Developer Darren Fraser, who converted the former RSL building in Lyons Street South into Ballarat Premier Apartments, bought the rundown building for an undisclosed sum.

Mr Fraser will turn the former hotel and nightclub into 20 boutique apartments, a day spa/health club, function room and a cafe/bar.

The dilapidated facade will also be restored to its former glory.

"It will have fresh, vibrant colours and be sympathetic to the area," Mr Fraser said.

He said he had been negotiating the building's sale for over a month, and had signed the paperwork two weeks ago.

"It will be similar to what we did in Lyons Street. It will be a substantial investment."

He said he would be completing the project "100 percent himself" and hoped to finish in 12 months after settling in early November and beginning the project straight away.

"I've spoken to the City of Ballarat and they've given me great support. They've been fantastic."

Mr Fraser said his plan fitted in with the recently released Ballarat Railway Station Precinct Masterplan, which highlighted the need for a boutique hotel in the area.

"It ties in perfectly."

The hotel was recently named as the number one priority among neglected buildings in Ballarat by a heritage committee.