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.
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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.
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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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