From Buying C/D Class to Buying A Hotel (with drone video)

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As some of you know, I started real estate investing by buying in the war zones of Cincinnati. 

For those of you who don't know, here's part 1 of how I started, lost everything and then acquired over 1,000 apartment units.

https://www.biggerpockets.com/forums/55/topics/690349-from-bankruptcy-to-1-000-units-part-1-thru-the-dark-tunnel

I've since "traded up" from "F" areas. First time I traded up from "F" to "C" areas  I was surprised that the tenants actually called you to let you know they will be a few days late on the rent! I thought I went to heaven :D

Below are a few lessons I learned along my journey from investing in the "ghettos" to hotel investing. My hope is that this will encourage newbies and for those of you who are more experienced, this will expand the possibilities of what you can achieve. 

So, here we go:

Lesson #1: Have a VISION BOARD: what your mind can conceive and believe, it can achieve

You want to become a real estate millionaire? or billionaire? or you simply want to acquire cashflow producing rental properties? Have a vision board. It works. I made one in 2003 and at that time I was broke. I put down on my vision board that I own apartment buildings, hotels, houses, etc. even though I was living back at my parents' home. I also wrote a check to myself for $1 Million.

Almost everything I put on my vision board became a reality, including being able to cash that $1 Million check.

Lesson #2: It's all in the DEAL: so become a master at finding good deals

I realized that the money is in FINDING good deals. The better you become at finding good deals, the higher the chances that you will succeed. Finding good deals is not just a matter of calculating the numbers. Anyone can do that. However, you need to dig a little bit deeper and find the value in a property that others might have overlooked. Here's a deal that others viewed as a bad deal - it has low occupancy and it's in an D area. And yet, in 60 days, I got the building 100% occupied and sold it 6 years later for over a $1 MILLION profit.

https://www.biggerpockets.com/forums/311/topics/644570-how-i-made-over-1-million-on-1-deal-after-6-years-of-headaches

Lesson #3: Know-WHO is CRITICAL to Success: what you know is important but WHO you know is MORE important

 The people you hang out with is very crucial. Hang out with those who are broke and you will remain broke. When I lost everything, I hanged out with people who were wealthier than me. I networked like a mad man. And I spoke to everyone who has some interest in real estate or has work related to real estate. Through networking, I met my future business partner, Nate - who is a whole lot better than me at construction and rehab management. Here's his story:

https://www.biggerpockets.com/forums/12/topics/748332-using-real-estate-investing-to-help-people

Also, I would never be able to buy a hotel without my private investors, specially my investors from China. How did I meet them? Yup - you guessed it right: through networking. Here are the details:

https://www.biggerpockets.com/forums/432/topics/738518-how-to-raise-private-capital-experience-with-chinese-investors

When I first tried to go into hotels, one of the obstacles I encountered was financing. I acquired over 1,000 apartment units with a multi million dollar net worth so I thought I could qualify for a loan to buy a hotel, right? Wrong. The lender asked me who is my hotel operator-manager is and when I answered "Me", they turned me down. I couldn't believe it. 

So, I solved it by...NETWORKING: I found a hotel operator who has over 5,000 hotel keys under management. This hotel operator has never lost a hotel even through the Great Recession. I partnered with them. And I am so glad I did.

I went back to the lender and they approved my loan. With hotels, the typical loan is 65% LTV. However, with the strength of the hotel operator backing me, combined with my & my partners' net worth, and how great the deal is, the lender gave me a 75% LTV!

That hotel operator I partnered with is the one doing most of the work and I am so happy with them. In fact, they've already increased the occupancy and we have not even started the PIP (Property Improvement Plan) yet.

Here's the drone video of the hotel (it's in Columbus - a Marriott Courtyard):
https://youtu.be/MepaNmcrnzk

My Advice, if you want to succeed is the third option...

I've been approached by some people here on BP and been asked for advice on what they can do to "break into" apartment investing. I told them there are 3 ways to do it:

1. You can do it yourself and do it the long & hard way (and have a low chance of success)

2. You can pay someone to teach you how to do it  & coach you - I don't recommend this because you will be out $10K-$20K paying a coach and you still have to do all the work yourself and you still don't have access to all the resources you need to succeed

or

3. You partner with one who has done what you want to do. It's easier to qualify for financing and easier to raise private capital. Chances of success is way higher because you can leverage on the experience and expertise of other people - just like what I did leveraging on the experienced hotel operator I partnered with. Of course you have to provide value so you can get experienced investors to joint venture with you. Here are some lessons on Joint Ventures:

https://www.biggerpockets.com/forums/432/topics/744841-joint-venture-and-how-to-buy-more-apartments-actual-experience

If someone who was broke and only knew about buying dirt cheap properties in the ghettos...can own a hotel - anyone can do it too! 

The bottomline is this:

You have to believe you can do it, focus on finding good deals and network your way to achieving your dreams!

Originally posted by @Joseph Firmin :

@Michael Ealy - This is awesome, nicely done. You solved big problems and were compensated in return! 

 Thanks Joseph.

Yup - that's what we do: solve real estate problems and get paid BIG for doing so.

Originally posted by @Tj Hines :

@Michael Ealy thanks for being so thorough and dropping gems in this community. Pretty rad.

 You're very welcome TJ.

Thanks for your contributions too. Your answers to the questions people pose here are spot on man!

Originally posted by @Monica Lewis :

This is super inspiring. You are a true success story

 I've been doing it for a while so it's not really that big of a deal.

You have the same potential in you Monica :)

Originally posted by @Ethan Smith:

You are fund raising ?

 Ethan, is your question - did I fund raise to buy the hotel, or am I fund raising NOW?

For the hotel deal I described here, I only have a couple of investors. Made phone calls and a few emails from my current list of investors and they liked the deal as much as I did so they invested.

For future hotel deals, I am always buying so I always need more capital to acquire.

My goal is to have $1 BILLION worth of hotels in addition to the 1,000+ apartment units I own.

do you raise funds from this site ?


how big is your team for 1000 units ?


Originally posted by @Michael Ealy :
Originally posted by @Ethan Smith:

You are fund raising ?

 Ethan, is your question - did I fund raise to buy the hotel, or am I fund raising NOW?

For the hotel deal I described here, I only have a couple of investors. Made phone calls and a few emails from my current list of investors and they liked the deal as much as I did so they invested.

For future hotel deals, I am always buying so I always need more capital to acquire.

My goal is to have $1 BILLION worth of hotels in addition to the 1,000+ apartment units I own.

@Michael Ealy another super informative post! I love the advice on partnering. I may have missed one of your earlier posts, but how did you and Nate connect?

(I’ll assume the answer is “networking”, but some specifics would be helpful!)

Originally posted by @Tony Robinson :

@Michael Ealy another super informative post! I love the advice on partnering. I may have missed one of your earlier posts, but how did you and Nate connect?

(I’ll assume the answer is “networking”, but some specifics would be helpful!)

 Here it is Tony:

https://www.biggerpockets.com/forums/12/topics/748332-using-real-estate-investing-to-help-people

Originally posted by @Angeline Mentor :

@Michael Ealy

Thank you for such an inspiring post. I want to purchase Multifamily properties. My area in the northeast is very expensive.

Would love to hear your thoughts on buying out of state.

 Angeline,

There are 2 things you need to have to invest out of state successfully:

1. You need to know the market you're going to invest in; and

2. You need to have a good team on the ground

If you have those two, investing out of state is almost the same as investing in your backyard.

Originally posted by @Ethan Smith:
do you raise funds from this site ?


how big is your team for 1000 units ?



 Ethan, is your question - did I fund raise to buy the hotel, or am I fund raising NOW?

For the hotel deal I described here, I only have a couple of investors. Made phone calls and a few emails from my current list of investors and they liked the deal as much as I did so they invested.

For future hotel deals, I am always buying so I always need more capital to acquire.

My goal is to have $1 BILLION worth of hotels in addition to the 1,000+ apartment units I own.

 Ethan,

Some folks here on BP has approached me wanting to invest in my deals. I actually turned down some and some can't invest because my minimum is typically $100,000 and they have to be accredited investors.

On the 1,000 apartment units, I own a Property Management company comprising of 3 people that handles about 400 units and the management of 600 units are with my other partners.

Originally posted by @Lee Bell :

Thank You @Michael Ealy

I will have to come back and read some of your linked posts.

Nice way to give back when you have succeeded. :>)

 Lee, giving back is a crucial component of success my friend.

Originally posted by @Matt Moylan :

Amazing, @Michael Ealy!  Hopefully I'll be at that level one day!

 You can do it too Matt.

Make deals, hustle, go to work...and if you don't quit, ten years from now or twenty or maybe even in 5...you will look at yourself in the mirror and say "Heck - I did it too. Mike's right!"

Very inspirational . You are a modern day zig Zigler for our time mike . Even In the little piece of success I’ve seen ,I gotta say looking back that I’m surprised at myself doing this on a shoestring budget but I refuse to give up and I follow through  . Oddly enough I think a big key is writing your goals down . When I heard all my personal development hero’s  all pushing this at first This sounded like absolutely superstitious and quasi mystical Mumbo jumbo to me but there’s just something weird that happens when you write your short and long term goals down on paper and study it frequently . It’s like your subconscious mind goes into over time behind the scenes to work out all the details to hit the goals ! I find myself erasing my goals and updating them because I hit them faster than I anticipated 

Originally posted by @Dennis M. :

Very inspirational . You are a modern day zig Zigler for our time mike . Even In the little piece of success I’ve seen ,I gotta say looking back that I’m surprised at myself doing this on a shoestring budget but I refuse to give up and I follow through  . Oddly enough I think a big key is writing your goals down . When I heard all my personal development hero’s  all pushing this at first This sounded like absolutely superstitious and quasi mystical Mumbo jumbo to me but there’s just something weird that happens when you write your short and long term goals down on paper and study it frequently . It’s like your subconscious mind goes into over time behind the scenes to work out all the details to hit the goals ! I find myself erasing my goals and updating them because I hit them faster than I anticipated 

 This is why you might as well set goals that are "too big" for you to accomplish. Someone coined the term: B-H-A-G: Big Hairy Audacious Goal. If your goal does not make you uncomfortable, it's not BIG enough & it's not Audacious enough - so that means you can go higher. Ask me my B-H-A-G when we meet next month :D