All Forum Posts by: Diya L.

An update to this post: We FINALLY got our refinancing at 6.25% interest closed!! Using the cash out to fund other renovations: would love to convert the back building into larger residences and an events space, plus build 8-10 treehouses in the back 1 acre of forest land. 

Also, time to turn my attention to more hotel deals, as we are about to have a great "season" of hotel buying this winter. 

Answering a few questions: 
-Where do you find hotel deals? MLS (hotel brokers) and off market (our own lead generation). I'm working on more off market deal flow now! Finally having hotel owners starting to reach out to me on social media to see if I'm interested in their hotels.
-How do you get owner financing? There is an art of asking for owner financing without asking for it. It really comes down to how you are able to solve THEIR problem rather than just asking for owner financing to help YOU out. Focus on the seller's problem and how you can solve that - they will be more willing to work with you. Sellers can get potential tax benefits if they are not 1031 exchanging into a new property, or they can finally offload a tired asset they can't sell otherwise (at a price they wanted to sell at). My lawyer background comes in handy for these negotiations. 

Quote from @Julia Ferris:

Quote from @Diya L.:

Quote from @Julia Ferris:

 Great job, and congratulations!

What areas are you looking in? Do you plan to hold them and operate them long term, or flip?

How are you habdling the labor shortage?

 We are holding most of the bigger hotels and flipping the smaller ones to other str investors looking for their first hotel deal. 

Looking everywhere where the numbers and data makes sense. 

We leverage technology to use fewer staff members but pay the staff that we DO hire very, very well compared to other hotel staff salaries in the area. I also have a 46,000 member FB group for airbnb investors so i post job postings on there when I need a hand across any of my projects. 

 Are you interested in selling any with seller finanacing? I am a Hotelier with a few STRs. I think I with be leaving my job soon, and I'm looking for other opportunies.

 Are you saying you already own hotels? If so you can message me and we can chat. Not currently trying to sell properties but always open to an offer. 

For what it's worth - we buy hotels/STRs and were considering FL to be one of our target markets and have decided in the last 2 months to stay from FL for at least a few more months, if not permanently.

The reason? Insurance. The bite-sized version of the information below is basically that FL insurance companies are exiting FL or filing for bankruptcy due to fraudulent insurance claims (70% of which originate from FL across the USA). FL insurance companies are also underfunded relative to how much reserves they are supposed to carry and rely on European re-insurance companies. [I don't really know what happens if a claim happens and the European re-insurance company refuses to pay - there is no US law that protects you in this case, and the FL insurance company will just have to file for bankruptcy.] The FL govt has now become the largest insurer in the state even though the state program was supposed to be the last back up plan. To expand the state-funded program further would be to go against the state's politics of smaller govt intervention. 

LINKS: 

https://news.fiu.edu/2022/the-...
https://www.bankrate.com/insur...

This plus the hurricanes/rising sea levels/global warming (or at least an increase in hurricanes in the future, if you don't believe in global warming), the fact that FL real estate prices dropped 30-40% last recession, and the fact that FL real estate has become frothy from pandemic influx of buyers... feels like the perfect storm for a lot of upcoming pain points for FL real estate investors. 

Maybe buy a duplex with extra land to build or subdivide, or a duplex that can be made into a triplex, or STR the other unit instead of long term renting it? Be creative in your deals.

I still prefer house hacking over paying rent even when the cashflow is not there - bought a house in Austin in 2018, house hacked by renting out the rooms on airbnb and was basically about $500/mo cashflow negative (I just considered it my "rent" to myself). Sold it for $270K more in 2021. Thinking of getting back into austin now that the market is cooling down but we keep buying more hotel and STR deals... lol. 

Quote from @Julia Ferris:

 Great job, and congratulations!

What areas are you looking in? Do you plan to hold them and operate them long term, or flip?

How are you habdling the labor shortage?

 We are holding most of the bigger hotels and flipping the smaller ones to other str investors looking for their first hotel deal. 

Looking everywhere where the numbers and data makes sense. 

We leverage technology to use fewer staff members but pay the staff that we DO hire very, very well compared to other hotel staff salaries in the area. I also have a 46,000 member FB group for airbnb investors so i post job postings on there when I need a hand across any of my projects. 

Quote from @Jared Hottle:

This is awesome. The most impressive thing that sticks out to me is starting with house hacking in a high-wage job like being an attorney. This is impressive as typically in my experience higher wage earners or white color jobs do not want to mess with the short term hassle of househacking but sounds like you were on a mission and sacrificed short-term pain for long-term gain. Keep at it! Also I hope you kept the heart tub lol

 We kept the heart tub for now... may re-visit the concept of making it into an instagram corner at some point. 

Yes I also spent 10 months in Harlem (NYC) staying at a $680 illegal (no window) sublet room while paying off my student loans. My roommate left half eaten kiwis everywhere so we had a rodent problem. This was when I was making $180K/yr already as a BigLaw first year associate... oh the funny stories I have from my journey from lawyer to investor! 

Quote from @Leo R.:

@Diya L. congrats!  Looks like you're making some awesome things happen!

Question about your underwriting and operations processes: what things are you doing to anticipate and prepare for the effects of recession? 

I worked in the hospitality industry for a while, and it seemed like the A+++ B&B's, hotels, etc. weren't affected by recession too much, but other places (esp. those that relied heavily on tourism) got hit pretty hard with vacancies whenever the economy turned south. Any info about how you factor economic downturns into your model would help us all be better underwriters and operators!

BTW; the heart-shaped tub is classic--all it needs is a '60s fireplace and more shag carpet lol

1. We are underwriting deals with higher exit CAP rates, assuming that CAP will go up with interest rates.
2. We are buying deals that are selling for below the average sales price per Key (door) in that market/submarket - meaning, we are buying stuff usually at least 20% below market in terms of sales comps. This usually means the current financials suck, and the valuation is lower to match it. 
3. We are buying deals that we can significantly increase the valuation simply by bringing the ADR (or RevPAR) to market average. Meaning, we are NEVER assuming we outperform the market (even though we have very talented operators on the team). We are only assuming we hit the average, or slightly below the average, on RevPAR and ADR. 
4. We are locking in good debt and chasing deals where we can get optimal financing. I have walked away from great deals with meh financing and chased average deals with amazing financing simply because of the market we are in. Amazing financing terms with at least 5 years of locked terms is key in this weird market we are in. 

... and many other considerations, like local market pressures, local politics, natural disaster liklihood, tourism diversity, nearby town growth, etc. I look at a ton of factors even back when I was just buying STRs, and I never bought anything for STRs at current market value either (always below market price). For example, some of my STRs I bought for $94K, $95K etc and I was able to resell at $250K the year later. 

Quote from @Account Closed:

In a hotel you can imagine you're leasing to tenants with a 1-3 night lease.

That opens the potential for a LOT of vacancy if you aren't in the right place at the right time. 

Business is also extremely seasonal.

I'd opt for multifamily if you want many units.

But if I can operate as STR and I can get 3-4x as much revenue vs LTR at a 50-60% occupancy, what's the harm in leaving the units vacant at times? I teach my students that higher occupancy doesn't mean better since a 90% occupied STR may generate just as much revenue as a 70% occupied STR (with higher ADR) except the wear and tear will be greater...

Quote from @Nicholas L.:

@Diya L.

congrats!!!!

can you provide more info on the "48 keys for $750K" deal?  on/off market?  commercial financing? etc.  seems like a killer deal!

Hi! Probably will have a recording of the presentation I gave at a recent conference up on youtube soon, but: 
-off market
-seller financing at 6% interest, 25 year AM, first year interest only, and 3 year balloon. Now we are refinancing with a bank (hence the $2 mil appraisal) and it's around 6.3ish% interest. 

Quote from @Collin Chan:

Congrats on the success with the transition from STR to hotel operator! That's good to know a 6-13 unit property could work well in the STR model.

 Yes, but why not think bigger? ;) Do fewer but smarter deals.