Some real estate investments, like single-family homes, are becoming harder and harder to obtain. As such, investors are finding new ways to invest and cash in on real estate. One up-and-coming trend for alternative real estate investments is converting motels into rental housing. After all, the consistent demand for affordable housing gives investors the opportunity to turn old buildings into new, efficient rental units. If you want to learn more about alternative real estate investments and how to find suitable properties, just keep reading.
What are Alternative Investments in Real Estate?
Alternative real estate investments are different from typical investments but provide the same great benefits. For instance, when you think of rental housing, you probably think of traditional apartments or single-family homes. However, an alternative investment method may include purchasing an old structure, repurposing it, and turning it into affordable rental housing.
Many communities and neighborhoods need more affordable rental housing. However, the cost for developers and investors is extremely high and continues to rise with inflation. As such, some investors are looking into repurposing distressed buildings, like old hotels.
The pandemic created a unique stay-at-home lifestyle, which hit the hotel sector hard. However, it made an opportunity for investors to purchase hotels are bargain prices and convert them to affordable rental units. That said, let’s go over how investors can use old hotels and repurpose them into alternative real estate investments.
How to Use Old Hotels as Alternative Real Estate Investments
One way investors are repurposing old buildings and turning them into profitable investments is by turning old hotels into rental housing.
Finding the right property is crucial if you’re looking to get into alternative real estate investments. That said, there are specific steps to follow if you want to find the best property for your investment goals and budget. Here are the steps to follow while looking for an alternative property investment.
- Look in Profitable Locations
- Find a Distressed Property
- Make Sure the Property Fits Your Budget
- Buy at the Right Price
- Start Renovating
- Hire Property Management
Look in Profitable Locations
The first step to finding a suitable property is looking for profitable locations. That said, it’s not too difficult to find places that need affordable housing right now. Many renters scramble to find reasonable housing as prices rise and the supply dwindles.
As such, if you’re looking to provide affordable housing, you’ll have to find areas that need it most. For instance, look for opportunities on the outskirts or suburbs where affordable housing is lacking.
Find a Distressed Property
Next, you’ll want to find a distressed property that you can purchase and renovate cost-effectively. However, it’s essential to keep in mind that residential and commercial buildings may have different zoning regulations.
So, if you’re repurposing an old hotel building, you’ll have to learn your area’s zoning restrictions. Additionally, if you’re looking to find a property to renovate, you’ll have to find run-down, outdated, or older buildings to purchase.
Make Sure the Property Fits Your Budget
Whenever you purchase real estate, you must follow your budget–especially with a fixer-upper. After all, you have to finance the property and pay for renovations. That said, renovations for an old hotel or apartment building can take a lot of time and money.
As such, it’s crucial to develop a reasonable budget and follow it throughout your investment process. You’ll want to account for mortgage costs, property taxes, insurance, renovation costs, property management costs, and more.
Buy at the Right Price
Once you’ve found a property that fits your budget and fulfills your investment goals, you’ll want to purchase it at the right price. Unfortunately, it’s hard to find multifamily buildings, hotels, or apartments at affordable costs.
So, it’s best to look for class C buildings to upgrade so you can set favorable monthly rental rates. After all, the point of upgrading the building is to achieve rental income while providing reasonable rental housing.
Once you’ve secured a class C or similar investment property, you’ll want to start renovating. Depending on what type of building you purchase, renovations may differ. For instance, if you bought an old hotel to convert to rental housing, you may start by turning half-kitchens into full kitchens in each unit.
During this step, it’s crucial to comply with rental housing laws and regulations. For instance, all landlords must provide a safe, habitable environment for all tenants and their guests. That said, landlords must make necessary repairs in each rental unit to comply with local regulations.
Hire Property Management
Once you’ve renovated your new investment property, it’s time to find tenants. Unfortunately, even though there’s a demand for affordable housing, it can be difficult to find tenants to fill up an entire apartment building. However, property management in Baltimore can help by marketing and advertising your rentals.
Additionally, property managers can help with several aspects of your rental business, like marketing, tenant screening, tenant communications, maintenance, rent collection, and more. So, instead of making it your full-time job, you can hire a professional team of property managers to help your rental business succeed.
Tips for Renovating an Old Building to an Efficient Rental
You’ll want to make efficient and cost-effective upgrades if you renovate a large building with several rental units. That said, if you’re turning an old building into a new efficient rental building, here are some property updates to consider.
- Update the Lighting- One of the cheapest upgrades to make in a rental unit is upgrading the lighting. Simple, new light fixtures create high-impact detail in any room.
- Fresh Paint Everywhere- Although painting the interior and exterior of a large investment property isn’t cheap, the cost is worth it. Just a fresh coat of paint can make a massive difference in the marketability of your property.
- Install New Flooring- New flooring is another renovation that’s not necessarily cheap but definitely worth it. After all, flooring can make or break someone’s decision to live at your property.
- Provide Storage Space- Rental homes generally don’t offer a ton of storage space. However, if you’re renovating an older building, consider adding extra storage to each unit.
- Upgrade the Appliances- New appliances are a massive attraction for renters. So, consider choosing cost-effective, energy-efficient appliances for each unit.
Hire Professional Property Management for Your Rentals
If you’re looking for alternative real estate investments, consider buying distressed buildings and repurposing them for rental housing. However, once you’ve secured an investment property, you’ll have to consider rental management.
Many rental business owners hire professional property management to help keep up with all the day-to-day tasks. For instance, property managers can help with tenant screening, marketing, tours, inspections, rent collection, maintenance, and more.
That said, if you need comprehensive rental management, contact Bay Property Management Group. Our team of professionals works hard to manage your rentals so you can feel secure about your investments. Reach out to BMG today if you need rental management in Baltimore, Philadelphia, Northern Virginia, or Washington, DC.