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From Rehabbing Homes to Renovating a Hotel – A Q&A with Investor Stacee Nelson
Throughout the years, I have met many phenomenal people at our live events throughout the country. One of the perks about this business is that after a while you begin to know some on a personal level and begin to follow their progress as an investor. When I met Stacee Nelson years ago, she was busy rehabbing a single family residence in Santa Barbara. The project was a major rehab and the property was stripped down to the bare bones. Nelson is not one to shy away from complicated deals, she takes on projects with certainty and confidence. It’s been interesting to follow Nelson through her progression from rehabbing single-family homes to her risk-taking efforts in purchasing water-front properties, REO tapes, and now even a hotel.
Linda: How long have you been investing in real estate?
Stacee: I purchased my first condo when I was 22 and then didn’t invest in anything for a long time. When I was living in Germany I started going to real estate auctions at the courthouse. My friend was buying properties to renovate and hold. I tagged along. In 2011, living in Santa Barbara, I began my formal education in real estate investing and purchased my first flip house in 2012.
Linda: I even saw one of your projects in Santa Barbara a couple of years ago. What attracted you to the hotel niche?
Stacee: The idea of renovating an empty building into a small boutique hotel was initially the idea of my business partner. At the time we were looking for alternative passive income opportunities as well as ways to create a positive impact on communities. An opportunity presented itself in the form of an empty 15,000 square foot building directly on the town square in Gonzales, Texas. The town was keen to redevelop their downtown, which made for a win-win opportunity.
Linda: Was it easier to take on the challenge and expense of a hotel rehab after doing many single-family home deals?
STACEE: Initially we thought it would be a comparable project, just larger in scope. What we learned was that renovating an empty building into a hotel with individual plumbing, HVAC, cable, etc. was far more complicated and costly than anticipated. Certainly having a background in single-family home renovations was crucial in the planning and budgeting, but we were surprised by the sheer volume of issues that arose during the construction phase. The next one will go much more smoothly as a result of the number of…lessons we learned!
Linda: Tell us about the hotel. Where and how did you find it?
Stacee: My business partner has a long-time family friend living and investing in the town. He made the initial introductions to the town’s economic development council who were very interested in supporting business growth in the area. Their support was a critical factor in the decision to purchase in Gonzales, Texas. We toured numerous vacant buildings in the area until we found one large enough and with a perfect location directly on the town square.
Linda: Was it easier to take on the challenge and expense of a hotel rehab after doing many single-family home deals?
STACEE: Initially we thought it would be a comparable project, just larger in scope. What we learned was that renovating an empty building into a hotel with individual plumbing, HVAC, cable, etc. was far more complicated and costly than anticipated. Certainly having a background in single-family home renovations was crucial in the planning and budgeting, but we were surprised by the sheer volume of issues that arose during the construction phase. The next one will go much more smoothly as a result of the number of lessons we learned.
Linda: How long did the rehab take? Did the entire property have to be worked on or only a section?
STACEE: The rehab took over a year to complete. There were a number of delays in the project especially when our initial contractor was removed from the project. One of our important lessons from this project, was to have a project manager on-site during the construction phase. The volume of issues was simply magnified by one hundred versus a single family renovation. Our hands-on project manager made the difference in our ultimate success and project completion.
To provide an idea of the complexity of a project like this: the smoke and fire alarm systems had to be coordinated with the installation of electricity and plumbing (water sprinklers), the HVAC system required coordination in timing with the electrician, drywall installer (ceiling vents) and the roofer (where the systems are housed), the water coming into the building had to be separated between the hotel and the restaurant located on the ground floor, and the elevator turned into a complicated project all by itself.
LINDA: What was the biggest lesson you’ve learned from this transaction?
STACEE: Rather than give one, I’m going to provide a few lessons we learned from this project: For large projects, invest in a project manager who is on-site and regularly reporting on progress. Have the contractor regularly send pictures and review before progress payments are made. It’s a necessity to have a detailed project plan and budget agreed on, in writing, by the contractor. We thought we had sufficient detail in our initial project summary based on our housing rehab experience. What we learned is you can’t be too detailed oriented in the budget and planning phase. The more detailed the budget and contractor commitments are, the better.
Include a split between labor and materials so it is very clear for both sides, especially when you choose materials. Have the contractor sign the agreements. Budget sufficiently for contingencies. The larger and more complex the project is, the greater the likelihood for additional unplanned expenses.
Have an agreed process for change orders that includes approving changes and costs before the work is completed.
LINDA: How is the hotel performing now? What are your goals with the property?
STACEE: The hotel looks fantastic. The reviews of the guests who have stayed there are overwhelmingly positive. While we positioned the boutique hotel to provide executive-style accommodations for the local oil industry, the majority of our guests thus far are visiting Gonzales, Texas, for the regional rodeo events, the hot rod show, the summer concert series, and many historical events. Gonzales, Texas is known as the place where the first shot of the Texas Revolution was fired.
LINDA: Wow, that really sounds exciting! Now, In addition to hotels and single-family homes, your company also invests in Marina and resort properties around the world, is that correct?
STACEE: Yes. We looked at a variety of different passive income and commercial real estate opportunities and decided that marina and resort properties were ideal: It is a relatively untapped market segment with a few big players and the rest mostly individual marina owners, which means opportunity to add value to struggling owner; it combines real estate with business; it provides regular passive income; and marinas and resorts tend to be a happy place for people, thus our motto: Invest in something fun!
LINDA: What’s next for Stacee Nelson and her numerous realty projects?
STACEE: Going forward I’m focused on three areas in real estate: Acquiring marina and resort properties; purchasing REOs in bulk nationwide to fix and flip; and contributing to the expansion of the Cashflow Divas, an organization dedicated to helping women achieve their financial freedom goals through passive (and active) income investing and financial literacy.
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New Book, ‘The E-Myth Real Estate Investor,’ Provides Road Map For Business Success
Successful real estate investors are expert at looking for and finding the next big deal.
But even as they focus on the mechanics of what they do, they often overlook something important. They are trained to buy and sell properties, not to run a business. And a real estate investment company is just that – a business that requires a vision and a plan.
Now a guide has arrived to help fill in the gap of real estate investors’ education.
The new book “The E-Myth Real Estate Investor: Why Most Real Estate Investment Businesses Don’t Work and What to Do About It” (www.michaelegerbercompanies.com) is designed to give them a complete toolkit for starting a real estate investment business from scratch or maximizing an existing company’s performance.
The book is co-written by small-business guru Michael E. Gerber and Than Merrill, a star of TV’s “Flip This House,” along with Paul Esajian, co-founder with Merrill of FortuneBuilders.com, a premier real estate investment education company.
It’s just the latest in Gerber’s best-selling series of “E-Myth” books aimed at helping small businesses grow and providing entrepreneurial skills to professionals whose expertise lies elsewhere.
“A lot of real estate investors end up becoming highly efficient technicians,” Merrill says. “Their income is completely dependent on them and their efforts buying and selling properties. But what they aren’t doing is building systems within the business so they can operate more efficiently.”
Sometimes the problem is an unwillingness to delegate responsibilities, he says. Many decisions have to be made to manage an office, from human resources issues to accounting to marketing and more.
As a real estate investment business grows, it becomes impossible for one person to handle all those responsibilities well while still concentrating on making deals. But too often, real estate investors have the mindset, “No one can do this as well as I can.”
“And maybe that’s true, at least initially,” Merrill says. “But you can train someone who eventually can do it as well, or maybe even better than you. That frees you up to concentrate on other things.”
He says it’s possible for two real estate investors to devote the same amount of time to their business, but one pulls in a six-figure income while for the other it’s just five figures.
“The difference is the systems they have put into place in their businesses and how effectively they use their time,” Merrill says. “Nobody has enough time and we are all challenged for time in every area of our lives. The most successful people are more strategic with their time.”
Merrill says “The E-Myth Real Estate Investor,” with chapters alternating between Gerber and Merrill and Esajian, is essentially a case study of how he and his partner were able to build their business using Gerber’s E-Myth philosophy.
“It’s about how we started out, how were able to grow in scale, who we hired and the systems we put them in charge of,” Merrill says.
Sean Malarkey, a blogger and author, had this to say about the book: “‘The E-Myth Real Estate Investor’ should be required reading for every real estate entrepreneur. No one has positively impacted more real estate investors’ businesses than Than Merrill.”
About Michael E. Gerber
Michael E. Gerber (www.michaelegerbercompanies.com) is an entrepreneur, thought leader, speaker and best-selling author whose modern classic, “The E-Myth: Why Most Businesses Don’t Work and What to Do About It,” has sold more than 3 million copies. He is the founder of The Dreaming Room™, where entrepreneurs and others are provided the tools and facilitation to see, experience, develop and design their Dream, Vision, Purpose and Mission. His next book, “Beyond the E-Myth” is a passionate response to America’s current inspiration deficit.
About Than Merrill and Paul Esajian
Than Merrill, who was featured for three seasons on the popular TV show “Flip This House,” is the co-founder of FortuneBuilders.com, a premier real estate investment education company, training thousands of real estate investors nationwide through proven and systemized processes. Paul Esajian, co-founder of FortuneBuilders.com and CT Homes LLC with Merrill, is one of the most successful real estate investors in the nation. Over the past decade, he has sold hundreds of properties across the country.
From “Handy-Man” to Flipping 100+ Houses Per Year – Learn with Anthony Patrick
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RealtyMogul.com Raises $35 Million in Series B Funding to Boost Its Big Data-Driven Online Real Estate Investing Platform
Sorenson Capital Leads the Round with Additional Funding from Canaan Partners to accelerate the company’s significant growth
LOS ANGELES, CA – July 14, 2015 — RealtyMogul.com, a leading online marketplace for real estate investing, today announced it has raised a $35 million Series B financing round led by Sorenson Capital with additional funding from Canaan Partners, the lead investor in the company’s Series A financing. RealtyMogul.com intends to use this new financing to hire more technologists and data scientists and strengthen its robust technology platform, which uses big data to get smarter about risk profiling in real estate. The company also plans to further expand its geographic presence across the U.S. To date, RealtyMogul.com has already helped fund 240 properties totaling more than $500 million in value.
Over the last 12 months, RealtyMogul.com has been on a tear, growing from 10 employees to 80, and its impressive trajectory is expected to continue. This funding news also comes on the heels of the company’s announcement of three key senior hires: Ryan Sakamoto joins as in-house general counsel, and Michael Sanchez and Charles H. Kim have joined the company’s commercial lending division from Colony Capital.
“We’re excited to be partnering with Sorenson Capital and Canaan Partners for this next stage of our growth,” said Jilliene Helman, CEO of RealtyMogul.com. “Their investment underscores RealtyMogul.com’s innovative technology for the full stack of real estate transactions, both debt and equity, and will help bring the $11 trillion commercial real estate market into the 21st century.”
Whether you are an accredited or institutional investor looking to diversify your portfolio, a borrower in search of flexible debt, or a real estate sponsor looking for joint venture equity, RealtyMogul.com offers a fast, easy, frictionless platform that connects clients to previously inaccessible investment opportunities and capital. RealtyMogul.com is setting a new standard for real estate investing by providing access to equity and debt that would likely take several months to secure through more traditional means.
“We’re seeing online marketplaces massively transforming other industries, and RealtyMogul.com’s growth path clearly shows they’re poised to be the key disruptor in the huge asset class of real estate investing,” said Rob Rueckert, head of Sorenson Capital’s technology practice and RealtyMogul.com board member.
“We’re thrilled to continue supporting RealtyMogul.com in their pursuit of becoming the gold standard for commercial real estate capital on the internet,” said Hrach Simonian, Partner at Canaan Partners and RealtyMogul.com board member.
