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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