Charles Chandler  0:00  

Really, it just comes down to saying what your intent is and what the end state of something is, and then allowing that subordinate leader which in that case, I was the subordinate leader to then execute as I saw fit. As long as the intent was there, I stayed within that left and right limit boundary. And then I met the end state, which that my commander, my boss laid out for me that that kind of theme is kind of how we communicate internally as well. We like to let people have that creativity and whatnot, to get the mission done and get the job done. But just providing the overall intent and then that allows people to make mistakes in which you can go back and then look at it and refine it and provide feedback and that that that constant loop is kind of what occurred overseas back here in the US training. And again, that has been very transferable over on the business side as well.

Announcer  0:57  

Welcome to CRE PN Radio for influential commercial real estate professionals who work with investors, buyers and sellers of commercial real estate coast to coast whether you’re an investor, broker, lender, property manager, attorney or accountant we are here to learn from the experts.

J Darrin Gross  1:17  

Welcome to Commercial Real Estate Pro Networks, CRE PN Radio. Thanks for joining us. My name is J. Darrin Gross. This is the podcast focused on commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio. 

Today’s program is sponsored by Building Insurance and Risk. Don’t put your real estate investment at risk, work with building insurance and risk and receive multiple coverage offers with a side by side coverage comparison. To learn more, go to building insurance risk, dot com. 

Today, my guest is Charles Chandler. Charles is the co founder and CEO of My Tennessee Home solution, a real estate solution company composed of veterans dedicated to hard work and service in the civilian world, just as they were during their time in service to their country. Currently transitioning out of the military. Charles looks to help others use their God given gifts and talent to help themselves and others. And in just a minute, we’re going to speak with Charles about building a team and investing in real estate. 

But first, a quick reminder, if you like our show, CRE PN Radio, there are a couple of things you can do to help us out. You can like, share and subscribe. And as always, we encourage you to leave a comment, we’d love to hear from our listeners. Also, if you want to see how handsome Our guests are, be sure to check out our YouTube channel, you can find us on YouTube ad commercial real estate pro network. And while you’re there, please subscribe. With that, I want to welcome my guest, Charles Chandler Welcome to CRE PN Radio.

Charles Chandler  3:13  

And thank you so much. I’m glad to be here. Looking forward to

J Darrin Gross  3:17  

Well, I’m looking forward to our conversation. Before we get started, if you could take just a minute and share with listeners a little about your background.

Charles Chandler  3:27  

Yeah, so I’m Charles Chandler, originally from Alabama, went to school up in New York, and then found my way back to the south. End of the military commissioned as an infantry officer in 2017. From less point and then my first duty station was at Fort Campbell, where I was able to reconnect with some of my classmates from school in which we decided to kind of pivot that current glide path of doing a career in the military instead of starting a real estate investing company, my Tennessee home solution. And so that’s kind of kind of where got us where we are today. It was about two years ago is when we really broke ground on everything. And then now from the single family side. We’re transitioning a lot into the multifamily space. So a lot of us are almost out right now. And so we’re just looking forward to reconnecting get everybody back in the Nashville area and keep getting after it.

J Darrin Gross  4:24  

Awesome. Well, first and foremost, I want to say thank you for your service.  It’s an incredible commitment you guys make and and very much appreciated. And speaking about your military background, you mentioned your you said infantry was was the the division you were in or the Caribbean, right.

Charles Chandler  4:50  

Yeah, so we tried it. Myself and my partner Jordan, we commissioned as infantry officers.

J Darrin Gross  4:56  

Okay. How has the military training He received help you with your real estate investing career.

Charles Chandler  5:04  

A ton, there’s a lot that’s really is transferable. I think that the majority of it just comes to just relationship building, learning how to communicate well with people. And really just being able to have a lot of trust, especially the first and foremost is really kind of going through that break down process of previous background of wherever you grew up, or hometown friends, or anything that kind of might have potentially been a bad influence and going through the different trainings and environments, and everything just kind of really molded you into a person that not only the military wants you to be, but they the military understands that there is a an exit from the military later in life, and they want to want individuals to continue to be contributing to society. And so I think a lot of initial core values that we have, as a company stemmed from a lot of the stuff that we’ve gone through and experienced and having a shared chair background definitely helps. Not only internally, building our team, but then also kind of what we want to project out to others and what others are, sense and feel and like have a sense of gratitude overall about doing what we’re doing right now.

J Darrin Gross  6:13  

It so in your in your role in it as an officer in the infantry? Can you describe kind of what what a day are? Or kind of a, you know, your level? And then what your role was, as far as working with others? Was it? Were you kind of the were you receiving orders and then distributing those? Or were you were you the one that came up with ways to accomplish the goal? Or how how What was your role in in in that?

Charles Chandler  6:48  

Yeah, that’s a great question. So why had a pretty interesting experience overall, I was very blessed to just be able to went overseas, served in Syria, actually, I actually took my platoon it was a roughly 30 individuals during the first month of that, that tour, and there was a lot of autonomy from our my one above my boss, which the military does a good job of, and is really trying to get better out, which is mission command, which really just comes down to saying what your intent is and what the end state of something is, and then allowing that subordinate leader, which in that case, was the subordinate leader to then execute as I saw fit. As long as the intent was there, I stayed within that left and right limit boundary. And then I met the end state, which that my commander, my boss laid out for me that that kind of theme is kind of how we communicate internally as well. We like to let people have that creativity and whatnot, to get the mission done and get the job done. But there’s providing the overall intent, and then that allows people to make mistakes in which you can go back and then look at it and refine it and provide feedback and that that that constant loop is kind of what occurred overseas back here in the US training. And again, that has been very transferable over on the business side as well.

J Darrin Gross  8:18  

So let’s talk about that on the business side with real estate. You said there at least I read that you’re the sea COO, correct? Yes. All right. And then who? Who were the people on your team? How big is your team? And what are the different roles and and how do you guys work between our housework done between the the different roles and different people?

Charles Chandler  8:45  

Yeah, so we have, there’s seven of us right now, myself, at the CEO role, just kind of going the day to day providing check ins are really just making sure operations and processes are going smoothly, and able to put out fires as needed and doing a lot of networking and whatnot with different vendors and investors that we work with. We have our CO CEO, Jordan, business partner, he does a lot of our growth really streamlines a lot of our push over to commercial multifamily as well. And then there’s Briard, who’s our chief investment officer, he kind of heads our dispositions as well and investor relations overall. And then we have an acquisition side as a two man team. And then our project manager who really oversees a lot of our flip projects, as well as property management and whatnot. And then we do have a creative director which is essentially our our in house real estate agent, who also helps kind of make the designs with everything and then list the properties for us and whatnot. So a lot a few of us definitely wear multiple hats. We got every role that we need. Uh, definitely has someone assigned to it, sometimes you’ll see the same name in two different positions. But for the most part, we need to know our lane pretty well. And the communication is pretty streamlined, which helps again, just having a smaller leaner team able to be able to do that a little bit more efficiently.

J Darrin Gross  10:19  

In and are all of the members ex military or current politics six

Charles Chandler  10:26  

out of the seven are the in house agents actually my wife and so keep having that in house has been a huge asset overall. And it’s really appreciate working weather and everything she’s able to put up with, but she’s just the spouse of one of the military ones.

J Darrin Gross  10:47  

So having that kind of language and experience I would think could be very helpful if not just critical to your guy’s success as far as your your your level of communication and expectation and, and that define the kind of almost like a shorthand for your, your ability to communicate and get things done.

Charles Chandler  11:10  

Yeah, definitely. We, the good thing about being in the position we are now is that we’ve seen a lot of good and bad styles of leadership, good and bad styles of communication, being at different places as well. Having a breadth of exposure has definitely helped. And so now, I think, again, being a leaner, smaller team, but then also having a collective shared experience being in the military, we’re able to really adjust and refine to things that fit our style, and fit kind of the market shifting as it is right now. and whatnot, and being able to be flexible and pliable enough to pretty easily make adjustments as needed, and especially given feedback to each other, which is huge. Everyone’s got pretty decent, thick skin, we’re able to communicate effectively. Talk through any issues, very good. And our cadence of accountability is what we kind of call it. And so that has definitely been a huge, huge standard that we’ve experienced so far.

J Darrin Gross  12:18  

So can you describe some of the challenges or, or issues you face transitioning from military into full time real estate?

Charles Chandler  12:31  

Yeah, definitely what we go through right now, kind of being somewhat virtual, in a sense, with some of us, we do have our office in East Nashville, which kind of serves that that as that hub right for everyone, but a couple of us are still in those final months right now. And so being virtual at times and rely, you can’t have a long distance relationship work if you’re only texting. So we have to get on the phone, we have to get on Zoom, we have to get FaceTime or whatever. And really use different forms of communication effectively. And so it inherently there at times, there’ll be issues with that, either in delay of communication or misinterpretation of of text messages, or emails or urgency of different things. And so I think those are common to a lot of teams. But I think that we’re able to really make it make an effort and appoint one to do our do evals with each other or what we call kind of alignment huddles with each other every month, and just making sure that we’re staying on the same page and a big thing too, we do quarterly retreats every quarter that way, it just everyone’s together, able to talk, go to dinner, have a have a good kind of unplugged time, all those kind of various central team building aspects, really kind of mitigate any possible issues that we might have just when we go through at a quarter’s length of time being virtual, in a sense.

J Darrin Gross  14:04  

No, it’s good to have some sort of regular interface in or in person. Opportunity to me like that. Was there any thought given or was it just more a matter of everybody had kind of mutual interests and you know, wanted to do real estate as to who joined your group or was there? Can you describe how you how you came together as far as the the were the roles that needed to be fulfilled? Or was it just more of a conversation of mutual interest? Or how did it how did you guys identify each other and come together for real estate investing?

Charles Chandler  14:47  

Yeah, that our guidebook is able to see on the screen I’m just pulling up the book who not how. excellent book by Dan Sullivan, Jordan and I act So when we when I had mentioned earlier about reconnecting with classmate, he was kind of a lone wolf, kind of solopreneur, if you will, doing real estate on the side while still in the military. And we got, we struck up a conversation, and it really interested me about what he was doing the, you know, the general revenue he was bringing in and clearly had an out from the military that would provide more time and flexibility and just peace of mind overall. And so, he and I definitely had a very strong shared vision of that, of what we wanted in life. And so my persistent questioning and communication and him kind of developed into us doing a single deal together in which we partnered on, which I do strongly recommend, if you have partners to definitely just do a deal together, to really see and flesh things out. And, and so he, the value I brought was really just the work ethic and the deal itself, like working to find it find a good margin deal and whatnot. And so with that turned into was Breyer, also joining our team, as someone again, very, very smart, super, not only witty, but just very able to communicate with people and understand immediately what it is that they want, and then be able to frame conversations around how we can get them what it is that they’re looking for. And that’s and he’s a perfect fit on the investor relation and our disposition side. So the three of us, my wife, had been an agent before and decided to actually stop her grad school for being to become a teacher. And she actually came to to do this full time, she saw the kind of the team that we were building and whatnot. And so she decided, well, I love I love real estate, I love designing things. And so that was a great fit to kind of initially work on those flips that we were doing, and rehabs. And then that was kind of the core team there for a while as for. And again, we went through a series of personality test, the disc, Clifton Strengths, Kobe a, there’s a lot of great resources out there. And so we went through it all we better understand how do we each communicate in on the poster behind now even we even have all of our disc profiles kind of outlined under the name. So you just kind of know who, what to expect from WHO and Jordan is a dynamo. So if you don’t know what a Dynamo is, but he, he gets it, he gets results he achieves. And so that, and it’s just been great to really understand deeper levels through that. And so, Max really came the need for, you know, kind of growing, more lead flow, looking to generate continuous revenue. And so I had, who is now our sales director, Spencer approached me and I knew him from school as well. And so I guess just having that internal network of just knowing, knowing people having references, in whatnot, I just, he’s the perfect fit to talk to somebody on the phone, he makes everyone feel extremely warm, secure, competent. He could talk all 24 hours a day, and not even think about blinking an eye. And so he, he was he’s an overall great fit. And then from there, we lead into on our project management side with Nick, who again, one of the most loyal, hardest working very just results oriented as well. And then our final most recent hire that we just had assistance or was Jay who, again, within the personal network, referral based and then going through a series of in our hiring process, again, we really rely on the who not how

kind of sentiment there and I already have the the person that we’re looking for kind of built out. And then we take them through a series of different style interviews to different scenario based situations and whatnot, to really see, you know, do you even believe in the core of that our core values and mission statement? Are you a good culture fit? How are you on like, when cold call on the phone just to see how they were? How they respond, reply, and then a lot of different situation based questions just to better understand outside of any kind of cookie cutter, interview questions. And so I really think going deep on the understanding personalities has led us to again, where we have a strong lean team that does have a couple multiple hats but but we communicate really well we get along really well. We found a lot of really good team retreats that has just continued to push us into some strong momentum especially in in this year despite any, you know, fears of housing crashing or anything like that. We just we’re full steam ahead and we’re getting after and we’re loving it,

J Darrin Gross  20:00  

Now’s Great. Appreciate you kind of walking us through your your different team members there. Now just to be clear, that sounds like did you guys start off flipping single families? Was that the starting?

Charles Chandler  20:15  

Yes. So that’s what was essentially like the cash generator, if you will, doing some wholesaling whenever we had too many projects at once needed, just again to maintain the consistency of cash flow, rehab and flipping houses. And then from that we knew the intent from the start was definitely to get into multifamily. But we needed a bit of a track record some credibility, a strong team, build out some processes and whatnot, and then overall, just have cash flow and have a strong balance sheet. And so we from that, myself, Jordan Brier are able to almost kind of remove ourselves from the day to day, single family operations we have we have a great pulse on it, we understand where we need to fit in to help and assist, but we are moreso, spearheading what, our multifamily efforts. And so in February 25 of this year, we closed on our first indication. And so now we’re looking to essentially repeat the process. Now that we are essentially just writing out our entire kind of way court process on the multifamily side. So that’s what what the product that you’re seeing now is the differentiating single family and then multifamily entities, but still a lot of the same faces.

J Darrin Gross  21:44  

Got it? And do you still continue to do the single family flips for like cash flow? Are you are you 100% To the multifamily side?

Charles Chandler  21:54  

Yeah, we are actually doing five flip projects right now. And it’s a huge reason for that, too, is because it does have a very positive impacts on the local community, the Middle Tennessee and national grid in Nashville area, we’re able to help a lot of people out that our big thing is just trying to have this make a difference. That’s one of our core values, that’s a big thing that we just want to be able to do, if it’s donating to local charities each quarter, to help an other veteran as homeowners out helping people relocate. And we stay within that affordable housing price point as well. Because we know what the demand what the need is there’s plenty of institutional buyers in the area which is which you know, they serve their purposes for you know, for who they answer to, but we try to keep the what who we’re selling to families, people move into the influx of individuals, especially the Middle Tennessee is is just growing rapidly the the influx of businesses come into Middle Tennessee against growing rapidly. And so the demand is gonna stay there, that supplies still is very simple, very still very low. And in general inventory days on market is still generally single digit across Middle Tennessee kind of vary slightly county to county, but that will definitely may be essentially our bread and butter. And then we’ll we will continue to gain units and assets under management on the multifamily side. Which the big benefit for that is essentially to our retirement plan.

J Darrin Gross  23:32  

Ya know, amen to that. Tell me a little bit about your first syndication.

Charles Chandler  23:39  

What a story. Yeah, we, the way we were able to get that was it is in Tennessee as well, which was nice. Only about isn’t Chattanooga, so just a couple hours drive away. And with a lot of authority in the South that it that was a huge, huge benefit. And it’s it was being run very poorly. The the the individual that was managing an individual that owned were in a partnership that went south very quickly. And so they were essentially a motivated seller that there were multiple buyers for it and their financing kept falling through. Because one side was being ran essentially as a as a short term rental, Airbnb, and while the other the other side was weekly rentals, and they were very dilapidated, very poor condition. But honestly surprised many of them lived in that state of of housing. And so we were fortunate to have some very good relations with the broker, which is another one of our key acquisition kind of frameworks on the on the multifamily side of just again, building those relationships and understanding people trying to bring value and so that’s what happened with the broker and she just let us know that if we were able to get financing in line and You know that we’ll definitely be able to close. And so we came in as a backup offer, were able to get financing lined up. And really the way this was able to work was that we came up with a creative business plan that showed that we were able to stabilize a 32 unit asset that was essentially needed in a complete full gut remodel. And so we were able to do raise 1.3 million within primarily the West Point, network, again, going back to the military roots and, and all that trust and everything in the values that that we grew up in, which inherently when this deal can, and we pitch it to potential investors that it was the automatic just yet. Let’s see what you’ve done in the single family side, we know who you are your background, like trust you. So we were able to get that deal closed down. And so right now we’re finishing up the majority of the of the rehab. And again, it’s 32 units, we essentially turned it into a boutique hotel that we’re running with an average daily rate of about $110 a night, the pro forma for it, we were thinking maybe 90 A night and we underwrote it at a 6% rate. But we were able to lock in at 3.95. And so it was overall was it’s it’s becoming a great asset for us. And so a lot more due diligence is probably the biggest learning point. This is where we’re in right now.

J Darrin Gross  26:33  

I’m curiously I hear a lot about, you know, the the hotel motel space becoming kind of an opportunity. Was this. Was your intent always to operate it as more of like a hotel? Or was it to be like a long term rental?

Charles Chandler  26:53  

Yeah, so we did some analysis with on the short term rental side, and we the individual that is running the private property management for It specializes in short term rental. And he’s local to the area as well as a great track record. And then we did air DNA had a lot of great statistics as well. And Chattanooga actually came in at number three in the US for top short term rental vacation destinations. And because we were able to see the financials on 15 of those 32 units that were that were being run as a short term rental, we saw that that is where the potential was, was to actually operate it as such. And so we did get it rezone, which was again, another huge value add. So now when we do go to exit this property, had already be rezoned, it’s been rebranded in and out to be completely renovated with a lot of amenities as well that kind of make it more of a desirable location rather than a honestly kind of a dump.

J Darrin Gross  27:57  

Sure, no, I just say I’ve talked to the few different investors here lately. And I think that that’s kind of a space that’s people are looking towards, based on another guy I talked with, it’s it’s really hard to build a hotel that’s less than 100 units anymore based on just the cost. So there’s a lot of like legacy properties and places that you know, there’s not likely to see a lot of investment that can be bought and renovated and rebranded and operated profitably based on on love the short term rental marketing platforms and, and all that. So that’s great. That’s, that’s awesome. Are you looking in that space for additional properties? Or are you? Or is it more of the like the traditional long term multifamily?

Charles Chandler  28:53  

Yeah, we, I agree with you, we definitely see a void there to where we can step in into the boutique motel hotel space, and really kind of make that our niche thing that we’re able to become eventually at a mastery level at and so where people aren’t is where we want to be. That’s obviously that’s very common. And so that moving forward, yes, that’s a model that now that we are stabilizing and seeing the the fruits of our labor start to come out. Yes, that’s definitely a kind of a way forward not to say that we wouldn’t do a value add for a b minus or a C, property of a long term rental. Absolutely. But we do know that this this current model definitely has a lot more meat on the bone.

J Darrin Gross  29:42  

And with that, again, you know, compared to like a traditional long term rental, the operations are kind of they’re more intense or they’re just more day to day with the turnovers kind of thing, which is kind of the business model anytime challenges with with the operations of the business. Within that the hotel model are is that any, any any issues there that you had to overcome? Or they presented themselves?

Charles Chandler  30:15  

Yeah, so we kind of talking back again about the individual. That’s now the operator for it really strong and great strategy that I would recommend for those getting into this space, as well as not only was he more so local to the area in new types of finishes, and whatnot, but we only put up one to two units at a time and let those go for about a week to two weeks. And that really allowed for those on ground to get into that routine, that rhythm. And then but guest even in their reviews or comments are really trying to get some initial surveys of what do you live, what do you think was missing, and then get it slowly open up units prior and not just letting Mogh come online at once, because I guess the initial thought is, oh, we got to get them up operational as fast as possible to drive revenue as fast as possible, but then you risk losing revenue, because you’re having to make multiple changes across the mall, instead of just very piecemeal, slowly bringing them online and then making the adjustments. As as people are booking and using them so that we haven’t seen those issues yet, because we’ve been able to keep them internal and not have to experience with a gas or, or unfortunately, or potentially get a bad review or whatnot. So we kept it internal.

J Darrin Gross  31:41  

That’s, that’s a good management strategy there to kind of be able to react. Yeah, you know, more more quickly to any kind of needs and incorrect rather than have some big tidal wave of complaint or, you know, negative ratings or whatever they would tank the experience or so with, with your kind of go forward, look on things looking for additional property similar to this, what is your strategy for finding the next investment opportunity.

Charles Chandler  32:17  

Yet, the biggest thing that we know that we can do, and that we can leverage, it’s definitely our ability to make a build and make relationships talking with current owners of properties that potentially look somewhat rundown, but we are staying in that more mid sized unit number two, where there’s somewhat less competition. And then still staying on LoopNet as well and trying to see what what we’re seeing that’s going in and out of contract kind of how this one was. And then using this as like that platform essentially of, of credibility in that and that is what’s going to help stay in that boutique motel hotel space, as you know, accomplish one year looking at, you know, replicate similar business plan in this location. Definitely trying to stay in locations that are clearly seeing the year over year growth increase and things like that. So our underwriting is something that’s evolving right now just based on what we’re seeing with this current asset, but broker relations, that is what we see as kind of number one. And then number two being the value add potential, if something needs to get rezone, or if there’s a property that’s just being clearly mismanaged or managed improperly, which easy to see based on reviews and look at and stuff like that. So the information is definitely there. Just takes it’s just the hours now to kind of come through that

J Darrin Gross  33:48  

Panning for gold. So on the the motel kind of space asset financing, were you able to or did use a local bank or what what was your financing? Would it look like?

Charles Chandler  34:07  

Yeah, initially, we were trying to kind of go at it ourselves before we’re using a broker. The kind of the big roadblock that we were hitting, I think was our terminology. We are essentially saying short term rental complex, which kind of put some fear in some lenders and so just changing the word into boutique hotel, soften the blow. And so we did get, we use Capstar. Great lender. When we initially sent in or were started about to receive term sheets we were saying in our pro forma one lesson learned was that yes, we underwrote at potentially getting a 6% interest rate. And so a couple term sheets we got they just put it up. They’re gonna give us a 5.5 say now that They’re kind of playing our hand a bit, but what they get with Capstar locked in at 3.95, it’s on a five year ARM 25 year amortized. So, initially it was 20. So we’re able to kind of go back and forth. In talking go into the 25. Six, which honestly was a great learning point about, you know, we, we want your business we want to work together, this is just where we need to be at, in maintaining the kind of the negotiation essentially all throughout, not really just accepting first term sheet that we saw. So having some having some patients there, which, again, it kind of these themes of what we kind of experienced and go through the military, that’s a tactical patients is what we call it. And, you know, waiting until we really kind of see what it is that we’re looking for. And that’s going to be favorable, not only for us, but more so far for our investors. And so that, knowing that we had a big value add or rehab product coming up, we definitely needed as much margin and security on the financing as possible.

J Darrin Gross  36:07  

That’s awesome. So the the current property, is it running full tilt? No, are you on fully operational,

Charles Chandler  36:15  

half of it is. So you got 15 of those 32 units that are up running right now. Because it is it is technically on two parcels. We were able to rezone it and get everything rebranded into when we do go to exit it’ll it’ll sell as one. And so one side essentially is good to go while the other is going through the full guy total total makeover, total rehab on it a lot of issues with the septic and everything and said really just putting on new systems in, again, huge rehab project. But we have a great contracting team that their office is just a mile up the road, thankfully. So that was they have to see it every day essentially going to work. So halfway there.

J Darrin Gross  37:06  

And as far as the capital for the capital improvements, was that part of your raise? Or were you able to include that in financing? Are you doing it out of cash flow? How are you? How are you paying for the improvements?

Charles Chandler  37:21  

Yeah, so that was initially all through the initial raise with limited partners who was for the downpayment, and then also for the capital, the capex. What we came across, though, is that because we’re able to raise the daily rate based on the finishes that we have in those first 15 And then we also installed some really nice high end amenities outside Zeebo grills, like more of a park aesthetic, and a sense, that’s also kind of helping connect the two properties. So we actually needed to do a capital infusion. And we went back to our lender, because we, we had the property essentially at a 60 to 65% loan to value and so that we had a ton of margin and we weren’t necessarily over leveraged. And so we that’s what we just recently, were able to get additional financing from them. To help finish out the remaining 17 units that the overall for that was way more than what we initially thought, especially the septic, essentially just installing the whole brand new system for it. And then completely redoing all the wiring plumbing. Again, you don’t you never know exactly how bad it is, until you pull everything back. And it it, it probably couldn’t have been as worse as what you can imagine just a step up from a tear down really, the bones are good, but that’s about it. There’s, I’d also say the reason for that is there’s even more potential to actually build on the land to create additional units which is something that once we see it at a full stabilization, we’ll kind of talk through that and also talk with in with mentors and whatnot, but it’s on a decent amount of acreage and so there’s there’s built up additional buildable land, which just overall increases that the value for it and see if when we exit if a new buyer has that interest and whatnot.

J Darrin Gross  39:19  

Not sounds exciting, it’s always nice to have options and and for for growth and and plus I mean just the you mentioned the financing, how you underwrote it for higher interest rates and what you were able to get your your revenue is exceeding what your projections were. So I mean, those are those are two good, two good numbers and, and I’m sure they’re, they’re going to help you be successful for quite a while. That’s good. Hey, Charles, if we could, I’d like to shift gears here for a second. By day, I’m an insurance broker. And I work with my clients to assess risk and determine what to do with the risk and there’s a three strategies that we typically look to, to see if we can solve the risk. The first is we look to see if we can avoid the risk. And when we cannot avoid it, we look to see if there’s way we can minimize the risk. And when avoiding or minimizing is an option, we look to see if there’s a way we can transfer the risk. And that’s what an insurance policy is. It’s a risk transfer vehicle. And as such, I like to ask my guests if they can look at their own situation, could be their clients, investors, tenants, market interest rates, political however, however you choose to frame the question, what is the biggest risk? And, again, for clarification, while I am an insurance agent? I’m not necessarily looking for an insurance related answer. And so if you’re willing, I’d like to ask you, Charles Chandler, what is the biggest risk?

Charles Chandler  40:59  

As a as an officer risk mitigation, risk management is a daily thing that gets communicated because we have risk at certain levels that we can mitigate and whatnot. So definitely appreciate that question. Because it again, it just ties into multiple things that I’m involved in. And so for us, and our team, really the biggest risks that we that we’ve experienced on and I can say this probably for both single family and multifamily has been not contacting the correct people and more so meaning on the multifamily side, getting into Build playing architects code, permitting, all kinds of different departments that we didn’t even know existed at all, and then on the single family side, somewhat the same as far as zonings. What, what can or can’t be done to certain houses, and again, that just being more So internally, kind of putting blinders on thinking of us individually, we have to solve this and figure this out and not. And that might be inherent as well, kind of a as a weakness on the military side, and more type a strong willed, will I’ll get this done kind of thing, and not realizing that there are so many outside resources that are that are postured to really take down a lot of those potential obstacles that you’re going to face. And so that on the multifamily side, that’s been a continuous learning experience, especially right now with who it is that we need to talk with. And so biggest risk was kind of tied to not only taking a ton of massive action, which is great, but almost too quickly, and not realizing who is it that we need to talk to, who’s out there who’s available, who’s a resource, or at least pausing just to even think of that question. And so that is the biggest risk for us, because that could potentially lead to where you’re at a point of potentially no return, or there’s going to take even more cost to potentially fix or mitigate something that that has happened. So thankfully, we’ve we’re not at that we’re not there and reach that that point. But we definitely saw that as a big learning lesson in internal conversations as far as risk.

J Darrin Gross  43:27  

No, those are points and I’ve learned multiple times is assume nothing. And make sure I’m clear understanding of whatever it is that somebody’s telling me because otherwise, you know, I’ve gotten myself to thinking one thing, only to find out that I was the one that didn’t understand. So. Good. Good. Good point there. Hey, Charles, where can listeners go? If they’d like to learn more connect with you?

Charles Chandler  43:53  

Yeah, definitely. LinkedIn would be a great spot and Charles Chandler, and you see the mind Tennessee home solution, Banner there. Another great spot would just be on our website www.myTennesseeHome Solution.com You’d see myself my contact information there. And then I’m pretty active on Instagram. My nickname is tray. So I just go with underscore tray Chandler underscore so fairly easy again to find me on that. But yeah, we were looking to do another deal soon. We’d love to talk with people just seeing how we can provide value and especially anyone that’s coming to the Middle Tennessee area, looking for any potential deals we have.

J Darrin Gross  44:37  

Awesome. Charles, I can’t say thanks enough for taking the time to talk today. I’ve enjoyed it. Learned a lot, and I look forward to doing it again soon.

Charles Chandler  44:47  

Absolutely. Thank you so much. I really appreciate your time. All right.

J Darrin Gross  44:51  

For our listeners. If you liked this episode, don’t forget to like share and subscribe. Remember, the more you know, the more you grow? That’s all we’ve got this week. Until next time, thanks for listening to commercial real estate pro networks, CRE PN Radio.

Announcer  45:10  

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Vimal Patel  0:00  

The typical term is a seven year window where you might be changing your soft goods or carpet you know you might be refreshing a paint we are your your FFP the furniture furniture you might you might stretch it out to maybe 10 years if it’s a good conditions right if it’s not started showing wear and tear brand brands will always do when doing the Q inspection brand is always tell you whether whether use on this capex items, you know, set the timeline upon renewal the license is typically you know, a 15 year window that there is a major upgrade that’s needed the brand requires a  major PIP so they will be doing spending you know 1.51 to 1.8 million 2 million depending on the size of the property and you know, to renovate and renew their license.

Announcer  0:48  

Welcome to CRE PN Radio for influential commercial real estate professionals who work with investors buyers and sellers of commercial real estate coast to coast whether you’re an investor broker, lender, property manager, attorney or accountant we are here to learn from the experts.

J Darrin Gross  1:08  

Welcome to commercial real estate pro networks CRE PN Radio. Thanks for joining us. My name is J Darrin Gross. This is a podcast focused on commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio. 

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Today, my guest is Vimal Patel. Vimal is the President CEO of Q Hotels Management, which develops and owns and operates hotels in Louisiana and Texas. He has been featured by Fox Business News Week, the Associated Press nerd wallet, authority magazine, nola.com, and others. And in just a minute, we’re going to speak with Vimal about hospitality real estate. 

But first, a quick reminder, if you like our show, CRE PN Radio, there are a couple things you can do to help us out. You can like share and subscribe. And as always, we encourage you to leave a comment. We’d love to hear from our listeners. Also, if you want to see how handsome Our guests are, be sure to check out our YouTube channel. And you can find us on youtube add commercial real estate pro network. And while you’re there, please subscribe. With that I want to welcome my guest, the mall. Welcome to CRE PN Radio.

Vimal Patel  2:55  

Yeah, thank you. Thank you for having me here.

J Darrin Gross  2:59  

I’m looking forward to our conversation. Before we get started, if you could take just a minute and share with the listeners a little bit about your background.

Vimal Patel  3:07  

Yeah, so you know, as you mentioned, cute hotels, pos management, we are the developer operator managers. In South Louisiana, we have nine properties that varies between Hilton Marriott IG, and Best Western. So we have a couple of properties that we manage as well in Texas. We are also getting into multifamily, retail and other avenues that we’re looking into as volunteers storage, storage facilities or assisted living and other avenues. So yeah, we are kind of diversify and branch out from the hospitality and you know, a little bit do a risk management there.

J Darrin Gross  3:49  

Got it. Got it. So I’m curious, you mentioned the different brands that you have his hotels, is there any limitation or any kind of friction you get between the different franchise ORS as far as your ability to operate other brands? Or is that kind of understood kind of like the car dealer that has Ford, Chevy and in you know, dodge or whatever it is that is it? Is there any issues at the at the, at the franchisor level?

Vimal Patel  4:22  

Yeah, so specifically regarding whether so we have four properties right here right now plus a very corporate offices as well. So we have played an express next door to Hampton Inn and then across the street, we have Best Western right next door to that is the compass is the Marriott. So, in regards to having a branded flag right next to each other, there are no restrictions. However it is in a story for another day. We’ll be dealing with the franchisors specifically regarding, you know, the tactics and some unfair business practices and so whether they tie into for 15 plus 20 years But if license agreement, that’s another conversation because, you know, I last year actually, in New Orleans federal court I had was one of the first one to sue the Holiday Inn brands regarding some of these unfair business practices, so that’s a conversation.

J Darrin Gross  5:16  

Gotcha, gotcha, well, I was just kind of curious, because it would make sense, from a, from an operational standpoint, to have multiple brands in one, one area to capture more of the market. And I would think, also, you’re, you’re able to do some cost sharing, or at least, you know, if you have staff, or whether you’re buying supplies, or whatever that is that you can bulk, you know, buy in bulk, or whatever, I think anyway, I don’t know if that’s, that translates or not. But that’s, that’s, that’s great. And so all of your, your, you have four right there locally, that are like essentially next door or across from each other.

Vimal Patel  5:57  

Right, that’s this guy, they were next to each other. Now. Now, obviously, his brand has a certain branded products, which really can both buy and use it every hotels, but then there’s some other common, you know, you know, materials, that that you can use, integrated into some of the cleaning supplies or some some other products. But, you know, typically the linen products, the breakfast products, and so forth, are branded brand specific products that you have to buy, for instance, or separately for the for the for the brand recommended guidelines. So yeah, it’s gonna vary. Now, there might be some options to save the labor where you could probably have a couple of director of sales in place where you can sell on the properties or taskforce managers or, or even rotate some of the front desk, people here and there. So there are some avenues that you can benefit out there having a cluster in the same area.

J Darrin Gross  6:46  

Yeah, I guess that makes sense. The cost sharing can be a little limited based on everybody has a unique presentation, I get it, I get it. So tell me a little bit about just the hotel market. In general, I know, in the past 10 years, there’s been, you know, competition from like Airbnb and other you know, I don’t know, what they call it sharing or whatever that. Is the market strong and also no COVID. You know, it was a kind of a wrench for everybody and in just the whole economy. Are you guys, are you have you come out of whatever may have been the COVID lag? Or is that has that gone? Now? Are you guys pulling?

Vimal Patel  7:33  

Yeah, so So obviously, you know, March of 2020, you know, we got slammed, you know, we were we were running, you know, somewhere around 75 80% occupancy, the time and all of a sudden just grinded to a halt. And we ran down to single digit occupancy, right, we had even close down off our hotels Hampton Inn at the time, it just to kind of mitigate some of the costs, costs, expenses, and so forth. The biggest challenge has been, again, we had mortgages, we have fixed costs for the insurance, utilities, and some other spreads, we have team members that rely on on some of the benefit packages and some basic wages. So there was a lot of challenges, you know, that we had to kind of dig up, you know, some of our line of credits and just gonna make it work, to be able to sell sustain. In that essence, there was some grant help from SBA for the PPP that that really helped the hotel operations and supporting some of the team members. Now, you know, but again, you know, the mortgages are due, you know, even they get extensions, you know, you still have to pay for it. So, so, the liquidity became a huge problem, you know, and then the edge exhausted line of credit as the property debt coverage ratio went down, you know, some of the line line of credit got wiped out or are no longer available, you know, because of because, because of the devaluation, right, so, so there were a lot of challenges there, in the regards 2021, we started picking up, you know, and things were doing doing it a bit, you know, better direction, but occupancy. But then in August, in, as I talked earlier, you know, pretty good idea hit, you know, and we came down, right about our town, because seven properties within the vicinity that got hit pretty bad. You know, it took a long time to recover from that dealing with the insurance company dealing with supply chain issues. And, as a matter of fact, two thirds are still down, you know, we still have this work in progress on that part, after almost about eight, nine months. So, yeah, there’s been been a bigger challenges for us specifically, you know, you’re getting out of the COVID zone, and no signs of just his optimism, and you know, and the light at the end of the tunnel, and then here comes a very good idea and just kind of we’re starting all over again. So it’s been it’s been a challenging path. The past two and a half years.

J Darrin Gross  10:02  

Yeah. Now I can only imagine, you know, get get through the COVID thing things are going back and then you have a hurricane. You know, that’s That’s rough stuff. So that the location that you are primarily located in what was the name of the town?

Vimal Patel  10:21  

So we have a plus over 12 miles west of the Neon is airport. Our town is located where I 55 dead ends on I 10

J Darrin Gross  10:30  

Okay, gotcha, gotcha. All right. So you guys are kind of right down there. And they the kind of the I have the, or at least that that hurricane risk is a regular thing for you. But I’m assuming is the is the tourism pretty strong? You mentioned you guys are back is that primarily your your market? Or is it just travelers that are traveling across the country? Or what? What’s the is there any kind of

Vimal Patel  10:54  

so yeah, our market for the class itself is gonna be dependent on oil and gas, there’ll be a lot of industries nearby on the river side somebody’s bank in the West Bank of our town. And so we are dependent heavily on the on the on the oil and gas industry right and the tourism is not directly affects us. However, when you have a large events, festivals or very big convention center has a lot larger groups in it, and we might see some overflow on it. Predominately, it’s, it’s a corporate driven market. And we will see some overflow here and there, maybe in the weekends and some something like that. But other than that, you know, we don’t really have a lot to depend on on the on the New Orleans overflow

J Darrin Gross  11:41  

genre. So more more business travel for the oil and gas industry. That’s how you catch it. Gotcha. So you guys develop properties, you operate them and you manage them? What are what are some of the things that you guys pay most attention to when looking to develop a property?

Vimal Patel  12:06  

Yes, so So the biggest thing is obviously we want to look at it is you know, what market that we’re getting into and what brand you know, we want to get to get into those these associations with the weather, you know, what I want to get to the upskill meetup scale the economy brand was extended stay brand, you know, we tend to stay out of the full service hotels, where we have the food and beverage components involved is the margin is simply not there in those kind of kind of brands of hotels because of the food component which is beneficial is not any not in moneymaking in a revenue generator for the for the hotel, and in some market they’ll work but in most of our market you know, we stick with the limited service scope whether it’s upper midscale or its domestic properties. So that that’s where we start off with and then obviously you know we do a study on whether the market is sustainable, how are the competitor hotels that are doing it we do Star Report on that you know, we do build a feasibility study we will assess that if there’s a future additional hotels that may come along with wood we’ll be able to kind of self sustain ourselves. So, so there are there are a few other aspects that that we can dive in there and then obviously dealing with the find the right brand the right fit for the market. And then obviously how many rooms you want to do right? So the cost of you know, rooms that dictate you know, nowadays you know what the hotel that used to be at 90 or 100,000 a unit is now costing us North Oakland and 50,000 a unit and it’s constantly you know going up but post COVID Right so so there’s other factors in play and and the one last thing would be that you got to have X number of rooms right so so he just kind of go with 6070 rooms anymore you know the cost of operations and the fixed costs involved and just just way way too much to to have this as a low key so you can kind of push it as close to the 100 as you can obviously that will bring a project cost high as well so so your your net worth your liquidity and the bank loan to to you know now they’re doing probably about 65 70% versus before this is 70 75% that you know the ratio so there’s all those factors plays in

J Darrin Gross  14:26  

no and when you guys so let’s say you find a location and brand that you think will work once you decide that you’re going to go forward how long before before you’re actually operational. I mean once you you sign the papers but you haven’t you don’t have a hotel yet you got to build it what how much time it had a couple of years are you able to get that new year which

Vimal Patel  14:51  

is a minimum minimum is two years. That depends on the city as well because like Florida market I deployed is a little different sets of laws. And the zoning requirements and then the days a, you had to go through this permitting process approved positively to change the zoning, zoning law, zoning code, and then you’re done. It’s another process. So, so yeah, I mean, you know, in in, you know, least my time would be minimum two years, it could drag on to three and a half years or even even more, depending on which state which city you might end up in. So it’s, it’s very, very varies in how whichever you want to build it? And what are the current local zones, and laws are that you have to go through here?

J Darrin Gross  15:39  

So, so once you have the the property, it’s built, its operational? Do you typically find that the newer properties? Do they get a boost? I mean, is it like people have seen this for a long time? And now they’re finally like, wow, we’d stay there kind of thing? Or is that? Is there any kind of initial

Vimal Patel  15:57  

guide, so it’s a, it’s a, it’s, it’s quite the contrary, right? So it’s a new property takes takes a little bit longer time to ramp up in a, you know, typically, you know, we gave 12 months, 18 months worth of was a timeline to ramp up property, because you had to get into, into your corporate accounts, you had to get in the RFP process, then in a year, they had disarticulation going for, for other companies to know. So it takes takes a you know, on average, 1218 months for the period where the property will will ramp up in here that that’s on an average job, sometimes the property may take two years, right. So so it all depends on on your brand, your market, and how strong your market is, as well, that will dictate so, you know, you have to be prepared to have some cash reserves for for the first 18 months, you know, to be able to pay the debt.

J Darrin Gross  16:51  

Yeah. So you’re, you know, once you sign up here, we’re gonna tell you, you’re gonna go forward, your your three to five years before you’re, you have a stabilized asset, is that kind of what I’m, what I’m understanding? Yeah, definitely,

Vimal Patel  17:03  

definitely. A long term process. time factor is, is pretty high. So you have to, we had to kind of survive, you know, going to through the zoning courses, a site plan, review to building from it with architects, delimit civil engineers, and then finally find a general contractor. And then then again, there might be change orders. There’s other other avenues playing futsal. So yeah, it’s a building is not easy. It is always recommended, if you can find the right product, if if there isn’t a market, you might might have to spend extra and buy that or the building it but again, you know, if you’re a developer, and that’s what you do, then then you’re used to it at some point. But but it’s never, it’s never the same target is always a moving target is always new lesson to learn. The process is always gonna go up is gonna run on time. So So yeah, it just it’s it’s a variable is project.

J Darrin Gross  18:02  

Ryan, you mentioned, you know, potentially buying an existing asset as opposed to developing it. I know the timeline we’ve talked about, but I’m assuming that the is there not a profit or nonprofit but an equity gain that you get from developing from ground up as opposed to buying an existing operating asset? Are you? Do you recognize that? Or is it just by the time you get there five years, it’s kind of a

Vimal Patel  18:38  

no, so So again, I’m gonna be talking about equity part of it. So again, it goes by what your loan amount is 20 25% of the of the of the purchase price of existing property, but that’s what you’re putting down. And so that’s what equities I similarly in the new construction, if your loan is for a project is worth 10 million, and if you’re coming up with 2.5 million, you know that that’s your equity. So equity, I think doesn’t play much of a role in it is the time the return on time. Right. So everybody talks about the return on on money, right. But what, what I think most people that don’t calculate is what is the return on time, and if you overpay a project now, that doesn’t say that there’s gonna graduate three years ahead, start, you know, and then you might even take the depreciations you might not take that some of the losses or, or if you’re in the 1031 market, you know, so the different ways that you can play that part, rolling it again, it all varies by the situation, your risk risk level, you know, and your financial strength and the How have you been pursued this?

J Darrin Gross  19:43  

Right. So you mentioned depreciation and or do you guys utilize Cost Segregation studies or is that not something you do?

Vimal Patel  19:54  

Yeah. So we have done for a couple of properties that, you know, that’s the property that we intend to Hang on for a while, the other properties that we will not too sure whether we will hang on, or we may sell it, we didn’t do it because again, you know, look, at the end of the day, everybody realize that, that the IRS always come and get you, right. So we, you know, you may or may put today’s or pass it on till tomorrow, right, but, but at the end of the day, you still have to pay taxes, it’s still nice to kind of get out of it. So, you know, so we made an educated decision where in certain properties, we didn’t really take the deductions and we kind of left it, and we even take accelerated depreciation, and we just kind of let it receive the basis that didn’t build up. And if you do decide to sell it, then maybe our tax application, we will be much lower than if we would have taken it. So we just kind of decided to play that game that may fit best for some of our partners.

J Darrin Gross  20:51  

Now make sense, case by case. So with a hotel, property, I’m assuming you have just constant capital improvement, you know, with whether it be replacing carpet, you know, whatever it is updating the pool, or whatever that is, to keep that fresh and, and inviting. Is there, you mentioned some of the other asset classes that you guys are are getting into multifamily. And that is there a Do you see a more significant, you know, budget item for capital improvements and replacement of things in the hotel? Business as opposed to you know, the other asset classes? Or is that was that more of an operational, just a cost?

Vimal Patel  21:45  

Yeah, so it kind of varies between the age of the building, right, so if you have a newer building, that the typical term is a seven year window, where you might be changing your soft goods, your carpet, you know, you might be refreshing a paint, we are your your FFP, the furniture furniture, you might, you might stretch it out to maybe 10 years, if it’s a good conditions, right? If it’s not, if it’s not started showing wear and tear, the brand will always do the when doing the Q inspection brand is always tell you whether whether use on this capex items, you know, set the timeline, upon renewal, the license is typically, you know, a 15 year window that there is a major upgrade just needed the bragging rights a major Pip, so you’ll be doing spending, you know, 1.51 point 8 million, 2 million depending on the size of the property, you know, to renovate and renew the license, you know, but normal wear and tear, you know, that is that is a you know, depending on how busy all the tell is in what market is we in South Louisiana has a lot of humidity as well. So this kind of plays plays a role in it, you know, and you’re just gonna have having a three to 4% results are built in each month, so that way you have the funds available for you. When when this time temperature to invest in the capex?

J Darrin Gross  23:05  

No, that’s that’s good to know the three to 4% there it makes sense to have that in reserve. So you’re able to to easily take care of the so as a hotel operator, do you guys are actually in the development and the operator and the management? Do you own and operate the the property in the same entity or do you separate Do you have do you have an ownership asset owner entity and then do you have an operator entity that

Vimal Patel  23:41  

yeah so yes, so each hotel is a different entity because they’re not the common ownership as well they’re different partners, different different ownership. So, so each of the hotel is different different entity, the Makita management company is a different entity which which doesn’t you know, just a key management company. So, we got to be good by default you know, we had to have the hotels in different areas and because of the separate different partners and different breakdown the percentages and then we have a GC we also have a GC license we build so while I say to build these companies we do build a separate entity for the constructions give hotels does the management and then they each entity can also owns a hotel so we’re going to do all three succeeding in house you

J Darrin Gross  24:25  

gotta admit as far as the the operation is separate from the ownership of the properties that I said that okay, yeah,

Vimal Patel  24:33  

a few of those manages all villages there is a management company for all of them. Okay,

J Darrin Gross  24:39  

is it a practice or do you ever see this where somebody just operates a I mean leases a hotel and operates it as opposed to owning the hotel the asset?

Vimal Patel  24:53  

Very, very rarely. You don’t get most of the cases they may be Fidel operated on Bill build Watch out, it makes sense to eliminate and give it to a management company to operate it right? Leasing Park kind of opens up a little bit more risk. Because you get to deal with the brand. You deal with the insurance and some other liability that comes along with with it. So So unless, you know very is a very lucrative lease and you’re able to make make the insurance while you make the brand in licensed works and so forth. But but it’s it’s it’s not not typical to see that kind of overall lease program here.

J Darrin Gross  25:37  

So, is there an average hold time you mentioned sometimes you guys buy property? And that was kind of a determination as to whether or not you might do a cost segregation study, if you’re going to keep it or you’re going to sell it? Is there indeed these trade on regular basis? Yes, it depends

Vimal Patel  25:56  

again, so So did that dynamics in the right for First of all, if you’re spending, if able to build out a property at a lower cost, let’s just say that and and we said that the whole model cost was probably about 100 A key and if able to be make it to 95 or 92,000. The key that’s that’s a good sign that you may be able to kind of helicopter and flip it, it doesn’t dynamics, but your your, your your partner’s right to see it, you know, where are they at and, you know, in a different age group of partners and be a couple of partners there that were 60, you know, and so forth. They may have some other other guidelines, the other requirements in their financials, situations, and then also what works right now, do we have the product that is going to be at the peak and get the max out of it, right? If the if there’s a slow start, like I mentioned about with 18 month period, then a property evaluation is probably going to take some time versus if we have a jump start right away, and you feel they can get the most out of it. Because again, the year two and year three is still to come. And so the buyer will see there’s love still a lot more upside, and you can they can get probably, you know, 120 120 530 a key, you know that there’s something so it’s dependable by individual situation with the market the cost to build? And again, what what’s your risk factor? You know, do you want to just take what you got and run with it? Or do you want to bet for the future and see if we can gain more more out of it. So, so I’m gonna do it all depends.

J Darrin Gross  27:28  

Oh, that’s, that’s, you know, it’s interesting now that I guess it’s true. I mean, it’s anything’s its numbers, if the what your what your plan is, if you’re planning it long term, that’s one plan versus if it’s, you know, shorter term or whatever. So, you mentioned the ownership, you have different investors in different properties. And that, do you typically do partnerships when you you acquire a property? Or do you? Do you do syndications? Or how are you set up on on the track contract in the capital and putting the

Vimal Patel  28:04  

Yeah, so in our case, it is a family business, right. So so currently, right now, we just have four partners. You know, so the whole family with the building right now, we had couple of other partners from before, in that part, but then, and later on in the last seven, eight years, we just kind of narrowed down to us four, and we’re just developing and managing and doing the assets that we just makes it easier because, you know, we have segregation and divisive duties, like couple of our partners are strictly into the constructions and rebuild and the juicy part of it versus I can manage finances, operations and brand relations and some of the other aspects of it. So so they kind of helps out in the area and in depends, you know, where the expertise are needed and is that we can share the workload and then nobody can jump into each other’s work in. It’d be like easier and less smooth transition, I think that worked out pretty well for us. And that’s, that’s, that’s what we have. And now moving forward, the goal would be that when we’re doing a larger project, which will exceed you know, 35 $40 million projects and 50 million, then we might see outside investors or invite some other partners or build a fund, so that some of the some of the options they’d be evaluating and see how that would work out. So we have a couple of projects right now that we’re doing is dimensionally the multifamily so that’s, that’s going to be probably about 35 36 million project 150 rooms. I mean, it’s, you know, so that’d be that’d be good for this project in our asset and on our portfolio, and then that will probably, you know, will allow us to go outside of the region and then do a lot of projects and maybe may, you know, do multiple projects in a year versus having to do one at a time with the limited partnership where you’re going to forget that Take funds and be able to do two or three projects in a year and kind of just scale it from there.

J Darrin Gross  30:05  

Yeah, definitely the more more opportunities. And you said that that’s a multifamily project you’re, you’re working on. Okay. And do you find the, as far as the the construction and development process kind of a similar timeline? Was to what you find with the hotels?

Vimal Patel  30:31  

Oh, well, one thing for the multifamily would be that there’s a brand that can dictate certain guidelines, right? So that there’s a little bit more of the answer meet the code, you still have to go by the regulations and all of that, so so that doesn’t change a bit, right. So so what what would help you would be in the designing part of it, our pre opening process, part of doing the SEO and so forth, where, you know, you’re, you’re, you’re holding on, I guess, inspect it to make sure that the calls are made, and the inspection is done, and the lifestyle is done, and so forth. And they will open it, if you have to change them designs is an element, you’re not going to go and seek approval, and wait for three wait for that. So that kind of works. works in your favor, because you don’t have don’t have Brian in the world, but the building part of it and the construction part of it is pretty much the same timeline.

J Darrin Gross  31:28  

And as far as the, the hotel business, we’ve talked a little bit about it kind of coming through COVID. And, and I asked him briefly, we didn’t really talk about it, but like Airbnb, do you see anything anything changing the hotel business? Going forward? Is it is it pretty much the same thing people need temporary shelter for for travel or for business for?

Vimal Patel  31:53  

So the hotel industry, it’s gonna kind of in a very unique position right now, our you know that there are several factors being in that even if you discount the Airbnb part of it. If you just think about it, we have labor shortages, in the labor shortage across the board across the country, you know, even even internationally, too, I just saw that the news article that Heathrow Airport is limiting the traffic 200,000 and telling the airline do not don’t sell tickets anymore. Right. So labor labor is it’s a big problem. So the most of the hotels have scaled back the housekeeping service their skill by the Food and Beverage operations, because simply you don’t have labor, you can you can sustain kind of service, you know, the cost of the the wages have gone up 330 5% Yet, you cannot fill the positions, the cost of insurance, you know, for in our area, very southern Gulf Gulf region, you know, Florida, you know, it has tripled in 2024. The eight hotels in green, three of marchment are denuded right before the pandemic, you know, it was $426,000, for the property insurance, wind and hail, GL and all of that, right? March of 2021. Same properties, the properties, right? It went to 606,000. Right? March of 2021. Same eight properties went to 1.8 million.

J Darrin Gross  33:14  

Again, so yeah, more than doubled.

Vimal Patel  33:17  

Perfect. Yeah. So that’s the thing. So so that part, your inflation right now is playing a heavy role your Feds raising the interest rates. So most of us as the as the prime plus rates are running, right supporting rate, you know, the mortgage payment has gone up. So there’s a lot of factors being part of the hospital industries. So we had to raise rates, you can self sustain, and yet the services will be scaled back. Because there’s labor shortages and other factors being in part, your bottom line. So it’s not that these eroding, you know, and then we take out the Airbnb for part of it again, Airbnb doesn’t have to play by the same rules, they don’t have same safety standards. They don’t have to have insurance. You know, they don’t they don’t pay taxes in a local local community occupancy, tax or otherwise. Right. So So yeah, so those are the those are the factors that are playing through right now. And, you know, a lot of things coming up, you know, it’s going to change how the industry operates. And, and then the adaptively of the of the customers moving forward. You know, it’s, it’s gonna be eye opening experience for all of us.

J Darrin Gross  34:27  

Ya know, I think the eye opening experience is definitely, you know, the underlying theme here. I mean, it is weird. I was just kind of doing a little bit of a comparison thing, you know, you look at, like the price of fuel or food or, or all of it, I mean, just how, you know, the doubling, in many cases is is what it is, but tripling that’s, that’s a that’s a huge deal. I have you have your rates. Have you been able to you mentioned that you’ve had to increase rates, but I can’t imagine Have you been able to double the rates to get to

Vimal Patel  34:59  

it that’s the challenge. I think there’s a small increment you can go up 1015 20%. You know, but you can just kind of jump from $100 range to $200 rate that’s not going to work. Right. So it’s not going to sustain either. Again, I mean, I mean, you know, that’s, that’s, that’s another part of it is diversifying, right, they’re spreading out your risk. You know, it’s no longer so sustainable with all these different elements, it’s taking away heating up your margin, and investment is pretty heavy, 10 $15 million investment with a personal guarantee on it, you know, and, you know, so it’s, it’s a huge challenge right now, but a lot of us know what the future holds.

J Darrin Gross  35:42  

You mentioned, the investment there lending is that do you primarily work with commercial banks? Or? I mean, I can’t imagine it’s already Fannie, Freddie. I’m assuming there’s not a Fannie Freddie option for

Vimal Patel  35:54  

oh, no, yeah. So but yeah, a lot of a lot of local banks get private capital as well, that is always expensive. There are CMBS options, as there’ll be a couple of other CMBS we got out of it, just simply, you know, it doesn’t sit well. If you if you want to hang on to the asset, you know, so but most of most of the most of the dealings that we do is try to find, find the local banks that you have relationship with, that can help you out in time of need, and then you have somebody to talk to and just kind of how the peace of mind,

J Darrin Gross  36:30  

ya know, I find a local bank that’s member of the community has a lot more interest in your success than somebody far away, so I get it. So, hey, the mall, if we could, I’d like to shift gears here for a second. As I’ve mentioned, by day, I’m an insurance broker. And I work with my clients to assess risk, and determine what to do with the risk. And there’s three strategies we typically look at, we first look to see if we can a avoid the risk, when that’s not an option, we look to see if b we can minimize the risk. And when a and b are not an option, we look to see if we can transfer the risk. That’s what an insurance policy is. And as such, I like to ask my guests if they can look at their own situation. It could be clients, investors, the market interest rates, economy, political, whatever, whatever you think is the biggest risk. And, you know, for clarification, I’m not looking for an insurance related answer. So if you’re willing, I’d like to ask you Vimal Patel, what is the Biggest Risk?

Vimal Patel  37:48  

Yeah, so as I mentioned, right now, the biggest biggest risk right now is again, having having the personal guarantee that you have on your debt, right, the loan, you know, the cost of operations has gone up, you know, the fixed cost has gone up, the revenue has not gone up in that percentage. So, so coming out of the COVID, getting extensions, and now dealing with inflation and rising interest rates and the rising costs and so forth, you want to maintain that because again, if you start slugging lagging on your, on your mortgage payments, if you can pay and your your liquidity during the network is digging up, you know, that that’s a huge concern, because that pretty much underlines your future your assets that you hold your your future for kids. You know, that’s that’s the biggest, biggest, biggest part of it. Obviously, the other part Hand in Hand goes with it again, as I mentioned about the hurricane, right, we went to the hurricane, you know, and again, we dealt the billing and insurance companies is a huge challenge in this part, it took us, you know, seven months to kind of settle the claim and get the funds. In the meantime, we had to use our own line of credits, and get more debt to rebuild, continue rebuilding, and while while we were negotiating and fighting the insurance company, you know, having having the M the property coverages is the biggest factor because we just went through that part, right coverage, the right deductible, knowing your coverages and be able to ability to to have a plan in place should disaster occur, right, you’re not scrambling to find the right resources who to sue to get into this, but as a public adjuster with his attorney, or whether it’s a mitigation company or whatever the case may be right so you got to have those plan in place because absolutely the day of the disaster the after the disaster. There’ll be a million other people lining up and digging a great job for you and then you will overpay them that job, you know, and they’ll run away so so those are the two bad to experience a huge aspect of the latest my experiences in fire the risk mitigation risk factor that Family, you know, we used to be concerned about this, why the dad is concerned, you know, you had to start building reserves to have knowing COVID. And then situations that Makara you know, minimum in that building six months worth of results for your mortgage payment that way that we need to down in our period, you’re still able to kind of manage it and then hang on to your, your, your, I guess the credit part of it your net worth and then you know, your credit scores.

J Darrin Gross  40:29  

Yeah, a lot of balls up in the air there. And, and so you got to try and keep them keep them in the air and keep them from landing on the ground. So that’s good. Hey, Vimal, where can listeners go? If they would like to learn more connect with you?

Vimal Patel  40:46  

Yeah, so again, you can look me up. I’ve done a LinkedIn at VimalQ on Twitter as well as VimalQ. And, you know, my hotel website is QHotels.co. So you can you can find me at either one of those places.

J Darrin Gross  41:04  

Awesome. The mail I can’t say thanks enough for taking the time today. I’ve enjoyed our talk, learned a lot, and I look forward to doing it again soon. Okay, thanks for having me. All right, for our listeners. If you liked this episode, don’t forget to like, share and subscribe. Remember, the more you know, the more you grow? That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks. CRE PN Radio.

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