All Forum Posts by: Justin Hayman

I am currently involved in a development project of 239 units in Northern CA. I understand CA civil code states that any apartment community with more than 16 requires an onsite manager if the owner doesn't live onsite.  Code states it can also be a janitor, housekeeper, etc.  

I am wondering if this can be avoided in any way.  There will of course be staff during the day.  Perhaps the implementation of an after-hours emergency service or something of that nature would satisfy code.  

Thanks in advance all.

I've been in the hotel business my entire life and have been a GM for the last decade.  I'm wildly curious what type of property you plan to build for $4M.  I noticed you're in Minnesota (not sure if it's there and what construction costs are compared to California), but it seems you won't be able to build that many rooms for $4M.  There is sometimes a place for very small, high-end properties in certain markets that command a very high rate, however those are rare.  

Whatever the case, the operator will make or break you.  Bad management guarantees failure.

Chris you're spot on.  I am curious about the 203k - how does that factor in?  I thought that was to rehab an existing home.....not to rebuild.  I'm struggling to make the connection post-fire.  Are you saying people can use that loan in conjunction with insurance money to rebuild?  

I don't own, but have run hotels my entire career.  As of now, my last hotel burned down in the CA wildfires in Oct 2017.  I was retained by the owner to handle the insurance claim and to coordinate rebuilding.  

In the last year, I've met with and talked to most of the brands.  With respect to your question about building to their specs, it depends on the specific brand, and what you are referring to.  Architecture may be slightly loose, but FF&E won't be.  If you consider a "soft" brand (Marriott has the "Autograph Collection", Hilton has "Curio" and 'Tapestry", Hyatt has "Unbound", and there are others), you may find more flexibility overall.

On to your concern about being stuck with one company.  I can answer that quickly.  Yes.  Most franchise agreements run for 25 years.  So you had better be sure you want to get in bed with the brand.  When you contact brand development, as you get serious and sign franchise disclosures, you can then ask to speak to some current owners and get their feedback.  

If you're considering running an independent hotel, I would caution you.  I've been the GM at two in the last decade, and it is harder than you might imagine to compete with the chains.  

Best of luck....PM anytime if you'd like.

By the way, my PM knew both the seller and his agent.  The seller owns a few hundred units and his this type of rep.  And his agent?  Well, I'm told they are "together".  

Birds of a feather..........

Thanks everyone for chiming in.  Here's what I ended up doing:

I called my agent and told him I was going to send him a somewhat nasty email that I wanted him to forward to the seller's agent.  Apart from the security deposits and rent issues, I noticed that the seller's agent had the same domain name in her email as the seller.  

In the email, I noted the legal transaction we were in, noted the language in the seller's leases that dictated what he can and can't do with security deposits, and demanded every dime owed.  I went on to mention if the seller mis-managed the security deposits, he needed to make it right via his checkbook.

I also typed in bold/underline that if this was not resolved within the hour, I would go ahead with closing, and would hire a process server to serve him a small claims appearance notice, and given the facts, I'd win.

Then, to add some strength to my email (at least I thought so), I pointed out the seller and agent have the same email domain.  I speculated that his agent must be managing for him, and must be in on the whole debacle.  So, I mentioned I would also be calling the real estate commission  after closing to have them open an investigation on his agent and her license.

Guess what?  A half hour later, I was informed that all the funds were now available.  I didn't care how, I didn't ask questions, but was glad it was over.  I guess a good old fashioned threat email still works these days.  

Thanks again to all for your ideas and support.  There's some greedy/slimy people out there just waiting to prey on people unwilling to put up a fight.  I ain't one of them!

I'm set to close on a triplex in 3 hours and just got an email forwarded from my agent....a conversation between the seller and his agent.  Here's the issue:

Two out of the three units don't have security deposits.  The leases state all 3 units have them, and has all the usual language about how they can be used, when they are returned, etc.  All units are still occupied.  The lease states the security deposit may not be used by the tenant as rent during the term of the lease.

Oh - and I almost forgot - one unit is in arrears and has not paid this months' rent.  So I may be walking into an eviction from the start.

Advice?  Thoughts? 

I'm 39 and close on my first deal next week.  I spent my 20's being an idiot wasting money, spent my 30's stabilizing, and the next 20 years are all about growth.  

"If only I started 20 years ago" thoughts won't do you many favors, but it does help motivate you to accelerate. 

I've run hotels for 19 years - there's a ton to be aware of. Are you familiar with hotel operations and how to evaluate financial performance? Hotels are a business and real estate hybrid - and if you look only at the NOI, you can get burned.

I would want to know the following before having a discussion around acquiring:

• Is there a brand affiliation, and how much longer is there on the franchise agreement?  (most run for 25 years)
• What segment is the hotel in, and what makes up the comp set (typically 5 hotels the hotel calls its competition)
• Is the brand/segment right for the market?
• Is there food and beverage offered?  What caliber of restaurant?  How does it do?  What would happen if the chef left - would your operation crumble, or are you in a market where you can replace easily?
• Do you have the amenities guests want?  If not, can they be added, and at what cost?
• When was the last total remodel?
• When was the last time FF&E was replaced/addressed?
• What is the net operating percentage?  Anything below 38% for a select service property is asking for trouble.
• How has the subject property done on the STR report in the last 3 years? How about the local hotel market in general?

All in all, hotels can do very well financially, but are super capital intensive.  Franchise agreements need to be studied carefully - often times they dictate when you renovate and how much you spend.  If the hotel is an independent, be aware that competing against the big boys can be a real challenge.  

Happy to answer more.  If you want to bounce ideas off of me, send me a PM.

Good luck

@Wayne Popelka, I am about to close on a triplex in Westwood.  I worked with a great agent that I can recommend with confidence.  As for the PM, it's too early to tell.  Good to hear you have financing in place - I found it difficult / near impossible to get a local bank to loan to me.  They hear I'm from CA and they run the other direction.  One bank to remain nameless even told me that Californians "ruined" Ohio during the last crash.  I got a kick out of that.  Good luck - agent info below.  Can't provide contact info in this thread, but you can easily find him online.

Rick Louallen ABR

Coldwell Banker West Shell

Commercial & Investment Property Specialist

Fully qualified in Single family homes, as well

Serving entire Greater Cincinnati Area