Building a Family Business Around Motel Hacking
Stewart Olney, PharmD and Elizabeth Olney, Realtor discuss their real estate investing path from house hacking by renting out a spare room to motel hacking and building a real estate business through hotel and motel investments.
About Today’s Guests
Stewart Olney, PharmD
Stewart graduated with a PharmD from the Wayne State University Eugene Applebaum College of Pharmacy and Health Sciences in 2015. He currently works as a floater pharmacist for Walgreens in Northern Michigan, but will soon be starting at Walmart in Cheboygan, MI as a pharmacy manager. He and his wife, Elizabeth, began house hacking using Airbnb and investing in real estate shortly after they were married in 2014. He and Elizabeth are focusing on building a hotel/motel business after purchasing their first motel in 2021.
Elizabeth Olney, Realtor
Elizabeth manages the real estate investments she and her husband, Stewart, have made. She is also a realtor on the side. Elizabeth and Stewart began house hacking using Airbnb and investing in real estate shortly after getting married in 2014. Elizabeth and Stewart are focusing on building a hotel/motel business after purchasing their first motel in 2021.
Episode Summary
Getting into the Airbnb game when working as a full-time pharmacist can be tricky, especially if you’re trying to save on expenses by doing everything yourself. Stewart Olney, PharmD, and Elizabeth Olney were able to do amazing things with their rental properties due in no small part to their partnership as a couple and their willingness to embrace unconventional living conditions to keep their costs low. In this episode, you’ll get to know Stewart and Elizabeth as a couple, their unique journey through real estate investing, and how their investments have transformed over the years to the point where they now own and live in their very own motel property. They delve into methods used to keep expenses to a minimum while Stewart was still studying and how they adapted to Elizabeth’s first pregnancy. Stewart describes some of the rehab work he has done, including refinishing wood floors, and why YouTube has been such a fantastic resource. Stewart and Elizabeth share from their own experience that there are times when you should apply your skills and times when you should hire out skills that others can easily do for you and how that applies to their business. They also share the most important lessons they’ve learned about how to obtain advantageous finances, as well as how best to navigate conventional mortgages versus commercial lending.
Key Points From This Episode
- Introducing today’s guests Stewart Olney, PharmD, and Elizabeth Olney.
- Stewart’s journey as a pharmacist and how that ties into his introduction to real estate.
- Why Airbnb has been an integral tool for Stewart and Elizabeth’s real estate journey.
- Stewart and Elizabeth’s limited budget after her first pregnancy.
- How YouTube initially helped them with doing all the rehabilitation work themselves.
- How they learned from the mistakes of others as well as trial and error.
- Why Stewart describes their approach as ‘house hacking’.
- How moving into the homes they purchased unlocked access to advantageous financing.
- The story of how they purchased the motel in which they currently live.
- How they have used technological innovations and AirBnB services to automate and streamline their check-in and check-out processes.
- A breakdown of their plan to purchase and run another motel in their area.
- Insights into commercial loans and how they differ from other loans.
- Why getting outside help with property management has had such a positive impact on their lives.
- The resources that have had the biggest impact on their real estate journey.
- Their top advice for any pharmacist who wants to start investing in real estate.
Highlights
“We kept getting these inquiries from medical students that wanted to come for six weeks for rotations and we could never house them because we had all the weekends filled up already and then we thought, ‘What if we restrict it to 28-day minimums and then try to attract those medical students?’” — Elizabeth Olney [0:12:05]
“I had put a keypad lock on the door to the house that I had bought and was renting out to roommates. Eventually, we ended up with WiFi connected keypad locks that integrated with Airbnb and would just give us codes that would end when their bookings end.” — Stewart Olney [0:21:25]
“Saying ‘labor’ doesn’t do people justice, right? It was a good friend that Elizabeth brought in to help us with the rentals downstate, and all the people up here that we worked with are great, and we could not do what we do without them.” — Stewart Olney [0:32:13]
Links Mentioned in Today’s Episode
- Connect with Stewart Olney on LinkedIn
- Dave Ramsey
- Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! by Robert T. Kiyosaki
- BiggerPockets
- The Totem Lodges
- Join the YFP Real Estate Investing Facebook Group
- YFP Real Estate Investing
- Your Financial Pharmacist Disclaimer and Disclosures
Episode Transcript
[INTRODUCTION]
[0:00:00.4] NH: Hello and welcome to the Your Financial Pharmacist Real Estate Investing Podcast. A show all about empowering pharmacists to achieve financial freedom through real estate investing. I’m Nate Hedrick and each week, my co-host David Bright and I explore stories from pharmacists all over the country who are achieving their real estate goals while maintaining a meaningful career in pharmacy. Whether you’re a first-time investor or a seasoned pro, we’re here to provide education and inspiration about the world of real estate.
Please note, this podcast is intended for educational purposes only and should not be considered financial or investment advice.
[0:00:42.9] NH: Hey, David, how’s it going?
[0:00:43.7] DB: Hey, good things, man. How are you doing?
[0:00:45.8] NH: Good, I am starting to un-burry from all of the snow that we’ve gotten here in Cleveland this month but it’s making me very excited for summer this time of year.
[0:00:53.1] DB: Yeah, I know, you guys got slammed, it feels like yeah, ’tis the season for snow and which for us has meant that my wife and I are on like VRBO and all those websites, looking for some place to get out of town to once we can uncover from all this, just great white north kind of stuff where we both lived, right? It ties into today’s episode really well because as we were dreaming of getting out of here and getting on vacation, we’re talking about people that have made vacation rentals their thing.
[0:01:25.2] NH: Yeah, we brought on Stewart and Elizabeth Olney and Stewart and I connected over LinkedIn actually, just kind of randomly about real estate investing and both being pharmacists and their story is just one that I knew immediately right away, we had to bring them on the show and talk about it.
They are long term Airbnbers, they’ve been doing that for years and years, they’ve rented out by the room. Here on the show, they now own a motel that they live in and rent out multiple rooms up in Northern Michigan and they’re buying another one right now. Talking about vacation, they’re living vacation and helping others do the same, which is really cool.
[0:02:01.9] DB: Yeah, it’s a really cool model because I know as I’ve thought about vacation rentals, I’ve always thought, well then, you’re going to buy one property, it’s probably going to be pretty expensive, you’re putting a lot of eggs in that basket and how they’ve done it, just the safety and diversity play of having all of the things that we talk about on the long term rental side where having multiple units either across multiple properties or in one property, that multiple units bring some safety there.
What if one’s vacant, hopefully others kind of carry it, that kind of thing. Doing that in the short-term rental space, in the vacation rental space, also provides them a lot of security and paradoxically, it was even a whole lot cheaper for them that way too. Check out their numbers, they get into the numbers about three quarters of the way through the episode and it’s just mindboggling how good these numbers are compared to a lot of other short-term rental scenarios.
[0:02:56.4] NH: What I really like about Stewart and Elizabeth’s story too is just, where they’ve come from, where they’ve gone and how authentic they are, this is just a family living and starting a business and I just, they’re easily the most authentic people we’ve had on the show, not that anybody else has come on and been fake but they are just really wholesome individuals and that’s what I really liked about just talking to them and having this great interview.
They come from the school of hard Knocks a little bit but it’s turned into an awesome strong business plan that just I’m really impressed by.
[0:03:26.4] DB: Yeah, do make sure you stay until the very end, all the way, right when we get to the end of the final infusion questions, they pop in with this like, “Oh, by the way…” and it’s one of the best nuggets of the whole show. It talks about just the value improvement when you value this as a business instead of as a property.
I mean, Nate, you and I had been doing these major rehabs lately, we’ve been talking about it, we’re hoping for this 10, 20% increase in value with these major rehabs and the percent increase value they’ve had just by managing this property better than how it’s managed previously, it blows anything we’re doing out of the water, right?
It’s amazing what they’re able to do. Make sure you stick around until after the final infusion this time for that last nugget.
[0:04:13.0] NH: Awesome, well, I hope you guys enjoy this as much as we did and we’ll take you to the interview.
[INTERVIEW]
[0:04:17.8] NH: Hey, Stewart, Elizabeth, welcome to the show.
[0:04:20.8] SO: Thanks, glad to be on.
[0:04:22.2] NH: Yeah, really excited to have you guys on today. We’ve got a super unique story. Stewart, you and I connected over LinkedIn a little bit ago and just – I knew I had to have you guys in the show, so thank you for joining us.
[0:04:31.1] SO: I think I gave you a bit of an earful, it wasn’t probably what you were expecting.
[0:04:35.1] NH: It was perfect and it was exactly what I was looking for so I appreciated that and why don’t we just jump right in and maybe you can give somebody, the audience a little bit of a look in your pharmacy story, we’ll start there.
[0:04:46.3] SO: I originally started in University of Minnesota, going for chemical engineering and I didn’t do well there, I think it was just the fact that it’s always dark in Minnesota. Anyway, I ended up at Michigan State, doing biochemistry and molecular biology that’s what I got my undergrad in and I realized that I wasn’t going to be able to get a job because I didn’t do any research.
I had to come up with another solution and my great grandfather and his father were pharmacists in Banker, Pennsylvania. I thought, “Well that” – I always wanted to do something and help people and I thought that that would be a great choice. I ended up at Wayne State University Pharmacy School and that’s actually part of the impetus for getting to what I got into and that was the beginning of it all so yeah.
[0:05:31.3] DB: Yeah, how does that tie into since you’re leading us in that direction, how does that tie into your real estate “why” and your real estate journey so far?
[0:05:39.7] SO: I feel like a lot of what we’ve done is kind of a bit of a necessity. When I went to pharmacy school, it was 2011 so it was the bottom of the real estate market, that was right when things started to turn around, it seems like and I was looking at an apartment on campus and it was going to be like $800 a month, which I bet part is down there like 1,600 now, wouldn’t surprise me.
Anyway, I started looking at houses because we realized that a house would be cheaper than an apartment at that time. I got a house in Harper Woods for $600 a month, that was my mortgage. I decided to start renting the rooms out on Craigslist. I was getting $400 a month for a room and it did all right. I had to evict some people and learn some from Hard Knocks but after a while, I decided that I needed to try something different because Craigslist wasn’t really working, I was getting low quality people.
I tried Airbnb and Airbnb is great because they kind of do all that advertising and your listings up there for you, you don’t have to hardly put any effort into that, that was kind of right before I got – that was right before Elizabeth and I were going to get married, it was three year, I started doing Airbnb in that November and then in January, we got married and Elizabeth kind of took the Airbnb off from there and –
[0:07:02.6] EO: Well, we were really poor because Stewart was in pharmacy school and he was doing rotations so we couldn’t really work extra hours for CVS and I didn’t have work with organization yet to work in the US plus it took a couple of months before I had a green card and stuff like that. We were just kind of going into debt, living off of student debt money and then somebody in our church gave us the Dave Ramsay course a gift voucher for that and that was kind of the turning point for us.
[0:07:36.5] SO: It’s kind of turned into our motto. He says, “Live like no one else so you can live like nobody else.” Well, we’re kind of still like living like nobody else and we haven’t started living like nobody else yet but you know?
[0:07:50.7] EO: In that course, he taught about how people spend about 30% of their income on their house and when we started renting out the rooms, we thought, “Well, can we get that down to zero? Can we live for free?” Then, we furnished all three bedrooms in the house.
[0:08:11.5] SO: Like I said, she is the catalyst, right? She came up with the idea for us to sleep on a futon in our basement and rent all of our bedrooms out.
[0:08:20.1] EO: We did that for two years.
[0:08:21.5] NH: That’s incredible. Is that the whole impetus of this that you guys were like, “Okay, we need to figure out a way to cut expenses” so that’s where the rooms, the Airbnb started from there? Because I know, it’s obviously grown a lot since then and we’re going to get into that but that was the kind of the jumping off point for you guys.
[0:08:36.3] SO: That was the beginning of it, yeah.
[0:08:38.4] NH: Got you.
[0:08:40.1] EO: Well, we like to say, we started the low at the bottom because we started in the basement.
[0:08:47.2] DB: You’re living in the basement, you’re making this work and it sounds like financially, that’s certainly helping. You have a $600 a month house payment, you’re getting a lot more than that in rent, so it sounds like this has lit a fire. What was then the next step in your investing journey, how did you get there?
[0:09:06.2] EO: Well, it was kind of a necessity again.
[0:09:08.4] SO: Another one.
[0:09:09.7] EO: Because I got pregnant and we had to move out of the basement and we had to get more privacy because we were sharing the kitchen and everything with our roommates. We thought, “Okay, we need to get our own house now.” We thought about living in the house and we kind of – we budgeted everything, the Dave Ramsay way and we realized, there’s no way we can afford to just have the house for ourselves.
[0:09:33.1] SO: Well, we just didn’t want to pay for a house.
[0:09:35.4] DB: Sure.
[0:09:37.7] EO: Yeah and then we thought, “Okay, what if we buy something else and we keep doing Airbnb?” we thought well, if we buy something else, we can finish the basement, that’s where a lot of ages right now and mainly a four bedrooms on Airbnb.
We started looking at houses and we just kept running the numbers until we found something that had a mother in-law suite and we thought, “Well, if we live in the mother in-law suite, we can still rent out the bedrooms in the house.” We bought that house, it gave us all the privacy we needed with our daughter and we had three more bedrooms on Airbnb plus the basement so that got us to – I
[0:10:14.8] SO: No, that house doesn’t have a basement.
[0:10:16.2] EO: No, no, the basement.
[0:10:17.5] SO: Oh yeah, okay, we rented the basement that we were staying on the futon, yeah. We put an egress window in and I trimmed it out and put a wall and all that.
[0:10:27.2] EO: We did everything ourselves back then. We really couldn’t afford any – to pay labor, so we learned from YouTube how to do everything.
[0:10:36.2] DB: That’s incredible, it sounds like you guys have really learned all the stuff from the ground up, from managing the tenants to doing the rehab yourself. I mean, all that is such a pretty intense process that overwhelms and intimidates a lot of people that you guys were like, “Yeah, no, this is what we need for our life so we’re going to figure it out.”
[0:10:52.9] SO: Yeah, our third house, I refinished wood floors by myself. It’s like a lot of 2 AM nights.
[0:10:59.7] DB: Damn, I should have you down in my next property, I could use some hardwood floors that need refinishing, I don’t want to do it.
[0:11:04.8] SO: I don’t think I’m doing that again.
[0:11:05.9] DB: Not a contractor? Darn, okay, that’s all right but backup for a second. I mean, how did you learn some of that stuff, especially even the managing tenants on Airbnb, you’ve got multiple units, multiple people, was it just all trial and error or was there a course that you read, a book that you read or was it like, “We’re just going to figure this out, it will be fine.”
[0:11:25.1] EO: You know, trial and error and we started following Facebook groups of people doing similar things, Stewart was on Bigger Pockets and I followed Airbnb hosts Facebook groups to see what situations they’re coming up with, how the service dogs and non-service dogs and all these things that come up and just kind of, I think that avoided a lot of having to learn through trial and error later, learn from other people’s mistakes but we still also learned a lot from our own mistakes too. One of the big things we learned early on, we started renting out by the day.
[0:12:01.0] SO: Pictures are important too.
[0:12:02.4] EO: Yeah, pictures. We kept getting these inquiries from medical students that wanted to come for six weeks for rotations and we could never house them because we had all the weekends filled up already and then we thought, “What if we restrict it to 28 day minimums and then try to attract those medical students?”
As soon as we did that, we started getting these really good guests and it made the cleaning more manageable because at this point, I was cleaning seven rooms with a baby and Stewart would work until five, six or sometimes –
[0:12:38.6] SO: Well, I mean, pharmacy, retail pharmacist schedule, 12-hour days. I work till three or three to nine and then I’m working around that, mowing lawns and doing gardening on the houses and you know?
[0:12:52.0] EO: Stewart put on a lawnmower in the back of our sewer one month back and forth and mowing our lawns. Yeah and then we kind of burned out a bit at that point when we got to seven. It was kind of – it was just too much.
[0:13:05.7] SO: Yeah, the impetus for us getting help was – my lawnmower got stolen.
[0:13:09.9] DB: Okay.
[0:13:10.6] EO: It was actually kind of a funny story.
[0:13:12.2] SO: It was trash day and I was mowing the lawn and I put it next to the curb to load back into the car and I ran inside real quick, I came out and the lawnmower was gone. She was in the car nursing our oldest daughter and I said, “Did you load the mower into the car by yourself?” She goes, no.
[0:13:34.3] EO: Then he realized and he yelled, “No” so loud, the neighbors came out of their houses and one neighbor came and she asked, “What’s going on?” Stewart said, somebody took my lawnmower and it was a 28-year-old lawnmower that his dad gave him.
[0:13:53.1] SO: Yeah, the reason it was such a big deal is because of the sentimental value. My dad gave it to me.
[0:13:57.9] EO: That has always started on the first go and it had push assist, it was nice.
[0:14:02.7] SO: Yeah, it was a good lawn mower.
[0:14:04.2] EO: Anyway, every time we had to make an investment, we kind of ran the numbers, “What if we hire it out, what if we buy a new lawnmower?” Every time there was a big expense, we kind of – yeah, we ran the numbers.
[0:14:19.9] SO: That was the impetus, first to get help.
[0:14:21.8] EO: Yeah.
[0:14:23.3] NH: What kind of help did it look like? Was it a property manager, was it just hiring a lawnmower? What did that look like?
[0:14:29.1] EO: Yeah, we started getting somebody to just come in and mow the lawns, took some weight off Stewart’s shoulders and then I got somebody to help me with the cleaning. We kind of felt like, “Okay, now, we can pick on something bigger, now we can maybe do another one” and we ended up buying that same neighbor, the one that came out to ask about Stewart’s yelling, we ended up buying her house and the day we closed, he said, “Guess what? There’s a lawnmower for you in the garage” and she gifted us a lawnmower.
[0:15:07.1] SO: When we bought those houses, they were all owner occupied, right? You put 5% down conventional loan, we’re really house hackers, it’s what we are and kind of what we’re doing now, it’s just house hacking to the extreme, right? The house we lived in and I actually did mow the lawn with that mower sometimes.
[0:15:27.8] DB: Yeah, so with that strategy, just to make sure that we cover that well, you jump 5% down because you commit to living in that property, it’s an owner occupant situation and house hack means you got other people living in it with you that are in this case, more than paying the mortgage, you’re getting paid to live there for free, albeit, in the basement and the futon and one house and then in the in-law suite, you could have had the big part of the house but you chose to live in the in-law suite.
Third house, you’re doing the same thing so you keep moving with this, these aren’t properties that you’re buying intentionally as rentals, you’re intentionally moving into them to get the advantageous financing in those cases, right?
[0:16:06.1] SO: Yes.
[0:16:07.5] DB: That’s a beautiful strategy and I think it sounds like this continues to cascade and then more recently, you’ve done the whole monopoly thing, right? Where you trade in some houses and you go for a hotel or in this case, a motel, right? That’s the next part of your story?
[0:16:24.1] SO: Yeah. Well again, it’s not something that we intentionally moved up north to do. I got this floater, the job up here at Walgreens is a floater and I was really interested in helping with the vaccinations with the pandemic, right? They were going to pay me to move up north more from Saint Clair Shores like who, you know?
[0:16:46.3] EO: I think it’s – was there a $5,000 signing –
[0:16:48.8] SO: There was a signing bonus so I got paid more to move up north, who wouldn’t take that deal, right? We were looking for a house and couldn’t find one in the price range that was acceptable to us. We ended up taking, “Well, let’s look at commercial real estate, maybe there’s something we can sleep in.”
This motel came up on the market and it kind of worked because we were kind of already doing it with our Airbnb so we weren’t necessarily afraid of it, it was just kind of a natural progression. We kind of – we bought it and here we are living in 700 square foot apartment with three kids and yeah, no dishwasher.
[0:17:30.7] EO: Also get –
[0:17:33.6] NH: Okay, I need – I love this, I think this is just so cool and again, Stewart, when you told me this story on LinkedIn, I was like, this, this is the moment, I got to have this on the show, it’s so cool. Talk to this, how big is this motel, you live in – is this basically like if you’ve never seen Schitt’s Creek before, that TV show, is it basically that? That’s what I’m picturing right now.
[0:17:50.6] SO: Yeah.
[0:17:51.9] EO: Actually not it, the previous owner actually worked for the Marriott and he designed the covered spaces, so when he retired, he bought this old motel and he took the 12 bedrooms and broke open the walls between every second one and he made it into five suites and then two additional –
[0:18:12.2] SO: We have a cabin towards the back of the property that he redid right before we took over and there’s attached kind of extra unit on the manager’s building, then we have five kind of suites in a row out we’re sitting in our office right now.
[0:18:28.7] EO: It’s basically seven mini lodges, we call that lodges and he disagrees that it’s so big of a place. What really gave us an advantage was, he couldn’t sign it as a business because the number didn’t look good, it wasn’t worth a lot as a business.
The website wasn’t that good, it came up on the sixth page after you search hotel in the [End River 0:18:54.9]. It was just, it had so much potential, it was so beautiful but it wasn’t getting the business it deserved.
[0:19:04.1] NH: You guys saw it and thought, “Look, I could fix up a couple of things, I can do the better management, we’ve got the experience.” It sounds like the perfect fit for you guys, it’s really cool. Did you find that the management was similar to running an Airbnb then, just the rooms were effectively the same kind of a setup just let me deal with a little more advertising or was it the same?
[0:19:22.6] SO: It was slightly different because it’s a different market up here. Up here, it’s kind of tourism-focused and not so much work-based travel whereas down in Detroit, it’s more we were, our market was kind of a niche, you know? We catered to medical students who were going on rotation with the local hospital.
Up here, it’s more tourism, we get snowmobilers, we get boaters, we get people going to the local crossing the woods trying up here and all sorts of reasons that come up into this area sometimes they’re here just to visit family. It worked out really well, we had a really strong summer, we were 98% booked out in July.
[0:20:02.9] DB: Wow, that’s awesome.
[0:20:04.1] SO: Yeah. In August was similar, September and October went way better than I expected and –
[0:20:12.1] EO: Every single month went way better than we expected.
[0:20:14.5] NH: That’s great.
[0:20:18.4] SO: It’s been good, we don’t plan to stop with just one motel.
[0:20:21.6] EO: When we bought this, it was kind of like a big old mom-and-pop’s motel where there’s a mom and pop that lives in the manager units and they’re always around, people stop in, they hand over the keys, they take the payment in the office, that’s the way it was run but we realized that once – so Stewart was on paternity leave right after we bought this because our third daughter was born.
We realized that when he goes back to work, there’s no way I could do this by myself with three kids. We thought, “How do we automate this, how do we take some of that load off my shoulders?” We switched the key locks to keypad locks which also integrated into our website and into Airbnb, so that made it so that I could tax people to keep that code before they arrived and they could just put it in and they did not stop by the office.
[0:21:20.0] SO: That’s actually something that we did with our Airbnb’s from the very beginning. Before I even met her, I had put a keypad lock on the door to the house that I had bought and was renting out to roommates. Eventually we ended up with WiFi connected keypad locks that integrated with Airbnb and would just give us codes that would end, when their bookings end and we kind of took that and put it here. We used our Airbnb experience to make things better here.
[0:21:47.2] NH: That’s awesome.
[0:21:47.9] EO: Yeah and we did had an office phone that you could – it only worked about 16 feet away from the office, so we felt like we could never leave because we were so attached to the building, so we switched to a mobile phone and then we could go out for dinner and we could still take reservations while we were eating dinner and the last step to the atomization was to integrate an automated messaging system that also integrated with our website and Airbnb.
That all the things people would come to the office for all day long, we could answer in advance like for example, what is the Wi-Fi password or how do we turn in the heat or whatever, so we answered those things ahead of time and just kind of one by one cut down the reasons to go into the office for until we got to the point where we could, a week would go by and maybe one person would come by at the office.
We could have our number on the door and they could just call us and one of our concerns were what if they arrive and their phone is dead and they don’t know what their code is. We put a ring doorbell on the door so they could call us just in case they couldn’t.
[0:22:56.5] SO: Yeah, those are all things that kind of apply to Airbnb as well on a single family home that we are renting out. You know, we’re kind of strange that we don’t rent a house as a whole, we do it by the bedroom but that’s something that would work well whether you got a single house, you know? It’s just kind of at a larger scale here.
[0:23:17.2] NH: I love how you guys have streamlined things and created strategies to make your life easier while still being able to run what you want. I mean, you’re a full-time pharmacist, a full-time mom and still killing it without having to answer a phone all hours of the day and night. It’s really cool.
[0:23:31.1] SO: I do admit we have gotten 2 AM phone calls.
[0:23:33.9] EO: Yeah, we still have phone calls.
[0:23:34.9] SO: It happens and we get prank calls from Detroit too.
[0:23:36.8] EO: I always kind of sound really happy and not bothered by the 3 AM phone call, so we sit up and we’re like, “Thank you for calling Totem office, this is Stewart speaking” even if it is 3:00 in the morning.
[0:23:49.0] NH: Very cool.
[0:23:49.7] DB: Oh man, it feels like that automation too is one thing that really helps it run more like a business because you mentioned that was why it was tough to sell because a lot of those things work there, so now that you’re making it much more like a business, it sounds like it’s easier to manage. It seems, it sounds at least by the way you are saying it, paradoxically easier than when you just had a couple of people that were from Craigslist and weren’t the best tenants, we’re dealing with eviction.
Now, you have really got it down to a science, you are texting passwords and you are making this so much easier. How does that go into kind of the next play and what you’re thinking about for next steps here?
[0:24:26.2] SO: We’re working on closing on another motel property up here and again, impetus isn’t actually to buy other motel property although that is a bonus. It just gets us a 2,000 square foot house that’s attached to it.
[0:24:39.1] EO: We actually cover the tourist thing out it seems here by a family of five and a two bedroom little apartment and we thought, “Okay, now we are building it a house” and then we started looking at houses and random numbers and –
[0:24:52.8] SO: Well, the other thing was we couldn’t get approved for conventional loan because of the business. The loan on this business they wanted two years tax return from it.
[0:25:02.0] EO: It kind of screwed us over for being able to get conventional mortgages.
[0:25:07.0] SO: We thought outside the box.
[0:25:08.4] EO: We kind of thought, “Okay, well so…” and then the bank said, “Okay, well we can’t help you with the conventional mortgage but maybe we can help you on the business side with a commercial loan since you are technically moving your managing units offsite” and we plan to convert the managing unit into another lodge. The local bank said, “Okay, well maybe we can do a commercial loan for you.”
Then we thought, “Okay, well since we are going to have to pay a commercial loan interest rate, why don’t we just look at commercial real estate again?”
[0:25:40.0] SO: Well and the thinking of that was we couldn’t find a house again as the real estate market up north in Northern Michigan is still white hot. I know it’s kind of slowed down a little bit down state there but up here, it’s still white hot.
[0:25:53.1] EO: We went around looking at all and local hospitality things that were for sale and we really didn’t like any of it and then we called somebody that we knew that was in hospitality up here and we asked them, “Is there any chance you’d let us make an offer or you’d consider?” How did we say it?
[0:26:10.0] SO: Would you let us make an offer?
[0:26:12.6] EO: Yeah, that was actually the third time that we asked them. The previous times we just said, “Hey, if you are ever interested in selling let us know” and we didn’t get any good response but when we asked the third time we said –
[0:26:23.9] SO: We changed the way we asked.
[0:26:25.0] EO: “Would you consider an offer?” into my call and they – I think it kind of – he thought, “Well, how much would they offer?” and I think he was just curious and so he showed us the whole place and we made an offer and he said, “No, that’s too low” we made another offer and he said, “That’s too low” and the third time he said, “Fine.”
[0:26:44.6] DB: Man, no that’s – it just boggles my mind that a bank won’t lend you money to buy a house to live in but they’ll lend you more money to buy a motel and also to live there. You’ve got me super curious now about the scope and the numbers here, so these types of motels if you are willing to share, what kind of price point and what do the loans look like and how does that differ from the other types of properties you’ve been buying before?
[0:27:13.4] SO: Yeah, so once you get into hotels and motels that’s commercial property, right? So you got to get commercial loans. Our loan term is 20 years not 30, the interest rates are variable. I think the one loan that we got on this is adjusted every five years, so crossing my fingers at loan, interest rates are 20% four years from now but we’ll see anyway. This property that we’re in right now was listed at 375 and we sold our property down state for 400.
[0:27:43.7] EO: We had $75,000 in cash when we sold our primary residence and we needed $93,000.
[0:27:52.4] SO: They had us put 25% down on this place, yeah –
[0:27:55.3] EO: Because we are buying it as a three percent –
[0:27:57.1] SO: Yeah and it wasn’t an SPA loan. It was an actual, you know?
[0:28:00.5] EO: If you are buying for – to buy a business and the business have books, then you can qualify for 10% down loan through the SPA but if it doesn’t have books, you have to buy –
[0:28:12.0] SO: Or the owners unwilling to share the books.
[0:28:13.4] EO: Yeah, then you have to buy this real estate and then you have to put 25 to 30 down. Yeah, so we had to put down 25%, which was $93,000 and so that $5,000 signing bonus came in handy and then the stimulus money came in and we were able to scrape together the rest. When we bought this I think we had less than a thousand dollars in our account. It was so razor thin.
[0:28:39.4] NH: Were you guys telling me a second ago about Dave Ramsey? Hold on.
[0:28:43.4] SO: Okay, yeah, we’re not very good at sticking with Dave Ramsey, mostly what we got was live like no one else, it can look like right off.
[0:28:53.3] NH: I was going to say that I think that Dave Ramsey has rolled over in thinking about all the leverage. I think that’s awesome though, that’s really cool.
[0:28:59.2] SO: Yeah but we’re okay now.
[0:29:02.1] DB: Yeah, so after that $275,000 sales price, then what’s the monthly revenue look like from the seven mini lodges and all that you had on that first property?
[0:29:11.9] SO: Of course it’s variable, right? Because of the seasonality up here. You know, in the summer it is the busy season, we are 98% booked out. I think in July we made 24 grand revenue on the seven lodges. Right now with January, I think we are sitting at 10,600 for the month and that is also being a little bit flexible in the types of tenants and bookings we take on. It didn’t snow for a while, so in the winter a lot of the revenue is seasonal or it depends upon the snow and the cold or whether or not there’s pikes on the lake.
On the lake, it’s ice fisherman you’re looking for and snowmobilers and other, I think I am not sure what else, who else is coming up.
[0:29:54.7] EO: Hunters.
[0:29:55.9] SO: Hunters, yeah.
[0:29:57.1] EO: March season is slow for us, when the ground is not frozen yet there is not a lot going on here.
[0:30:03.4] SO: It didn’t freeze early and it didn’t snow early, so we are kind of struggling a little bit with the revenue and so what we did is we – when I moved up here, I moved up ahead of the family and she looked for housing for me and she couldn’t find a place for much less than 1,600 short term. What we did was we, you know, people inevitably starting October and November, they start calling and asking, “Hey, what’s your price for a month?” so she started telling people 1,700.
We are renting motel room out – well, it’s a suite. It’s a suite, it’s got a kitchenette, living area, fireplace, nice bathroom, bedroom for 1,700 and we had four of them rented out like that right now. Well, one of them is for a thousand.
[0:30:47.9] EO: We are trying to push more daily reservations to the three that are still open for days, so I think it makes us maximize our profit on those while we are making good income on the four.
[0:31:00.7] SO: We told everybody that by May, then we can’t do anymore long-term because that is when business starts to pick up again.
[0:31:06.7] NH: It’s awesome. I love how you guys are adapting to like things on the fly, right? Here is what’s coming in, here is what we can do with this, this is what’s needed right now and most people would love a four unit renting at $1,700 a month per room and that’s incredible when you compare that to somebody just doing a simple multi-family deal or something like that, so that’s really cool. I appreciate you guys sharing that with us.
One more thing I want to dive into because I think it is a really good like bring everything back together is that you’ve done the single rent by the room, like house hack, cleaning the rooms by yourself, seven houses at a time management strategy, all the way down to now buying your second motel, managing multiple units at the same time, what do you feel like is kind of brought everything together?
Do you think that is it nicer now that you’ve got all these units that you can manage all at once or do you wish there was more like simplicity builds into it or what’s kind of the – now that you have been to this journey at this point, what is the grand feel about all of that?
[0:32:02.6] SO: I think it was hardest to where we are doing it all ourselves to be honest with you, that’s what was hard but once we’ve had brought in people, labor to help, it was really helpful. I mean and saying labor doesn’t do people justice, right? It was a good friend that Elizabeth brought in to help us with the rentals down state and all the people up here that we worked with are great and we could not do what we do without them.
[0:32:28.5] EO: I think what we learned was that there are certain skills that we have is valuable and let’s leverage those skills while we source out the skills that we can easily find somebody else to do and I think we’re kind of getting to the point now where we can say, “Okay, we really hate these things, let us outsource that and focus more on the things that we love to do and leverage that” and I think that’s what we’re going to do moving forward.
It’s probably to get somebody to help with all the paperwork and all the mail and all the laundry, which I hate and then we can focus on growing the business more.
[0:33:10.5] NH: I love that. That’s awesome. Well guys, I love this story. It is absolutely incredible but I want to jump into our final infusion questions. These are three questions we ask every guest on the show, so we’ll take it – we’ll do it one at a time here. We’ll let Elizabeth answer and have Stewart to jump in as well so you can have your own separate answers but the first question in our final infusion here is, what’s one tangible strategy and I know you have given us a lot but one tangible strategy that you used to make sure that investing works hand in hand with your careers?
[0:33:37.8] SO: For me, I couldn’t do this without Elizabeth. I am a retail pharmacist, right? If a toilet is overflowing, I am working. She’s got to be the one to handle that because you know, imagine if you owned all these rentals yourself and I imagine you’ve had other pharmacists on the podcast who had other strategies, somehow they handle that but that’s – I can’t do that. I can’t handle that when I am working, so Elizabeth is my secret weapon.
[0:34:05.0] NH: I love it.
[0:34:06.1] EO: I am a master toilet plunger at this point. Yeah, I think it was just his income has made it possible for me to not have to have a career.
[0:34:19.6] SO: Well, your career is awesome, yeah.
[0:34:21.6] EO: Yeah, I mean the business has become my career. I was going to – I was getting my prerequisites to become PA and when this all kind of kicked off, we made the decision that I was going to focus on this instead and the income that he generated really made that possible, that I could focus on this.
[0:34:41.3] DB: Second question is, what’s one resource that’s been most helpful to you in your real estate journey, whether that’s a book, podcast, person, author, website, whatever that would be? We’ll start with Elizabeth and then I’ll pass to Stewart.
[0:34:54.3] EO: Well, it was the Dave Ramsey course, which just came at the right time and then Rich Dad Poor Dad by Robert Kiyosaki. I think just Dave Ramsey was good for getting our budgeting right and lowering our expenses and kind of thinking about where our money was not where it went but focusing our money in the direction we wanted it to go but the next step was to understand cash flow and how to invest in the return on the investment, that is where Robert Kiyosaki came very helpful, useful.
[0:35:30.0] SO: For me it was Bigger Pockets. I was on Bigger Pockets I think right when we were in the first house, I started getting plugged into it because I realized all these Airbnb rentals are working out really well, so I started looking into it more and I learned a lot from Bigger Pockets in the beginning.
I am not on there so much anymore because I feel like just the act of doing, you learn so much more than going and reading the blogs and getting stuck in analysis-paralysis and thinking about stuff but Bigger Pockets really helped me have an idea and a lot of it was technical like what can you finance, how do you get the financing and who do you talk to and that really helped me know how to talk to the right people and do the right paperwork and have all my ducks in a row to get the financing done on the properties.
[0:36:21.4] EO: At the beginning, YouTube was very helpful when we haD to – we were set so active in our investing doing everything ourselves and we have to learn from YouTube and Pinterest, we got a lot of ideas and then the groups that we follow on Facebook, other hotel-motel owners, how they deal with situations, other Airbnb hosts, yeah.
[0:36:43.2] NH: That’s awesome. All right and then our third question, what is one piece of advice you’d give to a pharmacist that is contemplating a start in real estate investing?
[0:36:50.5] SO: Have a support system because when it hits the fan when you’re at work, you have to have a way to at least hold things off until you can go off.
[0:37:01.2] NH: Great tip.
[0:37:02.5] SO: I mean, I guess that is focused on retail pharmacist, right? I guess if you’re more clinically focused and can take five minutes and step aside and shoot some text messages off or make some quick phone calls at work but not in retail, not in a high volume pharmacy. It doesn’t work like that.
[0:37:20.6] EO: I think for anybody getting into investing or just is getting out of school, I think that the first five years is so important, it just kind of ripples everything you do, every financial decision you make in the first five years can have such a big impact on your future finances and if you are willing to take to heart to what Dave Ramsey says, look like no one else so you can live like no one else, that early and just not care what people think, in your case, sleeping on a Futon in the basement and going to that extreme that early on, it will have huge payoff at the end.
[0:37:59.6] NH: You guys are living proof of that and I think it’s awesome.
[0:38:01.8] DB: Yeah, it is so true just delaying some of that and not buying the shiny new car and all those things right away really does make an impact particularly if you do what you guys have done and take that momentum and turn that into investing and yeah, the ripple effect that that will have is just – that’s super cool. Where can people find out more about you and these motels if they’re looking for somewhere to stay in Northern Michigan?
[0:38:26.1] SO: totemlodgesir.com. We’re online, you can book online if you are so inclined to, we would be happy to host and you get to meet our daughters. They like to come out and greet people.
[0:38:40.8] NH: Awesome, I am sensing a YFP retreat David coming up.
[0:38:45.0] DB: Yes.
[0:38:48.4] SO: Yeah.
[0:38:48.8] EO: We are putting them to work really, teaching them the business. Our five-year-old picked up 17 wheelbarrows of leaves this fall and she earned $17 and she got to $95 and we said, “Don’t you want to give this five more wheelbarrows so you can get to a $100?” and she said, “No, my tooth is lose and I know you are going to give me $5 so I am good.”
[0:39:13.8] NH: Kids are awesome, they are smarter than we are.
[0:39:16.3] EO: She has been spraying wheat with the nicker and stuff and earning a couple of bucks here and there and we are trying to get her hooked in.
[0:39:25.3] SO: I am on LinkedIn of course, that’s how we connected so if you just look up Stewart Olney on LinkedIn, I think my address in [inaudible 0:39:33.1] I know I should better go check that but you know, Stewart Olney in Indian River, who is the pharmacist. I don’t think there is any other Stewart Olney out there who is a pharmacist.
[0:39:41.8] NH: Well guys, I really appreciate you joining us on the show. This is just such an awesome experience to hear what you guys have been up to and your journey so far and I hope to have you back at some point in the future to hear more about the next motel and where do you go from there, so we really appreciate your time.
[0:39:56.4] SO: Yeah, sounds good.
[0:39:57.9] EO: You know, we kind of missed something, something about the conventional mortgage versus commercial lending, which we didn’t know until we got to it that we find really, really awesome is when you are buying real estate, you can’t add that much value to it. I mean, you can put swipe in or add value that way but compared to the neighborhood, it is not going to go up that much.
You can only add so much value but with a business, it’s a whole different ball game. When we bought this, we paid 375,000 but now it’s valued as a business and so they’re looking at the income you generate then multiply it with –
[0:40:35.7] SO: Well conservatively, I take a 15% cap rate but the motel we’re purchasing is I think we’re paying 11% cap on it, so yeah.
[0:40:44.7] EO: Now that we’ve run it for eight months, we have almost doubled its value, so within eight months it basically grew from a motel that was worth 375 to one that’s worth almost $750,000.
[0:41:01.1] SO: Conservatively.
[0:41:02.1] EO: Yeah, so you can grow your business, you can double it in a year. I mean, you can probably do whatever but it can just grow exponentially, which kind of just blew our mind and kind of made us decide we’re sticking with this now. This is way cooler.
[0:41:21.7] DB: Absolutely and yeah, you’re right on, when it is valued as a business and there is a cap rate formula in there and you can increase that revenue and it sounds like you guys have just killed it, not only increasing revenue but also making the expenses very manageable through the automation that you’ve done by doing both of those things, yeah. You are killing it with increasing the value and so if you can find more value add business opportunities like that, yeah, the sky is the limit compared to where you guys started with by the bedroom on Craigslist, so that is fantastic. I love it.
[0:41:53.9] SO: Yeah.
[0:41:54.2] NH: Very cool. Well again guys, thank you so much. This has been great, we really appreciate it.
[0:41:58.3] SO: Yeah, thank you. It’s great talking to you guys.
[0:42:01.0] NH: Thanks so much.
[END OF INTERVIEW]
[0:42:01.8] ANNOUNCER: Thanks for listening to the YPF Real Estate Investing Podcast. If you like what you heard on today’s show, please leave us a review and subscribe to the show so you never miss an episode. If you have a question, know someone that would make a good guest or want to connect with Nate or David, head on over to yfprealestate.com and join the growing YFP Real Estate Investing Facebook group.
[DISCLAIMER]
[0:42:23.2] ANNOUNCER: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and it is not intended to provide and should not be relied on for investment or any other advice. Information of the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.
Furthermore, the information contained in our archived newsletters, blog post and podcast is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analysis expressed herein are solely those of your financial pharmacist unless otherwise noted and constitute judgments as of the dates published. Such information may contain forward looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer.
Thank you again for your support of the YFP Real Estate Investing Podcast. Have a great rest of your week.
[END]
Current Student Loan Refinance Offers
[wptb id="15454" not found ]Recent Posts
[pt_view id=”9480b4871g”]
Spread The Word
[TheChamp-Sharing]
