$187M Hotel Portfolio by Age 30: How to Choose the Right Deals, Brands, and Ops Model | Sujay Mehta E39

Michael Russell 0:00

Think building a $187 million hotel portfolio in just a few years is impossible. Think again. Suji Meta did it before the age of 30, and in this episode, he shares the exact blueprint behind his rapid rise in hospitality. You'll learn how to choose the right hotel brand for your market, when a boutique hotel property can outperform a flag, and why most investors underestimate the power of strong operations. He also unpacks what went wrong on his first ground up development and how Kobe Bryant's mindset shaped his risk tolerance and why he ultimately fired third-party managers to bring everything in-house. If you're serious about hotel investing, from your first acquisition to scaling a portfolio, this episode is packed with insights. Most operators learn the hard way. Let's dive in. Welcome to the Hotel Investor Playbook, your guide to building wealth and freedom through boutique hotel ownership. Hosted by Mike and Nate.

Nathan St Cyr 1:02

Get in the game.

Michael Russell 1:26

Sujay, welcome to the show. Thank you. I appreciate it. We're excited. You're a young guy, and I want to dig into some of your success. So I want to start by addressing something that you've said. You've said that real estate is a long game, not a get rich quick scheme. But you've built a $187 million portfolio before the age of 30. So what's the story behind that kind of acceleration?

Sujay Mehta 1:54

When I said that, the first couple of years were slow, right? They were hard, they were slow. I remember I got I got married and I was making like $30,000 a year. And I knew that if I went W-2, if I went corporate, I could easily leverage just like my experience. I was a neuroscience graduate from Ohio State. So the other option was go to med school. And I knew I could leverage all of these other avenues that would be open to me to be able to make some money and make a comfortable living and be fine and cruise, right? But I had invested in myself. I bet on myself. I wanted to bet on my business. And I knew it would take time to grow. And so it took years, and everyone sees like where it is now. But seven years ago, nobody was inviting me to be on a podcast. No one was inviting me to come to a meetup. And everyone ignores those first couple of years. And so many people want to jump straight to year seven, year eight, year nine, and and and forget about the grind or the tax that we had to pay in the first couple of years to get to where we are now. And even now, like I'm 33 now. So like my acceleration is is, I mean, it's exponential. So like every year we're moving faster and faster. Just a couple of years ago, like I would only do one deal a year. Like that was that was my principle, right? Like, I'm not going to do more than one deal a year because I want to make sure we stabilize these deals. I don't just want to buy deals just so I could show it on my portfolio, put it on Instagram, tell people that I've done this or that or whatever. But these deals actually have to cash flow. They have to be efficient. We have to be able to make money. They have to be good deals, right? And so we did one deal a year, but this year, like we've already gotten two deals done and we have another two under contract and we're moving, right? We're moving fast. And this is the first year we're doing multiple deals, right? In a in a year where I'm the I'm the sole principal of the of the asset, right? So that's kind of what I meant. Like it takes time to build those relationships, to build that foundation, to build kind of like that that velocity from that acceleration. Where now you're moving light speed, right? So that's what I meant, where it's not a get rich quick scheme. Like when you're looking to invest into real estate, it takes time and you have to be patient. Yeah.

Michael Russell 4:04

Yeah. No, we can relate to that. It feels like sometimes you're working so hard at the beginning and you're stacking all these skills and you're building all this foundation, but you're not necessarily seeing the results. And then all of a sudden it clicks and boom, boom, boom, all the efforts that you put in ahead of time to build that infrastructure, now you can see. So that makes a lot of sense. I'm curious though, going from neuroscience to hospitality, that's a big shift. What was it about hospitality out of all the different investment classes that you could have gotten started with? Why did you choose hospitality?

Sujay Mehta 4:36

Yeah, man, I fought it for a long time. I didn't want to. I fought it forever. Like we call them the Patel Cartel, right? But like a lot of Indian people in the hotel industry, right? And so, like, as opposed to maybe some of you guys, like you guys maybe not have haven't grown up around it. But for me, like a lot of people in the community, not even family, but just people that we've known have been in the hotel industry. I didn't want that image of being somebody who lived on site, like had a had a stay-in apartment inside of the property. Like that was kind of the image back in the day. And I was like, like, I'm professional, I'm smart, I want to do things a different way. So why can't I come up with a different business altogether where I can utilize some of my like science background and also like my entrepreneurial skills and and just like I felt like a nature that I had within and I could put all these things together and build a business. So I actually started in the addiction rehab space. So I opened up a couple clinics with fighting opioid addiction. But the problem with that was the as the as the regulations changed or the administration changed for like presidency, right? Or the reimbursement rates would change. We would have audits with insurance companies. And now all of a sudden, the $100,000 that are in accounts receivable, I'm not gonna see that money for six months, eight months, nine months. And how can you operate a business like that when you can't do proper cash flow management? You don't understand when the money is gonna come in, right? Like we provide the service today. I have to pay my doctors on payroll every two weeks, but I don't know when I'm gonna get the income from that, right? And we would get audited, and then the audit would become like a like an in-person hand audit. So like someone is physically checking every single script and every single form that we write. And the backlog would just become like unbelievable. And so I decided that like this is not sustainable long term if I want to scale this business. And so then I started dabbling back into real estate and I was like, I want to go into development. So my first hotel deal that I did was actually a development deal. I bought a two-acre site and I said, hey, like let me build a hotel here and then I'll sell it off. Yeah, I wanted to have no business of managing it, operating it, but started as we got more and more into it, more and more into the weeds, I started realizing like the cash flow with hotels is just unbelievable because you have that real estate component, but then you also have the business component where you can tighten up the screws, build efficiency, build efficiencies, build processes. And now all of a sudden, this thing cash flows like you would have just like a yoga studio or some other business, right? But then also you have the real estate component of it that appreciates over time that it's gonna be worth more overtime. You're paying down your debt, you're paying down your loan, and all of that aggregated together, like it was just gonna be it was it was way too profitable to say no to, right? And so naturally I just kind of like fell into the hospitality business. And you know, what what started as like a development company, we then started doing acquisitions as well. And especially like pre-COVID when rates were still 4.5%. I remember I would like negotiate with banks because they give me a 4.6% loan, and I'm like, no way, like I'll go to another bank, right? And I would fight for that like quarter of a percent. But nowadays we jump all over that 4.6, but but you know, just like naturally progress into it. But I fought it for a really long time, won nothing to do with hospitality, but now I'm all in on hospitality, never look back.

Michael Russell 8:02

I'm sensing a timeout from Nathan here, yeah.

Nathan St Cyr 8:05

You bro, you just took it right the words. I'm like, okay, I need to call a timeout because what you just dropped. I want to highlight uh uh and just summarize something. Yeah, you graduate with a degree in neuroscience, yeah, but you buck the system and you say, I'm gonna go the non-traditional route to entrepreneurship, and you build a company, you exit from the company, then you buck the system and say, I'm gonna skip the ladder and go straight to development. Now you're sitting there with a 187 million dollar hospitality company. And I've heard you talk about your passion for sports, and what I want to know is truly, how has the Mamba mentality specifically impacted the way that you've made your moves?

Sujay Mehta 9:01

Yeah, dude, I I love that. You guys have clearly done so much research, and I love that too. Literally, what even when you talk about Kobe like that, like it like I'm I'm like tearing. Like that, that's how much that man means to me. Every exam that I took in college onwards, I would wear like a Kobe jersey underneath the shirt that I'm wearing because it's like two four on my shirt. Like, I could do anything. That's who Kobe Bryant was. Kobe Bryant was never the most skilled, he was never the best, he wasn't the tallest, he wasn't the strongest, but it's that mentality that's like every single day, I'm gonna be better today than I was yesterday. Every single day. And it's getting that granule, granular, and building on the skills that you have. I mean, as simple as this. I mean, just another video I was watching yesterday. He's like, if I take this shot a thousand times, it doesn't matter if you're in my face, it doesn't matter if your hands up, if your hands to the side, if your hand is is is on me, you're touching my shoulder, you're touching my elbow. It doesn't matter. I've done this a thousand times. I know exactly how to adjust my shot, I know exactly what to do, and that ball is going in the nets, no question asked, right? And like it's that confidence and that ability to to execute when you've put in the work, right? And so, like, that is the mama mentality. And and through all of this, like through sports, you Nathan, you asked about sports, but like sports is the greatest lesson in life. And like, this is why I'm gonna push like my kids to to play as many sports as they can because imagine like basketball, right? When you play basketball, you get elbowed in the side, you get punched in the face, you're sweating, you're tired, you can't breathe, yet we're having fun. Like, what the hell is that? Right? Like, how does that make any sense? Right, like it defies all logic, it defies like all psyche. It makes no sense, but but there's something in there, and that's that's life, right? And so, like when I started out my career and all my friends had graduated, they got tech jobs or they got engineering jobs, they're making a healthy $80,000, $90,000 a year, and they're going out to Vegas and having fun, and I'm not making any money at this point. Like, I'm building my business, I'm building my vision, I'm iterating, I'm going out looking for land, but I have no, I have no income like that, right? And and when I'm saying no to all these guys and I'm looking at them and I feel like they're balling, right? And I'm buying like a $12 Amazon watch just so I could go to a bank meeting and like have a watch on, right? Asking for like a million-dollar loan or $5 million loan, it was hard and it hurts, right? But like you have to find that fun, right? Like, which is at the end of it. And it's like, for me, it was the vision. It was the vision of what I was creating. And even like thankful for my family, but they all believed in me, right? Like everything from my parents to my wife, they all believed in like what we're creating. And sometimes our community, right? Our community is like that, that the the biggest thing that's holding us back. And it's like, what will people say? People are gonna judge me. Even you guys like talking on the podcast, posting on social media, it's like, what are your friends gonna say? Who gives a shit? Right. Like, and that's like mama mentality for me. It's like keep your eye, keep your eye on like what the goal is, and it it's it is the journey, it's not just the destination. And if you can, if you can be in the moment and and understand what you're creating, then the journey gets a hell of a lot more fun.

Nathan St Cyr 12:24

Yeah, I love that. And when you if I rewind to when you were talking about people will call me now and ask me to fly out because I got a $187 million portfolio. Yeah. But what they don't see is what you were doing seven years ago. They see now. And I feel like in today's world, everything that everybody focuses on is this now and this instant gratification. And I do believe that's why guys like you have such an advantage. Guys like us have such an advantage because we've been willing to put the work in when people aren't watching. I love how you put that.

Sujay Mehta 13:03

No, and and I appreciate it, man. I appreciate it. You you give me a lot of credit. I got I still got a lot, a lot to do, and I'm always chasing, right? Like Matthew McConaughey said it in that in that speech, but he's like, I'm always chasing myself in five years, right? And so, like, for everyone listening, one of the things is like, if you're humble, like things will come to you. So, like, we're all we're all on this journey, right? Like, we're all we're all still grinding.

Michael Russell 13:28

Yeah, I was surprised by what you just shared. I did not expect that on a number of different levels of what you shared, your your first deal as a development deal, but also how you were sharing, like you were buying $12 watches from Amazon. Like, I'm just gonna share like real talk here. What I I assume maybe a lot of people are are making a presumption is this guy is 30 something years old, he owns 187 million dollars. And what did you say it was the uh what was the expression you had for like like basic Indian families that owned?

Sujay Mehta 13:59

Oh, the patel cartel.

Michael Russell 14:00

Yeah, the patel cartel, okay. Yeah, so are people thinking like, all right, he's got a rich uncle, right? He just gave him a bunch of money and he went and invested, but you're talking about how you started with very little and you grew this thing. So that that honestly, that's a surprise to me. I I was thinking you were part of the patel cartel. Cartel, yeah.

Sujay Mehta 14:21

There we go. There we go. No, and and and I will say, like, just pay homage to my parents, man. Like, they came from India, they sacrificed everything they had, like they left a comfortable life, they left their family, their friends, they left everything they had to go to a country that didn't treat them the same. They judged them because they had an accent, they didn't know the language. My dad at the age of like 25 was delivering paper in the mornings before the whole world woke up on a bicycle. Then he would go to a corner in New York and sell candy, right? And like he built, he built an empire himself. And he like stand on the shoulders of giants, right? Like I literally would be nothing without my parents and what they have taught me. And my dad is an entrepreneur and he created something that's amazing. But one thing that he instilled in me was when I decided I didn't want to do medicine and he was pushing me to become a doctor, right? Like he wanted me to become a doctor. And when I said that I didn't want to be a doctor, he's like, Well, what are you gonna do? And I was like, What do you mean? Like, what are we gonna do? He's like, No, like I did I did what I was supposed to do. What are you gonna do? Right. And so, like, he made me work for every single thing that I wanted. Now, today I'm grateful he did that because I have that self-pride, I have that self-esteem that like I have created this, right? Like, I have created this because he made me work for it. He didn't give me anything, he didn't hand it out. He was there to support me, he was there to guide me, he was there to push me. And I remember like when I wanted to go hang out with friends when I'm 25 years old trying to build this business, he's like, no, like yeah, or like he would judge me for it, right? Like, I'm 25, I could do what I want, but he would judge me for it and he'd be like, What do you mean? Like, you're not gonna work 16 hours today. I love football, I love basketball. He's like, Why? What the hell does that get you? And like, it's those conversations where I'm like, dude, I hate this. I hate this. Why can't you be a friend? Why can't you be a homie? Why do you have to judge me like that? But it's that that pushed me to be that go-getter, to feel like I can do anything that I put my mind to, right?

Nathan St Cyr 16:29

That's so good, Sujet. Yeah, yeah.

Michael Russell 16:32

So let's let's go back to your first deal because this surprised me. This is a development deal. Most people say, never start with the development deal. Too complicated, too risky. You did it anyway. What are some of the mistakes that were made? Some of the takeaways that that you learned from that experience.

Sujay Mehta 16:49

Yeah, I will second that. Don't do a development deal. It's our first deal, right? Like if you can do an acquisition, you you you gotta do that acquisition, unless you're going full out development company, right? Like that's your end all be all. But you know, just going through the development process, just like a couple pitfalls, give some examples of things that I've learned. So we went out, bought this two-acre lot, right? I was super aggressive, and it was honestly like my first negotiation too, like real estate negotiation. So, like just understanding that, like just because the broker says something, that doesn't mean that like that's their line, right? And so the broker didn't respond for two weeks. It was a prime piece of land, started freaking out. We gave them a full price offer. You know, like I probably could have gotten that for uh a hundred thousand less than what we offered. I think we roughly it was like 900K for this like 1.5 acre lot. And I probably could have gotten it for like seven or seven fifty if we just were patient, right? So, like it's those kinds of lessons that like when you haven't done something at all and you haven't had time to iterate your process to understand the nuances. One, it's always good to have someone who's done it. And then two, do something that's maybe not as like high risk, right? So that's just negotiation from the land. The negotiation from that point on, all the way through. I feel like if I were to redo it, I probably could have shaved at least 10% off of our total development costs, just in knowing what to negotiate, what we're looking for, and then what things that we didn't negotiate that we should have added on. Number two, from like the construction standpoint, and I'll again I'll give a very small example. We had negotiated because like hotels, you want a quiet room, right? You don't you want as minimum noise transfer as possible. And so, in in construction terms, they call that like the R value of windows or doors or the walls, right? And so one way that you can combat that is you can put an extra layer of soundboard between the walls. So we negotiated that. We paid for that extra layer of soundboard, but we assumed because we did all that, it was gonna be built accordingly. Later, when it was too late, we went through and we realized they only put one layer of soundboard on in between those walls, but now it's too late. Like now my contractor's not gonna go back. He's like, Well, what do you want me to do about it? Like it's it's too late. And I'm like, Well, you need to out of pocket, and he's like, No, we're not doing that, we're gonna walk away, right? And so, like, now I've like I'm I'm caught, right? Like caught with my my arm behind my back, and there's very little that I could have done at that point. Instead, if we had caught it during the construction process when the walls were open and we had systems of processes to check those parts of construction, we could have caught that and it would have helped our operations today, right? And then number three, I would say, is how am I supposed to even know those things are important if I've never operated a hotel? Or if I don't have somebody who has operated a hotel? How do I know that the employee break room is too big or too small? How do I know that two washer dryers are not enough for this size of a hotel if I've never operated or owned a hotel? Right now, the properties that we're constructing, we are Are are very, very intentional about how big the pool needs to be, depending on the market, depending on who our clientele is. We are very intentional about how many elevators we need at the hotel, about how big the employee break room is it needs to be. How many offices do we need behind the front desk? Is that a waste of space, or do we need more, right? In that first development deal we did, my office is so small and it's like it's always messy because there's just not enough room to organize things the way we need it to be. It's those things that I would go back and change if I could. And obviously, like it's never gonna be perfect, right? Like there are some restrictions based on how big the land site is, based on like what your cost is gonna be, like structural components, if you can add a room, not add a room, all those things, right? What amenities do you have? There's gonna be restrictions, but but again, if I know what I knew now, I would change that that new build that we did and I would I would make it more functional. With that being said, we're crushing it there. Like we're we are cash flowing within six months and we're doing really well. And I would do that project a hundred times over again if I had that opportunity.

Michael Russell 21:08

Yeah, yeah. We say this all the time. You learn by doing, you said it yourself. Like, how would I have known this unless I went and did it? Now I know and I can apply to the next thing. It's so valuable.

Sujay Mehta 21:17

Yeah, absolutely. And I wanted to highlight like three main components. Like one is like in the high level like negotiation phase, two is like construction phase, and then three is just like having that experience and how that could change what the vision is altogether. Even and like that was one small example, like the but even the site plan, right? Like how the how the parking lot, how like how everything connects, like what the user experience would be, like the curbs right? You could do two different curbs. One is like a like a sloped curb, and then the other is like one of like those, right? That we've we've seen when we were kids and we would like bike off of and those kinds of things, right? So there's two different types of curbs that we could have even done with our concrete. I mean, it's funny we're we're we're talking about curbs here.

Michael Russell 22:00

There's so much detail that goes into this, it's crazy. But you know, these are the things that you learn by hopping in. And that the inspiring takeaway for me is that you just communicated, I didn't know all of this. And yeah, I had to hop in and I had to balance knowing that I there's things that I just don't know, and still move forward. That part, maybe that's the Mamba philosophy there uh at work, but it's like just moving forward in uncertainty with conviction in yourself that you'll figure it out. And in the end, that gives you enough confidence for the next time, whether you win or lose in that situation to keep moving, playing the game.

Sujay Mehta 22:36

Yeah. No, I absolutely I think you're a hundred percent. You hit you nailed it on the spot. The biggest regret that I have today is all the deals that I didn't do because for whether it's like $50,000, like we weren't able to come to terms on it, or it's because of time or or whatever it was, right? All the deals that I passed on that were actually pretty good deals, and that to eight years later, 10 years later, would have been worth millions more, right? And so, like, that's the only regret I have today is like I wish I did more of them, right? So it's like sometimes we psych ourselves out and we get caught up in this like analysis paralysis, and we don't make the we don't make the jump, we don't make the move.

Nathan St Cyr 23:14

Yeah. Well, you started by saying that look, I would second that, Michael. I would not recommend starting with the I would start with acquisition. So I'd like to ask specifically about when you look at an asset, how do you specifically identify what brand would be best suited for that asset?

Sujay Mehta 23:34

Great question. So so we do boutique and we do branded. Started out my career in the branded space. So for those of you listening who don't know what the branded even like terminology means, it's like the Hilton's, the Marriott's, the IEGs, the Hyattes of the world. Like those are the brands, right? And then to be honest, like I see Airbnb as like another brand, right? And then and then you have boutique. You have boutique independent properties that are not branded, that have their own booking channel, their own marketing channel. And so when I am looking at a property and trying to decide, one, I mean, the first question is like branded, not branded, right? And then two, it's like if we do decide branded, what kind of brand are we are we trying to put over here? The first thing that we have to understand is like who our clientele is, right? So many times I see people talking about like, oh, I want to do a wedding venue and I want to do this and I want to do that and experiential and this and that, whatever. But like the the ADR of the market is like 60 bucks, right? Or $65. And so it's like your clientele is not gonna be that high luxury client. It's gonna be the work or like there's just someone traveling and needs a spot to stay off the highway, right? So why are we spending all this money on renovation, on branding when really you could get the same thing by by doing not the bare minimum, but but something significantly less in terms of renovation and what the offering is, right? So, first we need to figure out what the segmentation of your clients, your customers, your guests is gonna be. Two, we need to figure out like what can we afford, right? Like I would love to do high luxury everywhere I go, but if I'm not gonna be able to drive that $200, $250 rate, then it doesn't make sense, right? Like it's skewed a little bit based on like what the offering is and what the returns are gonna be. And so those are the two main things that I look at. Next, when we boil it down to like the brand specifically, each brand has a different offering. So, like with even within the Hilton family, they have a Hampton Inn, which most of you have heard of. They have a home two, which is like a pretty new brand, and we're actually building a home too right now. And then they have something like the Waldorf Astoria, right? Which is like their equivalent of like a Ritz-Carleton type stay, right? So you have a select service or a limited service hotel in like the Hamptons of the world or the Hilton Garden Inns. And then you have an extended stay model with like the home twos or the homewood suites, and and each one has like a little bit different of an offering in terms of like the amenities that they offer, but those are meant for like the extended stay traveler. So people that are coming for like a sports group that needs a lot of space, they may have their sports equipment, or they're staying for five plus nights. And so you may not need cleaning every single day. So you could save money there, but you have larger rooms, bigger square footage, and then you have like the luxury, right? So within this brand, they have offerings for every type of stay, but we want to look at the market and see what else is around, right? Like if there's no other Hilton products, there's a ton of Marriott products, that tells me there's a gap in this market where I can put a Hilton product, and now the Hilton loyal customers will come and stay at my property instead of the Marriott's, right? If there's a lot of Hiltons, a lot of Marriott's, a lot of IHEs, a lot of Hyattes, and it's a pop in market. Now I'm just I'm just looking for something that's left, right? Like there's already four different types of Hilton's here. Is there a true by Hilton? Or is there a homewood in this market? If there's not, then that might be something that we're looking at, right? So there's there's a few different ways to look at it. And and again, a lot of it is market dependent, but you want to look at the the market and the ADR, what my how much money I can make in terms of our ADR or ref par. And then I want to look at what else is available in the market, right? And then the third thing is I want to look at like who my customer base is, right? And like what they would be looking for from like a user experience. Awesome. That's great insight. And we're doing some like boutique stuff right now, too. So we're doing some boutique new builds because it's in a market where there's no branded stuff. It's a small town, I think. We can add that like small town feel and that character and a little bit of culture when it's ours, right? Like we're not abiding by like whatever design elements that Hilton requires from us or whatever furniture they want based on the version of the property we're building, and we can add a little bit of color of our own, right? So that that would go into like branded versus boutique as well.

Michael Russell 28:03

So well, just in short, the answer might seem obvious, but do you feel that in a just regular generic market where branded Hilton's and Marriott's exist, do you feel that a boutique hotel would find it to be difficult to compete?

Sujay Mehta 28:19

Yeah. So when you say general market, I'm gonna say like a general market for me in Ohio could just be very different than a general market in Hawaii, right? So if you could define that a little bit, I can I can answer.

Michael Russell 28:32

Well, I guess I was just trying to think like for you from your perspective, where you're investing and thinking about places you mentioned, like just workers and people are going there for convenience. It's a commodity, it's a market where there's a lot of these that are set up for convenience. They're not necessarily destinations people are flying to for a specific purpose, like a vacation or wilderness. They're just general hotels that are providing the convenience of a place to stay.

Sujay Mehta 28:59

Yeah, yeah, absolutely. I think brands kill it in like those markets because when we opened our first hotel, it was an IEG property called the Avid. We were one of the first 10 in the entire world to like build and open up. And so it was it was a fairly new brand. For those of you not familiar with IEG, it's that's like the parent company of Holiday and Express, right? And so the the minute like we we were working on the CO for a while trying to get the CO. Every day we were just working with the inspectors. We didn't know when we'd get it, but we knew it was in the next two days, right? And so three o'clock comes of the day that we opened, and inspector comes, he checks everything off, and he's like, here's your CA. Now we're officially open and we're live. That night we are at like 3 p.m. Okay, we go live 3 p.m. That night we already had three customers. Like that is the power of the brand. That doesn't happen in a boutique hotel. Like you have to have time to market it, to get it up. I mean, when you're when people are going online and they're searching on the Marriott website or the Hilton website, like boom, you're automatically there. You already have a massive, massive CRM and and and database of customers that will continue to stay there. There's a point system, there's a loyalty system. They want to come and stay there and enter their membership number so they get credit for that stay. So the next time they come, they get a free water bottle and a bag of chips, right? Like, like I mean, that's the power of the brand and like that's what it's created. And that's why we pay them 15% roughly of our revenue every single month, right? Like we pay them 15% because they're doing all the marketing for us, right? Like we we own the hotel, we own the real estate, we own the operations, we own the land, but they own the name that's on the building.

Michael Russell 30:46

Hey guys, quick heads up Malama Capital, our investment arm, is full steam ahead on finding our next hotel acquisition this quarter. If you know of a deal or you're working on something yourself and want to partner up, we'd love to hear about it. We offer a generous finders fee. Or if it's a fit, we can bring you into the deal for a slice of the equity and give you a front row seat to the whole process from A to Z. There's a short form linked in the show notes. Just drop your name and a few quick details. And if it looks like a fit, we'll be in touch. Now, back to the show. Yeah. Now that's a really good explanation. I think when we punch numbers into the spreadsheet, a lot of times we're evaluating opportunities to purchase hotels and we're looking for ways to increase NOI. And that's by either raising revenue or cutting costs. And so the first thing that we instinctually do is like, oh, let's just get rid of that brand. I mean, we can save 15% right then and there. But we're uncertain. Well, how does that affect top line revenue? And your explanation in my mind, just just kind of sum it up really well. We've asked this question a few times, other guests, and the reason is because I think the majority of hotels for sale are branded and we're constantly evaluating, well, how do we create value here? What's the value add play? And if it's not turning it into a boutique hotel, then the other aspect or avenue is to generate more revenue. And so my follow-up question is well, how do you take an existing brand that's for sale and create more value? It's already got the marketing, it's already got the systems in place. What else can you do to raise value that the previous owner hasn't already done?

Sujay Mehta 32:21

Yeah, yeah. No, great question. So, so when I'm looking at buying a brand, two things. Like one, we can change the flag, right? So if I buy a property, let's say like a low mid-scale uh uh property, right? Like a quality in or a comfort in or something of that sort. And then now I can all of a sudden I can change the flag into a Marriott or a Hilton, boom, automatically, same bones, same rooms, everything is the same, minus the carpet, the wallpaper, some of that stuff we change, right? Bay based on the brand standard of Hilton or Marriott. But now all of a sudden my ADR just jumped up 30 bucks, 40 bucks, right? Because but but the proof has to be there in the market. Like the market has to support that, right? And so that's one, right? Like that's not easy, but you know, that's like a simple, just like I think it makes sense to most people just from an understanding perspective. The the second thing, when you go into like the talk about the operations and you talk about efficiency, like you said, we're underwriting NOI, right? So NOI is a value derived from the actual cash flow of your property. And so if you are able to come into the property, yes, you have systems and processes, but like there's systems and processes everywhere. How many times do people follow them, right? There's systems and processes when you drive a car, but like how many times do we do a rolling stop on the on the road, right? Like, just because there's systems and processes doesn't mean shit, right? Unless someone's gonna enforce them, right? If there's a cop standing there, now all of a sudden everybody's gonna stop, wait three and a half seconds, look left, look right, and then keep going, right? Because there's someone enforcing them, right? So when I look at a property and I look at how they're performing, and if the NOI isn't to where we believe that it should be, that tells me that someone needs to come in and enforce these systems and like SOPs processes, right? So that's one. Number two is like doing a thorough investigation of how the property is operating. Because like the brand doesn't tell us how to do the inventory. The brand doesn't tell you what who does the inventory, the brand tells you where to buy the stuff from, right? And and that's like the breakfast items, for example, right? But like an example is if a few weeks ago I went to a property and I went at the end of breakfast. My dad taught me this is like how to be just like again, they're immigrants, they know how to save every single dollar. And so I went during breakfast time, I went around and I I checked the trash cans after breakfast. And what did I find? Like, any idea what I'm looking for? You're looking for waste of food. There we go, right? Like instead of instead of this, like maybe even like non-perishable items or something that has a shelf life of three, four days, instead of wrapping them properly, storing them properly in the fridge or wherever they need to go, it's easier to just take your hand, pull the trash can, and throw everything in the trash, right? Like, not even wasted food from my guests, but wasted food from my employees who are too lazy to put them away. So they just toss it in the trash, right? As an operator, as a business owner, you have to feel every single dollar that goes into your property. Like when someone comes to my property and they they use my gourmet coffee machine, I know exactly how much that cup costs me, how much that cup of coffee costs me, and like how much like the straw that they use. Like I know every single thing and how much it costs me. And so, like when I'm operating, I want to make sure that we have we have systems and processes where they're looking at the occupancy. They're understanding like how many people are gonna come and eat breakfast. On average, how many bacon strips is that gonna be? How many bagels is that gonna be? How many muffins is that gonna be? So we're not bring, we're not bringing too much, we're not thawing too many things, right? Like we're not making too many eggs or we're not cooking too many bacon strips, right? That management is like our our basic line level employees aren't gonna think like that, right? Like that they're not paid enough to think like that, right? But we have to tell them, we have to educate them, we have to show them, and we have to set systems. And if if they can't comprehend that, we got to create an Excel sheet where they can type in what the occupancy is. Okay, how many bacon strips do I need, right? So these are the things like again, I'm getting very, very granular, and I'm not gonna be able to talk about every single thing that we do, but I want to give an example of one thing that we do at a property level that now you can translate and multiply over a thousand different items and in multiple different departments. Like we're talking about maintenance, we talk about housekeeping, we talk about breakfast, we talk about front desk. I mean, it list goes on, right? And and now all of a sudden, if I can save five grand, right? Five grand, it's not a lot. Like a bacon strip costs me 80 cents, let's say it's a dollar. If I save five bacon strips a day for a year, that's over a thousand dollars, right? That was like 12, 1,300 bucks that I save straight to my bottom line, right? And so if I can multiply that times a hundred, now I've added a hundred thousand dollars to my NOI. A hundred thousand dollars to my NOI is a million dollars in value when I sell this thing in three years and five years, and that's cash because you know that million dollars is is above the bank note, it's above our investment, it's above all of that stuff. Like, so that's cash that we're making, a million bucks because I just saved five bucks on bake in a day.

Michael Russell 37:40

Yeah, yeah, these details.

Nathan St Cyr 37:42

Okay, so uh yeah, the details matter. I want to ask a question because as I hear this, so I love building teams and culture. So sometimes when I hear these types of details, in my mind I start going, okay, so how do how do you go and execute that level of detail without making a team feel like they are micromanaged and just a number? How do you make them feel important? Because ultimately you can have the best system and process, but you got to have the person that executes it and that wants to execute it so you can keep them for the long term. So, how do you drive that level of efficiency, but at the same time keep a culture of where people want to work?

Sujay Mehta 38:28

Yeah. No, I love that. And I think it goes back to what you said. It goes back to culture, right? You have to have that culture to then build that relationship with your staff, with your employees, with your team to be able to talk about those things, right? You guys hear this and you guys can take this like 30-second snippet and blast it over social media. But again, it's understanding what happens behind the scenes, right? Like what's happening so that way we can get here. And what's happening is we love every single one of our staff members. And what is love? Like during COVID time, when our staff couldn't go grocery shopping because they were sick, because they were standing on the front line for us at our property, facing and interacting with people, right? Like talking to them, like close contact, giving them keys, right? And they're putting themselves on the front line, and then they get COVID and they're not able to go grocery shopping for their family. I personally have gone out and gotten a grocery list from my employees, my front desk person, right? Like I'm not even talking about managers or district managers, got groceries for them, dropped it off at their front desk for no other reason than we have love for them and I care for them and I want them to be okay. Right. And and and similarly, they have love for us, they care for us, they want us to be okay. And so when we have these conversations, it comes from a constructive standpoint, not from a standpoint of you're just a number, like do. Or get out, right? And like that's how I treat every single one of my vendors, my partners, my customers, my guests, my employees, or or we try to, right? Like there may be some employees who don't agree or don't feel that, right? But we try to have a personal relationship with every single one of our team members, no matter how high up they are or how like front-facing they are, right?

Nathan St Cyr 40:25

So what it sounds like you just said in summary is that you make it from the top down that the feeling that is created is that you've earned the right to have those conversations to have high expectations.

Sujay Mehta 40:42

Yeah, yeah. And and even earn to write. Like I would even soften that a little bit. And it's like, it's like mute, it's it's just we have that relationship to have conversations like that, right?

Nathan St Cyr 40:52

And when I say earn the right, I mean you've earned the right by creating love first. Yeah. So that that that feeling of love and culture is the thing that overcomes or that says, look, I want to do this because there's something bigger at stake. I want to do this for the overall, for the culture, for the company, for the people. Yeah, absolutely.

Sujay Mehta 41:12

And I and I love the way you put it. So I I really do.

Michael Russell 41:15

Yeah. I mean, look, you're demonstrating that you're really intentional about how you create culture. And I've heard you tell a story on another podcast about how you have like you hide gift cards in rooms, like as a way for the housekeepers to make sure they're being thorough enough so that you know they can go. And if they find the gift card maybe under the bed, there's like a little bit of gamemanship there where it's it's not just you telling them like, hey, you must do this. It's like, hey, we're aligned here. And if you find the little Easter egg somewhere in the room, like, hey, we're making fun of this situation. I I love that it's a creative approach. And it's these little tokens of gratitude go a long way with the personality.

Sujay Mehta 41:55

Yeah, absolutely. And I actually I totally forgot we even we did that last year, but housekeeping appreciation week, right? Like we we celebrate that. We celebrate that we appreciate people, and and it just oftentimes we forget, especially like being on this side of it as like entrepreneurs, and like we're working late night and all day, all night, and taking phone calls, especially you guys with the with the time difference and stuff, right? So we're working day and light, but but at the same time, these people are they're at our properties and they spend more time there than they do at home, often, right? So, like again, if they're happy, then we're gonna be happy and and everything's gonna flow. And then obviously, like there's still expectations and we have processes where if job's not being done, there's a write-up process and all that. But but the first option is to to do it in a very organic, in a not not in transactional, but like a relationship type way. But then obviously, if things just don't change or we're not getting what we need to done, then we do have to kind of go through the process of the write-ups and verbal, written, then in person, all that stuff.

Michael Russell 42:57

So I just got asked though. I'm listening to all of this detail and all of this work and all of this, you know, process and headache, right? Operational headache. I just wonder, okay, you've got 187 million dollars of assets under under management. Like you've chosen to operate your own hotels in-house rather than outsource to a third-party manager. And why are you taking on this extra layer of complexity? Like what, yeah, what is it like, like what is it that you're gaining from operating these yourselves?

Sujay Mehta 43:26

Yeah, force to, not by choice, force to. So I actually I did hire a third-party management company. They took over two of my properties. One did 2.5 million revenue, the other did 2.7 in revenue. The NOI was pretty strong. And I I strategically I had them take over at acquisition. So it wasn't like I had to set my system processes and then someone else comes and has to redo it. They took over right after uh transaction happened and at acquisition. And I mean, I saw the NOI just year after year just deplete and they're focused on top line. Top line stayed steady, it didn't even grow much. But every problem that happens, and and I I highlight to the team, it's like, okay, well, then let's hire these people that can do this. And I'm like, like I've hired you. Like, if we're just hiring people to put out fires, like I could have done that, right? I could have done that myself. So I don't mind paying a third-party operator to go and take the operational headaches, but also have the upside of doing the operations. But like after paying them and paying them their fee, I have to have the confidence that they can at least do it, probably not as well as I can, but but if not close, right? Like 90% or 85% of the efficiency that I could do if I operated it myself, right? And I tried that for three years and it just haven't had the confidence that that could happen. So actually, the last property that I have with a third-party operator is set to come back in-house in August of this year. So that's when my last contract ends and we're we're taking over that last property. And then we'll be fully integrated and vertically integrated to do the acquisitions, development, and operations. Awesome.

Nathan St Cyr 45:14

Well, I I just wanted to pivot a little bit back to a piece as I was thinking about the the brands, and you're making a choice based on the asset, whether it's to develop, whether it's to choose a brand, whether it's to go independent. So as a someone that's just gone through our first capital raise, I'm like really like curious about this piece. Does your avatar for investor change based on the asset type? And if so, how?

Sujay Mehta 45:47

Yeah, not based on like if it's branded or boutique, really, to be honest. I don't think the investor avatar changes a whole lot from asset to asset, it absolutely does. So if you go from multifamily to hotels or hotels to multifamily, that investor is going to change significantly. And so, like, I've done some multifamily stuff as well, and we're working on some like town home developments and those other things as well. But like that investor profile is different from like hotel, because one is like it's high cash flow, cash on cash return is there on the hotel side. And then also like on the hotel side, it's returns aren't it's it's not structured, right? It's not like the first of the month, it's not guaranteed to come first of the month or mid-month or end of month. It's a business, right? So, like as cash flow allows, we will do profit distributions. And so again, that's where like the risk comes with hotel investing versus multifamily returns are lower, cash on cash return is going to be lower. If it's a value add deal, you got to wait until the exit to see that money. But you get some mailbox money on the first of every month, and it's you can plan for it. You have cash flow management from that perspective, you know exactly what's coming. If it doesn't come, something's wrong, right? So, but yeah, so that's that's where it changes. But like from you know, an in like from a hotel asset class, it doesn't change whether it's like a Marriott deal or a Hilton deal or a boutique deal, I've seen pretty much like the avatar stays stays pretty consistent.

Nathan St Cyr 47:12

Okay, fair. So when you're underwriting, what are your targeted returns for your investors?

Sujay Mehta 47:17

A lot has changed over the last couple of years just because of the high interest rates, right? Like so, debt service is really eating a lot. And I'm hoping that in the next couple of years, as as things settle down, even if it's a point or two, right, rates come down, like that's all just added cash flow to the property. But in general, I'm targeting at minimum, and this is like a minimum, 15 IRR. Usually I'm looking for like an 18 IRR from an average annual return with uh with underwriting a five or a seven year exit. Whether we exit or not, we underwrite for that exit at five, seven years. I'm looking for about like 20 plus minus percent AAR from a cash on cash standpoint. I'm looking somewhere between like eight and twelve. If you asked me a couple of years ago, I would say over 10 on a cash on cash return. And so yeah, that's I mean, again, like this is this is in general, like a lot of our deals are are way better and underpromise, over deliver, right? But if it's not hitting most of these metrics, I usually just toss it to the side and keep moving. Yeah, great. And how much capital have you raised? Uh, a lot. I gotta do the math, but we've raised a good amount of capital. But the way my firm operates is like we also do some deals like in-house, right? Like, I don't, I'm not always raising capital, even from a syndication standpoint. We've only done syndications a couple of times. Oftentimes we JV the deals and like built a pretty good network. And a lot of like because I'm younger, a lot of my friends are now of that age as well that I've known, grown up with, are also of the age where they're looking to do something else with their capital. And that's a whole different network that I haven't even opened up. And that was one of the biggest struggles is like a 25-year-old trying to build this portfolio, is like I'm going and approaching 40, 50 year old people, right? Like men, women, and I'm rolling up with my $12 Amazon watch, asking them to invest a minimum of 100K up to a million bucks and on a project that I've I've never done before, right? And so that that was probably the toughest raise that I ever did. But now it's it's gotten a whole lot easier. And similar to you guys, like it's like, I don't know where my ceiling is because like I just keep doing more deals and it keeps coming until one day the well's gonna dry out, but we'll deal with that when it does.

Michael Russell 49:29

So yeah, I'm sure it helps to have a bunch of neuroscientist friends to tap into for some capital, huh?

Sujay Mehta 49:35

Yeah, yeah. Good, good, good, a good amount of physicians again, Indian physicians in the network as well. So no, it that that helps.

Nathan St Cyr 49:43

Okay, but what's the differentiator that says, okay, this this deal sets up well to be a JV opportunity, or you know what, we need to go and syndicate here.

Sujay Mehta 49:53

Yeah, I I mean, honestly, I prefer JV in no matter how good the deal is, right? Just because like you guys know from like the the SEC attorneys and they're amazing, but they they cost some money, right? And so like from a due diligence standpoint, it costs money. Then there's additional regulations that you have to like tiptoe around, and it just adds like stress in a way, right? That you've got to make sure you're doing things, you're compliant, you're doing things the right way, you're verifying accredited and non-accredited investors, and and dealing with all of that stuff is just a little bit of a headache that I prefer not to deal with. If it's a larger deal or a larger raise, or if I'm working now, I used to never want to partner with anyone. Now I'm starting to partner with people on deals and leverage kind of what we've built and our experience to help guide and get a piece of equity and partner with people like that. And so when I'm working with people like that, who it's not an in-house deal, then then typically I do prefer doing a syndication because then I know we're compliant, where everything is is done properly. Again, there's another partner whom I usually interview and I make sure we're aligned and in principle and values more than anything else. I don't care how good the deal is, but again, I can't control them, right? And so if I have a partner with me in the game, like I want to make sure we're doing things the right way, right?

Nathan St Cyr 51:14

Yeah, that's great insight.

Michael Russell 51:16

Yeah. I I kind of want to shift gears a little bit here because I want to understand a little bit more about who's on your team, not from an operational standpoint, like who's managing the properties. Obviously, you can get down to cleaners and front desk staff. Like I'm talking high level from the investment arm. Sujay is running this company, but who's on your team helping you to identify these deals, to take them down, to finance them the whole deal?

Sujay Mehta 51:39

Yeah, yeah. So I have an acquisitions person on my team that will come and they'll underwrite deals, but they they're behind the scenes, right? So they're going through, they're underwriting deals, they're signing confidentiality agreements and putting the financials in and running them through our spreadsheets to see if it's a deal or not. Typically, like by the time it gets to me, like the only things I really need to see at this point is like, especially if it's a stable asset, I'm looking at revenue, NOI, how old it is, and what's the what's the reno that that needs to be done. Like, if I have those things, like I know I can put an offer and I know it's a deal or not a deal, right? The call that I got off of right before you was say it's a publicly traded company, they have tons of assets, and I'm looking to buy one of their properties. I haven't even looked at like all of their financial statements, and I was just on the phone with they were interviewing me as a buyer, and we just we, I mean, we agreed verbally and we're good to go. And they're like, we're gonna stop negotiating with everyone else and let's go. Right. And so, like, I've gotten that far already without like having seen even a lot of the due diligence materials because at this point I know like the worst case scenario where my bottom's at and high level, like where my ceiling is gonna be at on a lot of these deals, right? If I can understand those four or five things, and then my team has looked at it. So so we have an acquisitions person that's going through and underwriting those kinds of things. And then from like the design and all of that perspective, I have a few people that I've worked with. They're not necessarily in-house, but I have designers that I've worked with. I have my contractors that I've worked with. This new build home two that we're doing is going to be the first one that I self-GC. And so I also have a good reputation with a lot of our subs because of the development we did through COVID. We had to work directly with a lot of the subs because of like just like the economy and what was going on. But I have I have a good team from that perspective of people that we work with, civil engineers, site work crews. Again, they're not in-house, but we have excellent relationships with those people. And then, like, I have my ops team, right? Like VP of ops and above property, I have an ops team that works through things. And then we have the administrative team, right? So, like EAs, VAs that will help you just like coordinate through communication and those kinds of things, right? And then everything else is really going to be like property specific. So a lot of our employees will be property level. Oh, and then the accounting team. Sorry, the accounting team. So you know, I have an accounting team that will go and do the reconciliations and make sure the accounts are balanced, the balance sheets are accurate, the PLs are good. If there's anything off the PLs, I have someone that's reviewing those PLs, making sure coming to me. But again, I also make sure that I have a pulse on all my numbers and I'm digging into all these things. It's just if I get busy for two weeks, I'm not worried that this is going unattended, right?

Michael Russell 54:30

So all right. So you've got an acquisition person finding deals, you've got accounting that are underwriting the consistent reporting. And then you said VP of ops. Like I'm wondering who's doing asset management. Like there are property level managers, and then there's asset management. We're talking about risk assessment, analysis of insurance, all these things that on data, you just high-level decisions on a property level that need to be made. That's your VP of ops.

Sujay Mehta 54:55

Yeah, yeah. VP of ops is gonna do a lot of that. And then again, they're VP of ops because I'm P of ops, right? Like I am still like it's I still need to put eyes on it and I'm still very dialed in on that same point. I think with the next couple of acquisitions we do, like I probably will have to start taking a little bit more of a step back. But again, like I don't care how many deals we have, if they're not making money, it doesn't matter, right? So that's my fundamental is like operations. Like if I don't have that dialed in and if I don't have a pulse on that, then it doesn't matter how many deals I do, how many investors I I know, how many people, how many podcasts I've done. Like, none of that matters, right? If if we're not churning cash flow from these properties. And so, but yeah, VP of ops is is like negotiating like with different insurance brokers to make sure. But you know, again, I've done this so many times is like I have our go-to's, like energy brokers, insurance brokers. I trust them. They know exactly what I'm looking for. They know when things are good, when they're bad. And so they'll let us know, hey, insurance has gone up. I'm really trying, I'm struggling here. My recommendation is we do this and then we go out back out to market in three months, right? Like I trust them and they know exactly what I'm looking for. So I just got to send them an email, I toss things their way, and then they take care of it. Yeah.

Michael Russell 56:12

So I mean, sounds like you're running pretty lean. Like you've got a lean team, acquisition person, you gotta call it an asset manager for EP Bobs, and then you've got accounting. But to have this huge portfolio and not have this huge staff, that's that is another surprising component to me.

Sujay Mehta 56:27

Yeah, yeah. And then the staff property level, obviously, each property we have like 20, 20 people, plus minus, right? Like some part-time, some full-time. But you know, like from a property level, like we have people, we have like chief engineer that can like oversee and do like high-level like maintenance task or guide or deal with contractors, that kind of stuff. But yeah, we have a very lean team, and like that's how I that's how our operations are very lean overall. Okay.

Michael Russell 56:53

I I gotta, I gotta pivot here then a little bit. I want to go back because I'm listening to I see the picture now and how you're set up. Like in my mind, I've kind of orchestrated like the architecture of your business based on what you've shared. And so for selfish reasons, I want to share. We're we're analyzing a couple of opportunities to purchase some branded hotels. One of them is a super eight, the other one is a travel lodge. And you said operational efficiency, you go down, you see like all the details on ways you can make more money. But then you also said at this point, you've got an acquisition specialist who is just giving you the info and without even seeing it, you're able to make a quick decision and understand. We're not there yet, but if we're gonna dive into this world of looking at branded hotels and to buy something like this for all the reasons that you explained, financing is a little bit easier. It's already a proven market, it's got the operation is set up day one. You could just turn on the marketing machine, take over. There is the opportunity from the broker's marketing description that the flags can be discontinued without penalty. They don't have to be renewed. So we could pivot into a new brand, which is something you suggested might be an opportunity. But if you were us right now analyzing these deals, they look good on paper from a spreadsheet perspective. They look like going in could be anywhere from a 12 to 14% cap. What are some of the things that you would look for and say, hey, you got to dive into this? This is where maybe the owner is hiding some information. This is some areas that there's some risk you could be exposed to. What are some tactical things you would suggest we do when analyzing these deals?

Sujay Mehta 58:24

Yeah, how good is the PL? Like, is it is it like a QuickBooks report? Is it like, is it a piece of paper that's scribbled in? Is it an excel?

Michael Russell 58:32

No, it's it's clearly like a well document.

Sujay Mehta 58:35

From an accounting thing. Okay. So that's good. Like that's like first red flag is when it's just like an Excel sheet where it's like missing 50% of the the typical like GL accounts that we would have on a PNL that you and you or I would have, right? And so that's the first thing is like make sure you got to do your like financial due diligence. Second is like spend time at the property, right? And you're dealing with a with a different beast, which is like more like economy scale properties, right? So we have like one day in in the portfolio. And since then, I've haven't like just haven't touched like the economy scale because you're gonna have a different onslaught problems, right? If if your toilets are sideways, not completely, but like off angle, it's okay. They don't care. Your customer base is not gonna care. They'll they'll turn a little bit and they'll squat. It's all good, right? If I if I do that at our courtyard, right, like I'm gonna get a freaking like one out of 10 review, and it's gonna like go up the brand, and I'm gonna it's gonna be problems and problems and problems, right? I remember I got a complaint once because I didn't have a certain flavor of tea, you know? It's like, dude, come on. And like here at your travel lodge or what whatever super eight you're looking at, if you have tea there, they're gonna be like, oh, this is awesome. I love it. Thank you. Right. So, so it's it's a different customer base altogether, but you want to see like I I assume those assets are a little bit older, they're older than 25 years, 30 years. So I would definitely do like an inspection report to make sure like the MEPs are solid. Or if they had a lot of like leaking pipes, because chances are if they're if they're corroding in like the first floor halfway, they're it's probably gonna keep coming er every day, you know, like something something or another, right? And so it's like make sure you understand that it, I mean, again, your inspection's gonna happen. It's don't don't expect that you can go back to the seller and be like, oh, like we estimate $200,000 of repairs and maintenance and this and that, give me a reduction. It's probably not gonna happen. Like he they know what they're selling, that's why it's a 13 cap, right? But at least you know and you can budget for it and you can be aware of that before you take over. The other thing is like cash flow management. So, like one of the things we built is like our bookkeeping team, and now I've opened it up for like third party. That's the only third party thing that I do. Right now, we're working on an operations, like a management company that can do third party. But the accounting, the whole reason I opened it up is because like people just like entrepreneurs, whether it's for hotels, like a pizza shop or recruiting company, whatever it is, social media company, that people cannot dial in their their money. Like they can't they can't get their accounting straight. They don't know how much they're making, they can't do cash flow management. I know that at your travel lodge, let's say it does $1.2 million in revenue. Does that $1.2 million go to your bank account? Right? It's difficult to track because it comes from Visa, MasterCard, Discover, Amex, debit cards, cash, direct bills. I mean, I mean, there's so many ways that that money's coming through. And let's say you have five customers staying at your property today, right? One of those customers paid a month ago and they paid in full. Advanced, no refunds possible, but they paid in full a month ago, right? For a stay that's a month later, which is today. Your other customer is staying for three nights and they're gonna check out on the third night, and they just checked in today, so they're gonna check in, check out three days from now. So you're not gonna collect any money for their stay today. You're gonna collect it at checkout, right? So your third customer checked in today and is checking out today, right? Your fourth customer paid in cash, and your fifth customer is with a corporate account that you have, and so you'll get direct bill a month later, right? So, like today, if you say like, oh, I uh we need we did $500 in business because each one of my five customers stayed and it's a hundred dollars per person, and you go to check your bank account, you're not gonna see $500, right? Yeah. And so, like, how do you how how do you reconcile that? Like, how do you make sure at the end of the year when you're paying taxes and you're collecting your K1s, like you've actually collected that money and you don't have chargebacks or refunds and even refunds? Like, if you have refunds, are you paying sales tax on those refunds? Like, did those go into your system? And like there's a lot. You just stick your head in the sand and you just hope, okay, it's gonna be okay. Yeah, yeah, which is what a lot of people do, which is what a lot of people do, and you realize you're a hundred thousand off, you're fifty thousand off, or your your CLC accounts, right? Like your trucking company, like they haven't paid in months, right? Or or you go through or your biggest direct bill account, like, and again, it's like human error. It's not like they're trying to cheat you or steal money from you. A lot of times it's human error, and it's like just like we're not paying attention, that company's not paying attention and making sure that they're paying you in time, right? Like, how many times have we returned stuff on Amazon? And how often do you check your credit card to make sure that it comes through? I'll I'll give you an example. At one of my properties just a couple months ago, the county that's supposed to collect the lodging tax, they collected twice from my from my business, right? If it's just if it's uh if it's a random VA that you've hired that's just doing your bookkeeping, like they see that this county collected tax and they're gonna throw it into lodging tax, right? Like your GL account of lodging tax, but they're not paying attention. It's like, hey, I just paid 10% for my lodging tax for the county when it should be 5% a month, right? And again, it's an honest mistake from the county, and these guys are mindlessly just coding. Like they see Costco and they know it's your breakfast expense. And so they're just coding, they're not checking. And so you need someone to be checking and doing this reconciliation when you have that. Now all of a sudden you can scale and you can build because your foundation is solid.

Michael Russell 1:04:20

Yeah. Well, I've heard you talk about this. So it's quite impressive. You've got your hospitality, investing business, you've got your management side, property level management, and then you've got your, I guess it's bookkeeping, right? Accounting. Yeah. Division. And so I know that there's great value. You've described this. I've heard you talk about this and how valuable it is to have a team, a tactical approach to identifying where there's leakage and how important that can be to your bottom line and ultimately your your end valuation. So I know that that's something that you are passionate about and you are also offering to others. So if anyone wants to check out your accounting business, like where could they find out about that?

Sujay Mehta 1:04:59

Yeah, kafafinancial.com is the landing page. Again, just very simple, but like we want to offer this to small business owners and we're looking to grow, but really like the goal for me is like I love entrepreneurs and like people who are betting on themselves. And and the last thing that I want is like for people to have like leakage, like you called it, right? Like it's like if we're busting our butts every day to push this revenue, I want to make sure that we actually get that right. And it was a big struggle of mine when I started and I just jumped into it. I was like six months in, and I'm like, I have no idea where my money is or if I'm profitable, if I'm not, like things are coming in and out. There's a million transactions happening. And so, like, that's how I created this whole thing. But yeah, just I mean, I I just if you ever even just want to talk about it, like happy to talk about it. And you can DM me and reach out on Instagram as well. And I'll just like again, happy to share.

Michael Russell 1:05:50

Yeah. No, I mean, I think that's really important. And and actually, there's a lot that I think all of us can learn from you. I know that you've got an education program that you've started recently. Is that right?

Sujay Mehta 1:05:59

Yep, yep. So we started a mastermind, a coaching program for hotel investors specifically, both branded and boutique, people who are looking to get into the space or continue to scale. I've partnered with investor girl Brit. She's awesome. And again, just her and I connected on like values and principles, and I think we were aligned on that perspective. And so I felt like she'd be a good partner. And yeah, we we've done some fun projects, like bought the property in Belize and and then the branded stuff and doing some development. And we actually have one under contract in Tampa now, so getting into the the Florida market, which will be exciting. So, but yeah, like happy to talk about that as well. But we're looking to to grow that community, and definitely we'll have to have you guys come and come and speak to the community as well with everything that you guys have done.

Michael Russell 1:06:44

Yeah, would love that. Absolutely. Yeah, absolutely. I've got some final rap questions here, but Nathan, is there anything else that you wanted to ask?

Nathan St Cyr 1:06:54

No, man, this has been this has been extremely valuable.

Michael Russell 1:06:58

Okay. So I prepared this question because I think it's applicable for a lot of people that are inspired by your story. But not everyone can see the picture from the starting point to 187 million dollars. What is your best advice for someone who's got hustle? Maybe some Airbnb experience, but they want to break into hotels.

Sujay Mehta 1:07:18

Yeah. And again, like there's there's a lot of great people out there. But the first thing that I would say is like get focused, right? Because so many times, and in even me early in my career, like I didn't know if I wanted to stick medicine so many times when things got hard. I'm like, maybe just like go back and I already had my MCAT. So like maybe just apply to med school and and see what happens and go to med school and become a doctor and quit. Or like I was doing the healthcare thing. And even still, like, uh because I was so deep into it and I built that foundation, like I'm still like looking at healthcare opportunities, right? And it's all fine now, right? But in the beginning, like put your blinders on, right? Like, don't worry about what people say. Don't worry about all the people that say you can't do it, right? Because there's gonna be a million of those people for every one that says, go and do the thing, right? So put your blinders on, ignore that noise, but also put your blinders on to opportunities as well that don't fit your buy box or what you are trying to create, because that's where then we get off path, right? And if we are taking a path less traveled, a path that has not been blazed for us, right? And we are the trailblazers, and if you go off that path, you're gonna be confused. You're gonna be a boat with no sail, right? And and and then you're not gonna go anywhere. So the first and foremost, I would say is like get focused, put your head down, jump right into it. And then two is like find people that you can you can go to that can be mentors for you, whether it's like from the business perspective, from a mindset perspective, but find those mentors, whether they're paid, not paid, whatever. And then the last thing is like get out of your house. It's like after COVID, we just sit behind the computer screen or we sit behind the phone and we think like, oh, that's how we're gonna network, but like get out of the freaking house. There's like a hundred meetups going on. Maybe 90 of them are BS and like it's it's like not worth anything. But the five or 10 where you go meet someone and rub shoulders with them, you never know when that person is gonna be someone to you. It might be two years from now, it might be five years from now, but like that's how you met network. Like, go out and meet bankers, right? Like, don't just call them on the phone, like go out and and meet bankers, go out and meet loan officers, right? Like go to events, go to conferences and rub shoulders. So those are like I think my three pieces of advice for someone who's looking to get get into it.

Michael Russell 1:09:45

Yeah, that's so good. And it's so true. Look, we got connected because we met at an event, and this is a people business. At the end of the day, it's about relationships, it's not just about spreadsheets, it's about connection with real people. So that is really solid advice and appreciate you being on the show. We're gonna hop off. We are Mike and Nate, he is Sujay Meta. This is another episode of the Hotel Investor Playbook, and we will catch you again next week. Aloha. Thanks for hanging out with us today on the Hotel Investor Playbook. If you got even one good nugget of wisdom about hotel investing, do us a favor, hit that subscribe button and leave us a five-star review. And hey, if you're feeling extra generous, drop a quick line in the review section. Something like Mike and Nate are the go-to hotel investing guys, or best podcast for anyone looking to crush it in hospitality, or you know, whatever feels right. Those little shout-outs go a long way in helping more people find the show. And they pretty much make our day. All right, appreciate you guys. Catch you next time.