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MB 269: Repositioning Hotels as Multifamily Assets – With Serge Shukhat

COVID decimated the hotel industry, bringing property values down significantly. And savvy multifamily investors are buying distressed hotels on the cheap and converting them into apartment buildings. But what are the pros and cons of this strategy? 

Serge Shukhat serves as Principal at Zona Capital, LLC, a real estate investment firm that specializes in acquiring value-add multifamily and mobile home park assets. Serge spent 13 years as a corporate warrior before leaving his W-2 in 2012 with the cashflow from 70 single family rentals. Then he shifted his focus to multifamily and now owns a portfolio of more than 1,000 units. And in the last two years, Serge has developed an innovative strategy for repositioning hotels as multifamily properties.

On this episode of Apartment Building Investing, Serge joins cohost Garrett Lynch and me to share his approach to converting hotels into apartment buildings. Serge explains why he operates the units as Airbnbs to start and leases them up gradually and describes the challenges of running this kind of hybrid property. Listen in for Serge’s insight on the barriers to entry for repositioning hotels and learn how YOU can benefit from acting on this unconventional multifamily play!

Key Takeaways 

How Serge got involved in real estate

  • Searching for way out of corporate job
  • Started buying single family during recession

How Serge analyzes price per door

  • What other investors are buying at
  • Rebuild cost in market

What inspired Serge to reposition hotels as multifamily

  • Hotels cheaper than multifamily properties
  • No competition on deals

Serge’s first hotel-to-apartment conversion

  • 70-unit with kitchens, easy market for permitting
  • Bought with re-trade due to COVID at 15% off

Serge’s Airbnb bridge strategy

  • Operate units as STRs to start, lease up slowly
  • Provides immediate cashflow

What makes Serge’s STR bridge strategy work 

  • On-site team manages Airbnb units
  • Property operates at maximum efficiency

The challenges of hotel-to-multifamily conversions

  • Permitting and zoning
  • Takes property manager outside comfort zone

Why Serge is conflicted about shifting to full multifamily

  • Cashflow of Airbnb units = 3X long-term lease
  • STR-multifamily hybrid makes exit harder

Connect with Serge Shukhat

Serge on BiggerPockets

Serge on LinkedIn


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