BiggerPockets Real Estate Podcast

BiggerPockets Podcast 354: From Rookie Mistakes to Syndicating BIG Deals with Nichole Stohler

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From single family to multifamily to hotels!

On today’s show, Nichole Stohler sits down with Brandon and David and discusses her journey from purchasing a single family home to syndicating hotels! Nichole has a fascinating story that started with losing the first house she bought, grew into recommitting herself to learning the asset class of real estate, and ended with massive success through big deal syndications.

You’ll love the advice she shares about managing managers, scaling the right way, and dealing with tenants according to three irrefutable laws. She goes on to discuss keeping properties clean, choosing the right partners, and analyzing economic factors when choosing a hotel or apartment complex.

Nichole reveals tons of great tips when it comes to building wealth through various asset classes of real estate. This show has something for everyone!

Click here to listen on iTunes.

Listen to the Podcast Here

Read the Transcript Here

Brandon: This is the BiggerPockets podcast show 354. What’s going on number one? This is Brandon, hosting the BiggerPockets podcast here with my buddy David. What’s up David? It was fun hanging out with you last week.

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David: Oh my gosh, that’s one of the more crazy experiences that I’ve ever had in my entire life, was that not just insane? [crosstalk 01:14:25].

Brandon: Insane. Yeah, we’re talking about the BP-Con, of course, now it’s been like a month since BP-Con, but we just got back from recording this episode a couple of weeks, you know, before we release it. But man, BP-Con 2019 was insane. So many investors, there were 1000 people, so many good lessons, stories, things I learned, things I’m excited about growing my business with. And just like networking like crazy. I would say I got a million dollars of value out of that one event. Just stuff that’s going to make me wealthier, happier, more successful in my entire life, so, yeah. Very, very cool.

Brandon: I’m excited for next year’s BP-Con which we haven’t announced yet but listen for it at some point in the near future we’ll announce it and…

David: Time to go to the gym?

Brandon: No, I don’t know what that was. It was a Phoenix number calling me. But yeah, listen for it in the future, when we announce BP-Con 2020, and make sure you get your tickets early. We know when we announce it because it’s going to sell out just like 2019 did.

Brandon: But yeah, David, I’ve got to tell you. I talk about this on the show later, but this morning I woke up and I walked out to me lanai, what we call our porch, and Ryan Murdoch lives next door to me, like you know, my buddy Ryan. And Ryan lives next door in a little… Stop calling me. Hold on, let me put this on… Okay.

Brandon: So my buddy Ryan lives next door to me and I walk out, I take my dog Potty outside and Ryan comes out and he goes, “Dude, you’re not getting text messages.” And I’m like, “What do you mean?” He’s like, “I’ve been texting you all morning, you’re not getting the text message.” And I said, “I don’t know.” And he was like, “I think your phone’s broken.” Whatever. I was like, “What did you want?” He goes, “Oh, we got our deal accepted.” And we had put in like over $30 million offer in, in a huge portfolio of mobile home parks and very, very cool deals, like bunch of parks all combined together. Huge expansion stretch, what we talked about on today’s show.

Brandon: But anyway. What a day. What a day.

David: Very cool, man. Congratulations on that, this is the culmination of a lot of hard work and probably preparation as well. All culminating in one moment. And isn’t that a good example of what it’s like when you just work and work and work and work and work, and you feel like you’re not getting anywhere and then one day, boom!

Brandon: Yeah. What’s crazy is like, remember we talked about on the show that I did a few weeks back, I was talking about my vision, for my company vision, like I’m looking at it right now. On my wall it says… It was called the $50 million Surfers. And the goal was to get $50 million in real estate in the next three years. I should end this year then at .44 million. Like crazy, doing that in six months or seven months since I wrote that thing.

Brandon: But anyway. That’s power of having a lined vision and then a team that we talk and then tear up. So we should talk a whole episode sometime, on building a team, [crosstalk 01:17:07]as well?

David: Yeah, and I’m kind of right behind you as far as looking to start building people looking for analysts and underwriters and people to start looking for deals and syndicating into an apartment complexes. So I think that would be really, really good. Both starting a team and joining a team, what you need to do.

Brandon: Yeah. We’ll put that on the agenda. But anyway, but today’s show is actually, we covered some of that stuff today. Today we were talking with an investor named Nichole, and Nichole is a real estate investor who just has an amazing story of, first like failure, like actually jumping in like a lot of you guys are trying to do and then not making it. And then taking the lessons learned and then applying it, like, at a massive scale a few years later. Taking the lessons learned from the failure.

Brandon: And you’re going to learn about that today, you can learn from her struggles and how to avoid those things. We talk a lot about growing, we talk about The Stack, which is how you can grow your business really rapidly. And how she’s buying a hotel, which is a fascinating niche that I’ve never really thought about, but it has my mind spinning right now. I’m not even kidding. It’s like one of those squirrel moments for me. This is definitely one of my favorite shows we’ve done in a long time, so you guys will love it.

Brandon: But before we get to it, let’s get to today’s Quick-

David: Tip.

Brandon: I was waiting for you to come in there. All right, today’s quick tip. Nice and simple. If you are not attending local real estate meetups in your area, networking is so important, so start attending local meetups in your area. If there aren’t any start one. If you want to check out all the meetups in your area, just go to biggerpockets.com/events, you can find all the events that are happening there. And those are just unofficial, they’re not BP-sponsored events, they’re just people getting together because we like getting together with people, and that’s just what it is.

Brandon: So go hang out at a local meetup in your area and do it today. And again, if there’s not one, start one. Like David does.

David: Amen.

Brandon: All right. It’s time to get into today’s show, long enough introduction, I wan to introduce you to Nichole. Nichole, again, is a real estate investor in the Phoenix area who has an amazing story of going from small deals to failure, to big stuff. You’re going to love this. Without further ado, let’s get to the interview with Nichole.

Brandon: All right Nichole welcome to the BiggerPocket’s podcast, good to have you here today.

Nichole: I am so excited to be here, I’ve been listening to you guys for years.

Brandon: Oh, that’s awesome. Well, very, very cool. I’m excited to tell your story to the BiggerPocket’s audience, or have you tell your story to the BP audience because I know a little bit about you, just been reading here in your bio and you’ve done some really cool stuff and so we haven’t talked about on this show. So, lets kind of get into it. Why don’t we start with, how did you get into real estate investing?

Nichole: So it is a great story, and it is a warning story. But also a story about how important having a good network of people is in your real estate investing journey. But basically, right out of college, recently married, my husband and I did not have very much money. He was still going to school full-time. I was working a second job in addition to my college graduate degree job, and I was obsessed with personal finance books because these are the strategies and things we were not really taught through college and growing up.

Nichole: So I came across Rich Dad, Poor Dad by Robert Kiyosaki and that book just, it floored me. No one in my family spoke that way, no one was entrepreneurial, everybody went to go work for a company and then just retired after 40-plus years, and I’m a very action-oriented person, so I immediately signed us up for a real estate seminar and it was actually, at the time we were living in Indiana, we flew out to Las Vegas for this seminar, and the entire purpose of this seminar was, How do you creatively find property when you don’t have any money? And I will say that a lot of the strategies, we were able to come back and 100% implement.

Nichole: We found property without having any money, although we did need to put some down-payments on. So I don’t know, do you want me to go into how we found that property?

Brandon: Sure. Yeah, let’s do it, let’s do it.

Nichole: Okay. So basically, we found, at the local university in the town that we were living in, when people would die that would leave sometimes houses to this university. And the university at that time, this was 1999, said, “Hey, you know what? We’re not really in the real estate business, this is isn’t really where we want to be focused,” so they were very willing to be creative around those properties, so they offered seller financing, which we jumped at this opportunity.

Nichole: Now we did have to put some kind of money down, so this is 1999, what did we do? Credit card cash advances, so this is how we were able to come up with… And I want to say maybe it was about $5000 per property, somewhere around there. So, we ended up with these properties and we were super excited. Everything we’d been taught in the seminar we applied. We found properties. But there were so many things that we didn’t learn that we didn’t know how to do, like, were that actually good properties? Just because you can find a property doesn’t mean you should actually buy the property. They were not in the best areas, they were not going to rent… We didn’t know how to analyze rent payments versus our regular payment, what was feasible, market research, all those kinds of things we didn’t know how to do.

Nichole: On top of that, repairs. They weren’t in the best shape, so they required repairs. My husband’s getting up on the roof doing it himself because we don’t have a lot money, and we’re using credit cards to pay for supplies, and we’ve got residents outside drinking beer, watching him put the roof on, right? So not the best class of properties and not the best shape of properties.

Nichole: And then the final thing is really managing residents. There is an art to that, right? There’s going to be a lot of sob stories. You have to have strict policies and procedures. So there were all the things that we did not know, and we had not been taught. And this was really at a timeframe where I’m sure there was a local REA in the state that we lived in at the time. But there wasn’t BiggerPockets, there weren’t online forums. There wasn’t a lot of people that we could reach out to, to give us some ideas of what to do. And we really ended up feeling very devastated. Dug ourselves into a pretty great hole at an early stage, just beginning our careers.

Nichole: So we ended up giving back the properties, so we lost all the money, all the credit card… We had the credit card debt, gave back the properties and we were in a little, tiny starter home, we ended up selling that home, moving in with my parents, and then basically digging our way out of debt over the next couple of years.

Brandon: Wow. Wow. So there’s so many good lessons in there. I mean, one thing I talk about a lot, you know, I wrote a book called The Book On Investing In Real Estate with No (and Low) Money Down, one point I make in there is, investing in real estate with no money down doesn’t mean having no money. And it’s kind of a weird thought, that people are instantly attracted to no money down strategies when they have no money, for obvious reasons. But, with real estate there are crazy things that happen all the time, especially when you own multiple properties, if you have no insurance, if you have income from a good… If you’re not making tons of extra money every month, you can get sunk.

Brandon: I had a mentor once tell me when I was younger, when I just got started, he said, “You can go broke buying good deals.” And I didn’t know what he meant at the time, and this is exactly what he meant. Like, it might’ve felt like a good deal because you got it for no money down, well, what an infinite return on investment, right? But, not so much if you can’t handle all the payments at the time. So, what lessons did you learn in that process? What would you tell somebody who’s, you know, 20-something-year-old you, excited about real estate, wants to do these creative finance deals, what would you tell them?

Nichole: The first thing would be, don’t be so excited about the deal, kind of to your point, Brandon, really there’s a lot of… There’s resources on BiggerPockets. For example make you know how yo analyze the property and if you don’t know how, find osone who can help you. And understand, do you have the capacity to manage residents, and if not then you’ll need property management. And if you need property management you need to build those costs in as well. And just as a side-note, property manager does not mean that you get to sit back and collect cheques, you still have to manage your manager as well.

Nichole: So I would say don’t get so enamored by your first deal and especially if you’re finding something creative like that, that you lose sight of all those pieces. And then for us, the big lesson that we learned is, we were committed to real estate. We didn’t say, “Oh, gosh, we’re done. We’re never investing in real estate again.” We recognized 100% it was our fault. We knew that we need to learn. And so we said, “Gosh, how can we learn? How can we actually get this knowledge and understanding?”

Nichole: So my husband went to go work for a property management company, so that he could get that knowledge and that background.

Brandon: That’s smart, that’s smart. Yeah, you know, David and I talk a lot about on this show here, this idea too of, get that first deal you’re going to get a bunch of knowledge and experience, which is important. You don’t have to hit a home run. Now we’re not saying buy a bad deal, your first deal, but you’ve got to get somehow started.

Brandon: And I think most people would agree. You’ve just got to do something, right? But where do you reconcile being scared to pull the trigger on the first deal, but then with your story of like failing because you went too big too fast. Like, is there a certain number of deals a person should maybe buy or not buy? Like, buy one and hold onto it? How do you kind of look at those two things? Taking action versus doing it carefully?

Nichole: Yeah, and I actually have people ask me this question, and being in tech, there’s a lot of people in this industry that have a lot of analysis paralysis. That’s really huge. We love spreadsheets and processes, but then pulling the trigger. So here’s what I would say: figure out your tolerance level for… Return your tolerance level for time, what kind of time you want to invest, right? So figuring these things out, let’s say you have no time, and you’re very conservative. Okay, so you need to be looking for a deal where you can look at, for example, if you’re looking at a house, you want to look at the past ten years, what has been the rent in that particular city, town, area. And what was the worst rent during that time?

Nichole: Now granted, rents, I’m in Phoenix, our rents continue to raise 8% per year, but let’s just say in the past ten years, what was the worst? Okay, now if you figure that’s the worst, can you still make a good, decent amount of income if you add, for example, if you have no time, you need a property management. After you have [inaudible 00:12:57]can you make a good income still?and I can’t say what that is. It might, for you, it’s $200 a month, it might be $500, it kind of depends on the person and I think the more deals you look at the more you’ll start to understand what’s realistic because you’re not going to probably make $1000 a month in today’s market and a new single-family house you’re buying.

Nichole: But you look at that and you say, “Okay, what’s the worst that can happen? Well, the market, the rents drop, and I see what it was ten years ago, and I can still cover the mortgage and I can still make money.” That’s when you pull the trigger, because otherwise… You’re scared because you don’t know what could happen. Just plan for the worst, and then you’re good.

David: [crosstalk 00:13:39]I think you made some really good points right there. One of them that I loved was that you need to understand yourself and you have to know what works for you. Are you conservative? Do you have time but no money? Do you have money but no time? Because the temptation when you’re new is to look at what somebody else does, and say, “I want to go copy that. Oh, that’s the deal that David buys, that’s the deal Brandon buys, okay, I only want to buy that deal.”

David: But you don’t live David and Brandon’s life and you don’t have our goals and it’s completely different. It doesn’t make sense to try and compare what you’re trying to do with what we’re trying to do. Real estate is a very powerful vehicle, it build wealth very powerfully over time. But everyone has to come in with a different style not everybody plays the same way, if you’re Stephen Curry you don’t play like Dennis Rodman.

David: And I love that you admitted that that’s one of the keys is you know yourself and know what you’re looking for. For some people turnkey is the absolute best way to go, because they make a really high income and they don’t have time. For other people, it’s going to take them so long to build capital that it would take 15 years, they need to be counting the payment, door-knocking and driving for dollars, looking for something they can buy with seller financing that somebody else missed.

David: There is something for everyone though, and I love that you made that point, that there’s a way that anyone can do this if you know yourselves.

Brandon: Yeah, that’s really good. You know, another point you made I want to pull out there. There’s a lot of investors look at… We’ll call them rose-colored real estate investors, right? The RCREI. I was hoping that would be a nice phrase, like [BURB 00:14:57], or whatever. But Rose-colored Real Estate-

David: You needed a vowel somewhere in there somewhere.

Brandon: But no, they look at deals and they’re like, “Okay, what’s the best…” And I’m guilty of this as well. Rent is going to be between $800 and $1000, let’s round the number to 1000, and let’s say the expenses are going to be between 800 and 1200? Well, let’s assume expenses are 800, it’s like… New investors especially because they’re so excited and emotionally drawn into doing a deal, that they look at it with these rose-colored glasses, rather than what you just said, which was so good, is, What’s worst-case scenario? Well, I mean, worst case is that an asteroid hits the building and blows up, but what’s the most likely worst-case scenario that could actually happen, and then can you still move forward? I think that’s a fantastic… I think I actually put that in one of the books I wrote, the worst-case scenario analysis, can you still survive by doing a worst-case scenario analysis? AWC, whatever.

Brandon: Anyway, very, very, very good point. So, okay, what came next? You did that thing… By the way, how many houses did you buy in there? You said you bought houses, plural, right?

Nichole: Yeah, one was a 4-plex, one was a tri-plex, there was a duplex and there was a single-family. So basically four, yeah.

Brandon: So a few things in there, you gave them back to the university, is that when you-

Nichole: Yes.

Brandon: So you gave them back to the university, said, “Hey, we can’t do this,” and started over. And then you quit real estate and just did nothing for the next 20, 30 or 40 years until you retired on social security. All right, end of show, thank you guys for joining us… Okay, but what came next? Obviously you didn’t do that? You took the lessons learned and applied it, so what came next?

Nichole: Yeah so there’s an interesting lesson in this next part that came next. Which is my husband went to go work for this property management company. And two pieces. We had met a person at… We actually went to another seminar, too, but we met someone at a seminar, and he worked for this property management company and we kept in touch with him. And then when this all went down, and we decided, “Okay, we’re committed, we need to figure out how to learn this business,” my husband called that person that he had met up and went to go work for him.

Nichole: So that was a cool connection, very important person to give him that shot because he didn’t really have a lot of experience, but he had a degree and he was just fresh out of college. So essentially, he went to go work for a really large developer that then managed their own, very large multi-family, like 600-plus unit apartment complexes. So he wasn’t really out there managing like a bunch of individual homes, and he wasn’t really in a property management company that wasn’t tied to ownership.

Nichole: So what happened was, he got this great experience in multi-family that became what he knew and what he understood, but when he thought about property management, he thought of ownership, which we came to learn later are two different things.

Brandon: Yeah. Explain that.

Nichole: Well, so when we… We’ll talk about as we move further, and we bought 4-plex and 7-plex further on and we lived in a different state, we hired property management for that, and I think it was really eye-opening to him that we have different objectives and that hiring a separate entity to manage our investment, they did not have the same… They did not have the same approach, they did not care about the investment like we did. Prior, he’d worked for this company where that was all their investment and they were managing it. So it was eye-opening to him that that property management was decoupled and maybe sometimes had opposite goals.

Brandon: Interesting. Yeah, just yesterday, I’m buying a tri-plex [Maui 00:18:57] right now, and I close in a couple of days. So I’m interviewing property managers and I asked done of them about whether or not the furnished rentals versus… I keep it furnished because Maui’s a little different, I keep it furnished and go like, traveling nurses, doctors vising for a few months. Or should I go regular? And he said, “No, definitely go long-term, definitely go long-term, it’s just a much better thing to do.”

Brandon: And what I thought was interesting, is the only reason she said that is because for her, it was a better thing because they don’t have so much turnover and it’s less work for them. So I thought it was a perfect illustration of like, property managers are thinking about what’s best for them, not necessarily what’s best for you and what’s best for the investment. I’m still working the numbers, should I do furnished or not furnished, but you’ve got to take everything a property manager says with a grain of salt because it’s not their investment. It’s their business and the two are not always aligned.

Nichole: Absolutely.

Brandon: All right, so what did you do then?

Nichole: So, we actually took… I would say we were not aggressively investing in real estate then for a few years, and we moved out to Phoenix and then we started investing again. We bought a 4-plex, then we bought a 7-plex, and then from there we took those, turned them over, bought a 28-unit seller financing apartment complex, bought a 50-unit and then transitioned into hotels.

Brandon: Okay, so we’ve got a lot to cover there. So first of all, I love it. You say you went from a four to a what? What was the next one? It was a four-?

Nichole: A four and a seven, we owned those about the same time, yeah.

Brandon: Okay. So let’s hear about that because I teach this concept on BP I call The Stack, and it basically means growing exponentially rather than buying a house and buying a house, and buying a house, and buying a house, so after ten years you have ten houses, let’s say you buy one a year. The Stack is this concept where you grow exponentially. You buy a house and maybe a duplex then maybe a 4-plex, then a 10-unit then a 20-unit, whatever. I love that you kind did 4, 7, 28, 50 and then hotel.

Brandon: So the reason I teach that and talk a lot about it is because people sometimes get caught in comfortability, they get caught where I’m comfortable buying a 4-plex, and you could stuck there forever, I’m just comfortable buying a single-family house, or I’m comfortable buying a duplex, but you obviously expanded. So I want to kind of talk through that journey, I just want to point that out that that’s awesome. But before I get there, what changed in your investing strategy between the first phase, which was rough, and then you decide to get back into it, what did you do differently with that first 4-plex and the 7? Obviously things are going better because you got buying, what was the difference?

Nichole: The big thing is we understood how to manage residents. Now, we did have property management to start, and that’s when we learned that we had opposite objectives. And my husband ended up taking… When we got into the 28-unit, he ended up taking over the management at that point in time. But basically, we learned a lot more about how to evaluate the property and I’m not going to say that every one of those properties was perfect, because I think you continue to learn, right? The 28-unit was challenging, especially going from seven and a four to 28.

Nichole: But the key was that we really understood a lot more about, you know, we did this kind of cash flow analysis, and the commercial properties, we were really looking at the numbers, we were figuring out worst-case scenarios, and that part gave us more of a comfort, but I will say to your point, it is a little scary when you’re signing off on, you know, now it’s a 28-unit, right? It is a little bit intimidating, but you can do it. And then you get through that and then you’re ready to take on the next one.

David: So in your years of managing tenants, can you share with us maybe three irrefutable rules that you’ve learned from managing tenants that you will just never break?

Nichole: Well, I think the first is, and this is really important in today’s world, too, is that you have to have policies that you adhere to, and you have to have them written down. Especially when he was working with the big property management company, that was really key. I would say you also… And actually you know what? I’m going to say that all comes down to policy. So your policy, if rent is not paid within that specific date, it’s an immediate five-day, well, we’re in Arizona so, we can do an immediate five-day notice if rent is not paid on time.

Nichole: And then there are late fees that you 100% enforce. You don’t allow excuses. You also set your guidelines for your residents that, if you’re going to accept pets or you’re not, you keep those and you don’t change with the different sob stories or situations that come across. I think that main thing is really consistent policy.

Nichole: The other thing is taking care of your residents. So if they’re paying on time et cetera, make sure the apartment is clean. That they have a good, I guess I should say, a good experience, if they have issues, make sure that you’re addressing those issues. Make sure that the park area, the pool, that these things are kept up-to-date. When there are maintenance issues be responsive to that. Those are some of the things that people care about and will continue to live in your apartment complex if they’re getting that kind of service level.

Brandon: Yeah, so good. I think anybody who is currently a landlord or is going to become one needs to hit that rewind button a couple of times right now, go back and listen to it again because everything you said there is exactly… I mean, better said than I would say it. But exactly how I think of, like the difference between a good landlord and a bad one. Somebody who succeeds and somebody who fails is that skill.

Brandon: Because a lot of people can buy real estate, but the best real estate deal in the world, the best deal in the entire world is a horrible deal if you don’t manage it correctly, or manage a property manager correctly. And yeah, policies, taking care of residents, so good.

David: I think it’s really good that we’re pointing that out because a lot of the time we focus on analyzing a deal, know your numbers and that’s it. Once you buy it, it takes care of itself, but no, that’s not the case at all. Managing the asset doesn’t get talked about but that’s a huge, huge piece of if it’s successful or not.

Brandon: Yeah, it really is. So I’ve got this performance coach, his name is Jason, he’s awesome, and we meet together every other week and we talk and he has this… I wish I had the text right now, I should read it to you, he said… Actually I’ll pull it up here. He said, because we got a big deal accepted this morning, I bog offer accepted, he said, “I hope you’re starting to understand that your only lending factor is how fast you can accept the expansion.” And I love that he said that, that how fast you accept the expansion.

Brandon: So what I mean by that is what you just said a minute ago is like, it’s a little scary to do that 4-plex and then the 7-unit and then 28-unit, but my friend [Darren Sager 00:25:47] says, “Don’t be afraid of commas.” It’s just a comma. It’s difficult but you’ve got to learn, but once you accept that expansion, that new level, like that become the norm. So today I bet you could probably go and buy a 28-unit and probably be okay, like you wouldn’t be freaked out and scared to go buy a 28-unit, back at the beginning you are.

Brandon: Anyway, just a little mindset thing there was like, as my coach always told me, “Breathe. Breathe and accept the expansion.” Like you’re blowing up a balloon. Here’s my analogy, I’m taking one from you, David, you filling a balloon, and it’s a little bit tough but then just let it stay there a little bit, get the balloon used to that size and then you can expand bigger. And just breathe and just feel that expansion.

Brandon: So anyway, very, very cool again, your story doing that. So let’s get back to the 4-, the 7-, the 28-, the 50-unit, I want to actually ask you about the 50-unit. That’s a big jump, from 28 to 50. I mean 50 is now like, that’s large multi-family. Even I would say it’s a different, almost investment than a 28-unit almost. Did you find that? Or was it easier, harder, what did you learn in that process and then let’s go to hotel because I’m super interested in that.

Nichole: So a great point, the 50-unit was a dream property for the size and for the fact that I would say it was a C-class multi-family. But we always had a wait list, it was really just… It was in a good location, like all the things, right? And there was pride of ownership, not of every single resident but for the majority. And that’s why there was a wait list to come into the property.

Nichole: So yes. Things had changed there. My husband needed to train and hire an onsite person which we had never really had before. He would basically go to the 28-unit and we might have had like a few people that did certain things and would get some kind of income for that, but not having really this onsite person. That particular property had an actual office, right? So it had those types of things. So that was different.

Nichole: It was also partially Section 8, so and that was interesting because, and I remember that you know, the way Section 8 works, at least here in Arizona is that utilities, we had to pay for utilities. And so you’re getting about 25 different utility bills every single month that the bookkeeping company is dealing with. So, there’s some challenges and incremental work that comes along with that, but it’s still overall, was just a really great property to own.

Brandon: Yeah. Super cool. So, why did you go then from a 50-unit to a motel? Because that’s something I don’t think we’ve ever talked about here on this show before, motel investing.

Nichole: Yeah. So, a couple of things. When I talked about it in the beginning you have to understand your tolerance and your time and those types of things. The other piece is, what is a realistic… Don’t be super crazy, but what’s your investment return that you want to see for the work, and especially if you’re putting a lot of work into this kind of real estate. It is a lot of work, and for us, we looked around at the available apartment complexes, and of course now, we were selling the complex, we didn’t actually want to but we got an unsolicited offer three times, and finally took it on the third time. Now we’re under 1031 exchange, and we’re looking around and we like to invest locally, and that’s partially because we want to physically be able to go and see the property. I would say we were self-managing even though we had an onsite, it was still under Mike’s, my husband’s management.

Nichole: So we weren’t really looking to go out of state, and we could not find apartment complexes in Phoenix that met our criteria. And by that I mean, by that time, this would’ve been late 2016, there were enough people coming in, enough commercial private equity groups, there were enough folks coming from California, buying apartment complexes. The cap rates were around 6%, at that time. And for us, we just didn’t feel like the work was worth that low of a return.

Nichole: And we had actually been networking and talking with a hotel guy, I’m going to call him that, he’s been in hotels 20-plus years, about three years prior. Because we actually were already intrigued by hotels. And we thought, “This is an investment that we might want to invest separately,” it had nothing to do with selling our apartment complexes or anything like that. And for whatever reason that was going to be a new build, it was a little bit complicated. We didn’t actually end up doing it.

Nichole: When we got the unsolicited offer, we called him up right away and we said a couple of things. We’re going to be 1031, we had a large amount at that point, so we needed to find a large property, do you know of anything that’s a good deal, that makes sense, and also can you help us, because we don’t know anything about running hotels? And if there’s anything we learned from that very beginning is when you don’t know about something, you either partner with someone or you get the education to be able to be confident with that particular real estate asset.

Brandon: Yeah. So good. So good. So before we talk a bit more in-depth on the motel. Hotel or motel, what’s the difference?

Nichole: Hotel. Motel would imply that it would be like a roadside, you know, like one of those places-

Brandon: Yeah. Where a horror movie takes place at.

Nichole: Exactly. It’s a franchised hotel. It’s actual name brand and you know, not in a scary place.

Brandon: Okay, so it’s a hotel. So before we go there, though, you mentioned you were under a 1031 exchange, can you explain to those who maybe have not heard that term before, what exactly a 1031 is? And then, maybe like because I’ve been through it, some of the difficulties of that 45-day window.

Nichole: Right. So we have actually used a 1031 a few times, and one time we didn’t and we wished we had. So I would always encourage people to explore it. So the minute, and I always say, if you even have just one house that’s an investment property and you’re thinking of selling it, investigate 1031 exchange. And it actually doesn’t hurt you to at least get into one. So basically you have an intermediary who holds the funds, and you have a time to identify a new property which has to be like or greater than what you just sold. And I believe it’s about the debt service, so at a point you can see that this is growing your portfolio because you can’t take the proceeds from the sale of a single-family home and then just apply it to a less expensive single-family home. It would either have to be the same or bigger. And you have to identify within certain timeframes.

Nichole: But what the 1031 exchange allows you to do is take the capital… Like all the proceeds, basically. All the proceeds from the sale of the property, put them into, let’s just say, like a vault, which is the intermediary, they stay there, and then you go find your new property and you leverage all of those funds into the new property and you don’t pay capital gains tax. And, more importantly, because this is what came to haunt me, you don’t have to pay the depreciation recapture.

Brandon: Yeah. Yeah, that’s huge. Maybe explain that for those who don’t know it, was depreciation is and depreciation recapture, that’s huge.

Nichole: Right. So a huge benefit of real estate investing is that you could… So let’s just say you have a single-family home, and you’re making $5000 a year on that particular property after everything. You can actually, through depreciation, and let’s say the value and there’s your CPA would do this and figure out the depreciation amount, and it’s basically 27-and-a-half years, that particular asset is depreciated. So on paper it can look like you did not make any money, because maybe it’s $5000, and that just basically means that you get to keep that $5000 in your pocket and not pay taxes. Well, when you go to sell, though, the government says, “Okay, you no longer have that property, we need our tax revenue back that you didn’t pay during those years you owned the property.”

Nichole: But the 1031 exchange allows you to not pay that. And it’s so important because it’s pretty easy to sit there and think, “Okay, well, I’m going to make X amount in this property and capital gains,” it’s really not that big of a deal, and in my case I thought, “Well, it’s not that big of a deal.” But the depreciation recapture, especially on these bigger properties, that is a huge deal. Huge deal.

Brandon: I think that can expand quite a bit, too, if you do like cost segregation study or do accelerated depreciation and like, yeah. I sold a 24-unit a few years ago, bought another 24-unit in Ohio, and then sold that one and I’m buying a tri-plex. So I went smaller, but it’s about the same price, actually I’m should be having to pay in a little bit because it wasn’t exactly the same. I had to downsize.

Brandon: But anyway, it’s basically the same price, but I went from 24 units to three units, and moving a debt from one to the other because it was going to be a whole lot more simple to manage a three-unit than a 24-unit. But yeah, that 45-day window that you’ve got to identify in 45 days, that drove me crazy last time, and I identified on day 45. This time I got lucky because I found a deal before I sold the other one. But did you have that problem? Were you stressed with, “I have 45 days to find that property?”

Nichole: So when we moved in the hotel that one was not that bad because we’d already been looking around the Phoenix metro area, and we realized that there wasn’t going to be a property. So when we contacted the hotel guy, he was able to very quickly get back to us with his ideas and thoughts and so that one wasn’t as bad. But we certainly had that in the past. It is very stressful, but then you think, “Okay, well, if you can’t find anything then you are going to have to pay,” and at least I’d say just get into it and then try, and then if you can’t, you can’t, unfortunately.

Brandon: Yeah. And this is much deeper than we need to go and this might confuse people. But there is something called a DST out there, so the DST where you can 1031 into a… It’s kind of like a syndication, you can put your money into a DST, and park it there, and get super low returns. I might even do a DST some day just to take people’s 1031 money at super cheap rates because they’re kind of stuck, they have no other option, right?

Brandon: So you can put money into a DST, get a really low return for a while, and then take the money out of the DST and go put it into a new deal when you find one. There is an avenue there, just it get a little complicated so I’m not going to spend that time. But just write that down, if you’re in that situation, you’re at a 1031 right now and you’re in the 45-day window, yeah, yeah.

Brandon: And again, it’s not 45 days to close, right, it’s 45 days to identify and then I can’t remember, six months to close?

David: 180.

Brandon: 180 days?

David: 180 days.

Brandon: Okay.

David: And the DST stands for a Delaware Statutory Trust.

Brandon: Oh, look at that. David green coming in with the brains.

David: Actually our producer Kevin filled that in. He passes me the ball, all I got to do is lay it up [crosstalk 00:37:12].

Brandon: Yeah, there you go. Just like, I don’t know, any basketball examples you can give there?

David: Don’t try to give us basketball analogies Brandon.

Brandon: I was going to let you come in with the… I was going to assist you with the analogy right there.

David: Just like John Stockton to Karl Malone.

Brandon: Okay, there we go.

David: So I want to ask you something, Nichole, for those people that are interested in owning a hotel, investing in hotels, you’ve already mentioned, as a new person you either need to partner with someone who knows or get the education. Let’s say that they have a little bit of an idea what they’re doing, what should they be looking for in a deal?

Nichole: So when you’re evaluating a hotel property, some of the things are very much the same, right? You are absolutely looking at location, are there economic drivers happening in that particular area? Why are people traveling? But, it would employers, it would be, is there a military base? What kinds of things exist around that area, and you also want to look at your competition. In hotels, just like in multi-family you have A, B, and C, in hotels you have different levels, you have like your high-end resort, you have boutique, you have limited service, you have upper mid-scale, and they seem to add more and more categories because the brand keep coming out with new brands every year.

Nichole: But basically who in your competition, where are they? And how close are they to amenities? So when people are traveling, they want to be close to entertainment, work, restaurants, those kinds of things they want to be close by. So you look at the location.

Nichole: You also want to look at the revenue per available room, and you want to look at the average daily rate, but that doesn’t mean anything except for, if you can compare it the peers. So there are things in industry called STAR reports, and those basically will say, hey, of your peer-similar type of hotels, similar category, similar area, right, this is how they’re preforming. And in our case, just like with multi-family we always look for value add, right? We look for an opportunity where we can come in and improve operations. So you do the same thing. You kind of want to look for they’re not doing as well as the other hotels, and why is that? And then that can also be a negotiation, too. “Hey, I noticed what is happening here,” and you can look at your factors and say I’m going to offer less or whatever the case may be.

Nichole: So I would say those are the things, and of course, just the basic. What’s your mortgage going to be? What’s your loan going to be like? And can you clear that if… Look at about 2010, that was the worst year for the hotel industry, so look at 2010, what were the average occupancies during that timeframe, and I think in Arizona we were probably talking about 50% but in some areas of the country it may have been 30, depending where the hotel’s located. So when you have those lower rates, are you going to be able to make the mortgage? Are you going to be able to pay the staff? And if you are, okay, it’s not going to be great, like you’re not going to be rolling in the cash, but you know that you’ve conservatively underwritten the deal.

Brandon: That’s really good. So you mentioned staff, how much of your time is spent now dealing with… Because it’s really what you do, you bought a business, right, you bought a business that provides housing, temporary, for people by the night. Is the majority of your business now just like managing people and teams and hiring and firing or do you have… How does that work?

Nichole: So, it’s a great question because in the hotel industry you can also find the equivalent of property management-type of companies. And there are different layers and different kinds of services, so on our case what we have is, we have the 20-year hotel guy, who, I would say is like and advisor, so oversees. And he had the connections and said, “Okay, well here is a good property management company, but all they do is hotels.” And so what’s important about that is that they do handle the staffing, they handle the payroll, they handle the bookkeeping for the hotel itself. So paying for the linens and those kinds of things.

Nichole: They also handle, let’s just say, all of a sudden somebody quits and now you have a gap, maybe it’s your night person. If you’re 24-7 desk, well they have someone that can come step in, so you’re not having to scramble, or you’re not having to go work that. So we pay a premium for that, right, so that does cut into our revenue and our profit, but the reality is, we want to continue to grow our business, we’re actually in the process of our next hotel, we can’t do that if we’re having to day-to-day manage those kinds of things. So then it become more managing the manager, as we talked about in the beginning. But there’s just a few more moving pieces with that property management.

Brandon: I guess I never even realized that there would be property managers for hotels, like I didn’t know that was a thing. What are the typical rate? I don’t know if it’s the same property management at 10% or are they way higher, more like vacation rentals which are like 50%?

Nichole: So the company we’re working with is 2%, so that’s not bad at all. But it’s 2% of the revenues and the more we make the more… So actually I would say they’re pretty well aligned, and then staffing. Now we hire a general manager, so we’ve got that onsite as well, but yeah, about 2%.

Brandon: When you find another motel, or hotel, sorry, hotel, can you share a general manager over the two of them and save some costs there?

Nichole: Yeah, absolutely. In fact I met, at one of the hotel conferences, I met someone who did that. His two hotels are right in the airport area, and they’re just a half-mile from each other, so yes, you can do that. And I think you would get some good economies of scale in that way.

Brandon: All right, so, that’s fascinating. The motel thing… Hotel thing is interesting, so here’s what I love about that, we talk about it the whole time, but there’s so many ways to make money in real estate. Some people are like, “I do hotels.” Some people are like, “I do motels.” Some people do low-end Section 8 single-family houses and you could find an example of somebody who’s super wealthy in any one of those niches, so.

Brandon: It’s very cool you did it, you’re going all in, it sounds like that’s your passion now, which is cool. Are you still looking for other things as well, other types of real estate? Are you hotel-focused?

Nichole: We are hotel-focused, we’re in the middle of a syndication right now, actually supposed to close later this month. So I’ll talk first syndication, so to your point about expanding and now once you’ve got the model down and you understand how it works and your first hotel’s doing well and you can take that and people have confidence, okay, you know what you’re doing, and then you can grow from there.

Nichole: And now we’re only really limited by how fast we can find a good property where the numbers make sense. Which, this one has been almost nine months in the making, so it definitely takes some time, at least in today’s market.

Brandon: Yeah, that’s cool. So let’s talk syndication real quick. Unless David you-

David: I was going to ask, I had a question with that.

Brandon: All right, yeah. For those who don’t know what a syndication and then let’s talk about what did you learn in that process?

Nichole: Okay, so a syndication is basically where you are pooling private money, typically for the down-payment on a large property. But you could also be pooling that for… What do I want to say? Repairs or large loans that you would need to upgrade and renovate the property as well. So basically, you have options. The option that we chose was a 506C, but you also have a 506B option. So you would work with the real estate and basically SEC entities structure… Like a lawyer that really understands law and contract and documents around this, so we did.

Nichole: And the 506B would mean that you are only having investors that you personally know. And there aren’t really a lot of qualifications for those investors, but just that you know them and you’ve known them for a long time, not like I just met you and now you’re going to sign up. Apparently there’s a length of time period. The 506C is for accredited investors only, and that means you can also widely talk about it. You can advertise if you would want to, you could put it on Facebook et cetera.

Brandon: Yeah. Why did you choose… Because I chose the 506C because I have a big Instagram following and a podcast following, so I can talk about my 506C all day long, “Hey everybody, check out my 506C,” is that why you did it, or was there another reason?

Nichole: Yeah. So I have a podcast and I did talk about it on my podcast. I would say, though, the reality is that we could’ve done 506B because we do know absolutely everyone, and that is part of this first syndication. But from thereon what happens is, as you grow and you expand now you probably are going to be talking about people that you don’t know that are friends of your original investors. So I can see where it makes sense either way.

Nichole: But yeah, we just did 506C. We have learned that the… Oh, my gosh. It’s pretty complicated to do this with a hotel. I think if we were going to do it again we would probably raise more of a fund, and then go, versus what we did is, we socialized the idea of this, we already were looking at hotels, people knew we owned a hotel within our social circles and within our work circles. And we identified a property and then we were able to really get the details around what are the returns? What can people expect? People wanted to know what is the property. So we couldn’t really raise a bunch of funds initially, I would say, without an actual property we could point to.

Nichole: Once we did, though, we actually get in under contract, the time pressure there, I would say is way more than on a 1031 exchange. The pressure to make sure that you’ve got all of the funds, that you’ve talked to all of the people, that you’ve answered all of their questions, is a lot of process that we go through. And then because it’s a hotel, it’s slightly more complicated. First of all, we are leveraging a small business loan, so that’s the government and now our loan is very different than just working with a commercial lender like we used to in multi-family properties. So that adds a layer of complexity.

Nichole: We also have the franchise, the franchise company wants to vet out the people that are part of the partnerships, so that has also created just incremental work and just it’s been very intense for almost four months, I would say. Just because of these moving pieces and the process and narrowing everything down and getting all the funds ready.

Brandon: Yeah. And this is all part of that expansion, that balloon filling up and you’re learning all these things and it’s like it’s crazy and you’re not sure… As you’re figuring out, but then next time you’re going to be at that new level, so you’re building from that point, that’s your new foundation and you’re building from there. Super cool. That’s the story of your investing, so.

Brandon: Now I want to move on to the next segment of the show here, which is our Deal-

David: Deep Dive.

Brandon: This is the part of the show where we dive deep into one particular property that you’ve recently bought, maybe a good one maybe a bad one, we just want to dive in to the details on it. So do you have a property in mind that we can pick apart?

Nichole: Let’s talk about the one that we are looking at purchasing right now.

Brandon: Okay, that’s cool. I like that. And we’ll start with the basic, What is this? I think you already said it’s a hotel, correct?

Nichole: It is a hotel.

Brandon: And how big is it?

Nichole: This is a 64-room, upper mid-scale hotel.

Brandon: Okay. And are they like name brand? Sorry, David.

Nichole: Yes. Name brand.

David: Is upper mid-scale similar to… Within real estate we talk about A-class, B-class, C-class, so you guys have a different classification?

Nichole: Yes. And so the piece of this particular hotel is that it’s limited service. So that would mean that there is free breakfast but that is the only food and beverage component. So there’s not a restaurant, there’s not room service, that’s what the limited service means. And it also means that there’s certain expectations, it’s really targeted toward a business traveler, so not necessarily a resort where people are hanging out, although it does have a pool. And upper mid-scale is classification based on aesthetics and based on the brand as well.

David: Okay.

Brandon: Beautiful, okay. How did you find this deal?

Nichole: So we found it also through networking with our hotel guy and he’s really plugged in with hotel people all over the state of Arizona, and we looked at properties in Tucson, outside of the Phoenix metro area. But yes, we found it through our hotel guy.

Brandon: Cool. Let’s see, how much was the property, how much are you buying it for?

Nichole: So we are buying it for 5.2, but our loan is for 5.5 because we have 300K that we need to put into property improvements.

David: Very nice.

Brandon: What kind of improvements? Like what do you need to improve?

Nichole: Yeah, so in the hotel industry there is a term called PIP, not to be confused with those in corporate America but it does mean Performance Improvement Plan, which is kind of negative. But essentially what happens is, the hotel brand and all of those things you get as a result of being a part of the brand, they have standards that they want to maintain, and they certainly don’t want someone staying at a hotel that is not what they expected because it’s old and tired and hasn’t been updated.

Nichole: So the Performance Improvement Plan are specifications that are required and within certain timeframe, certain components and different timeframes to implement in the hotel. In this case, this case is in… It’s fully converted but it’s in the conversion physical aesthetic process, from one brand to another. So the exterior’s already been converted, the lobby is already updated and refreshed, but the rooms are dated. They are looking like from 20 years ago. And they’re okay, but do you know when you stay in a hotel and it’s dated like that, it’s almost like it doesn’t feel clean. You just don’t even want to touch anything. So we’ll be updating all of the rooms, and that is where the 300K comes in.

David: How did you negotiate this deal?

Nichole: Okay, so the original asking price was 5.7, and so basically I think that the current owner was looking at it and said, “Okay, this is what will be worth,” but the reality is, we had to make that investment. So we asked for copies of all the quotes that he had received for that renovation, and we also checked with the franchise company to see, just to make sure that we understood what those costs would be. And then we negotiated from there.

Nichole: And the other thing that had happened with this particular hotel is that hotels are seasonal, although in some parts of the country they’re not so much, like Orlando I think, has year-round people that are staying there. But in Arizona, our seasonality is that summer is the worst time. People are not traveling to Arizona when it’s 115 out in July. So our best season comes into October on through up until May. The person that owns the hotel right now essentially did a conversion. Now just think about this, it’s construction, it’s branding that’s not fully available, you’re probably not on the corporate travel booking sites, all those things as you convert. They did this during the busy season, which impacted their revenue greatly.

Nichole: So my husband also used that as part of the negotiation saying, “Hey, I know you think the hotel could do this, but I’m looking at actuals and you didn’t.” So he leveraged that plus the construction.

Brandon: Yeah, I always found people are selling properties, it’s always… People are so generous with their, “This is what the property performs,” like, yeah, in its best rose-colored glass analysis. But, you know, it’s not always the case, so great negotiation strategy there.

Brandon: How did you fund the property? I guess we already know that, syndication, right?

Nichole: Syndication through a SPA and the particular loan that we’re using is the 504C SPA loan.

Brandon: Interesting. All right. Do you mind me asking, and I don’t know if you can say, if you can’t say this let me know, but what kind of returns do you offer investors? Is there a cash flow that you expect or is this mostly back loaded at the end when you refire sell? Where’s the investor return come from and what do you kind of predict?

Nichole: Yeah, so yes, we have an annual cash flow that you… But it’s not a preferred rate of return, but there is a cash flow that starts at 10% and then goes up as the revenues increase. So as you renovate, now people want to stay because the rooms aren’t 20 years old. And then there is a seven-year, so the backend, the selling of the property, but the total is IRR close to 18%.

David: Now I have a questions, it’s not one of the Deal Deep type questions, but when you go to sell, say five years later, whenever it is, is the formula the same as multi-family where you’re going to use the NOI and the cap rate or is it more complex because it’s a hotel?

Nichole: Yeah, no, the formula’s the same, we did a waterfall, it’s exactly all of the same processes. There’s basically paid for performance on how you manage the property, and you have to hit the hurdle, investors are paid back, right, you have to hit the hurdle before you actually get paid as the syndicator or as the sponsor. Yeah. All of that is exactly the same.

David: Very cool. Okay, so with this hotel, what are your plans, what are you going to do with it?

Nichole: So, we’re pretty excited about it because we’re going to be testing a few interesting strategies with this particular hotel. But just out of the gate some really basic things. We’ll be going after corporate contracts which are not in place today. And the location is really close to a lot of businesses and some major, major tech companies in that area.

Nichole: The other piece is a huge thing in the hotel market, especially in like a limited service where it’s free breakfast and WiFi and it’s not that many amenities and it’s a good quality hotel, is the traveling sports teams for kids. So you know, they want to book like 40 kids coming in and they’re going to play soccer or they’ve got tournaments, and there is a facility just two miles away from the hotel. And there’s actually travel agencies, that that’s all they do is book travel for these traveling sports teams.

Nichole: So we’ll be going after corporate and traveling sport teams. And then we’re going to be really active also in the community because I have this theory that people don’t know, and people actually write me, they say, “I didn’t know regular people could invest and own hotels.” You see a name brand and you think it’s like a big corporation. So that something that we’re going to test is making sure that people understand we’re local, and our hotel is involved in local organizations, local charities, and really be a part of the community, that we are not just like this name brand, some faceless corporation, some big private equity. It’s us, we’re here, so we’re going to be testing that out because I think that’s really important for people to understand and know and I think as people want to support more local businesses that will be something for them to understand as well.

Brandon: Yeah, that’s so smart. I’ve always liked when I see businesses say like, “Locally owned and operated,” I naturally am drawn to those. Even if they are a brand name, it’s like an Applebee’s but says locally owned and operated I’m instantly like, “Oh, that’s cool, I should go there.” I don’t know. I bet you they’ve done studies, but just like having that advertisement, it probably increases conversions and people showing up, so yeah, that’s neat.

Brandon: All right, so I guess we don’t have an outcome yet but I guess what lessons have you learned overall from this deal so far?

Nichole: Oh gosh, I would say start the socializing with more investors than you think you need earlier. That would be the other thing. I think that, I would say 90% of the people we talked to ended up being very excited in investing with us in this particular property, but we probably didn’t talk to enough people. So I think that would be an important… So try to raise more, this is all going back to the whole conservative thing, right, when you’re buying the property underwrite it as the worst can happen, when you’re raising funds raise more than you actually need and be really way above that for just factors and things that will happen. I would say that is a huge lesson that we learned.

Nichole: And then the other thing is, we would structure the syndication a little bit differently, more of as a fund so that it allows us less of this time sensitivity, and then more power to go after a property with funds already in a location and ready to go.

Brandon: That makes perfect sense. Yeah the investor thing is important. I noticed that too, is, we had a $5 million we raised, and we had $6 million, immediately said $6 million dollars committed, but then actually wired in money is about half of that. Now I haven’t pushed too hard, I could probably get a little bit more, but I’ve always heard that even though people are committed to it, they might not jump in, so raise more than you think you’re going to need.

Brandon: And the deal I got accepted this morning, I just heard this morning, I mean, I’m going to have to raise 15 million for that one. So it’s like three times or four or five times bigger than I did already. So yeah, I’ve got to start meeting more investors, and it’s that whole thing. So yeah, the networking is so key, even if you don’t think you’re going to syndicate right now, you’re not going to buy a motel or hotel, apartment, mobile home park whatever, now, but five years in the future I might, start building your network right now, start connecting with people in that world and building your name as somebody reputable, because it’s going to come back and help you a ton.

Nichole: So true, yeah.

Brandon: All right, well, let’s move on to the last segment of the show. I think we’ll forego the Fire Round this week and head right over to the World Famous-

David: Famous Four.

Brandon: All right, this is the Famous Four, part of the show where we ask each guest the same four questions every week, and we want to know what you’ve got to say. So, Nichole number one, what is your current favorite real estate-related book?

Nichole: All right, can I say two?

Brandon: Sure.

Nichole: Okay.

Brandon: It costs you extra though.

Nichole: What, what did you say?

Brandon: That it’ll cost you extra.

Nichole: Okay, all right. I’m good with that. So the first, this is going to sound not that exciting. It’s basically the tax strategy book that’s on BiggerPockets that was written by Amanda Han, part of Keystone CPA. Now, why? Because I read this book and I realized that we probably had a ton of leakage and it was our fault, again, because we didn’t work with one, we didn’t work with a real estate-specific CPA at the time that I read this book, and two, your CPA, it’s not their job to question and to bring… So you need to bring the strategies and the ideas to them. Let them tell you no, but you need to do it, and this book just taught me that we probably made a lot of mistakes there, too, as well.

Brandon: Okay, very good.

Kevin: What about your favorite business book?

Brandon: Wait, did you have a second book? You said the two real estate ones?

Nichole: Yeah, well, I was just going to say, I have a case study, actually, slash blueprint that’s actually going on my website and it’s called How We Overcame A False Start, To Go From A 100K 4-plex To 14-million In Eight Years. So, that’s my second one.

Brandon: Okay, good deal, good deal.

Nichole: Okay, business book. That’s going to be Michael Hyatt’s Your Best Year Ever. And the reason I really like that book is that I am very guilty of working a lot and being just in the grind and the hustle and Michael Hyatt focuses on, “You should have well-rounded. You need to make time for these other pieces in your life, and not be so hardcore hustle all the time.” So I really like that book for setting some goals in those other areas, and working through those throughout your year.

Brandon: Yeah, Michael Hyatt, it’s great. I like that guy. We should get Michael Hyatt on the podcast sometime. Maybe on the business podcast, maybe the real estate one. Anyway, he’s fantastic.

Brandon: All right, next question. David?

David: What about some of your hobbies?

Nichole: Okay, I have, one, I love Scandinavian murder mysteries, so it’s like Jo Nesbo, Camilla Lackberg-

David: They have a specific category for Scandinavian murder mysteries?

Nichole: Yes. Well, I don’t know. I just go to Good Reads and I’ll pick out the few authors that are Scandinavian. Okay, here’s why, because I love mysteries to begin with, but those, because the names are weird, the names of the streets are odd, it makes you pause and it makes me have to read a little bit harder than if I would just pick up a book by a US author, I’m going to skim it and be done with it very quickly. So yeah. I love those.

David: There you go.

Brandon: All right, very good, very good. Last question I guess. Actually no, this is your question, well, no, this is my question. What do you think separates successful real estate investors from those who give up, fail, or never get started?

Nichole: I think it is making a plan. Now let me talk about this really quick. So I’m in tech and I love processes, procedures, strategies, love all that. I think when something goes wrong, get quiet, take the emotion out of it and make a plan with actionable steps you’re going to take. So that blew up? Okay, fine, what am I going to do about it? I think it’s just having that focus to say, “Okay, move on, and here’s the next step I’m going to take.” So making a plan.

Brandon: Yeah, so good, yeah. Well cool.

Speaker 4: Thank you, Nichole, last question of the day from me, can you tell us where people can find out more about you?

Nichole: Sure. You can reach me at my website, which I do need to clarify for a second. I’m in tech and I have a podcast for people in tech, where we talk about real estate investing but also other things that other tech people are doing to build wealth. So, the website is called The Richer, R-I-C-H-E-R, Geek, dot-com, and you can reach me there.

Brandon: Nice. The Richer Geek, I like that, it’s awesome. All right, well Nichole, thank you so much for joining us, it’s been fantastic, learned a ton today. I’m excited about the hotel thing, I think that’s really, really neat, definitely something I would… When I’m done with the mobile home park thing I am going to look more into it, I think that’s super cool. I am just one of those, like, what do they call them? Squirrel, “Mom, I tried.”

Brandon: I really want to just… I’m going to look into those right now. And in fact, just this morning, one of my best friends sent me a text message and said, “Hey can you help me analyze this motel,” in this case it was a motel in a vacation area, kind of like a woodsy national forest vacation area, and I’m like, “I don’t know anything about it, but that sounds super cool.”

Brandon: But anyway that’s why this was super cool timing, talking to you today. Obviously just a little bit differently, but I might have to pick your brain a little bit more at some point in the future on this, so, we’ll see. Anyway, Nichole-

Nichole: Fantastic.

Brandon: Thank you, I appreciate it, you brought so much good stuff today. David, you want to take us out?

David: Absolutely, but first let’s hear this week’s BiggerPockets pro member success story.

Brandon: Yeah. All right. All right, so I’ll do that, that today I want to give a shout to one of our pro members who recently closed his fifth deal, his name is Andre Taylor, he’s from St. Louis, Missouri, he’s got five multi-unit properties now, which is awesome. Andre recently bought a duplex for 62 grand, had some mold on the first floor, and after he takes care of that, he plans to flip it, so, very, very cool. So check out Andre’s profile, we’ll link to it on our show page, on biggerpockets.com, show 354, and as always if you want the chance to have your deal highlighted here, email [email protected], and put the word “Pro Deal” on the subject line, and we might be talking about you.

Brandon: And now finally, David, do you want to take us out?

David: I would love to. Thank you, Nichole, this is David for Brandon Can-I-Buy-A-Vowel Turner, signing off.

Brandon: That’s pretty good. All right Nichole, that was awesome, thank you.

Nichole: Thank you [crosstalk 01:09:26].

Brandon: Yeah, really, really good. Really good.

David: I think that’s the most in-depth we’ve ever got on hotels that I’ve been a part of.

Brandon: Yeah, yeah, definitely. And not motels like I kept saying.

Nichole: Well, I like how you said it’s where people get murdered and killed [crosstalk 01:09:41]. Scary movie motels, yeah.

Brandon: Exactly, yeah. The motels are where you get murdered.

David: The motel’s the thing that has the sign with the letters you can take off and on, has like free WiFi, that’s something that you should be really… “Oh, my God, pull over there, they have free WiFi.”

Nichole: Yeah, yeah. That’s hilarious.

Watch the Episode Here

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In This Episode We Cover:

  • Her 3 irrefutable rules for dealing with tenants
  • How she scaled from SFH to multifamily and hotels
  • How she manages her managers
  • What she learned from her first deal that lost her money
  • Why she committed to really learning the asset class of real estate
  • Why having clean apartments is so important to tenant relations
  • Why so many investors make the mistake of not focusing on asset management
  • Why she turned to hotels when she couldn’t find anything in the multifamily space
  • How the 1031 exchange impacted her capital gains and depreciation recapture
  • Which economic drivers she looks for when choosing a property to buy
  • What she’s learned about operating syndications in the hotel space
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “Just because you can find a property, doesn’t mean you should actually buy a property.” (Tweet This!)
  • “A property manager’s always thinking of what’s best for them—not what is best for you.” (Tweet This!)
  • “People don’t know that you can invest in a hotel.” (Tweet This!)
  • “We always look for value add. We look for an opportunity that we can come in and improve operations.” (Tweet This!)
  • “If you don’t know about something, you either partner with someone or you get the education.” (Tweet This!)

Connect with Nichole

Real strategies that work for real people seeking to build wealth through real estate investments. Co-hosted by Brandon Turner and David Greene, this podcast provides actionable advice from investors and other real estate professionals, who chat about failures, successes, motivations, and lessons learned.

    Tiffany Roberts from Eastern Michigan
    Replied 19 days ago
    I really enjoyed this one. Her story initially sounds like something that the average person could never do but when she breaks it down it it's really relatable and repeatable. It provides a lot of insights and motivation!