Expert Highlights Alternative Capital in Mid-Market Hospitality

Written by:

Rudi Davis

Date:

08 Feb 2026

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Traditional institutional lenders rarely underwrite loans below $10 million, leaving a significant gap in the mid-market hospitality sector. This gap creates opportunities for operators who understand how to use alternative capital structures to acquire and grow hotel portfolios.

Blake Dailey, CEO of Stayvest, which has completed eight hotel acquisitions, says the challenge is built into the financing landscape. Most institutional lenders are unwilling to consider loans under $10 million, and larger family offices or private equity firms often set minimum investment thresholds much higher. “We dealt with a family office on our Blue Ridge acquisitions that required a $25 million minimum to participate,” Dailey says.

This creates what Dailey calls a “dead zone” in the market: properties are too large for individual investors to handle on their own, but too small to attract institutional capital through conventional channels.

Seller Financing as a Solution

To navigate this gap, Dailey has relied on seller financing for most of his acquisitions. Of the eight hotels Stayvest has purchased, six involved seller financing. Dailey typically makes two offers: one with lower cash and traditional bank financing, and one with higher cash and seller financing.

This approach, Dailey explains, works because sellers are usually focused on their net proceeds. If seller financing allows for a higher sale price and a faster, smoother closing without the delays of bank underwriting, both parties benefit. “You close faster, no bank underwriting. It’s just a smoother transaction,” he says, allowing operators to act quickly when time-sensitive opportunities arise.

On the refinance side, Dailey has used a mix of SBA, USDA commercial, and hard-money commercial loans. Each debt product serves a different purpose within the capital stack, with selection based on the property, timing, and specific value-add strategy.

Equity Sourcing and Military Investors

On the equity side, Dailey’s approach has shifted as deal sizes have grown. Early deals in the $1-3 million range were funded through friends and family. As Stayvest’s portfolio expanded, the company began raising equity from a broader network while maintaining a focus on long-term holdings and consistent cash flow.

A significant portion of Stayvest’s investors come from military backgrounds. According to Dailey, more than half of the firm’s investors have served in the military. He notes that many military professionals lack access to private real estate investments and the associated tax benefits. “Being able to provide those opportunities to a typical Captain, Staff Sergeant, or Major is something I’m really proud of,” he says.

Dailey also notes that many investors use their retirement accounts, including TSP, Roth IRAs, and self-directed vehicles, to participate in these deals. This structure allows investors to access private real estate while maintaining tax advantages and long-term growth potential, which are often unavailable in traditional stock market investments.

Combining Properties to Reach Institutional Buyers

Dailey’s experience also highlights the importance of combining smaller properties to reach a broader buyer pool and improve pricing. When two of his hotels, each generating $500,000 to $600,000 in revenue, were marketed individually, they failed to attract institutional or regional buyers. “You have to be the owner-operator, and it’s too big for that type of investor,” Dailey says.

However, when he combined the two properties into a single transaction, generating over $1 million in annual revenue, regional hotel buyers became interested. The combined portfolio ultimately sold for $3.6 million to $3.8 million to a regional buyer from Florida. Dailey’s experience suggests that crossing the $1 million annual revenue threshold is a key threshold for attracting larger buyers, as it enables the operational infrastructure and management required at that scale.

Lifestyle Benefits as a Differentiator

Another aspect of Stayvest’s capital raising strategy is offering investors direct access to the properties. Investors receive free hotel nights, making the investment tangible and personally rewarding. “Invest in our deals, and you also get to use them. It’s not some beige box you can never see,” Dailey says.

This lifestyle benefit differentiates hotel investments from other real estate asset classes, such as commercial multifamily buildings, where investors rarely interact with the property. Dailey believes this personal connection is a strong differentiator when raising capital.

The Stayvest Model

Stayvest operates with a vertically integrated model, handling property acquisition, capital raising, staffing, and day-to-day hotel operations in-house. The company also manages marketing and event business for its properties. With about 25 employees, Stayvest expects to generate roughly $5 million in revenue this year. As projects in Blue Ridge are completed, the portfolio is projected to reach $25 million to 30 million in value by year-end.

Broader Implications for Mid-Market Hospitality

The success of Stayvest’s approach suggests that alternative capital stacks—especially those built around seller financing and creative equity structures—can be effective in the mid-market hospitality segment. Institutional funding isn’t available at this scale, but operators can still complete transactions. Those who understand how to align seller and investor incentives can compete for properties that receive less attention from larger buyers.

These strategies also attract pools of patient, long-term capital, especially from investors seeking both financial returns and tangible lifestyle benefits. By tapping underutilized equity sources, such as retirement accounts and military investors, operators can build resilient portfolios even when traditional financing is limited.

Looking Ahead

As interest rates remain elevated and institutional capital continues to focus on larger deals, the mid-market hospitality sector will likely see more operators turning to seller financing and alternative capital structures. The ability to combine smaller properties, offer lifestyle benefits, and less targeted investor groups may provide a competitive edge.”

Operators who recognize that institutional structures are not available at this scale and who are willing to design alternative models with clear incentives will be best positioned to succeed. As Dailey’s experience shows, creative financing is not simply a workaround; it’s a competitive advantage that enables mid-market hospitality investors to move quickly and capitalize on opportunities others overlook.