Podcast Summary: Real Estate Investing School Podcast Episode 218

Title: REAL DEAL: Scaling Big with a Small Hotel Deal with Tony Robinson
Host: Brody Fawcett
Guest: Tony Robinson, Host of the Bigger Pockets Rookie Real Estate Podcast
Release Date: December 12, 2024

Introduction to the Episode

In Episode 218 of the Real Estate Investing School Podcast, host Brody Fawcett welcomes Tony Robinson, a seasoned real estate investor and host of the Bigger Pockets Rookie Real Estate Podcast. The episode centers around Tony's successful hotel deal in Kanab, Utah, highlighting strategies for scaling investments without exponentially increasing effort or complexity.

Tony Robinson’s Journey from Corporate to Real Estate

Tony shares his transition from a secure corporate career to real estate investing. This shift underscores the pivotal moment when he decided to pursue larger investments beyond traditional single-family homes, aiming to scale his portfolio effectively.

Notable Quote:

"We managed the rehab, we designed the place, and we've been managing it every single day since we launched at the end of April."
— Tony Robinson [00:00]

The Hotel Deal: From Failed Attempts to Success

Tony recounts his initial attempts to purchase a hotel, which ultimately fell through due to insufficient capital. Investing nearly $100k in the first two deals, he emphasizes the importance of learning from failures. The third attempt was strategically smaller, priced under $1 million, making it more attainable.

Key Details:

• Property: 13-room hotel in Kanab, Utah
• Purchase Price: Approximately $950,000
• Financing: Seller-financed deal requiring $200k down
• Loan Terms: 10-year term with 30-year amortization, 7% interest rate, interest-only payments for the first three years
• Capital Raised: $600k structured as 70% equity for investors and 30% retained by Tony for management
• Renovation Budget: Over $300k allocated to renovation, with an additional $80k-$100k for working capital

Notable Quote:

"Both times it came down to an inability to raise enough capital... we said, let's just go smaller."
— Tony Robinson [04:13]

Structuring the Investment and Partnerships

Tony explains the innovative partnership structure where investors receive 70% equity in exchange for capital, while he retains 30% for deal sourcing and management. Additionally, a 15% property management fee is allocated for daily operations, demonstrating a fair and attractive proposition for investors.

Notable Quote:

"We kept 30% for finding the deal, all the due diligence, all that stuff... and then we also get a 15% PM fee for the day-to-day management."
— Tony Robinson [05:44]

Strategy Highlights:

• No Upfront Fees: To make the deal more enticing, Tony chose not to collect upfront syndication fees, aligning interests with investors.
• Onsite Management: An onsite manager resides in the owner’s suite to handle day-to-day operations, ensuring efficient property management.

Operational Insights and Performance Metrics

Since launching in April, the hotel has shown promising performance. Revenue fluctuates seasonally, with peaks during the fall and projected growth in the following year.

Performance Breakdown:

• Initial Revenue: Over $30k in the first month
• Summer Slump: Averaging $13k to $18k monthly
• Fall Surge: Revenues increased to nearly $50k over two months
• Current Projections: $12k to $15k monthly during shoulder seasons, ramping up to $40k-$50k in peak season next year

Notable Quote:

"We're projecting somewhere between 12 to maybe 15 per month over these next couple of months and hopefully ramping back up to like that 40, 50 during peak season next year."
— Tony Robinson [13:35]

Financing Strategy and Future Plans

Tony discusses the decision to delay property appraisal until after 12 months of operation, aiming to leverage the increased property value for potential refinancing. The goal is to achieve significant equity growth (projected at $2.5 million) to secure better financing terms.

Notable Quote:

"Our partners who brought the capital... have only wired in their funds... Who's really doing all the work? Who's really bringing all the value to that situation?"
— Tony Robinson [16:56]

Future Plans:

• Refinancing: Assessing market conditions post-12 months to refinance at potentially lower rates.
• Scalability: Using the current deal as a blueprint for future larger investments without proportionally increasing complexity or effort.

Raising Capital and Investor Relations

Addressing common concerns about capital raising, Tony emphasizes the value proposition for investors, highlighting that their capital is actively working in a profitable deal rather than sitting idle. He reframes the partnership dynamic to showcase how both parties contribute meaningfully to the investment’s success.

Notable Quote:

"You're presenting them with an opportunity to put that 600k to work in a way that probably wouldn't happen if it was just sitting in their bank account."
— Tony Robinson [16:56]

Investor Engagement:

• Minimal involvement from investors beyond initial capital injection.
• Regular updates with limited interactions, ensuring transparency and trust without excessive dependency.

Conclusion and Takeaways

The episode concludes with Brody praising Tony’s transparent approach and valuable insights into scaling real estate investments through strategic partnerships and manageable deal sizes. Tony reiterates his commitment to effective management and looks forward to expanding his portfolio with similar models.

Final Thoughts:

• Education through Real Deals: Highlighting specific deals provides practical learning opportunities for listeners.
• Mindset Shift: Viewing investment partnerships as opportunities rather than favors enhances capital-raising success.
• Scalability Without Complexity: Demonstrating that larger portfolios don’t necessarily require exponentially more effort.

Notable Quote:

"There are enough people out there who would have said, hey, I would love to put my money to work in this deal... There's money out there, man."
— Tony Robinson [16:56]

Call to Action

Brody encourages listeners to engage with Real Estate Investing School for further learning and to connect with experts like Tony Robinson for deeper insights into successful real estate investments.

This episode serves as an instructive example for real estate investors aiming to scale their investments intelligently by leveraging partnerships, maintaining manageable deal sizes, and fostering transparent relationships with investors.