Across the country, hotels, lodges and inns that once bustled with guests are now sitting quiet. Some were hit hard by changing travel patterns, others by oversupply, and many simply haven’t bounced back from the pandemic era. But savvy developers see an opportunity—one that’s gaining momentum nationwide: converting underperforming hotels into much-needed residential housing.
There’s good reason this trend is taking off. Hotels come with built-in infrastructure that aligns surprisingly well with multifamily use—private bathrooms, HVAC systems, plumbing, and sometimes even amenity spaces that can be reimagined for residents. Add in the growing demand for workforce and affordable housing in urban and suburban markets, and the case for hotel conversion becomes even stronger.
But a sound concept doesn’t guarantee smooth financing.
Traditional Lending Falls Short
Despite the upside, these deals rarely check the right boxes for conventional lenders. Hotel-to-multifamily conversions often require zoning changes, creative floorplan modifications, and a forward-looking vision of cash flow that hasn’t materialized yet. In the eyes of a bank, that’s high risk and low predictability—two red flags that stall approvals and slow down timelines.
For borrowers looking to move quickly, that delay can be a deal-breaker.
Why Short-Term Loans Fill the Gap
This is where private lenders—and specifically, short-term bridge loans—step in to provide a critical lifeline. When time is of the essence, and the property has untapped potential, a well-structured bridge loan can offer the speed, flexibility, and certainty needed to get the deal across the finish line.
With a short-term loan, you don’t need to wait for pre-leases or stabilized income. The financing is based on the property’s value or hard assets, along with the borrower’s vision—not on outdated lending formulas. These loans can close in a matter of days, not months, allowing developers to acquire properties before competitors swoop in, and to immediately begin renovations and repositioning.
In many cases, private lenders can also tailor terms around the realities of the project—whether that means releasing funds in phases, structuring interest-only periods during construction, or accounting for entitlement timelines.
Unlocking Long-Term Value with Short-Term Capital
Consider a developer who acquires a struggling 100-room hotel near a growing employment hub. The building is 40% occupied, operating at a loss, and in need of reinvention. With the right permits and a modest renovation budget, the property could be transformed into 60 one-bedroom apartments targeted at essential workers. But the seller wants a fast close—and traditional financing is too slow to compete.
A private bridge loan solves the problem. It delivers the capital needed to acquire the asset and fund renovations, while giving the borrower the time to stabilize the property and line up permanent financing or exit via sale.
It’s a simple equation: short-term financing for long-term impact.
Moving Quickly in a Shifting Market
The opportunity to convert underperforming hotels into housing won’t last forever. As market conditions shift, the properties ripe for transformation will be snapped up fast. And for borrowers who wait on traditional financing, the window might close before the first dollar is wired.
At Kennedy Funding, we specialize in making complex deals happen quickly. If you’ve identified a hotel conversion opportunity and need a lender who sees potential where others see risk, we’re ready to talk.
Let’s turn keys into leases—and empty rooms into opportunity.
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