We are thrilled to welcome former lawyer turned hotelier, Diya Liu, to the podcast. Diya is a true powerhouse in the real estate and hospitality industry. Drawing from her academic background in chemical engineering and biochemistry, she pursued a legal career in patent litigation. However, her incredible success in reaching $200,000 net rental income with short-term rentals led her to make the courageous decision to quit her job and fully immerse herself in the world of real estate investing. With her extensive portfolio, she owns four boutique hotels and around a dozen short-term rentals across the USA. As if that wasn't impressive enough, Diya is also the CEO of Welcome Capital, a remarkable $10 million STR and hotel fund. 

What sets Diya apart is her ability to leverage her legal background to teach others not only how to achieve financial independence through short-term rentals but also advanced techniques such as off-market acquisitions, creative financing with zero down payments, and innovative exit strategies like wrapped note transactions. She is passionate about sharing her expertise and empowering experienced short-term rental operators and owners to scale into hotel investing.

We are honored to have Diya share her invaluable insights, experiences, and strategies with us on this podcast. Diya gives us the lowdown on where to find hotel acquisition opportunities in the best markets, unique marketing strategies for boutique hotels, optimizing operations with new technology, what’s in her buy box and why now is the golden era for boutique hotels. Get ready to be inspired and gain the knowledge you need to take your real estate and hospitality ventures to new heights.

Resources:

• Instagram: @DiyaESQ

• Event: Western NC Hotel Bootcamp & Market Tour August 22-26

• Facebook: Airbnb Professional Hosts: Short Term Rentals, Mid Term Rentals, and Hotels

• Website: diyaliu.com

• Twitter: @diyaesq

• Facebook: Diya ESQ

• Welcome Capital: thewelcomefund.com

• CoStar: costar.com

• Cloudbeds: cloudbeds.com

• LoopNet: loopnet.com

• Crexi: crexi.com

• Ten-X: ten-x.com

• #STRShareSunday: @thebrooklyninn

Thanks For Visiting is produced by Crate Media.

Mentioned in this episode:

Breezeway | Go to breezeway.io/tfv to claim your free implementation when you start a Breezeway account.

Hosting Business Mastery Method | Join us for our live, free, host masterclass and learn how to OWN your digital real estate!

HBMM | Sign up today at hostmasterclass.com.

Minoan | Minoan helps short-term rentals and boutique hotels enhance their appeal with their customizable, curated retail platform.

Minoan | Visit MinoanExperience.com and tell them TFV sent you!

SEGMENT GAP

Hello, listeners.

Welcome back for another great week.

My name is Sarah Karakaian.

I'm Annette Grant.

And together we are--

Thanks forVisiting.

We want to kick off this episode like we do every week, that is sharing one

of you, our amazing listeners, who is using our hashtag # STRShareSunday.

So if you want to see other hosts who listen to this podcast,

that is a great way to find out.

Search the hashtag.

But then use it yourself because we are prowling Instagram.

We're going to share you here in the podcast and, of course, share you to our

email list, on YouTube, everywhere we can.

Annette, who are we sharing this week?

This week we are sharing @thebrooklyninn.

Again, that's @thebrooklyninn.

And I'm going to have to say, these hosts, Melinda and Matilda, I think

I've done a STR share on them before, way back in the day because they have

another account, @mountainlakebungalows.

Those are their short-term rentals in the Catskills.

But they are back again.

They have the new property, @thebrooklyninn, and they

are doing mid-term rentals.

And love this because I know that New York City has different rules

and regulations around short-term.

And they're like, hey, no worries here.

We're going to do mid-term.

And The Brooklyn Inn is gorgeous.

They're doing mid-term rentals there.

And one thing I want to just give a shout out to them because

they do PR for Visit Sweden.

Yes.

Huge account.

Because they're both from Sweden.

So I love that they are doing PR for Visit Sweden, but then they have

their own properties here in the US.

So I'm sure they are bringing that same hospitality and that view

of a guest to their properties.

So check them out.

If you're in a spot where maybe your town is considering different rules

and regulations around short-term rentals, don't count yourself out.

Go to The Brooklyn Inn, see how they're doing it.

Right now, I see there was a new opening.

One of their mid-term rentals is up.

So they were on Instagram letting people know, hey, you can book again

starting 30 days stay at this date.

So I would start to look for inspiration, um, if you need

to for some mid-term rentals.

I know also maybe you have a slower season or maybe you have a busier time

in your life and a mid-term rental would be-- maybe you need to press pause on

the fast action, short-term rentals.

So check them out, see how they are welcoming guests in their mid-term

rental, and look to them for inspiration.

But thank you for using the hashtag, Melinda and Matilda.

Give them some love on @thebrooklyninn.

All right, Sarah, let's get some goods about the show today.

All right.

We're going to go slightly rogue.

And instead of talking about short-term rentals by way of residential properties

being rented out on a short-term basis, we're going to talk about hotels.

Because I'm not going to lie to you, Annette, I've thought about it.

Maybe not a 50-door hotel or anything giant, but something

boutique and cute that is an actual hotel and not a multi-family that's

converted into a short-term rental.

And so we have the queen of hotels.

Diya is going to be on the show today.

And one of the favorite things I think she gave a hot tip on is why right now is

the best time to consider buying a hotel.

All right, let's dig in.

All right, Diya.

You've got four boutique hotels, a dozen plus short-term rentals, plus you're

the CEO of the Welcome Capital Fund.

You have a lot going on.

Obviously, you got started somewhere.

So take us back before all of this, whatever your previous career was.

What was that, and then how did all of this come about?

So I am formerly a patent litigation attorney, and I worked as an

attorney for about five years.

Prior to that, I double majored in chemical engineering and biochemistry.

I went to law school in New York City, and I've dabbled in fashion styling as well.

So I've done a lot of different things.

But I stumbled into real estate investing mostly by the way of

financial independence, doing some research, and realizing that I don't

want to work 9-9 for the rest of my life, or at least my working career.

A lot of my colleagues are very well paid, but they are basically constantly

working at their desks, and they could be well past midnight sometimes.

And so I just recognized really early on in my attorney career that

this is not something that I want to do for an indefinite future.

And I needed to figure out something else before I burn out.

So I started looking into financial independence.

At the time, I was living in New York City.

It's basically the most competitive landscape in terms of law firms out

there, and so, uh, the expectations are that you really don't have weekends.

You don't really have vacations, even if you take vacation and it's approved,

even if the partners need something, you're still on the hook for it.

And I've had some fellow colleagues that had to sprint to a printer

in the middle of some tropical island that they're vacationing in.

So you really just don't have any work life boundaries.

And going back to real estate investing, I decided to move back to Austin,

Texas, to take up a law firm job there, start my real estate investing journey.

Austin's been my hometown for a very long time.

So I felt like that was a better market for me to get

started in than New York City.

And I basically started with house hacking.

Many folks probably got started with real estate investing.

And I experimented first with long-term rentals and determined that I don't really

like living with someone for a whole year at a time, honestly, in my space or what I

consider my space, uh, because, of course, it's also their space at that point.

And then I looked into Airbnb and just hosting on Airbnb instead.

And I just really felt like, one, I was getting a lot more money, and two, I

like that model better just because I am able to upcharge for better designs,

better marketing, etc, better experience rather than just being limited to a

single monthly fee or monthly rent.

And it just really appealed to me because of my engineering

background, of my design background.

I love the fact that if you design something better, it's more attractive,

then you're able to get more money out of your hosting experience.

And basically, I was like, wait.

So I like traveling.

I like design.

I like numerical analysis.

I have a legal background This actually fits really well with

everything that I'm good at.

And then I don't really know a lot about real estate investing.

So at the time, I was really insecure when it comes to long-term rentals, but I

felt like when I was looking at short-term rental investing, I can beat all these

folks that have 20 years of experience because they don't understand technology.

They don't understand digital marketing.

They don't understand branding.

They don't understand design.

So those are things that I can outperform these folks who had

20 plus years of experience on.

So I decided to go full steam into short-term rental investing and basically

spent all my weekend and also holidays on setting up short-term rentals.

I saved every single penny I had, uh, working as a patent litigation

attorney and just reinvested that into short-term rentals.

And basically, I quit my job in 2020 when the world shut down.

I had to make a decision.

Do I start doing this full time and let my law career go?

Basically, it was getting to the point of choosing between the two.

So either I had to spend more time focusing on my law career, or I

had to spend more time focusing on my real estate investing career.

And I just took a big leap of faith at the time, when I already had nine

short-term rentals, and just quit and do short-term rentals full time.

And since then, of course, I've broken into the world of boutique hotel

investing, and that's where I spend most of my energy on these days.

I feel like it's that pivotal moment that everyone struggles with, and

the fact that you were able just to take that leap and trust yourself.

So you had those nine short-term rentals.

Did the cash flow there replace what you were making, or you truly

just believed in yourself enough to say, I know I've got this?

I've already proven my concept.

I just need more time to focus on it.

So I was netting about 150 to 175.

So it wasn't necessarily completely replacing what I was walking away from.

It's painful to walk away from a job where your bonus is, uh, six

figures, and you're just like, oh my gosh, I'm walking away from this.

But I felt comfortable enough that, you know what, my expenses are relatively

minimal because at the time, I was living a very frugal lifestyle.

And so I was like, I can travel, buy more short-term rentals, meet

really cool people, and learn what else I'm going to do as my next step.

And so I just decided to take that leap and quit my job in fall 2020.

And I haven't looked back since.

I have just a question about you being an attorney.

Those extra years of school, the extra years of education,

was that taken into account when you were making this decision?

Was it a decision tree?

Did you have these lists of like, this is what I can make over time?

I just feel like, especially someone that had to have those extra years

of education, that that would make the decision that much harder.

I know we have a lot of professionals that listen to our show, and

they're like, oh my gosh, I have all these extra years of school.

I have these years into my career.

What was the decision?

Did you make it in a silo by yourself?

Were you listening to anybody else?

What were some of those moments where you're digging deep to figure out

if you're going to take the plunge?

So my parents were definitely anti-quitting my lawyer job, for sure.

My dad was like, what a waste.

You spent so many years doing this, etc.

And nobody respects the landlord.

I was like, dad, nobody likes attorneys.

We're the butt of every single joke.

So I don't understand how landlords are way better or worse.

So definitely, I had a lot of people who were naysayers about me quitting,

including my own family, but I think in the end, I never went to

law school basically to just be an attorney for the rest of my life.

I actually went to law school because I met someone while I was a chemical

engineering major who was recruiting for an engineering company, and he was

the CEO of that company, and he was a former patent attorney, and he was,

prior to that, a chemical engineer.

So I was like, oh, I can be CEO one day if I go to law school and run a company, etc.

How cool would that be?

And so I always went to law school with a scene as a stepping stone.

I just didn't know what that stepping stone would be, to

what the end goal would be.

And it just became more and more apparent to me that this traditional trajectory

for lawyers is not what I want to do.

Either I had to start going towards being involved with a startup, or

something like that, to be more on the management position there.

Go get an MBA or something on top of having a JD or something like that.

I've always been more interested on the business side of things.

So yeah, I think that going back to folks who are listening to this, who

have a W-2 job, I guess it just really depends on what your end goal is.

My end goal was that I was able to travel the world, see really cool places,

experience really great experiences, and get to meet other entrepreneurs.

And the only way for me to do that is to create my own dream job.

And also I wanted to be able to have a career where I got to be both

creative and a local at the same time.

And so that's something that's not going to exist in the W-2 world.

It's only going to be something that I self-create and I build my

own teams, outsource the things I'm not good at, and then keep the

things that I really like doing.

Love it.

Let's talk about the hotels.

Let's talk about the short-term rentals.

You're crushing it there.

Did an opportunity just cross your desk that you couldn't refuse?

Were you on the prowl like, this is the next thing that I want to conquer?

When did the boutique hotels start to come into your world, and

how did you start tackling that?

I started basically when the real estate appreciation really took off

in terms of short-term rentals and short-term rental markets, and I was

selling some of my short-term rental portfolio to basically buy other deals.

When I ran into appraisals, and I was like, oh my gosh, wait, so it doesn't

matter if I'm making a 100 grand on my short-term rental, I can't sell it for 500

grand if my neighbor sold their townhouse that's unfurnished, that's not a business,

that's not cash flowing for 400 grand.

I actually have to evaluate my business the same way as someone that

doesn't even have a business on their asset how much they sold it for.

That doesn't really make sense to me, conceptually.

So I had to get really creative with how I sold my stuff and do owner

financing or wrap mortgages, etc.

And I started looking at hotels, initially, just because I was like, I want

to be able to supercharge a business and then push the valuation of that business

higher by operating it better, by having the better design, better marketing, etc.

And then the more I look into boutique hotels, the more it made sense because

not only is the valuation of a commercial asset based on the performance of

the business rather than just on what other people have sold their properties

for, it's also immune to short-term rental regulations, which, uh, it

was definitely starting to be born more of a topic in the news at the

time I started researching into this.

And also it's just better scalability because there were times where I was

doing almost a dozen closings by selling some stuff, buying other stuff, and it

was just the most stressful thing ever to do that many closings in the same month.

And I was like, you know what, if I just did one deal every three months

or every four months, but it was a 100 doors, then really I'm adding to my

portfolio by the order of 50, a 100, 75, etc, and I'm less stressed because

I have a whole team of people who are doing the things that I'm not good at.

And I can just focus on the things that I'm good at.

And it's just a lot more efficient that way.

And so a lot of reasons pointed to just focusing on more hotels

instead of short-term rentals.

When you say boutique hotel, those four, can you let us know how

many rooms are in each of those?

What's your buy box?

I think is a more specific question.

When you're looking for a boutique hotel, what's the room count, and what else

does it need to have in order to qualify as a reason for you to dig in deeper?

I think my buy box has shifted from when I first started buying

hotels to what I'm looking for now.

So when I first started, I was looking for somewhere around 10

to 30 doors and under $1 million.

Just because it's my first deal, I wanted to make sure that we got a really,

really steep discount off of the deal.

And also it's something that's small and manageable.

Our smallest hotel is 13 units.

And then the second smallest is 19 in North Carolina, and the bigger

one, one step up from that, is 48 doors that we converted into 46 by

making some of the units a little bit bigger in Northwest Arkansas.

And then the largest one that we just closed on is 76 units, and that one

still, currently a franchise hotel that we're deflagging and converting

into a boutique hotel next year.

So now our buy box is going to be 50 doors and up because the last deal that we

bought is definitely my personal favorite deal just because day one, we're walking

into $2 million worth of gross revenue.

And we got amazing bank financing terms because their price for

$2.9 million was higher than what we were under contract for.

So it just ended up being a seller deal for us.

So now I'm looking at bigger deals, and I think somewhere between 50 to 100

doors or even more than 100 doors is something that I'm really interested in.

And the great thing about hotels this year is that unlike short-term rentals, you can

actually buy them for somewhere between 20 to 40% off, versus during normal times.

Talk to me about the value add.

Are you buying turnkey, or are you buying properties that you need

to either add value to operations or to the spaces themselves?

Talk to us about how that fits into your preferences.

So we do typically buy value added properties, and when I first

started, I thought that meant I had to be really rough, like it

had to be really, really ugly.

So our first few hotels were definitely really ugly hotels.

I would say, as the search continues, I realized that the operations can

be ugly, the marketing can be ugly, or there might be inefficiencies in

the P&Ls, but it doesn't necessarily have to be a rundown hotel.

So our most recent buy is a 2008 construction, so

it's relatively brand new.

It is still ugly in the sense that it has that corporate hotel vibe.

I'm sure everyone listening to this podcast has stayed at the same beige

carpet space with continental breakfast.

So I'm sure everyone's stayed at a billion of those hotels.

So it's one of those right now.

And what we really want to do is make it a little bit more special when guests

walk in and have a cooler food truck park on site, those kinds of things

that we're trying to add to make it more hip that's going to be very different

than just a corporate travel hotel.

What about location in your buy box?

Does it have to be near X, Y, Z?

Does it have to have a population of one-- what in terms of

location is attracted to you?

I would say we're typically looking at locations where there's a future

trend of upward potential for tourism.

And what I mean by that is that usually what I look at is 2-3 driving hours

from a major metro that's growing.

So wherever the multifamily syndicator guys are going in terms of where

they're buying multifamily, we're looking within 2-3 hours driving

distance from that because those markets are going to trend upwards in

terms of tourism in the near future.

So what is two, three hours driving distance from Austin,

from Dallas, from Atlanta, from Charlotte, from Raleigh, etc?

We're really looking at those areas because it's something that a lot

of these backward-looking trend data is not going to show you.

They're not going to show you what the forward trend of tourism is going to be,

but just common sense tells you that these are going to be markets that are going

to continue to grow in terms of tourism demand because people are not always

able to hop on a plane and get away.

Instead, they are interested in a lot of quick getaways these growing metros.

I have a question about staffing and running a hotel

versus a short-term rental.

All of your hotels, are your team members there?

Is it fully staffed?

Are they W-2 employees like front desk and cleaning team?

What does that look like for you?

For our larger hotels, they do have staff.

Over time, we're able to be more and more efficient with our staffing

by combining it with smart tech.

For example, once we have deflagged the 76-unit hotel, we plan on automating a lot

of the check-in and check-out processes and stuff like that and getting a better

PMS in place, etc, so that we don't need as many full-time staff as before.

But I will say that for most of our hotels, we still have

traditional hotel W-2 staff.

So that's a little bit different than I know some of the other folks

who are going from STR to hotels.

They are advertising a much more remote contactless check-in to

completely zero staff on site model.

For me personally, a lot of our guests, they don't really like that model.

They're older folks who do expect the traditional hotel person

to be able to talk to them.

And so if they didn't find anybody on site, they would definitely

leave a negative review, even if the rest of their stay is really great.

For our smallest 13-unit hotel, we are going to do a whole just contactless

check-in, only STR management type accommodation, just because 13 units

is not really enough for us to have a full-time staff on site, so we

are going to have a local co-host who's going to help us with that.

But for everything else, we have staffing on site that's full-time.

Cool.

Talk to me about where you find your data.

For short-term rentals, at this point, we know we can go to

AirDNA, Key Data, STR Insights.

These are all great places to get data depending on what data you need.

Where does someone who's interested in hotel data go to underwrite their deals?

CoStar and Star really has a monopoly on hotel data right now.

So you basically have to have a CoStar account to access this.

So it's definitely a pricey subscription for hotel data, but

that's really the only go to source.

And I will see a lot of people take the shortcut and just use

the traditional short-term rental data sources to analyze hotels.

And I always caution people against that just because hotels may have

the same seasonalities and stuff like that compared to a short-term rental.

But a lot of the other stuff like occupancy and ADR, those are

going to be totally different.

So understanding hotel data is very key to your success.

And CoStar, is that a monthly subscription or annual?

Can anyone get a hold of that if they want to if they want to pay the price?

Yeah, they can.

It's usually about $12, 000 a year, I think.

Oh,wow.Okay.

Got you.

But, I mean, if you're buying multiple million dollars worth

of real estate, it makes sense.

I want to go back to something that you were mentioning about selling your

short-term rentals in order to have that cash to purchase these hotels.

I heard you say one of the problems that you found is you are on the same block

as someone, a normal residential home, and you are having to compete on market

to sell it exactly the same as someone that's just a residential homeowner versus

you who had a cash flowing business.

And I heard you say you were doing some seller financing.

Of some of those properties that you sold in order to purchase the hotels, how

were you marketing those as businesses and doing the seller financing?

How much more were you getting for your properties than those residential homes?

I think it really depends on the return.

So for the one that had 12 months revenue of about 97, 98

grand, I was able to get 500.

I'm not exactly sure how much the sales comps were in the area at the

time because it was cash flowing for me, and so I didn't want to sell

it unless it was for at least 500.

But I think it was probably significantly less.

I think it was maybe 400 or so for market comps.

Interesting.

And then did you do that seller financing, or were you able to find a

buyer that could finance the whole deal?

I did a wrap mortgage.

So I've sold two of my short-term rentals with wrap mortgages.

I'm selling a few more with that financing in place.

It also helps the buyer a lot of times because they may not qualify

for traditional financing, or if they do get DSCR financing, they're going

to get much higher interest rates.

So in some instances, their mortgage payment might be less when it's with

me, as a wrap mortgage, even though the price of the sale is higher.

Got you.

Okay.

Can you explain the wrap mortgage for me?

The wrap mortgage is basically where there is still an underlying

mortgage on the property from your original lender, and then you wrap

your new mortgage on top of that.

And I highly recommend someone who's doing that to use the right attorneys and

also maybe potentially reach out to me because it can get pretty complicated.

But yeah, I usually do those.

Okay.

I also am making a lot of offers on short-term rentals with wrap

mortgages or creative financing structures in place right now

because of the high interest rates.

Interesting.

Got that.

So you are offering also, hey, I'll take over the original mortgage,

whatever that difference is.

You'll get the loan for that difference and pay both of those.

Is that correct?

So you can have low interest rates on those.

Yes.

Okay.

Right now, in this current market where a lot of people have 2, 3% interest

rates previously when they bought it two years ago and they're trying to

resell it, it's both helpful for that person who's selling it and also the

buyer if they're able to find a way to still have that existing mortgage.

And so there's a lot of creative ways that you can structure it to either

wrap the mortgage or do what's called subject to or sub to, or assumptions.

And so usually it's sub two wrap mortgages that a lot of people prefer, and the

buyer can get let's say 4 or 5% interest instead of 7% interest on that purchase.

And in exchange, a seller can get a little bit higher in terms of their ask price.

Love it.

So listeners, that's a type of creativity.

You can't just go for the first broker like, this is the deal on the table.

There are so many ways to get creative, and you'd be surprised how many of the

sellers want to get creative with you.

I had a friend yesterday, went into contract on something where it started at

800,000, came down to 700,000, and he's only bringing 300,000 to the table, and

the seller is financing the other 400,000.

So at the beginning of the day, you're looking at this--

Giant number.

800,000.

And at the day, it's 300, 000.

So I love that you're bringing that up.

That, don't stop at this one plan, plan A, which is a normal traditional mortgage.

There is a lot of other ways.

And most likely the sellers are going to want to work with you too because they

want to move assets also and continue on whatever their portfolio growth is.

So thank you for bringing that up to us and our listeners.

So there are alternate ways that people can get into deals that might seem a

little bit out of reach to them right now.

Yeah.

Absolutely.

I mean, there's people who are willing to sell or finance, and they're willing to

accept a 7% or 5% down payment, and you're able to get into a multimillion-dollar

STR for relatively little out of pocket right now just because a lot of people, if

they need to sell, they need to move, they just want some cash to move, and they're

okay with that passive income for the next few years until you refinance the deal.

AD MARKER

I have a question.

You said that your goal was to not work 9-9, but we all know, as

entrepreneurs, that can be this thing, like, I just traded in a 9-9 to a--

24/7, 365.

Correct.

And you're in hotels.

So we know those are open all the time.

Well, then you get into short-term rental or hospitality.

I used to work in hotels.

You get into that industry, and, my gosh, their holidays-- people

ask, like, oh, that's a holiday.

I was like, it is--

It actually means you're busier.

Correct.

I am immune to the rest of the world getting time off.

I felt like it never was for me.

And so having that be the reason you left your law career, what is working for you

so you're not working around the clock?

And I know it's finding people who are good at what you're not good at and

all that, but truly, give us something that's tangible in terms of you're buying

these assets in different locations.

You said you're building your own teams.

Are you, right now, working around the clock so that eventually

you can take a step back?

Or have you found something that really works for you so you can take time

off and be present in traveling the world and all those sorts of things?

Share that with our listeners about how you're either doing that now or you're

working harder now so that in the future you have some more time to yourself.

I will say that if I just sat pretty with my short-term rental portfolio

and didn't really do anything else, didn't want to scale into additional

short-term rentals, didn't want to buy more hotels-- right now, I have a pretty

stress-free life where I will probably be working five to 10 hours a week max.

So I think it's absolutely possible for those who are listening who are like, you

know what, I don't want additional stress.

I don't want to quit my job into another job which is

never-ending or anything like that.

Um, I will say that I only work as much as I work right now because

we're buying more hotels this year.

So that is going to be a lot of work in itself.

And I'm also teaching other people how to buy hotels in my hotel

mastermind, so ends up being a lot of work, uh involved in that.

And I'm raising money for multiple deals.

So I'm doing a lot of different things.

And so that's what ends up costing a lot of time for me.

And in terms of how I'm not-- so I'm actually not the operator for any

of our short-term rentals or hotels.

I have one key operations partner that is helping me on all the

operations and streamlining everything.

But also, I have a hotel mastermind with the intent of bringing up these really

skilled short-term rental operators who are already super hosts on, let's say,

10 plus listings or whatnot, and I'm training skilled operators to become the

next generation of boutique hoteliers.

So now I can just focus on raising money, putting together deals,

finding deals, and then I can test one of them with operating the hotel.

So there are different ways to structure teams, um, to where I'm not usually

the person who has to operate things.

I don't even manage my short-term rentals at this point just because I

would rather be out finding more deals.

Awesome.

I love your hotel mastermind idea where you can cherry pick the

students that are amazing and like, hey, there's a deal in your area.

I think that is genius.

Genius idea.

I know you're not operating your hotels, but I'm sure our listeners are

wondering, since you have short-term rentals and you're in the hotel world,

talk to us about the property management software versus your hotel software.

Are you able to use a short-term rental PMS for your smaller boutique

hotels, or do you advise anyone who's interested to just get ready to invest

in a different platform altogether?

Yeah.

We're your mastermind students right now.

Right now we are using a different PMS for our independent hotels

versus our short-term rentals.

The one right now that we have for our hotels is Cloudbeds.

There's a lot of different PMS out there for hotels.

As my operation partner likes to say, it's the wild, wild west

right now for hotel software.

There's hundreds of software out there, and he's usually the person

who ends up picking whichever is the most efficient for our hotels.

So right now that is Cloudbeds.

I know that there are some short-term rental PMS out there that are now

venturing into hotels, but once again, we haven't started using those yet.

So we do currently have two different systems.

And then when we have a takeover or franchise hotel, we do typically have

to use their PMS for the time being.

And I can tell you safely, do not use that type of software, no matter what.

It is like 1990s interface.

I took a look at it.

I was like, you can't even see the calendar more than a date out.

It's just one day at a time.

It was just weird.

So I don't like that.

But aside from that, it's really just based on whatever suits your needs

in terms of how many doors you have, or do you want the same short-term

rental and hotel software, uh, what integrations you want, etc, for your PMS.

So your boutique hotels, is that one thing that you're bringing

to all of these properties?

Are you putting them on Airbnb, Booking.

com immediately?

Are you seeing your occupancy go up just from bringing them onto those sites?

Or is that part of your marketing plan?

So we do bring our independent hotels onto the non-traditional hotel

platforms, although I would say that Airbnb has invested a large amount

of money trying to bring hotels onto Airbnb platform right now.

So yes, we do onboard our hotels.

Two of our hotels are on Airbnb right now.

The franchise one, we don't have it on Airbnb, and there's a

lot of reasons behind that, but that's one of our strategies.

The other one is to redesign it.

So we definitely recreate and reimagine the space so that it's

not your standard hotel look.

The one in my virtual background, that's one that we have converted

into a boutique hotel, and I don't have the before picture anywhere,

but it was brand new chic before, and it had hot pink carpet, and popcorn

ceilings, and a lot of other things that are reminiscent of a 1980s hotel.

And so we really recreated the entire experience for our guests.

So yes, we're doing that.

And then secondly, we're listing on all these traditional market OTAs

that short-term rental operators are very familiar with, as well

as the traditional hotel OTAs.

And then the last step is direct marketing, and understanding how to do

direct bookings, and starting to venture more into that space now that we have

stabilized the operations on the OTAs.

With your hotels, can you or are you planning to cross-promote each other?

I mean, obviously, I know you have the one that's a franchise.

We're going to wait for that one to cycle out, but is that part of

your grand plan with your mastermind students, with buying these hotels?

Is it to create a brand across all of them so you can share your

email list, share your past guests?

Is that part of the larger strategy?

I think that is something that we're working on right now.

I will say that when we started buying hotels, I was basically buying stuff

that was discounted and in the markets that were waning without like, hey,

in five years, do we want to have a cohesive brand, which means that the

target demographic has to be similar?

So that's something that I wanted to work back from, is that if you wanted

to do that, where you're sharing email lists, then you really have to look at

the markets where the target demographic is very, very similar to each other.

And I would say between two of our hotels or three of hotels in mountain

towns, that might be the case.

But in our beach destination 13-unit hotel, there's not a lot of overlap

in terms of that target demographic.

So it is one of our things that we're looking at, is do we want

to build a loyalty program?

Do we want to build our own version of franchise hotels in the future

where it's leaner and not collecting 10 to 17% franchise fees compared

to all these other brands and just basically be more of an independent

indie franchise or something like that?

We're looking into that, but that's not something that we're

heavily investing in right now.

Right now, because of the market cycle and where it is, we're just raising

money like crazy and buying hotels like crazy just because this and next year are

these golden windows of opportunity for buying hotels at a significant discount.

And so that's what we're focusing on right now.

All right, listeners, that's your call to action.

Why is it the golden time?

Is it people are retiring?

Is it they went through it during COVID and they're over it?

You just coined it the golden era.

Why is that time of the essence right now?

There's a few reasons.

And, yes, COVID-19 was really, really tough on a lot of hotels versus

short-term rentals just because it had-- short-term rentals, one remote

cabin in the woods sounds a lot more appealing than a crowded hotel that has

50 rooms during the pandemic times, one.

So a lot of folks had taken a heavy hit in the hotel industry during the pandemic,

so the valuation of hotels is discounted.

The second reason is because a lot of interest rates are climbing up and

hotels on residential assets, they have usually a bridge loan, so they have

usually five years for the interest rates fixed before it's resetting.

And a lot of these interest rates are resetting this year.

So if your former interest rate is 3% and now your interest rate is 8%, that's

a problem because you might not actually qualify for a refinancing anymore.

Or even if you qualify, you're like, you know what, I'm ready to retire in

the next five years anyway, and this is no longer cashflowing that much

for me, so I might as well just sell it now versus sell it in five years.

And a lot of people are also just retiring as well.

So they're just looking at the potential of a market downturn.

And if they already had goals of retirement in the next five years,

their kids are not interested in taking over their hotels because

their kids are now engineers, and scientists, and stuff like that.

And they saw their parents grow up behind the front desk and stuff like that.

They're willing to sell those at a discount.

The final reason is that a lot of people get hit with what's called PIPs,

which are just property improvement plans or renovation plans by brands.

And whenever they get hit with PIPs, every five to 10 years,

they end up being forced to sell.

But it's really hard for new hoteliers to get financing right now, so

the buyer pool is also diminished.

If you don't have hotel experience, it's harder for people to get financing.

And so because of that, hotels are willing to sell at a discount, or they're willing

to negotiate to experienced operators.

So if you have hotel experience, right now is one of the best times

to buy hotels because you can get seller financing on some stuff.

You can get 30-40% discounts off of auction hotels.

It's just a lot of really great opportunities right now that's going to

start popping up the next few months.

Oh.

Can you give us trade secrets?

What's the auction hotel site?

Or do we have to be in the mastermind?

Oh, no.

It's Ten-X.

I don't mind talking about it.

It's just a lot of these standard auction sites, but in order to close

on a hotel like this, you definitely have to learn a lot more, like we'll be

teaching the mastermind, just because to just even qualify for the auction site

and also be able to close on a hotel in 45 days and also get financing from

lenders, etc, to raise that money, that requires a lot of effort and knowledge.

Got you.

Okay.

Other than those auction sites, like our MLS or Zillow, where does

one look just to start dreaming and seeing what's available?

Is there a site where they can see hotels that are for sale?

LoopNet, Crexi, and Ten-X are probably the sites that you

can look when it's on the MLS.

But I will say that unlike short-term rentals, 99% of really good hotel deals,

you're not going to find on these sites.

And the reason is because they are sold to other hoteliers in the network first.

They are just marketed towards other hoteliers and brokers who

already have established lists of clients who are hoteliers.

That's normally where they are marketed first.

And one of the main reasons is because they are operating

businesses, so they have employees that they don't want to quit.

So these employees don't normally know about the pending sale unless

pretty much most of the contingencies are already removed in the contract.

So because of that, by the time it reaches Crexi and LoopNet, it's likely

not a good deal because 10 people have already said no to this deal,

at least, if not hundreds of people have already said no to this deal.

Now, that doesn't mean that there's no good deals at all because the last

hotel that we bought was off of Ten-X, which is a very public auction site.

But once again, that was the reason that we got such a good deal, was because

it was such a hard deal to close.

And if we didn't have all the connections and stuff like that and help of franchise

attorneys, help of just lenders, help of the fact that we already have three

other hotels, I don't think we would have been able to close that deal.

That's a hot tip for you, listeners.

Okay, you are the CEO of a 10-million-dollar short-term rental

and hotel fund called Welcome Capital.

So what is the fund, and why was it important for you to start it?

Because we're buying hotels at such short time [Inaudible], it was imperative for

us to basically raise money up front to buy a lot of hotels at auction, and then,

in return, get an amazing return for our investors-because if you're able to get

a hotel at 30-40% discount this year, by the time that the interest rates climb

back down, you're able to refinance that hotel and basically refinance or recapture

all your initial invested capital.

And you can do two things.

You can redistribute that back to your investors like, there you go.

And, by the way, you're technically still in the deal, so you still get

cashflow, but your initial capital has already been returned to you.

Or two, which is a better scenario for most of our investors, is that

we return some part of that, but the other part of it is reinvested

back into buying more hotels.

So now not only are they getting double the cashflow for the same amount of money

that they invested into the deal, they also get double the tax benefits because

now we're buying a new set of hotels.

We're doing a new set of cost segregation.

So that's the whole premise between Welcome Capital, is that we are able to

buy hotels that closed difficult deals that other operators are not able to do.

And we're able to do it faster because we raise the money up front.

So that's why we started Welcome Capital, to be able to move faster, to be able

to buy discounted deals, and at the same time, educating our investors, who

are oftentimes aspiring STR investors and aspiring hoteliers how to do these

deals by offering VIP retreats where they get to see our hotels, and our

operations, and how we do things.

I love that.

That's a value add to your fund.

No, that's great.

So how do our listeners-- you got three things to offer them.

Where do they find out like about these hotels if they want to stay there, about

your mastermind, and about the fund?

I think the easiest way is to just reach out to me.

Shoot me a quick message about what of the things that we talked about is

interesting to you and how I can help.

On social media, I'm most active on Instagram, so it's

@diyaesq or D-I-Y-A-E-S-Q.

I provide a lot of free content on what to do in terms of analyzing

hotels, how we bought some of these deals, how we structured them, how

we finance them on social media.

And then also you can always reach out to me for the free training that I provide

on hotels, upcoming bootcamps, etc.

You can always message me on social media.

And if you're interested in investing, you can also reach out to me.

So the best way is Instagram, and the second best way is to join our Facebook

group, Airbnb Professional Hosts.

Cool.

And we will make sure to link the Instagram and Facebook

group in our show notes.

But we just want to thank you.

This was your free knowledge today.

I know I learned so much.

I know our listeners are too.

And we just want to thank you for sharing that information.

It's always great to see how people went from their corporate job

to their short-term rental, and now what's next, to the hotels.

And it's super exciting.

We can't wait to continue to watch you in this golden era, see how many hotels

you can purchase in the next 12 months.

Thank you, guys, so much.

Of course.

With that, I am Sarah Karakaian.

I'm Annette Grant.

And together we are--

Thanks for Visiting.