While construction of new apartments is at a 50-year high, the number of apartments available to those with lower incomes is actually falling. The number of apartments with rents between $600 to $1,000 a month has fallen by 14.5 million units since 2011.
Furthermore, the percentage of renters spending over 30% of their income on rent recently hit a record high. The number of households spending over 30% of monthly income on rent (sometimes referred to as “cost-burdened households”) increased by 1.2 million between 2019 and 2021 to a record high of 21.6 million households. Of those 21.6 million households, 11.6 million of them spend more than 50% of their income on rent.
With the increasing demand for affordable workforce housing and the desire for multifamily investors to make a positive social impact, Hotel to Apartment (H2A) Conversions have emerged as the newest opportunity in the realm of real estate investing. MultifamilyOS Founder Charles Dobens, along with affordable housing expert David Peters and economist Alex Cartwright, thinks this is the best opportunity in real estate today.
Here are five reasons why 2023 is the year of the “hotel conversion”:
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The rise of single-person households: The ever-growing trend of single-person households has created a substantial demand for studio units. Currently, only 11% of the national inventory consists of studios, leaving a significant gap that H2A Conversions can help bridge.
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Mounting pressure on affordability: Rent growth in traditional apartments and inflation have placed immense pressure on housing affordability. H2A Conversions provide a viable solution by repurposing existing hotel structures into affordable housing options.
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Prime locations with limited development opportunities: Many hotel properties suitable for conversion are located in areas where new construction is no longer feasible. By leveraging these existing structures, H2A Conversions not only provide valuable housing units but also preserve the charm and character of these sought-after locations.
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Favorable market conditions for buyers: The current market presents a unique opportunity for investors to acquire hotel properties at significantly reduced prices. These acquisitions well below replacement cost allow for completed units at half the price of traditional apartments, creating substantial value and potential returns.
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A triple-win investment: H2A Conversions offer a win-win-win scenario. Firstly, they address the pressing need for affordable housing without relying on government subsidies. Secondly, by transforming declining assets into valuable apartment complexes, these conversions contribute to crime reduction and increased property tax revenues, benefiting the community at large. Lastly, investors enjoy the advantages of buying low and forcing substantial appreciation, generating substantial returns on their investments.
Learn more at Hotel2Apartments.com
The news and editorial staffs of the Chicago Tribune had no role in this post’s preparation.