9/30/12: Hotel Impossible or Can You Make Money in Lodging and Hospitality

Lodging and hospitality is a business that involves providing real estate and an array of services to business and leisure travelers.   That’s pretty straight forward.

As real estate investors, any time there’s real estate and cash flow, we’re interested.  And when you do the math on nightly rentals, you can see there’s some real opportunity in the hospitality sector.  But it’s a very different game than just renting out single family homes.

Like any business sector, there are trade groups, conferences, industry publications and gurus who cater to hotel investors, owners and operators.  One of our favorite resources is Lodging and Hospitality magazine and their annual Lifestyle Boutique Hotel Development Conference.

So as we’re making our plans to head to Miami Beach (like we really needed an excuse for THAT), we thought it would be fun to dedicate an episode to talking about what’s happening in hospitality.

Checking in and enjoying the lifestyle of reality radio for this episode of The Real Estate Guys™:

  • Your 5 star host, Robert Helms
  • The no-tell co-host, Russell Gray
  • Special guest, Managing Editor for Lodging Hospitality magazine, Eric Stoessel

One of the many things we love about real estate is there are LOTS of ways to make money.  One of the sexier ways is hospitality.  Hotels, bed and breakfast inns, and resorts are among a few of the property types in this sector.  And while there are certainly crappy properties, the odds are you’d probably rather spend the night in your hotel than your Section 8 rental, right?

What’s really interesting about lodging and hospitality is the premium guests pay for short term rental use (nightly or weekly versus month to month).  So even after you factor in all the expenses, the numbers can be pretty enticing.

Just as exciting are all of the ancillary income opportunities.  Not only can you make money renting the room, but you can earn additional profits with conference space, restaurants, spas, vending, referral fees to local merchants and attractions, internet, pay-per-view TV, dry cleaning – and the list goes on and on and on.

Of course, turning rooms over nightly and providing all kinds of additional services requires a lot more work.  Then again, you can sub-contact all the work and simply take a piece of the action.  Last time we looked, a little bit of something with no work can be very attractive.  And with a diverse income stream, you have many options to increase profitability and adjust to economic cycles.

But before you run off and trade all your little green houses in for a big red hotel, it’s a good idea to know a little bit about the business.  If you’ve ever watched an episode of Hotel Impossible with Anthony Melchiorri, you know the hotel business can devour an amateur.

The good news is that there are resources and experts available to help you learn the business, whether you intend to operate a boutique hotel or simply invest in a property and rent it out to an operator.  So if you’re curious about the opportunities in the lodging and hospitality business, listen in on our conversation with Eric Stoessel.  This is a sector he’s been focused on for quite some time.

Even if you don’t think you’d ever want to own a hotel property, you’d still be well advised to monitor the hospitality sector.  The health and direction of hospitality can often be an indicator of the general health and direction of the economy.  And in case you’re wondering how the hotel business is doing in this economy, Eric tells us that leisure travel is UP.

So if you’re REALLY interested in this sector, you’ll want to join us in Miami Beach when we attend the Lifestyle Boutique Hotel Development Conference.  All of the industry leaders will be there.  In just a couple of days, you’ll gather up all kinds of resources, contacts and information about lodging and hospitality.  So when your portfolio is ready for that big red hotel, you’ll be prepared for success.

Did we mention that Hotel Impossible star Anthony Melchiorri will be the keynote speaker?  Come check him out!

Meanwhile, enjoy our interview with Eric Stoessel.  Hope to see you in Miami Beach!

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9/9/12: Rhetoric and Reality – A Look at the History of Economic Policy

As the U.S. presidential elections rapidly approach, there’s a lot of talk about economics and economic policy.  You probably noticed.

At their convention, the Democrats invoked the spirit (and oration) of ex-President Bill Clinton.  The GOP conjures up wistful visions of Reagonomics.  Dire predictions of fiscal cliffs, debt-ceilings, defaults, hyper-inflation, depression, civil unrest and other calamities pepper the debate.

It seems that EVERYONE has an opinion about what the future holds.  But what does history say?

To find out, we sit down with another big brain (one you’ve probably never heard of) in sunny Las Vegas, Nevada.

Tossing their own rhetoric into the radio ring for this episode of The Real Estate Guys™ Radio Show:

  • Your who-would-you-rather-have (rhetorically speaking) host, Robert Helms
  • Your his-mom-wanted-him-to-be-a-reality-TV-star (not really) co-host, Russell Gray
  • Special guest, Associate Professor of History and Economics at San Jose State University, Dr. Jeffrey Hummel

In our likely never to be written book, “It’s Not Obama’s Fault”, we’d put forth the idea that Mr. Obama, like every President before him, are victims or beneficiaries of “the economic cycle”, or what Jeffrey Hummel calls “the business cycle”.

Now we’re not picking sides here (life is too short for that). And if you’re into blaming Presidents for economic conditions, then Bush and Obama are both well deserving.  And if Romney wins, we’re sure he’ll have his turn in the barrel too.

But rather than try to find consensus on theories and concepts, Jeff persuades us that it’s useful to take a look at the history of the business cycle.  Everyone might disagree about what might happen if this or if that.  But since history has already happened, there’s less to argue about – and more to learn.

So why should real estate investors care?  Yes, you guessed it, it’s a somewhat rhetorical question. 😉

Obviously (we hope), the ups and downs (cycles) of the economy affect jobs, incomes, interest rates, asset values and the confidence of consumers, builders, lenders, employers, buyers and tenants.   And ALL of those things affect real estate and therefore provide important context to our investing decisions.

For example, some pundits have expressed grave concerns about the possibility of debt-burdened states defaulting.  But did you know that way back in 1840 there were four states that repudiated their debt and four more that defaulted?  Like today, they turned to Uncle Sam for help, but then-President Martin van Buren blocked the bailouts.  OMG!  What’s going to happen?

Oh, wait.  It already happened.  So we don’t have to guess.  We can look at history and find out.  But if you don’t know, then you’ll have to listen to this episode and hear what Professor Hummel tells us.

What we like about looking at history is that it helps us calm down.  When we are so focused on the now, we sometimes forget that markets have been cycling for a lot longer than we’ve been around.  We’re guessing they’ll still be cycling long after we’ve gone.

So even though there are many very real things to be concerned about, sometimes talking a giant step back and a few deep breaths can give us enough perspective to press forward when everyone else is running scared.

When we look at today’s real estate market, we keep coming back to the same thing.  Properties are selling below replacement costs, interest rates are at historic lows, there’s a growing renter population and still not enough new product coming on the market to meet the population growth.  Put all that in a blender and it looks pretty good for investors.

Add to this the notion that even though this down cycle has lasted longer than most, history teaches us that sooner or later the cycle will take the economy back up – and when it does, those investors who are actively acquiring bargains today, while properties are on sale, are going to come out the big winners…no matter who wins in November.

So listen in to our extremely interesting interview with Professor Jeffrey Hummel – and consider what your personal history will look like 20 years from now, depending on what you choose to do (or not do) today.

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9/2/12: Ask The Guys – Making the Move to More Units

In this, yet another exhilarating edition of Ask The Guys, we take on several excellent listener questions!  Several (but not all) had to do with making the move to more units, so we look at this as anecdotal evidence that investors are feeling good about this market.   After all, it wasn’t that long ago that we were dealing with questions about loan modification, credit repair, strategic default, bankruptcy and foreclosure delay.  Fun.

Are happy days here again?  We think so.  It’s hard to think of a better time to be a buyer of investment real estate.

Proudly pontificating behind the platinum microphones in The Real Estate Guys™ stellar studios:

  • Your fully brilliant host, Robert Helms
  • Your semi-dim co-host, Russell Gray 

Diving into the email grab bag, we pull out several excellent questions:

  • With only $20,000 to invest and living overseas, which U.S. markets make sense?
  • Does size matter? A Minneapolis investor is enjoying great cash flow on smaller properties, but feels the urge to go big. Should he?
  • A Texas investor is stacking up cash flow properties and wants to retire to Belize in 12 years (great idea!).  Should he accelerate his loans or leverage into more properties?  And what’s the shortest path to “critical mass”?
  • A New York investor wants to know if she should use off-the-shelf deal analysis software or build her own spreadsheets. Decisions, decisions.
  • A rookie investor from Minnesota is flipping his first deal – a single family home. He wants to know how to build a true investment business with multi-unit buildings. How can he go from forcing equity to collecting piles of passive cash flow?
  • Another New York investor with 12 residential propeties wants to move up to commercial properties. What do commercial lenders look for? How can he make the leap?
  • A land owner in New Jersey is looking for investors – presumably to help develop the property.  He’s tried investor clubs, bars and dating services (just kidding) with no luck. Where can he go to find the funding partners he needs?
  • A California couple have an expensive home that’s paid for, a bunch of cash in a low rate CD, and a half million in retirement accounts. They’re doing great…but want to own more real estate.  How can they get there from here?

We love your questions!  To submit yours, just click on Ask The Guys!

The Real Estate Guys™ radio show provides real estate investing news, education, training and resources to help real estate investors succeed.

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