Latest / Thanks For Visiting / 273. From Lawyer to Hotelier: Build Your Portfolio with Diya Liu’s Real Estate Investing Strategies

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273. From Lawyer to Hotelier: Build Your Portfolio with Diya Liu’s Real Estate Investing Strategies · Thanks For Visiting

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SEGMENT GAP
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Hello, listeners.
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Welcome back for another great week.
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My name is Sarah Karakaian.
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I'm Annette Grant.
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And together we are--
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Thanks forVisiting.
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We want to kick off this episode like we do every week, that is sharing one
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of you, our amazing listeners, who is using our hashtag # STRShareSunday.
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So if you want to see other hosts who listen to this podcast,
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that is a great way to find out.
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Search the hashtag.
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But then use it yourself because we are prowling Instagram.
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We're going to share you here in the podcast and, of course, share you to our
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email list, on YouTube, everywhere we can.
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Annette, who are we sharing this week?
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This week we are sharing @thebrooklyninn.
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Again, that's @thebrooklyninn.
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And I'm going to have to say, these hosts, Melinda and Matilda, I think
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I've done a STR share on them before, way back in the day because they have
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another account, @mountainlakebungalows.
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Those are their short-term rentals in the Catskills.
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But they are back again.
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They have the new property, @thebrooklyninn, and they
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are doing mid-term rentals.
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And love this because I know that New York City has different rules
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and regulations around short-term.
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And they're like, hey, no worries here.
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We're going to do mid-term.
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And The Brooklyn Inn is gorgeous.
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They're doing mid-term rentals there.
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And one thing I want to just give a shout out to them because
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they do PR for Visit Sweden.
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Yes.
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Huge account.
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Because they're both from Sweden.
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So I love that they are doing PR for Visit Sweden, but then they have
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their own properties here in the US.
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So I'm sure they are bringing that same hospitality and that view
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of a guest to their properties.
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So check them out.
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If you're in a spot where maybe your town is considering different rules
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and regulations around short-term rentals, don't count yourself out.
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Go to The Brooklyn Inn, see how they're doing it.
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Right now, I see there was a new opening.
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One of their mid-term rentals is up.
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So they were on Instagram letting people know, hey, you can book again
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starting 30 days stay at this date.
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So I would start to look for inspiration, um, if you need
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to for some mid-term rentals.
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I know also maybe you have a slower season or maybe you have a busier time
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in your life and a mid-term rental would be-- maybe you need to press pause on
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the fast action, short-term rentals.
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So check them out, see how they are welcoming guests in their mid-term
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rental, and look to them for inspiration.
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But thank you for using the hashtag, Melinda and Matilda.
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Give them some love on @thebrooklyninn.
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All right, Sarah, let's get some goods about the show today.
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All right.
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We're going to go slightly rogue.
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And instead of talking about short-term rentals by way of residential properties
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being rented out on a short-term basis, we're going to talk about hotels.
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Because I'm not going to lie to you, Annette, I've thought about it.
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Maybe not a 50-door hotel or anything giant, but something
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boutique and cute that is an actual hotel and not a multi-family that's
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converted into a short-term rental.
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And so we have the queen of hotels.
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Diya is going to be on the show today.
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And one of the favorite things I think she gave a hot tip on is why right now is
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the best time to consider buying a hotel.
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All right, let's dig in.
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All right, Diya.
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You've got four boutique hotels, a dozen plus short-term rentals, plus you're
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the CEO of the Welcome Capital Fund.
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You have a lot going on.
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Obviously, you got started somewhere.
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So take us back before all of this, whatever your previous career was.
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What was that, and then how did all of this come about?
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So I am formerly a patent litigation attorney, and I worked as an
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attorney for about five years.
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Prior to that, I double majored in chemical engineering and biochemistry.
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I went to law school in New York City, and I've dabbled in fashion styling as well.
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So I've done a lot of different things.
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But I stumbled into real estate investing mostly by the way of
4:04
financial independence, doing some research, and realizing that I don't
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want to work 9-9 for the rest of my life, or at least my working career.
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A lot of my colleagues are very well paid, but they are basically constantly
4:20
working at their desks, and they could be well past midnight sometimes.
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And so I just recognized really early on in my attorney career that
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this is not something that I want to do for an indefinite future.
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And I needed to figure out something else before I burn out.
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So I started looking into financial independence.
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At the time, I was living in New York City.
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It's basically the most competitive landscape in terms of law firms out
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there, and so, uh, the expectations are that you really don't have weekends.
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You don't really have vacations, even if you take vacation and it's approved,
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even if the partners need something, you're still on the hook for it.
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And I've had some fellow colleagues that had to sprint to a printer
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in the middle of some tropical island that they're vacationing in.
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So you really just don't have any work life boundaries.
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And going back to real estate investing, I decided to move back to Austin,
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Texas, to take up a law firm job there, start my real estate investing journey.
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Austin's been my hometown for a very long time.
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So I felt like that was a better market for me to get
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started in than New York City.
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And I basically started with house hacking.
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Many folks probably got started with real estate investing.
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And I experimented first with long-term rentals and determined that I don't really
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like living with someone for a whole year at a time, honestly, in my space or what I
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consider my space, uh, because, of course, it's also their space at that point.
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And then I looked into Airbnb and just hosting on Airbnb instead.
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And I just really felt like, one, I was getting a lot more money, and two, I
6:04
like that model better just because I am able to upcharge for better designs,
6:10
better marketing, etc, better experience rather than just being limited to a
6:15
single monthly fee or monthly rent.
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And it just really appealed to me because of my engineering
6:22
background, of my design background.
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I love the fact that if you design something better, it's more attractive,
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then you're able to get more money out of your hosting experience.
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And basically, I was like, wait.
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So I like traveling.
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I like design.
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I like numerical analysis.
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I have a legal background This actually fits really well with
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everything that I'm good at.
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And then I don't really know a lot about real estate investing.
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So at the time, I was really insecure when it comes to long-term rentals, but I
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felt like when I was looking at short-term rental investing, I can beat all these
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folks that have 20 years of experience because they don't understand technology.
7:01
They don't understand digital marketing.
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They don't understand branding.
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They don't understand design.
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So those are things that I can outperform these folks who had
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20 plus years of experience on.
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So I decided to go full steam into short-term rental investing and basically
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spent all my weekend and also holidays on setting up short-term rentals.
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I saved every single penny I had, uh, working as a patent litigation
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attorney and just reinvested that into short-term rentals.
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And basically, I quit my job in 2020 when the world shut down.
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I had to make a decision.
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Do I start doing this full time and let my law career go?
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Basically, it was getting to the point of choosing between the two.
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So either I had to spend more time focusing on my law career, or I
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had to spend more time focusing on my real estate investing career.
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And I just took a big leap of faith at the time, when I already had nine
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short-term rentals, and just quit and do short-term rentals full time.
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And since then, of course, I've broken into the world of boutique hotel
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investing, and that's where I spend most of my energy on these days.
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I feel like it's that pivotal moment that everyone struggles with, and
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the fact that you were able just to take that leap and trust yourself.
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So you had those nine short-term rentals.
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Did the cash flow there replace what you were making, or you truly
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just believed in yourself enough to say, I know I've got this?
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I've already proven my concept.
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I just need more time to focus on it.
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So I was netting about 150 to 175.
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So it wasn't necessarily completely replacing what I was walking away from.
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It's painful to walk away from a job where your bonus is, uh, six
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figures, and you're just like, oh my gosh, I'm walking away from this.
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But I felt comfortable enough that, you know what, my expenses are relatively
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minimal because at the time, I was living a very frugal lifestyle.
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And so I was like, I can travel, buy more short-term rentals, meet
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really cool people, and learn what else I'm going to do as my next step.
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And so I just decided to take that leap and quit my job in fall 2020.
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And I haven't looked back since.
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I have just a question about you being an attorney.
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Those extra years of school, the extra years of education,
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was that taken into account when you were making this decision?
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Was it a decision tree?
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Did you have these lists of like, this is what I can make over time?
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I just feel like, especially someone that had to have those extra years
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of education, that that would make the decision that much harder.
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I know we have a lot of professionals that listen to our show, and
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they're like, oh my gosh, I have all these extra years of school.
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I have these years into my career.
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What was the decision?
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Did you make it in a silo by yourself?
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Were you listening to anybody else?
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What were some of those moments where you're digging deep to figure out
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if you're going to take the plunge?
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So my parents were definitely anti-quitting my lawyer job, for sure.
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My dad was like, what a waste.
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You spent so many years doing this, etc.
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And nobody respects the landlord.
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I was like, dad, nobody likes attorneys.
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We're the butt of every single joke.
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So I don't understand how landlords are way better or worse.
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So definitely, I had a lot of people who were naysayers about me quitting,
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including my own family, but I think in the end, I never went to
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law school basically to just be an attorney for the rest of my life.
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I actually went to law school because I met someone while I was a chemical
10:43
engineering major who was recruiting for an engineering company, and he was
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the CEO of that company, and he was a former patent attorney, and he was,
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prior to that, a chemical engineer.
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So I was like, oh, I can be CEO one day if I go to law school and run a company, etc.
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How cool would that be?
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And so I always went to law school with a scene as a stepping stone.
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I just didn't know what that stepping stone would be, to
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what the end goal would be.
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And it just became more and more apparent to me that this traditional trajectory
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for lawyers is not what I want to do.
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Either I had to start going towards being involved with a startup, or
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something like that, to be more on the management position there.
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Go get an MBA or something on top of having a JD or something like that.
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I've always been more interested on the business side of things.
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So yeah, I think that going back to folks who are listening to this, who
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have a W-2 job, I guess it just really depends on what your end goal is.
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My end goal was that I was able to travel the world, see really cool places,
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experience really great experiences, and get to meet other entrepreneurs.
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And the only way for me to do that is to create my own dream job.
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And also I wanted to be able to have a career where I got to be both
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creative and a local at the same time.
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And so that's something that's not going to exist in the W-2 world.
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It's only going to be something that I self-create and I build my
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own teams, outsource the things I'm not good at, and then keep the
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things that I really like doing.
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Love it.
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Let's talk about the hotels.
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Let's talk about the short-term rentals.
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You're crushing it there.
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Did an opportunity just cross your desk that you couldn't refuse?
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Were you on the prowl like, this is the next thing that I want to conquer?
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When did the boutique hotels start to come into your world, and
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how did you start tackling that?
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I started basically when the real estate appreciation really took off
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in terms of short-term rentals and short-term rental markets, and I was
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selling some of my short-term rental portfolio to basically buy other deals.
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When I ran into appraisals, and I was like, oh my gosh, wait, so it doesn't
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matter if I'm making a 100 grand on my short-term rental, I can't sell it for 500
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grand if my neighbor sold their townhouse that's unfurnished, that's not a business,
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that's not cash flowing for 400 grand.
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I actually have to evaluate my business the same way as someone that
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doesn't even have a business on their asset how much they sold it for.
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That doesn't really make sense to me, conceptually.
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So I had to get really creative with how I sold my stuff and do owner
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financing or wrap mortgages, etc.
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And I started looking at hotels, initially, just because I was like, I want
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to be able to supercharge a business and then push the valuation of that business
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higher by operating it better, by having the better design, better marketing, etc.
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And then the more I look into boutique hotels, the more it made sense because
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not only is the valuation of a commercial asset based on the performance of
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the business rather than just on what other people have sold their properties
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for, it's also immune to short-term rental regulations, which, uh, it
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was definitely starting to be born more of a topic in the news at the
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time I started researching into this.
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And also it's just better scalability because there were times where I was
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doing almost a dozen closings by selling some stuff, buying other stuff, and it
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was just the most stressful thing ever to do that many closings in the same month.
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And I was like, you know what, if I just did one deal every three months
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or every four months, but it was a 100 doors, then really I'm adding to my
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portfolio by the order of 50, a 100, 75, etc, and I'm less stressed because
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I have a whole team of people who are doing the things that I'm not good at.
15:00
And I can just focus on the things that I'm good at.
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And it's just a lot more efficient that way.
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And so a lot of reasons pointed to just focusing on more hotels
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instead of short-term rentals.
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When you say boutique hotel, those four, can you let us know how
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many rooms are in each of those?
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What's your buy box?
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I think is a more specific question.
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When you're looking for a boutique hotel, what's the room count, and what else
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does it need to have in order to qualify as a reason for you to dig in deeper?
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I think my buy box has shifted from when I first started buying
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hotels to what I'm looking for now.
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So when I first started, I was looking for somewhere around 10
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to 30 doors and under $1 million.
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Just because it's my first deal, I wanted to make sure that we got a really,
15:50
really steep discount off of the deal.
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And also it's something that's small and manageable.
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Our smallest hotel is 13 units.
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And then the second smallest is 19 in North Carolina, and the bigger
16:07
one, one step up from that, is 48 doors that we converted into 46 by
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making some of the units a little bit bigger in Northwest Arkansas.
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And then the largest one that we just closed on is 76 units, and that one
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still, currently a franchise hotel that we're deflagging and converting
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into a boutique hotel next year.
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So now our buy box is going to be 50 doors and up because the last deal that we
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bought is definitely my personal favorite deal just because day one, we're walking
16:40
into $2 million worth of gross revenue.
16:43
And we got amazing bank financing terms because their price for
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$2.9 million was higher than what we were under contract for.
16:52
So it just ended up being a seller deal for us.
16:55
So now I'm looking at bigger deals, and I think somewhere between 50 to 100
17:01
doors or even more than 100 doors is something that I'm really interested in.
17:06
And the great thing about hotels this year is that unlike short-term rentals, you can
17:09
actually buy them for somewhere between 20 to 40% off, versus during normal times.
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Talk to me about the value add.
17:18
Are you buying turnkey, or are you buying properties that you need
17:21
to either add value to operations or to the spaces themselves?
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Talk to us about how that fits into your preferences.
17:29
So we do typically buy value added properties, and when I first
17:34
started, I thought that meant I had to be really rough, like it
17:36
had to be really, really ugly.
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So our first few hotels were definitely really ugly hotels.
17:44
I would say, as the search continues, I realized that the operations can
17:51
be ugly, the marketing can be ugly, or there might be inefficiencies in
17:56
the P&Ls, but it doesn't necessarily have to be a rundown hotel.
17:59
So our most recent buy is a 2008 construction, so
18:03
it's relatively brand new.
18:05
It is still ugly in the sense that it has that corporate hotel vibe.
18:10
I'm sure everyone listening to this podcast has stayed at the same beige
18:15
carpet space with continental breakfast.
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So I'm sure everyone's stayed at a billion of those hotels.
18:22
So it's one of those right now.
18:24
And what we really want to do is make it a little bit more special when guests
18:29
walk in and have a cooler food truck park on site, those kinds of things
18:35
that we're trying to add to make it more hip that's going to be very different
18:39
than just a corporate travel hotel.
18:42
What about location in your buy box?
18:44
Does it have to be near X, Y, Z?
18:46
Does it have to have a population of one-- what in terms of
18:51
location is attracted to you?
18:53
I would say we're typically looking at locations where there's a future
18:59
trend of upward potential for tourism.
19:03
And what I mean by that is that usually what I look at is 2-3 driving hours
19:10
from a major metro that's growing.
19:12
So wherever the multifamily syndicator guys are going in terms of where
19:17
they're buying multifamily, we're looking within 2-3 hours driving
19:20
distance from that because those markets are going to trend upwards in
19:25
terms of tourism in the near future.
19:27
So what is two, three hours driving distance from Austin,
19:31
from Dallas, from Atlanta, from Charlotte, from Raleigh, etc?
19:36
We're really looking at those areas because it's something that a lot
19:39
of these backward-looking trend data is not going to show you.
19:43
They're not going to show you what the forward trend of tourism is going to be,
19:46
but just common sense tells you that these are going to be markets that are going
19:50
to continue to grow in terms of tourism demand because people are not always
19:54
able to hop on a plane and get away.
19:58
Instead, they are interested in a lot of quick getaways these growing metros.
20:04
I have a question about staffing and running a hotel
20:08
versus a short-term rental.
20:09
All of your hotels, are your team members there?
20:12
Is it fully staffed?
20:13
Are they W-2 employees like front desk and cleaning team?
20:18
What does that look like for you?
20:21
For our larger hotels, they do have staff.
20:26
Over time, we're able to be more and more efficient with our staffing
20:31
by combining it with smart tech.
20:34
For example, once we have deflagged the 76-unit hotel, we plan on automating a lot
20:40
of the check-in and check-out processes and stuff like that and getting a better
20:45
PMS in place, etc, so that we don't need as many full-time staff as before.
20:51
But I will say that for most of our hotels, we still have
20:56
traditional hotel W-2 staff.
20:59
So that's a little bit different than I know some of the other folks
21:02
who are going from STR to hotels.
21:06
They are advertising a much more remote contactless check-in to
21:11
completely zero staff on site model.
21:14
For me personally, a lot of our guests, they don't really like that model.
21:18
They're older folks who do expect the traditional hotel person
21:24
to be able to talk to them.
21:25
And so if they didn't find anybody on site, they would definitely
21:30
leave a negative review, even if the rest of their stay is really great.
21:33
For our smallest 13-unit hotel, we are going to do a whole just contactless
21:38
check-in, only STR management type accommodation, just because 13 units
21:44
is not really enough for us to have a full-time staff on site, so we
21:48
are going to have a local co-host who's going to help us with that.
21:52
But for everything else, we have staffing on site that's full-time.
21:57
Cool.
21:57
Talk to me about where you find your data.
22:00
For short-term rentals, at this point, we know we can go to
22:04
AirDNA, Key Data, STR Insights.
22:08
These are all great places to get data depending on what data you need.
22:11
Where does someone who's interested in hotel data go to underwrite their deals?
22:18
CoStar and Star really has a monopoly on hotel data right now.
22:23
So you basically have to have a CoStar account to access this.
22:28
So it's definitely a pricey subscription for hotel data, but
22:32
that's really the only go to source.
22:34
And I will see a lot of people take the shortcut and just use
22:38
the traditional short-term rental data sources to analyze hotels.
22:42
And I always caution people against that just because hotels may have
22:47
the same seasonalities and stuff like that compared to a short-term rental.
22:52
But a lot of the other stuff like occupancy and ADR, those are
22:56
going to be totally different.
22:58
So understanding hotel data is very key to your success.
23:03
And CoStar, is that a monthly subscription or annual?
23:08
Can anyone get a hold of that if they want to if they want to pay the price?
23:12
Yeah, they can.
23:13
It's usually about $12, 000 a year, I think.
23:16
Oh,wow.Okay.
23:16
Got you.
23:17
But, I mean, if you're buying multiple million dollars worth
23:20
of real estate, it makes sense.
23:21
I want to go back to something that you were mentioning about selling your
23:25
short-term rentals in order to have that cash to purchase these hotels.
23:30
I heard you say one of the problems that you found is you are on the same block
23:35
as someone, a normal residential home, and you are having to compete on market
23:39
to sell it exactly the same as someone that's just a residential homeowner versus
23:43
you who had a cash flowing business.
23:45
And I heard you say you were doing some seller financing.
23:48
Of some of those properties that you sold in order to purchase the hotels, how
23:54
were you marketing those as businesses and doing the seller financing?
23:57
How much more were you getting for your properties than those residential homes?
24:03
I think it really depends on the return.
24:05
So for the one that had 12 months revenue of about 97, 98
24:12
grand, I was able to get 500.
24:15
I'm not exactly sure how much the sales comps were in the area at the
24:19
time because it was cash flowing for me, and so I didn't want to sell
24:23
it unless it was for at least 500.
24:25
But I think it was probably significantly less.
24:28
I think it was maybe 400 or so for market comps.
24:32
Interesting.
24:33
And then did you do that seller financing, or were you able to find a
24:37
buyer that could finance the whole deal?
24:39
I did a wrap mortgage.
24:40
So I've sold two of my short-term rentals with wrap mortgages.
24:45
I'm selling a few more with that financing in place.
24:49
It also helps the buyer a lot of times because they may not qualify
24:54
for traditional financing, or if they do get DSCR financing, they're going
24:59
to get much higher interest rates.
25:01
So in some instances, their mortgage payment might be less when it's with
25:06
me, as a wrap mortgage, even though the price of the sale is higher.
25:12
Got you.
25:12
Okay.
25:13
Can you explain the wrap mortgage for me?
25:16
The wrap mortgage is basically where there is still an underlying
25:20
mortgage on the property from your original lender, and then you wrap
25:24
your new mortgage on top of that.
25:27
And I highly recommend someone who's doing that to use the right attorneys and
25:33
also maybe potentially reach out to me because it can get pretty complicated.
25:37
But yeah, I usually do those.
25:39
Okay.
25:40
I also am making a lot of offers on short-term rentals with wrap
25:45
mortgages or creative financing structures in place right now
25:49
because of the high interest rates.
25:51
Interesting.
25:52
Got that.
25:52
So you are offering also, hey, I'll take over the original mortgage,
25:55
whatever that difference is.
25:57
You'll get the loan for that difference and pay both of those.
26:00
Is that correct?
26:01
So you can have low interest rates on those.
26:03
Yes.
26:03
Okay.
26:04
Right now, in this current market where a lot of people have 2, 3% interest
26:09
rates previously when they bought it two years ago and they're trying to
26:13
resell it, it's both helpful for that person who's selling it and also the
26:18
buyer if they're able to find a way to still have that existing mortgage.
26:24
And so there's a lot of creative ways that you can structure it to either
26:27
wrap the mortgage or do what's called subject to or sub to, or assumptions.
26:33
And so usually it's sub two wrap mortgages that a lot of people prefer, and the
26:39
buyer can get let's say 4 or 5% interest instead of 7% interest on that purchase.
26:46
And in exchange, a seller can get a little bit higher in terms of their ask price.
26:51
Love it.
26:52
So listeners, that's a type of creativity.
26:54
You can't just go for the first broker like, this is the deal on the table.
26:58
There are so many ways to get creative, and you'd be surprised how many of the
27:02
sellers want to get creative with you.
27:05
I had a friend yesterday, went into contract on something where it started at
27:09
800,000, came down to 700,000, and he's only bringing 300,000 to the table, and
27:13
the seller is financing the other 400,000.
27:16
So at the beginning of the day, you're looking at this--
27:18
Giant number.
27:18
800,000.
27:19
And at the day, it's 300, 000.
27:20
So I love that you're bringing that up.
27:21
That, don't stop at this one plan, plan A, which is a normal traditional mortgage.
27:26
There is a lot of other ways.
27:27
And most likely the sellers are going to want to work with you too because they
27:31
want to move assets also and continue on whatever their portfolio growth is.
27:34
So thank you for bringing that up to us and our listeners.
27:37
So there are alternate ways that people can get into deals that might seem a
27:41
little bit out of reach to them right now.
27:44
Yeah.
27:45
Absolutely.
27:45
I mean, there's people who are willing to sell or finance, and they're willing to
27:49
accept a 7% or 5% down payment, and you're able to get into a multimillion-dollar
27:56
STR for relatively little out of pocket right now just because a lot of people, if
28:01
they need to sell, they need to move, they just want some cash to move, and they're
28:05
okay with that passive income for the next few years until you refinance the deal.
28:10
AD MARKER
28:11
I have a question.
28:12
You said that your goal was to not work 9-9, but we all know, as
28:18
entrepreneurs, that can be this thing, like, I just traded in a 9-9 to a--
28:22
24/7, 365.
28:24
Correct.
28:25
And you're in hotels.
28:26
So we know those are open all the time.
28:28
Well, then you get into short-term rental or hospitality.
28:31
I used to work in hotels.
28:32
You get into that industry, and, my gosh, their holidays-- people
28:36
ask, like, oh, that's a holiday.
28:37
I was like, it is--
28:38
It actually means you're busier.
28:40
Correct.
28:40
I am immune to the rest of the world getting time off.
28:44
I felt like it never was for me.
28:45
And so having that be the reason you left your law career, what is working for you
28:53
so you're not working around the clock?
28:55
And I know it's finding people who are good at what you're not good at and
28:58
all that, but truly, give us something that's tangible in terms of you're buying
29:03
these assets in different locations.
29:04
You said you're building your own teams.
29:06
Are you, right now, working around the clock so that eventually
29:10
you can take a step back?
29:11
Or have you found something that really works for you so you can take time
29:15
off and be present in traveling the world and all those sorts of things?
29:19
Share that with our listeners about how you're either doing that now or you're
29:23
working harder now so that in the future you have some more time to yourself.
29:27
I will say that if I just sat pretty with my short-term rental portfolio
29:33
and didn't really do anything else, didn't want to scale into additional
29:38
short-term rentals, didn't want to buy more hotels-- right now, I have a pretty
29:43
stress-free life where I will probably be working five to 10 hours a week max.
29:48
So I think it's absolutely possible for those who are listening who are like, you
29:52
know what, I don't want additional stress.
29:55
I don't want to quit my job into another job which is
29:59
never-ending or anything like that.
30:01
Um, I will say that I only work as much as I work right now because
30:07
we're buying more hotels this year.
30:10
So that is going to be a lot of work in itself.
30:14
And I'm also teaching other people how to buy hotels in my hotel
30:17
mastermind, so ends up being a lot of work, uh involved in that.
30:21
And I'm raising money for multiple deals.
30:23
So I'm doing a lot of different things.
30:25
And so that's what ends up costing a lot of time for me.
30:29
And in terms of how I'm not-- so I'm actually not the operator for any
30:34
of our short-term rentals or hotels.
30:36
I have one key operations partner that is helping me on all the
30:40
operations and streamlining everything.
30:43
But also, I have a hotel mastermind with the intent of bringing up these really
30:49
skilled short-term rental operators who are already super hosts on, let's say,
30:54
10 plus listings or whatnot, and I'm training skilled operators to become the
31:00
next generation of boutique hoteliers.
31:03
So now I can just focus on raising money, putting together deals,
31:06
finding deals, and then I can test one of them with operating the hotel.
31:12
So there are different ways to structure teams, um, to where I'm not usually
31:17
the person who has to operate things.
31:19
I don't even manage my short-term rentals at this point just because I
31:24
would rather be out finding more deals.
31:27
Awesome.
31:27
I love your hotel mastermind idea where you can cherry pick the
31:32
students that are amazing and like, hey, there's a deal in your area.
31:36
I think that is genius.
31:38
Genius idea.
31:39
I know you're not operating your hotels, but I'm sure our listeners are
31:42
wondering, since you have short-term rentals and you're in the hotel world,
31:45
talk to us about the property management software versus your hotel software.
31:50
Are you able to use a short-term rental PMS for your smaller boutique
31:54
hotels, or do you advise anyone who's interested to just get ready to invest
31:58
in a different platform altogether?
32:00
Yeah.
32:00
We're your mastermind students right now.
32:03
Right now we are using a different PMS for our independent hotels
32:08
versus our short-term rentals.
32:10
The one right now that we have for our hotels is Cloudbeds.
32:14
There's a lot of different PMS out there for hotels.
32:18
As my operation partner likes to say, it's the wild, wild west
32:23
right now for hotel software.
32:25
There's hundreds of software out there, and he's usually the person
32:28
who ends up picking whichever is the most efficient for our hotels.
32:32
So right now that is Cloudbeds.
32:34
I know that there are some short-term rental PMS out there that are now
32:40
venturing into hotels, but once again, we haven't started using those yet.
32:46
So we do currently have two different systems.
32:50
And then when we have a takeover or franchise hotel, we do typically have
32:55
to use their PMS for the time being.
32:58
And I can tell you safely, do not use that type of software, no matter what.
33:03
It is like 1990s interface.
33:06
I took a look at it.
33:07
I was like, you can't even see the calendar more than a date out.
33:11
It's just one day at a time.
33:12
It was just weird.
33:14
So I don't like that.
33:16
But aside from that, it's really just based on whatever suits your needs
33:21
in terms of how many doors you have, or do you want the same short-term
33:24
rental and hotel software, uh, what integrations you want, etc, for your PMS.
33:32
So your boutique hotels, is that one thing that you're bringing
33:35
to all of these properties?
33:37
Are you putting them on Airbnb, Booking.
33:39
com immediately?
33:40
Are you seeing your occupancy go up just from bringing them onto those sites?
33:45
Or is that part of your marketing plan?
33:47
So we do bring our independent hotels onto the non-traditional hotel
33:53
platforms, although I would say that Airbnb has invested a large amount
33:57
of money trying to bring hotels onto Airbnb platform right now.
34:01
So yes, we do onboard our hotels.
34:03
Two of our hotels are on Airbnb right now.
34:07
The franchise one, we don't have it on Airbnb, and there's a
34:10
lot of reasons behind that, but that's one of our strategies.
34:14
The other one is to redesign it.
34:16
So we definitely recreate and reimagine the space so that it's
34:19
not your standard hotel look.
34:23
The one in my virtual background, that's one that we have converted
34:27
into a boutique hotel, and I don't have the before picture anywhere,
34:32
but it was brand new chic before, and it had hot pink carpet, and popcorn
34:38
ceilings, and a lot of other things that are reminiscent of a 1980s hotel.
34:45
And so we really recreated the entire experience for our guests.
34:50
So yes, we're doing that.
34:52
And then secondly, we're listing on all these traditional market OTAs
34:55
that short-term rental operators are very familiar with, as well
34:59
as the traditional hotel OTAs.
35:01
And then the last step is direct marketing, and understanding how to do
35:05
direct bookings, and starting to venture more into that space now that we have
35:09
stabilized the operations on the OTAs.
35:13
With your hotels, can you or are you planning to cross-promote each other?
35:18
I mean, obviously, I know you have the one that's a franchise.
35:21
We're going to wait for that one to cycle out, but is that part of
35:25
your grand plan with your mastermind students, with buying these hotels?
35:30
Is it to create a brand across all of them so you can share your
35:35
email list, share your past guests?
35:38
Is that part of the larger strategy?
35:48
I think that is something that we're working on right now.
35:48
I will say that when we started buying hotels, I was basically buying stuff
35:48
that was discounted and in the markets that were waning without like, hey,
35:48
in five years, do we want to have a cohesive brand, which means that the
35:51
target demographic has to be similar?
35:53
So that's something that I wanted to work back from, is that if you wanted
35:57
to do that, where you're sharing email lists, then you really have to look at
36:01
the markets where the target demographic is very, very similar to each other.
36:05
And I would say between two of our hotels or three of hotels in mountain
36:09
towns, that might be the case.
36:12
But in our beach destination 13-unit hotel, there's not a lot of overlap
36:17
in terms of that target demographic.
36:20
So it is one of our things that we're looking at, is do we want
36:24
to build a loyalty program?
36:25
Do we want to build our own version of franchise hotels in the future
36:30
where it's leaner and not collecting 10 to 17% franchise fees compared
36:36
to all these other brands and just basically be more of an independent
36:40
indie franchise or something like that?
36:43
We're looking into that, but that's not something that we're
36:47
heavily investing in right now.
36:49
Right now, because of the market cycle and where it is, we're just raising
36:54
money like crazy and buying hotels like crazy just because this and next year are
37:00
these golden windows of opportunity for buying hotels at a significant discount.
37:06
And so that's what we're focusing on right now.
37:08
All right, listeners, that's your call to action.
37:11
Why is it the golden time?
37:12
Is it people are retiring?
37:15
Is it they went through it during COVID and they're over it?
37:18
You just coined it the golden era.
37:21
Why is that time of the essence right now?
37:24
There's a few reasons.
37:27
And, yes, COVID-19 was really, really tough on a lot of hotels versus
37:32
short-term rentals just because it had-- short-term rentals, one remote
37:35
cabin in the woods sounds a lot more appealing than a crowded hotel that has
37:40
50 rooms during the pandemic times, one.
37:44
So a lot of folks had taken a heavy hit in the hotel industry during the pandemic,
37:49
so the valuation of hotels is discounted.
37:52
The second reason is because a lot of interest rates are climbing up and
37:58
hotels on residential assets, they have usually a bridge loan, so they have
38:05
usually five years for the interest rates fixed before it's resetting.
38:09
And a lot of these interest rates are resetting this year.
38:12
So if your former interest rate is 3% and now your interest rate is 8%, that's
38:18
a problem because you might not actually qualify for a refinancing anymore.
38:23
Or even if you qualify, you're like, you know what, I'm ready to retire in
38:27
the next five years anyway, and this is no longer cashflowing that much
38:30
for me, so I might as well just sell it now versus sell it in five years.
38:34
And a lot of people are also just retiring as well.
38:38
So they're just looking at the potential of a market downturn.
38:42
And if they already had goals of retirement in the next five years,
38:46
their kids are not interested in taking over their hotels because
38:49
their kids are now engineers, and scientists, and stuff like that.
38:53
And they saw their parents grow up behind the front desk and stuff like that.
38:57
They're willing to sell those at a discount.
39:01
The final reason is that a lot of people get hit with what's called PIPs,
39:05
which are just property improvement plans or renovation plans by brands.
39:09
And whenever they get hit with PIPs, every five to 10 years,
39:13
they end up being forced to sell.
39:15
But it's really hard for new hoteliers to get financing right now, so
39:20
the buyer pool is also diminished.
39:22
If you don't have hotel experience, it's harder for people to get financing.
39:26
And so because of that, hotels are willing to sell at a discount, or they're willing
39:30
to negotiate to experienced operators.
39:33
So if you have hotel experience, right now is one of the best times
39:37
to buy hotels because you can get seller financing on some stuff.
39:41
You can get 30-40% discounts off of auction hotels.
39:46
It's just a lot of really great opportunities right now that's going to
39:49
start popping up the next few months.
39:51
Oh.
39:51
Can you give us trade secrets?
39:53
What's the auction hotel site?
39:55
Or do we have to be in the mastermind?
39:57
Oh, no.
39:58
It's Ten-X.
39:59
I don't mind talking about it.
40:00
It's just a lot of these standard auction sites, but in order to close
40:05
on a hotel like this, you definitely have to learn a lot more, like we'll be
40:09
teaching the mastermind, just because to just even qualify for the auction site
40:14
and also be able to close on a hotel in 45 days and also get financing from
40:21
lenders, etc, to raise that money, that requires a lot of effort and knowledge.
40:27
Got you.
40:28
Okay.
40:28
Other than those auction sites, like our MLS or Zillow, where does
40:34
one look just to start dreaming and seeing what's available?
40:37
Is there a site where they can see hotels that are for sale?
40:42
LoopNet, Crexi, and Ten-X are probably the sites that you
40:45
can look when it's on the MLS.
40:48
But I will say that unlike short-term rentals, 99% of really good hotel deals,
40:53
you're not going to find on these sites.
40:56
And the reason is because they are sold to other hoteliers in the network first.
41:02
They are just marketed towards other hoteliers and brokers who
41:08
already have established lists of clients who are hoteliers.
41:12
That's normally where they are marketed first.
41:15
And one of the main reasons is because they are operating
41:18
businesses, so they have employees that they don't want to quit.
41:21
So these employees don't normally know about the pending sale unless
41:26
pretty much most of the contingencies are already removed in the contract.
41:30
So because of that, by the time it reaches Crexi and LoopNet, it's likely
41:35
not a good deal because 10 people have already said no to this deal,
41:40
at least, if not hundreds of people have already said no to this deal.
41:44
Now, that doesn't mean that there's no good deals at all because the last
41:48
hotel that we bought was off of Ten-X, which is a very public auction site.
41:53
But once again, that was the reason that we got such a good deal, was because
41:57
it was such a hard deal to close.
42:00
And if we didn't have all the connections and stuff like that and help of franchise
42:04
attorneys, help of just lenders, help of the fact that we already have three
42:09
other hotels, I don't think we would have been able to close that deal.
42:13
That's a hot tip for you, listeners.
42:15
Okay, you are the CEO of a 10-million-dollar short-term rental
42:18
and hotel fund called Welcome Capital.
42:22
So what is the fund, and why was it important for you to start it?
42:26
Because we're buying hotels at such short time [Inaudible], it was imperative for
42:31
us to basically raise money up front to buy a lot of hotels at auction, and then,
42:38
in return, get an amazing return for our investors-because if you're able to get
42:43
a hotel at 30-40% discount this year, by the time that the interest rates climb
42:49
back down, you're able to refinance that hotel and basically refinance or recapture
42:55
all your initial invested capital.
42:57
And you can do two things.
42:58
You can redistribute that back to your investors like, there you go.
43:02
And, by the way, you're technically still in the deal, so you still get
43:05
cashflow, but your initial capital has already been returned to you.
43:09
Or two, which is a better scenario for most of our investors, is that
43:13
we return some part of that, but the other part of it is reinvested
43:17
back into buying more hotels.
43:19
So now not only are they getting double the cashflow for the same amount of money
43:23
that they invested into the deal, they also get double the tax benefits because
43:27
now we're buying a new set of hotels.
43:29
We're doing a new set of cost segregation.
43:31
So that's the whole premise between Welcome Capital, is that we are able to
43:36
buy hotels that closed difficult deals that other operators are not able to do.
43:41
And we're able to do it faster because we raise the money up front.
43:45
So that's why we started Welcome Capital, to be able to move faster, to be able
43:49
to buy discounted deals, and at the same time, educating our investors, who
43:54
are oftentimes aspiring STR investors and aspiring hoteliers how to do these
44:00
deals by offering VIP retreats where they get to see our hotels, and our
44:06
operations, and how we do things.
44:08
I love that.
44:09
That's a value add to your fund.
44:11
No, that's great.
44:13
So how do our listeners-- you got three things to offer them.
44:17
Where do they find out like about these hotels if they want to stay there, about
44:21
your mastermind, and about the fund?
44:24
I think the easiest way is to just reach out to me.
44:27
Shoot me a quick message about what of the things that we talked about is
44:31
interesting to you and how I can help.
44:34
On social media, I'm most active on Instagram, so it's
44:40
@diyaesq or D-I-Y-A-E-S-Q.
44:41
I provide a lot of free content on what to do in terms of analyzing
44:47
hotels, how we bought some of these deals, how we structured them, how
44:51
we finance them on social media.
44:53
And then also you can always reach out to me for the free training that I provide
44:59
on hotels, upcoming bootcamps, etc.
45:02
You can always message me on social media.
45:04
And if you're interested in investing, you can also reach out to me.
45:07
So the best way is Instagram, and the second best way is to join our Facebook
45:12
group, Airbnb Professional Hosts.
45:14
Cool.
45:14
And we will make sure to link the Instagram and Facebook
45:18
group in our show notes.
45:20
But we just want to thank you.
45:21
This was your free knowledge today.
45:23
I know I learned so much.
45:25
I know our listeners are too.
45:26
And we just want to thank you for sharing that information.
45:29
It's always great to see how people went from their corporate job
45:33
to their short-term rental, and now what's next, to the hotels.
45:37
And it's super exciting.
45:38
We can't wait to continue to watch you in this golden era, see how many hotels
45:42
you can purchase in the next 12 months.
45:44
Thank you, guys, so much.
45:46
Of course.
45:47
With that, I am Sarah Karakaian.
45:48
I'm Annette Grant.
45:49
And together we are--
45:50
Thanks for Visiting.
45:51
Talk to you next time.