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Quitting multifamily investing

by Jonathan Twombly
Last Updated: October 9, 2023

Ever since I started investing in independent hotels, people have been asking me,

“Jonathan, does this mean you’re quitting multifamily investing?”

Absolutely not.

Multifamily remains an asset that’s in-demand no matter the state of the economy and can help you build generational wealth.

When you buy it right.

And that’s the key.

Because it’s been hard to buy multifamily right in recent years.
(A sign was that you rarely heard people talk about buying right anymore.)

Now, with recent price declines, Multifamily has been a lot righter than it’s been for years.

And a huge opportunity is coming, one that I’m getting ready for.

But, at the moment, financing is tough to come by.

And sellers cling to the fantasy that interest rates will return to the recent anomalous, unprecedented, all-time historical lows to bail them out of buying wrong.

So they’re holding deals off the market or coming to market with unrealistic prices.

Result:  the deals aren’t there yet.

Enter independent hotels.

You can buy them right.  Right now.

There’s a classic mismatch happening. And mismatches create opportunity.

On one hand, Americans are traveling more than ever – according to Forbes, 87% of Americans planned to travel as much or more in 2023 than last year.

And 42% said, to beat inflation, they planned to take nearby road trips.

Perfect for independent hotels in driving destinations near major metros.

On the other hand, because of high interest rates, banks are afraid to lend on hotels, and financing is hard to get.

So, like Multifamily, you have good fundamentals matched with a difficult lending environment.

But, unlike Multifamily sellers, independent hotel sellers are realistic.

They understand the lending environment. They know their hotels may need a capital injection, and that makes it even harder to sell.

Yet, many are ready to sell anyway.

Because the time has come for them. Independent hotel owners are aging. Many are in their 70s and 80s.  Their kids have moved away and don’t want to run a hotel. And they know their hotels need to be upgraded, which they lack the funds to do.

They want to retire and the only way to do so is to get what equity they can out of their hotels. And the only way to do it is to sell.

At a reasonable price.

Very often with attractive seller financing.

The opportunity is ripe for buyers who know how to pull off a value-add and can raise the cash to do it.

I’m a value-hound, and there’s so much value here.

So much wealth to be created by buying hotels in great locations at great prices and bringing them up to today’s standards.

It reminds me of Multifamily before 2016, when it seemed like everyone had suddenly become a syndicator.

And don’t even get me started on the low-hanging fruit to be plucked through proper marketing, automation of reservations systems, and modern revenue management techniques, which the sellers almost never seem to have adopted.

So, am I quitting Multifamily?

Absolutely not.

Yet, while Multifamily continues to muddle along, the opportunity to reposition tired independent hotels into attractive boutique destination hotels is irresistible.

I just can’t help myself.

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