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Hotels Post Covid 19 & Why I'm Still Buying Them

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Because of Covid 19, the world was in lockdown. Travel was virtually stopped and so hotels all across the world suffered. With low to zero occupancy, hotels were forced to shut down. For a few months, I even had to shut down my hotel (pictured above). Good thing I have plenty of cash reserves set aside for each of my properties and I could keep paying the mortgage even with no income coming in.

But, after getting some "insider" information and based on what I learned during the Great Recession of 2008-09 (I not only survived it - I actually made a ton of money during that period), I've decided that NOW IS THE PERFECT TIME TO BUY HOTELS.

In this blog post, I will reveal my rationale for buying hotels NOW and will show you, both the risks and the rewards for doing so.

The PROBLEMS with HOTELS - Effect of Covid 19

As I write this post, there seems to be a second wave of Covid 19 cases. Travel has been allowed, although limited and as a result occupancy is still low. 

According to a report by the AHLA (American Hotel & Lodging Association) hotels in the US are losing $400 million in room revenue per DAY!

Low occupancy (or zero) means negative cashflow. Negative cashflow means mortgage defaults for smaller hotel operators who are not well capitalized (or do not have enough cash reserves). And defaults will eventually lead to foreclosures.

"But with Great Problems Come Great Opportunities!"

If Spiderman did not say that...I just did. All throughout history, the ones who can turn problems into profit come out ahead and create massive wealth for them and their investors. Blackstone came out of nowhere because they raised massive amounts of cash to buy tens of thousands of foreclosures back in 2009. 

Personally, because of the Great Recession of 2008-2009, I became financially free. When the real estate market was still falling, I went on a buying spree and the cashflow from those properties paid for all my expenses.

I heard the expression "Do not catch a falling knife!" Well, in 2008-2009, the "knife" or the real estate market was falling. Good thing I did not listen to that advice.

With hotels, the knife is falling right now. And guess what...NOW is the time to SEIZE THE OPPORTUNITY to buy premium assets at MASSIVE discounts. MASSIVE discounts especially from premium assets like well-located hotels with premium brands (or flags), means massive cashflow and massive ROI.

Moreover, with banks not lending money for hotels right now, we can get hotels, not just at a discount but we can get them "light" - meaning with not a lot of cash via owner financing or joint ventures.

For example, I am in negotiations right now to get majority ownership (70-75%) in a renovated hotel in Lexington KY (that is worth $10M when it's stabilized) for a mere $500,000 in cash. Before Covid-19, I had to shell out $3M in downpayment to qualify for bank financing to get that hotel.

BUT What About the CASH BURN????

Before I answer that, let me reveal to you the "insider" information I mentioned at the start of this blog post. One of the people I know works for the health industry and she told me the Covid-19 vaccine will come out. It's already in Phase 3 trial and will likely be available to the public anywhere from 6-12 months. 

In other words, the cash burn will not be forever. Once the vaccine comes out, people will no longer be afraid to travel and more travel means higher hotel occupancy. Of course, hotels will not go back to their pre-Covid 19 occupancy and RevPAR immediately (it might take 3 to 5 years).

But again, now is the time to get these premium assets so we can take advantage of the great uptick in cashflow and price in the next 3 to 5 years.

So here's the answer to the cash burn.

My strategy is to focus on hotels that already have or can be converted partially or fully into Extended Stay Model or LTR (Long term rentals). 

The LTR will produce some revenue to help offset the negative cashflow.

Of course, when we acquire a hotel, we calculate the worst case scenario (zero hotel occupancy) and have enough cash infused into the project to sustain that for a period of at least 6 months.

Lastly, as I write this blog post, we can also offset the cash burn with the PPP & EIDL money from the government.

So, What Now?

If you want to become part of what will be a massive creation of wealth as we acquire premium assets like hotels at massive discounts, you will be glad that I am putting up a FUND to take advantage of this.

This is open right now to accredited investors ONLY.

* Investing Involves Risk, Including Loss Of Principal. Past Performance Does Not Guarantee Or Indicate Future Results. Any Historical Returns, Expected Returns, Or Probability Projections May Not Reflect Actual Future Performance. While The Data We Use From Third Parties Is Believed To Be Reliable, We Cannot Ensure The Accuracy Or Completeness Of Data Provided By Investors Or Other Third Parties. Neither Eden Capital Nor Any Of Its Affiliates Provide Tax Advice And Do Not Represent In Any Manner That The Outcomes Described Herein Will Result In Any Particular Tax Consequence. Prospective Investors Should Consult With A Tax Or Legal Adviser Before Making Any Investment Decision.
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