Ormond Beach developer Ty Lohman had never been in the hotel business, nor did he own any properties on the west coast of Florida.

But when a broker showed him the Ramada Wyndham Hotel Venezia in Venice, he knew he'd found something special.

The 146-room hotel, on U.S. 41 not too far from Roberts Bay, had undergone about $12 million in renovations. It was surrounded by palm trees that welcome guests in as they drive. And its location in a busy beach community with growing tourism rounded out the appeal.

Once he saw the line of palms, he said, "as you drive in, and the whole area of Venice, I was sold.

"It was so beautiful there."

In case you missed it: Ramada by Wyndham Venice Hotel Venezia sold for $13.4 million

Lohman purchased the hotel, along with another one in Jacksonville, with the profits of a sale of a multifamily complex in Orlando. The hotel was purchased to complete a 1031 exchange, a tax deferral transaction in which an investor uses proceeds from a sale to purchase a new property. This way, the buyer doesn't have to immediately pay capital gains taxes on a sold property.

The 1031 exchange tax loophole is having a bit of a moment in the real estate market. Worried about the proposed hike in capital gains taxes in the Biden administration's Build Back Better legislation, many investors are taking advantage of this loophole before using it becomes a less lucrative investing strategy.

Jim Shiebler, first vice president of investments at Marcus & Millichap's Medefind Garner Shiebler Group, said that this led to a fever pitch of property closings in the month of December.

"It has by far accelerated the urgency of 1031 exchanges," he said.

The 1031 exchange process is typically for investment properties. It's not a tax write-off, but a deferral on capital gains taxes that can happen when purchasing a property of similar or equal value.

The property exchange has to be between two "like-kind" investments, meaning they have to be of the same "nature, character or class," according to information provided by the financial website NerdWallet.

Not all of the sale proceeds in a 1031 exchange have to be invested, NerdWallet said, but if an investor holds on to any of the proceeds, those might be taxed right away. Sellers have 45 days after a property sale to identify what they want to buy, and 180 days after the sale date to purchase the new one.

Although the exchanged properties have to be "like-kind," as the rule states, they don't have to be the same. You don't have to buy another parking lot with the proceeds of an old parking lot, for example, or a retail property in exchange for another one, Shiebler said.

Lohman's portfolio includes several multifamily and commercial properties. The Hotel Venezia is his first on the Gulf Coast.

Hotels, Shiebler said, are generally considered to be riskier investments, since the business deals with overnight stays rather than years-long leases.

But Lohman said he sees a lot of promise in Florida's tourism industry, where leisure travel demand has been strong in the second year of COVID-19.

"I think it's a better value-add play," he said.

Through the 1031 exchange, Lohman also purchased the Ramada by Wyndham Jacksonville Hotel & Conference Center.

When he decided to purchase the Hotel Venezia, Lohman said he knew he was getting a well-oiled machine.

Over the past few years, the previous owner invested $12 million in upgrades and renovations. It has a 10,000-square-foot meeting and event space, an outdoor heated pool with a hot tub and sundeck and a state-of-the-art fitness center. The hotel also has a dedicated staff that has been there for years. One of those staff members is Jeannie Gomes, who was recently promoted to the general manager role.

While he wants to keep in place what's already working, Lohman said he's also interested in bringing in more amenities.

That could include some extended bar hours and poolside activities over the summer. The Jacksonville hotel also has a comedy club, and Lohman said he's looking into possibly bringing some of that to Venice.

"All the same employees are there, and they're continuing to run it the way they had. There's a good management team," he said. "We don't plan on changing a thing, we'll just try to make things nicer."

This article originally appeared on Sarasota Herald-Tribune: Ormond Beach investor purchases south Sarasota hotel