PassivePockets: The Passive Real Estate Investing Show

Hotel-to-Multifamily Conversions 101 with Alex Cartwright

Mar 24, 2026

Alex Cartwright, a real estate operator focused on hotel-to-multifamily conversions and adaptive reuse, walks through why converting hotels is a powerful financial arbitrage. He outlines which hotels work, typical acquisition and capex drivers, timelines for entitlements and construction, financing tools like CPACE, refinance plans, and the biggest risks to underwrite before investing.

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INSIGHT

Conversion Is Financial Arbitrage Between Asset Classes

Hotel to multifamily conversions are a financial arbitrage not just a physical one where rezoning captures value between high hotel cap rates and low multifamily cap rates.
Alex Cartwright explains hotels trade at high cap rates due to cashflow variability while multifamily gets lower caps, so rezoning unlocks upside.

INSIGHT

Labor Costs Favor Adaptive Reuse Over Ground Up

Rising construction and labor costs make it harder to build affordable housing ground-up because many costs are fixed regardless of product class.
Alex argues A, B, and C class units share similar labor/material costs, favoring adaptive reuse for affordability.

ADVICE

Only Pursue Conversions In Higher Rent Markets

Target markets with high rents and affordability gaps; aim to offer rents about 15–20% below prevailing multifamily by leveraging lower basis.
Alex typically pays $25k–$35k per door for non-extended-stay hotels and budgets $30k–$45k per door in renovations.

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Hotel-to-multifamily conversions are one of the most interesting “free market” solutions to the affordable housing crunch, and Alex Cartwright is building his entire business around that niche. In this episode, Chris sits down with Alex to break down how (and when) these conversions actually pencil and why the opportunity exists in the gap between hotel cap rates and multifamily cap rates.

They also talk about a real-time example: Alex has a conversion project happening about 15 minutes from the hotel where the 2026 PassivePockets Summit will be held in Denver. Alex will be at the Summit, and attendees will have the chance to tour the project and see what a conversion looks like up close (including what changes once you stop calling them “rooms” and start calling them “units”).

Alex shares the full playbook: what types of hotels make sense, typical basis per “door,” what drives renovation costs (spoiler: electrical), how long zoning and entitlement really takes, how these deals get financed (including CPACE), what the refinance timeline looks like, and the biggest risks LPs should underwrite before wiring a dollar.

Key Takeaways

Why hotel-to-multifamily is a financial arbitrage as much as a physical conversion (hotel cap rates vs. multifamily cap rates)
What makes office-to-multifamily so hard, and why hotels are often a better conversion candidate
Typical acquisition basis and capex ranges (and why “adding kitchens” is the expensive part)
The real timeline: 120–180 day DD/entitlement windows, construction sequencing, and refi timing (often 18–30 months)
Downside risk and mitigation: managing cashflow during construction, experienced construction teams, and conservative terminal cap rates

Disclaimer

The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk, so use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. Past performance is not indicative of future results. This podcast may contain paid advertisements or other promotional materials for real estate investment advisers, investment funds, and investment opportunities, which should not be interpreted as a recommendation, endorsement, or testimonial by PassivePockets, LLC or any of its affiliates. Viewers must conduct their own due diligence and consider their own financial situations before engaging with any advertised offerings, products, or services. PassivePockets, LLC disclaims all liability for direct, indirect, consequential, or other damages arising out of reliance on information and advertisements presented in this podcast.