Source: Excerpts from “Motel to Apartment Conversion Deal | Commercial Property Advisors”

Main Theme: The document highlights a real-world example of a successful motel to apartment conversion project, emphasizing the potential for creating affordable housing with strong returns through strategic commercial real estate investing. It focuses on the win-win nature of commercial deals, the power of seller financing, and the importance of mentorship.

Key Ideas and Facts:

Motel to Apartment Conversion as a Profitable Strategy: The central theme is the viability of converting motels into apartment buildings as a lucrative investment strategy, particularly for creating affordable housing. The case study revolves around Jordan’s successful conversion of a 16-room motel into 16 apartment units, along with the acquisition of additional multi-family units and a commercial lot.

1031 Exchange for Funding: A crucial element of the deal was the utilization of a 1031 exchange, allowing Jordan to reinvest profits from the sale of a single-family rental property into the commercial property, deferring capital gains taxes. As stated in the document, “To fund this deal, Jordan sold a single family house rental and did a 1031 exchange into a commercial property… It’s a powerful tool to build wealth in real estate and increase your net worth and cash flow.”

Win-Win Deals: The document stresses the importance of structuring deals where both the buyer and seller benefit. This is achieved by understanding the seller’s motivations and needs. As Zig Ziglar said, “If you help enough people get what they want, you’ll get what you want”.

Seller Financing: When traditional financing fell through, the deal was salvaged and improved through seller financing. This allowed for more flexible terms and the acquisition of an additional commercial lot for a nominal fee. “Jordan sat down with the seller to discuss the property issues and was able to successfully negotiate seller financing terms. These new terms were better for Jordan than a bank loan and Janette is happy because her family will be well taken care of too.” Moreover, “$100 Commercial 0.5 Acre Lot… with seller financing, we could pull this off.”

Property Details and Financials: The document provides specific details regarding the property and the financial aspects of the deal:

Property: 16-unit motel with adjoining 9-unit apartment complex and a separate 0.5-acre commercial lot.

Purchase Price: $1.35 million ($48,000 per door).After-Repair Value: Projected at $1.8 – $2 million.

Down Payment: Funded by the 1031 exchange proceeds.

Seller’s Win: Janette received $300,000 at closing and will receive $6,000 a month, plus her two children will receive $800,000 in five years.

Buyer’s Win: Jordan purchased the property below market value, with a significant increase in value after repairs, and potential for further development of the commercial lot. “The price per unit was about $48,000 per unit. Comparable properties in the area are selling for $85-$95,000 a door. The after-repair value is $2 million, and that does not include the half acre lot and the potential development of it once the motel conversion is stabilized.”

Mentorship: The document underscores the value of mentorship in commercial real estate investing, citing Jordan’s reliance on a mentor to navigate the complexities of the deal. Jordan stated, “I couldn’t have done this without you… There are things that you don’t even know that you don’t even know when you’re looking at commercial versus single-family residential.”

Impact of One Deal: It highlights the potential for a single commercial real estate deal to significantly impact one’s financial life. As Jeanine Placide-Carthans commented, quoting the author, “YES! AS PETER HARRIS A L W A Y S SAID, ONE DEAL IN COMMERCIAL REAL ESTATE CAN CHANGE YOUR LIFE !”

Target Audience: This information is geared towards individuals interested in commercial real estate investing, particularly those seeking to create affordable housing and build wealth through strategic property acquisitions and conversions.

Potential Applications:

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• Demonstrates a viable investment strategy for creating affordable housing.
  
• Provides a case study for understanding 1031 exchanges and seller financing.
  
• Highlights the importance of mentorship in commercial real estate.
  
• Offers concrete financial data for assessing the potential returns on motel to apartment conversions.