Ryan Sudeck discussed his company's innovative strategy for tackling the affordable housing crisis by converting distressed motels into residential units, successfully expanding their portfolio from 1,100 to 2,500 units and planning to undertake 10 to 12 projects annually. He highlighted the challenges posed by zoning regulations, particularly in markets like Kissimmee, Florida, while noting supportive legislative changes in states like Washington. Sudeck emphasized the positive outcomes of their projects, such as crime reduction in areas like Tacoma's Hosmer district, and expressed confidence in their model's potential to alleviate the affordable housing shortage. Also, outlined the current real estate market challenges, including a decline in new developers due to high inflation and costs, and explained how their firm can outbid traditional hoteliers for properties.
Find Ryan here: https://sageinvestment.com
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And so we don't see a lot of competition with developers looking to buy these properties. We do see other hoteliers that might want to take them over and upgrade them and maybe take them from a Hampton into a Marriott or get them rebranded. But we typically find that we're the best buyer for these assets and the sellers want to work with us because we can pay a little bit more than that hotelier is willing to because hotels are worth three to five times the revenue that they generate whereas an apartment building is worth seven to twelve times the revenue that it generates. You're listening to Carrie Lutz's Financial Survival Network where you get valuable information you just can't find anywhere else. To thrive in today's trying times you need the financial survival network now more than ever. Go to financialsurvivalnetwork.com and get your free newsletter and gift financial survival network now more than ever. And welcome you are listening to and watching the financial survival network of your host Carrie Lutz. Interesting person you're about to hear from interesting investment approach. I don't think you're going to find anything like it. Basically what they're doing is taking small motels hotels across the country converting them to residential affordable residential. When I think of affordable housing this seems to be the way to go. It's a private approach they're not taking government money to do it and they can produce more units probably in a year than than many of the housing authorities around the United States do in a decade. Name of the person that you're about to hear from is Ryan Sunday. Ryan it's great to have you on the show. So affordable housing all we hear about is that you know affordable housing we don't have enough governments got to build more of it. But you seem to be offering a different approach. Yeah that's exactly right thanks for having me Carrie. Your intro and a spot on we're shipping you know a hundred to two hundred units at a time of affordable housing naturally affordable housing and it only takes us about six to twelve months once we buy a property till we can start running it out to tenants. So we can we can get big units to market and address the need a lot faster than any ground up developer could or certainly you know a government authority could. Yeah so you've gone from eleven hundred units in twenty to eighteen hundred units last year. I assume you're that's pretty furious pace. I mean just dividing by three you're doing two hundred thirty four units a year. I assume that pace is increasing for for twenty four. It is. Yeah we're we're at about twenty five hundred units total right now. You know we've had some sales in the portfolio but there's a lot of acquisition opportunities out there for us and you know you kind of couple the distress and hospitality with the insatiable demand for the affordable housing and we feel like we're we're on to something. So we see no shortage of opportunities and you know our plan is to do about ten ten to twelve projects per year so that we can execute on them pretty well. Well I've got a place that you should definitely buy it's in Kissimmee Florida right by Disney World it's a welfare hotel and I'm sure the neighbors would welcome you taking it over and it's got a pool parking and I once had the misfortune of staying there when I fled from a hurricane and there were guys with like prison tattoos there it was a scary place. Yeah I I hope the the city of Kissimmee can work with us on some of the the change of use permitting and zoning. We've had some challenges breaking into that market but we know well we're trying to do some work down the street in Orlando and that is one of the biggest challenges with these conversions because we're changing the use from a hospitality asset to a residential asset and we have to you know the jurisdictions and the zoning and permitting folks have to basically let us do that. Yeah but so is that considered an up zone or a down zone? Ah I would consider you know we're moving it to its highest and best use so I'd consider it an up zone. Usually we're not changing the underlying zoning for the property itself because most most jurisdictions won't allow for what's called spot zoning but we're going to the city and we're asking them to change the definition of the zone to allow for residential use or you know there are other potential exception processes in states like Washington where where I live where we're based as sage they've actually legislated effective June of 2025 that all commercial buildings can be zoned by right to residential so there isn't basically the local municipalities can't get in the way of it and so it's a different approach than some other states you know some other states just roll at the red carpet to try to you know get us through and then in some other states you know they've actually legislated to make these conversion projects a little bit easier you know they really should because you know if you watch an episode of cops you could definitely find a lot of prospective properties there because it seems like nothing good it's happening in these rundown low-life motels and bad parts of town and all that and here you redo them make them new and you get like taxpayers in there. Ah that's exactly right you know we've had some good success with this especially in the Hasmar district of Tacoma we bought four properties on one street on Hasmar Street. Hasmar Street used to be responsible for 10% of all the murders in the state of Washington. Hasmar is in Tacoma which is just south of Seattle for those not familiar with the northwest and you know since we've taken over these properties we've eliminated violent crime the police officers used to send three patrolmen for every call that was made from one of these properties now they only send one. So it's really it's a really unique opportunity where you know we're kind of doing good but it's also good business right the underlying fundamentals of of the investment are pretty sound as well. So like in Florida a lot of these older rundown motels they just knocked them down and put up high-rise you know. So I guess that's kind of your competition the people that want to come in and knock them down and put up a residential tower. Yeah and there's fewer and fewer developers that are starting right now I think permits the difference between housing that's being created and housing that's being permitted has never been wider in history than it is right now just because inflation has been running rampant the cost of labor materials is so high the cost of debt is so high the lot of ground up developers have just pulled out and so we don't see a lot of competition with developers looking to buy these properties we do see other hoteliers that might want to take them over and upgrade them and maybe you know take them from a Hampton into a Marriott or you know get them get them rebranded but we typically find that are like we're the best buyer we're the best buyer for these assets and the sellers want to work with us because we can pay a little bit more than that hotelier is willing to because hotels are worth three to five times the revenue that they generate whereas an apartment building is worth seven to twelve times the revenue that it generates and so you know there's a bit of an arbitrage in there obviously there's a hard work to capture their arbitrage but it allows us to pay more than a hotel operator would. Right and so is there much competition for this out there are there other companies doing what you're doing? Less than ten I'd say they're doing it repeatedly there have been some that have pulled out some folks that unfortunately overpaid and you know we're kind of coming in to grab those assets at a discount so I say there's really probably three or four groups that I'm aware of including ourselves that are they're trying to do this repeatedly you know at scale in multiple markets. Okay interesting interesting so how do you wind up getting into this by the way Ryan? Great question my interest in real estate started at an early age growing up my dad was a pilot but had a small portfolio of real estate in my hometown of Medford, New Jersey and so I spent the weekend swinging hammers and installing toilets and sneaking drains with him and you know a 9/11 hit you know he lost his pension took a big pay cut and you know I saw the insurance policy and the stability that investing in real estate gave to my parents and so I always knew I wanted that one day fast forward I went to college out on the west coast ended up having a corporate career in merges and acquisitions you know helping big companies by smaller companies work for Amazon and Samsung and Redfin and a few just just to name a few companies but then start building my own portfolio on the weekends do it doing a similar thing where you know I bought a six unit and renovated it then an eight unit then a 16 and a 30 eventually fast forward to 2020 and Sage Investment Group got started and that's where I'm now the CEO I was still working in my corporate job at the time but I decided to move my properties into Sage in exchange for shares of our fund and then just became a passive investor in real estate I decided to outsource the hard work you know to the the folks at Sage and you know ended up joining the company full time as CEO mid last year so in mid 2023 very cool story so I never looked back I'm right I think you said there's 70,000 of these like mom and pop uh motels around the country that's exactly right yeah in markets that we're interested in because we're looking for wage growth population growth and we're also looking for properties with about 100 to 200 units because we want enough where we get economies of scale on management we can have an onsite manager that you know it's kind of governs the low end and then on the high end we don't want to ship too many studio units in any one market so you know we don't want to take over 400 unit property and ship 400 units of studio housing because that would oversaturate the market right hey are these units uh furnished right typically not uh we only have one of our 24 properties that is furnished we're actually just starting to lease it now um and we're we're gonna see how it goes but typically unfurnished units but they have full full kitchens uh for folks yeah so uh what's the biggest challenge you see in this market show say there's probably three challenges um the first is working with the local municipalities that um you know need to basically approve our change of use of the buildings to give us the permits to you know convert these properties that takes a long time uh on average at least six months and you know some of those uh municipalities treat this differently and you know maybe they assess us impact fees because they think that we're gonna use more city resources whether that's you know water or sewer or parks and we have to work with them and educate them on you know hey these are fully aminitized properties you know there aren't you know families here so we're not hurting the school system and then we also have to work with them to figure out you know what code they're gonna hold us to you know what code book they're gonna hold us to the energy codes they're ever changing and sometimes we get curveballs thrown at us um you know on what requirements we're gonna be held to so it's a that's kind of uh challenge number one challenge number two is just the development itself it's certainly not easy to do the work that we we do we just started our 19th conversion project so we certainly learned a lot along the way both in you know the diligence period and also uh the process of uh you know doing the renovation and then the third is just you know sources of capital you know we're always out there raising equity um to fuel our growth and then also you know finding lenders uh to partner with um to help uh you know secure the properties as well interesting you would think that uh must be municipalities would be looking to upgrade the quality of the properties and thereby because i assume that uh after you get done with your reno your rehab uh real estate tax are gonna go up a little bit they go up a lot of it uh now the city loses the hotel tax revenue uh and so i haven't actually done the math recently you know one of our projects to see what they net out to be but certainly you know we pay a lot more in property taxes after the renovation um you know because we see at typically at least a 50% increase in in value over what we pay between the acquisition and the development but you know it's usually at least double what the the property was worth as a hotel well you'd think if a place is an in by 10 out by two type of situation uh most of those people are paying cash i don't know that uh a lot of them don't even take credit cards and nobody wants to leave a trail that they were actually in this place so probably they're not getting their full full ride on the hotel and uh you know resort tax that accounting like in florida it's like those are huge taxes to 20% on many places interesting interesting business model um obviously you'll be busy with this for a long time to come and we appreciate you coming out just to tell us anybody wants to connect with you follow you how do you do that yeah you can uh go to sageinvestment.com um you can book a meeting with me there uh you can also email me at ryan@sajinvestment.group um where we've got a uh linkedin account now you can certainly follow us there as well excellent well take there'll be a link in the show notes to this interview on financial survival network.com so you just have to click it you find out all about ryan and sageinvestment group and uh the fund if you got a question for ryan shoot me an email kl@carrilutz.com and while you're at the site please sign up for your free newsletter ryan got a pleasure thanks for stopping by thanks so much for having me kary thanks for listening to karylutz's financial survival network your solution to today's trying times for the latest go to financial survival network dot com financial survival network now more than ever
