Plan for the future
As mentioned earlier, aging structures can be profitable investments. If you are looking to increase your property portfolio, checking into whether or not the adjacent homes are owner-occupied or rental property is a good start.
Additionally, looking into potential redevelopment projects for your properties is also an area that can grow with your business over time. Such projects could add value to your properties by providing additional parking, retail space, or residential units.
If you become the owner of a busy complex with several houses on the same street, you could consider acquiring one of those houses to build yourself a vacation home community!
As tourism continues to grow and stay strong in today’s economy, business will continue to thrive in the intersection of hotels and multi-family real estate.
Upgrade your hotel assets
Adding another room or two to your hotel can yield significant revenues. After renting a two-bedroom apartment for six months, I bought the same room for $800 ($200 per month in rent) to add another bedroom and living space.
This is an easy way to make money in the market, as long as you have enough rooms for everybody. If you have fewer than four rooms, look into purchasing a condominium or a property on the lease-referral program.
Another way to upgrade your hotel is by acquiring nearby multi-family properties. Buying a series of three or five apartments is a good way to gain exposure to high-quality housing with little up front investment.
Interfacing your hotel with an online store is also very profitable, as guests purchase their accommodations through the website and not at the hotel.