R&G #9: How to buy a hotel 101 with Davonne Reaves

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where culture and commerce connect [Music] so [Music] welcome back to another episode of the ranting gems real estate podcast my name is matt garland nmls number five eight seven zero zero mortgage that's a lot listen and my name is kiana watson broker extraordinaire licensed number three one seven five seven six and um i want you guys to know that today we have a phenomenal episode for you we have devon reeves okay dave henry um i really wanted to bring someone on here like i said i met her out and about and she owns a hotel let me just say it one more time she owns an entire hotel and i wanted to have her to come on this podcast share her gifts give you guys some steps to help you dream bigger because you know we like to play monopoly around here so you know you buy four houses then you get a hotel yeah i'm still waiting for my hotel i need to know what to do i think we need to name this episode monopoly or something it is it's called monopoly baby this is deemed to proclaim monopoly exactly exactly all right so let me ask you this first question let's get started right when did you fall in love with real estate well wow when did i fall in love with real estate probably when i was working as a non-paid intern a non-paid intern yeah for a hotel consulting firm okay because i actually got my start off working in the industry not through real estate actually working as a front desk agent so i never thought about owning a hotel mostly for anything and everyone in my family owned a home so that wasn't new right but um but my my love for real estate came working as a non-pay intern wow and how long ago was this probably about seven or eight years ago damn so from seven eight years you went from non-paid to hotel owner yeah [ __ ] this is a safe place we need to know i mean you got to work hard right and you all know that's why you're on the stage right um so again i got my start working as a front desk agent working at a hotel working at the hyatt regency atlanta and i never thought that you could own a hotel because the owners of that particular hotel is the highest so i didn't think anything of it so after about six and a half years working in the front office i decided i was like i want to do something else i still want to be in the hospitality industry but i want to do something else and so i was like i want to get into asset management i want to get into the transactional side i wanted to do something else and that's when this non-paid internship came came along and so i'm working there in the morning because i started paying my bills this is after college so and of course my family was like wait davon how are you taking a non-pay internship after you graduate from college like that doesn't work it's usually the other way around yeah but i knew that my goal wanted to become a hotel owner again i didn't know hotels real estate i didn't want their own hotel right and so i had to create my own road map that wasn't google back then there wasn't you know instagram i don't think instagram wasn't really around there was two people on instagram yeah at that time it was instagram wasn't like it is today right at facebook i think you still had to have your like college you know email address to even be on so it wasn't this community that we have now so i had to create my own way and working at that again that non-paid internship that's when i learned about commercial real estate that's when i learned about feasibility studies that's when i learned about public private partnerships you know because our clients at the time they own thousands of acres of land you know they're coming into meetings on their own private planes and i'm like oh wait this is the life i want to be right see okay and so they were like you know we want to we want to own hotels just playing monopoly again in real life and so i left working at the the uh working full-time at a hotel and i took that job full-time so i was there for about two years and i wanted again i wanted something larger i wanted to work for a larger firm and that's when i moved to boston and that's when my eyes opened to really owning hotels i mean the reason why because i was working on behalf of owners i was working in asset management so i was learning about financing right um i was learning how people understand leverage okay um learning how these larger companies you know they're essentially not really using their money to buy i don't know wait a minute opm but ain't doing the opm on like a billion dollar level okay so what we want to do is we want to slow this down can we just make sure we drop a gym where we always forget the value of unpaid things we want to get paid to be a part of everything and she took an unpaid position just to get the game yeah she took an unpaid position and now eight years later she owns her own hotel how long were you unpaid for three months for three months okay so 90 days a 90 day i like that i like that so what's the first step like how do we go from because we talk multi-families you know everybody talks one two duplexes triplexes quads you know ten family units but hotel that's just a whole different ballgame well yeah what's your mindset oh talk about them come on you gotta start with your mindset so you know it's it's like like monopoly right so you own you literally buying the block so but you have to wrap your brain around that i can actually on this hotel because a lot of people don't really realize that a hotel is an operating business sitting on real estate so that's why it's so attractive because not only are you on a land you're owning a building and now you're owning the business you know what i mean and so you have to get your mindset and you have to wrap your brain around when you actually stay at a hotel that you can actually own it right because people don't cause we don't i mean i didn't grow up thinking i could own a hotel i didn't inherit one but it wasn't until i started to expand my network and i started to join different organizations that were very diverse it wasn't people that all looked like me i was the only one in the room but that's why i learned about hotel ownership is people my age who were inheriting hotels who were working for hotel ownership groups and essentially so i had i had to change my mindset i had to get out of my my own way and be like you know they can do it i can do it too so i've always been curious so i had to be curious i had to ask questions i had to be creative um essentially i think you mentioned before in a previous episode i didn't see anyone who essentially looked like me so i had to i had to figure it out but i had to start i had to and i had to i had to speak it with convince conviction right i had to say okay i want to be a hotel owner i want to do this i want to i want to create work for myself and for generations that i never meet but i have to believe it right because people you know they they say it but you have to believe it so going back to that mindset mindset first stop that's the first step finances so let's talk about let's talk about finance you got to get your finances together right so what do we need right to buy a hotel how much money do we need well it depends on the hotel yeah i know you're gonna hear me say that word a lot because it does depend okay all right right so you can get i've seen hotels selling for 450 000. wow wow how many how many rooms there's like 16 rooms it's in the middle of nowhere you know okay it's not like it's like a hotel it's not really a hotel okay it's a motel okay i've worked on deals where the hotel sold for a billion dollars oh wow right now we're talking so that was my portfolio while i was in boston i had a billion dollar portfolio so that's what i'm saying it it all depends but starting off i always recommend first-time hotel owners to look into something that's probably less than eight million um so that way you can take advantage of sba loan you know and you and so let's talk wait a minute there's a what there's an sba loan about hotel oh yeah let's write this down please wait wait a minute we're going too fast wait a minute let me slow it down wait a minute so i want to own a hotel i got my mind right i've already decided i i am capable i am able i am deserving and i'm ready to buy a hotel my recommended price point is eight million and sba is going to help me buy buy that home hotel let's talk about how much financing are they gonna give you on that uh typically you know uh 10 to 20 i would say start off with like twenty percent now so they'll find sba will finance a eight million dollar hotel with twenty percent down i would say that maybe not eight maybe like five to seven just to be on the state sector five to seven million dollar deal with 20 down with an sba loan yeah and then you can get other other you know some some deals i've seen where they work with their local banks yeah so now you get the sba the 80 and now you can do what's called a capital stack and you stack the money you can get more money from other banks to bridge that bringing investors talk about this queen we need that i mean yeah let's sit back listen yeah yeah yeah just breakfast i mean you you can bring in investors a lot of people don't realize you know that you can use your retirement to invest in deals you can use life insurance to invest in deals so people don't realize like the stuff and i'm i didn't realize this but until i was around these circles right when i realized the true definition of opm that they really they weren't using their they were leveraging in their you because hotels is a long-term investment so anybody who's trying to get into hotels is not a quick rich this is not an overnight flip this is like you looking at three to five years and also going back to the steps mindset finance but then what's your ownership thesis so set up your criteria so if you know that you want to stick with something that you can get something like an sba loan or uh you want to work with your community bank and they can provide financing for you if you're able to obtain it um you need to you need to figure out your criteria what type of brands you want to look into you know what type of what's the location it's real estate location is the key right right remember that 450 that was in the middle of nowhere okay that's why i was 450 000. yeah but if you're talking about something in downtown atlanta you're not getting anything for 450 000 right nothing so when you're evaluating so you're like okay listen i want to i want to buy my first hotel so i have my financing so finance is in order just take us down with it like is that kind of like the same thing like buying a house financing's in order that way you have the reapproval broker's not going to talk to you if it's your first time buying a hotel same thing if you talking to someone who wants to buy a house i want to buy a house okay i need your pre-approval right so same thing with the hotel if you're looking to talk to a broker they want to see your pre-approval where do they find these brokers um brokers um there are major brokers a good friend of mine he he's a broker he works for paramount lodging advisors say that one more time paramount lodging advisors another hotel broker is um marcus and milchap hunter advisors is here in atlanta so there are a lot of um hotel brokers there's only a thing about four black hotel brokers and one of my friends i'm giving him a shot his name was omar head uh he's the hip-hop hotel broker very good friend of mine he's training the whole that's the hip-hop hotel hotel broker okay so you can find that that person's on social instagram yeah he stayed dr dropping gyms but um he's transacted actually over 140 hotels wow that's amazing man they need to get him on the podcast yeah no that's crazy but um so finding a broker um actually starting off before you get to a broker you want to actually work with like a consultant or asset manager um because then they can help you find a broker right okay um because a lot of time when people get into hotels they think oh i've done so many multifamilies i've done so many houses it's the same thing i can do it myself no you need to get people who have experience in hotels yeah yeah because how are you analyzing these deals like what's the formula i can't remember the term off the top of my head par revenue oh redfer revpar what's revpar so red part stands for revenue per available room and essentially that's just the metric this to show you how healthy your hotel is performing um and essentially what you can use it as a benchmark um so the three top kpis that we look for in hotels what's the kpi thank you thank you thank you for that because i just go on but kpi it stands for key performance indicator okay and so essentially what that is you use that to track that anybody who's in business they should be using some type of kpi to track whatever their performance to measure their performance and so essentially that's what a kpi is and so the top three for hotels is um occupancy and so occupancy is i give you an example let's say you have a 100 room hotel right and 50 50 rooms have checked in now you're at a 50 occupancy right and so then another metric would be adr and that stands for average daily rate okay so essentially what that is that is all it is so many different rate codes in the hotel so let's say you're here for a conference that's a rate code let's say you know you're traveling on aarp that's a rate code so now you're getting the average of all those different rates um and uh and that'll determine as far as like how your performance um year over year how you're comparing other hotels how you perform in the market and then how you get to red car is a combination of occupancy and adr wow so love it so like when people book for blocks of rooms for weddings and things that that's all considered in these metrics correct yep that's all considering these yup exactly so adr so for wedding block can't they'll have their own rate right well they should if they negotiated so they have a negotiated rate you know if you just walk in there's a walk-in rate if you're you know flying if you're working for a crew there's so many different rates um as far as a family union rate right why have you ever gone to a family yeah and you have a special rate code they use it to track it right and so all of those are combined without combined but those are um those are once they negotiate it but it just gives you an idea of all the different rate codes and um you use it at the at the end of the year the end of the month at the day just to just to track and see how your hotel is performing so once you have all these metrics then from there the broker um the hotel broker will determine what type of financing that's a great question so and go i'm glad you brought that up that's another reason why you need to get someone who understands hotels because all those metrics that i just spit out if you don't understand hotels and you're looking to evaluate are you looking to sell a hotel you could possibly be having your client buy a hotel that's overvalued and see how hotels are evaluated they're really evaluated based off the business the real estate yeah but it's really the business right and so it's three things that makes the hotel successful location brand and operator right and so those are what banks are typically looking at right if you got all three and you have someone who has experience owning i mean managing a hotel because at the end of the day you a mortgage all they care about is just getting that money back that's the foundation that's all banks care about right are you going to pay your debt service am i going to money that's it anything outside of that what's that service for those who don't that service is mortgage it's just a mortgage okay yeah so when you're talking about now i got now i have gotten my stuff together i found me some investors so most people do find investors or get backing to buy that first hotel right okay i've yet to see a hotel where it was one person i'd be yet even you basically how we do crowdfunding on our end we need to get our minds around you know because there's some people like i don't want to invest with other people but if you have that mindset would you you wouldn't recommend them to get to the hotel business if fortune 500 companies invest with others why can't we invest with others that's a gym again say it louder because we always get like we can't work together because collaboration is greater than competition collaboration is i say that all the time over competition right so people that's another thing going back to that mindset where we feel like that we have to do everything on our own no and i kind of thought that too and so again working in a non-paid intern working in asset management working in consulting and i started to see these billion multi-billion dollar firms working with other people i said wait a minute y'all don't need them you don't even need a bank to buy a hotel that's a fact like they buy for this one company they bought a over 400 million dollar hotel they didn't need a bank but they understand leverage and they brought in other investors so they understood that they want to use other people's money and keep their capital where their capital is less risk a lot of people don't a lot of people when you put all your eggs in one one bag you know what i mean and something happens now that's all that risk associated on you but now if you spread the risk that's less risk on your your portfolio i love that so let's talk about the crowdfunding part because i just want people to know like one step so when you're looking at different hotels what hotel brands would you say would be good for a beginner hotel investor and um i know you looked all over the country all before you even found the hotel that you're in so when this is one question then we get to the second one give them three hotel brands that you feel like will be good for beginner investors when it comes to owning a hotel it's a great question and i'm gonna ask you a question to clarify it depends on your strategy your investment strategy do you want to focus more on cash flow or do you want more of a buying hold i want the i don't want the cash cash is king baby i can say that with all honesty okay okay and the reason why i'm saying that because it's two different strategies well break them down both so i'm gonna do i'm gonna do the first one is cash flow so if you want to do cash flow ooh the top three oh my gosh top three i would say i would say a choice property choice choice choice brand so i don't know if you ever heard of like comforting and swedes or cambria um all of those are part of choice and the reason why i say choice because they actually they're one of the very few brands that actually has an initiative to encourage african americans to own a hotel they actually have an incentive in place sure why we didn't know that we didn't know that we know now we know now how that's the damn show jim because why are they not out here marketing this to us so we can know these things well our our industry i love our hospitality industry they mark it within the industry the rich get richer basically you know it's just and see and i'm a different generation i'm a different color right so i have a different a different platform so um but i'm here to say that yeah so so choice choices and the reason why because they have more of what we call um economy brands and those are like your um econo lodge um you know again cash flow you know the indians own over 50 percent of the hotels in the united states the indian community from india and the reason why because they start off with cash flow that cash flow model starting off with like a econo lodge or a motel 6. so that's why i'm starting off with and then the reason i'm saying choice because they have that incentive program so they're probably the next brand i would actually say motel 6. okay motel 76 is a part of g6 that's the brand um look at motel 6. i don't know if they have any incentives or african-american but that's a good place to start right um i'm sure everybody has driven by and seen some of military absolutely and i always wonder how they stand in business but then when you think about it on the other side it's like somebody got us they gotta say somewhere and that owner is very happy i'm sure i'm pretty sure the owner and that's how they start their portfolio with that model starting off with that cash flow because they think about doing kovic it was all these truck drivers i know exactly and when they needed the place to stay what'd they say right they're not staying at the same region they're staying right at their motel 6. they may stay at that comfort inn their suites that's what they're saying and they were saying it and actually here's another gym those type of hotels perform very well during kovic talk about affordable affordable and just think about it you know families who are driving from you know new york to florida to disney world and so this is pre covered in post cove and they see a nice comfortable you know motel six or you know comforting and suites or hampton inn or something on the side of road something that's affordable for them to stay and feed those kids that's what they're going to say man i never thought about it like that yeah because because mg wants to be where the wagoo is yeah yeah mg want to be at the same region after the fourth season yeah you can stay there [Applause] so can we hack a hotel can you heck yeah actually you can come on talk to us you got my attention she didn't finish number three right now okay so we have i'd say a choice i said motel six and i the next one oh it's so hard i guess window window window will be good um the reason why windham would be good um they have days in uh what other brands do they have i've seen tons of days in the streets days and days haven't been around you know since our grandparents didn't live you know what i mean yeah been growing up yeah so it's just it's a brand it's established brand um good cash flow um microtel they have microtelling the windham brand um so oh who can i add a fourth one go ahead yes so fourth one would be uh a best western i've seen those i've seen them everywhere and the reason why i would say best western because best western they so think of the other three did i mention the first three brands think of them as banks and think of the best western as a credit union so best western has more of a a membership model so that's why i would say uh a best western perfect see that's a gym that's a gym right there bonus gym four gyms yeah i got that [ __ ] we about to get some hotel money in there exactly the hotel so go ahead i'm sorry no no you go ahead now i ask those questions you guys no i wanted to know about like hacking right because i'm all about house hacking and things of that nature so funny i didn't even think about it until you said it but they actually have the a lot of these communities they they grew their portfolio because they live in the hotel them and their family they all work in the hotel to save you know labor and cost and everything and yeah essentially there's a lot of the older hotels the newer hotels you won't see they have typically what you call like an owner's suite or the gm suite um and it's like an actual like apartment like kitchen washing everything in there um it's just that with a lot of newer hotels um the um owner suites aren't in the buildings but if you find like the exterior your corridors like where you have to like you go into your room from the outside that's when you see a lot of the general managers where you can live in so yeah interesting so buy the hotel live in it hire your family or you can what you could do this is a gym you could bring your general manager to incentivize your general manager because again you don't want to you don't want to be in there checking folks in and doing out of work you bring in your general manager give them as part of their compensation package and they can live in the the hotel gym damn gym yeah super gems i like this so far so yeah this is this is interesting because now my mind is just sitting here like why do you think i said listen she always my head was spinning every time i sit down with her my head just gets spinning because i'm thinking why was i thinking so small you know so i hope that you guys are feeling the same way it's like why was i why was i limiting myself no that's a fact because i've never thought in a million years about ever owning a hotel even thinking about buying a hotel and now from what you're telling me like this makes a lot of sense to me to own a hotel i wouldn't say limited it was more so the exposure and the knowledge absolutely we don't talk about owning hotels in our community right we talk about buy your house keep it in you know keep it in the family pass it down you know save grandmama house but in any community they have hotels floating around like it's nothing i'm telling you it's people who own hotels that are like 19. what wow exactly that's why i had to say youngest african-american i was very specific with that because it's an indian who owns a hotel like this one of my girlfriends she's way younger than i am she owns like three hotels wow because they inherit them wow generational wealth sounds like you get a hotel you get a whole to you yeah that's how it is damn they're like oprah you know what now they they have a different mindset so they're like i don't want to days in i want to truth by hilton damn you see what i'm saying so they don't want to hide it now um damn so so from a course perspective right like expenses like how expensive as it is to run a hotel because i know we talking all this good stuff right because i'm just thinking about when i stay in hotels i mean i've been to hotel parties they thrive like it's crazy sometimes that's right trash that's an expense like how does that work because that got to kill your bottom line especially with covid you know people wasn't traveling like they are now america's opening up people are traveling but people took a lot of losses in the hospitality industry so right how did kovac really affect your business well and expenses and everything like that well we actually acquired the hotel during kovic um turned a pandemic pandemic baby yeah that's what we actually told you i was banned you did since buying hotels doing about the entire hotel talk to us about this so we we you would understand this because you're in the mortgage business uh we we uh took advantage of a uh i mean this is a true true jail i'm like they need to take the course for what i'm about to say okay just enough just to give them just enough but you you're familiar with note sales and stuff too yeah and that's essentially how we took advantage of our um what's the subject tool for those who don't know so subject to essentially what that is is you're taking over the mortgage right you're taking over the debt um and so i'm essentially what we did the previous owner uh you know due to coverage and had other properties um one of the hotel that we required wasn't able to hold on to it and so we were able to take advantage of what is called a note sale so for those who are looking to get into the hotel business i'm starting to see more and more hotels that are being for sale using note sales and essentially you just take over you just take over the note it's like you're one person in it so the original sellers in the driving you know you know the driver's seat and then i come over i'm like hey and so either the the new the old cell it sits in the driver sit in the passenger seat or it gets out but either way now i'm now in the driver's seat i'm the driver now i'm with them look at me you're the captain now i love it so when you do it listen so you can assume somebody's know oh yeah in the hotel world oh yeah what kind of terms do they offer because they ain't throwing your fixes oh no what they're offering five years seven year ten year come on queen talk to us oh i forgot what i'm trying to think i got so many deals in my head i'm trying to think of the terms that we got that's what i'm talking about sis got so many deals i know i am i'm really thinking i don't want to say to ron i don't want to say the wrong deal the the i will say this one deal that we had to pass up the deal definitely wasn't favorable it was a note sale i'm still sad about this once it was a portfolio sale okay let me tell you how good these note sales are right come on this is not we we didn't close on it it didn't work out but it was the note was 10 million but it was worth 20 million oh wow it was a two two hotel portfolio 10 million the note but it was actually valued at 20 million why did that close the seller he backed out it just made it he didn't he didn't want to he didn't want to get out the car remember that analogy i was saying yeah okay so he wanted to stay in the passenger seat and then tell you how to drive and then be in the back it was just a lot yeah so it just didn't work out got it so you got to get out the car yeah i'm like wait a minute you can't even drive then i got to take directions but you messed up your hotel that's how we in this position you know what i mean so it was just it just didn't work damn so you can really sit out here and find distressed hotel owners all the time how do we find that you know having relationships with the bank um having relationships it's all about relationships you know relation or service providers debt service providers um have relationship with lenders having relationships with management companies and owners you know a lot of owners don't even use when you get to a certain level you don't really deal with broker you deal with only certain brokerage firms that can handle those sophisticated deals so sometimes i get wholesalers um you cannot i'm saying this you cannot wholesale a hotel i'm like you cannot i'm saying this again for somebody to come to my inbox you cannot and i can spot them like we can people hotel people can spot wholesalers and so you can't wholesale a hotel no it's kind of like taboo it's not it's not the thing to do no it's not i mean for one because you buy you don't even know how to evaluate it like you know what i mean like i remember one time somebody's trying to sell me like a ritz carlton on a word document i'm like what are you doing on the word document you know it's like what do you know basically she said don't do not get it this this is a very very valuable seat she is she is the captain come over here with knowing what you know in your stuff right yeah cause i mean nobody's gonna take you yeah nobody because another thing is with brokers you know they because you want to have control of the deal so wholesalers you working with the broker like i've seen hotels who came to me because typically the hotel world is small so we've seen the deals before i could just call up a broker like you know this deal oh yeah yeah yeah and the whole seller tried to sell me the deal from the broker of the broker i'm like what are you doing oh they're doing so that they're doing too much so good thing so one thing about the hotel industry it sounds like to me you got to have the right relationships you got to be a part of the right organization yeah so let's just talk bottom line numbers when you are evaluating a hotel now you say this is for the long haul you know this is not like flipping the house and making me six figures real quick but everybody got to get paid i mean you're looking beautiful today you showed up i mean i said you know looking like money with miss kiana so let's just talk about like how do you evaluate your hotels and what are what are the potential um profits um that you can get from just just just a typical hotel like you know humbly speaking to five million dollar hotel because you because it sounds like to me a 500 hotel is just like it's like somebody buying a hundred thousand dollar house yeah it is it really is like buying a hotel when you get in the hotel community it's like you bought a house it's like it's really not a big deal um it's like oh congrats like i have one and they're like oh i got 50s you know it's not a competition but it's just humbly speaking yeah i got 50. yeah that's exactly how they say it yeah i got 57. yeah but anyway um as far as so i'm more of a buy and hold person okay and so um typical typically the margins i look for margins really the percentages or roi that are roi stands return on investment i typically look for um going back to my ownership thesis or investment criteria i look at at least 20 return on investment um i look at uh brands i'm not really brand agnostic like i can as long as the brand makes sense right depending on really i'm more of a location person right so going back to what i said before location branding operator so i'll talk about my hotel my hotel is in oklahoma it's in el reno it's on the make now el reno it is nothing in the arena it's beautiful actually i should go visit it's a beautiful lake hilton h room so actually yes it is but the hotel is next to an interstate it's like literally along the interstate a major interstate so again a lot of these truck drivers a lot of people driving back and forth so that's why it's a great location um brand um so i look at so it was a hilton brand hilton is number two in the world um operator we actually brought in an operator we brought in commonwealth um so they operate the day-to-day so that's why i'm able to sit here on the stage with you beautiful people i love it because commonwealth they're doing an amazing job running the day-to-day operations um so as far as those are the things that um i look for as far as value-add opportunities um a distress what a distressed property looks like it looks like if we can come in if i can come in and bring an operator it depends on if the market can hold it um how much renovation i have to put in so you i don't know how it works in i think the arv and resident i don't so we don't talk like that in hotel so this sometimes i like i have to like yeah try to understand but um so we call pips so pip is like a renovation so pip stands for property improvement plan okay right okay and so that means we're seeing you know how much it would cost if the hotel needs renovated my hotel didn't need it need renovated it was built in 2017 we were acquired in 2020. so it's the fairly new hotel uh typically brands they want you to render they have brand standards i don't know if you sometimes you've gone to different hotels and one day it's like oh they changed and they got this new sofa and they have this new design because they meet the different brand sanders but as i only have to pay for it okay so one thing about being a hotel is the franchise so you're buying into a franchise right and so you have to abide by their rules if you want to be a part of their franchise it can be expensive so that's why i said choice because the the you you're the it's not as expensive as the marriott and the hyatt and the hilton so it's a little bit more feasible for someone who's just getting into the space as far as managing that that pit so if i buy a hotel and i buy through a brand now i have to buy the franchise also with that brand and pay franchise fees as well yeah you'll have to pay a franchise yeah yeah you have to buy um if anyone who's familiar with franchising yes so you buy into a franchise you have to um apply um so they could decline you essentially and you won't get your application back your application money back you got to pay and how much how much is your application for you it can start from you know five figures to six figures what for a [ __ ] application six figures yeah listen i don't lost i haven't forgotten we was even on this podcast so some people you know i i'm very transparent if you want to get into this space you definitely want to have um oh so it means no 100 finance or no money down okay so if you want to develop it actually it developed developing a hotel it costs more to acquire but there are more incentives okay so you can get um you know incentives depending on if your local you know municipality if they're in need for a new hotel um sometimes the brands they'll work with you but again you have to work with someone who's experienced because sometimes if you don't know you don't know what to ask for like some people they wouldn't even know to go to the city and ask for tax incentives experienced developers know but people who are just starting out they they wouldn't know so you get the tax incentives from the state or the county yeah and they have it available yeah tax abatements and all that others if they have it so that's so those that's where we that's where we're we're just trying to find where the money resides you know we're like okay i own this hotel so now you're talking about you know a lot of that has a lot to do with your vacancy rate has a lot to do with your rate and how you kind of get all these other programs out here so you got the walk-in rate and i didn't even know that so you're just charging me an extra fee because i walked in the door but if i walk outside and go on the app i'm gonna get charged with different people yeah and that's why they have like all these different websites different apps and stuff yeah it's just a disrupter yeah i mean some hotels even use airbnb to market their their oh speaking of airbnb since you brought it up can we airbnb exactly i mean i've seen hotels at airbnb their rooms i've seen some hotels meet in space that was on pure space what yeah damn all it is is just another revenue stream like you on there uh looking for a space i might also add my hotel so if you're in the brand they don't restrict you it depends now it depends it depends on which brand because you have to follow any rules so it it depends um yeah it's not like it's a lot yeah so that's why some people now some people i hear it a lot i want to start my own brand and i'm just like thinking my head okay for one that's very expensive to start your own brand yes i'm sure the kiana brand it would be luxury and great and beautiful but it'll be very expensive oh no i'm just going to jump on somebody's bandwagon saint regis me choice me please thank you choice me please you said incentive choice me please because that's a whole another you just because you know what i look at it when i look at just individual businesses right you own um a couple of houses you put it on airbnb right you can put your furniture in there you can do all these things to give the certain type to attract a certain clientele but i with hotels i'm just it's just like it's convenience it's location and it's okay somebody told me this place was luxurious but i don't see any major commercials or campaigns for hotels like i see a little something like you know you got certain names you're like okay tonight i'm just gonna go to bed so i'm going to have to then or today is a luxurious night this is the date night you better take them to the same regions it's different but you don't see these huge campaigns for that so it's kind of like each hotel is already marketed and put into this kind of category of what they can offer and what they can make so i'm trying to figure out how you can make more money that's right so the versatility industry i love my industry but sometimes it can be a little antiquated it won't keep up with the times when it comes to marketing and attracting new guests so you're right you don't see a lot of commercials i think i do see more hilton yeah i've started trying to do more like they're trying to do more lifestyle so to track and then hotels have what you call soft brands and so what a soft brand is is essentially it's like an independent hotel but you're still taking advantage of the major hotels franchise or reservation system so marriott has autograph hilton has curio um a choice has the ascent collection um it's so many so i don't want to get them confused but essentially you can take advantage of that right so essentially you know you you still have to pay the after application fee you can still kind of have your own uniqueness about it you can kind of name it whatever you want um you still the the brands they do have some structure but it's not it's a little loose right and so you can kind of mark it a little bit differently to attract a different type of guest perfect man this is an interesting conversation here i don't think i was justifying yo interview because it's like a lot wow i'm a consultant so i have a consulted mind this is just but the good thing about it is you are a consultant yeah so let's just say all these people in the room today if everybody had this amount of dollars and it's i don't know 60 people how much with the you know i'm a dollars and cents type of person how many dollars does each person need to have say 60 people and they band together what next step would they need to do to come together and own a hotel because like you said a lot of it can be cash flow and some of it can just be the property values and these values are going up so it's not like a hundred thousand dollars in equity i would imagine if i own a hotel i'm talking a million in equity in a couple of years so that's the gas that's the real game yeah that's the real game let's talk about that the millionaire equity yeah equity payment equity every time yeah yeah seven figures it's a gym yeah yeah that's a [ __ ] job i like certain things exactly so let's talk about that you don't say that out loud but yeah yeah um it's oh i mean i would say minimum you know y'all probably can get something with the at least if everybody put in like 20 to 25 000. okay really what can we get for if exactly 25 000 a pop probably like you know something that's like probably like five to six seven million perfect and then we're so so really the equity play is the long that's that's the long haul that's the real play when it comes to hotels yeah because see with so from my understanding just hearing what i hear from my friends who in residential when they look for investors they don't really give their investors equity they just give them a percentage in return yeah well hotels are different when you get investors they get a portion of equity they may not get voting rights and control that's how i structure my deals all the investors that's your percentage voting rights structure let's talk about how you structure like an investment group so every deal is is structured differently i definitely recommend that you get a cpa i'm so glad that you said that earlier yes a cpa certified public accountant make sure you get that um also make you make sure that you want to get an attorney a hotel someone who specializes in that or if you're looking to raise capital look to get a securities attorney um because you do not want the sec or the irs coming at you for raising capital you know like three letters that i did not deal with you don't need the alphabet boys when you're back no no no i surely have my security lawyer and um so that's what you want to do to structure because you're dealing with securities on a larger scale right and securities meaning you know if you're seeking out a return or dividends that's what it means when it comes to security so typically how how i structure my deals simply raise capital from private investors give them us equity based off their portion um and then give them a percentage of the profits and so on a quarterly basis and um and then you know you get your really true value you uh when you sell the hotel so then they'll get there they'll get their their full investment back and it all it depends on the hotel too it depends on how so that's where i come in as an asset manager managing the asset to make sure that my investors come in so if you you know meet anybody who is like hey i want you to invest in this hotel because i'm pretty sure they're going to be a whole bunch of people now yes saying i got to do it i want you to invest in and ain't never done anything they don't have a team together so when you're investing in a deal make sure you do your research and this is just for anything that you invest in make sure you do your research you know what kind of experience do they have have they ever worked somebody on that team has to have some type of hotel experience because the lender won't approve it now lending is tougher now because of colby let's talk about that yeah how how is it how has the linden um been impacted by cover 19 in your industry so i had one of my uh clients they were about to close on uh was it maybe about i think it was 48 million yeah 48 million dollar hotel deal and they lost their financing was a new construction loan kovi they missed it by 45 days because of kovit done now we got to restart the entire process so wait so there are lenders out there that's going to give you acquisition and construction on these hotels yeah yeah and then even some you get some some will do if you can't get the full thing i think some they'll give you depending on your depending what you can find you can find someone that doesn't mess a messaging messaging loan um or bridge loan um and then um then you have folks who will cover the construction what's the message we know yes methane loan is it's like the it's kind of help you get to that that financing as far as for the construction um so it's kind of like that uh you could probably explain it better than i can no no not in the hotel world that's right that's that's that's well i'm trying to that's a whole difference i'm trying to make sure they're overcomplicated really yeah if you can't get all of your financing for construction and so you may need like some money to kind of cover you until you get your construction because you still have other things that you have to you know pay for like the building and as you're sitting there so you get what it's called like a mezz loan and so sometimes it's like you know some people can get the meds loan but they can't get the construction loan yeah and some people can't get the construction on something to hit the missile yeah and so typically when you work with and but that that is a whole that's a whole nother level yeah that's a whole nother point yeah that's a whole nother like first time hotel owners they're not dealing with that and if you are a first time hotel or dental athlete you have 100 multiple hundred million dollars of real estate in your portfolio for you to be having that conversation so how important is your experience as you know just an investor period right whether you're owning multi-families because you just said a hundred million dollars worth or whatever right but if someone's coming from the residential and maybe they own let's just say 100 doors you know maybe they own 30 40 properties is it easier for them to get financing from these banks coming from that multi-family investor world residential kind of sort of commercial versus going down to the hospitality industry they need to have someone on their team with the experience okay and the reason why it's even more crucial than ever because during covet experience hotelies lost their hotel and had to give it back to the bank damn so now you got this first-time hotel owner who said oh you know i got like 50 doors in the basement that's great but have you ever operated hotel before right you need to have somebody on your team whether it's the management company an asset manager somebody somebody has to be on your team meaning when you send your your your information to the bank as far as you know essentially like a pitch deck for those don't know what a pitch deck is it's just essentially giving an overview of what your project who's on your team the financial projections you know the competition it's just giving you an over it's just giving the bank and your potential investors an overview of of your project it's essentially telling the story to say i can get this deal done and i can make money and pay you your money back that's essentially where the pitch deck is oh wow man you're giving out a lot of information about this hotel game and i know there's a lot that you're not covering right now oh yeah this is not this is just this is just this is just scratching the surface that's why i wanted to ask you so yeah if someone wanted to own a hotel and they have some money like i got about 50 000 and i want to be a part of i at least want to get my foot in the door yeah is that where you come in yeah i mean you can invest i you know i don't have any deals right now but um if you wanted i would say start off as a passive investor so a passive investor is someone who and wants to invest privately like do a crowd fund or invest through reits real estate investment trusts or invest privately um i would start that way because you could start with like fifty thousand or you know ten thousand twenty depending on the deal and then maybe then transition to someone to active now if you have more access to cash or more access to capital um because i've seen people who use lines of credit to invest come in with 150 to 200 000 because they had that line of credit to invest so you sometimes you can use it as leverage to partner where you can actually get on a deal as a gp right and gp stands for general partner and so that means you're stepping into that ownership role um so that could be some ways as far as some strategies that you can get on your deal but it goes back to your investment thesis and criteria what you really want to do well thank you i want to say this we're about to wrap up anyone that may have a question we gotta ask you a rant and a gym about your industry okay because one thing about it every industry has their rents and their industry has their gym so let's start off with a rant about your industry something that is just your pet peeve in your industry can it just be an industry go ahead go ahead so i've been seeing a lot of this on instagram about manifestation you have to do the work you have to do the work it's just not it's just not you just can't say it and it'll happen like it drives me crazy you have to now you can say it now i do want you to say because i say my things but you have to speak with convention and you have to do the work and you have to stay focused without without focus there's no such thing as manifestation so you can't say i'm i want to become you know a millionaire but you over there spending all your money and you're not focused on one thing you just i just want to buy every ebook take every class do all this and you're not focused on one thing you have to follow your passion the money will come so many people are that's a whole nother podcast i'm sure well but the rant that i got that rant yeah i felt that no it just drove me crazy so just stay with your passion focus on your goal the money will come because people you know what you know how when you go to the supermarket and you hungry and you buy the whole store that's cause you're hungry so when you out here buying all this stuff you hungry you hungry for learning so you have to take the time and focus so that we can really that way you can make the right decision that way you can do your research and that way you won't be wasting money in time go ahead you gotta fight you better pray all right what's the gym give up not that you haven't given us enough gyms but give us one gym one gym or even where to get started one step something give us a gym about your industry something you love about it i do love that the hospitality industry is one of the few industries it's a big economic driver right for jobs so i'm very fortunate to be in a position where i can employ a lot of people not only with the job with the career providing benefits you know providing dental insurance you know providing travel benefits uh you know you can start off from a front desk agent and now become a hotel owner and i'm very fortunate that i created a platform where people can they they wanted to do it but now that they know it's possible that someone that looks like me who's a little who who who is brown but they black and they're not because usually you see a lot of people who are from the indian community on the hotel and they're like now this sister is owning something and i it's so that's a a gem that the hospitality industry you can start off literally from being a dishwasher and becoming a ceo i love it that's amazing that that is amazing look so we got a question from our lovely studio audience introduce yourself my name is dominic i'm here from miami um i just came from miami for this yes i love you shout out to you thank you marwan um i just want to say that you have opened my mind to so much more um i feel like keanu like i was thinking so micro like so small um and kudos to you for even owning a hotel like that is just that's so bomb but my question is would you suggest getting into the industry with zero knowledge with zero knowledge like about the hospitality industry i would definitely say do your research there are a lot of organ organizations out here um nav put which stands for national association of black hotel owners operators and developers say that again netflix map nav put is the national association of black hotel owners operators and developers that's an organization their goal is to increase the percentage of african americans ahola which stands for the asian american hotel owners association they have a lot of free information so i would say definitely do your research before you jump and make a major investment because again we just went to kovit so some people lost money um so you want to make sure that you're educated on what you're doing because it is a very capital intensive industry and i would hate to see that you're losing your money um jumping into something that she didn't educate yourself on okay don't you offer education i do so as we wrap up this episode don't worry about it i want to i want her to talk about where you where you can they can find you what you stand for where you what you offer as far as your consultant um firm and all that good stuff tell everybody all about you and where they can find you thank you thank you so much um on instagram devon reeves so d-a-v-o-n-n-e reeves r-e-a-v-e-s on instagram um i have an upcoming mastermind for those who are like really serious and really related by hotel i have a mastermind coming up in a couple weeks so just go to my instagram we're at um because i'm coming it's online i need to learn about this yes yeah this is yeah this is about it this is gonna be intense you gotta do the homework by the time you finish this mastermind you should be able to put a lot somewhere i love intent loi yeah okay um and also um i have a goal to create 221 hotel owners and investors this year yeah so i'm definitely almost there i've created some investors who've actually invested in some hotels i have another i have some other deals and i have a large project that's coming up so i i can't wait to announce it um but yeah and to to help people um create generational wealth and well but not even generation rent wells for your family correct well for you first and then that way you can pass it down to your family yeah i love it no that's what's um my mind is still like i got so much in my brain right this was an enlightening episode right it definitely stretched my thinking because i was just thinking multi-families commercials and now you got me thinking about hospitality and really learning this business so thank you for coming on the show and and giving us um your time and your intellectual property most important we definitely appreciate that so this was a great episode guys i don't know about y'all man but this queen is over here killing the game so y'all give her a round of applause this was great um she's gonna be here so ask her questions off camera um you should have been here youtube but you know it is what it is but um yeah so we're gonna wrap this one up right so this is uh matt garland in mls number five eight seven zero zero better known as mgd mortgage guy and this is keanu watson license number three one seven five seven six thank you guys for tuning in to the ransom gym show all right [Music] [Music] you

Channel: Earn Your Leisure

Views: 15,181

Rating: 4.9747901 out of 5

Keywords: earn your leisure, business, finance, sports, entertainment

Id: 7f21IfFK47k

Length: 59min 16sec (3556 seconds)

Published: Wed Jul 28 2021