From Househacking to Hotel Ownership!
Hey guys! We just closed on a 48 key hotel earlier this month in the Ozarks. That now totals the number of hospitality doors I have under ownership/co-ownership to a bit north of 60-something.
This has been an interesting journey of fails and pivots, so I figure I'll (over)share my journey with the BP community.
#SuperNoob Beginnings:
I came to the USA when I was 8 and my parents have always told me that I needed good grades, good school, good W2, etc. I doubled majored in chemical engineering and biochemistry from UT Austin, I got a full ride law school scholarship and got a JD, and I practiced patent litigation law for a few years with a big white-shoe firm in NYC. But I wasn't happy... 9-9 (sometimes 9-midnight) work schedules, guilt every time I take a few days vacation, and sitting at my desk 24/7.
I decided I wanted to become FI, and real estate would become my vehicle. The real estate investing/FI movement bug bit me hard in 2017 and I started telling everyone that I was going to move back to Austin and start investing in RE, without ever analyzing a deal or knowing where to start.
I moved back to Austin November 2017. I closed on my primary residence in Jan 2018 and started remodeling, then house hacking. Tons of things went hilariously wrong here - imagine fashion girl trying to learn remodeling for the first time when I didn't even know how to change an A/C filter.
My First Short Term Rental:
I finally felt ready to buy my first investment property in early 2019. Since I was already using Airbnb in my househack to get month-to-month renters, I decided to get more short term rental (STR) properties. I also really love traveling and design, so the thought of creating beautiful travel experiences for others appealed to me. I ended up picking up a 1 bedroom beach condo for $115K (25% down). I ran my numbers probably 20-30 times!!! All of my friends thought I was crazy because they couldn't see how this condo could possibly make money.
The condo was in decent condition but just was really dated. The furnishings and carpet HAD to go. I wanted to get away from the kitschy beach-shack look in my condo:
After much delay in remodeling I FINALLY listed my condo on Friday, March 7th, 10:40PM. I set my first availability for the following Monday because we didn't even have a dining table yet - it was waiting to be picked up. BOOM - I got my first booking 23 minutes later (11:03PM) for that Monday!! I couldn't believe it - did my numerical analysis skills just pay off? Whoa.
Ever since then, it has been super BOOKED (close to 100% occupancy), both in peak seasons and off seasons.
SO I purchased more STR's:
-August 2019: first ski condo (2/2). $95K.
-Nov. 2019: Second beach house (3/2), $255K.
-Feb 2020: Main house and casita in city (5 bedrooms total), $305K (appraised @ $327K).
-April 2020 (yes I am crazy): second Ski condo (2/1), $95K (appraised @ $105K).
[Photo of a 1 bedroom beach str - this is actually a deal I wholesaled to one of my mentees, and they also paid me to set it up and renovate it for them!]
Black Swan Events and COVID-19:
I was soooooo excited that I was projected to gross $20+K in March 2020, and that's before adding my last two acquisitions onto the Airbnb platform! I entered March 2020 happy that I was already at $15K and I knew that I would get at least another $5K in bookings by the end of the month. I did it! I was going to net $12-14K that month, bringing my annual income to north of $100K NET PROFITS a year, achieving $0 to $100K net rental income in 13 months!
Then... #Covid19 happened. Cancellations started rolling in. Airbnb overrode all hosts' policies and fully refunded guests. Angry Airbnb hosts threatened to file class action lawsuits on Airbnb. Marriott announced that Covid19 is worse than 2008 and 9/11 combined. F***...my...life...
Pivoting and Bouncing Back:
Luckily I was able to quickly turn some of my properties to monthly rentals, and still make more than long term rentals. People quickly realized that "work from home" = "work from anywhere." I was also crazy and was able to pick up a little duplex cash May 2020 to STR and househack as a vacation home near the ski slopes in NM for $200K (that duplex is easily worth $500K now!). I also was able to now work remotely, which meant i can slow-remodel some of the STR's myself while hiking every day in the mountains. Here's a few before-after photos of one of my ski condos (purchased for $95K during the pandemic, resold a year later for $250K):
[I painted the wall murals in both "after" photos! That's about the extent of my DIY skills. I suck at painting cabinets or laying flooring, etc.]
All in all, 2020 turned out to be a good year, since travel is now limited to the USA which meant everyone focused on drivable vacations, flooding the STR markets that I operated in. I grossed over $220K this time, after grossing slightly under $50K in 2019.
2021: Focused on Bigger Acquisitions:
On January 2, 2021, I decided that I finally am ready to take on hotels and STR multifamilies. At this point I've learned how to optimize online booking engines, how to deal with seasonality, how to analyze markets and competitors... why not take to a bigger deal? So I began my hunt across the USA...
...I did NOT realize how difficult it is to buy a hotel when you've never bought a hotel before!
- -I had to learn how to underwrite hotels and STR multifamilies: I had to basically rebuild the multifamily underwriting models that others have into a STR/hotel model (my engineering background came in handy here).
- -I had to figure out commercial lenders who lend on a wide variety of products across the USA (since we do not stick to specific regions).
- -I analyzed hundreds of deals for zoning, financing potential, exit strategies, regulatory/political climate, seasonality, tourism trends, and so much more.
- -Me and my team made offers on at least 10+ hotel deals, and probably at least half a dozen multifamily deals. We went under contract multiple times only to find issues during due diligence that made us decide we shouldn't do the deal anymore.
- -I made over 20 visits and phone calls with real estate attorneys in TX, AZ, FL, TN, and NC.
- -I lost $17K of EMD/Inspections/Appraisal money on a 12-plex hotel when I found out 2 weeks before closing that the property was located in a special flood zone (Severe Repetitive Loss), meaning the flood insurance is $40K alone! Previous seller's insurance did not indicate the changing of this property's status to the highest risk category, and thus was at a lower amount.
- -A seller-financing hotel deal fizzled out when the seller asked us to pay HIS income taxes, for the sale. We were stalled for 4 months on this 48 key hotel we ultimately got because SBA did not like the seller's financials, which we ultimately resolved by negotiating for seller financing for 3 years
All in all, on January 22, 2022, we finally closed on a hotel, 385 days after I vowed to take action every day to buy a hotel. Oh, we also got a 10-plex to STR in TX in July 2021 as well.
What's Next? 2022:
I also sold most of my turnkey STR's in mid-2021 to buy ugly STR's (PROBABLY should have phased that out so I'm not rehabbing 5 str's at once while trying to buy hotels, but alas...). In early 2022 I aim to push as many of these properties online as possible, finish out the rehab with the multifamily and hotel projects, and take a REAL vacation. It's ironic that I visited over a dozen ski towns and dozen beach towns in the last year, but I feel like I haven't taken a real vacation because I'm always networking and chatting up local STR operators in the area, taking market tours, and learning.
Misc STR Photos:
