\n<\/p>\n
Hotel investments<\/strong><\/a>, big BRRRRs<\/strong>, and some mind-boggling cash flow<\/strong> are coming up on this Deal Deep Dive<\/strong> with our very own Rob Abasolo<\/strong>. For almost the entirety of Rob\u2019s short-term rental investing career, he\u2019s preached the good gospel about how small, mom-and-pop-owned vacation rentals are the way of the future. The secluded single-family rental, log cabin, or treehouse were some of Rob\u2019s most impressive and profitable investments. But now, he\u2019s taken a step in a whole different direction<\/strong>.<\/p>\n Rob doubled his rental property portfolio almost overnight<\/strong>, going from fifteen units to thirty-five by purchasing a twenty-unit hotel\/motel mix<\/strong> in beautiful Upstate New York. Without much experience running anything on that scale, Rob and his partners went to work trying to figure out how to turn this mess of a motel into a profitable, high-value vacation destination<\/strong>. He faced some serious hurdles, from canceling on guests to fixing a literal hole in the middle of the property, but found a way to make it work.<\/p>\n Once the renovations are complete, Rob will walk away with an almost unbelievable amount of yearly <\/strong>cash flow<\/strong><\/a>, a seven-figure increase in equity, and a scalable system that will let him do these types of deals more often than he thought. Want to hear the nitty gritty<\/strong> so you can tackle something as lucrative as this? Sit back, relax, press play, and prepare for your next big property purchase!<\/p>\n David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: \u00a0<\/p>\n<\/div>\n Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here<\/a>. Thanks! We really appreciate it!<\/p>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Check out our\u00a0<\/em>sponsor page<\/em><\/a>!<\/em><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
This is the BiggerPockets Podcast Show 660.<\/p>\n
But one of the really hard lessons that we learned was that the transition of ownership was a little bit tricky. We hadn\u2019t really hashed out a battle plan with the seller because we were so focused on closing the deal. There was always stuff happening. As you know, deals start to fall through and then everyone\u2019s got to be like, hey, we\u2019re all on the same team. You really want to sell it. We really want to buy it. Let\u2019s renegotiate. How are we going to make this work? And so we had like five of those moments I felt like through that whole process. We were like, oh shoot.<\/p>\n
What\u2019s going on everyone. This is David Greene, your host of the BiggerPockets Real Estate Podcast. Here today with my partner in crime and partner in business, Robert Abasolo. Rob, so nice to see you today. And I can\u2019t help but notice you\u2019re a little dressed up. You got rid of the black pocket tee and you\u2019re actually looking fit, trim, and sharp in a shirt with buttons and a collar.<\/p>\n
That\u2019s true, man. I think I have mentioned this to you before, but I did this whole thing for two years where I saw a YouTube video of this guy that was like, why I only wear one shirt. And I was like, I like that. And so I decided to just rock the black pocket tee for the last two years on the channel. And I was like, you know what? I think I\u2019m tired of looking like a schlub, like a minimalist schlub. So I decided to fork out some dough and buy a couple button downs that\u2019s all.<\/p>\n
Well, and you can afford it based on the cash flow you should be getting from your new acquisition, which is what we are talking about on today\u2019s show. This is a deep dive episode where we are getting deep into the details of Rob\u2019s newest deal. It\u2019s a lot of D\u2019s right there. You bought a hotel. Well, you\u2019ve actually bought a kind of boutique hotel. Tell us a little bit about what people are going to learn about as they listen to today\u2019s episode.<\/p>\n
So I\u2019m pretty open about this stuff. I\u2019m a very transparent person. So we\u2019ll be talking about the hotel, why I even went the hotel route after being such an accomplished short-term rental operator that\u2019s so anti-hotels. You\u2019ll get to hear my pivot on why I\u2019m doing that.
And then some of the really big hardships and mistakes that I\u2019ve made on this deal, which I just want to be honest about and put it out there because I think for me, I embrace mistakes because they make me better. And I just want everyone to know that it\u2019s okay to make mistakes and to fail because that is how we get good at the thing that we call real estate.<\/p>\n
That is a great point. And if you listen to today\u2019s show, you will learn about the mistakes Rob made, how he overcame them, how he found this deal, how he structured the deal, how he negotiated the deal, what he likes about the deal, how he\u2019s designing the deal and how if everything goes well, he should make over $5 million when he exits this deal.
Fantastic episode, make sure you listen all the way to the end to get all the juicy deets. But before we get into those juicy deets, today\u2019s Quick Tip is brought to you by Rob Abasolo himself.<\/p>\n
So if you\u2019re ever going to buy any kind of property that\u2019s outside of your typical asset class, ask yourself what is the battle plan as soon as I close on this property? I think a lot of people are like me and we jump in because we\u2019re not scared to just tackle something head on, but at the end of the day, you\u2019re going to sign those closing docs, and then you have to actually run that business or asset class that you just purchased, and you don\u2019t know what you don\u2019t know.
So before you get into a deal and you focus all your time on closing the deal, focus on everything that\u2019s going to happen the month after you close that deal because it will save you a lot of headaches. Take it from your friend, Rob.<\/p>\n
Very nicely done. Great job there, Rob. All right, let\u2019s get into the interview. All right there, Mr. Abasolo, let\u2019s get into this thing. So first off, in your opinion, you\u2019ve probably been investing in real estate for quite some time, but to an OG like me, I\u2019m thinking you\u2019re kind of new to this game.
So it seems like you\u2019ve done pretty well since the time that you\u2019ve been in real estate. Can you share with our audience how long you\u2019ve been investing in real estate and what your journey was like to get to where you are right now?<\/p>\n
Yes, I do, I will. And let me just say it is an honor to be a guest on the BiggerPockets Podcast. It\u2019s been a dream of mine for a long time. So thanks for having me on.<\/p>\n
I did make myself sound like an old man right there. Well, tell me about how you\u2019re using computers to buy houses.<\/p>\n
What it is this Airbnb you speak of? All right, reeling this back in. So I\u2019ve been doing this for about five years, probably just a little bit over now. And I have really, I\u2019ve done a lot in the short-term rental space and it\u2019s always been an interesting journey. I think for me, I\u2019ve wanted to diversify as much as possible for just \u2026 I\u2019m very curious.
And one of my favorite things really about BiggerPockets is how creative people can get in real estate and extrapolating that further into just the actual Airbnb space, I\u2019ve always been very appreciative of how creative people can get with their spaces. What can you Airbnb? You can Airbnb at air mattress in your living room. You can Airbnb a potato in the middle of Idaho. You can Airbnb a cabin. It doesn\u2019t really matter, it\u2019s whatever your imagination is.<\/p>\n
You love that potato.<\/p>\n
I do. It\u2019s so good. It makes like 70 grand a year. I\u2019m jealous. I\u2019m going to build a potato [inaudible 00:05:13]-<\/p>\n
I love how often you bring it up.<\/p>\n
I know. It\u2019s just, I\u2019m so jealous that I didn\u2019t think of it first. But this is exactly what I\u2019m talking about because someone would see that and they probably were selling it for 20 grand, and then everyone was like, no, I would never pay for that. That\u2019s a stupid price. Then we have someone that comes on and they \u2026 Actually we should bring her on. We should bring her. I think her name is Kristen Wolfe. I\u2019m going to make that an initiative here.
But effectively, I like how creative things can get. So for me, I started in the rental arbitrage space for, I think my first three or so listings. And then I bought my first house. In that house, I had a tiny 279 square foot studio that I rented that was making pretty good income on Airbnb.
And then I thought to myself, what if I built a tiny house in my backyard? And then I thought, what if I built a tiny house in Joshua Tree and then a small home in Joshua Tree? What if I put a tent out in a national park or an Airstream or a tiny A-frame?
And so I kept really leveling up as much as I could because every type of new listing I could come up with, I was like, this is great, this is fun. And it was so fun because no matter how wacky you get with your ideas or whatever you put out there, there is a target market for that. There\u2019s a target market for a vintage Airstream. There\u2019s a target market for a tiny A-frame, or a tiny house. And for me, I think I get a lot of joy out of fulfilling that bucket list item for people.
So in my five years, I went from zero to 15 units. For all of those 15 units, for the most part, I think I had partners on a lot of those because I was pretty broke when I was getting started out and I was doing pretty well. And I was putting myself out there on social media and people would reach out and say, hey, Rob, I\u2019d say that you\u2019re pretty good at this. Would you mind taking an investor? And I\u2019d say, sure.
And so that\u2019s how I was able to scale up pretty quickly. And I was pretty passionate about it and I still am, but I\u2019ve started to realize as I was acquiring all these different units, the scalability was getting a little tougher because I was getting so engulfed in the actual A, the self-management, but B, the setup. Setting up an Airbnb takes a very long time. I don\u2019t know, have you ever set up one of your Airbnbs, or no?<\/p>\n
Going through that right now. I was lucky enough that almost everything I purchased came furnished and was used as an Airbnb before. So those ones are going pretty quick, but the ones that I bought in Florida that were not used as an Airbnb, it\u2019s definitely a log jam right now with ordering furnishings and getting the cable and the internet turned on and getting stuff fixed so we can take the pictures. I\u2019ll actually let you go into everything that goes on to that because I\u2019m just getting exposed to this now.<\/p>\n
Well yeah, and you saw a sneak peek of how I do things in Scottsdale, when we were setting up our 6,000 square foot spansion, our Spanish mansion. You saw a little bit of \u2026 I mean, that was a little bit of a different beast compared to your typical 2,000 square foot home, but that\u2019s a pretty good indication of how I do it.
It\u2019s not just coming in and putting couches here and hanging a picture frame. For me, it really is a process of where do things go? How do we get rid of boxes? Who\u2019s going to do what? Are all the drawers filled? Do we have can openers? It\u2019s a very analytical process, which is very odd because I am not necessarily the most analytical person.<\/p>\n
You appear that way in those environments. I thought I\u2019m watching Banksy looking at a street corner and figuring out the mural that he\u2019s going to paint here. That\u2019s what it was like to watch you in action.<\/p>\n
Honestly, that is kind of how it felt walking into that house, but admittedly, that mural was very beautiful and I didn\u2019t have to do much to it. It wasn\u2019t much of an open canvas because it was already an architectural house that was just anything we would\u2019ve done to that place would\u2019ve been perfect.
But all to say, even that house took a little bit longer to set up than we thought. We thought we were going to set it up and say, let\u2019s do this thing. And it took about a month to get all the furniture in and everything, due to the supply chain issues and everything.<\/p>\n
I think what short term rentals have done to real estate, real estate has traditionally been, especially commercial real estate because this is where investors used to operate. Commercial real estate was for investors. Residential real estate was for people that just want to live in their home.
Then we started buying rental property en masse after 2010, when there was all this opportunity and all of these foreclosures. And now it\u2019s gone into this whole new stratosphere where we\u2019re doing short term rentals and we\u2019re competing with hospitality industries. And what I\u2019ve noticed is real estate\u2019s always been part art and part science.
It used to be much more heavily geared towards the science element. The spreadsheet would tell you almost everything you needed to know about that triple net property or that big commercial multifamily property you wanted to buy, while Airbnb has allowed the art side to play a much bigger role in what\u2019s happening. How do I design the house? How do I market the house? How do I furnish the house?
These are all things that are not numbers you can put into a spreadsheet to determine a return, but the art will affect the return. Is that something that you think you\u2019ve been able to harness to be so successful as a short term rental investor?<\/p>\n
For sure. I think short term rentals in general are a very visceral thing for me. I walk into a place and I know if it\u2019s going to work or not. Or I see photos on Redfin or Zillow and I know if it\u2019s a dud or not.
Now I do genuinely believe that any house in a good market can perform well, if you put a little bit of love and TLC and passion into the design side of things, but certainly some houses they make for better properties in general and they\u2019re more Instagrammable.
So I\u2019m always looking for something that has a bit of that potential in, I don\u2019t know, the category sense. Airbnb just changed their website design and they have categories at the very top. So for me, I\u2019m always looking at how can I best fit those categories.
And this is something I\u2019ve really been doing over the past five years until somewhat recently, which is moving into where I am now and that is focusing a little less on the single family acquisition.<\/p>\n
All right. And so as you\u2019re focusing less on the single family acquisition, where are you shifting that focus to?<\/p>\n
It\u2019s a bittersweet moment for me because I cut my teeth on buying single family residences and doing that. Obviously I still will. I still work with a lot of investors and we partner up, they\u2019ll fund the deal, they\u2019ll finance the deal and I\u2019ll go and find the property and set it up and everything with my team. But we just started to realize how quickly that started to gobble up our time, if you will, to source the deal, analyze the deal, overanalyze the deal, get in touch with the realtor.
In this crazy competitive market, you can do all that work and still not get it, even if you put in a really good offer. Then you got to go and do it again. And then traveling and doing all the remote setups as well, was really, really tough for us because we\u2019re a pretty scrappy team. There\u2019s only three of us really right now.
I mean, it\u2019s expanding relatively quickly on a lot of different fronts, but for us, it\u2019s just really tough because I think in a perfect case scenario, what I started to realize was if I find it, I can effectively set up at least one Airbnb a month, but if I was just really firing on all cylinders, I could probably do two with my current team, and that\u2019s great. If you could do two every single month, that\u2019s 24 in a year. That\u2019s certainly not anything to walk away from, but that\u2019s the max.
I can only do 24 short-term rentals in a year working with investors, and I\u2019m also splitting it with those investors and I\u2019m having to work with them and get info and analytics and answer questions. And really that side of it too has been very \u2026 And rightfully so they want the information.
So it does slow down the process to work with the one-off investor, because it can be a little tough to just get everyone on the same page and get money moved around. And in this market, you need to act very fast, make offers and think last kind of thing, which is terrible advice, don\u2019t ever do that, but this market is crazy.
So I think honestly, this all started to come to a head when you and I were talking about partnering up and then I was like, \u201cAll right, man, let\u2019s buy this campsite with 10 units on it or something.\u201d And then you were like, \u201cDude, it\u2019s a good return, but that\u2019s a job. 10 units is crazy.\u201d And you\u2019re like, \u201cWhat if we just started acquiring luxury properties? And that will cost the same as this 10 unit camp site you sent me.\u201d And I was like, \u201cOkay, sure.\u201d
So I started giving a lot of thought to that and that was the beginning of you and I partnership where we bought that house in Scottsdale. And setting that up was a bear, but it wasn\u2019t the work of setting up 10 properties that equal the same amount monetarily. And I think the moment that hit me, I was like, okay, I think it\u2019s time to rethink how I approach short term rentals.<\/p>\n
Yeah, that\u2019s awesome. I remember that conversation we had where we were fleshing out our options and you said, \u201cWell look, we can get \u2026\u201d It was a ridiculous number, like 40, 50% ROI on these $400,000 houses, let\u2019s just buy 10 of them. I was like, \u201cOkay, we could do that, and then for the next year, this is all that we\u2019re doing is we\u2019re trying to manage these 10 properties we bought. What if we just bought one for 4 million that could do less, maybe cash flow right up front, but it had a bigger upside. And with that time we would make more than the cash flow that we were giving up.\u201d
And it was, I almost remember seeing you freeze for a minute. The little Apple rainbow thing was spinning and you\u2019re like, \u201cWait a minute. That\u2019s not how I was ever thinking. Tell me more of this, how we would make more money with the time you speak of.\u201d
And I remember when I had that first same epiphany that we often look at ROI, it\u2019s very seductive to just find the highest ROI you can find, and it feels like progress to the human mind so we like to chase it. But in real estate, ROI is never pure unless you\u2019re investing in a REIT or into someone else\u2019s syndication.
With the money that you\u2019re putting into the deal, you\u2019re putting in time, effort, mental energy. You\u2019re thinking about it. You\u2019re having to go find people to do work. There\u2019s some frustration that comes when things break or a guest isn\u2019t happy. And there\u2019s a cost outside of just your capital. It\u2019s very easy to forget that because we tend to only look at the ROI when it comes to the capital.
And when I had that revelation, I realized, oh, I need to think way differently about how I\u2019m investing. So as you\u2019re newly born, you just got jacked out of the matrix and you\u2019ve opened your eyes for the first time-<\/p>\n
I took the red pill, if you will.<\/p>\n
Yeah, exactly. Now you\u2019re in Zion. Tell me what type of thoughts you\u2019re thinking. What types of properties are starting to catch your attention? Where\u2019s your mind going with your investing strategy at this point?<\/p>\n
So fast forward to about \u2026 I guess not fast forward, but let\u2019s go back to about two months ago, and I get this very mysterious Instagram message from somebody. And they were like, \u201cHey, I don\u2019t know if you\u2019d be interested in this. I follow your channel, but I\u2019m actually selling this hotel in New York. And it\u2019s a split motel. It\u2019s a seven unit motel, I think with 12 tiny home cabins and then two bedroom cabins and then full size, and then four RV spots.\u201d
And then I was like, oh, I get a lot of messages like this all the time and it\u2019s really hard to respond to all of them because when someone says, hey, I got this house, you interested? I\u2019m like, maybe, but you didn\u2019t give me much information to analyze if I want the house. So probably not.
But this person actually wrote it out and I was like, okay. Well this is sort of around the time where I\u2019m like, okay, how do I scale? How do I scale? I\u2019ve done the one to 15 units. I\u2019ve proven I can do that. And sure, I could go out and continue to do that.
And as a matter of fact, I worked out a deal with an investor who wants to buy 100 houses with me and my business partner. And he runs a fund and he was like, \u201cHey, if you can get us a 10% return after your equity split and everything, we\u2019re happy, we\u2019re good to go.\u201d And we were like, \u201cGreat.\u201d
So I had to tell him, I was like, \u201cBy the way, from a scalability standpoint, this is really difficult and it\u2019s going to take about two years to do that.\u201d And he was like, \u201cYeah, that\u2019s fine.\u201d And we were like, \u201cOkay, cool.\u201d
So we worked out that deal with him, but that\u2019s even scary to me because my partner brought that to me and he was like, \u201cDude, this is it. This is the holy grail.\u201d And I was like, \u201cMan, that\u2019s 100 houses we have to buy. That is really hard.\u201d
So when I got this Instagram message from the guy who was selling this hotel, I was like, this sounds interesting. It was a little scary because it\u2019s a whole new asset class, motels and hotels. I know a lot of people have done them and they all say good things and they all do super well. We just had Heather Blankenship on the podcast and she just did the same thing. She buys these.
And I was like, okay, I know that a lot of people do these and everyone that I\u2019ve talked to is always really scrappy and very savvy with this and I consider myself relatively scrappy and savvy, scravvy if you will. And I was like, okay, let\u2019s pursue this. So I said, \u201cHey, sure. Let\u2019s talk about it.\u201d And he\u2019s like, \u201cHere\u2019s my realtor\/broker\u2019s info. Give him a call and let\u2019s see.\u201d And I was like, \u201cGreat.\u201d
So I shot this over to my partner, connected them and then we started just talking about all the different logistics and really figuring out if we wanted to do this because you have to also keep in mind as a real estate investor, I\u2019m kind of anti-hotel as an Airbnb guy. All of my videos are about hotels are evil and Airbnb is the way of the future. So there\u2019s a little bit of dissonance here with changing my investment strategy.
But ultimately we are going to renovate this hotel and we are going to still list it on Airbnb. It\u2019ll still be an Airbnb property, but we\u2019ll also be hosting direct bookings.<\/p>\n
All right, so I definitely want to ask you about some of the hurdles that you\u2019ve encountered, because anytime you move into a new asset class, it\u2019s guaranteed mistakes will get made, things will hit you, that you didn\u2019t see coming. You just have to accept that.
But before I do, I want to ask about how you\u2019re analyzing the property. So you have a large degree of comfort and confidence when it comes to analyzing a short term rental, but a hotel\u2019s a little bit different. Was the process similar? Did you have to learn a completely new system? How did you figure out the revenue this thing was going to make?<\/p>\n
A few different ways. This was a little bit tough, definitely. The concepts are similar, but it\u2019s a whole different animal because you\u2019re analyzing 20 units at one time and deciding is there a taste for this, or is there a desire for this in the market.
And so we started looking around at all the different motels and hotels in the area. They weren\u2019t really that great, but they seemed to be booking up very heavily. And the owner left us with his proforma and his books. The numbers looked pretty good and he said, \u201cHey, I\u2019ve only been running it for this amount of time, but based on what I know in the area, it should make X and this much and it should be this kind of return.\u201d And we were like, \u201cOkay, well thank you. We appreciate your opinion here. We do have to verify this. Everyone can say a high number.\u201d
So we started looking into the seasonality of hotels and we just had to get a little creative. So we started calling different motels and hotels in the area and asking like, \u201cHey, what\u2019s your busiest season? What are the dead seasons? Is it true, I hear that this is a really great touristy spot. Are you usually booked up?\u201d
And all of them were basically like, \u201cOh yeah, we are booked up for the next three, four months straight. Then it\u2019s one or two months of a dead zone, and then it gets crazy after that.\u201d Then we were like, \u201cOh, okay, good.\u201d And so we had to get really sneaky with that and asking the different locals about the seasonality and really trying to figure that stuff out.
So basically we had to analyze that, and then of course I had to also do the Airbnb analysis as well. So I have my own way of doing this, but basically I had to go and see what\u2019s my competition because whenever I\u2019m buying in any market, I\u2019m running several audits. I\u2019m doing an audit on Redfin and Zillow just to see in general what things cost.
And then I also have to run an audit on Airbnb to see who my competition is and how good is my competition? Is my competition design-forward? Are they small? Are they big cabins? What\u2019s the theme? Are they booking? And we found a couple of, not as great Airbnb listings that were booking like crazy. So I was just like, okay, all I have to do is figure out how to renovate and run a 20 unit motel, and when I do that, I should be successful.<\/p>\n
So when you were analyzing the revenue streams, are you looking at how it\u2019s going to book on Airbnb? Is that where most people are booking this hotel? Or is it also something where SEO becomes a factor as people are looking for a place to stay in this area?<\/p>\n
It\u2019s probably going to be a little bit more on the SEO side simply because right now it is completely direct bookings, they are not on Airbnb. And so actually, I like this because I know that based on the bookings \u2026 And we\u2019re getting bookings now and they\u2019re coming in. We were actually trying to stop the bookings, which we\u2019ll get into in a little while because we wanted to renovate the place, but it\u2019s booking right now.
And based on how much it\u2019s booking, based off of this little dinky website that we inherited, I mean, it works and it books and everything, but it\u2019s not the greatest and the SEO is okay, but there\u2019s a lot of work to be done there, but somehow people find it.
We\u2019re trying to figure out how the heck are people finding our motel. I have no idea. I\u2019m thankful that they are, but for sure there\u2019s an SEO component. I actually just think there\u2019s not a lot of options in the area. And so when you type in motel in Tupper Lake, there\u2019s just not a lot, ours pops up.
Oh, there was one other thing that we found when we were analyzing this market, there\u2019s this other hotelier, that\u2019s a fancy word for saying hotel investor, and they actually just bought a motel down the road at the same time or right before us and they were doing a full renovation of that property.
And so we looked into this person and basically everything they touch turns to gold kind of thing. And so we were like, oh, okay. So if this person bought a hotel and they want to renovate it, clearly they\u2019ve already done the market research for us. They\u2019ve figured out that this is a good spot to invest in.
So we used that and then we took projections and we also took past data and then we looked at Airbnb comps and we called around and we got a sense from the different locals and the different motels in the area to find out when our hot season is and everything like that. So it was a little bit of what they call internet sleuthing, but also general Airbnb research as well.
And based off of that, there were a few things that were also working in our favor. The owner was willing to finance. It needed a lot. This is the ultimate BRRRR, man. I mean, it needs a full gut remodel on the whole thing. So based on the fact that it was actually doing pretty well in the current state that it\u2019s in, which is not Robuilt standard, I\u2019ll put it that way. I was like, okay, well, if we make this nice, it should book a lot more and we can also raise rents.<\/p>\n
I guess the person brought you the deal, so they said, \u201cHey, do you want to look at it?\u201d So you probably weren\u2019t looking at that area already, but now that you\u2019re in that area, what do you like about that location that would cause you to buy more property there?<\/p>\n
I\u2019m not sure that I would necessarily go the single family route out there and I\u2019ll tell you why. That area is very rural. It\u2019s not secluded, but it\u2019s very rural and there\u2019s a vendor shortage there. It\u2019s tough to find people to hire. So for me, when I\u2019m buying an Airbnb, I\u2019m always looking for the Airbnb Avengers.
And so I\u2019m looking for my cleaner, for my handyman, for my pool service guy, for my landscaper, for my pest control person and I need backups for all of those. And we have found that it is tough to find vendors in that market, just like a lot of the other markets I\u2019m in, where we\u2019re out in the middle of nowhere, basically.
So from a single family resident standpoint, I wouldn\u2019t really do that, but because it\u2019s a hotel and there are economies of scale, we have it in our budget to actually just hire a full-time onsite manager, very similar to mobile home parks or RV parks, or even storage facility units, where there\u2019s someone that is dedicated and it\u2019s their job to run that place.
So that alleviates some of that dream team that I need to hire because we now have a full-time staff. We provide that full-time staff housing and then a relatively, I think fair price to live there. And actually, funny enough, we were striking out left and right. We were not able to find people to help us. And we\u2019re like, uh-oh, we just bought this hotel and no one can actually work on it.
And we had Heather Blankenship on the podcast and she talked about this group of people called work campers. And these are people that travel around and they\u2019re effectively nomads, digital nomads, or they\u2019re always just looking for places to park their trucks that have campers and basically camp at the place and make money and that kind of stuff. So I was like, okay, let me try that.
And we posted an ad on one of the Facebook groups and someone was like, \u201cOh my God, this sounds exactly like what I would love to do. I used to work in hospitality and I used to work in hotels for the Marriott and stuff. So I know exactly what you need for this job.\u201d Me and my partner were like, \u201cYeah, it\u2019s a little too good to be true. There\u2019s no way.\u201d
And we interviewed her and afterwards we got off the phone and I was like, \u201cThat\u2019s too good to be true, right?\u201d And he was like, \u201cYeah, I don\u2019t believe it.\u201d And I was like, \u201cI don\u2019t think so either. There\u2019s no way that she\u2019s perfect, our first candidate.\u201d And we called all the references and all the references gave glowing reviews and we were like, \u201cMan.\u201d Sometimes I do get lucky on the first try, but it happens less and less at scale.<\/p>\n
This is a legit problem and I\u2019ve run into this myself, not as often, because typically my investing strategy is usually to find the best market, the hottest market, where I see a lot of growth headed and try to get there early. But a handful of times I have bought in rural areas or maybe vacation destinations where the only people that are going there are going to vacation. There\u2019s not a lot of people who live there as their primary residence, and so you don\u2019t have a workforce.
And when there\u2019s a problem, like you said, pest control or \u2026 I remember running into this on one of my properties actually in the Smoky Mountains that has a pool. And in the middle of escrow, the seller could not get the pool fixed before we closed, but I had to close because of a 10-31.
So I was in a situation where if I close, I\u2019m inheriting a problem, if I don\u2019t close, I\u2019m inheriting a bigger problem, because I\u2019m going to lose over seven figures in taxes here. And we close and there\u2019s not a person that does pool repair for months. It\u2019s really bad. I\u2019m like, I\u2019m going to have to find a person and fly them out to Tennessee to look at this. It\u2019s that bad because there\u2019s not a big workforce.
So it is absolutely something to take in mind when you see an area and it looks amazing, sometimes there\u2019s reasons why that opportunity\u2019s there. So if you\u2019re listening to this and you are someone who\u2019s willing to travel and do that kind of work, please message me, because I\u2019d like to put together a system of traveling work campers, like you said, that could go to some of these remote areas and charge a premium to do stuff like fix roofs or fix pools, whatever the problem would be.
But until something like that is going on, make sure you put that in your underwriting because I\u2019m sure \u2026 I mean, how much did your butt pucker when you realized, oh there\u2019s not people around here that can do this work and I just bought a 20 unit hotel?<\/p>\n
I think the proverbial butt was puckered the entire process because we knew nothing going into this really about motels. We were just really leaning on the fact that we are a couple of smart guys that fail and learn from our mistakes and get smarter. That\u2019s how I think of it. So we sort of expected it.
Every time we buy, it\u2019s exactly what you just said, there\u2019s this opportunity and you\u2019re like, this is crazy, this is too good to be true. And then you find out that it\u2019s smack-dab in the middle of South Dakota or something and then there\u2019s not a civilization around for 50 miles, and you\u2019re like, uh-oh, what have I done?
That was us this whole time because we were like, okay, New York is obviously a very populated state, but out here it really is, not a ghost town or anything like that, but it\u2019s tough to find the work. So I think we were expecting it. We always find these houses.
There\u2019s a lot of accounts that I follow like, Cheap Old Houses or Mid-Century Modern Hunt kind of thing and they have all these amazing, beautiful, character-driven homes or these amazing mid-century modern beauties, and then they\u2019re like $200,000. I\u2019m always like, oh, this would be the greatest Airbnb. And then it\u2019s in a place where the population is negative three. So that\u2019s always the tough part.
So we bought this knowing that the vendor shortage was real, but actually just like you said, we actually have a contractor who reached out to my buddy and I think he was a fan of the channel and he\u2019s like, \u201cHey, I\u2019d like to be involved in your projects.\u201d
He was working for a construction company and he was just on salary and I think he wasn\u2019t getting promoted in the way that he was hoping to. I can\u2019t really recall off the top of my head, but basically he\u2019s like, \u201cI\u2019ll come work for you guys. If you guys pay me to come and do the work, I want to prove myself, and then I\u2019d like to start getting some equity on some of these projects.\u201d And then we were like, \u201cAre you willing to move to New York?\u201d And he was like, \u201cAbsolutely.\u201d And we were like, \u201cGreat. You\u2019re in.\u201d And he\u2019s been really great.
So we actually flew our contractor out to New York and he\u2019s living there right now. He\u2019s cleaning everything. He\u2019s maintaining everything. He\u2019s meeting with contractors. He\u2019s budgeting. He\u2019s getting the timeline set for the next six months. And honestly, without him, it\u2019d be pretty tough. And that\u2019s why we were relatively confident going into this deal because we knew we had a contractor that could run the show for us while we were gone.<\/p>\n
Yeah, that\u2019s huge. That\u2019s why I was saying if I had a system of a traveling contractor that you could put a business together that they\u2019re willing to do that and they could stay in the property and then they could work on it, man, that\u2019d just be huge for the BP community, if there was people that we knew could do that, especially if you\u2019re someone who lives in an area where wages aren\u2019t as high.
If you live in Malibu, this probably doesn\u2019t make sense to you, but if you\u2019re in Louisiana, Mississippi, you don\u2019t make as much money, but you can work on projects in Southern California, in New York and some of these more expensive areas. That could be a really good way to make some \u2026 It\u2019s a business idea I\u2019ve been tossing around for a while in my mind and you definitely are highlighting the need for it.
So let\u2019s talk about renovations because that\u2019s a huge, huge part of opportunity in today\u2019s market, especially is the market\u2019s been so hot, even fixer ups, you couldn\u2019t find them. And then when you did find one, good luck finding a contractor, because they\u2019re so busy working on the people that are putting their houses on the market and the people that just bought one that needs work, as well as all the investors that are flipping houses and doing BRRRRs. They\u2019ve been in short supply, but as the market cools off, you actually have an opportunity to get a contractor.
So what\u2019s your renovation model look like here? What\u2019s your budget on this? What\u2019s the strategy going forward? How much effort are you putting into the renovation to add value?<\/p>\n
So this is a tough one because you can\u2019t really extrapolate your single family home knowledge to a 20 unit motel. Everything gets a lot more expensive on bigger properties, but luckily our contractor, he\u2019s worked on these types of projects. He\u2019s worked on every type of commercial development, and so it has been extremely helpful for us in budgeting all of this.
But effectively right now we\u2019re looking at an entire gut renovation, there\u2019s not much that we\u2019re saving from this property, like the seven unit motel. It was painted this very bright aqua blue, which I don\u2019t know why this color follows me around, but that was also the main central color in our Scottsdale house that I was like, no, we have to remove this color. Why does this color exist?
So the hotel is this very bright, vibrant blue, and then everything on the inside, it\u2019s in disrepair, not every single unit, but a few of them. My business partner went to go for inspection and final walkthrough and he called me at midnight after he was done and he was like, \u201cBro, there is a hole in the ground.\u201d And I was like, \u201cWhat do you mean?\u201d He\u2019s like, \u201cIn the middle of this motel, there\u2019s literally a hole in the ground.\u201d And he shows me and I\u2019m like, \u201cHow is it booking? How does anyone stay? This can\u2019t be safe.\u201d
So we have effectively gone into this knowing that there will be nothing really salvaged except for maybe a couple of wood walls that are currently in there. But yeah, this renovation is going to cost us in the neighborhood of about $800,000.<\/p>\n
Okay, $800,000. And then what did you purchase it for?<\/p>\n
We bought it for $825,000. So we\u2019re spending just under the purchase price to get it flipped.<\/p>\n
There should be a title for that when your rehab is higher than your purchase price. That\u2019s definitely a specific type of deal.<\/p>\n
Yeah.<\/p>\n
Is this a BRRRR situation? As far as hotels are valued, can you refinance it once the upgrades are done or do you have to wait until revenue is a certain point for a year or two before you can refinance to get that capital out?<\/p>\n
Yeah, because it\u2019s seller financed, we actually worked it out to where we are going to be financing it on an amortized schedule over 20 years, but it\u2019s going to balloon in three years. So we\u2019re hoping that by the time it\u2019s stabilized and rents are up and there\u2019s a history of rents, exactly what you just said, we can go to a commercial lender.
Hopefully interest rates won\u2019t be like 27% APR and basically refi, cash out, pay our investor back. This was a really opportune timing because we actually had an investor who had about, I think $800,000 set aside, I want to say and we had been trying to find a project for him. He wanted to build a treehouse village with us and we were like, okay, let\u2019s do that, but it was hard to find land.
All the places that I wanted to build treehouses in, I have talked about them a lot on the channel in different places and I\u2019m not going to say I ruined the market for myself because that\u2019s not possible, but more attention has been brought to a lot of the different places. And so I was just like, okay, we were striking out trying to find-<\/p>\n
I believe it.<\/p>\n
It\u2019s happened-<\/p>\n
That happened to me when I talked about Jacksonville five years ago, it was within a month, all of a sudden stuff was disappearing off the MLS very quickly.<\/p>\n
Yeah, I\u2019m not going to say I\u2019m that cool, but-<\/p>\n
BiggerPockets is a powerful entity.<\/p>\n
But there have been markets that I\u2019m like, well, honestly, I haven\u2019t even opened up Redfin in Gatlinburg in about six months, not because I\u2019ve ruined it for myself, but because everyone has ruined it for ourselves. And so now it\u2019s like impossible. I mean, you bought a bunch of stuff there. I\u2019m honestly very impressed because it\u2019s a tough market out there, although I do see some price cuts coming in every so often. But we were trying to find this land-<\/p>\n
As a side note, don\u2019t lose your thought, it\u2019s important to note that real estate investors, now that we have podcasts like this information that\u2019s readily available, everyone\u2019s talking on YouTube, the word spreads really fast.
I mean, imagine 60 years ago, first off long distance investing was not even a thing that you could do safely or that you would do. And second off, you would\u2019ve never known about the markets you should be investing in. Everything had to be local. And now I\u2019ve noticed this trend since I\u2019ve been in this educational space, that real estate investors are like locusts that just move from area to area.
So when we had the crash, you noticed everyone moved into the Phoenix, Arizona and Las Vegas markets and started scooping up properties because they got hit really hard. And then that sort of dried up and they moved into Memphis, Memphis was the big thing. And then after Memphis, it was Atlanta. Everybody was in Atlanta. And then I got into North Florida, and so a lot of people moved into that space and there was a lot of cash flow opportunities.
And then they moved on from Atlanta and it became Huntsville, Alabama was really, really big, and then Austin, Seattle. So those tech hubs started to catch on and then it moved into the Idaho area and Nevada. And now we\u2019re seeing the Smoky Mountains was super popular for the last several years. But there\u2019s absolutely patterns where everyone hears that everyone else is buying and then they all go.
And the reason I want to highlight this is it\u2019s very easy to be the last person to the party and you don\u2019t know that you\u2019re the last person to the party. You could be getting into a market that\u2019s already sort of peaked thinking, oh, this is what everyone\u2019s doing and you\u2019re all happy. And right when you start the game of musical chairs, they turn off the music and you get left stuck.<\/p>\n
That\u2019s true and it compounds. So it\u2019s a compounding effect where everyone talks about it. More people talk about it. Oh, I heard this and I heard it\u2019s a really good market. So all to say, this is actually a really great side note because I really like the term, real estate investors are locusts. We totally are. It\u2019s not like I just find a market and I\u2019m like, I have done it, I\u2019m a genius. I\u2019ve heard it from someone else. I\u2019m one of those locusts.<\/p>\n
It\u2019s human nature, we all want to cross the river at the same time as other gazelles. We don\u2019t want to be the one out there crossing the river.<\/p>\n
We want to emulate success. And that\u2019s what I always say, emulate the greats, go find someone that you really like and go emulate their strategy because there\u2019s a reason they\u2019re successful. And I think that happens a lot on BiggerPockets, where we have a lot of these titans come on and it\u2019s like, whoa, I want to just do what they did. That\u2019s sounds good to me. I don\u2019t have to do anything else. And so a lot of my portfolio and a lot of what I\u2019ve done is just come from listening to the success stories of a lot of other people.
But yeah, I mean that basically all to say, I was trying to find land to build this treehouse village for our investor and he had the money lined up and we just couldn\u2019t find land that fit from a zoning standpoint because we have to go legit, we have to get conditional use permits and engineering and all that stuff. And so it\u2019s hard to find something for an investor at scale like that. So it was taking a little bit of time.
Then all of a sudden this deal popped up and I was like, well, it\u2019s kind of in the same budget that the investor had. It\u2019s not quite as wacky or cool as a treehouse village, but it is a tangible thing. Because I think when you\u2019re working with investors, honestly, what it comes down to is how quickly can you deploy their money? I\u2019ve had a lot of investors that they want a very specific kind of thing that they want us to execute and I\u2019ll say, \u201cWell, look, we can do that, but it can take five to 12 months to find that exact thing. And so are you okay with an alternative? What if I find this type of project, would you be okay with that?\u201d
Most of the time they say sure, because no one likes to have a million bucks in their bank account for a year, you want to deploy money. If you\u2019re a good investor, you\u2019re trying to make yourself broke as often as possible by sending all that money out of your bank account into some new asset.
And so this investor had his money sitting and we were like, great. So we went in and we bought it and a few trials and tribulations along the way, if you will, if want to talk about that for a second, some of the hard lessons that we\u2019ve learned.<\/p>\n
Well, you said it was 20 units, how are those 20 units actually broken up? I\u2019m picturing a building that has a condo building type hotel, like the Hilton that you would go to and it\u2019s just 20 different rooms. Or is this more of several different types of properties all on one location?<\/p>\n
Yeah, so it\u2019s the latter. It\u2019s a seven unit motel and those are all in the middle of the property. And it just looks like a very long mid-century modern cabin, a log cabin that\u2019s painted that bright blue I was telling you about. And then all along the edge of the property, there are 12 tiny cabins that are, I mean, I can\u2019t say off the top of my head, but I want to say like 200, 300 square feet. And then there are two, two bedroom cabins on the back of the property. I think it\u2019s on four acres. And then there\u2019s four RV spots. And so those four RV spots we\u2019re going to eventually build out decks and put Airstreams on there.
And the reason I like this strategy, by the way, is because obviously I like glamping and I\u2019m working on permitting a 60 unit glamp site in Arizona and I\u2019m a big fan, but it takes a long time to permit this. We\u2019ve been working on the permit for the Arizona glamp site now for about six months to about a year, depending on a few different variables there.
But basically, this place already has all the entitlements. So we don\u2019t have to go and run permits for all these tiny homes or anything. It already came fully permitted. So the four RV spots are already permitted. We can just add our Airstreams on there. It\u2019s not going to be a big deal. Or we\u2019ll just open it up to the public to bring their RV and just make our lives a little bit easier probably.
But one of the really hard lessons that we learned was that the transition of ownership was a little bit tricky. We hadn\u2019t really hashed out a battle plan with the seller because we were so focused on closing the deal. There was always stuff happening. As you know, deals start to fall through and then everyone\u2019s got to be like, hey, we\u2019re all on the same team. You really want to sell it. We really want to buy it. Let\u2019s renegotiate. How are we going to make this work?
And so we had like five of those moments I felt like through that whole process. We were like, oh shoot, this is going to kill the deal. And then we would renegotiate and then the seller would actually give a little. And so we did that a lot and we never really formally said, hey, what\u2019s the current schedule for guests? And when are they checking in? When are they checking out? Who are they? What\u2019s their information? How do we get this information? What kind of CRMs are you using?
We closed and effectively the owner was like, \u201cAll right, well here\u2019s all the logins, have fun.\u201d And we were like, \u201cOh shoot, we didn\u2019t even talk about this.\u201d And now in retrospect, obviously this will never happen again because now anytime we negotiate this, we will negotiate that the owner of the hotel or motel that we buy stays on board for a month or two to help train the new staff and pass over everything.
This is not something I blame the seller for really, I think I blame equal parts here on both sides because I was kind of hoping that he would just want to help. This was his baby and I was like, \u201cHey, would you stay for a week or two and help us transition.\u201d And he\u2019s like, \u201cOh man, I really got to get back home to family.\u201d And we\u2019re like, \u201cAre you sure? Because we could really use the help.\u201d And he was like, \u201cNo. No, I\u2019m sorry.\u201d And we were like, \u201cOkay.\u201d
And so basically we did the worst thing you could do. And I hate saying this, but I am a honest and transparent person, but this was 4th of July weekend and days before we had to cancel on a few guests and they were not happy about it and I was not happy about it. And we did our best to reason with them and say, \u201cHey, I am so sorry. We just bought this. We didn\u2019t even know this booking existed until we closed.\u201d And it was that kind of thing.
And some of them took it okay. One lady was like, \u201cOh well, I\u2019m going. I\u2019m going anyways. Try to stop me.\u201d And we were like, \u201cLiterally, no one is there.\u201d And so basically we actually ended up working it out with her because the owner was like, \u201cWell, hey, I keep an extra set of keys here. If you want to let her in, she can just stay.\u201d And we were like, \u201cAll right.\u201d I mean, even if she destroys the place because she\u2019s not vetted or did not give us her information, we\u2019re remodeling it anyways.
And so that was one kind of oopsie on our spot, it was just not having a battle plan for transition of ownership. This is something that\u2019s not super clear or tangible, and so for anybody that\u2019s working to do this, you definitely want to have a lot of conversations outside the negotiation with a seller on how to freaking run the property, because if you try to figure it out yourself, I\u2019ve learned the hard way it\u2019s going to be very difficult.<\/p>\n
Well, I\u2019m really glad you\u2019re bringing this up because, and really this is a trend in general with the hospitality industry becoming bigger in our space, hotels are a mix, just like an Airbnb is, of real estate and business. It\u2019s not like you\u2019re just buying a single family home and renting it out to someone with a year long lease. That\u2019s still a form of a business, but it\u2019s much more passive. When you\u2019re buying a hotel, the revenue is higher because there\u2019s more work that\u2019s going to go into it.
So if you were buying a pure business, like you were buying a software company or you were buying a pool maintenance company, like I mentioned earlier, it would be customary to negotiate into the terms of that deal that management is staying on for this period of time to help with transition. You see this all the time.
Patrick Bet-David just sold his insurance company and part of that was he had to stay for a year to get the new people trained up that bought it because they don\u2019t want it to immediately run into the ground. Imagine that you\u2019re flying a plane and someone says, okay, I\u2019m coming in to take over flying the plane, but they don\u2019t know anything about how to fly that plane. You want the pilot sitting in the co-pilot seat for a while till they get it down.
And this is the first, from my understanding, legit business that you had bought, so I can understand it wouldn\u2019t have occurred to you to even think about. Well, you think you\u2019re buying real estate and you\u2019re like, well, I\u2019ll just have my team go out there and get it ready. This is all happening in your subconscious. And then you close and yay, and then, oh no, what do we do now? There\u2019s no one there. I didn\u2019t think about that. There\u2019s no employee that\u2019s on the property. How are we going to do any of this? Well, I need time to get it ready, then these bookings. So that\u2019s probably a terrible feeling, just the pit of your stomach sink like, oh no.<\/p>\n
It was because basically my business partner\/COO who runs operations, he was running this and he was really spread thin also trying to learn how to buy a hotel. So it\u2019s not his fault. Okay you know the phrase, you don\u2019t know what you don\u2019t know? It\u2019s very true. You don\u2019t know what you don\u2019t know. We did not know. And I empowered my COO to do this and he did really crush it. He crushed the negotiations, most of the actual coordination of all this stuff, but this didn\u2019t really translate for both of us. We were like, uh-oh, we dropped the ball here.
And for me with the way I\u2019ve empowered my team, it\u2019s like, you own this, you\u2019re running it. But when something like that happens, it is ultimately a reflection of me and my management for not having been more involved and asking those types of questions. And so that\u2019s just a management failure that I\u2019m like, okay, cool, I get it now. I failed there. I\u2019ll make it up on the next one and we\u2019re going to crush this. So it\u2019s not anything that\u2019s detrimental to the bottom line, but it is detrimental to the bottom line of my heart. You know what I mean? No, I\u2019m just kidding.<\/p>\n
Well, that\u2019s how you know you\u2019re the right person to be doing the deal because the reason it hurts your heart is you have a standard and you miss your own standard and high standards are the hallmark of success. That\u2019s why you want to do business with people that have high standards. That\u2019s what makes people good at anything. Tom Brady is a better quarterback than other quarterbacks, because he has a higher standard for what he expects.
So if you hold high standards and you push yourself, it is inevitable that you will feel the way that you\u2019re feeling right now, Rob. So I\u2019m not judging you for that. I totally understand. I think that it takes some courage to come up and share these are all the mistakes I made with our audience. So I just want to thank you for that.
And anybody who\u2019s listening to this is like, oh see, that\u2019s why I would never do whatever I\u2019m going to do, that\u2019s okay to make mistakes. You have to make these mistakes. It\u2019s going to make you a better overall investor and business person in the long run.<\/p>\n
Well, that\u2019s why I always say you don\u2019t become a real estate pro by everything going right, you become a real estate pro by everything going wrong. So I recognize that. And I\u2019m far enough along this where I\u2019m like, okay, it\u2019s not a big deal because I\u2019m going to be better for it.
I will say though, the reason it affected me as much as it did was because my philosophy, what I teach to my Host Camp students and everybody out there is never cancel. No matter what it takes, you never cancel on a guest because these guests made reservations. They plan their life around this, and then if you cancel on them, everything\u2019s booked and then you really end up putting them in a bad spot. And so this directly just breaks my number one non-negotiable, but we did everything we could.
We started looking at flights. The flights weren\u2019t going to get in time. It\u2019s out in the middle of nowhere, so it\u2019s not like you could just fly to Tupper Lake. And so it was all this stuff where we were like, okay, all right, it will cost us four grand to get out there. We can rent a rental car. We\u2019ll go to this airport. We\u2019ll go here. And then we\u2019ll get in at four o\u2019clock. We\u2019ll check them in, if they check in \u2026
And so you know that Zach Galifianakis math meme? That was us. And ultimately, it was going to cost us money to go out there and it wasn\u2019t even going to work. We put out ads on Craigslist, we need a one day worker to help us with this stuff and it didn\u2019t work out. So that\u2019s okay, lesson learned.
Another thing for us was that, I mentioned this earlier, we \u2026 Oh, and also want to say to the credit of the hotel owner, we did kind of hash things out a little bit on Instagram and he was like, \u201cLook, here\u2019s how I felt. I didn\u2019t realize that this is what you needed, but I\u2019m happy to actually go back out there and teach you the systems and teach whoever you hire, how to run this hotel.\u201d And I was like, \u201cGreat. Okay, awesome. Sorry for making you mad.\u201d All that kind of stuff. So we squashed that bug too, because I was a little miffed by the whole scenario or the whole situation myself.
So anyways, that\u2019s that big one for us. The next one is we didn\u2019t have the Airbnb Avengers. We were kind of hoping that the owner had a Rolodex of all the different vendors and he did not because A, it\u2019s really hard to find the vendors out there. So what did he do? He did it all himself for six months. He was the cleaner, the pool guy, the pest guy, the plumber, the electrician and everything.
And so I think he burned himself out so much. I think he had intended to buy it, I don\u2019t know for sure, and then say, okay, I\u2019m going to clean it up, remodel it, I\u2019m going to hire my teams, and then I\u2019m out. He couldn\u2019t do any of that. He couldn\u2019t hire anybody. And so he said, \u201cAll right, I\u2019ll just do it until I find someone.\u201d He never found someone. And after six months, I think he was just like, I\u2019m out. This is terrible.
And again, this is just speculation on my part, because this is how we\u2019re feeling now where it\u2019s like, oh, there are no vendors. He was the vendor. So that was our tough thing is now we\u2019re having to hire a full-time property manager. All good there. Our contractor\u2019s out there, all good there.
And the contractor, it\u2019s his job to go out to supermarkets, hotels, motels, mom and pop shops and just start asking people, asking the cashier, asking the owners of those businesses, hey, do you know anybody that\u2019s looking for work? Hey, do you happen to know any handymen in the area? Do you know any cleaners in the area. By any chance, do you know a pool guy?
A lot of these relationships and these vendors have to come creatively. And that\u2019s what a lot of people don\u2019t understand about Airbnb. They think you can just go to TaskRabbit and hire everybody, which I do. I hire a lot of TaskRabbit people, but sometimes you need a human touch that an app isn\u2019t going to help you with, and so you have to take it to the streets, as they say, to go find the people that are going to be running your operation.<\/p>\n
Or the woods in this scenario for this project.<\/p>\n
Right, or the mountains really. It\u2019s actually on a lake, so the woods, the lake, the streets, all of it. So no vendors, but we\u2019re working on it.<\/p>\n
So we\u2019ve got a couple hurdles you\u2019ve already had to overcome in this deal. There\u2019s the lack of vendors, like pest control people, handyman. Hey, there\u2019s a big rat running around, what are we going to do? You have to figure out that problem.
You\u2019ve got the renovation that you\u2019re walking into that\u2019s very significant. And the lack of local people, contractors, that can do some of that work. It sounds like you narrowly avoided a big problem there, but that\u2019s still something that\u2019s going to be popping up in the future.
You\u2019ve got the management issue like, okay, I bought this place and now how am I going to run it? And you\u2019ve had to overcome that. Any additional ones before we move on, that you can share of things that went wrong, that you just weren\u2019t expecting?<\/p>\n
Yeah, just one big thing and that\u2019s there\u2019s no roof. No, I\u2019m just kidding. There are no automations in place at this motel, which is really big for an Airbnb business. The reason I have no issue running 15 Airbnbs is because I\u2019ve got automations. I\u2019ve got automated messaging, automated check in, automated reviews, automated pricing. All that stuff is all automated, and so it helps chop out 80, 90% of the work involved with running those Airbnbs.
And there\u2019s none of that for this hotel, and rightfully so, because typical hotels, you got someone behind the counter. They go and they check you in and boom, you\u2019re good to go. But we are wanting to make this a very hybrid boutique hotel, Airbnb experience type of thing.
So, as I said, we hired a property manager and this actually goes back to the whole, oh, it\u2019s a job. And the thing with that campsite was there wasn\u2019t anyone living on site and I don\u2019t even think that was really an option because it was so far out in the middle of nowhere, even more than this hotel. Whereas this, our automation is hiring a full-time staff member to run that motel for us.
So it won\u2019t really be like running 20 units, it\u2019ll be like running a business that we\u2019ve empowered someone to actually do most of the work for us. And we\u2019ll be supporting with the bookkeeping. It\u2019s our job, we told the property manager, we are going to do everything we can to automate as much as possible about this motel. We are going to try to automate check in. We\u2019re going to try to automate cleaning schedules. We\u2019re going to try to automate supply deliveries and inventory checks and all that stuff.
So you have to tell us, hey, this one thing, I keep doing it, it sucks up 40% of my time. Is there anything we can do about it? And then we will figure out what we can do to automate that. And so we told her we\u2019re here. We don\u2019t want it to feel like you\u2019re managing 20 units. We want it to feel like you\u2019re managing a couple at a time, because at the end of the day, my contractor, he\u2019s out there right now and he had to clean 10 apartments or 10 units two days ago by himself. And I was like, dude, you are the man.
So I think with a little bit of automation with the check-ins and checkouts and with the cleaning scheduling and all that stuff, I think we\u2019ll be in an okay spot.<\/p>\n
I appreciate you sharing that. That\u2019s some really good stuff there. One of the cool things when you get into bigger real estate is that excess revenue that it generates can be used to hire the people to run it. You hit the sweet spot, where if it generates enough revenue, you can hire someone to do the work and make it more passive.
When you\u2019re playing in the smaller spaces, it doesn\u2019t make enough revenue for you to pay somebody to manage it, so you end up managing it yourself. So kudos to you for moving on that. Before we get you out of here, let\u2019s talk about the numbers on this deal. So you said you bought it for, was it 825?<\/p>\n
We did. We bought it for 825 and it actually started, it was either 950 or 925. I\u2019ll go 925 for now. And so those numbers didn\u2019t really work for us when we first started. So we really went back and forth quite a bit. And so 825 at the end of the day. And I think I said this already, but it was amortized over \u2026
Oh, the seller was willing to finance it, which is why we were down to do this because I think if we had to go and get commercial lending, it would\u2019ve mucked up everything with the investor and trying to get everyone on the co-signing and everything. So seller financed and then 30% down, which was relatively hefty for us, but it was worth it. And here\u2019s the cool part, oh man, I love this part, the interest rate is 2.75%.<\/p>\n
Yeah. That\u2019s nice right now. That\u2019ll make a deal work.<\/p>\n
It\u2019s not like we got in right before the rise of interest rates, this was as it was all happening. So they originally, I think wanted 7 or 8%, which is, it\u2019s not totally unfair. I actually think that\u2019s-<\/p>\n
That\u2019s where market rate is right now.<\/p>\n
And I think that\u2019s actually pretty common for owner-financed things because it\u2019s usually with the owner finance, you have to concede a little bit. You have to give them the price they want and the down payment they want and the interest they want, because they\u2019re like, hey, I\u2019m financing it, so you got to be on my terms.
So I think what it came down to the phrase that comes to mind here, it\u2019s like, you can either have your price and my terms, but you can\u2019t have your terms and your price. And so we went back and forth on this and effectively we bought this at an 11 cap, which is pretty good. We were really happy with that.
And after our budget of $800,000 to renovate this place, we\u2019ll be all in from a cash standpoint, 1.1 million, but if you\u2019re talking about the actual total price here, we\u2019ll be all in at, I don\u2019t know, like 1.7 for this whole property. And we\u2019re hoping that rents will be in the neighborhood of about a million dollars gross with a net operating income of $750,000.<\/p>\n
Oh, that\u2019s solid.<\/p>\n
Yeah, it\u2019s really good. That\u2019s best case scenario, pie in the sky. If I come out there and I do my thing and I hit my marks the way I usually do, that\u2019s the best case scenario. And so obviously if we sold that at a 10 cap, it\u2019s a pretty good deal.<\/p>\n
Appreciate you sharing the details. Is the plan to sell it? Is that what you think you\u2019re going to do once you improve performance?<\/p>\n
It is hard to say. I mean, right now we have that balloon at three years. So it would make sense to either refinance it or resell it. I don\u2019t know. I don\u2019t know. If I sold it, let\u2019s say we sell it for seven mill or something like that at just a 10 cap, then I got to figure out what to do with that seven mill, go into the next thing.
So I think I would like to maybe just ride out the cash flows on this. I think the $750,000 net operating income between me, my partner and the investor will actually be pretty good. It\u2019s a nice little cash flow thing. So we\u2019ll see. I mean, everyone always says, oh, I\u2019m going to hold it and then they get a really juicy offer and it\u2019s like, all right, I guess I\u2019ll sell.
But for now, theoretically, I think I would like to add to the cash flow of my business because I have never paid myself from cash flow. I always reinvest it. So I\u2019d like to think one of these days I\u2019ll actually pay myself for all this stuff.<\/p>\n
Well, the cool thing with a property valued as a commercial deal, like this one will be is that you win in two ways with cash flow. A, you just get more money, which is always good and you increase your return, but B the property will be valued based on the improved performance of the cash flow. So if you decide you want to sell it, it\u2019s not like you gave anything up. You actually made it worth more by focusing on improving the cash flow. So it\u2019s kind of a win-win no matter how you look at it.<\/p>\n
Yeah, and then just the apocalyptic kind of nuclear scenario. And this would really just be, I mean, if we just really didn\u2019t change much, it\u2019s I think about a half a million dollar gross with the NOI of 250. And so we\u2019re going to really design this. I mean, this is going to be a very boutique, aesthetically-driven, beautiful property.
We\u2019ve met with our interior design designers on it. They\u2019ve presented the mood boards. It\u2019s going to be a whole different property by the end. So I\u2019m pretty confident that we\u2019ll hit our marks on the investment side. But honestly, any scenario from the 500 to the million dollar mark for us on the gross revenue, it\u2019s a pretty good scenario for us.<\/p>\n
All right. Well, thank you for sharing that. Thank you for sharing some of the obstacles. Thank you for going into such amazing, beautiful depth on this deal. I learned a ton listening and I\u2019m sure everyone else can say the same.
If you guys enjoyed this episode, or if you want to know more about this deal, first off, go to BiggerPockets\u2019 YouTube channel and leave us a comment. Let us know what you\u2019re thinking as you hear this. Rob, if people want to get more intricate detail about this, where can they find out more about you?<\/p>\n
So I did a YouTube video on this, on the Robuilt channel, it\u2019s called, I Just Doubled My Airbnb Portfolio Overnight, which is another cool thing that I didn\u2019t really talk about, but 15 units, bought a 20 unit motel, I got 35 just like that. Over the course of one month, I doubled my short term rental portfolio.
And that\u2019s a really cool thing to be proud of. I think I\u2019m like, okay, that\u2019s cool, I did it. Because I worked so hard for five years, and then in one month it all changes. So you can go to YouTube and you can watch that video, give it a like, shoot me a comment. And then you can find me on Instagram @robuilt. What about you<\/p>\n
Follow me @davidgreene24. I have a very boring name, but that makes me easy to find. And let me know what you\u2019re thinking. You can also message me through that BiggerPockets system. I do my best to try to keep up with that.
Rob, this has been fantastic. Really appreciate you sharing all this stuff. I\u2019m going to let you get out of here. This is David Greene for Rob hotel, motel, Holiday Inn Abasolo, signing off.<\/p>\n