Investors leverage Triangle hotels for cost-effective housing

by Mia Khatib

RALEIGH — With wages not keeping pace with the cost of living, investment companies like REALM and Vivo Investment Group are turning to more innovative solutions to help people cut costs on housing. The two have partnered to convert three Extended Stay Americas — one in Raleigh and two in Durham — into cost-effective apartments.

The fair market rent for a studio in Raleigh is $1,213 a month as of 2023. The efficiency units by REALM and Vivo, which average 350 square feet, will lease for around $1,000 a month. REALM Principal Will Moyer told The Tribune it’s a great lower-cost option for people who want to live on their own and are willing to trade off more space for less rent.

“If you look at the Raleigh-Durham area to live on your own and one-bedroom apartments, you're gonna be hard pressed to find something less than $1,500 a month,” he said. “We're trying to find a solution for folks that are getting started in their career, to have not only an affordable option but an option that gives many of the amenities that they're looking for.” 

Tenants will have access to an on-site fitness center, common areas and game rooms, shared laundry facilities, outdoors spaces, and more. Vivo Living has performed nearly 30 hotel conversions across multiple states, and community outreach director Leslie Moody said they see everyone from recent college graduates and single adults to retirees looking to downsize in their occupancy. 

“What they all share in common is a desire not to overspend on their housing,” she said. “It gives people a real shot at building economic resiliency if you're not spending greater than 30% of your income on housing.”

The Raleigh location is across the street from Raleigh Duke Hospital, which Moyer said could help house nurses and cleaning staff. The Durham sites are off N.C. Highway 55 and Ivy Creek Boulevard. He also expects this housing option to be popular among younger renters.

“Gen Z, millennials, there's kind of a huge move toward this minimalist kind of lifestyle, where having less things can actually help free you up,” he said. “I think the industry is really transitioning to accommodate for this cultural trend and change.” 

Existing hotel infrastructure and already embedded HVAC systems makes conversion projects like these less expensive and faster to turn around than new construction, Moyer said. The sites were acquired in December, and some units are already available for lease. 

“We were able to purchase these hotels, that we believe are undervalued, at $60,000 a unit, when in reality, if you were to build this from the ground up, you could make the case that this is $200,000 a unit kind of cost,” he said. 

The units may not be affordable to traditionally low-income households, but Raleigh Housing and Neighborhoods Director Emila Sutton said they can help free up other units for people who really need them.

In 2023, a report by the National Low Income Housing Coalition noted that in the Raleigh metro area, only 29 units are available for every 100 extremely low-income households. 

“It's sort of like reshuffling the deck to allow more and more variety of housing options on the market, which alleviates that sort of overburdened, lower income sort of affordability band,” she said. “The more variety of units and types of units on the market, the better.” 

The City of Raleigh has also leveraged hotel conversions, like Studios at 2800, as part of its strategy to preserve naturally occurring affordable housing. Moody told The Tribune it’s often hard to produce housing that is truly affordable without government subsidies. 

“We see this as just a really smart solution to a much bigger problem,” she said. “It's not gonna solve the housing crisis, but it's one slice towards making a difference in it.”

Mia Khatib, who covers affordable housing and gentrification, is a Report for America corps member.